Martin Robertson - Fundamentals of Political Economy

In the 1950s a transitory arrangement known as state-private joint operation was set up for the purpose of smoothing the transition of large (such as textiles) and middle-size enterprises (such as hardwares) that had remained in private hands in a way that would make it possible to continue the enterprises while changing the ownership system. There were two variants of joint operation by enterprise and by trade. In the joint enterprise the state was a partner, participating in investment and management. The private shares were to be paid off by the company out of its net revenue. In manufacturing, those producing the same type of products in the same locality were organized into a special company under the supervision of the Industrial Bureau of the local government.

The broadening of state control over consumer goods began in November 1953, as grains and edible oil were put under a ) The state set up an annual quota of procurement that had to be fulfilled under fixed procurement prices. The planned supply part of the scheme meant some form of rationing in accordance with availabilities, based partly on consumers needs, and partly on the states requirements for export and for commodity reserves. The operation of these two schemes resulted in the elimination of an open market for controlled goods, although government-controlled grain markets continued to exist.

Earlier, mainly between 1950 and 1952, lands confiscated from landlords and rich peasants were redistributed to poor peasants. But land redistribution was only a means to an end because (1) private ownership was incompatible with socialism, and (2) the landholding after the redistribution was too small to operate economically. This was especially true with regard to the large-scale capital formation necessary to raise agricultural output substantially. Initially, it was planned to make collectivization a gradual process, but the slow growth of agricultural output and the reappearance of such capitalist phenomena as speculation and increasing polarization of income led to a decision to accelerate the process. So in 1955 the CCP organized peasants into agricultural producers cooperatives in which farm tools and draft animals were collectively owned, and land, although still privately owned, was collectively operated; the members were paid according to their work days and their land-contribution. A year later, the land too was collectivized, and the members were paid only according to their labor. On August 29, 1958, the Party Central Committee published a directive demanding prompt merger of all producers cooperatives into communes embracing whole townships ( hsiang ), each comprising about 5,000 peasant households. The institutionalizing of the commune was partly for economic reasons such as economies of scale; partly for political reasons such as reducing disparities between urban areas and the countryside; and partly for social reasons such as shortening the process ) Thus, by the end of the 1950s the economy was virtually socialized.