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Case-studies in the different economic sectors
Seven sectors in the economy were chosen for research in the economic sectors. The rationale for the choice of these sectors is given in figure 5. The case-studies focused on the agricultural sector, the light industry sector (textile and agrofood), the infrastructure sector (electric power), the heavy industry sector (iron and steel, machine-building, and machine tools) and the high-technology sector (electronics). Two illustrative case-studies are described in detail here, one on the agrofood sector and the other on the steel industry.
Before its liberation in 1949, China did not have a fully fledged food industry. In the large cities there were only a few enterprises engaged in food processing, vegetable-oil pressing, livestock-slaughtering and cigarette-making, while in the rural areas there were only manual workshops. The country's food industry altogether numbered 1,379 enterprises with a total of 100,000 employees. Less than one-fourth of these enterprises operated with machine power and hired more than 500 workers.
For China, therefore, food processing is a new branch of industry. During the past three decades or so, the food industry has undergone three stages of development.
During the first stage (1949-1957), the industry received 3.7 per cent of the country's total industrial investment. Under the principle of cooperation between urban and rural areas and between industry and agriculture, many food-processing workshops were set up, both in the cities and in rural areas. During these eight years, the food industry grew at a rate of 13.2 per cent a year. In 1957, it accounted for 19.7 per cent of the country's total industrial output value, becoming the no. 1 industrial sector.
In the second stage (1958-1978), errors in the guidelines for national economic development - with their overemphasis on accumulation to the neglect of consumption, on heavy industry to the neglect of light industry, and on grain production to the neglect of cash crops and sidelines - resulted in a serious shortage of food raw materials, the slow development of the food industry, a reduction in food varieties, and a deterioration in quality. Food was now in short supply in the market-place. In this period, investment in the food industry was only 1.53 per cent of total industrial investment. In Shanghai alone, food factory buildings totalling a floor space of 400,000 square metros were used for other purposes.
Fig. 5. Rationale for the choice of sectors
In the third stage (1978 to the present), after the implementation of new rural economic policies, agricultural and sideline products have increased by a big margin and food raw materials have become unprecedentedly abundant. The food industry, to which the state now gives priority, has again taken the road of vigorous development. Investment in the industry constituted 2.96 per cent of the country's total industrial investment in 1980, 4.3 per cent in 1981, and 5.4 per cent in 1982, and continues to rise. The momentum of development in rural townships is even greater. From 1979 to 1982, the output value of the food industry increased by an annual average of 10.4 per cent. This was accompanied by an increase in food variety and a marked easing of food shortages in the market-place. By 1983, the food industry had diversified into 24 separate trades. There were more than 60,000 state-owned enterprises with 2.5 million employees, producing 6 billion yuan in output value. The food-processing sector led other industries in contributing taxes to the state. Food exports earned US$ 3.5 billion.
Total output value registered an increase of 13.2 per cent during the first Five-Year Plan period (1953-1957); a decrease of 1.7 per cent during the second Five-Year Plan period (1958-1962); and increases of 11.4 per cent from 1963 to 1965, 2.4 per cent for the third Five-Year Plan period (1965-1969), 8.4 per cent for the fourth Five-Year Plan period (1970-1975), and 9.3 per cent for the 1979-1983 period.
Self-reliance in science and technology
The food industry suffered from various restrictions and developed slowly, and so cannot be expected to have made much technical headway. Technical progress in the field was negligible during the 20 years from 1958 to 1978. The present and future direction of the food industry is to achieve high-speed development on the basis of enlarged reproduction. The strategy aims to make up for long neglect by means of a sudden take-off. Therefore technical development is still directed towards popularizing existing techniques, with the import and development of new and sophisticated technologies taking second place. This trend is best illustrated by the proliferation of township food enterprises applying low-level techniques.
Though China's food industry has undergone unprecedented development in recent years, it is still very backward. The country's total output of farm products is in fact quite large, but the per capita amount is small and cannot be increased quickly. China is a success agriculturally. With less than 7 per cent of the world's cultivated land, it feeds nearly one-fourth of the global population. However, in comparison with that of other countries the speed of development is slow. Furthermore, China's average per unit area yield is lower than the world's highest, though it comes up to the world average. The per capita output of various kinds of food, particularly milk, is also lower than the world average.
At present, the output value of the food industry in developed countries is usually greater than that of agriculture. It is 169 per cent, for example, in the United States and 232 per cent in Japan. In China, the output value of the food industry is only one-third that of agriculture.
