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

The Soviet-based model wasn't a perfect match for the Chinese 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 upcoming five years.

Background

After the founding of the People’s Republic of China in 1949, there was an economic recovery period that lasted until 1952. The first Five-Year Plan was implemented the following year. With the exception of a two-year hiatus for economic adjustment between 1963 and 1965, Five-Year Plans have been in continuous implementation in China.

Vision for the First Five-Year Plan

China’s First Five-Year Plan (1953-57) had a two-pronged strategy. The first objective was to aim for a high rate of economic growth with an emphasis on the development of heavy industry, including such assets as mining, iron manufacturing, and steel manufacturing. The second goal was to shift the country's economic focus away from agriculture and move toward technology (such as machine construction).

To achieve these aims, the Chinese government opted to follow the Soviet model of economic development, which emphasized rapid industrialization via investment in heavy industry. Not surprisingly, 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 when it was initially implemented due to two key factors: China lagged far behind in technologically than more progressive nations and was further hampered by a high ratio of people to resources. China’s government would not fully come to terms with these problems until late 1957.

In order for the First Five-Year Plan to be successful, the Chinese government needed to nationalize industry so they could concentrate capital in heavy-industry projects. While the U.S.S.R. co-funded many of China’s heavy-industry projects, the Soviet aid came in the form of loans that China would, of course, be required to repay.

To acquire capital, the Chinese government nationalized the banking system and applied discriminatory tax and credit policies, pressuring private business owners to sell their companies or convert them into joint public-private concerns. By 1956, there were no privately-owned companies in China. Meanwhile, other trades, such as handicrafts, were combined to form cooperatives.

A Gradual Shift Toward Progress

China's 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% annually between 1952 and 1957. China's industrialization also increased workers’ income by 9% annually over the same period of time.

Even though agriculture was not its main focus, the Chinese government worked to modernize the country's farming methods. Just as it had done with private enterprises, the government encouraged farmers to collectivize their farms, which gave the government the ability to control the prices and distribution of agricultural goods. While they were able to keep food prices low for urban workers as a result, the changes did not significantly increase grain production.

By 1957, over 93% of farming households had joined a cooperative. Although farmers did pool the bulk of their resources during this time, families were allowed to maintain small, private plots of land to grow crops for their own personal use.