$Unique_ID{COW00832} $Pretitle{260} $Title{China Chapter 5D. Living Standards} $Subtitle{} $Author{Thomas R. Gottschang} $Affiliation{HQ, Department of the Army} $Subject{percent per chinese rural average economy kilograms urban economic income} $Date{1989} $Log{} Country: China Book: China, A Country Study Author: Thomas R. Gottschang Affiliation: HQ, Department of the Army Date: 1989 Chapter 5D. Living Standards Progress since 1949 Before 1949 the Chinese economy was characterized by widespread poverty, extreme income inequalities, and endemic insecurity of livelihood. By means of centralized economic planning, the People's Republic was able to redistribute national income so as to provide the entire population with at least the minimal necessities of life (except during the "three bad years" of 1959, 1960, and 1961) and to consistently allocate a relatively high proportion of national income to productive investment. Equally important to the quality of life were the results of mass public-health and sanitation campaigns, which rid the country of most of the conditions that had bred epidemics and lingering disease in the past. The most concrete evidence of improved living standards was that average national life expectancy more than doubled, rising from around thirty-two years in 1949 to sixty-nine years in 1985 (see Mortality and Fertility; Health Care, ch. 2). In 1987 the standard of living in China was much lower than in the industrialized countries, but nearly all Chinese people had adequate food, clothing, and housing. In addition, there was a positive trend toward rapid improvements in living conditions in the 1980s as a result of the economic reforms, though improvements in the standard of living beyond the basic level came slowly. Until the end of the 1970s, the fruits of economic growth were largely negated by population increases, which prevented significant advances in the per capita availability of food, clothing, and housing beyond levels achieved in the 1950s (see Population, ch. 2). The second major change in the standard of living came about as a result of the rapid expansion of productivity and commerce generated by the reform measures of the 1980s. After thirty years of austerity and marginal sufficiency, Chinese consumers suddenly were able to buy more than enough to eat from a growing variety of food items. Stylish clothing, modern furniture, and a wide array of electrical appliances also became part of the normal expectations of ordinary Chinese families. Food While food production rose substantially after 1949, population increases were nearly as great until the 1980s. Production of grain, the source of about 75 percent of the calories in the Chinese diet, grew at an average rate of 2.7 percent a year between 1952 and 1979, while population growth averaged almost 2 percent a year. Total grain output per capita grew from 288 kilograms a year in 1952 to 319 kilograms in 1978, an increase of only 11 percent in 26 years. In 1984, however, a remarkably good harvest produced 396 kilograms of grain per capita, an increase of 24 percent in only 6 years. In 1985 grain output fell below the peak level of 1984, to 365 kilograms per person, and recovered only partially in 1986 to 369 kilograms per capita (see table B; Crops, ch. 6). Other important food items that remained in short supply before the economic reforms included edible oil, sugar, and aquatic products. Production of oil-bearing crops increased at an average rate of about 2 percent a year from 1952 to 1979, and annual consumption of edible oil was less than 2 kilograms per person in 1979. Between 1978 and 1985, output grew at over 16 percent a year, and annual consumption increased to 5.1 kilograms per person. Sugar production grew at an average annual rate of 4.5 percent after 1952, but in 1979 consumption per person still was only 3.5 kilograms per year. From 1979 to 1985, sugar production grew by 10 percent a year, and the total amount of sugar available per person rose to 5.6 kilograms in 1985. Output of aquatic products rose at an average rate of only 2 percent a year between 1957 and 1978 and declined slightly in 1979; between 1979 and 1985, however, output grew at an average rate of 8.5 percent a year, and individual annual consumption rose from 3.2 kilograms to 4.9 kilograms. Pork, eggs, and vegetables were increasingly available before the 1980s (see Animal Husbandry, ch. 6). Annual consumption of pork-the most commonly eaten meat in China-grew from 5.9 kilograms per person in 1952 to 7.5 kilograms per person in the mid-1970s. In 1979 a sharp increase in procurement prices for pork brought about a surge in supply- to 9.6 kilograms per person. Beginning in 1980, availability increased steadily, reaching 14 kilograms of pork per capita in 1985, an increase of 9 percent each year from 1978. Consumption of fresh eggs followed a similar pattern, climbing from an average of just over one kilogram per person in 1952 to almost two kilograms in 1978. The economic reforms elicited rapid increases in the supply of eggs, as they had with pork, and by 1985 consumption had more than doubled, to 5 kilograms of eggs per person a year, for an increase of over 14 percent a