SOME COMMENTS ON ECONOMIC WORK
October 4, 1979
At this forum we shall mainly discuss economic work. I should like to air some ideas on current and future economic work.
1. Economic work is a political task of prime importance and the economic question is an overriding political question. I think that we must concentrate on economic work for a long time to come.
By the political task, we are referring to the four modernizations. We used to have the ambitious goal of realizing the four modernizations by the end of the century. Later we changed the goal the “Chinese-style” modernizations, intending to lower the standard a little. We did this because our per capita GNP will not actually grow very high. According to statistics from Australia, the per capita GNP in the United States was more than US $8,700 in 1977, ranking fifth place in the world. That of Kuwait was more than $11,000, ranking first place; that of Switzerland was $10,000, ranking second place; that of Sweden was more than $9,400, ranking third place; and that of Norway was more than $8,800, ranking fourth place. Will China’s per capita GNP reach $1,000 by the end of the century? Not long ago, I said that when our per capita GNP reached that figure we will be in a much better position and able to provide more support to the poor countries of the Third World. We cannot do so now. China’s per capita GNP is probably below $300, so it is hard for us to increase it even 200 or 300 per cent. We shall have to work as hard as we did before. Even lowering the previous goal and fulfilling the lower targets, we shall still spare no effort to promote economic development and we will do every aspect of our work effectively. It is impossible for us to accomplish the four modernizations by empty talk. Economic development should be the central task of Party committees at all levels.
In addition to economic work, the Party committees perform many other kinds of work, but many issues involve economic affairs. For instance, the question of ideological line requires thorough discussion. Instead of conducting campaigns, such endeavours should be accomplished through routine and chiefly economic work. If we combine discussions concerning the criterion for judging truth with practical work, we shall achieve better results and avoid formalism. For example, a production team should discuss how to improve productivity by making full use of every hill, water surface, plot and corner. A factory should discuss how to expand production, increase variety, improve the quality of its products, reform administration, open up markets, solve the workers’ and staff’s problems, and help eliminate the practice of anyone taking advantage of social connections to secure special privileges. If we discuss those questions and emancipate our minds, we shall achieve better results. We should advocate a method of work that encourages every production team, factory, and school to solve their own problems. Some movements which we carried out, learning theory for example, failed to combine with actual practice. As a result, people became fed up. Of course, I am not saying that political work is no longer necessary. Some people think that closure of the political departments means that political work is not necessary. What are the Party, the trade unions, the Communist Youth League, and the women’s federations doing? They are doing political work. We need to do this work earnestly. However, political work should be carried out through economic work and a political problem should be settled from an economic angle. For example, the issues of implementation of the Party’s policies, of employment, and of the return to our cities of educated urban young people who work in the countryside and in mountainous areas are all social and political problems that should be solved mainly from an economic perspective. If the economy does not develop, these problems can never be solved. The above-mentioned policies are primarily policies concerning the economy. To create more jobs, Beijing, Tianjin and Shanghai are practising collective ownership. They are using economic policies to settle political problems. In solving such problems, we should have a broad outlook and adopt flexible policies. In a word, we should use economic methods to solve political and social problems. We should open all possible avenues and try all possible means to settle problems that arise. Now that we have set a high goal, we must realize it and not indulge in empty talk. As I said before, our economic work should be done more carefully.
2. I favour the idea that we should encourage people. But I must stress that we need true, not false encouragement. That is to say, our efforts should produce practical results. Scientifically speaking, we should act according to realistic principles. Economic work should be done in accordance with economic law. We must follow scientific methods without practising fraud or chanting empty slogans.
If we want to do our work according to economic law, we should train people to act accordingly. We need specialists. There are so many people who are jacks-of-all-trades and masters of none serving as cadres. We have 18 million cadres but lack technical cadres, technicians, managerial staff, and other professionals. If we can increase by 1 million our judicial cadres, employ an additional 2 million qualified teachers, and utilize 5 million scientific researchers and 2 million capable businessmen and businesswomen, progress will be much easier. Our present personnel structure is irrational and it will take a long time to change it, so we need to set about this now. Otherwise we shall not be able to operate excellent machinery and equipment. We should be confident that we can train such people. Comrade Fang Yi related to me that we have fine directors in the departments and bureaus of the Ministry of the Metallurgical Industry. These intellectuals are between 40 and 50 years old and graduated from universities and colleges in the 1950s or 1960s. They are very energetic, conversant in professional knowledge and good at negotiating with foreigners. I believe that such people can be found in all departments. Why aren’t they promoted? What are the obstacles to this? We must eliminate these obstacles. Of course, this is easy to say but it must be accomplished step by step. If we fail in this endeavour, our goals will be slow to achieve and may become hopeless. Organizational line is a major question. We do have talented people who have been stifled. With regard to the personnel system, which is connected with the promotion of talented people, we should establish a retirement system. All departments and units in the country should establish special sections to minister to those who are retired and who can serve as advisors. These sections should also take charge of their political treatment and welfare. If we properly resolve the question of retirement, we can easily utilize talented people. It requires much effort, but we have to do this now.
