CHINA A critique of the seventh five-year plan DURING THE seven years since China began a policy of bold economic reforms on a large scale, there has been a permanent debate in the leadership of the Chinese Communist Party (CCP), where the new economic policy is contested in varying degrees by some leaders. In this context, every economic decision becomes the object of debates and critiques, especially at the time of the adoption of a new five year plan.
In this article from the Hong Kong journal October Review of April 1986, Zhang Kai explains these debates and makes a radical critique of and consumption funds, which has sped up inflation, foreign trade deficit, imbalance of foreign exchange and devaluation of the RMB. [Renming bi yuan - "people's money", , the official name for the Chinese yuan. ]
However, the gross social investments in fixed assets as set by the seventh FYP is 1,296 billion yuan, (of which those of state-owned enterprises is 890 billion yuan), 2.6 times the figures of the sixth FYP.
This indicates that the seventh FYP has not drawn lessons from the past, and it is difficult to ensure accomplishment of the basic tasks quoted above.
Of the investments in fixed assets of state-owned enterprises, capital investments take up 500 billion yuan, of which 375 billion is arranged by the central government and 112.5 billion is arranged by the local government. Of the former, energy, raw materials, heavy industries, transport and communication, the four Special Economic Zones and the Guangdong nuclear plant totally take up 73.2%, "other sectors" take up 13.5%, the defence industry and military projects take up 5.4%, but agriculture, irrigation and meteorology take up 3.9% (14.68 billion yuan), and science, education, culture, health take up merely 2.6% (9.98 billion yuan). The latter is expected to be placed mostly in industries.
The investments in agriculture and education are very low. In recent years, Deng Xiaoping has stressed the success of rural reform. However, gross grain production in 1985 decreased by 7% as compared to 1984, the main reason being that the income from growing grain is small, many peasants are thus unwilling to grow grain and cultivated land has decreased. At the same time, the prices of fertiliser, insecticide and farming instruments have increased. State funds to support agriculture are also appropriated by local institutions. The situation is reflected in the speeches of some deputies to the National People's Congress (NPC).
For example, "deputies from the Jangsu, Zhejiang, Jilin and Fujian provinces and from Beijing pointed out that the decrease in investments in agriculture and irrigation and the slackening of capital construction in agriculture must be corrected. Li Qingkui from the Jiangsu Province said that the phenomena of "degeneration of the land, ageing of machinery, deterioration of irrigation and worsening of the seeds deserve attention." (New China News Agency, 31 March, 1986, despatch from Bejing). One of the "acute viewpoints" during
Wen Hui Bao is a CCP spokesperson in Hong Kong.
the seventh five year plan, adopted ZHANG KAI
The Seventh Five Year Plan (FYP), 1986-1990, has been adopted by the National People's Congress. The FYP was formulated amid differences in the Party leadership on the policy and tempo of reform. China now "seems to be at a crossroads": "Either take a small step and establish an economic model with the plan being predominant and the market being supplement, or take a big stride and quickly form a socialist market economy" (feature article by Li Minhua, Hong Kong Wen Hui Bao's correspondent from Beijing, April 3, 1986.) (1) "A big debate is brewing among new and old economists" (article by Cheng Xiang of Wen Hui Bao reporting from Beijing, March 31, 1986).
The FYP was "adopted in principle" • This means some questions still await amendment, pending decis ions to be made after controversies are resolved in the Chinese Communist Party (CCP) leadership, or pending actual developments later on. This implies reduced planning and increased possibility of loss of control.
The basic tasks of the seventh FYP are: "1) to maintain a basic balance between total social demand and supply, so that the reform can develop smoothly, and the basis of a new type of socialist economic structure with Chinese characteristics can be basically established in five years or more; 2) to keep up continued and steady economic growth, and on the premise of controlling the total amount of investments in fixed assets, greatly 22 for 1986-1990. strengthen key projects, technology reform and talent promotion . . . 3) on the basis of developing production and heightening economic efficiency, to continue to improve the life of the urban and rural people."
