An Encyclopaedia on Chinese History, Literature and Art

The First Five-Year Plan 1953-1957

Mar 20, 2017 © Ulrich Theobald

The turbulences between 1950 and 1953 were also one reason for the delay of the First Five-Year Plan (Di yi ge wunian jihua 第一个五年计划 , short Yi wu jihua 一五计划) that started in 1953. In these years, family farming was replaced by collective farming and private ownership in trade and industry disappeared. The Party redefined itself in the Eighth Party Congress and created the first Constitution of the PRC. It also tried to integrate intellectuals in the Hundred-Flowers Campaign and experienced first positive successes on the international parquet . China also emancipated itself from Soviet dominance and, after the initiation of Destalinization, chose another way of changing its society and economy. The disturbances with the initialization of the Great Leap forward greatly disturbed the realization of the following five-year plans, until Chinese politics became more settled in the late 1970s.

Quite ironically, the final decisions of the First Five-Year Plan were not finished until February 1955, two years after its initiation, because of lack of statistics, the heterogeneous nature of economic forms, and also lack in experience. The State Planning Commission (Zhongyang renmin zhengfu guojia jihua weiyuanhui 中央人民政府国家计划委员会) under Li Fuchun 李富春 (1900-1975) had to defend itself against the criticism of overambitious targets, overemphasis on producer goods (instead of consumer goods), inadequate capital resources, or an overrating of technical abilities. The Commission defined the target as to double the industrial output, with an annual increase of 14.7 percent. Agriculture was to grow annually by just 4.3 per cent (Guillermaz 1976: 78).

More than half of the investment of 76,640 million Yuan (RMB, roughly 32,500 million US$) for the five years was going into the industry (mainly for basic construction), 20 into transport and telecommunications, and just 7 into agriculture. The expenditure for the Plan corresponded to 22 per cent of the national income, which was constituted of taxes, the compulsory sale of part of the harvest to the state, confiscations during the political campaigns, profits from state-owned enterprises, and from government bonds (China Construction Bonds, Guojia jingji jianshe gongzhai 国家经济建设公债) issued in 1954.

Figure 1. Figure 1. Construction Bond from 1954, denominated 500,000 Yuan. Source: XXX, 59.

To this income, Soviet aid has to be added, as well as foreign currency sent by Overseas Chinese. The construction of enterprises was planned in the shape of projects, with differing sizes of "norms". Northeast and East China were privileged areas, while the inner provinces would be part of the Second Five-Year Plan. In the field of agriculture, it was acknowledged that the disappearance of small-scale family farming would still take some time. Instead, the number of state farms was to increase by ways of "colonization" of remote areas, for instance, northern Manchuria. First hydraulic projects were also envisaged. Quite surprisingly, the importance of chemical fertilizers for the agricultural output was ignored in the Plan.

Soviet aid covered mainly large-scale projects like factories, laboratories, roads, railways, or canals. The financial value cannot be assessed, and how the help of Soviet technicians performed under real conditions in China, is a matter of debate. The SU granted long-term credits of 300 million US$ in February 1950, and a further lot of 520 million in October 1954. Engineers took part in the construction of 258 large projects. In 1959 a further agreement was signed concerning 78 projects (Guillermaz 1976: 82), but the Sino-Soviet split a year later ended any further cooperation. The loans were repaid through trade exchanges in the form of agricultural products or minerals. Of the 300 million US$, probably more than half was consumed for military matters during the Korean War, but Soviet sources give the figure of 2,025 million US$ as the total sum of credits given to China.

More than 7,000 Russian experts helped to build up from the scratch industries involving steel, oil, electricity, machinery, engines, and electronics, and prospected resources throughout China—all industrial branches that did not exist in China. They trained Chinese technicians, and more than 6,000 students were sent to Russia for technical education.

Yet the Russian economic models did not always fit Chinese conditions, where small-scale enterprise had been the dominant form of manufacture for centuries. Chinese experts therefore were not always happy with the high concentration of heavy industries as it was common in the Soviet Union.

According to official statistics, 56 per cent of the industrial output in 1952 originated in the already nationalized (guoyouhua 国有化) sector, 21 per cent in the private sector carrying out state orders, and 17 per cent in the "capitalist industry" (Guillermaz 1976: 86). In the mid-1950s, the private sector disappeared very quickly after private companies were forced to transform into mixed concerns and later into state enterprises. In order to make this decision easier, and not to lose them as managers and technicians, owners were allowed to retain 5 per cent of the profits for several years. Capitalists were forced to invest their funds into state bonds. In late 1956 the process of nationalization as virtually complete, from the largest industrial enterprises and banks down to small artisans. The "national bourgeoisie" thus had also ceased to exist.