(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP04T00367R000201410001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 47
• Document Creation Date: January 12, 2017
• Document Release Date: April 1, 2010
• Sequence Number: 1
• Publication Date: April 1, 1984
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Directorate of
Intelligence
Briefing Material for the President's
Trip to China~~ 25X1
EA M 84-10078
April 1984
copy, 0 4 1
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Briefing Materials for
the President's Trip to China
CONTENTS
China's Independent Foreign Policy in Perspective
The Foreign Policy Positions of China's Senior Leaders
Deng-Zhao with Brzezinski--An Assessment
Sino-Soviet Relations
China and a Korean Dialogue
Sino-Soviet Trade and Economic Relations
China and Japan: Building for the'Long Haul
China's Taiwan Policy
China-Southeast Asia
China: Leadership and Succession
China: Economic Reforms
US-China.Economic Relations
China: Expanding Market for US Energy Firms
China: Nuclear Power Prospects
China: Changes in Military Industrial Development Policy--
Implications for the United States
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04TOO367ROO0201410001-5
Central Intelligence Agency
WashiVon,D.C20505
DIRECTORATE OF INTELLIGENCE
16 March 1.984
China's Independent Foreign Policy in Perspective
Summary
China's formal articulation of an "independent
foreign policy" in September 1982 marked a
significant tactical shift rather than a basic
change in China's strategic posture--which remains
anti-Soviet. It was intended to remind Washington
that China's anti-Sovietism could not be taken for
granted (and hence to increase Chinese leverage with
the United States); to improve China's influence in
key areas of the Third World; to ease tensions with
Moscow; and to enhance Chinese leaders' nationalist
credentials at home. We believe the Chinese
concluded by last spring they may have
miscalculated. Thus, although they continue to
stress their independent line, they also have sought
better relations with the United States--we believe
for basic strategic reasons. Premier Zhao, in fact,
openly acknowledged when he was here in January that
China does not stand "equidistant" between
Washington and Moscow.
Chinese leaders have not changed their basic perception of
Soviet strategy. They continue to assert that the Soviet Union
is pursuing a long-term strategy to outflank Europe in the West
and encircle China and Japan in the East. As an influential
Chinese foreign policy adviser told US
This memorandum was produced by-the China Division of the Office
of East Asian Analysis in'response to a National Security Council
request.. Questions and comments are welcome and ma be addressed
to the Chief of the China Division
25X1
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04TOO367ROO0201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
"When we don't talk about the Soviet threat, it does not mean
that our views have changed." 25X1
We believe China also still regards at least a tacit
strategic relationship with the United States as an essential
component of its foreign policy. Premier Zhao Ziyang, for
instance, recently told a visiting US delegation that good
relations with the United States have an "extremely important
strategic significance. China continues to view the United
States as the only viable counterweight to the long-term Soviet
threat globally and as a strategic deterrent to Soviet aggression
on its borders. In strategic terms, China relies upon the US-
NATO alliance in Europe oint, supports US-Japanese
cooperation in Asia. 25X1
What accounts, therefore, for the Chinese decision in late
1982 to distance themselves publicly from the United States and
to open talks with Moscow? Some strands of their current policy
clearly predate the public enunciation of the "independent
foreign policy." By the late 1970s, for example, some senior
Chinese leaders were arguing that China should strike a more
independent posture in order to compete more effectively with the
Soviets for influence in the Third World and the socialist
movement. Close association with the United States, they argued,
only alienated potential opponents of the Soviet Union in key
strategic areas such as the Middle East and southern Africa,
where they believed the United States relies too heavily on
unpopular surrogates ("unsinkable aircraft carriers") such as
Israel and South Africa to thwart Soviet advances. China, in
fact, began its efforts to expand contacts with the Eurocommunist
parties, especially those in France, Italy and Spain, as well as
with the Communist parties of Eastern Europe well before it 25X1
adopted its current independent line.
