You have raised some questions. Now let me share my thoughts.

At the October 1955 forum on industry and commerce, I said that Xiao Guiying in *The Fisherman’s Revenge* had good reason to cherish the furniture even as she was about to flee.
Later, I went to Jinan and Xuzhou for investigations, and also visited Qufu, Su County, Bengbu, Nanjing, Suzhou, Shanghai, Songjiang, Hangzhou, and other places.
There, people said that the complete socialist transformation of capitalist industry and commerce was not a question of taking until 1962—just a few months would nearly do it.
In Shanghai, Ma Tianshui [¹] said that in industrial and commercial circles, the two ends are small and the middle is large: the advanced, the middle, and the backward respectively account for twenty, sixty, and twenty percent.
In Suzhou, a female deputy mayor first spoke of four merits of the industrial and commercial circles, then pointed out their shortcomings—first encouraging, then criticizing, both encouraging and criticizing.
That was very good.
According to Jinan, Shandong’s statistics on 2,600 industrial and commercial households, the advanced accounted for twenty-five percent, the middle for fifty percent, and the backward for twenty-five percent.
Local comrades were still quite dissatisfied, saying there were so many in the middle and backward categories.
Yet I was very satisfied—only twenty-five percent were backward.
At the Hangzhou Conference [²] this January, it came to light that after the “Three Antis” and “Five Antis” [³] campaigns, people had grown somewhat timid in their hearts.
There was a representative of public shares who came back late from a meeting; the proprietor’s wife cooked a bowl of noodles for him to eat, but he dared not eat it, afraid of being criticized.
Some of our comrades only criticize the bourgeoisie without encouraging them, failing to recognize that the bourgeoisie has made great progress in recent years.
We should adopt a policy of both criticizing and encouraging the bourgeoisie.
In January, I went south to attend the Hangzhou Conference and produced the Forty Articles [⁴]. After returning, at the Supreme State Conference, I said that the socialist transformation of industry and commerce would be basically completed in about three years.
At the Eighth National Congress [⁵], Comrade Liu Shaoqi’s report differed from what I said, stating that it would be basically completed in the first half of this year.
Which is correct?
The report of the Eighth National Congress is correct.
“Basically completed” refers to joint public-private management, not to nationalization; nationalization is complete completion.
“About three years” can mean slightly more or slightly less.
Some people misunderstood this remark of mine, wondering whether it meant that the fixed dividend [⁶] was to be abolished.
Abolishing the fixed dividend is complete completion, not basic completion.
Beijing has its advantages and disadvantages.
The advantage is that heroes gather in one place; the disadvantage is that it does not produce knowledge.
To produce knowledge, people must come from the localities.
The same goes for your Federation of Industry and Commerce, with its few hollow articles.
When people from the localities come and talk, knowledge is produced.
Those living in Beijing should spend half the year going down to the localities.
Beijing has theory and principles but lacks practice; the localities have practice but lack an understanding of the overall situation.
When the two are combined, things will go well.
How long should the fixed dividend be maintained?
On this question, it should be said that the Eighth National Congress has already resolved it.
For a seven-year illness, seek three-year moxa.
The principle is to solve the problem; time must submit to principle.
Whether this issue is handled well or badly affects the bourgeoisie, the democratic parties, democrats without party affiliation, intellectuals, religious circles, and upper-level figures of minority nationalities, and has an international impact as well.
The Communist Party does not wish to save a little money on this; we must persuade the workers and explain to them that a longer period for the fixed dividend is better than a shorter one.
We can begin with vigor and end with less vigor—seven years of vigor, five years of less vigor, stretching into the Third Five-Year Plan.
If an extension is still needed, it can be prolonged into the Fourth Five-Year Plan.
When abolishing the fixed dividend, it is not good to stir up some “high tide”; the moment you stir up a high tide, you wind up targeting those who draw relatively large fixed dividends, and they are mostly advanced core elements.
Those who want to take off their hats quickly are the small and medium capitalists, some of whom draw very small fixed dividends.
If the small capitalists cannot wait for the seven-year period, can we “start the meal” early—abolish their fixed dividends and take off their hats first?
I think that after two or three years, those who request to take off their hats may do so first.
We shall first, not advocate it; second, not stir up a high tide; and third, not publish it in the newspapers.
We can set up a “flowing banquet,” with some going first and some later.
The question of “starting the meal”—whether to start it only after everyone has arrived or to set up a flowing banquet—should be discussed and managed by the China Democratic National Construction Association and the Federation of Industry and Commerce.
The core issue does not lie with the ninety percent of industrial and commercial capitalists but with the ten percent.
Among the 130,000 industrial and commercial households, only a few thousand or ten thousand play a major economic role.
In solving the problem, we cannot look merely at the number of people; it is the big capitalists who represent the bourgeoisie.
The China Democratic National Construction Association mainly represents the big capitalists.
The main targets of our unity and the main recipients of the fixed dividend are the big capitalists.
These people are the hosts, not merely guests.
The small capitalists are of an ancillary nature; they process goods on contract for the big capitalists and do not play a leading role.
We must not harm the interests of those who play an important part in the national economy.
Proposing a line for the small and medium capitalists shows that the issue has not been clearly understood.
Of course, the small and medium capitalists also have a role and must be looked after.
Is the national bourgeoisie now a revolutionary class or a counterrevolutionary one?
We cannot call it a counterrevolutionary class.
They have the right to vote, have always opposed imperialism, cooperate with the government, and abide by the Constitution.
Is the contradiction between the working class and the national bourgeoisie antagonistic or non-antagonistic?
