in both 1976 and 1977, and output through September this year appears behind schedule. The target for 1979 is 1.2 million metric tons, again indicating an apparent drop in the 1980 goal. Soviet plants also failed to meet their goals in 1977 for soda ash, caustic soda, and sulfuric acid. Soviet leaders are concerned about lagging chemical output, which holds up production of consumer items and other products. They have instructed the ministries in charge of the chemical and petrochemical industry and of construction to accelerate completion of new plants under construction and to eliminate internal conflicts and bottlenecks. New chemical and petrochemical capacity is being built primarily in the eastern U.S.S.R. Actually, growth of the Soviet economy and industry has been gradually slowing since the 1950's. Between 1951 and 1960, according to Central Intelligence Agency calculations, gross national product grew an average of 5.8% per year, from 1961 to 1970 5.1%, from 1971 to 1975 3.7%, in 1976 4.3%, and in 1977 3.3%. Corresponding CIA figures for industrial output are 10.2%, 6.4%, 5.9%, 3.7%, and 4.1%. To some extent, the economic slowdown reflects exhaustion of factors that fostered rapid development, especially abundant labor supplies and cheap, widely available fuels and other natural resources. Indeed, note recent CIA reports, these are likely to become problem areas, further impeding growth. A sharp slowing in growth of the working-age population is expected to start this year. And Soviet oil production is predicted to peak and then decline during the next few years. (This would undermine a major source of hard currency.) However, a CIA report points out, "Inability to raise productivity is now the key problem" in economic and industrial growth. Soviet leaders have been importing huge amounts of western technology and equipment and investing heavily in industry to try to raise productivity. Nevertheless, problems rooted in the nature of the Soviet economic system continue to obstruct development of efficiency, technical progress, and product quality. One glaring difficulty was described by Soviet President Leonid Brezhnev last month to the Communist Party Central Committee—a growing volume of construction projects left uncompleted for years, while "uninstalled equipment worth several billion rubles lies useless in warehouses." (One ruble officially equals $1.50.) The value of uncompleted chemical production facilities and uninstalled machinery increased 49% between December 1975 and December 1977, compared to a 20% increase for industry in general. Brezhnev and other Soviet leaders are displeased with the way the economy and industry are going. But, according to one U.S. observer, the only remedy prescribed is to increase controls and to urge people to work harder. D 52
C&ENDec. 18, I978
iiliii
China looks to West in industrialization drive Almost every day in recent weeks has brought news of another huge Chinese purchase of foreign technology and equipment, or a further opening of the nation's economy and industry to business relations with western firms and governments. Intent on rapid modernization of its agriculture, industry, national defense, and science and technology—with the aim of reaching world levels by the year 2000—the People's Republic of China is pragmatically overturning economic and political taboos that have guided it since its founding in 1949. In a carefully controlled but clear way, it is starting to accept foreign credit, allow investments and joint ventures by foreign firms, open up to tourism, offer financial and professional incentives to its work force, send large numbers of scientists and engineers to study abroad, and permit foreigners to study and do research in China. This dynamism comes after a decade of political upheaval, beginning with the Cultural Revolution of 1966-69 and ending with a battle in 1976 for ideological and political control between political moderates and the now-purged leftist "Gang of Four." That turmoil had devastating effects on the economy and industry, with essentially no growth in gross national product or industrial production in 1976, and an actual decline that year in output of such key products as chemical fertilizers, coal, steel, and machine tools. China has released very little data on its centrally planned economy or its chemical
industry. But the current 10-year plan, running through 1985, which gives top priority to agriculture, metals, fuels and power, and machine building, calls for industrial production to grow at least 10% a year. Petrochemicals, electronics, and other new industries also get top ranking. One hundred twenty large-scale projects are to be completed by 1985, including 10 steel plants, nine nonferrous metal complexes, eight coal mines, 10 oil and gas fields, 30 power stations, six new trunk railways, and five key harbors. Large imports of foreign technology, equipment, and expertise are involved. Sales of oil, coal, labor-intensive industrial products, and certain agricultural products are expected to supply some of the hard currency needed. Fertilizers, synthetic fibers, and plastics are leading chemical priorities. Use of synthetic fibers will enable China to divert land from cotton to food production. Fertilizer output is to grow 58% between 1978 and 1980, to 60 million metric tons. The Chinese economy rebounded from 1976, with a rise of 9% in GNP in 1977. Industrial production grew 14% last year and 24% through June this year, made possible in part through reactivation of idle capacity. Chemical fertilizer production also soared last year, and first-quarter growth this year was 50% over the same period last year. Major additions to nitrogen fertilizer capacity were the main factor, as several of the 13 large ammonia-urea complexes purchased from abroad began to come on stream, as did numerous local, small-scale plants. The remaining complexes should begin producing in the next two years. The near-term outlook is thus promising. However, Chinese officials say that investment of some $600 billion will be required between 1978 and 1985 to achieve all their economic goals—including at least $40 billion to purchase foreign plants and technology—according to China Business Review, published by the National Council for U.S.-China Trade. And political stability in China will also be necessary. D
China's industry resumes fast growth after 1976 slowdown Gross national product (billions of 1977U.S.$) Industrial production index (1957 = 100) Chemical fertilizers (millions of metric tons) Coal (millions of metric tons) Crude oil (millions of metric tons) Crude steel (millions of metric tons)
1952
1957
1965
1970
1973
1974
1975
1976
1977
92
128
174
244
308
320
342
342
373
48
100
199
316
436
455
502
502
579
0.2
0.8
7.6
66.5 130.7 240
14.0 338
24.8 411
24.9 417
28.8 na 480
463
38.0 519
0.4
1.5
11.0
28.2
54.8
65.8
74.3
83.6
90.3
1.3
5.4
12.2
17.8
25.5
23.8
25.0
21.3
24.0
na = not available. Source: U.S . Central Intelligence Agency's National Foreign Assessment Center
