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.
A particular element of China should also be mentioned the role of Confucian Political Economy. Confucianism, as a dominant system of social and ethical philosophy, exerted a profound influence on Chinese economic thought, social hierarchy, and governance for over two millennia . It emphasized hierarchical relationships, social order, respect for authority and tradition, and the fulfillment of prescribed roles within society, with the family serving as a central model for political organization . While this framework provided a strong foundation for social stability and imperial governance, its inherent conservatism and emphasis on maintaining established social roles and harmony might have inadvertently discouraged radical innovation and challenged the existing status quo, potentially hindering the dynamic changes needed for rapid economic growth and industrialization. The prioritization of social order over economic disruption could have created an environment less conducive to the transformative nature of modernization.
Traditional Confucian thought also held a distinct view of different occupations, with agriculture considered the morally superior and fundamental pillar of society . In contrast, crafts and trade were often viewed with suspicion, sometimes seen as secondary and potentially destabilizing forces that could lead to extravagance and divert labor from essential agricultural production . This philosophical bias against commerce and industry, deeply embedded within the dominant ideology, might have influenced policy decisions, resource allocation, and social attitudes, leading to an underestimation of the potential of the non-agricultural sectors to drive economic growth and modernization, thus contributing to the long-standing dominance of the agrarian economy. If the prevailing intellectual and moral framework devalued commercial and industrial activities, it could have resulted in government policies that favored agriculture, limited investment in infrastructure and institutions supporting trade and manufacturing, and discouraged talented individuals from pursuing careers in these sectors.

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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. The sectoral composition of the Chinese economy before 1950 was overwhelmingly dominated by the agrarian sector. In the pre-1949 era, approximately 90% of the population lived by agriculture . During the early 1950s, farmers in China largely controlled their cropping and input decisions. State involvement was limited to setting minimum price ratios for some commercial crops relative to regional grains, while cereal prices were dictated by market forces. This strategy effectively boosted cotton production, which the state desired. Hebei province, for instance, saw cotton acreage and output exceed pre-war levels by 5.4% and 210%, respectively, by 1952. Compulsory delivery quotas for agriculturalproducts were instituted in 1953-57. But farmers were still allowed to sell surplus farm products in rural markets.
This heavy reliance on agriculture indicates a limited diversification of the economy, which often results in lower overall productivity compared to economies with a larger proportion of the workforce engaged in manufacturing and services. 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. Trade regulations were significantly impacted by Western powers following the Opium Wars, leading to the imposition of unequal treaties and the establishment of treaty ports that granted favorable conditions to foreign trade and investment, potentially at the expense of the development of indigenous Chinese industries and control over its own economic policies. The combination of these factors – a potentially under-resourced state, underdeveloped infrastructure, and an unequal international trade environment – likely acted as significant constraints on China's economic growth and its ability to transition towards a more industrialized and prosperous economy before 1950.
2. Self-Strengthening Movement (1861-1895) represented an early effort by the Qing dynasty to adopt Western technology, primarily for military modernization and institutional reform. While this movement led to the establishment of some arsenals, schools, and industries, its overall success was limited by administrative inefficiencies, financial constraints, and a fundamental resistance from conservative elements within the government and society to embrace broader institutional and ideological changes necessary for comprehensive economic modernization. The primary focus remained on military strength rather than a holistic transformation of the economy towards industrialization.
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. This period can be characterized by fluctuations with periods of turmoil like the Warlord era (1913-1927) causing significant disruption and decline. This era of regional fragmentation and conflict led to widespread misery and hampered any consistent economic progress. Following this, the Nanjing decade (1927-1937) witnessed a period of relative prosperity despite ongoing civil war and increasing Japanese aggression. During this time, the government made efforts to stabilize tax collection, establish a national budget, and invest in infrastructure, indicating attempts at recovery and growth. However, these periods of attempted progress were often short-lived and ultimately insufficient to fundamentally alter the long-term flat trajectory of economic development. Political instability and external threats consistently undermined efforts to build a foundation for sustained economic growth. Figure 26.1 shows China's relative economic position with several major world powers around 1900 and 1930. This comparison clearly demonstrates the extent to which China lagged behind the major global powers in terms of economic development by the turn of the 20th century and in the lead-up to World War II.

