Encyclopedia of Anti-Revisionism On-Line

Cynthia Lai

China: What Went Wrong at Boshan Steel

First Published: Workers Viewpoint, Vol. 6, No. 23, June 15-21, 1981.
Transcription, Editing and Markup: Paul Saba
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Construction of the second stage of the Boshan Steel Mill in Shanghai has stopped. Boshan is the much-talked-about steel mill which the Chinese government imported from Japan. China’s economic policy over the last two years in general and the decision to build Boshan in particular has been declared a failure caused by “leftist thinking.” Boshan is one of many ambitious projects that were previously conceived of as being vital for the modernization of China’s economy. Now they are all being cut back as Chinese leaders embark on a readjustment program.

The reasoning behind the present readjustment was presented by Yao Yi-lin, Vice Premier and Minister in Charge of the State Planning Commission, in his Feb. 25 report to the Standing Committee of the Fifth National People’s Congress. Readjustment is necessary to correct the economic imbalance revealed by the 1980 budget deficit of 12,000 yuan (Chinese currency). The deficit, financed by printing more money without being based on real production, led to an average 6% increase in retail prices per year. Store prices for foodstuffs alone have jumped 13.8%.

What is the root of the problem? According to Peking, “under the guidance of a ’left ideology,’ the scope of capital construction was over-extended and over-high targets were set for industrial production” (Beijing Review, 3/16/81). “The aim of the ongoing major readjustment is to free our economic work further from the influence of ’left’ thinking” and to “reduce the scale of capital construction as much as possible” (BR, 3/23/81). This way “the 1981 appropriation for capital construction will be reduced from the originally planned 55,000 million yuans to 30,000 million yuans.” “Projects which lack suitable conditions for production, or projects which, if built, would lack the conditions for production (including imported projects)” will be suspended. This means Boshan, among others.

Serious mistakes have been made concerning the Boshan steel plant and the economy as a whole. But it is totally one-sided for China’s leaders to sum up the errors as ultra “left.” Far from strengthening China’s economy, an incorrect evaluation could have disastrous effects. A brief review of the Boshan incident – the heart of the controversy that led to the readjustment plan – shows what’s wrong with the sumup.

History of Boshan Steel Mill

According to an article in the Oct. 1980 issue of the Trend, a pro-China magazine published in Hong Kong, the decision to build Boshan was first made by Deng Xiaoping, China’s top man. This was in early 1978 when the head of New Japan Steel visited the country. The buying of a complete steel mill was deemed necessary to reach China’s production target of 60 million tons by 1985. The building of the giant Boshan mill was part of a long-term trade agreement between the two countries.

To a poor country like China, the investment – projected at 27 billion yuans – was huge. Nevertheless, the decision to go ahead stirred national excitement. Scores of top scientists and over 20,000 skilled workers from all over the country were transferred to work on the project. When construction started at the end of 1978, Li Sen-ni, a Vice Premier and Vice Chairman of the Communist Party of China, personally surveyed the site in order to promote its significance. Many top officials of the central government attended the ribbon-cutting ceremony, and Boshan became the symbol of the modernization of Chinese society.

Then last November, Vice Premier Gu Mu suddenly announced that “the state department had decided to delay the second stage construction of Boshan Steel in Shanghai.” Why? Because “to China, improving the standard of living of its people, to resolve the problems of clothing, eating, living is the first item on the agenda. To the government, the main thing is to induce people’s confidence towards the government.” Boshan must be delayed “even if it could lead to loss of credit internationally” (as quoted in the Trend, Dec. 1980).

Criticism of Boshan Steel Mill

This decision was in response to the Chinese people’s severe criticism of the Boshan steel project.

First, the site for the mill was chosen without any scientific consultation. The ground under the site was too soft to provide a strong foundation. Several hundred million yuans had to be spent to put in a steel foundation. At the same time, the port near the site was too shallow to allow ships of over 50,000 tons to pass through. Imported minerals from Australia and Brazil (part of the mill’s design) had to be unloaded mid-route in Japan and transported to the site in smaller vessels. This was an extra 8 yuans per ton in transportation costs alone. In addition, China had planned on eventually using domestically-produced minerals from its Northeast region. But traffic congestion around Shanghai made this impossible.

