Postwar Economic Development of China

MR. CONQUERGOOD: The Empire Club of Canada today opens its 42nd season, in the fifth year of the second World War, that has so severely tried the fortunes and fortitude of the Empire.

During the more than forty years of its life, this Club has been privileged to hear many very distinguished guest speakers. Each year the addresses have been published in book form at the end of the season. These books make a reference library on Canadian and world affairs that is valuable to the student of Canadian history. The 1943-44 volume will be out shortly. In addition to those gathered here in the Royal York, who have the opportunity to see as well as to hear, the message is being carried to a considerable radio audience, through the courtesy of the Canadian Broadcasting Corporation as a part of their public service.

It has been the purpose of our Club to promote by sound knowledge the progress of Canada, as part of our Empire, and as a member of The British Commonwealth of Nations. We have been interested in our neighbors and especially during war times, in the welfare and understanding of the problems of our Allies. I fear that, so far, perhaps, many Canadians have taken a casual concern in the war in the East. With the end of the European phase of the war, and a transfer of some of our loved ones more directly in the conflict against Japan, our interests will magnify many fold.

Today, we are privileged to have as our guest a member of the Cabinet of China, which is now in the thirteenth year of its war with Japan. Dr. Tingfu F. Tsiang was born in Hunan. He came to America to pursue his education. He attended Oberlin College, Oberlin, Ohio, and Columbia University in New York. Returning to China, he became Professor of Modern Chinese History in Nankai University and National Tainghau University.

In the winter of 1935, when General Chiang KaiShek became President, our guest became Chief Political Secretary of the Executive Yuan. In August of 1936, he was appointed Ambassador to the U.S.S.R. In May, 1938, he returned to his former post as Chief Political Secretary. In January, 1942, he was made a member of the Cabinet.

He has represented his country at the U.N.R.R.A. Conference which finished its session in Montreal two days ago and he returns to China shortly. It is a pleasure to present Dr. Tsiang, who will address us on the subject "Postwar Economic Development of China."

DR. TINGFU F. TSIANG: Mr. President, Your Worship, Bishop White, Gentlemen of The Empire Club of Canada: First of all, I want to thank you for these warm words of welcome, and for this opportunity to explain one part of China's life to friends in Canada. Although I have been in Canada only two weeks I have had occasion to meet friends who are interested in United China Relief, as well as in Canadian Red Cross work in China.

I want to take advantage of this occasion to thank you, on behalf of China's common people, for this generous help to us in our hour of need.

Yesterday morning, almost as my first act after arrival in your great city, I visited the Royal Museum. There I saw one of the most splendid collections of products of Chinese culture throughout the centuries. Gentlemen, I want to congratulate you on possessing such a splendid collection in your great city.

Canada and China are close neighbours. Future developments will make us even closer than today, closer in distance, closer in trade and commerce, and closer, I hope, also in friendship.

Today in speaking before you I have no plea to make, no policy to advocate, no axe to grind. My sole purpose is to put at your disposal some of my knowledge of China, so as to help you to understand my country. I have chosen to speak on the subject "The Postwar Economic Development of China", because I consider that economic development is the key to many of China's problems.

Let us look at the war in the Far East. It is a paradox, to say the least, that small Japan could invade and occupy such large areas of China which is so much bigger than Japan in area and in population. If we study the situation carefully the apparent paradox disappears. Fundamentally, the strength of Japan in the Far East lies in her high degree of industrialization.

Let me put it more accurately. Japan's modern strength is derived from her wide use of modern science and modern technology in all fields of production and distribution. On the other hand. China's relative weakness is explained by the fact that hitherto she has not applied modern science and technology to her vast natural resources.

It would require more time that I have at my disposal to explain how it happened that Japan's industrialization proceeded faster than China's. I would just say this, that as far back as 1860 the Chinese statesman. Li Hung-Chang, understood the great importance of industrialization. He then pointed out that the rivalry between China and Japan in the Far East would be decided by the race for acceptance and utilization of modern science and modern technology.

A variety of difficulties, some political and some cultural, have prevented us from embracing wholeheartedly the programme of modernization which Li Hung

Chang advocated 80 years ago. After the experience of this war, with all its bitterness and suffering, we in China, for the first time, are united in the conviction that we must whole-heartedly, and as fast as possible, apply modern science and technology to our factories, farms, roads and rivers. We believe that through such a programme of economic development we will achieve national security. We believe further that there is no other road to national security than the development of our own strength.