year. Vegetables were the major supplement to grain in the Chinese diet and were very important nutritionally. In 1957 annual vegetable consumption per capita in Chinese cities averaged 109 kilograms and by 1981 had grown to 152 kilograms. Household survey data indicated that in 1985 vegetable consumption had leveled off, at 148 kilograms per person per year in urban areas and 131 kilograms in the countryside, as people used their higher incomes to increase their purchases of more expensive foods, such as meat, fish, and edible oil. As of the late 1970s, famine and malnutrition were no longer major problems in China, but the average diet lacked variety and provided little more than basic nutritional requirements. Protein, in particular, was barely adequate for health maintenance. By the mid-1980s the availability of food had improved dramatically. Bustling street markets offered a good variety of fruits and vegetables throughout the year, and per capita consumption of high-protein foods-meat, poultry, eggs, and fish- -increased by 63 percent over the 1979 level, to nearly 27 kilograms a year in 1985. Clothing Before the reform period, clothing purchases were restricted by rationing. Cotton cloth consumption was limited to between four and six meters a year per person in the 1970s. In the 1980s one of the most visible signs of the economic "revolution" was the appearance in Chinese cities of large quantities of relatively modern, varied, colorful, Western-style clothes, a sharp contrast to the monotone image of blue and gray suits that typified Chinese dress in earlier years. Cloth consumption increased from eight meters per person in 1978 to almost twelve meters in 1985, and rationing was ended in the early 1980s. Production of synthetic fibers more than tripled during this period; in 1985 synthetics constituted 40 percent of the cloth purchased (see Textiles, ch. 7). Consumers also tripled their purchases of woolen fabrics in these years and bought growing numbers of garments made of silk, leather, or down. In 1987 Chinese department stores and street markets carried clothing in a large variety of styles, colors, quality, and prices. Many people displayed their new affluence with relatively expensive and stylish clothes, while those with more modest tastes or meager incomes still could adequately outfit themselves at very low cost. Consumer Goods As with food supplies and clothing, the availability of housewares went through several stages. Simple, inexpensive household items, like thermoses, cooking pans, and clocks were stocked in department stores and other retail outlets all over China from the 1950s on. Relatively expensive consumer durables became available more gradually. In the 1960s production and sales of bicycles, sewing machines, wristwatches, and transistor radios grew to the point that these items became common household possessions, followed in the late 1970s by television sets and cameras (see Other Consumer Goods, ch. 7). In the 1980s supplies of furniture and electrical appliances increased along with family incomes. Household survey data indicated that by 1985 most urban families owned two bicycles, at least one sofa, a writing desk, a wardrobe, a sewing machine, an electric fan, a radio, and a television. Virtually all urban adults owned wristwatches, half of all families had washing machines, 10 percent had refrigerators, and over 18 percent owned color televisions. Rural households on average owned about half the number of consumer durables owned by urban dwellers. Most farm families had 1 bicycle, about half had a radio, 43 percent owned a sewing machine, 12 percent had a television set, and about half the rural adults owned wristwatches. Housing Housing construction in towns and cities lagged behind urban population growth. A 1978 survey of housing conditions in 192 cities found that their combined population had increased by 83 percent between 1949 and 1978, but housing floor space had only grown by 46.7 percent. In 1978 there were only 3.6 square meters of living space per inhabitant in these cities, a reduction of 0.9 square meter since 1949. To remedy this problem, construction of modern urban housing became a top priority in the late 1970s, and by the mid-1980s new high-rise apartment blocks and the tall cranes used in their construction were ubiquitous features of large cities. Some apartments in the new buildings had their own lavatories, kitchens, and balconies, but others shared communal facilities. Nearly all were of much higher quality than older houses, many of which were built of mud bricks and lacked plumbing. By 1981 living space in urban housing had increased to 5.3 square meters per person, and by 1985 the figure was 6.7 square meters (see Housing Construction, ch. 7). Despite this progress, scarcity of housing continued to be a major problem in the cities, and many young married couples had to live with parents or make do with a single room (see Housing, ch. 3). Housing conditions in rural areas varied widely. During the 1960s and 1970s, thousands of production brigades built sturdy, sanitary houses and apartments and in many cases entire new villages. With the introduction of the responsibility system