Giving real encouragement also requires us to do our work in a correct manner. For instance, our targets should not be exaggerated and our products should be up to standard and marketable. If your products are not in demand, why should you manufacture so many? If there are no raw materials, how can you plan to manufacture products? If materials are not up to standard, what will you be able to do with your products? By true encouragement I mean that we should emancipate our minds and solve problems in a realistic manner. When we improved the railway system in 1975, there was a problem: it was difficult for railway workers, especially engine drivers, to take a bath. The workers got dirty during their work and needed to take a bath. Was it that difficult for such a large enterprise to produce a few shower nozzles? Nothing was done. I think that such is the case throughout the country. Solutions depend on human effort. If someone acts, results will follow. When there are many problems, people often simply give up trying to solve them. Consequently, nothing is accomplished.
3. I should like to talk about economic readjustment. The essence of the eight-character policy is readjustment. What is the purpose of readjustment? As I see it, it is to create conditions so as to ensure a better and faster growth rate during and especially after economic readjustment. During a recent discussion about the growth rate, we considered whether to increase the total value of industrial and agricultural output by 8 or by 6 per cent over the next two years. In my opinion, it does not matter whether the growth rate is higher or lower. The increase by 6 per cent is all right, provided that this is a realistic and not an inflated figure. During the “cultural revolution”, the figures published were falsified. There were duplicate calculations, products were not marketable, and their quality was very poor. It is good for us to consider the history when we ponder current issues. In the future, the growth rate figures must be genuine and not be exaggerated, and our products must be of high quality. In this way, the true level of our economic development will be reflected. If we can accomplish this, other methods of work can be altered, our managerial and technological levels can be raised, and many more benefits can be secured. We should also realize that we cannot count on achieving this unless we quicken our pace in 1982 and 1983. Therefore, we have to make preparations in advance. The current economic readjustment should thus include preparatory work. If we do not start it now, there will be no new production capacity. It takes five or six years to open a mine and about five years to build a power plant. Some projects require funding not at the beginning, but after two or three years. If we do not make preparations now, worry later will be useless. There are many examples of this. It will be too late if we do not begin to upgrade and renovate enterprises, apply new technologies and train key technical staff. We should look both backward and forward and take a long-range view. It is not enough for us to project our economic work to 1982. Starting in 1983, we should have a reasonable growth rate, which cannot be achieved at the last minute. We should start the work now, including specific projects. This requires that in making plans and considering questions, we should have a broad outlook, for example, plans to be implemented three years down the road.
4. I am proposing that we thoroughly research how to use foreign capital. I agree with the analysis made by Comrade Chen Yun that foreign capital falls under two categories: invested foreign currency and loans for equipment. No matter what category foreign capital belongs to, we should utilize it, because the chance to do so does not arise often and it is a great pity if we do not make use of this opportunity. After World War II, some countries devastated by war, including a few European countries and Japan, developed by using loans, but mainly by importing technology and patents. If we can make good use of this opportunity, we may attract even more foreign capital. The cardinal issues are how to make efficient use of foreign capital, how to make every project bring about economic returns as quickly as possible, and how to solve the problem of repayment. It is a very important policy to use foreign capital, and I think that we should adhere to this policy. As for the methodology, we should focus mainly on establishing joint ventures as well as conducting compensatory trade and allowing foreign entrepreneurs to set up factories in China. When I visited Singapore, I discovered how the country used foreign capital. Singapore enjoys three benefits from its foreign-funded factories. First, 35 per cent of the profits from foreign-funded enterprises were turned over to the government as taxes. Second, workers received earnings for their labour. Third, foreign-funded enterprises encouraged the development of other services and trades and brought about more income for Singapore. We should weigh the advantages and disadvantages, do our accounting and be determined to use foreign capital even if we suffer some losses. In any case, foreign-funded enterprises create new productive capacities in China and help some of our enterprises to expand. I think that in studying financial and economic questions, we should concentrate on and take advantage of expertise in using foreign capital. If this is not done, it will be a great pity. At present, we are experiencing circumstances which allow us to do this. The reason why foreigners come to invest in China is that they judge that China really is solvent. China has rare metals and all kinds of mineral resources, so foreigners know they can make profits here. If we were not solvent, no one would invest in China. We must demonstrate solvency in every project introduced from abroad. We should launch new projects in order to gain more experience. Comrade Chen Yun has proposed that we research project one by one, and I agree with his view. Foreign entrepreneurs invest here in order to make a profit, so we should ensure that they can make more profits from investments in China than they can make through investments in other countries. In this way, our country will be more competitive. We have inexpensive labour, which is to our advantage. However, we should not suffer enormous losses. So long as we continue to launch projects, we can gradually learn how to attract foreign investments. In addition, projects introduced from abroad must help our enterprises to expand. In other words, we can and should provide much equipment and many services for projects introduced from abroad. In the case of some machines and equipment, we can utilize drawings and specifications provided by foreign entrepreneurs and produce them ourselves. In this way, a project introduced from abroad will help some of our industries to develop. After we master imported technologies, we can use them in other fields.