Let us look at the internal situation in China. There the most glaring fact is the poverty of the people. Their poverty, we think, is due fundamentally to the fact that we have continued to produce and to transport commodities through ways and means which are actually mediaeval, which go back to the pre-scientific age. We believe that with the application of science and technology to our natural resources, we can increase our production and raise the standard of living of the people many times.

The poverty of the Chinese people has been the root cause of their illiteracy. The common people of China appreciate education and respect the men of knowledge and learning. It is entirely unnecessary to tell them that they should send their children to school. If many of them don't send their children to school, it is because they need their boys and girls to help with their work in the home and on the farm. With the rise in the standard of living education will spread automatically.

Let me call your attention to another of China's problems. People who have travelled in my country know that China suffers from the prevalence of disease among all classes of the population. The Chinese people appreciate health as much as any other people. If they do not achieve a good standard of health it is because they have not the means to eat nutritive food, live in comfortable houses and utilize the services of well trained doctors and nurses. The people of China are not healthy because they are poor and since they are poor they cannot become healthy. Economic development is undoubtedly the key to our building in China a strong and healthy race of people.

The ideas which I have expounded are today the common property of the Chinese Government and people. A thousand different reasons unite to compel us to works for rapid and large scale economic development after this war.

We in China are agreed that we should launch forth a large programme of economic development. We are not quite agreed as to the type of economy which we should try to build up in China. Should China go in for state enterprise or should she try to develop private enterprise? This question is one of the important questions facing the Chinese people today.

Let us look first at the facts of the situation. The Chinese Government today owns and operates all the railways. In the old days private capital in China was not ready to build railways. We had no choice. If we wanted railways, the Government must build them. Likewise with the munitions industry. Today the Chinese Government owns and operates all the munitions factories in China. We had no choice about that matter either. Private business was not interested in making ammunition. The Government simply had to do it.

Again, let us take steel. Before the war the largest steel mill in China was owned and operated by the' Government. We tried a variety of experiments for attracting private capital to the steel industry, but we failed. Today the Chinese Government has assumed the chief burden in the development of heavy industry. We have not adopted the policy of government monopoly, but factually the Chinese Government will play a much larger role in the development of heavy industry than governments in most Western countries.

Let us turn to the field of finance. The four government banks of China are the four giants in the financial world in China. There is room for private banks. but it would be impossible for any private bank or group of private banks to control or dominate the financial world. There the key is firmly held by the Government. So much for the facts of the situation.

Now let us turn to the thinking in China. Dr. Sun Yat-Sen, the Father of the Republic, left as his testament to the Chinese people the ideal that the coming industrial revolution in China should benefit all classes, that we should profit by the experience of the West and that we should from the very beginning guide economic development for the good of all. Dr. Sun's teachings have been reinforced by a number of contemporary movements in many Western countries.

Factual development and theoretical preference would naturally lead us to develop a type of economy somewhere between the U.S.S.R. type and the U.S.A. type. We shall most likely pursue the middle way in economics. This is my prediction. There are controversies in China on this point. Some say that private business is always more efficient than government enterprise. They say that if China should adopt state ownership on a large scale China would not be able to borrow the necessary capital from Western countries. They would add that, since that is true, China might as well adopt a policy of private enterprise in order to hasten the industrialization of China.

Then there is another minority, who hope that in any case China will not be able to borrow largely from Western countries and that China might as well make up her mind to get along with her own resources and to imitate the U.S.S.R. in her various Five Year Plans. I do not care to engage in controversies here today. I wish to inform you that while the major tendency in China is towards an economy of a mixed nature, there are minor groups advocating either complete free enterprise, or a very large measure of state enterprise. I would say that I predict that the major tendency of developing a mixed economy will be the line eventually to be adopted by the country.

We look forward toward industrialization. After this war the Chinese Government and people will be wedded to modern science and technology. That wedding will be a honeymoon of long duration. There can be no question about universal enthusiasm in China for modern science and modern technology.

When looking over the history of China and the entire world situation we come to the conclusion that China's material culture has strengthened her own moral culture. That doesn't mean we are satisfied with our own moral culture, that we think we can make no improvement in that respect. It simply means that the great handicap which prevents China from having her share of influence in this world is the backwardness of her material culture.

