ECONOMIC SITUATION

June 6, 1950

[Written report to the Third Plenary Session of the Seventh Central Committee
of the Chinese Communist Party.]


The present international situation is favourable to us. The world front
of peace and democracy headed by the Soviet Union is stronger than it was
last year. The people's movement for peace and against war has made headway
in all countries. The national liberation movements to throw off the yoke
of imperialism have greatly expanded, and the emerging mass movements of
the Japanese and the German people against U.S. occupation and the growing
people's liberation struggles of the oppressed nations in the East are especially
noteworthy. At the same time, contradictions have developed between the
imperialist countries, primarily between the United States and Britain. Quarrels
among the different groups of the U.S. bourgeoisie and of the British bourgeoisie
have also increased. In contrast, there is strong unity between the Soviet
Union and the People's Democracies and among the latter. The new treaty between
China and the Soviet Union, [1] which is of great
and historic significance, has strengthened the friendly relations between
the two countries; it enables us to carry on our national construction more
freely and more speedily and at the same time promotes the mighty struggle
of the people of the world for peace and democracy and against war and
oppression. The threat of war from the imperialist camp still exists, and
so does the possibility of a third world war. However, the forces fighting
to check the danger of war and prevent the outbreak of a third world war
are growing rapidly, and the level of political consciousness of most of
the world's people is rising. A new world war can be averted, provided the
Communist Parties of the world continue to unite all possible forces for
peace and democracy and help their further development. The war rumours spread
by the Kuomintang reactionaries are designed to deceive the people, they
are groundless

The present situation in our country is as follows. The Central People's
Government of the People's Republic of China and local people's governments
at all levels have been set up. The Soviet Union, the People's Democracies
and a number of capitalist countries have successively established diplomatic
relations with our country. Basically the war has ended on the mainland,
and only Taiwan and Tibet remain to be liberated, but this task still involves
serious struggle. In certain areas on the mainland the Kuomintang reactionaries
have resorted to bandit guerrilla warfare and incited some backward elements
against the People's Government. They have organized many secret agents and
spies to oppose our government and spread rumours among the people in an
attempt to undermine the prestige of the Communist Party and the People's
Government and to disrupt the unity and co-operation of the various
nationalities, democratic classes, democratic parties and people's organizations.
These secret agents and spies are also engaged in sabotaging the people's
economic undertakings, assassinating the personnel of the Party and government
organizations and collecting intelligence for the imperialists and the Kuomintang
reactionaries. All these counter-revolutionary activities are directed from
behind the scenes by imperialism, and particularly by U.S. imperialism. All
these bandits, secret agents and spies are imperialist lackeys. In the thirteen
and a half months since the operations mounted to cross the Yangtse, which
began on April 21, 1949 after the decisive victories in the three great campaigns
of Liaohsi-Shenyang, Huai-Hai and Peiping-Tientsin in the winter of 1948,
the People's Liberation Army has completed the occupation of all Chinese
territory except Tibet and Taiwan and a number of other islands and wiped
out 1,830,000 troops of the reactionary Kuomintang and 980,000 of its bandit
guerrilla forces, during this time the people's public security organs have
uncovered large numbers of reactionary secret service groups and agents.
In the new liberated areas, the present task of the People's Liberation Army
is to continue to wipe out the remnant bandits and that of the people's public
security organs is to continue to strike at the enemy's secret service groups.
The great majority of the people throughout the country warmly support the
Communist Party, the People's Government and the People's Liberation Army.
In recent months, the People's Government has exercised unified control and
unified leadership over financial and economic work on a national scale and
has been successful in balancing budgetary revenues and expenditures, checking
inflation and stabilizing prices. The whole people have supported the government
by delivering grain, paying taxes and buying state bonds.
[2] Last year our country was hit by natural calamities
over wide areas; about 120 million mou of farmland and 40 million
people were affected by flood or drought to a greater or lesser degree. The
People's Government has organized extensive relief for the victims and in
many places has initiated large-scale water conservancy work. This year's
crops are better than last year's and in general the summer harvest looks
good. If the autumn harvest is also good, still better prospects for next
year may be envisaged. Long years of imperialist and reactionary Kuomintang
rule left our economy in a chaotic state and caused widespread unemployment.
Since our victory in the revolution, there have been reorganizations of varying
degrees in the whole of the old economic structure and the number of unemployed
has further increased. This is a serious matter, and the People's Government
has begun to adopt measures to give relief to the unemployed and find jobs
for them so as to solve the problem step by step. It has done extensive work
in the spheres of culture and education, and large numbers of intellectuals
and students have undertaken either studies of the new knowledge or revolutionary
work. It has already done something towards properly readjusting industry
and commerce and improving the relations between the state sector and the
private sector of the economy and between labour and capital, and it is devoting
great efforts towards these ends.