Second, people criticized the high production costs. Boshan Steel had to use imported minerals since it was designed along Japan’s most advanced model. This would raise the cost of producing steel at Boshan far above that of steel produced at domestically-built mills and immediately raise the price of steel products.

Also, China could not guarantee Boshan’s supply of raw materials. Because of its design, Boshan not only needed minerals from Australia, but also supplemental materials from five other countries. This would put the huge Boshan enterprise at the mercy of foreign countries who could cut off supply at will and blackmail China. Furthermore, Australia has already stopped producing the minerals needed at Boshan and no alternate source has yet been found in China. This was the people’s third criticism.

Fourth, critics said it was cheaper to import steel than build new steel plants. Supporters of the Boshan project claimed that building Boshan and other mills would be cheaper than paying $2.22 billion to import the 55 million tons of steel needed by late 1985. But others said that at best Boshan’s total steel output in the 1980’s would only provide half of the amount China needs. With the interest payments, equipment purchases and minerals, the mill would not be as economical as importing steel from abroad.

Boshan also presents a pollution problem. Environmentalists said that Boshan pumps 200 tons of carbon monoxide into the air each day, raising Shanghai’s air pollution level by 25%. The accumulated effect of this would be to plague Shanghai, with the country’s largest population, with acid rain.

Another criticism is that people feel China was cheated by Japan in the deal. Initially, New Japan Steel agreed to design 19 items for $27 billion (400 billion Japanese yen). But in the contract, Japan was only obligated to design 10 items for that amount. The other nine had to be done by other companies, costing China an extra 1,300 billion yen – 30% more than she had planned. In the Japanese press, even Japanese economists and industrialists have criticized the blatant greed of the companies involved. Chinese critics fear that the vagueness of both the contract as a whole (costs are not itemized) and the terms of Japan’s guarantee towards the mill is unfavorable to China.

Last but not least, critics of the Boshan project blame the whole mess on the guiding ideology and the way decisions were made. The decision was based on an over-zealous attempt to modernize China, they say, and on the casual word of one leader. They have called the project “irresponsible,” wasting the precious resources created by the Hood and sweat of the Chinese people.

Boshan Lesson – Better ’Right’ Than ’Left’?

Many of the criticisms of the Boshan fiasco are valid. If taken seriously and summed up comprehensively, there are precious lessons (even in money terms) here for future economic work. However, China’s leaders have apparently been so burned by the mistakes that they’ve become gun-shy. In a major article, “Further Economic Readjustment: A Break With ’Leftist’ Thinking,” that appeared in the March 23 issue of Beijing Review, the Chinese leaders advocated a “better right” than “left” view in economic construction and an economic program of “no capital construction before livelihood is guaranteed.”

The article quoted Chen yun, China’s top economist, who in 1956 said, 𔄢When the scale of construction is larger than what the country’s financial and material resources can afford, it means something rash that is sure to lead to economic chaos.” “Of course, conservatism is just as bad because it holds back the right speed for construction. But (our emphasis) conservatism can be remedied much more easily than a hasty advance can be remedied. In the case of the former, more items of construction can be added easily when there is plenty of materials on hand; but in the case of the latter, it will not be that easy to reduce the scale of construction which has grown larger than what the financial and material resources can afford; besides, a big waste will have resulted in the process.”

Both Left and Right Mistakes Wrong

While this argument may seem like common sense, it is wrong on several counts. First, Boshan was not just the result of ultra-leftist thinking. Of course, in the final analysis, all ideas that run too far ahead of reality are “left.” But the decision to import the Boshan steel mill was based on the idea that “it is better and easier to import whole plants than to build our own.” The decision did not proceed from the concrete conditions of China, but rather from a pre-conceived, doctrinaire notion that China should adopt wholesale the Western mode of development. This is doctrinairism coming from the right that betrays the correct principle of self-reliance. The argument that it is cheaper to import steel than for China to build its own mills is also a rightist mistake. Apart from serving the political aims of discrediting the “gang of four” – though the result could be just the opposite – no constructive purpose is served with this kind of sumup. It is at best naive or worse, opportunist.