Once compromise is reached, what antagonism remains?
The national bourgeoisie abides by the Common Program [⁷], supports the Constitution, and accepts joint public-private management.
There is no more antagonism.
During the “Three Antis” and “Five Antis,” only a part of the bourgeoisie was antagonistic; only those completely law-breaking households were antagonistic.
In recent years, relations have become even more harmonious.
The problem now is that our work has not kept pace.
We cannot blame the lower levels; we can only blame the upper levels.
Take, for example, public-private relations—daring not eat noodles, daring not speak up, an atmosphere of “leftism.”
The forum [⁸] has shown that the progress of the bourgeoisie is the main trend, yet there are still shortcomings and mistakes, and further remolding is needed.
Within the bourgeoisie, nonrevolutionaries and counterrevolutionaries are isolated cases; the class as a whole cannot be called nonrevolutionary or counterrevolutionary.
Some articles today are too “left.”
After joint management, there is no antagonism, nor was there antagonism before joint management.
The China Democratic National Construction Association, the Federation of Industry and Commerce, and the democratic parties cooperate with us—we see no antagonism.
We should organize people to write articles about this.
However, the bourgeoisie still has a dual character: on the one hand, progressive; on the other, backward.
If we thought it had only one character, then there would be no need for remolding, and claiming a single character is not conducive to remolding and progress.
Our task is both to encourage and to criticize—like the two wheels of a cart, the two wings of a bird.
All things in nature and society are the unity of opposites.
Criticism and self-criticism are likewise the unity of opposites.
Both encouragement and criticism—this will remain so for ten thousand years.
I once said two things: People can be analyzed; no one is free from error.
The bourgeoisie can be analyzed; so can the Communist Party.
The free market in our country today is still basically capitalist in nature, even though there are no longer any capitalists.
It forms a pair with the state market.
Shanghai’s underground factories and the joint public-private enterprises are also opposites.
Because society has a need, they have developed.
We must bring them above ground, legalize them, and allow them to hire workers.
Nowadays it takes three months to get clothes made; the cooperative factory produces trousers with one leg long and the other short, and buttonholes with no slits—poor quality.
It would be best to open private factories to compete with those above ground, and also to allow mom-and-pop shops, with hired workers permitted as well.
This is called the New Economic Policy.
I suspect Russia ended its New Economic Policy [⁹] too early; after only two years of retreat, it turned to the offensive, and to this day social goods are still insufficient.
We have retained 2.5 million employees in private industry and commerce (1.6 million in industry, 900,000 in commerce), while Russia retained only eighty or ninety thousand.
We may also consider that, so long as society has a need, underground factories can be increased.
We can open large private factories, sign an agreement, and not confiscate them for ten or twenty years.
Investments by overseas Chinese need not be confiscated for twenty years or a hundred years.
Investment companies can be opened, with principal repaid and interest paid.
We can engage in state-run enterprises and also in private enterprises.
We can both eliminate capitalism and again engage in capitalism.
Of course, we must consider the conditions; so long as there are raw materials and a market, we can do it.
Right now, state-run and joint enterprises cannot meet society’s needs.
If there are raw materials, if state investment faces difficulties, and if society has a need, private individuals can open factories.
This also provides an outlet for the fixed dividend.
Chongqing’s low-quality products are not up to standard during the peak season but meet standards during the off season—because during the peak season society’s need is too great and supply falls short.
Supply shortages are a long-term phenomenon and a good sign, because they reflect rising purchasing power.
We must think of solutions.
The fixed-dividend period must be quite long; rushing into nationalization does not benefit production.
Joint public-private management has advantages, better than operating separately: workers’ enthusiasm has risen, and the attitude of the capitalist side has changed.
The state’s accumulation relies mainly on industry, not on agriculture.
The state’s average annual budget revenue is twenty-seven billion yuan, of which agriculture contributes only three billion; even adding the scissors gap between industrial and agricultural products, it comes to only about seven billion or so.
Why do we preserve capitalists?
Because the state has a need, and it benefits the people, as it can increase industrial goods.
We must form an alliance with the national bourgeoisie to consolidate the alliance with the peasants, because the peasants need industrial goods for exchange.
At the same time, this can better stabilize prices and guarantee market supply.
Preserving the bourgeoisie during the transition period is of tremendous importance.
Comrade Liu Shaoqi’s report at the Eighth National Congress explained the reasons for this.
What about the Federation of Industry and Commerce in the future?
It can also enjoy long-term coexistence and mutual supervision.
Even after the fixed dividend is abolished, capitalists still need remolding.
The name “Federation of Industry and Commerce” can be preserved.
Historical names should be kept—why should the names of Commercial Press or Zhonghua Book Company be discarded?
The names Ruifuxiang and Tongrentang [¹⁰] should be preserved for ten thousand years.
Photographs should be taken of nationally famous signboards; the calligraphy on many of those signboards is beautifully done.
If they are not preserved, later generations will know nothing about them.
I am not pleased. *Liberation Daily* could revert to being *Shen Bao* [¹¹]; *Shen Bao* was done away with.
Party newspapers can also use their original names.
When I was young and visited relatives in the countryside, everywhere they were hawking *Shen Bao*, which shows it was deeply rooted in people’s hearts.
Content can change, but names should be preserved.
Wang Mazi, Donglaishun, Quanjude [¹²]—these must be preserved forever.
The content is socialist, but the name can remain from the feudal era.
“Great Wall” and “province”—these have been called that since the Yuan dynasty.
Han Yu [¹³] wrote an essay titled “Farewell to Poverty.”
We, too, should write a farewell to poverty.
It will take China several decades to see the ghost of poverty off.