In the cooking process used by Chinese families, the discard rate is 20-30 per cent for vegetables, 30-40 per cent for fish, and 20 per cent for chicken and ducks. If the food industry is technically advanced enough, these leftovers can possibly be processed into food, or into feedstuffs, which can again be turned into food in the form of livestock or poultry. Because of a low capability in storage, processing, and transportation, a large amount of grain has to be stored in farmers' homes. This alone leads, because of insect pests, to a waste of 15 billion kg, or 8 per cent of the stored amount. China annually produces 8 million tons of fruits, but can store and keep only 5.3 per cent of them, resulting usually in a waste of 5-25 per cent. The wastage rate of vegetables is also 25 per cent. Similarly, the processing ability for aquatic products is less than 10 per cent of the output, causing an annual loss of 1 billion yuan. A lack of processing capacity for potatoes leaves 2.5-5 billion kg rotten, with a value of 0.5-1 billion yuan. The loss rate for grain products processed by traditional methods is 2 per cent greater than grain processed by machines. In 1980, however, grain processed by machines made up only 28.6 per cent of the total, and as a result some 5 billion kg of grain was wasted. Compared with the traditional pressing technique in edible oil extraction, the soaking method gives a 5 per cent increase in output, but only 13 per cent of oil-bearing seeds are now processed by the soaking method, leading to a loss of 350 million kg of vegetable oil.
This inadequate production capability is closely connected with the low level of investment in the industry. The food industry in Shanghai, for example, has given 9.8 billion yuan to the state over the past 30 years, compared with only 50 million yuan invested by the state in food enterprises during the same period. As a result of the lack of investment, food factories have to operate with out-of-date equipment, which often breaks down. At present, with the situation in rural areas getting much better and offering greatly increased amounts of farm products, shortfalls have been replaced by overabundance. The consequent stockpiling of farm products calls for an urgent, large-scale development of the food industry.
There is no difficulty in developing suitable technologies in the fields of storage, transportation, and primary processing. What is needed is investment funds and the popularization of technologies. Because the accumulation of funds needs time, low-level and even primitive techniques will continue to exist for some time yet.
A surplus of certain farming products cannot by itself meet the demands of the food industry. A large-scale food industry needs large-scale, regional raw materials and a supply base that is guaranteed by the cultivation of suitable varieties. In other countries, food enterprises usually own their own farms or have long-term contracts with farmers. The enterprises decide what to plant, how much, and when, and even dictate the kind of fertilizer to be used and the time of harvest. For example, in the United States, the state of Florida is a producer of oranges, the state of California of peaches, and the state of Hawaii of pineapples; in Japan, the counties of Ehimi and Shizona yield great amounts of tangerines, while Hokkaido is a producer of asparagus. Such specialized economic zones make it possible to set up large-scale, highly efficient and highly mechanized canned-food factories, wineries, and sugar-making factories.
China lacks adequate raw material bases. Structurally, the food industry is characterized by scattered raw material supply bases and small-scale operations. In terms of economic relationships, the practice in China is the direct opposite of that in other countries: here it is the farms or farmers that run food enterprises, instead of vice versa. The existing supply bases, like the green bean base near Nanjing, now face serious difficulties. Many food factories, set up on the basis of "do whatever is available," simply cannot expand in scale and become highly efficient.
The comprehensive use of raw materials, in effect, increases their quantity. Technical treatment immediately after the harvest and timely industrial processing can prevent the decay of grain and reduce losses. Modern processing technologies can turn inedible ingredients of grains into edibles or materials of higher value. Technologies for the comprehensive use of raw materials are as yet far from being developed in China. Neither is enough attention paid to the resources of waste products. Waste matter and left-overs from the country's gourmet powder factories, sugar-refining factories, butcheries, and breweries alone are enough to feed 4 billion chicken each year.
Some countries in the world have developed unique food-processing industries for export based on imported raw materials combined with advanced technologies. Denmark's fruit jams, the Netherlands' cocoa and Switzerland's instant coffee, for example, are all products made from imported raw materials. China has yet to build such industries.
In order to create an industrialized food industry and raise economic efficiency, large-scale raw material bases must be set up in China, and varieties of food crops suitable for industrialized processing cultivated. To demonstrate the distance yet to be covered, we could cite the example of potatoes. Potatoes processed for their starch in some countries contain 22-24 per cent of starch, and some new varieties reach a figure as high as 28 per cent. In China, however, the starch content is only 12-20 per cent.
At this stage in the development of the country's food technology, China has engaged in a series of programmes including directional breeding, technical guidance and services, the popularization of fine crop strains, pricing policy, long-term purchase contracts, and regional planning.