and the more than doubling of rural incomes in the early 1980s, another wave of housing construction took place as farm families moved quickly to invest in their major personal assets- their homes-which for the most part were privately owned. Many farm family houses lacked running water, but virtually all had electricity and were considerably more spacious than urban dwellings. In 1980 farm homes averaged 9.4 square meters of living space per person, and by 1985 the figure had risen to 14.7 square meters. Despite extensive construction of new housing, in poorer regions some farm families still lived in traditional dwellings, such as mud-brick and thatch houses or, in some regions, cave houses. Many of the nomadic herders in Nei Monggol, Xinjiang, and Xizang (Tibet) autonomous regions still lived in tents or felt yurts. In the Chang Jiang Valley and in south China, some fishing and boat transportation communities continued to live on their vessels (see Minority Nationalities, ch. 2). Income Distribution Income differences in China since the 1950s have been much smaller than in most other countries. There was never any attempt, however, at complete equalization, and a wide range of income levels remained. Income differences grew even wider in the 1980s as the economic reform policies opened up new income opportunities. More than two-thirds of all urban workers were employed in state-owned units, which used an eight-grade wage system. The pay for each grade differed from one industry to another, but generally workers in the most senior grades earned about three times as much as beginning workers, senior managers could earn half again as much as senior workers, and engineers could earn twice as much as senior workers. In 1985 the average annual income of people employed in state-owned units was -Y1,213. An important component of workers' pay was made up of bonuses and subsidies. In 1985 bonuses contributed 13 percent of the incomes of workers in state-owned units; subsidies for transportation, food, and clothing added another 15 percent. One of the most important subsidies-one that did not appear in the income figures-was for housing, nearly all of which was owned and allocated by the work unit and rented to unit members at prices well below real value. In 1985 urban consumers spent just over 1 percent of their incomes on housing (see Wages and Benefits; Urban Society, ch. 3). The 27 percent of the urban labor force that was employed in collectively owned enterprises earned less on average than workers in state-owned units. The income of workers in collectively owned enterprises consisted of a share of the profit earned by the enterprise. Most such enterprises were small, had little capital, and did not earn large profits. Many were engaged in traditional services, handicrafts, or small-scale, part-time assembly work. In 1985 workers in urban collective units earned an average annual income of -Y968. In the more open commercial environment of the 1980s, a small but significant number of people earned incomes much larger than those in regular state-owned and collectively owned units. Employees of enterprises run by overseas Chinese (see Glossary), for instance, earned an average of -Y2,437 in 1985, over twice the average income of workers in state-owned units. The small but dynamic domestic private sector also produced some lucrative opportunities. Private, part-time schools, which appeared in large numbers in the mid-1980s, offered moonlighting work to university professors, who could double or triple their modest incomes if they were from prestigious institutions and taught desirable subjects, such as English, Japanese, or electronics. Small-scale entrepreneurs could earn considerably more in the free markets than the average income. Business people who served as a liaison between foreign firms and the domestic economy could earn incomes many times higher than those of the best- paid employees of state-owned units. A handful of millionaire businessmen could be found in the biggest cities. These people had owned firms before 1949, cooperated with the government in the 1950s in return for stock in their firms, and then lost their incomes in the political turmoil of the Cultural Revolution. In the late 1970s and early 1980s, when these businessmen were politically rehabilitated, their incomes were returned with the accrued interest, and some suddenly found themselves quite wealthy. Although the number of people earning incomes far beyond the normal wage scale was tiny relative to the population, they were important symbols of the rewards of economic reform and received a great deal of media attention. In 1985 most of these people worked in enterprises classified as "units of other ownership" (private rather than state- or collectively owned enterprises). These enterprises employed only 440,000 people out of the total urban labor force of 128 million in 1985 and paid average annual salaries of -Y1,373, only slightly higher than the overall urban national average. In China, as in other countries, an important determinant of the affluence of a household was the dependency ratio-the number of nonworkers supported by each worker. In 1985 the average