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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Mao's implementation of socialism in 1950s China was heavily based on the Soviet model of the 1920s and 1930s. The "Short Course on the History of the All-Russia Communist Party (Bolshevik)," published in 1938 under Stalin's direction, served as the central ideological guide. This book, widely translated and distributed, promoted the idea that socialist success required the eradication of capitalism and the rapid development of industry through state-led Five-Year Plans and that collectivized agriculture provided inputs for rapid industrialization. It asserted that the USSR had achieved a fully socialist, industrialized state by 1937. Mao used this text to impose ideological uniformity within the CCP, effectively adopting the Soviet blueprint for Chinese socialist construction.
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. Wang Guangwei sets out three main goals: the launch of 694 major industrial projects (156 with Soviet aid, largely in heavy industry); the cooperative organization of one-third of agricultural households and one-fifth of handicraft households (retaining private land ownership under centralized management); and the initial socialization of half of private industry and commerce through state-capitalist conversion. 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. Soviet assistance in managing China's modernized enterprises was crucial to the development of the First Five-Year Plan, particularly in establishing essential industrial standards, technical procedures, and financial quotas
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, China's economic reforms followed a decentralized model. The Politburo established national goals, but implementation was delegated to provincial authorities, regional committees, and local managers, fostering diverse local experimentation. Successful initiatives were then propagated through exhibitions, media, and knowledge-sharing, enabling organic diffusion of effective micro-level reforms. However, the 1950s planning system suffered from regional fragmentation. Enterprises at different administrative levels operated independently, hindering national integration. For instance, national and provincial coal mines were centrally planned, while local mines were under local control, resulting in a disjointed national coal allocation. This division was further emphasized by the classification of coal as either "commodity" or "merchandise," depending on the planning level. This fragmented structure complicated interactions between enterprises and planning authorities, often preventing direct collaboration across regional boundaries.
The presence of diverse ownership structures hindered comprehensive centralized planning. State control was limited to the state sector, while joint state-private ventures retained decision-making autonomy. Private and cooperative entities were influenced indirectly through price, credit, and financial controls, managed by the GAC, ministries, and local authorities. This fragmented control persisted until the 1956 socialist transformation of industry and commerce, which eliminated these alternative ownership forms. Furthermore, central planners faced significant information challenges. The sheer size and complexity of the Chinese economy made it difficult to obtain timely and accurate data, hindering precise planning and responsive policy adjustments.(see below) This information deficit underscored the limitations of excessive centralization.
Recognizing the potential pitfalls of blindly replicating the Soviet Union's highly centralized model, the CCP acknowledged the need to balance centralization and decentralization. While some decentralization efforts were made, ultimately, key decision-making power remained concentrated within a small group of leaders. This political centralization effectively undermined economic decentralization, suppressing local initiative and leading to significant consequences.

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.

Figure 26.7 shows that China's industrial output value increased significantly, especially the proportion of heavy industry in the industrial output value. The growth rate of heavy industry has been kept at more than 10%, and the per capita GDP from 1952 to 1960 also increased year by year.
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.
The "First Five Year Plan" was developed in response to a confluence of factors: strategic considerations, including learning from Soviet models and securing Soviet aid; economic imperatives, such as stabilizing the economy during transition and pursuing rapid development; and ideological influences, encompassing Marxist planned economy theory and the established tradition of planned work. The Soviet Union's Five Year Plan served as a direct and influential precedent. Scholarly analysis has largely converged on the interpretation that the initiative, while termed a "plan," functioned more akin to a set of broad directives. A key factor contributing to its informational shortcomings was the compromised integrity of the underlying statistical data.

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During the inaugural year of the five-year plan, a notable deficit in inter-departmental communication between planning and statistical operations was evident. This manifested as a pattern of decentralized, ad hoc methodologies, wherein planning and statistical offices independently derived indicators without requisite authorization. Consequently, this contributed to a proliferation of disparate and conflicting data and analytical outputs.
In the early days of the People's Republic of China, numbers weren't just numbers. They were weapons in a political battle. Driven by a strong ideological shift, the nation decided to ditch "Western" statistical methods, viewing them as tainted by "bourgeois" thinking. Instead, they embraced a Soviet-style approach, fundamentally changing how data was collected and interpreted. This wasn't just a theoretical debate. It had real-world consequences. The field of statistics was essentially split in two. "Socialist statistics" focused on gathering raw data, while the more complex mathematical side, dealing with probabilities and analysis, was pushed aside. This division hampered the development of sophisticated analytical tools. Figure 26.8 shows the differences between the two methods.