Since the shortage of food resources is an important factor limiting the development of China's food industry, continuing neglect of the establishment of raw material supply bases will only perpetuate this shortage. This in turn will restrict the development of a modern food industry. On the other hand, with advanced technologies we can enlarge the sources of food raw materials through comprehensive utilization, high-tech processing, and the development of a sector which processes raw materials for export.
Except for the consumption of food grains, which is higher in China than in other countries, the per capita consumption of other foods is quite low. And except for sugar, which has a 90 per cent commodity rate, the rate for market-oriented foods in China is generally low: 14.25 per cent for grains, 43.7 per cent for pigs, 1.95 per cent for beef cattle, 6.1 per cent for mutton, and 53.1 per cent for cooking oil.
The present low level of consumption offers great potential for the development of the food industry. Food science and technology, therefore, have considerable market prospects. For instance, there is stockpiling of such starch-containing products as maize, potatoes, and cassava in one part of the country, while elsewhere starch, noodles, and vermicelli are in short supply. This can be avoided through proper utilization of the industry. The extremely low level of commercialized food products demonstrates that the food industry is facing challenges from a natural economy and from traditional consumption patterns. A solution to this problem depends on sustained economic development and greatly improved living standards.
China's food industry is not complete. This is reflected in a weakness in the supply of basic raw and accessory materials for the flour, oil, protein, sugar, and food additive industries.
The flour industry in the United States turns out about 100 varieties of flour. In Japan, 64 varieties of flour are used for making bread. China has only two; a coarse type and a fine type. In cooking oil, there are dozens of varieties, and these, hydrogenized to varying degrees, can be mixed to make hundreds of varieties. In Japan, for example, cooking oils number more than 200. In China, however, there are only two types; unprocessed raw oil, which dominates the market, and a small amount of second-grade oil.
There is as yet no protein industry in China. Every year, the 2 million tons of cottonseed cakes and 1 million tons of rapeseed cakes, as well as peanut and sesame cakes - all by-products of oil pressing - are mostly used as animal feed and manure.
Maize, a source of sugar after sugar-cane and beet, is a staple crop in China. Glucose, maltose, levulose, top-levoluse syrup and other raw materials needed by the food industry can be produced from maize starch. But China has not fully utilized maize. The starch industry remains at a simple level and is still confined to turning out one product - raw starch. Starch reprocessing is very limited and no development has been made toward making denatured starch and starch derivatives. Of the starch used overseas, only 30 per cent is raw starch, and 70 per cent is reprocessed starch. The number of starch derivatives exceeds 100.
Food additives including trace elements, microbial elements, pigments, germicides, thickeners, emulsifiers, and special condiments are very important in raising food quality. They are widely used overseas. In China, there are fewer varieties and their output is small. "Grandma Bean Curd," a popular dish from Sichuan province, has become one of the main soft-can foods in Japan simply because a special condiment with the flavour of "Grandma Bean Curd" has been developed and mass-produced there.
In short, because of the rough and simple processing of farm products in China, food raw materials are not fully and rationally utilized.
In the meantime, it is difficult to turn out high-increment products owing to the shortage of necessary food raw materials - particularly of special basic ingredients - that results from an absence of intensive processing.
The food industry in the United States developed 9,747 new products between 1970 and 1979. In Japan, there are more than 300 kinds of bread and over 1,400 types of canned food. Products on foreign markets include cholesterol-free, sugar-free, and salt-free foods, low-caloric food, and low-sodium food, as well as high-energy, high-protein, and high-cellulose foods. There is also food for the young, the aged, and athletes, and foods with various kinds of local flavours.
Although an increasing number of new food products have come into being in China in recent years, those foods sold in volume have remained the same as before. Baby food and fast food have not as yet established a reputation. Many new products often disappear shortly after their introduction.
Decades of neglect in the food industry have resulted in a huge gap between supply and demand; and the development of basic raw and accessory materials and new products is largely out of the question. Coordination among specialized enterprises does not yet exist in China, owing to defects in the economic structure as well as to China's traditions in the food-processing sector. A large number of newly established enterprises are gearing their production directly to the consumer market, while the basic materials industry attracts little attention. As a result, the limited number of food scientists and technicians have not been able to devote themselves to strengthening the foundations of the food industry.
Food equipment manufacturing is a backwater of China's industry, receiving little attention and developing at a slow pace. Except for the canned-food, dairy, soft drinks, grain-processing and oil-pressing industries, whose equipment is partially provided by specialized factories, the old factories in other fields have to depend on their own repair and spare-parts workshops for new equipment. It was not until 1978 that industries began studying the problem and started manufacturing food-related equipment.