cost of living for one person in urban areas was -Y732 a year, and the average state enterprise worker, even with food allowance and other benefits added to the basic wage, had difficulty supporting one other person. Two average wage earners, however, could easily support one dependent. Families with several workers and few or no dependents had substantial surplus earnings, which they saved or used to buy nonessential goods. An important positive influence on the per capita consumption levels of urban families was a decline in the number of dependents per urban worker, from 2.4 in 1964 to 0.7 in 1985. In farm families the dependency ratio fell from 1.5 in 1978 to 0.7 in 1985. Farm incomes rose rapidly in the 1980s under the stimulus of the responsibility system but on average remained considerably lower than urban incomes. Household surveys found that in 1985 average net per capita income for rural residents was -Y398, less than half the average per capita urban income, which was -Y821. The value of goods farmers produced and consumed themselves accounted for 31 percent of rural income in 1985. The largest component of income in kind was food, 58 percent of which was self-produced. Farm family members on average consumed much less of most major kinds of goods than urban residents. For instance, a household survey found in 1985 that the average urban dweller consumed 148 kilograms of vegetables, 20 kilograms of meat, 2.6 kilograms of sugar, and 8 kilograms of liquor. At the same time, a survey of rural households found that the average rural resident consumed 131 kilograms of vegetables, 11 kilograms of meat, 1.5 kilograms of sugar, and 4 kilograms of liquor. Differences of a similar nature existed for consumer durables. Another indication of the gap between urban and rural income levels was the difference in personal savings accounts, which in 1985 averaged -Y277 per capita for urban residents but only -Y85 per capita for the rural population. There was great variation in rural income levels among different provincial-level units, counties, towns, villages, and individual families. While the average net per capita income for rural residents in 1985 was -Y398, provincial-level averages ranged from a high of -Y805 for farm families living in Shanghai to a low of -Y255 for the rural population of Gansu Province. The fundamental influence on rural prosperity was geography (see Physical Environment, ch. 2). Soil type and quality, rainfall, temperature range, drainage, and availability of water determined the kinds and quantities of crops that could be grown. Equally important geographic factors were access to transportation routes and proximity to urban areas (see Internal Trade and Distribution, ch. 8). The highest agricultural incomes were earned by suburban units that were able to sell produce and sideline products in the nearby cities. Under the responsibility system, household incomes depended on the number of workers in each household and the household's success in holding down production costs and in supplying goods and services to local markets. Most of the rural families with the highest incomes-the "10,000-yuan households" -were "specialized households" that concentrated family efforts on supplying a particular service or good. Many of these families owned their own equipment, such as trucks or specialized buildings, and operated essentially as private concerns. An increasingly important influence on rural incomes in the mid-1980s was the expansion of nonagricultural rural enterprises, often referred to as "township enterprises." These were factories, construction teams, and processing operations, most of which were owned by collectives, primarily villages, towns, and townships. Some were owned by voluntary groups of families. Township enterprises were considered by the government to be the main source of employment for rural workers who were leaving agriculture because of rising productivity under the responsibility system. By the end of 1986, township enterprises employed 21 percent of the rural labor force. The movement of rural labor into township enterprises helped to increase average rural incomes because of the higher productivity in nonagricultural jobs. In 1986 industrial workers in rural areas produced an average annual value of -Y4,300 per person, compared with about -Y1,000 per farmer in the same year. The change in farm production from primarily collective to primarily household operations is reflected in household survey data on the sources of rural incomes. Before the 1980s farmers received income in the form of shares of the profits earned by their production teams plus supplementary income from household sideline activities. In 1978 two-thirds of the net income of farm families came from the collective, and only 27 percent was derived from household production. With the shift to the responsibility system these ratios were reversed. By 1982 the collective provided only 21 percent of farm income, while household production provided 69 percent. In 1985 the collective share of farm income had fallen to just over 8 percent, and the family production share had risen to 81 percent. Perhaps the most serious gaps in living