Article 26 of the Common Program

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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. The new government inherited three separate, unintegrated economies: a subsistence agricultural economy in the interior of the country, a set of eastern Treaty Port economies based on light industry, and a Manchurian economy based on heavy industry.
Analysis of the prewar Chinese economy yields three key findings: imperialism did not fundamentally hinder development; while some modernization occurred, it was constrained by institutional flaws; and critically, agricultural stagnation significantly impeded overall economic progress.

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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. During the early 1950s, industrial production was largely concentrated on consumer goods, as evidenced by the fact that only 26% of factory output consisted of producer goods, a pattern replicated within the handicrafts sector. Beyond major urban centers and Manchuria, modern industry was virtually non-existent. Industrial hubs like Wuxi and Suzhou were rare exceptions, with provinces such as Jiangsu and Guangdong primarily reliant on agriculture and commerce. Western China, excluding the wartime enclave of Chongqing with its limited defense industrialization, lacked modern industry entirely. This scarcity was directly linked to the underdeveloped railway network, exemplified by Sichuan's complete absence of railways, despite its size comparable to France, save for a short coal line in Chongqing.
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%.
The apparent ease with which Mao's China adopted the Soviet economic model was not due to its proven track record. Instead, the model's appeal lay in the absence of viable alternatives. Previous attempts to break China's cycle of poverty and underdevelopment throughout the 19th century had yielded limited results. Moreover, the "demonstration effects" of the Great Depression, which discredited Western capitalism, coupled with the Soviet Union's triumph over Nazi Germany and the subsequent geopolitical division of the world, significantly lowered the perceived risks associated with implementing a Stalinist economic system. Essentially, the lack of success of other models, and the perceived success of the Soviet model created a situation where the risks were deemed to be lower.

Although figure 26.1 gives an impression of the situation in 1953, it shows clearly the spatial difference in development. In 1953, China's per capita GDP was 142 yuan, with significant regional disparities. Shanghai, the most developed area, boasted a per capita GDP of nearly 600 yuan. Wealthier provinces generally possessed abundant resources and low populations, like Gansu and Inner Mongolia, or had benefited from pre-1952 industrialization, notably Manchuria. Conversely, the southwest region was exceptionally poor, with Sichuan, Guizhou, Hunan, Guangxi, and Yunnan ranking as the five lowest provinces. These areas, despite large populations, suffered from severe industrial underdevelopment.
At the Central Committee meeting on March 5, 1949, Mao outlined the economic strategy as follows: first, the confiscation of all GMD government assets, estimated at between $10 billion and $20 billion; second, cooperation with urban and rural capitalists, who held the second largest share of China’s modern industries; third, devising methods to modernize and collectivize the fragmented, individual economies of agriculture and handicraft production; and fourth, swiftly asserting control over foreign trade and the broader economy. See Article 37
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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The Party's 1953 decision to replace its "New Democracy" postwar reconstruction strategy with the Soviet economic model stemmed from a convergence of factors. The end of the Korean War allowed for a renewed focus on domestic economic development. Furthermore, the unexpectedly successful Three and Five Antis campaigns solidified the CCP's power, making Soviet-style economic planning feasible. Crucially, Mao Zedong's critique of New Democracy, citing policy ambiguity and internal Party strife, provided the impetus for this major shift. 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, Bo Yibo, Li Fuchun, Nie Rongzhen, and Song Shaowen .
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. 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. In the above mentioned agreement the SU committed 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.

The first Five-Year Plan (1953-1957) outlined a substantial state investment of ¥76,640 million, equivalent to $31,154 million at the prevailing official exchange rate of ¥2.46 to the dollar. This investment strategy was heavily skewed towards industrial development, particularly heavy industry, reflecting the adoption of the Soviet economic model. The key investment allocations are:
• Capital Construction:
o Approximately 60% of the total state investment was designated for capital construction, signifying the development of infrastructure and fixed assets.
o Within capital construction, a similar 60% was allocated to industrial sectors, demonstrating the plan's focus on rapid industrialization.
o The majority of this industrial investment was directed towards the ministries of heavy industry, fuel industry, and machine-building industry, emphasizing the development of core industrial capabilities.
• Agriculture:
o Direct state investment in agriculture was limited, with just over ¥1 billion, or 2.4% of planned capital construction investment, allocated to this sector.
o An additional 3.3% of capital construction investment was earmarked for water conservancy projects.
•Limitations and nuances of the official figures: The official figures for agricultural investment present a potentially misleading picture due to several factors:
• Excluded Expenditures: o The stated figures do not account for miscellaneous expenditures allocated by the state to agriculture, which, while not categorized as capital construction, still contributed to agricultural development.
• Private and Cooperative Investment: oThe plan anticipated approximately ¥10 billion in additional investment from individual farmers and agricultural cooperatives, significantly augmenting the overall investment in the sector.
• Indirect Agricultural Investment: oThe plan's impact on agricultural modernization extended beyond direct investment. Critically, investment in industrial sectors supporting agriculture, such as the expansion of farm input and equipment manufacturing and the development of agricultural scientific research, was also important. However, the plan's investment in these indirect areas was also modest.
• Traditional Inputs: o The bulk of the goods used in the agricultural sector, despite the planned investment, would be traditional inputs produced by handicraft enterprises. This highlights the slow pace of agricultural mechanization and modernization in the initial phase of the plan.
China’s first Five Year Plan (FYP), greatly assisted by the Soviets, was a programme for import-substituting industrialization. The Plan was launched without a comprehensive vision with an aim to fine-tune it by making annual plans every year. During the Mao era, Chinese economic reforms were initiated by Politburo leaders who set broad national challenges. Implementation was then decentralized, empowering provincial authorities, regional committees, and local managers. This led to diverse local experiments. Successful initiatives were then disseminated through various channels, including exhibitions, media coverage, and knowledge-sharing, allowing effective micro-level reforms to spread organically across sectors. China's planning system in the 1950s was characterized by regional fragmentation. Enterprises at different administrative levels operated independently, rather than being integrated into a unified national plan. For example, national and provincial coal mines were centrally planned, while local mines were controlled by local authorities, leading to a disjointed national coal allocation. This division was also reflected in the categorization of coal as "commodity" or "merchandise" depending on the planning level. This fragmented structure created complex relationships between enterprises and planning authorities, often preventing direct interaction between enterprises with different regional affiliations.

Figure 26.4 and 26.5 indicate that actual results surpassed even the ambitious targets, with industrial production growing by an average annual rate of 18 per cent

The five-year plan appeared to be developmental, aiming at bridging the ‘three major gaps’ between the industrial working class and the peasantry, between urban life and rural life, and between mental labour and manual labour. CCP leadership members advocated for China’s self-reliance. The drive for industrial growth and national self-sufficiency ("import substitution industrialization") came at the direct expense of the population's material well-being. Promises of improved living standards were hollow. The state forcibly seized private land and capital, imposing collectivization and nationalization, and replaced market mechanisms with centralized resource allocation to fuel its industrial ambitions. The economic engine, fueled by high investment and low consumption, operated on the principle of suppressed wages. Aligned with the Soviet model, planners prioritized industrial growth, neglecting consumer needs. Their focus was limited to maintaining subsistence levels, reflecting a systemic disinterest in improving the material lives of the general population.

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Chapter 4 of Common Program

• Road to Common Program
• Common Program
• Bibliography
• Documents