The latter period of the sixth FYP saw an imbalance between total social demand and supply, the basic reason being that investments in fixed assets were excessive. The sixth FYP formulated in December 1982 had set investments in fixed assets of state-owned enterprises from 1981 to 1985 at 360 billion yuan. [3.7 yuan = 1 US dollar.] At that time, Zhao Ziyang's report said that "such an arrangement means drawing lessons from the excessive scope of capital construction and inefficiency of investments in the past" • Still, the actual outcome reached 530 billion yuan, almost 50% more than planned. Past errors not corrected
The pursuit of speedy development and high production value resulted in disregard ! for efficiency and quality, and further tension in raw materials, electricity and transport. (For example, Guangzhou suffers from a 40% shortage in electricity, and in Nanjing and Chengdu, electricity shortage causes stoppage of work two days every week.) Since 1984, there has been a sharp increase in credit funds
group discussions and interventions at the NPC was that "the seventh FYP (draft) ignores agriculture" (article by Li Minhua, Wen Hui Bao's correspondent from Beijing)
As a result of the criticisms made by the deputies, an amendment was made to Zhao Ziyang's report: "To continue to strengthen agriculture, which is the basis of our national economy, is a key strategic orientation in our modernization construction. We should continue to grasp grain production and strive to assure steady increase of grain production."
The criticisms made at the congress showed certain support to Chen Yun's speech at the CCP congress last September. (2)
Despite certain increases these past years, the educational funds are still meagre. According to Hu Zhiewi, former chief editor of the People's Daily and presently deputy to the NPC, of the educational funds set by the seventh FYP, '77.7% is spent on personnel, and less than one-third is really spent on improving educational undertakings." (People's Daily, 10 April, 1986.)
The 1982 census showed that 23.5% of the population - 230 million people - are illiterate or semiilliterate. Liu Bin, deputy director of the State Educational Committee, recently went on a survey to Yunnan and Guizhou Provinces and "discovered that 15-40% of school-age children do not go to school; while old illiterates have not decreased, new illiterates have increased.
"At present, funds for primary and secondary schools are very low. There are only 102 yuan per year for every secondary school pupil and 33 yuan for every primary school pupil (1984 figures). This amount covers wages, scholarship, cadres' travel allowances, administrative costs and school maintenance charges.
"Statistics at the end of 1984 showed that there are still 46 million square metres of dangerous school buildings, and a shortage of 37 million sets of desks and chairs (about onefifth for all pupils) ... Library books and laboratory facilities are even more pitiable." (People's Daily, 8 April, 1986)
Besides due to the low wages of teachers (only 20-30 yuan every month for teachers in many rural primary schools), large numbers of teachers change their jobs, and the quantity and quality of teachers are low.
The seventh FYP provides that 201.6 billion yuan from the state budget is to be spent in the coming five years on education, science culture and health, and 9 years' free education will gradually be implemented. Yet Tao Dayong, professor of Beijing Teachers University, pointed out that "the present problem is that there is not sufficient attention paid to fundamental education in primary and secondary schooling, and educational funds are not enough ... The authorities agree to exempt school fees, but are reluctant to exempt 680 million yuan annual sundry fees. Without the exemption of sundry fees, the exemption of school fees is mere empty talk because the school fees can take the form of sundry fees. I still think there should be a big increase in investments in education." (Ming Pao, 4 April, 1986) Overheating
The FYP sets 4% as the average annual growth rate of agricultural output in the next five years (6% including industries on village level). The growth rate for industries (light and heavy) is 7.5%. It is an 87.5% increase compared to the aim of the sixth FYP, but is only about 60% of the actual growth rate during the sixth FYP period.
According to the above growth rates, the GNP in 1990 will be 1,117 billion yuan, a 44% increse from 1985. If the population of 1990 is kept under 1,113 billion, then the per capita GNP is about 1,000 yuan, equivalent to about 312 US dollars. [With the current dollar slide, this should be adjusted to 370 dollars.] It is still a long way from the 1,000 US dollars predicted by Deng Xiaoping for the year 2,000. ping fort aile 000 the Sixth Five Year Plan" (October Review, No. 1 of 1983), I criticized the average annual growth rate of industry and agriculture projected at 4% as too low. In fact, the actual development has been much faster than the planning. In industry, there is even a danger of extra high tempo: a 14% increase of gross value of industrial output from 1983 - and a growth of 22.8% in January to July 1985 as compared to the same period in 1984. Chen Yun signalled the warning: "We cannot possibly continue with such a high tempo, because our present energy, transport and raw materials cannot meet the requirements of such a high tempo." The central government ordered national industrial departments to an urgent brake. Still, the growth rate for 1985 was 18%.