The present situation can be described as one of a weak foundation, low technological standards, and a lack of sophistication in equipment. The development of equipment that carries out intensive processing and permits a comprehensive utilization of raw materials has only just started. China's food-equipment manufacturing industry is backward. Canned food production in China, for example, is a sector with a relatively high level of mechanization: each worker produces 4.7 tons of canned food a year. But this is only one-forty-sixth of what a worker in the United States produces. The efficiency of Chinese machines for making bottles is only one-tenth that of those made overseas. China-made machines can pack only one-quarter the amount of candies packed by similar machines.
China is capable of making small renovations to simple separate machines or production lines and gradually copying them. In 1980 the Baiyun Rice and Flour Products Factory in Guangzhou introduced a fast-noodle production line. Within a year, the factory was able to pay off the foreign investment of US$280,000. The factory renovated the "irrational" parts of the production line, raising its efficiency as well as the quality of fried noodles. Moreover, all the spare parts that are susceptible to wear and tear can be substituted by those made in China. In 1983, China's first fast-noodle production line was successfully trial-produced, passed appraisal, and was put into operation in Tianjing. The production line cost only 270,000 yuan. A renovation was made on the production line later, changing de-watering through frying into de-watering through steaming. The change gave birth to a steamed fast-noodle production line. By July 1985, 60 steamed fast-noodle production lines made by the Renmin Machinery Factory of Guangzhou had been installed and put into operation in many cities. In the food industry, there are a good many facilities of this kind which can be manufactured by unspecialized factories. However, despite the fact that China has the ability to do this, repeated imports of the same technology are still a common practice. Up until now, about 40 fast-noodle production lines have been bought. By the end of 1983, foreign investment used by China's food industry for introducing advanced technologies amounted to over US$100 million.
The New Sugar Refinery in Jilin province was a major project in the first Five-Year Plan period (1953-1958). All the facilities and technology were supplied by Poland. The refinery was designed to treat 1,000 tons of beet per day. Technical renovations and the addition of equipment increased the refinery's capacity to 1,500 tons by 1980. The technical level and economic efficiency of the refinery have always been counted as high in China, yet its equipment and technology, in fact, belong to 1940s Poland. In 1983, the refinery introduced from Denmark a cleaning technology, seven key pieces of sugar-refining equipment, and six control systems. These facilities, after some technical transformations, can treat 3,000 tons of beet per day.
The equipment in the above example is typical of that currently used in the food industry. Thirty years ago, China built part of its food industry with imported equipment. Factories operating with such equipment have given the best performance during these 30 years. Now China's food industry is 30 to 40 years behind the developed countries, and it therefore has to continue importing advanced equipment to catch up.
Food factories can make small renovations to existing machines, and specialized equipment manufacturing factories have the ability to copy and improve simple machines, but they are unable to manufacture highly efficient, technically advanced equipment in complete sets, let alone develop new models of machines. This is because the latter are closely related to the general level of the technology employed by the food industry and the scale of that industry. There will be no demand for highly efficient equipment without the existence of large-scale enterprises.
Packaging is an indispensable part of high-grade, high-increment products. Food and food-packaging industries promote each other. China still has to import many packing materials and containers. To some extent, foreign countries can even influence our food production and export by controlling the export of packaging materials to China. China's export foods still face the problem of "first-rate materials, second-rate quality, third-rate packaging, and fourth-rate price," giving poor economic results.
With regard to glass containers, the trend overseas is toward lighter and thinner types strengthened by chemical processes. Improved sealing technology has given rise to various kinds of push-turn covers and plastic-metal composite caps. We still use old-type caps that are difficult to open, in spite of repeated complaints from consumers.
Overseas tin-plate making has developed from double cold rolling to continuous casting, and from electroplating to organic polyester coating. China imports large amounts of material for tin plate. Can-making overseas has developed from double reeling to deep punching, three-segment connecting, and welding. These technologies are still not used in China, and only a few sample machines have been imported. Owing to an inability to control lead penetration in the welding process, Chinese-made cans face the danger of being squeezed out of the international market.
The development of compound material for plastic packaging takes place even more quickly overseas. The appearance of plastic tins is due to the invention of compound materials able to withstand high temperatures. Different layers of this material play complementary functions, resulting in an ideal packaging material for food. In China, the quality of the paper, aluminium foil, and plastic used for compound packing materials is not yet up to standard. The so-called "soft packaging," with only one layer of plastic, that is seen on the market does not meet hygienic requirements.