China is a vast country and conditions are very complex; moreover the revolution
triumphed first in certain areas and only later throughout the country.
Accordingly, in the old liberated areas (with a population of approximately
160 million), agrarian reform has been completed, public order has been
established, the work of economic construction has started on the right track,
the life of most of the working people has improved, and the problem of
unemployed workers and intellectuals has been solved (as in the Northeast)
or is nearing solution (as in North China and Shantung Province). In particular,
planned economic construction has begun in the Northeast. On the other hand,
in the new liberated areas (with a population of approximately 310 million),
since liberation occurred only a few months ago, or half a year or one year
ago, the more than 400,000 bandits scattered in remote regions have yet to
be wiped out, the land problem has not been solved, industry and commerce
have not been properly readjusted, unemployment has remained serious, and
public order has not been established. In a word, the conditions for carrying
out planned economic construction are still lacking. That is why I said some
time ago that we had achieved a number of successes on the economic front,
for example, budgetary revenues and expenditures were nearly balanced, inflation
was being checked and prices were tending towards stability -- all this indicated
that the financial and economic situation was beginning to take a turn for
the better, but not yet a fundamental turn for the better. Three conditions
are required for the fundamental turn for the better in the financial and
economic situation, namely, (1) completion of agrarian reform; (2) proper
readjustment of existing industry and commerce; and (3) large-scale retrenchment
in government expenditures. The fulfilment of these three conditions will
take some time, say three years or a little longer. The whole Party and nation
must strive to bring about these conditions. I believe, and so do you all,
that we can surely do this in about three years. By that time, we shall be
able to witness a fundamental turn for the better in the entire financial
and economic situation of our country.

To this end, the whole Party and nation must unite and carry out the following
tasks:

(1) The work of agrarian reform should proceed step by step and in a systematic
way.[3] As the war has basically ended on the mainland
and the situation is entirely different from that in the period from 1946
to 1948 (when the People's Liberation Army was locked in a life-and-death
struggle with the Kuomintang reactionaries and the issue had not yet been
decided), it is now possible for the state to extend loans to the poor peasants
to help them out of their difficulties and thus make up for the drawback
that they are to receive less land. Accordingly, there should be a change
in our policy towards the rich peasants, a change from the policy of
requisitioning their surplus land and property to one of maintaining the
rich peasant economy in order to facilitate the early rehabilitation of rural
production and the better to isolate the landlords and protect the middle
peasants and lessors of small plots.

(2) Unified control and unified leadership in our financial and economic
work should be consolidated, and so too should the balancing of budgetary
revenues and expenditures and the stabilization of prices. In accordance
with this principle, taxes should be readjusted and the people's burden
appropriately lightened. In line with the principle of making over-all plans
and taking all factors into consideration, drifting and anarchy in our economic
work should be gradually eliminated, existing industry and commerce should
be properly readjusted, and relations between the state sector and the private
sector and between labour and capital should be effectively and suitably
improved; thus under the leadership of the socialist state sector all sectors
of the economy will function satisfactorily with a due division of labour
to promote the rehabilitation and development of the whole economy. The view
held by certain people that it is possible to eliminate capitalism and realize
socialism at an early date is wrong, it does not tally with our national
conditions.

