Learning How to Open the Door 483 Three Cases of Incremental Learning 1. Plan-Oriented Export Promotion Policies Despite the international norms promoted by the World Trade Organi zation, economies ranging fromfree traders"such as the United States to more mercantilist states such as france and Japan continue to enact a variety of export promotion measures. China is no exception. Chinese leaders have in the past provided export incentives ranging from admi istrative orders imposing export priorities to more remunerative approaches such as providing rubber galoshes to farmers producing hogs for export. The Third Plenums"opening"strategy was to a large degree a continuation and enhancement of measures first implemented in the Export promotion: pre-Third Plenum origins. Following the economic collapse resulting from the Great Leap Forward, the Chinese leadership urgently needed to finance grain imports to feed China's starving millions and repay its foreign debts, especially to an increasingly estranged Sovict partner. China could no longer rely on the insulated barter arrangements with the Soviet bloc countries following the Sino-Soviet split, and had to engage the capitalist marketplace. The post-GLF coalition thus experi mented with a variety of export promotion measures to overcome expor procurement problems and to " develop production of products suited for to suit the characteristics of the capitalist market, "2 quality and variety export to the capitalist markets, further raise product By June 1963, the success of these measures and China's overall economic recovery enabled he Chinese to readopt a small-scale IS programme based on importing technology and turnkey plants from Western capitalist econ One of the first export promotion initiatives enacted during the post footnote cotinued result of"complex learning, "which"involves recognition of conflic\ a "mrs. "s Nuclcar leaming and U.S.-Sovict security regimes, "In No. 3(1987), P. 380; sce also Chris Argyris and Donald Schon, Organizational Theory of Action Perspective(Reading, MA: Addison-Wesley, 1980), pp 20-26: Levy, Learning and foreign policy, pp 286-87. Peter Hall borrows from Thomas Kuhn the ide d in patterms of policy, third order change is often a more disjunctive process and the state, " Comparative Politics, No. 25(1993),p. 279. 21. National Foreign Trade Conference, 5-27 September 1963, in X hubanshe, 1996), p 910; Fang Weizhong(ed ) Zhonghua renmin gonghe (1949-1980)(A Chronology of Major Events in the PRC's Economy (1949- 22. Long Chucai (ed ) Liyong waizi gailun(An Introduction to the Use of Foreign see Robert L. Pric Joint Economic Committce (ed ) gress, Ist Session(Wa n. DC: GPO in China. "in U.S Congress, Joint Economic Committee (ed ) China: A Reassessment of the Econony, 94th Congress, Ist Session (Washington, DC: GPO, 1975), Pp 712-721
The China Quarterly gLF period applied administrative means to prioritize export procure ment, where quotas were threatened by Chinas looming economic crisi Despite the growing threat of massive starvation, the CCP Central Committee and the State Council issued an"Emergency directive"on 26 October 1959 inaugurating the Yi qi, er xiang san chao("First squeeze, secondly replace, thirdly exceed") policy. The policy"squeezed"from the domestic economyall commodities which [had] not met the export plan and whose domestic consumption [could] be reduced or eliminated Secondly, it mandated the"replacement"of any export commodities that could not be procured on the domestic market by other obtainable, exportable goods. Thirdly, the policy insisted that production units exceed"their planned export quota. The policy also provided"Five priorities"(Wu youxian) status to all export products, guaranteeir priority in production and processing, in access to raw materials and packaging supplies, in procurement and in transportation. 4 A second important initiative was the Yijin yangchu ("Import pro duction inputs to produce exports")foreign trade programme. Its purpose was to increase foreign exchange by"importing raw materials, equipment and technology from abroad, processing [the material] into a finished product and then exporting it. "The basic strategy was straightforward guarantee export procurement and raise the amount of foreign exchange receipts derived from exports. It was achieved in part by launching a nation-wide procurement, export, allocation and transportation campaign (Shougou, chukou, diaoyun yundong), raising the value-added content of export commodities and increasing gold production. Such administrat- asures set the goals and provided the"stick"to mect and exceed By the early 1960s, the post-GLF elite realized they needed to provide certain" carrots"to motivate Chinese farmers and factory Agricultural producers were"bribed"with the increase of state procure ment prices and the institution