p In analysing China’s industrial development, one should always start by considering its economic level, social set-up and economic structure by the time the People’s Republic was established. It succeeded to an inheritance shaped over the preceding century or so under the influence of various factors, the most important of these being the semi-subsistence farming, which made for but slow progress towards a domestic market and restricted any capital accumulation in the country; and the unfavourable conditions for the emergence of a modern industry in view of the virtually duty-free import of cheap foreign manufactures.

p Capitalist industry normally takes shape in three stages: simple co-operation, manufactory and machine industry, with the latter being built on the firm basis of a wellestablished market, accumulated capital, skilled labour force and management and rapidly developing production of the means of production. In China, however, national industrial production at the first two stages—simple capitalist cooperation and manufactories—was largely destroyed by the invasion of cheap machine-made goods from abroad, so that China’s factory industry did not emerge as a natural outgrowth of the first two stages, but was introduced in an arbitrary manner from above at the expense of the feudalbureaucratic state, the top bureaucrats and foreign capitalists. It had a specific, semi-colonial structure, and was meant to satisfy the feudal state’s military requirements, to produce a narrow range of goods for the foreigners and the upper urban strata, or to make goods for export. Only a very 100 small part of its product was intended for the rural market and the handicraft industry, but not as the means of production, but as semi-finished products (yarn) or consumer goods (matches, kerosene, fabrics). All the means of production for modern industry, instruments of labour in particular, were imported from abroad, whereas China only had a metalrepairs industry, servicing transport, shipping and the arms and light industries. As manpower was extremely cheap, the industrial infrastructure was very primitive. The electricpower, raw-material and transport sectors were in a particularly poor state. What is more, this very imperfect industrial structure was most irregular and lop-sided in development and was largely influenced by external, rather than internal factors.

p On the eve of the Second World War, factory industry accounted for about 10 per cent of gross industrial production, the manufactories—for 17 per cent and the handicrafts—for 73 per cent (according to other estimates, 65 per cent).

p In the factory industry foreign capital amounted to 41.7 per cent, national capital—37.8 per cent, and bureaucratic capital—20.5 per cent. The textile and food sectors accounted for 63 per cent of its total output, and the main branches of the heavy industry—for only 19.5 per cent (according to other estimates, 72 and 28 per cent).

p The Second World War effected some changes in the sectoral structure of industry as a result of more rapid development of the heavy and arms industry by Japanese monopoly capital in the North and the North-East and by Kuomintang bureaucratic capital in the South-East. In the civil war that followed, however, these sectors were virtually devastated.

p By 1949, industry and its structure were in a much worse state than in 1936, with the bulk of the population’s needs being satisfied through semi-subsistence handicraft production and peasant cottage trades. Out of a total industrial commodity production of 14,000 million yuans, modern industry (which, according to Chinese statistics, included enterprises with mechanical drives or thirty or more workers) accounted for 57 per cent, small manufactories (employing under 30 workers, with 70 per cent of the total employing under 10 workers)—for 20 per cent, and petty-commodity 101 handicraft production—for 23 per cent or even, according to other estimates, 32 per cent. If account is also taken of the peasant cottage trades, which had an estimated output of 7-8,000 million yuans, the share of so-called modern industry will be down to 35 per cent, with 65 per cent being turned out by manufactories, peasants and handicraftsmen. There are figures to confirm these estimates, which show that only 3 million workers were employed at modern and manufactory outfits, 6 million—in the handicrafts and 8 million—in the peasant cottage trades. Only 587 of the 126,800 enterprises employed over 500 workers.

p In 1949, the sectoral structure of industry was marked by a prevalence of light and handicraft industry: respectively, 36 and 32 per cent of total industrial production. The electric power, metallurgical, chemical and oil industries provided only 5 per cent of total output in heavy industry, whereas the coal (11 per cent) and metalworking (9 per cent) industries did not work directly for production but mostly catered for transport, the communal services and repairs.

p In 1949, fixed assets in industry were estimated (their original value) at only 12,800 million yuans, with a considerable part of these being immobilised.

p In 1949, the social structure of industry was marked by an overwhelming prevalence of private capitalist production (48.7 per cent of gross output) and handicraft production (23 per cent) over state, mixed and co-operative enterprises (28.3 per cent).

In other words, in 1949 Chinese industry still retained most of its old sectoral and part of its social structure.