(3) While preserving its main forces, the People's Liberation Army should
be partially demobilized in 1950, provided that the forces must be adequate
to liberate Taiwan and Tibet, consolidate national defence and suppress
counter-revolutionaries. This demobilization must be carried out carefully
so as to enable the demobilized soldiers to return home and settle down to
productive work. Readjustment is also necessary in administrative organizations,
and here too the excess personnel should be dealt with appropriately so that
they have the opportunity either to take up work or to study.

(4) Reform of the old school education and of the old cultural institutions
in our society should be conducted carefully step by step, and all patriotic
intellectuals should be won over to the service of the people. On this question,
procrastination or reluctance to introduce reforms is wrong, and so is rashness
or any attempt to push them through arbitrarily.

(5) Relief for unemployed workers and intellectuals must be carried out in
earnest, and they must be helped to get work in a planned way. Serious efforts
to provide relief for people stricken by natural calamities must continue.

(6) We must earnestly unite with the democratic personages in all
circles, help them solve the problem of work and study, and overcome any
tendency towards either closed-doorism or excessive accommodation in united
front work. We must endeavour to make a success of the conferences of people
from all circles [4] so that people from every
walk of life can unite in a common effort. All matters of importance to the
people's governments should be submitted to these conferences for discussion
and decision. Representatives at these conferences must have the right to
express their views fully; any attempt to hinder such expression is wrong.

(7) Bandits, secret agents, local tyrants and other counter-revolutionaries,
all of whom are menaces to the people, must be resolutely rooted out. On
this question it is necessary to follow a policy of combining suppression
with leniency without stressing one to the neglect of the other, that is,
a policy of certain punishment for the main culprits, no punishment for those
accomplices who act under duress and rewards for those who render positive
services. The whole Party and nation must heighten their vigilance against
the conspiratorial activities of counter-revolutionaries.

(8) The Central Committee's directives on consolidating and expanding the
Party organization, on strengthening the ties between the Party and the masses,
on conducting criticism and self-criticism and on launching a rectification
movement throughout the Party should all be strictly carried out. Since the
membership of our Party has grown to 4,500,000, we must henceforth follow
a prudent policy in expanding the Party organization, be strict in preventing
political speculators from gaining Party membership and take proper measures
to clear out those already in. We must pay attention to admitting politically
conscious workers into the Party in a planned way in order to increase the
proportion of workers in the Party organizations. In the old liberated areas,
in general Party recruiting in the villages should stop. In the new liberated
areas, in general the Party organizations in the villages should not expand
until agrarian reform is completed in order to prevent political speculators
from worming their way into the Party. During the summer, autumn and winter
of 1950, the whole Party must carry out a large-scale rectification movement
in close co-ordination with its other tasks, not in isolation from them.
Such methods as reading selected documents, summing up work, analysing the
situation and making criticism and self-criticism should be used to raise
the ideological and political level of cadres and rank-and-file Party members,
correct mistakes in work, overcome the conceit and complacency of the self-styled
distinguished veterans, eliminate bureaucracy and commandism and improve
the relations between the Party and the people.

NOTES


1. This refers to the Sino-Soviet Treaty of Friendship,
Alliance and Mutual Assistance signed on February 14, 1950.


2. This refers to the People's Victory Parity Bonds floated
by the Central People's Government in 1950.

3. Beginning from the winter of 1950, the new liberated
areas, one after another, unfolded a large-scale agrarian reform movement.
By the winter of 1952 agrarian reform was basically completed, except in
some minority nationality areas. In the old and new liberated areas throughout
the country, about 300 million landless or land deficient peasants received
some 700 million mou of land.

4. Before the election and convocation of the local people's
congresses at all levels, conferences of people from all circles were convened,
in accordance with the stipulations of the Common Programme of the Chinese
People's Political Consultative Conference of 1949, to exercise the functions
and powers of the people's congresses step by step.

Transcription by the Maoist Documentation Project.