of various bonus schemes. Mirroring initiatives taken on the domestic market, the leadership approved 23. Li Xiannian, Duiwai maoyi trade work"), in Li Xiannian, Li Xiannian lun caizheng jinrong maoyi, 1950-1991 (Li inance and Trade, 1950-1991), VoL. I(B Zhonghua renmin gongheguo jingji guanli dashiji(A Chronology of the Major Events in th s Economy and Management)( Beijing: Zhongguo jingji chubanshe, 1986), p 131 Secretaries, approved by the CCP Central Committee on 3 March 1960, in Dangd ngji guanli bianjibu, A C) ogy of Major Events in the PRC. 5. Tan Qingfeng, Yao Xuecong, and Li Shusen(eds ) Waimao fuchi shengchan shijian (The Practice of Supporting Foreign Trade Production)(Beijing: Zhongguo duiwai jing aoyi chubanshe, 1984), p 43; Zhongguo duiwai maoyi gailun bianxiezu(ed. ) Zhong duiwai maoyi gailun(An Introduction to Chinas Foreign Trade)(Beijing: Duiwai maoyi 26. Professional conference on problems of gold production called by the SEC 61, in Dangdai Zhongguo de jingji guanli bianjibu, A Chronology of Major Events in the 27. For instance, see"Guanyu liangshi jiangli banfa he youlian jiage wenti"("Methods for the grain bonus methods and problems in the oil crop pricing"), issued by the State Council
Learning How to Open the Door 485 increases in export procurement prices in 1961. By 1965, the State Council had approved a separate foreign trade procurement price, which stipulated higher procurement prices for goods whose quality, variety or packaging exceeded that of similar goods intended for the domestic market. The leadership again copied initiatives in the domestic sector, instituting a bonus scheme to stimulate production of a variety of agricultural sideline products for export. Following Li Xiannian's sug gestions of March 1961, the state initially offered grain to producers of economic crops-tea, silk, peppermint oil, apples, oranges and shelled walnuts. By 1962, foreign trade corporations could offer a variety of bonus items to the producer in exchange for the procurement of 108 export commodities. Speaking to the National Foreign Trade Planning Conference in September 1963, Li Xiannian even suggested mixing administrative and remunerative measures by extending the remunerative carrot" of foreign goods bonuses to participants of the yijin yangchu programme. Thus, despite massive starvation in the Chinese country side, elites after 1961 succeeded in procuring export commodities from Chinese farmers, who were both commanded by administrative decree and motivated by cartons of cigarettes, bolts of scarce silks and squeaky tennis shoes. 33 Mirroring the remunerative schemes for agricultural export ment, the state offered export financing through the Ministry of Trade and the Chinese Peoples Construction Bank, which initiated a 600 million yuan loan programme to expand export production of industrial goods( Chukou gongyepin shengchan zhuanxiang daikuan) 34 The state also allowed localities to retain a portion of their foreign Office of Finance and Trade and approved/transmitted the CCP Central Commi November 1960, in Dangdai guanli bianjibu, A Chronology of Major Events in the PRC's Econom 148-49 regulations on a unified price Council in November 1965 ingfeng et al. The Practice of Supporting Foreign Trade Production, pp 52-56 29. For instance, see""Guanyu shougou zhongyao ji anjibu, A Chronology of Major Events in the PRC ' s Economy and Mar et al. The Practice of Supporting Foreign Trade Production, pp. 16-40Sce Tan 30. For a complete nt of the export nian,Kefu dongqian jingji ng the current e ngji kunnan de ji ge wenti"("Several problems in rade work acording to the new situantion o, apcweah ta the national foreign Trade piani Conference, delivered on 26 September 1963, in Li Xiannian, Discussions on Finance and Trade, vol. 2, p. 151 33, Tan Qingfeng et al. The Practice of Supporting Foreign Trade Production, pp. 18-19. 69 in 1964 and recodificd in 1972, 1975 and 1982. Sce Tan Qingfeng et al. ibid. p. 70; "Chukou gongyepin dustrial products for export"), Maojizongzi 82.35, issued by the Ministry o oreign Economics and Trade, the Ministry of Finance and the People's Construction Bank
