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$Unique_ID{COW00836}
$Pretitle{260}
$Title{China
Chapter 7B. Manufacturing}
$Subtitle{}
$Author{Michael L. Waddle}
$Affiliation{HQ, Department of the Army}
$Subject{production
industry
china
plants
million
tons
steel
equipment
percent
large}
$Date{1989}
$Log{}
Country: China
Book: China, A Country Study
Author: Michael L. Waddle
Affiliation: HQ, Department of the Army
Date: 1989
Chapter 7B. Manufacturing
China's manufacturing sector developed according to the principle of
"walking on two legs," a policy of self-reliance introduced in the 1950s. In the
1980s one leg consisted of the state-funded and state-controlled large and
medium-sized plants with the most qualified personnel and the most advanced
equipment. The other leg was small-scale plants using inferior equipment and
large amounts of local labor. Together, the two sectors produced a wide range of
industrial products. In most cases the larger plants accounted for the bulk of
production, but the smaller enterprises were increasing their share and
producing a significant percentage of cement, fertilizers, and farm machinery.
Iron and Steel
Before 1949 the iron and steel industry was small and dispersed; the
Japanese had built the only modern steel facility just after World War I at
Anshan, Liaoning Province. Although Japan eventually built nine blast furnaces
in Anshan, total steel output by all plants never exceeded 1 million tons
annually. Much of the Japanese equipment was either damaged in the Chinese civil
war (1945-49) or removed by the Soviets at the end of World War II.
Since the establishment of the People's Republic, considerable investment
has consistently gone to expand steel output. Steel production, however, has
been very sensitive to changes in economic policies and political climate (see
fig. 12). Steel output rose steadily in the 1950s, when Soviet advisers helped
establish the basis of the iron and steel industry, installing numerous
Soviet-designed blast and open-hearth furnaces. The Great Leap Forward saw a
significant increase in the number of primitive backyard furnaces producing
poor-quality pig iron; numerous new, small, modern plants; overuse of large
plants; and exaggerated production reports. In 1961 the industry broke down.
Nearly all small plants were closed, and output fell to less than half the
amount reported for 1960. From 1960 to 1965, output gradually recovered as
equipment was repaired; basic oxygen furnaces were purchased from Austria and
electric furnaces from Japan. Production fell in 1967 and 1968 during the
Cultural Revolution but grew rapidly in the relative political stability from
1969 through the early 1970s. In the mid-1970s political upheaval retarded
output, as did the catastrophic Tangshan earthquake of 1976. That event severely
damaged the Tangshan steel plant and the Kailuan coal mines. The latter are
major sources of coking coal. After 1976 output climbed steadily, reaching 34.5
million tons in 1979. Steel production for 1986 was 50 million tons.
Steel was viewed as the cornerstone or "key link" of both the Great Leap
Forward and the Four Modernizations programs (see Economic Policies, 1949-80,
ch. 5). But the post-Mao leadership was determined not to repeat the
economically disastrous Great Leap Forward policies: in 1978 it called for a
period of readjustment and a cutback in steel investment. It had set a goal,
however, of producing 80 million tons of steel by 2000. Production targets were
to be met by renovating and improving existing facilities, rather than building
new ones. Improvements in existing plants reduced steel-industry energy
consumption from 73.8 million tons of coal in 1978 to 69.1 million tons in 1983,
and production increased by 26 percent. The Chinese realized they would need
outside assistance to fully modernize their steel industry. They sought
hardware, technology transfer, and managerial and planning assistance.
In 1987 China was the world's fifth largest producer of iron and steel but
lagged far behind developed countries in production methods and quality. Most
steel capacity was in open-hearth furnaces with basic oxygen furnaces, electric
furnaces, and side-blown converters. Much of the iron and coking coal used in
making steel was of low quality. Approximately 25 percent of the country's coal
went for steel production in 1985. In 1985 capital construction, considered
excessive by the Chinese, exacerbated existing shortages of rolled steel, and
imports filled 25 percent of domestic demand.
The Ministry of Metallurgical Industry reported in 1985 that China had 13
plants capable of producing at least 1 million tons per year. Accounting for
approximately 65 percent of total production, these mills were built mostly
during the 1950s. The Anshan plant was the oldest and most productive of all,
producing 7 million tons per year. The next largest was in Wuhan. It was
constructed in the 1950s with Soviet aid. China began construction in 1978 on
its first integrated steel complex, the Baoshan iron and steel works in
Shanghai, but the completion date moved from 1982 to 1985 and finally to 1988.
Besides the larger plants, about 800 smaller mills were dispersed
throughout the country in 1985. They ranged from specialty mills producing
500,000 tons per year to very small operations under local jurisdiction or other
ministries. Many of the smaller mills were legacies of the Great Leap Forward,
when local authorities had hurriedly established their own steel-making
facilities. In the mid-1980s the government hoped to phase out these inefficient
plants in favor of larger, more productive plants.
In the late 1980s, it was apparent that steel output would remain
insufficient to meet the needs of the Four Modernizations. During the period
covered by the Seventh Five-Year Plan, imports were expected to average 41
percent of domestic output. Thin rolled sheets, used to make such items as motor
vehicles, washing machines, and refrigerators, were in extremely short supply.
In 1984 China had to import about half its steel sheet and about 80 percent of
its steel plate. Production of tubes and pipes also was inadequate, and
approximately 50 percent of all tubes had to be imported. The country was most
proficient in the production of steel bars, but it still had to import an
estimated 1.8 million tons of rods and bars in 1984. In 1985 China imported a
record 15 million tons of steel, more than two-thirds of it from Japan.
Machine Building
The machinery industry has been a leading priority since the founding of
the People's Republic. The industry expanded from a few small assembly and
repair facilities before 1949 to a large, widely distributed machine-building
sector producing many kinds of modern equipment. However, as of 1987 the overall
level of technology was still relatively backward. In the late 1970s and early
1980s, China intended to use large- scale imports to modernize the machinery
industry but later decided that limiting imports to critical areas would be less
costly. The former Ministry of Machine-Building Industry's plans called for
about 60 percent of the industry's products in 1990 to reach the technological
level of the industrialized countries during the 1970s and 1980s. Products built
to international standards received priority in allocation of funds, materials,
and energy.
In 1987 the machinery industry was distributed throughout the country.
Nearly all counties and towns had one or more machine factories. Major machinery
centers were Shanghai, Tianjin, Shenyang, Beijing, Harbin, Changchun, Taiyuan,
Luoyang, Wuhan, Chongqing, Chengdu, Xi'an, and Lanzhou.
The machinery industry was selected by the State Council to lead the way in
management reform. China's leaders realized that the quality of machinery would
determine the success of modernization in all areas of the economy. The
industry's extreme compartmentalization (a legacy of the Maoist obsession with
self-reliance) showed a