Having restored a viable economic base, the leadership under Mao Zedong, Zhou Enlai, and other revolutionary veterans was prepared to embark on an intensive program of industrial growth and socialization. For this purpose the administration adopted the Soviet economic model, based on state ownership in the modern sector, large collective units in agriculture, and centralized economic planning. The Soviet approach to economic development was manifested in the First Five-Year Plan (1953-57). As in the Soviet economy, the main objective was a high rate of economic growth, with primary emphasis on industrial development at the expense of agriculture and particular concentration on heavy industry and capital-intensive technology. Soviet planners helped their Chinese counterparts formulate the plan. Large numbers of Soviet engineers, technicians, and scientists assisted in developing and installing new heavy industrial facilities, including many entire plants and pieces of equipment purchased from the Soviet Union. Government control over industry was increased during this period by applying financial pressures and inducements to convince owners of private, modern firms to sell them to the state or convert them into joint public-private enterprises under state control. By 1956 approximately 67.5 percent of all modern industrial enterprises were state owned, and 32.5 percent were under joint public-private ownership. No privately owned firms remained. During the same period, the handicraft industries were organized into cooperatives, which accounted for 91.7 percent of all handicraft workers by 1956.

Agriculture also underwent extensive organizational changes. To facilitate the mobilization of agricultural resources, improve the efficiency of farming, and increase government access to agricultural products, the authorities encouraged farmers to organize increasingly large and socialized collective units. From the loosely structured, tiny mutual aid teams, villages were to advance first to lower-stage, agricultural producers' cooperatives, in which families still received some income on the basis of the amount of land they contributed, and eventually to advanced cooperatives, or collectives. In the advanced producers' cooperatives, income shares were based only on the amount of labor contributed. In addition, each family was allowed to retain a small private plot on which to grow vegetables, fruit, and livestock for its own use. The collectivization process began slowly but accelerated in 1955 and 1956. In 1957 about 93.5 percent of all farm households had joined advanced producers' cooperatives.

In terms of economic growth the First Five-Year Plan was quite successful, especially in those areas emphasized by the Soviet-style development strategy. A solid foundation was created in heavy industry. Key industries, including iron and steel manufacturing, coal mining, cement production, electricity generation, and machine building were greatly expanded and were put on a firm, modern technological footing. Thousands of industrial and mining enterprises were constructed, including 156 major facilities. Industrial production increased at an average annual rate of 19 percent between 1952 and 1957, and national income grew at a rate of 9 percent a year.

Despite the lack of state investment in agriculture, agricultural output increased substantially, averaging increases of about 4 percent a year. This growth resulted primarily from gains in efficiency brought about by the reorganization and cooperation achieved through collectivization. As the First Five-Year Plan wore on, however, Chinese leaders became increasingly concerned over the relatively sluggish performance of agriculture and the inability of state trading companies to increase significantly the amount of grain procured from rural units for urban consumption.

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Source: U.S. Library of Congress