standards between rural and urban areas were in education and health care. Primary schools existed in most rural localities, and 80 percent of the country's primary-school teachers worked in rural schools. Secondary schools were less widely distributed; only 57 percent of the total number of secondary-school teachers served in rural schools. Most rural schools were less well equipped and their staffs less adequately trained than their urban counterparts. Health care had been greatly improved in rural areas in the 1960s and 1970s through sanitation campaigns and the introduction of large numbers of barefoot doctors (see Glossary), midwives, and health workers. Most modern hospitals, fully trained doctors, and modern medical equipment, however, were located in urban areas and were not easily accessible to rural families. In 1985 two-thirds of all hospital beds and medical staff personnel were located in urban hospitals. The economic reforms affected rural education and health care positively in places where farm communities used their higher incomes to improve schools and hospitals and negatively in localities where the reduced role of the collective resulted in deterioration of collective services (see Health Care, ch. 2; Primary Education, ch. 4; Secondary Education, ch. 4). Potential for Achieving National Goals By 1987, under the stimulus of the reform program, the Chinese economy had made major strides toward achieving modernization and improved living standards. The potential for further improvements in efficiency and productivity was greatly increased by the revival of the education system, the opening of the economy to broader trade and cooperation with other countries, the expanded use of the market to enliven commerce and production, and the increased decision-making power of individual economic units (see Modernization Goals in the 1980s, ch. 4; Trade Policy in the 1980s, ch. 8). The country's most important resource was its labor force, the largest in the world. The rapid expansion and improvement of the education system that began in the late 1970s was creating larger numbers of workers who were skilled and well educated, as well as the first substantial numbers of advanced-degree holders to staff the nation's universities and research institutes. In addition, the decentralization of management encouraged the participation in planning and decision making of growing numbers of local and enterprise-level managers, planners, administrators, and scientists. It also trained future economic leaders for higher administrative responsibilities. In terms of material resources, China was adequately endowed to meet the needs of modernization in all but a few materials. Under the new policy of encouraging cooperation and joint ventures with foreign firms, advanced technology was more widely used to exploit China's large deposits of iron ore and other important minerals, along with the country's vast coal and petroleum reserves and its enormous hydroelectric potential-the largest in the world. Much of the investment in expanding the transportation network in the 1980s was aimed at improving access to previously remote mineral and energy resources for both domestic needs and foreign trade. The most stringent resource constraint was the limited amount of arable land, which actually declined in the 1980s as cropland was appropriated for new rural housing and urban expansion. Between 1978 and 1985, the total area sown to crops declined by over 4 percent. The loss of farmland, however, was more than compensated for by improved productivity of the land that remained under cultivation. Farmers expanded the irrigated area, increased fertilizer application, acquired improved crop varieties, and made better use of comparative advantage in determining which crops to grow, resulting in an average rate of growth in the value of crop production of better than 5 percent a year over the same 7-year period. Although agricultural growth rates had begun to fall off in the mid-1980s, the incentives of the responsibility system and greater access to international technical advances suggested that the farm sector could continue to meet the needs of the growing economy in the foreseeable future. The industrial sector, while much less advanced than those of the developed countries, was nonetheless a solid base for modernization. Industrial enterprises were dispersed throughout the country and included units capable of producing all major kinds of machinery, equipment, chemicals, building materials, and light industrial goods. Chinese enterprises could make most of the products required for modernization, and the growing pool of industrial technicians and managers was increasingly capable of effectively integrating advanced foreign technology into Chinese production processes. Key industries were being technologically strengthened by the purchase of advanced foreign equipment and the adoption of modern management techniques. Despite promising potential, formidable obstacles still impeded the drive for modernization. Physical restraints included a renewed increase in birth rates and population growth rates as the number of women of child-bearing age began to rise in 1986 