In general, the cost of packaging does not exceed 10 per cent of the total cost of production in foreign countries; the cost for ordinary food varieties may come to only to 3-4 per cent of the total. The main way to cut down on packaging costs is to set up highly centralized packaging materials and containers enterprises. Some such enterprises overseas have developed into multinational corporations. Packaging materials in China, owing to price hikes for raw materials, can account for 30-40 per cent of the total production cost of food, adding to the burden on consumers and hindering the development of packed food.
The more intensively food is processed, the more coordination among specialized departments is needed. This is one of the weakest links in China's managerial system and economic structure. Food technology is subject to packaging technology, which in turn is subject to the materials industry.
Some of China's food products are comparable with, or even better than, those overseas. The quality gap in the final product is often due not to technology per se, but to raw and accessory materials, packaging, equipment, factory conditions, and circulation links.
It must be admitted, however, that the technology in most factories is backward. This reflects a weakness in the development of technology which is based upon experience rather than a systematic study of mechanisms. Consequently, some operational processes cannot be flexibly adapted or modified to guarantee the quality of products. This indicates an inadequacy in technological personnel, which hampers the popularization of more mature technologies.
In our push for the industrialization of traditional foods, the research and development of technology is also crucial. Technology should not be just a means of expanding traditional methods; it involves different, modern methods which can nevertheless be based on the mechanisms of the old. China's traditional method of making bean curd is worth studying. It is now not as advanced as those available overseas because of a shortage of technical personnel and research means.
The starch industry demonstrates the backwardness of the technology. In foreign countries, a closed process is used, which needs less water, discharges less waste water, employs technologically advanced equipment, and is highly efficient. The advantages of the new production method are a high rate of starch collection, high quality, and a better comprehensive utilization. The utilization rate of maize reaches 99 per cent. However, in China, the open process is still used. It needs large quantities of water, discharges too much waste, causes pollution, has a low rate of starch collection, and produces starch of low quality. Additionally, many exploitable resources are wasted in those small factories with a low utilization rate. Production of 500 kg of starch from potatoes, for example, involves a waste of 80 kg of protein.
In other countries, raw materials are processed at multiple levels, which results in their complete utilization. For instance, in processing kelp Japan makes some 60 different kinds of pickles. Even the water used for boiling kelp is made into a soft-packed food. In China kelp is merely dried in the sun before being marketed, which involves no technology at all.
The existing technology is not widely applied, and this sometimes causes big technological gaps between factories in China. This phenomenon, not limited to the food industry, is due to an economy of shortages and a lack of competition caused by underdeveloped commodity production. As a result, technically backward enterprises have the "right of existence" and similar factories still continue to be built. There is not enough motivation to raise comprehensive economic efficiency, nor is there pressure to do so.
Up to now, China has not had a short- or long-term plan for training technical personnel for its food industry. A very limited number of students are being trained in the country's universities and colleges to become technicians and food industry administrators. In the light industrial sector, which has the biggest number of trainees, only 2,682 persons were trained in institutions of higher education during the sixth Five-Year Plan period. During the same period, about the same number were trained in secondary technical schools. If the situation remains unchanged, there will be only one technician for every two food factories by the end of this century.
In the 60,000 state-owned food enterprises, technical personnel make up less than 1 per cent of all staff and workers. Technicians with a college education are very scarce. The 300,000 collectively owned enterprises have their own comprehensive food research institutes. Three provinces and autonomous regions have no food research institutes of any kind. Most of the existing research organizations deal with the primary processing of grain and edible oil.
Take the starch industry, for example. Many countries have set up national research institutes. There is the Northern Agriculture Research Center in the United States and the National Grain and Potato-processing Research Centre in Germany. Companies or factories dealing with starch or starch sugar, as well as some universities, have set up their own research institutes. There is not a single research body in China's starch industry, nor do universities and colleges offer courses related to starch production.
We can also make comparisons with Japan. From central to local departments and to enterprises, Japan's food industry has an established system of research institutes. Located in the science city, Tsukuba, is the state-run general food research institute, which operates under the jurisdiction of the Ministry of Agriculture, Forestry, and Aquatic Products Industry and has about 100 senior researchers. Every county has a food research institute with 10-40 researchers. Most of the food enterprises have their own research and development department with researchers accounting for 20-40 per cent of the total workforce. All the research institutes have a rational division of work and cooperate with one another, avoiding repetition and waste. The research budget of Japan's scientific research food industry in 1980 reached about 1 billion Renminbi (RMB). Japan also has a complete educational system to train qualified personnel for the food industry. Many universities have courses in food disciplines, while some big enterprises have set up training schools and food colleges offering two-year courses.