The reason for the excessive tempo of industrial development is: investments in fixed assets are getting out of control; the more the investments, the more increase in light industries and processing industries; and the greater demand for raw materials and stimulation of speedy production in heavy industries.
The present FYP on the one hand desires a slowdown in the rate of growth, and on the other hand increases total investments in fixed assets by 1.4 times as compared to the actual figures of the sixth FYP. Such a contradiction will inevitably induce high tempo of industrial development, and intensify pursuit of growth of output value without regard for quality and efficiency.
The first basic principle and orientation of the seventh FYP is "to persist in placing the reform in priority". The tasks and aims of the reform on economic structures as set by the FYP are:
Firstly, "to strengthen the vitality of enterprises, especially the big and medium state-run enterprises, so that they can truly become relatively independent economic entities, and become the socialist commodity producers and administrators that are autonomous and responsible for their own profits and losses." While big and medium state-run enterprises practise management at different levels, many small enterprises are run by a collective or by individuals. This means that they are run privately, through contracting or leasing. Products become commodities sold in the market, and are produced for this purpose.
Secondly, "to further develop the socialist commodity market, gradually perfect the market system." The perfection of the market system means "to gradually reduce the varieties of resources allocated by the state, and lower their proportion in the total amount of resources; expand the market of the means of production; systematically open up and set up a capital market, a technology market, and a rational flow of labour power."
The reduction of the role of the state in the allocation of resources, coupled with the "gradual reduction of the scope of mandatory planning" will induce the majority of products to become commodities sold in the market. Their prices will be affected by the law of supply and demand of the market. The FYP provides that "on the premise of a full consideration of the receiving capacity of the state, the enterprises and the people, to actively and steadily push ahead • the reform of the pricing system, to gradually form a pricing system that more or less corresponds to the value and can reflect the relationship of supply and demand, and to gradually form a price management system that combines state controls, state guidance and market adjustment of prices."
2. Chen Yun is a member of Stand. ing Committee of the CCP Politburo.
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As for the concrete stipulation of the formation of the pricing system, the FYP says: 1) concerning the means of consumption, besides state price fixing for a minority of important commodities, the prices of general commodities will gradually be set free according to the supply and demand of the market; 2) concerning the means of production, adjust the planned prices of important resources, and gradually reduce the proportion of products whose prices are set by the state, so that the state prices and the market prices can gradually approximate; 3) concerning the fares or prices of important public utilities and main services, the state will continue to manage them and readjust them according to planning; the prices of other service enterprises will gradually be set free.
The trend is that the majority of products will become commodities sold at the market with their prices "more or less corresponding to their value and reflecting the relationship of supply and demand". • The idea of "planning being predominant and the market mechanism being supplementary" may become outdated.
Under such an aim, the "premise" of considering the receiving capacity" to the pricing reform actually means consideration of the extent to which the ordinary people can tighten their belts, and tolerate the situation without breaking into general resistance.
The establishment of the capital market means capital can flow freely in the market, collecting interest without any restriction of the interest rate, and shark loans like those under the capitalist system may revive generally in China (this has appeared 24 in some places in recent years). The stock market may exist. Technology may become a commodity. As for labour power, though the regulation that "labour power is not a commodity" (i.e., non-recognition of the existence of exploitation) still holds, it has the attributes of a commodity, since it can flow freely, and the labourers can be dismissed or can resign. A "socialist commodity economy"
Though the FYP uses the epithet "guidance by planning", ', it does not project how the plan can play a decisive role so as to subordinate the market to the plan.