We have good natural resources and we have now a good number of trained scientists and engineers. As to our capacity to master modern technology, we have no doubt. During the next ten or twenty years of rapid national reconstruction we will need the services of a large number of foreign technicians, but in time we believe our scientists and engineers will be equal in every respect to those in other lands.

Our enthusiasm, however, is not wild or Utopian. In the decade before the war our geologists made accurate and detailed surveys. While we can do a great deal in the way of industrialization, we have come to the conclusion that China will never be industrialized to the same degree that the United States, the United Kingdom or Germany have been industrialized.

Take, for example, the resources of iron. If the Chinese people should have the same annual per capita consumption as the people in the United States, we would exhaust our natural resources in twenty years.

Therefore, agriculture will always play a larger part in China's economy than it does in the highly industrialized nations today. But we in China can improve agriculture and increase our agricultural production by the application of science and technology. Before the war our scientists had done good work in this field. We succeeded in producing new varieties of rice, wheat and cotton, which increased the yield by 12 to 15 per cent.

That was, however, only a beginning. That type of work must be continued and enlarged. In addition, we must take up a number of other tasks. For example, we can develop animal husbandry. Last year the Government of the United States lend-leased to us the services of some experts who surveyed the grass lands in the NorthWest and the South-West of China. They have reported that the conditions in those regions are suitable for the building of a large animal husbandry. The Chinese people are using more wool for clothing. They need more meat in their diet. We look to our North-West and SouthWest to supply the wool and the meat.

In supplying scientifically prepared fertilizers to the farmer we made only a beginning before the war and that beginning was destroyed by the Japanese invaders. After the war we will build fertilizer factories again and build them on a larger scale.

The science of insecticide has many benefits to confer on the Chinese farmer. We have suffered big losses in the past from such pests as the locust. After we have killed the Japanese we will try to kill off the locusts and other pests.

Modern forms of organization, such as farmers' co-operatives, can be highly beneficial to the Chinese farmer, both in production and in marketing. My government has been much interested in the development of the Co-operative movement. After the war we will push that movement with great zeal.

The Chinese Government has a Farmers' Bank which has tried to place credit at the disposal of the farmer. That Bank will play a large role in transforming the tenants into independent farmers. In other words, we intend to take up a great agrarian reform after this war.

I would like to dwell a little on this point. We have been criticized for our slowness in taking up agrarian reform. It may be that we have been too slow, that we could have adopted a bolder programme. Again, I do not wish to indulge in controversy here, but I would like to point out some of our difficulties. The Government Party definitely rejected the principle of outright confiscation of land. We wish to help the tenant to acquire land through some scheme of long term credit. Now our register of land ownership in China was and is grossly defective. We don't know what percentage of the farmer population are tenants, what percentage are independent farmers, and what percentage live by just owning land. Before the war we tried to make good this deficiency in knowledge. We tried to start an aerial survey of the land, but before we had gone far the war stopped us because we had to conserve all our aviation equipment and personnel for purposes of war.

Then with the coming of the war we have had inflation. The Government feels that in the period of inflation it should not extend credit but agrarian reform is one of the most important planks of the Government Party. Dr. Sun Yat-Sen put that plank there from the very beginning of his revolutionary movement. After this war we will make a systematic attempt at giving the land to the man who works on the land.

The development of China, both in the field of industry and in the field of agriculture, would require considerable foreign investment as well as the services of a large number of foreign experts for some years to come. The Chinese Government is therefore faced with the problem of attracting foreign capital and foreign experts to China.

In regard to foreign capital, the Government has taken some steps. In the old days we had a law which required that all foreign and Chinese joint enterprises should have 51 percent Chinese and only 49 percent foreign capital and that the Chairman of the Board and the Manager of such joint enterprise should be persons of Chinese nationality. That law was passed many years ago when we suffered from the regime of extra-territoriality and we were much afraid of political complications arising out of foreign investments in China. Now that the old unequal treaties have been abolished the fear of political complications is largely removed. Last fall my Government decided to revise that law. Hereafter in all joint enterprises there will be no legal limitations as to the relative shares of foreign and Chinese capital.

