China's defense industrial complex produced weapons and equipment based predominantly on Soviet designs of the 1950s and 1960s. Because of a lack of foreign exchange, a low short-term threat perception, and an emphasis on the three other modernizations (agriculture, industry, and science and technology), China had decided to develop its defense industries gradually. It would rely primarily on domestic production, importing foreign technology only in areas of critical need.

The defense industries produced a wide range of military materiel. Large quantities of small arms and tanks were produced, and many were exported to Third World countries such as Iran. China had upgraded Soviet aircraft and was developing nuclear-powered ballistic-missile submarines, intercontinental ballistic missiles, and tanks equipped with infrared night-vision gear and laser rangefinders (see __________, ch. 14)

Because defense was assigned the lowest priority in the Four Modernizations in the 1970s, China's large defense sector has devoted an increasing amount of its resources to civilian production. For example, in the mid-1980s approximately one-third of the ordnance industry's output was allocated to civilian production, and the share was expected to rise to two-thirds by 1990. The defense sector produced a wide variety of products, ranging from furniture to telescopes, cameras to heavy machinery.

Despite the military's contribution to the industrial sector, in 1987 Chinese industry lagged far behind that of the industrialized nations. Much of industrial technology was severely outdated severe energy shortages, transportation bottlenecks, and bureaucratic interference also hindered modernization. Although output was high in a number of industries, quality was often poor. However, China's industrial sector has made considerable progress since 1949. Output of most products has increased dramatically since the 1950s, and China now produces computers, satellites, and other high-technology items. The reform program introduced in the late 1970s brought an era of more rational economic planning and laid the groundwork for more balanced and sustained industrial growth. As of 1987, China's leaders were aware of the need for greater industrial efficiency and productivity, and were striving to achieve these goals.

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Industrial growth prior to 1949 is outlined by John K. Chang in Industrial Development in Pre-Communist China. Thomas G. Rawski describes the development of the producer goods industries, both before and after the founding of the People's Republic, in China's Transition to Industrialism. A wealth of material on Chinese industry is found in the two-volume set of China's Economy Looks Toward the Year 2000, which includes an overview article, and specific articles relating to the structure, management, ownership and control, and finance and planning of industry. It also describes and analyzes the energy sector in detail.

Volume II of the World Bank Series, China: Socialist Economic Development, con7b0 ontains information on industrial organization, policy, strengths and weaknesses, and issues and challenges. Another World Bank Study, China: Long-Term Development Issues and Options, looks at some of the major development issues facing China to the year 2000. Two RAND studies, Industrial Innovation in China with Special Reference to the Metallurgical Industry and Chinese Electronics Industry in Transition, are excellent case studies, documenting China's attempt to modernize its outdated industrial sector. The annual State Statistical Yearbook of China provides figures on a wide range of industrial categories. The monthly China Business Review provides well-researched articles on many topics related to industry, and the Country Report: China, North Korea, (formerly Quarterly Economic Review of China, North Korea) outlines economic events on a quarterly basis and provides annual summaries. (For further information and complete citations, see Bibliography.)

Data as of July 1987