The official theory and the FYP crown China's commodity production, commodity economy and market mechanism all with the epithet "socialist". The argument is that socialist commodity production is based on the socialist public ownership of the means of production, and labour of unexploited labourers. (See Xu Dixin's A concise dictionary on political economy, 1983, p.494.) In his report on the seventh FYP, Zhao Ziyang said, "The commodity economy that we want to develop is on the whole a socialist commodity economy which is based on public ownership, practises the principle of 'to each according to his labour' and is under planning and control."
Let us look at the three conditions proposed by Zhao Ziyang.
First, the question of public ownership. At present, the means of production in China is under state or public ownership; this is important in supporting the fact that China is a workers' state and not a capitalist country. However, according to the FYP, state-owned big and medium enterprises will distinguish clearly between right of ownership and right of use, and the right of use is exercised by the factory director or manager. As for small state-owned enterprises, many are now operated by the collective or by individuals. The right of ownership then only has meaning in terms of property relationships. The right of use has more substantial meaning. Production is aimed for the market, and prices are regulated by supply and demand in the market. Selfresponsibility for profit or loss induces production for profit and not for need. Between the enterprises will be competition rather than cooperation. This is induced by the law of the market, especially when commodity production is "fully developed".
In the aspect of gross value of social output, at present, the value produced by state-owned enterprises comprises about half of the gross value. Take 1985 as an example.
The State Statistics Bureau figures indicate that gross output value for the year is 1,624.2 billion yuan. Of this, state-owned industries output is 624.7 billion yuan (38.5%), collective industries is 233.2 billion, agriculture 357.5 billion, village industries 93.5 billion, rural construction, transport and commerce 168.5 billion, and others including urban construction, state-run transport, communication and commerce) 128.8 billion. (3)
The majority of collective industries have been contracted to private hands; rural land is contracted for long terms for small commodity production; almost all rural (and a large part of the urban) industries, commerce, construction, transport and services are run collectively or privately; and state farms take up only 3-4% in the gross agricultural output value. Since the growth rate of output value of collective and individual enterprises is much higher than that of the state enterprises, if this trend continues the weight of state-owned enterprises will continue to decrease. The FY projects that by 1990, gross output value of rural enterprises will increase 100% in comparison with 1985, yet the growth rate of state
The figures of the output value of these two types of industries are calculated from "Statistics communique on the 1985 national economy and social development", and "China Statistics Yearbook 1985", , English edition, p. 306. In the gross industrial output value, there are also 3.22 billion yuan from individual industries and 14.72 billion yuan from other types of industries.
enterprises is far less for the same period.
The FYP projects 160 billion yuan of investments in fixed assets of collective enterprises and 240 billion yuan in individual enterprises. The total amounts to 44.6% of investments in state enterprises. It is also unprecedented that investments in individual enterprises are included in an FYP. The speed at which private capital has increased these last few years is also stunning.
The second of Zhao Ziyang's conditions is the question of "to each according to his labour". Though this principle is indispensable in a transitional or socialist period, this principle alone cannot automatically guarantee socialism. While the FYP proposes to "overcome and prevent unreasonable excessive differentiation of income" , it also "continues to encourage" some areas, enterprises or individuals to get rich first. Zhao Ziyang also uses this principle to evade the question of the basis of "work by unexploited labour". Instead he advocates "the promotion of a free flow of labour"
The third condition is the question of "under planning and control". If a general market system is "gradually formed" , and prices and production regulated by the market become predominant, then the planned economy will be superseded by the market economy. Chen Yun pointed out at the Party congress that "market regulation means no planning, with production carried out according to changes in the supply and demand of the market. This means regulation with 'blindness' "
Economic reforms should aim at affirming the central place of the proletariat in production. The FYP does not even mention this. In the section "enliven activities of the enterperor", under the heading "structural
, it proposes to "improve the leadership of enterprises, gradually practise the responsibility system of factory directors or managers, fully exercise the enthusiasm and initiative of the administrators", , but does not mention the working class. In the FYP, there is a general reference to "socialist democracy and legal system", but this decorative word does not even appear in Zhao Ziyang's report.
