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It was still a raw material- and power-oriented industry.
With the Communist liberation, the new central government adopted a planned economy and the role of government policy was great.
Moved to the inland areas
In two stages:
In the North, it moved to Baotou and Taiyuan, then to Urumqi.
In the South, it moved to Wuhan and Xi'an and later to Kunming, Panzhihua and Chongqing.
Favourable factor
Explanation
Raw materials
Fukang provided iron ore for Urumqi; there was much iron ore in Sichuan (Panzhihua)+Chongqing and near Wuhan.
Power
Shanxi (Taiyuan) and Shaanxi (Xi'an) were great producers of coal, as was Yunnan (Kunming).
Transport, infrastructure and amenities
Transport network to the inland areas were improving with highways and railways built.
Government policy
The government introduced the policy of industrial decentralisation to achieve these aims:
Ensure a greater balance of income, wealth, technology level and economic development between the East and the West
Prevent Japan and the US from bombing iron and steel plants in Eastern China
Attract workers to migrate to the inland, easing population pressures in the East
Yet new problems arose:
Constraint
Explanation
Land
Harsh continental climate, rugged and uneven relief, steep slopes and difficult terrain in the West.
Labour
Lower density of population and lower education level (unskilled labour) produced insufficient labour supply and quality
Raw material
Iron ore of the interior was of inferior quality and scattered
Power
Coal of the interior was of inferior quality
Market
Markets were small as other industries were poorly developed
Transport
The distance from the interior to the coastal areas was long. Transport networks were still poorly developed. Accessibility was low.
Capital
Lack of capital