The lack of scientific and technological personnel is normally a major factor affecting self-reliance in science and technology. This problem is more serious, however, in China's neglected food industry. A way out lies in reforming the economic structure to allow researchers and technicians in the food industry to develop their talent to the full by occupying proper posts. China's old administrative system makes impossible a rational distribution of technical and research personnel. The latter face all sorts of possible technical problems in individual factories. Meanwhile, the technical personnel in research institutes often have to study basic problems in a state of isolation. This results in a failure to pool research personnel for major projects, which could have offered a way of solving the problem of the general shortage of personnel.
Further development of food science and technology, and of the food industry itself, cannot be assured if necessary measures are not taken in macro-management. What is needed is a feasible programme for the development of the food industry, including programmes for different trade lines and a science and technology development plan. At present, food production is scattered throughout a dozen or so economic sectors including light industry, commerce, agriculture, animal husbandry, fishery, and land reclamation. As a result, it is even more difficult to make a coordinated and feasible general plan for the industry.
Second, there must be a definitive policy for the industry. Whether it is categorized as being closer to agriculture - providing basic food for the people -or to industry - offering high-grade consumer goods will determine its scope. Overseas, canned food is a low- or medium-grade consumer good, while in China it is regarded as high-grade. Many agricultural products are developed because of price subsidies. The food industry often has to use raw materials at a negotiated price because of a shortage of allocated, low-priced materials. Price gaps put factories producing industrial foods at a disadvantage, compared with those producing primary agricultural foods. High tax rates have hindered the development of some food products. For instance, the tax rate for maltose and glucose is as high as 30 per cent.
Coordination among specialized enterprises is essential to the development of large-scale socialized production. Coordination among various fields, and links between production and trade, are especially needed in the food industry, particularly by enterprises doing intensive processing. An absence of socialized coordination necessitates the maintenance of a workshop production method. China's economic mode, structure, and management system have forced enterprises to try to do everything themselves, regardless of their scale. The food industry is no exception. Overseas, canned food factories do not produce their own cans. In Japan, for example, all empty cans are provided by three specialized factories. All the cans have brand names printed or pasted on, so that the canned-food factories have only to do the packing. A production line making a single type of can helps standardize the product and makes it easier to employ advanced automation facilities. In China, however, all the 700 canned food enterprises make their own containers.
There is an even larger gap between China and developed countries in micro-management. In Japan, one yen of fixed assets in the food industry can give an annual output value of 35 yen, while in China one yuan generates only 3.7 yuan, one-tenth of Japan's output.
Iron and steel
Iron and steel is a traditional industry. China had already mastered the problems of production, construction, and design capability. The present problem is insufficient production capability, leading to an increase in the importation of steel in recent years. For example, steel imports were 12,300,000 tons in 1984 and 20,030,000 tons in 1985. To illustrate the problems in the industry, a micro case-study of the Capital Iron and Steel Corporation, an enterprise following the overall economic responsibility system, is presented.
The Beijing-based Capital Iron and Steel Corporation (CISC) is an iron and steel complex whose activities include mining and iron-ore dressing. CISC's predecessor was the Shijingshan Ironworks, which was established in 1919 and produced only iron before 1949. The aggregate output of iron for 30 years was a mere 286,200 tons. The plant was rebuilt after liberation. Now CISC mines and dresses 14 million tons of iron ore, turns out three million tons of iron and 2.7 million tons of steel, and rolls half a million tons of steel. The corporation now markets more than 200 brands of steel products. There are 14 categories and more than 100 varieties. CISC made a profit of 430 million yuan in 1983.
The overall economic responsibility system for the enterprise has two major components. First, the enterprise promises, by contract, to fulfill the tasks and targets stipulated by the state on the basis of increasing its profit turnover to the state by an annual rate of 6 per cent, while the state gives a corresponding degree of autonomy, as well as economic benefits, to the enterprise. Second, under the responsibility system adopted by the corporation, responsibilities are spelt out for executives of the corporation, plants, and mines, as well as for workers in workshops and grass-roots units. Their work performance is strictly vetted, and rewards and punishments are handed out.
The economic reforms have brought changes in both the internal and external conditions of the enterprise's technical work. Under the old system, most of the profits and depreciation fees had to be turned over to the state. No funds were available for technological development, technical items had to be approved by the authorities concerned, and any technological progress made few gains for the enterprise. Now, CISC returns a greater amount of profits, and uses its own money to raise the technological level of its plants.
