p As the country was unified, most financial and economic operations were centralised under a single fiscal system, all tax revenues were in the hands of the central government, and the property of bureaucratic and foreign capital was nationalised, the people’s government gained control over large material and financial resources necessary for the country’s economic development.

p The agrarian reform freed the peasants from the heavy feudal toll exacted by the landlords, totalling 50 million tons of grain (30 million tons in rent and 20 million tons in exorbitant taxes to the Kuomintang Government).^^10^^ The people’s state was now levying a tax of only 15 million tons of grain, which amounted to no more than 6 per cent of all budget revenues in 1952, whereas the remaining 25 million tons required to supply the towns, settlements and the army, and to meet other needs, including supplies to rural areas where crop failures had occurred, came by way of statutory planned procurement. In return the state sold the peasants various industrial goods. Low purchase prices both for foodstuffs and technical crops (cotton, jute, oil-bearing crops, and so on) were another source of accumulation for the state, being realised through the light and food industry in the form of turnover tax.

p Profits from nationalised enterprises, formerly owned by bureaucratic and foreign capital, were yet another source of accumulation for the needs of industry. By late 1949, the people’s state had already taken over 2,677 enterprises with 743,000 workers. Almost 73 per cent of the workers and 75 per cent of the electric-motor capacities were concentrated at enterprises with over 500 workers.^^11^^ Alongside the means of production and raw materials, state industry was also producing many kinds of consumer goods, notably, cotton prints, yarn and foodstuffs. In 1952, it produced 88 per cent of the country’s coal, 63 per cent of its yarn, 51 per cent of its fabrics, 47 per cent of its footwear, 52 per cent of its butter, 54 per cent of its flour and 71 per cent of its cigarettes. In 1952, taxes and profits from state enterprises accounted for 58 per cent of all budget revenues.

p A third source of state accumulation was the twofold exaction of profits from capitalist industry and trade: taxes and deductions into the state-controlled social accumulation fund. The profits of the capitalists themselves were not to exceed 25 per cent of their overall business profits. Private industry and trade made a profit of more than 3,000 million yuans, 800-900 million of which went to the capitalists. In 1952, various taxes on private-capitalist industry and trade (like commodity, commodity-industrial, and turnover tax) totalled 3,700 million yuans, or 21 per cent of total budget revenues.

p The people’s power used the three sources of revenue from the major economic sectors, yielding 95 per cent of all budget revenues, to redistribute the national income, in 1952 setting aside 18.2 per cent of the latter (11,100 million out of 61,100 million yuans) for accumulation.

p Since most of the national income (59.2 per cent) was produced in agriculture, where the rate of accumulation was very much below average (13 per cent), the overall accumulation rate of 18.2 per cent meant, first, that there was need for a higher rate in other sectors of the national economy, and second, that despite its high relative value the absolute accumulation figure was inadequate for industrialisation.

In these conditions, assistance from the socialist countries, the USSR in the first place, was of major importance for industrialisation in China.