To ensure the smooth accomplishment of the FYP, the enthusiasm and initiative of the labourers must be mobilized. To do this, their living and working conditions must be significantly improved. What has the FYP promised in this respect?
It projects that by 1990, the average annual net income of the peasants will be 560 yuan, an increase of 41.1% from 1985. However, the intlation rate of 1985 is reportedly 9%. If this high rate continues, it means the growth of the net income of peasants will be zero.
It promises that the average annual increase in the real wages of workers will be 4%. This is about half of the annual growth rate of gross value of industrial output, which is 7.5%.
In official reports, the rate of inflation is not high. Unoffical reports however indicate that in recent years, the inflation rate is two-digit. For example, the State Statistics Bureau announced that the end of February this year that the average net income of peasants in 1985 had increased by 11.8%, while prices have increased by only 3%. On March 27 it was announced that the general index of average retail prices of 1985 increased by 8.8% over 1984. As the economist Qian Jiaqu pointed out, such figures do not reveal the actual situation, for they average the price decrease of TV sets, refrigerators, washing machines, cameras, watches, and so on, with the price increase of vegetables and daily necessities, hence pulling down the rate of the overall increase. Cheng Zhiping, head of the State Bureau of Prices, also pointed out that "the prices of subsidiary foods that greatly affect people's livelihood has increased by as much as 23% (from 1984 to 1985); the increase of vegetables is 34.5%, sea products 37.4%, newspapers and books 32.5%." (Wen Hui Bao, March 28, 1986.) Price squeeze
This trend in the beginning of 1986 was acute. According to the statistics published by Beijing's Peasant Daily, the increase at the end of February 1986 as compared to the end of December 1985 in the main agricultural subsidiary products in about 50 urban and rural markets is: over 100% for rice, wheat, soya beans, hens, apples, oranges, almost 100% for sesame oil, beef; 90% for pork; 75% for carp; 58% for eggs; 150% for ginger. (Ming Pao, 28 March, 1986, p. 17.)
The rate of increase in two months is indeed stunning. The prices are those for the market. At the end of 1985, there were in total 61,000 markets, with a turnover of 70.5 billion yuan. The prices in state-run shops are lower. However, only the prices of rice and cooking oil are controlled. The prices of all agricultrual and subsidiary products have been unfrozen. free. In addition, 75% of small state-run retail shops are now operated by the collective or individuals. The figures of price changes in state-run shops for the same period are not yet available, but they are certainly affected by the increases in the market.
Such a situation shows that the projected 4% wage increase is far from sufficient to cover inflation. The 7.5 yuan monthly living subsidy for every urban resident is only enough to buy 2 catties [approximately 2½Ibs] of meat in the market.
The urban residents have to bear with an increasing cost of living. As for the peasants, the benefits they obtained a few years ago have mostly been taken back by the state through the high prices of fertilizers, insecticide, daily necessities and farming instruments. Intensified social tension is being expressed in an increase of workers' strikes and work-to-rules.
The reflection of social tensions and struggles in the CCP is the intensification of differences and controversies that have been unfolding in recent years.
Existing information indicates that serious controversies exist in the CCP concerning the question of reform, in particular concerning the concrete measures, steps, tempo, scope, emphasis, and so on. Differences also exist in the top leadership, and were partially revealed in Chen Yun's speech at the Party congress last September. Some traditional theories and positions of the CCP are being revised, and questions that are still unresolved are expressed in ambiguous terms.
The seventh FYP expresses the above situation. It does not define how planning can predominate over market regulation. Its concrete measures are, however, towards the establishment and perfection of a general commodity market. It is still unclear to what extent the FYP intends to reduce the scope of planning and increase the scope of market mechan-
Whither goes China? Closer to the socialist goal, or futher away? Defending its present basis of a workers' state - state ownership, planned economy, monopoly of foreign trade - or changing them gradually until ultimately abandoning them? The seventh FYP has no definite answer to this, though there are disturbing indications.
The balance and struggle of various social forces in China and internationally will affect China's development. In particular, the Chinese working class will defend its present and historic interest,. and will not allow its gains to be overthrown in a "peaceful" way. This is one major reason why it is difficult for capitalism to be restored in China.
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