Within the corporation, a technical responsibility system links the interests of managers, technicians, and employees to technical progress in their respective fields. This motivates all to engage in technical innovation and to achieve good results. Practice has proved that the economic reform has promoted and accelerated the technological progress of the enterprise. From 1978 to 1984, CISC, using its own capital, achieved good results by adopting a set of new technologies in the main production system. In 1984, of the 70 major comparable indexes in terms of technical level and economic efficiency in the metallurgical industry, CISC was among the top 35. In iron-smelting and converting, some technologies have reached an international level. The profits of the enterprise have grown by 20 per cent annually for six consecutive years.
Technical management is primarily the responsibility of the corporation's Technical Department. Its main task is to make technology development plans, organize and coordinate the carrying out of the plans, and conduct the day-to-day management of technical work. The department is under the direct supervision of the deputy manager of production and technology and the chief engineer. Specific research and design projects are initiated by the Design Institute and the Research Department for Computers, Control Equipment, and Instruments. There are corresponding technical sections and technicians in plants, mines, workshops, teams and groups. Thus, a four-level technical management system is created, from the Technical Department down to the work groups.
Technical management work consists mainly of implementing technical planning, technical-specialized planning, technical quotas, regulations and standards, technical analysis, and technical measurements.
Technical planning is an important integral part of the corporation's production development planning, and oversees technical principles, quotas, measurement, trial production of new products, and scientific research. It is also concerned with reducing energy consumption, improving quality, developing scientific information, and popularizing science and technology. An annual and a long-term plan is worked out.
On the basis of this technical planning, a technical-specialized plan is made by the Technical Department from initial plans sent by plants, institutes, and centres in order to meet the requirements of scientific research and to exploit new products. The technical department controls technical quotas, measurements and standards.
The technical analysis keeps abreast of developments in production and technology, determining what affects output and quality. Technical renovation upgrades old enterprises, with a consequent increase in benefits. Until the end of 1978, the development of CISC took place mainly through new construction; after that, the focus of its technical work was on technical renovation. The enterprises had limited funds and old equipment on which fresh investments would have little effect. CISC selected, designed, and evaluated items for renovation, taking several measures designed to tap the potential of the enterprise and to increase output, develop new products, improve quality, lower energy consumption, find new ways of saving energy -such as tackling waste gas, waste water, and industrial residue in a comprehensive way - and protect the environment. Some concrete examples of these improvements are given below.
Tapping potential to increase production
The steel plant originally had three 30-ton converters, with a designed capacity of 600,000 tons. By using new types of furnace lining, enlarging the furnace volume, prolonging the furnace lifetime, and applying composite blowing, the plant reduced consumption and shortened steel-making time. Consequently, annual output in 1984 climbed to 1.67 million tons. The 1985 production was expected to reach 1.8 million tons, 300 per cent of the designed capacity.
Developing new products and improving quality
Measures were taken to improve the quality in every aspect of mining, sintering, steel-making, and steel rolling. Through the application of a computer-controlled production process, the concentrate grade was raised from 62 to 68.3 per cent, the qualified rate of sintering jumped from 76.6 to 97.5 per cent, and the left-over rate for cutting steel billet was lowered from 3-3.5 per cent to 1-1.5 per cent. In 1984 alone, more than 140 new products with 418 kinds of specifications were developed.
Reducing energy consumption
The iron and steel industry accounts for about 13 per cent of the total energy consumption of the national economy. In the iron and steel complexes, the process of steel-making takes 45 per cent of the total energy consumption; with sintering and coking, it amounts to about 70 per cent. So the Capital Steel Plant centred its energy-saving efforts on the iron system, first attempting to lower the coke ratio. Using new techniques for emitting coal powder, the furnace coking ratio was cut from 455 to 412 kg, with an annual profit of 16 million yuan. This was only one-third of the investment. After the renovation of the furnace and the heating furnace, which use converter-coking coal-gas mixed supply steelrolling, the diffusion rate of gas produced by four converters declined from 17.9 to 8 per cent, the utilization rate was raised, and pollution decreased. The pressure difference was also used to generate power and hot water for heating purposes.