and 1987. Some crucial resources-especially educated personnel and modern equipment-still were in very short supply because of the sheer size of the economy. In the realm of policy, the administration faced the daunting problem of trying to integrate market measures-for efficiency-with government planning and control, the source of stability. In 1987 both kinds of mechanisms exerted extensive influence, with the result that market efficiency was hindered by government intervention and government plans were undermined by off-plan activities. Finally, the most serious concern of government leaders was the possibility of future political upheavals. While nearly all Chinese people enjoyed better living conditions as a result of the progress achieved by the reform program, the new policies also had given rise to new social problems and political tensions. Increasing crime and corruption, greater emphasis on the profit motive, widening income disparities, and inflation aroused resistance in many conservative quarters and resulted in the political struggle that caused Hu Yaobang to be forced from his position as Chinese Communist Party general secretary in early 1987. By mid-1987 it was not yet clear what the outcome of the struggle would be or how it would affect the future course of economic reform. * * * Among the most useful works on economic development in China before 1949 are Mark Elvin's The Pattern of the Chinese Past and Dwight H. Perkins' Agricultural Development in China, 1368-1968. These books examine the fundamental relationships between technology, population, society, and economic growth in China. A good, brief integration of much of the scholarship on the Chinese economy in the modern period may be found in Ramon H. Myers' The Chinese Economy Past and Present. China's Modern Economy in Historical Perspective, edited by Perkins, is a valuable collection of articles by leading scholars dealing with various aspects of China's modern economic development. A concise description of the Chinese economy in the eighty years before 1949 is presented in two brief works by Albert Feuerwerker, The Chinese Economy, ca. 1870-1911 and Economic Trends in the Republic of China, 1912-1949. The most authoritative and detailed sources of information on the economy of the People's Republic are the annual statistical yearbooks compiled by the State Statistical Bureau. As of 1987 the most recent was Statistical Yearbook of China, 1986, which contains updated information on most major aspects of the Chinese economy since 1949, as well as a set of explanatory notes that define the terms and measures used. Another useful annual Chinese publication is the Almanac of China's Economy. Recent general treatments of the Chinese economy by Western scholars include a good overview, China's Political Economy by Carl Riskin, and a mathematically oriented work, The Chinese Economy by Gregory C. Chow. Some of the earlier classic works on the post-1949 economy are China's Economic Revolution by Alexander Eckstein, China's Economy by Christopher Howe, China's Economic System by Audrey Donnithorne, The Economy of the Chinese Mainland by Ta-Chung Liu and Kung-Chia Yeh, and The Chinese Economy under Communism by Nai-Ruenn Chen and Walter Galenson. China's Development Experience in Comparative Perspective, edited by Robert F. Dernberger, is a collection of studies by noted economists dealing with China's modern economic development. A good description of the Maoist economic model is presented in John G. Gurley's China's Economy and the Maoist Strategy. The United States Congress Joint Economic Committee has published a series of useful volumes on the Chinese economy: An Economic Profile of Mainland China (1967); People's Republic of China: An Economic Assessment (1972); China: A Reassessment of the Economy (1975); Chinese Economy Post-Mao (1978); China under the Four Modernizations (1982); and China's Economy Looks Toward the Year 2000 (1986). There are many useful works dealing with specific aspects of the Chinese economy. Economic planning is analyzed by Perkins in Market Control and Planning in Communist China and more recently by Nicholas R. Lardy in Economic Growth and Distribution in China. The banking system is described in Money and Monetary Policy in Communist China by Katherine H. Hsiao and in China's Financial System by William A. Byrd. The Political Economy of Reform in Post-Mao China, edited by Elizabeth J. Perry and Christine Wong, is a collection of insightful analyses of the reform process. Prominent among the many works on Chinese agriculture are Food for One Billion: China's Agriculture since 1949 by Robert C. Hsu, Agriculture in China's Modern Economic Development by Lardy, and The Chinese Agricultural Economy, edited by Randolph Barker, Radha Sinha, and Beth Rose. Current economic information appears in several official English-language periodicals from China, including Beijing Review, China Daily, and China Reconstructs. Major periodicals published outside China that monitor the Chinese economy include Asian Wall Street Journal, China Quarterly, Economist, and Far Eastern Economic Review. (For further information and complete citations, see Bibliography.)