486 The China Quarterly exchange earnings in order to"bring the initiatives of the localities into full play. " Where foreign exchange revenue was previously sold to Peoples Bank of China, the new retention rights were seen by key economic policy figures as an effective tool to motivate an increase in export production During the Cultural Revolution, Mao Zedong believed that politics was in command, and that" one only [needed] to use spiritual encouragement nd not material incentives"to stimulate production. The Chinese furthermore could implement a more self-reliant strategy in which China no longer needed to import large turnkey plants from Europe and Japan As a result, the majority of the 1960s export promotion strategies were eliminated, including the bonus scheme, the loan programme expanding industrial production for export, the allocation of foreign exchange to localities(waihui fencheng)and"using imports to develop exports. 40 This period of semi-autarchy ended with the death of Mao's appointed successor, Marshal Lin Biao, in September 1971. Zhou Enlai, with help of the other post-GLF coalition members, readjusted the countrys development strategy to overcome the after-effects of the Cultural Revo- lution and to stimulate domestic development. Somewhat freed from Maoist utopian dictates and the economic constraints of the early 1960s the post-GLF coalition reimplemented a comprehensive, large-scale Is domestic development strategy whose total projected cost in foreign exchange was US$4.3 billion. 4I footnoTe cotinued shang jihuasi (ed. ) Lilu wenjian huibian(A e)(Beijing: Zhongguo jinrong chubanshe, 1986), rcial and foreign trade work), delivered at an Office Conference of the State Council Office of Finance and Trade on 25 August 1965, in Li Xiannian, Discussions on Finance and Trade, Vol. 2, pp. 254-5 ibmiteezhi guashuai wenti de yijian"("Opinion on putting politics in of Major Events in the PRCi's Ecomordai zh, and approvedtransmitted by the CCP Central the State Council on 16 June 1968, in Dangdai Zho ts in the PRC s Economy and mianbu fenpei wenti"("Problem of distributing cotton cloth to inhabitants of Im burbs in 1969), issued on 4 March 1969, in Dangdai Zhongguo de jingji guanl rade Production 39. Guanyu quxian feimaoyi waihui fencheng banfa da the method of apportioning foreign exchange for non-trade channels"), issued by the ncil on 9 May 1967, in D Major Events in the PRC's Economy and Management, p. 240 Tan Qingfeng et al. The Practice of Suppe request for instructions conceming the increase of equipment imports shi baogao" onomic exchange"), was submitted to the State Council by the SPC on 2 January 1973 and
Leaning How to Open the door 487 To finance the"4-3"development strategy, the post-GLF coalition reviewed the export promotion policies of the early 1960s, many of which were subsequently revived and expanded. To repair the damage to Chinas industrial export sector, the State Council approved a Ministry of Foreign Trade plan to revive the Specialized Loan Programme for Industrial Export Production in 1972. 42 After reviewing the post-GLF loan programme that had been terminated during the Cultural Revolution the State Council determined that such loans had been very effective in developing export industrial products, raising quality and variety, and improving packaging. 43 The State Council thus set aside 200 million yuan to target foreign trade industries, state-owned industrial or mining concerns and collectives; in reviewing the programme in 1975, the State Council again acknowledged its effectiveness, doubling its commitment to 550 million yuan The Specialized Loan Programme was denominated in non-convertible renminbi-useless for importing the advanced production equipment needed to improve quality and variety and compete on the international market. Thus, the Ministry of Foreign Trade and the Peoples Bank authorized a"new kind of work"-the short-Term Foreign Exchange Loan programme established under the Ministry of Foreign Trade's Specialized Foreign Trade Corporations. These Corporations were directed to distribute the loans to production industries that would dvanced technology, equipment and materials production capacity, raise product quality, increase variety, improve packaging and design;.. import raw and supplementary materials to be processed and exported develop transportation and tourism industries f Major Events in the PRCs Ecor ortation of 13 four chemical fibre plants, three petro-chemical plants, an alkylbenzene factory, 43 coal mine facilities, three large electrical generating plants as well as an assortment of turbines and jet 42. Chukou gongyepin shengchan zhuanxiang daikuan de yijian"("An opinion on the of Forcign Trade and approved by the State Council in 1972, in Tan Qingfeng ef al. The Practice of supporting Foreign Trade 43. For an analysis of the" Measures"and its post-1972 result, see Tan Qingfeng et al. ibid. Trade)(Beijing: Duiwai mao chubanshe, 1986), pp 30-3 Guanyu zhuanfa 'duanqi waihui daikuan shixing banfa' xi zunzhao zhixing(fu duanqi waihui daikuan shixing banfa)"("The letter of instructions conceming the issuance provisional measures gn exchange loans)"), Maochudaierzi 7399/Yin waizi 73 135, issued by the MFT and the People's Bank of China on 16 June 1973, in Zhongguo renmin yinhang jihuasi, A Collection of Documents on Interest Rates, pp. 378-79 45. Duiwai jingji maoyibu renshi jiaoyuju, chukou huayuan gailun bianxiezu(ed. ) Chukou huayuan gailun(An introduction to Export Sourcing)(Beijing: Zhongguo duiwai ngji maoyi chubar