Environmental protection and comprehensive treatment of waste gas, waste water, and industrial residue
Environmental protection is a key aspect of technical innovation in the complex. In fact, environmental protection also saves energy, increasing production and improving work conditions. For instance, the technical renovation of the sintering machine of No.2 blast furnace is just such an item with additional benefits. In recent years, the Capital Steel Plant has focused its work on raising the water recycling rate and reducing the waste water discharge and dust concentration in gases. More than ten synthetical treatment programmes were carried out, all with obvious effect. The phenol contained in the waste water discharge declined from 8-10 mg/l to 0.04-0.06 mg/l. In the sintering workshop, where dust smoke is a serious hazard, the dust concentration in the gases declined from 1,000 mg/cubic metre to 100-150 mg/cubic metre; the dust concentration of gases in 90 per cent of the workshops is less than 10 mg/cubic metre, up to international standards.
As an major enterprise in a developing country, the Capital Steel Plant should aim to learn from the most advanced enterprises in the world, relying on its own abilities and improving itself step by step. By adhering to this principle in renovating its No.2 converter, the plant achieved the comprehensive objective of high output, low energy consumption, environmental protection, and automation of production.
The old No.2 blast furnace of the Capital Steel Plant was made in Japan in 1929. It was moved to Beijing from Pusan, Korea, in 1941. The blast furnace body is of the steel belt type, with a single-bell furnace crown and horizontal raw material feeding. It was still very old-fashioned after several major repairs. The furnace coke ratio was as high as 600 kg, combined fuel was 700 kg, the coefficient of use was 1.4 tons per cubic metre per day, and the pollution was heavy. In 1978, the plant decided to carry out major repairs on the converter. Considering the time that the repair would take - eight to ten years and the fact that China was at least ten years behind the world level in converter technology, it was decided instead to perform a comprehensive technical innovation.
The innovation began in 1978 and was completed by 1979. The renovated No.2 converter adopted 37 items of new technology, including a blast furnace with bell-less top, injection of coal dust as fuel into the blast furnace and crown-burning hot gas furnace, and other environmental protection measures. The furnace volume was enlarged from 500 to 1,327 cubic metros. In 1984, an imported programmed controller and other computer systems were installed. The material supply, coal injection, and the main body of the blast furnace were automatically controlled. The renovation proved to be effective. The technical and economic targets approached international levels. The total investment was recouped within 19 months.
An overall survey of the Capital Steel Plant had shown that the plant lagged far behind advanced international levels in respect of the technical equipment in every system. The mastering of advanced foreign technology, therefore, was always a key task for the plant.
The technical information network is the chief organization for obtaining foreign technical information. A chief engineer is in charge of the network, which is run by the technology department. The designs institute of the information office is the backbone of this information network. Subordinate plants and sections are responsible for collecting information in their own specialty. Every information unit puts forward a comprehensive information summary data to the technical department every six months. This serves as a basis for scheduling technical design and keeping up with, and surpassing, advanced levels both at home and abroad. An annual session of the information network is held every October to exchange experiences and discuss the plan for the following year. The network solves important scientific and technological problems faced by the enterprises.
The "importation office," which supervises the import of technology, is also an important information service. The network attends to purely technical information, while the "importation office" deals with the analysis of prices and commercial information. Consultative arrangements with foreign companies and experts, overseas investigations, and attendance at conferences and exhibitions are also channels for obtaining information.
The direct import of foreign techniques is an effective way to improve the technical level of an enterprise. The process of technical importation includes collecting and analysing information, choosing and evaluating techniques, negotiation on import items, importing, installing, and testing. In this way the managerial and technical ability of the enterprise is improved.
Between 1981 and May 1985, the Capital Steel Plant imported 122 technical items, of which 15 brought obvious benefits; the volume of business amounted to US$100 million. To ensure correct technical importation and digestion, the Capital Steel Plant set up an "importation office," which organized the import of technology, and collected, analysed, and sorted the information. It was ensured that the technology was up-to-date and appropriate for the plant. Stress was laid on the importation of instruments, control systems, and equipment that would rapidly improve the technical level and reasonable use of resources. Investigations were conducted to compare different technologies before importation so that both advanced technology and a reasonable price was guaranteed. Attention was paid first to absorbing and then to transferring the imported technology.
Technical innovation in old enterprises is closely related to the dissemination of technology. The lack of knowledge of new technology is an important factor that delays its spread. Awareness of existing technical systems is a prerequisite for technical innovation. A major factor influencing the effectiveness of technical work is its organization and systems. In this lies the significance of the economic reform and economic responsibility in the Capital Steel Plant.
The analysis of the Capital Steel Plant shows that self-reliance in technology means relying on the development of the state's, enterprise's, or scientific research unit's own resources - that is, their knowledge, equipment, organization, personnel, and investment. Self-reliance results from the combined effects of organization, absorption of information, technology development, policy-making, and policy implementation. It is not an individual ability, but a social one.
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