heavy vs light industry

[82riceballs]

from China's Foreign Trade Reforms on google books, I read that:

"In the prereform period, China's economic policy focused primarily on the growth of heavy industry, the sector which is considered to be a prerequisite of economic modernization. Such a policy culminated in the government's launch of the Four Modernizations program in 1978. However, the severe economic imbalance caused by the severe investment bias led the government to adopt a readjustment program in 1979, aimed at promoting the growth of agriculture and light industry."

Did they suddenly switch to light industry so that people could make more money?

[studentyoung]

Did they suddenly switch to light industry so that people could make more money?

No. But heavy industry needs much more state appropriation each year than light industry does. Light industry can add more consumer goods, so in this way it can improve people’s daily life. In those day, our country just put all its stress on heavy industry, so people had very little consumer goods to choose in their daily life.

Cheers!

[cdn_in_bj]

On a related note, the government has recently moved towards discouraging the proliferation of polluting and resource-intensive industries.

[82riceballs]

Thanks! I just have one question:

But heavy industry needs much more state appropriation

What's state appropriation?

[studentyoung]

What's state appropriation?

Sorry, I think I should use “national financial allocation国家财政分配”. Does it work? During the first allocation of the national income, a lion share will be given to heave industry as re-production investment.

Cheers!

[yonglin]

I think studentyoung's point might have been related to the fact that establishing heavy industries (e.g., coal mines, chemical plants) involves higher fixed (start-up) cost than establishing light industries (e.g., clothes, shoes, household items manufacturing).

The reason why China (just like other communist-style planned economies, like the former USSR) was very concerned with developing heavy industry was because marxists believe that all kind of social/economic development relies on technological progress. It also seem reasonable to believe that the economy will grow faster if more of production is geared towards goods that are used in other parts of the economy, than merely for consumption.

While these kinds of policy might work in some cases for some time, they typically result in severe inefficiencies. It is very difficult for the government to estimate how many goods will be produced, and by underestimating the need for light industry products (consumer goods), these got very scarce and expensive.

The appropriate balance between heavy and light industry products depend on the characteristics of each economy, its relative strengths and weaknesses. The Chinese economy, for instance, is endowed with a massive labour force, and it turned out that it was internationally competetive in producing labour-intensive consumer goods (like, what's being sold everywhere today).

[82riceballs]

Thanks, guys! I understand now