Chinese History: First Five-Year Plan (1953-57)

The Soviet model did not prove successful for China's economy.

Chinese History: Tiananmen
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Every five years, China’s Central Government writes a new Five-Year Plan (中国五年计划, Zhōngguó wǔ nián jìhuà), a detailed outline for the country’s economic goals for the next five years.

After the founding of the People’s Republic of China in 1949, there was an economic recovery period until 1952. Starting in 1953, the first Five-Year Plan was implemented. Except for a two-year hiatus for economic adjustment in 1963-1965, the Five-Year Plans have been continuous.

The goal of China’s First Five-Year Plan (1953-57) was to strive for a high rate of economic growth and emphasize development in heavy industry (mining, iron manufacturing, and steel manufacturing) and technology (like machine construction) rather than agriculture.

To achieve the goals of the First Five-Year Plan, the Chinese government opted to follow the Soviet model of economic development, which emphasized rapid industrialization through investment in heavy industry.

So the first five Five-Year Plan featured a Soviet command-style economic model characterized by state ownership, farming collectives, and centralized economic planning. The Soviets even helped China craft its first Five-Year Plan.

China Under the Soviet Economic Model

The Soviet model was not well suited to China’s economic conditions, however. as China was technologically backward with a high ratio of people to resources. China’s government would not fully realize this problem until late 1957.

In order for the First Five-Year Plan to be successful, the Chinese government needed to nationalize industry in order to concentrate capital into heavy industry projects. While the U.S.S.R. co-funded many of China’s heavy industry projects, Soviet aid was in the form of loans which China needed to repay.

To acquire capital, the Chinese government nationalized the banking system and used discriminatory tax and credit policies to pressure private business owners to sell their companies or convert them into joint public-private companies. By 1956, there were no privately owned companies in China. Other trades, like handicrafts, were combined into cooperatives.

The plan to boost heavy industry worked. Production of metals, cement, and other industrial goods was modernized under the Five Year Plan. Many factories and building facilities opened, increasing industrial production 19-percent annually between 1952 and 1957. The industrialization of China also increased workers’ income nine percent a year during this time.

Even though agriculture was not a main focus, the Chinese government worked to make farming more modern. Just as it did with private enterprises, the government encouraged farmers to collectivize their farms. Collectivization gave the government the ability to control the price and distribution of agricultural goods, keeping food prices low for urban workers. However, it did not increase grain production by much.

Though farmers pooled their resources at this time, families were still allowed a small private piece of land to grow crops for their personal use. By 1957, over 93-percent of farming households had joined a cooperative.