5. I should like to talk about our system. Is our financial system centralized or decentralized? I think that it is inadequately centralized as well as inadequately decentralized. Since the central authorities control only limited revenue, can this really be called a centralized system? On the whole, our financial system is comparatively centralized. We need to delegate some financial resources to local authorities so that the latter have more financial power and more room for manoeuvre. This is the general financial principle we should establish. However, our financial system is inadequately centralized. I am unable to make concrete proposals concerning specific aspects of finance which should be more centralized and what financial control should be delegated to local authorities. Therefore, you should discuss this. I assure you that, in any case, we should continue to give enterprises more decision-making power, because this helps us to expand production. In the past, we exercised a too centralized management of the economy; this impeded economic development. Our system also exercised a too rigorous control over some sectors, in particular, foreign trade. Too many regulations are not conducive to the development of foreign trade or an increase in foreign earning.For example, the iron and steel products of the Wuhan Iron and Steel Company are in demand in foreign markets. However, according to the current international price for iron and steel, for every ton exported, we suffer a 40 yuan loss. Why can’t our government provide a subsidy of 40 yuan for every ton exported, which will then bring in more foreign currency? Many countries subsidize exports. So this problem involves the superstructure, our system, and policies. We should encourage the export of products which are in demand, because this is very advantageous and brings in foreign currency. There are many complaints about our finance departments and banks. Some feasible projects need only an investment of several hundred thousand yuan and can bring in profits very quickly. However, these projects cannot be launched because of limitations imposed by the financial and banking systems. I am afraid that this situation occurs often. If we exercise a too rigorous control over the economy and there is no room for manoeuvre, we shall be stifled. Of course, we must act prudently with projects that require investments of up to tens of millions of yuan. Some of these projects can bring us quick profits, therefore, the finance departments and banks should support them. In this way, the economy will thrive. This is not simply a problem of financial centralization or decentralization. We must truly operate our banks on a commercial basis. Why have so many unmarketable products been stockpiling in every province and city? One reason for this is that under our present financial system we allocate funds rather than grant loans by banks. This system must be reformed. Any company that wants to purchase materials should obtain loans from banks, repaying them with interest.
Local authorities may not have a full understanding of some of these matters. I think that most of the suggestions made by comrades from various localities are good. But I should like to emphasize one point. If the central authorities do not have at their disposal a certain amount of funds, many undertakings that should be initiated but would require investments beyond the financial capability of local authorities will not be initiated. Some key projects that can only be invested in by the central authorities may be affected. Most enterprises in China, including some major enterprises, have been placed under the authority of the localities, so the central authorities have only a limited amount of income from the enterprises which remain under their control. This problem needs to be studied. At present, people often say that the central authorities centralize too much power and delegate too little to local authorities, and that they do not reflect on the issue of what should and must be centralized. However, the central authorities must ensure that some power be centralized.
Naturally, people have differing opinions about economic problems. Since our country is very big and our aspirations are very lofty, all of us should pool our wisdom in order to settle the question of how to develop the economy smoothly, withstand risks, overcome difficulties and barriers, and seek rapid economic development. Therefore, at this meeting you should fully raise any pertinent issues. I propose holding a lively face-to-face debate and avoid any covert politics. Truth prevails following debate. Some comrades have proposed that the central authorities and comrades from all provinces and municipalities reveal their tentative plans. At this meeting, not all of their problems can be solved. After problems are posed, we should sort them out, weigh the advantages and disadvantages and decide what to do. We should never think that our solutions and ideas are completely correct. Comrades from the various localities have made many suggestions to the central authorities, some of which are very acute. This should give no cause for criticism, because it is quite right for them to consider one matter or problem from a certain angle and in light of the conditions existing in their respective provinces and municipalities. From the perspective of considering the country as a whole, it may be impossible to solve their problem. At present, we should strive for consensus and take the overall situation into account. At this meeting, problems will be posed first, and then the central authorities, in particular, the Financial and Economic Commission, will sort them out and derive fairly workable solutions to them. The reason I say this is that solutions should be practical. It is impossible for solutions to be completely correct. We cannot find panaceas and our solutions must be tested through practice in the days to come. Practice should be our criterion for judging truth. We should improve on these solutions after a couple of years. However, this will not work if we cannot reach a consensus, in which case it will be very difficult to solve problems. Consequently, since cadres spend days merely drawing circles around their names on documents submitted for approval and await the decisions of others, matters that should be handled rapidly are handled slowly and problems that should be solved cannot be solved. At present, we need to reach a common understanding. If we reach a consensus, we can make concerted efforts.
6. We should lose no time in increasing production and economizing. If we do this, our economic growth rate could be more than 6 per cent. We should increase production and economize as much as possible. This is not a short-term goal for only this year or next year, but extends far in the future. Over the last two years, we have increased our production capability through capital construction. However, more importantly, we should make good use of our existing production capability. We should stress practical results and do solid work to improve the variety of products and their quality, particularly the latter. Improving the quality of products is the most important issue facing economic readjustment. If we accomplish this, we shall gain more benefits and lay a more solid foundation than ever in our work.
(Excerpt from a talk at a forum of the first secretaries of the provincial, municipal and autonomous regional committees of the Communist Party of China.)