A central finding of this study is that the decentralization introduced at the end of the First Five-Year Plan period did not significantly reduce the ability of the central government to achieve broad distributive objectives. This view is supported by specific expenditure tests and the pattern of central-provincial revenue sharing, as well as by a more careful examination of the provisions of the decentralization measures themselves. Particularly when compared with earlier reforms, the decentralization seems less extensive than many have supposed. Equally important, as will be shown in this chapter, the redistributive investment policy of the central government has led to a significant reduction of interregional inequality in the distribution of industrial output, both during the First Five-Year Plan and during the 1957–74 period.

However, this is not meant to suggest that the decentralization did not have important implications for the nature of economic planning in China. Although the leadership has not either deliberately sacrificed equity for the achievement of more rapid growth or allowed the emergence of de facto provincial autarky, the system of economic planning that was initiated in the closing years of the 1950s decade did provide improved mechanisms for coordinating the partially overlapping horizontal and vertical hierarchical elements of the planning process. This enhanced the economic management powers of provincial governments and introduced a new degree of flexibility in economic and budgetary planning that became the foundation of the system of planning in the 1960s and 1970s.