By 1987, under the stimulus of the reform program, the Chinese economy had made major strides toward achieving modernization and improved living standards. The potential for further improvements in efficiency and productivity was greatly increased by the revival of the education system, the opening of the economy to broader trade and cooperation with other countries, the expanded use of the market to enliven commerce and production, and the increased decision-making power of individual economic units (see Modernization Goals in the 1980s , ch. 4 Trade Policy in the 1980s , ch. 8).

The country's most important resource was its labor force, the largest in the world. The rapid expansion and improvement of the education system that began in the late 1970s was creating larger numbers of workers who were skilled and well educated, as well as the first substantial numbers of advanced-degree holders to staff the nation's universities and research institutes. In addition, the decentralization of management encouraged the participation in planning and decision making of growing numbers of local and enterprise-level managers, planners, administrators, and scientists. It also trained future economic leaders for higher administrative responsibilities.

In terms of material resources, China was adequately endowed to meet the needs of modernization in all but a few materials. Under the new policy of encouraging cooperation and joint ventures with foreign firms, advanced technology was more widely used to exploit China's large deposits of iron ore and other important minerals, along with the country's vast coal and petroleum reserves and its enormous hydroelectric potential--the largest in the world. Much of the investment in expanding the transportation network in the 1980s was aimed at improving access to previously remote mineral and energy resources for both domestic needs and foreign trade.

The most stringent resource constraint was the limited amount of arable land, which actually declined in the 1980s as cropland was appropriated for new rural housing and urban expansion. Between 1978 and 1985, the total area sown to crops declined by over 4 percent. The loss of farmland, however, was more than compensated for by improved productivity of the land that remained under cultivation. Farmers expanded the irrigated area, increased fertilizer application, acquired improved crop varieties, and made better use of comparative advantage in determining which crops to grow, resulting in an average rate of growth in the value of crop production of better than 5 percent a year over the same 7-year period. Although agricultural growth rates had begun to fall off in the mid-1980s, the incentives of the responsibility system and greater access to international technical advances suggested that the farm sector could continue to meet the needs of the growing economy in the foreseeable future.

The industrial sector, while much less advanced than tho 1000 ose of the developed countries, was nonetheless a solÍÍÍÍÍÍÍÍid base for modernization. Industrial enterprises were dispersed throughout the country and included units capable of producing all major kinds of machinery, equipment, chemicals, building materials, and light industrial goods. Chinese enterprises could make most of the products required for modernization, and the growing pool of industrial technicians and managers was increasingly capable of effectively integrating advanced foreign technology into Chinese production processes. Key industries were being technologically strengthened by the purchase of advanced foreign equipment and the adoption of modern management techniques. Despite promising potential, formidable obstacles still impeded the drive for modernization. Physical restraints included a renewed increase in birth rates and population growth rates as the number of women of child-bearing age began to rise in 1986 and 1987. Some crucial resources--especially educated personnel and modern equipment- -still were in very short supply because of the sheer size of the economy. In the realm of policy, the administration faced the daunting problem of trying to integrate market measures--for efficiency--with government planning and control, the source of stability. In 1987 both kinds of mechanisms exerted extensive influence with the result that market efficiency was hindered by government intervention and government plans were undermined by off-plan activities. Finally, the most serious concern of government leaders was the possibility of future political upheavals. While nearly all Chinese people enjoyed better living conditions as a result of the progress achieved by the reform program, the new policies also had given rise to new social problems and political tensions. Increasing crime and corruption, greater emphasis on the profit motive, widening income disparities, and inflation aroused resistance in many conservative quarters and resulted in the political struggle that caused Hu Yaobang to be forced from his position as Chinese Communist Party general secretary in early 1987. By mid-1987 it was not yet clear what the outcome of the struggle would be or how it would affect the future course of economic reform.

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Among the most useful works on economic development in China before 1949 are Mark Elvin's The Pattern of the Chinese Past and Dwight H. Perkins' Agricultural Development in China, 1368-1968. These books examine the fundamental relationships between technology, population, society, and economic growth in China. A good, brief integration of much of the scholarship on the Chinese economy in the modern period may be found in Ramon H. Myers' The Chinese Economy Past and Present. China's Modern Economy in Historical Perspective, edited by Perkins, is a valuable collection of articles by leading scholars dealing with various aspects of China's modern economic development. A concise description of the Chinese economy in the eighty years before 1949 is presented in two brief works by Albert Feuerwerker, The Chinese Economy, ca. 1870-1911 and Economic Trends in the Republic of China, 1912-1949. The most authoritative and detailed sources of information on the economy of the People's Republic are the annual statistical yearbooks compiled by the State Statistical Bureau. As of 1987 the most recent was Statistical Yearbook of China, 1986, which contained updated information on most major aspects of the Chinese economy since 1949, as well as a set of explanatory notes that define the terms and measures used. Another useful annual Chinese publication is the Almanac of China's Economy. Recent general treatments of the Chinese economy by Western scholars include a good overview, China's Political Economy by Carl Riskin, and a mathematically oriented work, The Chinese Economy by Gregory C. Chow. Some of the earlier classic works on the post-1949 economy are China's Economic Revolut d69 ion by Alexander Eckstein, China's Economy by Christopher Howe, China's Economic System by Audrey Donnithorne, The Economy of the Chinese Mainland by Ta-Chung Liu and Kung-Chia Yeh, and The Chinese Economy under Communism by Nai-Ruenn Chen and Walter Galenson. China's Development Experience in Comparative Perspective, edited by Robert F. Dernberger, is a collection of studies by noted economists dealing with China's modern economic development. A good description of the Maoist economic model is presented in John G. Gurley's China's Economy and the Maoist Strategy. The United States Congress Joint Economic Committee has published a series of useful volumes on the Chinese economy: An Economic Profile of Mainland China (1967) People's Republic of China: An Economic Assessment (1972) China: A Reassessment of the Economy (1975) Chinese Economy Post-Mao (1978) China under the Four Modernizations (1982) and China's Economy Looks Toward the Year 2000 (1986).

There are many useful works dealing with specific aspects of the Chinese economy. Economic planning is analyzed by Perkins in Market Control and Planning in Communist China and more recently by Nicholas R. Lardy in Economic Growth and Distribution in China. The banking system is described in Money and Monetary Policy in Communist China by Katherine H. Hsiao and in China's Financial System by William A. Byrd. The Political Economy of Reform in Post-Mao China, edited by Elizabeth J. Perry and Christine Wong, is a collection of insightful analyses of the reform process. Prominent among the many works on Chinese agriculture are Food for One Billion: China's Agriculture since 1949 by Robert C. Hsu, Agriculture in China's Modern Economic Development by Lardy, and The Chinese Agricultural Economy, edited by Randolph Barker, Radha Sinha, and Beth Rose. Current economic information appears in several official English-language periodicals from China, including Beijing Review, China Daily, and China Reconstructs. Major periodicals published outside China that monitor the Chinese economy include Asian Wall Street Journal, China Quarterly, Economist, and Far Eastern Economic Review. (For further information and complete citations, see Bibliography.)

Data as of July 1987