The practical methods used to gather information also created problems. The nation relied heavily on "complete enumeration," essentially trying to count everything. In a country as vast and populous as China, this led to a tidal wave of paper reports, overwhelming officials with raw data they couldn't effectively process. Imagine trying to analyze every single farm's output in a nation with a massive agricultural sector—the sheer volume of information became a major hurdle.
Furthermore, when complete enumeration wasn't feasible, they used sampling techniques that often resulted in inaccurate estimates. By assuming a single village represented an entire region, they introduced significant errors that compounded as the data moved up the chain of command. The State Statistics Bureau came in operation in September 1952. The Northeast region had already a statistics bureau, in the other five regions statistics bureaus started in 1953, likewise the provincial statistics bureaus.

Essentially, the pursuit of ideological purity led to a statistical system that struggled to accurately reflect reality. This resulted in data that was often unreliable, hindering effective planning and decision-making. This period reveals a critical lesson: even in the seemingly objective world of numbers, ideology can have a profound and detrimental impact.
To solve problems, the State Planning Commission (SPC) of China enacted "Uniform Provisions for a number of Problems [Encountered] in Planning and Statistical Work," a six-page directive designed to rectify systemic and coordinative deficiencies between planning and statistical units. The document of August 1954 identified several key issues: Discrepancies in Inter-Unit Coordination: A lack of consistent interaction between planning and statistical entities resulted in incompatible data sets and compromised indicator reliability. Secondly, deviation from Central Directives: Subordinate administrative bodies frequently disregarded joint SPC and State Statistics Bureau (SSB) regulations, implementing localized and often contradictory modifications. Thirdly, data Set Proliferation: The existence of multiple, unharmonized planning data sets within single units obscured accurate plan implementation assessment. To address these, the SPC mandated five provisions:
• Enhanced Inter-Agency Collaboration: Statistical offices were required to align with corresponding planning committees at all administrative levels, with a defined data provision and validation protocol.
•Indicator Standardization: The congruence of indicator definitions and calculation methodologies across planning and statistical domains was emphasized, with national catalogs and classification schemes serving as normative frameworks.
•Conformity in Plan Implementation Monitoring: Statistical reporting and summary units were obligated to adhere to planning unit directives, particularly those pertaining to the National Economic Plan (NEP), and to utilize SSB periodical reports and survey estimates.
•Uniformity in Plan Implementation Methodology: Nationally approved numerical data was to be used for plan implementation verification, with a hierarchical data sourcing protocol for cases of data absence.

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Not only an efficient statistic system was necessary for the realization of the Five-Year Plan, but also that an adequate number of specialized and scientifically educated personnel were available. The education of specialists was therefore given high priority. See Chapter 5
China's health system, modeled after the Soviet Union, emphasized urban specialist concentration. The initial plan targeted significant growth in hospital beds and doctors.See Article 48 Integrating traditional medicine, with its vast practitioner base, was difficult, encountering resistance from Western-educated doctors. See Article 48 The government's strong 1954 criticism forced a shift. Industrialization also necessitated substantial housing construction, (see Article 45) with plans for 46 million square meters. The 1954 Constitution further demanded the expansion of social security. See Article 32
The 1953 census, revealing a population exceeding 580 million and rising unemployment, forced the Chinese leadership to address family planning. This represented a significant policy shift, as the CCP had previously rejected birth control, attributing population-food imbalances to feudal or bourgeois economic failings, in line with Marxist theory. See Article 48
Initially, large administrative regions were created to link Beijing with the provinces. However, they began to exhibit increasing centrifugal tendencies, even after the transfer of influential regional leaders to Beijing. To solve this problem and strengthen central control, the eventual dissolution of these regions was considered necessary. See Article 14
To support agricultural and industrial growth, plans were made to expand transportation and communication infrastructure. This expansion aimed to ensure food and raw material supplies and integrate the nation through inland railway construction. While political and strategic factors were present, the railway's primary purpose was to connect new inland industrial centers to existing urban conglomerates.Article 36

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Chapter 4 of Common Program

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