Printed based on the transcript of the conversation preserved in the Central Archives.

Notes

[1] Ma Tianshui (1911–1988), a native of Tang County, Hebei Province. At the time, he was serving as Secretary of the Secretariat of the Shanghai Municipal Committee of the Chinese Communist Party.

[2] The Hangzhou Conference refers to the meeting held in Hangzhou from January 4 to 9, 1956, attended by some central leaders and some local leaders.
The conference mainly discussed the Draft Outline for National Agricultural Development from 1956 to 1967.

[3] The “Three Antis” refers to the campaign waged from December 1951 to October 1952 against corruption, waste, and bureaucracy in state organs, the military, and state-owned enterprises.
The “Five Antis” refers to the campaign waged in 1952 against bribery, tax evasion, theft of state property, cheating on workmanship and materials, and theft of state economic intelligence in capitalist industry and commerce nationwide.

[4] The Forty Articles refers to the Draft Outline for National Agricultural Development from 1956 to 1967; see note [4] on page 3 of this volume.

[5] The Eighth National Congress refers to the Eighth National Congress of the Chinese Communist Party; see note [2] on page 98 of this volume.

〔6〕Fixed interest was a form of buyout of the means of production owned by national capitalists implemented in China following the joint state-private ownership of entire trades of capitalist industry and commerce.
Under this arrangement, irrespective of whether an enterprise was making a profit or incurring a loss, the state uniformly paid the capitalists a fixed rate of interest (generally 5 percent per annum) each year based on the value of private shares determined through asset appraisal and capital verification at the time of the joint ownership conversion.

Starting from 1956, fixed interest payments were made.

In September 1966, the payment of fixed interest was discontinued.

〔7〕The "Common Programme," see Note 12 on page 46 of this volume.

〔8〕This refers to the symposium jointly convened from July 6 to 9, 1956, by the Fourth, Fifth, and Eighth Offices of the State Council, with the participation of the All-China Federation of Industry and Commerce, the China Democratic National Construction Association, and leading members from relevant government departments.

At the symposium, representatives from the industrial and commercial circles reported extensively on issues related to public-private relations, personnel arrangements, wage and salary standards, the fixing of shares and interest rates, and arrangements for small traders and peddlers—all pertaining to the transformation of private industry and commerce—and put forward numerous criticisms and suggestions.

〔9〕The New Economic Policy was an economic policy introduced in the Soviet Union in 1921 to replace "War Communism."

Its main features included replacing the surplus grain requisition system with a grain tax, promoting commerce and permitting free trade and private traders to operate within certain limits, implementing a system of economic accounting in state-owned enterprises, and developing state capitalism through forms such as concessions and leasing.

〔10〕Ruifuxiang refers to the Beijing Ruifuxiang Silk and Cloth Store, which opened around 1870.

Tongrentang refers to the Beijing Tongrentang Pharmacy, which opened in 1669.

〔11〕Shen Bao (Shanghai News) was founded in Shanghai in 1872 and ceased publication upon the liberation of Shanghai in 1949.

〔12〕Wang Mazi refers to the Beijing Wang Mazi Knife and Scissors Shop, which opened in 1651.

Donglaishun refers to the Beijing Donglaishun Restaurant, which opened in 1903.

Quanjude refers to the Beijing Quanjude Roast Duck Restaurant, which opened in 1864.

〔13〕Han Yu (768–824), a native of Heyang, Henan (present-day Meng County), was a Tang Dynasty writer and philosopher.