Second, conservative errors are not “more easily remedied” than mistakes due to rashness. To make an analogy, if revolutionaries were to make a premature call for insurrection and the uprising was defeated, then there would be tremendous casualties among the revolutionary forces and the people. At the same time, if revolutionaries refuse to call for insurrection when the opportunity arises for fear of defeat or other reasons, then the masses could be condemned to several more decades of suffering under capitalism. It could mean even more bloodshed and casualties since the enemy would have the initiative.

The “better-right-than-left” view inevitably leads to reformism since this is always less “risky” than revolution. But this is still the era of imperialism where the imperialist economy is still dominant in the world. China is still surrounded by hostile powers all around its borders. Not seizing the time to build up its economy could do tremendous harm to socialist construction in China. It could leave China dangerously far behind and ill-prepared.

While all ultra-left errors must be defeated, ultra-right mistakes are not a better alternative. Both are antagonistic to Marxism. The main thing is that communists must have the daringness to try and not be afraid’ of making mistakes. As Lenin summed up from the Russian people’s revolution, “The Communist movement exerts every effort to direct the working class movement and social development in general along the straightest and quickest road to the universal victory of Soviet power and the dictatorship of the proletariat.” “But it is enough to take one little step further – a step that might seem to be in the same direction – and truth becomes error.” (“Left-Wing” Communism, An Infantile Disorder). It is in this context that we must view the errors that result from trying, Boshan included.

Capital Construction and Importing Technology

Furthermore, there is nothing inherently wrong with capital construction or importing foreign technology. The mistake at Boshan was not that China tried to do capital construction. In trying to break with the “gang of four’s” total ban against imported technology, China’s leaders went too far. Due to inexperience, China was outwitted in its hand-to-hand combat with the imperialists, who are more skilled in manuevering and have a long history of cheating. Though the results are bad, the attempt to engage the imperialists is nevertheless valuable. Now China should be wiser in its future relations with the imperialists and shake off whatever illusions it might still have about the capitalists.

The idea of undertaking “construction only when the livelihood of the people has been well-arranged,” though a correct orientation, can have dangerous consequences if it is applied to all situations at all times. This is a mechanical “stages” approach to economic construction that pits the long-term interests of the people against their immediate interests. This view ignores the fact that people’s standard of living changes and is relative to time, place and conditions – it can always be improved. Looking to improve only the production of consumer goods in the short run can actually hurt the betterment of the people’s livelihood in the long run.

The relationship between people’s long term interests and their immediate needs must be handled correctly. Like harnessing the power of fire, it can be destructive if it is handled wrongly, as well as provide tremendous benefits if tackled correctly. The same goes for the question of using foreign technology. China’s view of “importing less complete sets of equipment, buying instead technology and software so as to combine the import of technology with the transformation of the old enterprises” is a relatively more correct sumup of one of the lessons of the Boshan mistake.

Inaction Can’t Solve Planning Problems

The mistakes made at Boshan and in the Chinese economy as a whole over the last two years are the result of problems in socialist planning. They stem from the gap between objective reality and man’s subjective thinking. The cause and effects are both ultra-left and ultra-right errors. By summing up lessons and correcting previous mistakes – thus better planning – China can achieve a more balanced economy.

This ability to readjust the economy through conscious planning is one aspect of the superiority of a socialist system. However, the incorrect sumup of the present Chinese leadership justifies inertia, bureaucracy, inaction and reformism. Using rightist thinking to “cure” leftist thinking means trying to use one imbalance to correct another. This leads to greater economic instability all around. Mistakes can kill and so does inaction. The harm done through doing nothing may not be as rapid or as obvious, but that just makes it that much more deadly.