The basic principle for the economic construction of the People's
Republic of China is to develop production and bring about a prosperous
economy through the policies of taking into account both public and private
interests, of benefiting both labour and capital, of mutual aid between
the city and countryside, and circulation of goods between China and abroad.
The state shall coordinate and regulate state-owned economy, co-operative
economy, the individual economy of peasants and handicraftsmen, private
capitalist economy and state capitalist economy, in their spheres of
operations, supply of raw materials, marketing, labour conditions,
technical equipment, policies of public and general finance, etc.
In this way all components of the social economy can, under the leadership
of the state-owned economy, carry out division and co-ordination of
labour and play their respective parts in promoting the development
of the social economy as a whole.
Content
Introduction...
Article 26 gives the basic principles of the economic policy of the PRC. The guiding principle for China's economic construction is to achieve prosperity by balancing public and private interests, benefiting both labor and capital, promoting mutual aid between urban and rural areas, and facilitating international trade. The state coordinates and regulates diverse economic sectors, including state-owned, cooperative, individual, and private enterprises, ensuring their collaboration in areas such as operations, raw materials, marketing, labor conditions, and finance policies, all under the leadership of state-owned enterprises for the overall development of the social economy.
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Almost all areas of this article are dealed with in the upcoming articles. On this page will follow an inventory of the Chinese economic situation in 1949.
China’s industrial landscape was dominated by small, labor-intensive enterprises, with the most modern sectors controlled by foreign interests, primarily concentrated around key ports and coastal cities. This structure left the country’s interior impoverished and transport and communication infrastructures chronically underdeveloped. Thus, the national rehabilitation plan involved the confiscation and nationalization of foreign-controlled enterprises, along with large metallurgical and heavy industry firms owned by entrepreneurs aligned with the GMD. However, private ownership of small and medium enterprises was maintained, as these were viewed by the communists as crucial allies in the revolution and essential for national reconstruction and large-scale industrialization.
The degree of industrial development can be measured, among other things, by the growth of Chinese engineering. Before 1949, Chinese engineering development occurred in three phases:
1. Post-Opium Wars Era (After 1842): Traditional intellectuals began engaging in Western science and engineering by translating scientific texts, establishing academies, and working on early industrial designs. However, their methods and goals remained rooted in traditional science, so they were not considered true engineers.
2. Self-Strengthening Movement (1861-1895): Sending students abroad marked a shift towards formal engineering training. Returning students contributed to early industrial projects, like shipbuilding and railways, significantly advancing China’s Westernization and industrialization efforts.
3. Industrial Policy Emphasis (1920s-1930s): The Ministry of Industry enacted policies supporting industry and business growth. The National Government also reformed higher education, establishing structured degree programs and emphasizing Western science. By 1947, 55 universities, including 33 engineering institutes, supported China’s modern engineering education and industrial policy.
Article 43 of the Common Program makes a statement about the target of the development of science and technology. Yet, planned development of scientific and technological ideas were absent.
However, from the perspective of the social and economic structure, after almost one hundred years’ development, Chinese modem industrialization still lagged behind and China was still an underdeveloped agricultural country. In 1949, Chinese industry as whole only contributed 15.5% of the gross value of the national industrial and agricultural output, with heavy industry taking only 4.5% Following the 1949 communist victory, China relied heavily on the Soviet Union as its main supplier for rebuilding its war-torn industry and economy. However, this dependence was complicated by the legacy of China's technological development. Many factories inherited by the communist regime were originally built with Western machinery and adhered to Western operational standards. The new regime insisted these factories adopt Soviet technological and operational norms. The transition was further complicated by the influence of Western and Japanese industrial practices, as many Chinese industrial elites were trained in these systems. The process of transferring Soviet technology in the early 1950s thus became a contested political and institutional challenge, shaped by national policies, local contexts, and historical influences. While a few major industrial projects received substantial Soviet support, most regional factories experienced Soviet influence indirectly, as a political and institutional transformation rather than a purely technological or economic shift. Local forces often played a decisive role in shaping the adaptation to Sovietization. 12-06-1950 Instructions from the CC on Handicraft Industry Policy
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In August 1952, Mao Zedong declared, “After two and a half years of hard work, the national economy has recovered and is now entering a period of planned construction.” By September, China began laying the groundwork for a planned economy, with the State Development Planning Commission initiating preparations for the First Five-Year Plan. In February 1951 , the enlarged meeting of the Political Bureau decided to implement the first five-year plan for the development of the national economy ( 1953-1957 ) from 1953. The Central Committee set up a leading group for the compilation of the five-year plan (a six-member group), consisting of Zhou Enlai, Chen Yun, Li Fuchun and others.
In January 1952 , the Central Financial and Economic Committee issued the Provisional Measures for the Preparation of National Economic Plan.
In August 1952 ,a Chinese delegation, headed by Premier Zhou Enlai and represented by Chen Yun, Li Fuchun, Zhang Wentian,Su Yu and also included heads of relevant party, government, and military departments, went to the Soviet Union to exchange views with the Soviet Union on the "Outline (Draft) of the First Five-Year Plan" and strive for comprehensive assistance from the Soviet Union. Li Fuchun and a part of the delegation spent 10 months conducting more in-depth exchanges and negotiations with the Soviet government, after returning from the Soviet Union in June 1953, Li Fuchun organized the State Planning Commission and relevant departments to make major revisions to the " Draft " and re-arrange it. On May 15 , 1953 , Li Fuchun and Soviet Mikoyan signed eight documents and related annexes , including the Agreement on the provision of assistance by the government of the USSR to the CPG of PRC in the development of the national economy of China. The preparation of the First Five-Year Plan took four years, starting with the organization's trial preparation of the first draft, and after six revisions, the report was formally passed at the National People's Congress.
This period also marked a significant shift as scientific research was gradually incorporated into the planning process.
Khrushchev’s first priority was to expedite Soviet-supported projects in China’s First Five-Year Plan (1953–1957). Following discussions with Zhou Enlai in late 1952, Stalin agreed to provide economic assistance, though specific projects required approval from Soviet departments. China proposed large, complex projects but faced challenges due to missing documentation, limited baseline data, and lack of negotiation experience. Despite difficulties, both sides signed the “Agreement Regarding Soviet Government Aid to the Chinese Government on Developing the National Economy” on May 15, 1953, committing to build or upgrade 91 enterprises and complete 51 Soviet-assisted projects by April 1953, totaling 141 projects. Li Fuchun later acknowledged that China’s economic development would have been much slower without Soviet support during this period.
However, numerous project details required clarification and further negotiations, with the Soviets conducting site investigations. China’s frequent requests for revisions added delays. Originally, the First Five-Year Plan was to start in September 1953, but due to the extended negotiations, Mao Zedong demanded a draft plan by February 25, 1954, allowing only minimal extensions. Finally, on April 15, Vice-Premier Chen Yun submitted a revised draft to Mao. China’s first Five Year Plan (FYP), greatly assisted by the Soviets, was a programme for import-substituting industrialization. CCP leadership members advocated for China’s self-reliance.
Chen (2022). Page 592 "Soviet industrial products, such as matches were forbidden in the Chinese market so as to protect domestic production.66 Meanwhile, Chinese factories imitated German technology and products for making completely Chinese products.67 By the mid-1950s, the Soviet and East European officials started to worry about patent protection and Chinese “catching up”.68" [↩][Cite]