The Manager of a joint enterprise hereafter may be either a Chinese or a foreigner, but the Chairman of the Board must be a Chinese. The Chinese Government realizes that the laws relating to corporations need revision and steps have been taken to make a thorough survey of practices prevailing in the major industrial countries of the world.

Foreign investment in China may take a number of forms. First, it may be in the form of loans to the Chinese Government; secondly, it may take the form of joint enterprises between the Chinese Government and foreign capital or between Chinese private capital and foreign private capital. It may also take the form of concessions of franchises granted by the Chinese Government to foreign companies. It may further take the form of branch establishments of foreign corporations.

While the Chinese Government would be careful in guarding against political complications, the chief thought is to attract to China as much foreign capital as may be possible. You can be sure that the Chinese Government would meet foreign capital more than half way.

We realize that the economic development of China would require decades. The relationship that we wish to build up with foreign capital must be of long duration. If that relationship is to endure it must be mutually satisfactory.

You probably would like to know how China intends to pay back the advances which foreign capital may make to her. It is obvious that she can only repay foreign loans with her exports and for that reason commercial relationship after this war must provide two-way traffic. Otherwise economic development in any part of the world would be impossible. The export trade of China before the war consisted mainly of agricultural products and certain minerals. After the war, our export trade will have to start where it left off. In time we can expand the exports of China very largely. There are many lines of semi-artistic production which we have not exploited for our export trade.

Then China might look into markets in countries with a low standard of living which demand goods of very low price. Thirdly, we think we can do a great deal in the way of stimulating tourist trade in China. This problem of exports is a very complicated one. It requires strenuous efforts on the part of China. It also requires an enlightened attitude on the part of other countries.

Before I sit down I would like to call to your attention the necessary transition between the time of war and the time of serious economic reconstruction. The war will leave on our hands also many towns and villages to be rebuilt, diseases to be checked, flood areas to be rehabilitated, river dykes to be repaired, railways and highways to be restored. In other words, after the fighting has stopped, China will face many problems of relief and rehabilitation.

While the United Nations Relief and Rehabilitation Administration can be of great service to China in that transitional period, the problems are too great to be per formed by that organization alone. China will have to mobilize her manpower for relief and rehabilitation as she has organized for war.

Besides relief in food, clothing and shelter, China's greatest need after the war will be the restoration of inland transportation. Just now there is an almost complete breakdown in communications with the result that the products of one province cannot be made available to people in other provinces. If we can get trucks moving on the highways and trains moving on the railways and boats moving on the rivers. China's own productive forces can be released for the relief of China's population.

The second greatest postwar need of China will be medical service. After seven lone years of malnutrition, the sickness rate has gone up. We are of raid that the movement of millions of war refugees across the country after this war might spread disease. The Government is determined to make a supreme effort to prevent plague in China after this war. For this reason we expect UNRRA to give China all possible aid in medical service.

China, as you know, is largely an agricultural country. Her richest fields are along the rivers. They have to be guarded against floods with dykes. During the war some of the dykes have been broken with the result that vast areas of good cultivated land have been flooded. Other dykes have gone without repair. The rehabilitation of the flooded areas would restore many families to the land. The repair of dykes would prevent floods which might be. very disastrous. In the rehabilitation of flooded areas and the repair of dykes we also expect substantial aid from UNRRA.

The Chinese Government has formulated a co-ordinated plan for relief and rehabilitation. In drafting that plan we had the technical assistance of experts sent by the Director-General of UNRRA to China for that purpose. We hope for the complete realization of the plan. Gentlemen, I have indicated briefly and simply the major lines of economic development in postwar China. I have also indicated the most urgent needs of China in relief and rehabilitation.

We believe that we can build up a much stronger China, a much healthier and wealthier China, a China that can take care of the peace in the Far East without relying upon outside aid, a China which while helping to preserve peace throughout the world will be no menace to any country. We believe we can build up a China which will be economically strong, and at the same time contribute to the common prosperity of the world. Economics. I believe, is the key to many of China's problems. With economic development many of the weaknesses that we find in China today will disappear. Naturally, we think and hope that with China's economic development, Canada--our close neighbour--will be sympathetic and helpful, and I wish our Canadian friends to consider this question: Would not a strong and prosperous China on our side of the Pacific contribute to the security and prosperity of Canada on this side of the Pacific?