Similiarly, China undoubtedly would have reopened talks with
the Soviet Union at some point as part of its policy to reduce
tensions. Some Chinese leaders advocated such an approach as
early as 1979,1 ~ and Beijing 25X1
held one round ot discussions wit oscow in ate 1979 before
breaking off the talks as a result of the Soviet invasion of
Afghanistan. 25X1
The shift in 1982, however, probably was triggered by a
combination of factors. By then, Chinese leaders were
complaining that the United States increasingly acted
uniilaterally and that it was insensitive to the concerns of its
friends and even close allies. They, of course, were
particularly upset with US policy toward Taiwan and may have seen
that policy as symptomatic of the lower priority they believed
Washington accorded good relations with Beijing. In late 1981,
Ji Pengfei--one of the formulators of the independent policy .
line--declared that it was possible for the United States and
China to pursue parallel strategic interests and, at the same
time, imperative that China continue its "principled struggle"
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
with the United States over Taiwan,
Ji and some other Chinese leaders,.in fact,
implied that adopting a more independent stance--with the implied
threat of moving toward Moscow--could give China greater lever
with Washington on a range of issues, including Taiwan.
We believe the Chinese decision to move in this direction
was bolstered by their assessment that the overall global balance
of power was shifting back in favor of the West--hence, giving
China greater room for diplomatic manuever. The Soviets, they
concluded, had become bogged down in Afghanistan, Poland, and
Indochina and posed a less immediate threat to China's
security. In our judgment, Beijing saw an opportunity not only
to increase its leverage with the United States by opening talks
with the Soviets, but also to enhance China's independent image
in the Third World. Chinese leaders also sought to reduce
tensions with Moscow in part so that they could concentrate on
their ambitious modernization program.
Finally, we believe China's leaders have used this policy to
help strengthen their domestic position. Through it, Deng
Xiaoping and his allies have continued the process of dismantling
the Maoist ideological edifice without sacrificing the regime's
strategic goals. They have set aside the Maoist notion of the
inevitability of war, for instance, and have reemphasized the
nationalist basis of their foreign policy. At the same time, the
establishment of the policy has enabled Chinese leaders to
continue to proclaim C "self-reliance" while defending its.
opening to the West.
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
SECRET
Wishingo. Q C.20505
DIRECTORATE OF INTELLIGENCE
28 March 1984
The Foreign-Policy Positions. of China's Senior Leaders
Each of the Chinese leaders with whom the President will
hold talks next month--Deng Xiaoping, Hu Yaobang, Zhao Ziyang and
Li Xiannian--plays a key role in China's foreign policy. Deng
Xiaoping, at 79, is the leading strategic thinker and main
architect of China's current foreign policy. Deng is the primary
exponent of a strong relationship with the United States on
strategic grounds and the leading antagonist of the Soviet
Union. Deng's chosen successors--General Secretary Hu Yaobang
and Premier Zhao Ziyang--endorse his views but are more closely
identified with China's policies toward Eastern Europe, Asia, and
the Third World. Li Xiannian, Deng's peer on the Politburo's
Standing Committee, takes a more cautious approach to relations
We believe that the Chinese will try to set a positive tone
both in public and private in order to ensure that the visit is a
success. A principal. Chinese aim is to establish good relations
with the President--reflecting a consensus that relations with
the United States must be improved for strategic reasons. In
keeping with past practice, we expect that the Chinese will
manipulate the atmosphere of the visit and that each leader will
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Council
request. Questions and comments are welcome and may be addressed
to the Chief of the China Division
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 follow a prescribed role in discussions with the President. Deng
in particular will concentrate on the strategic dimension of US-
China relations and on sensitive bilateral problems, especially
Although Li Xiannian, 79, holds a.largely ceremonial
position as State President, he is still very influential on
foreign policy issues. He is a senior a.member of the
Politburo's Standing Committee and the party's Foreign Affairs
Group as well. Like Deng, Li has had broad experience in foreign
affairs. He has been involved in the US-China reconciliation
since its inception in the early 1970s when he stood behind
Chairman Mao Zedong and Premier Zhou Enlai's opening to the
United States against formidable opposition. Unlike Deng, who
was still in political disgrace Li ' rti ipant in the 1972
meetings with President Nixon.
In recent years, Li has reaffirmed that Chinese strategic
cooperation with the United States is both imperative and long-
term. Li told a former senior US official in August 1981, for
example, that good relations with the United States were
"essential to preserve and enhance global stability" and praised
the administration's efforts in areas of Chinese concern,
especially aid to Pakistan. At the same time, however, Li has
taken a harsh, rigid line on US arms sales to Taiwan. In April
1981, Li was among the first leader to label US policy toward
Taiwan as "hegemonist" and ,later declared that China "cannot make
any concessions" on arms sales.
Li may favor the adoption of a more balanced approach to
Sino-Soviet-US relations but, we believe, he does not advocate
significantly improving relations with the Soviets. He has been
willing, however, to use the threat of improved relations with
the Soviets to try to extract greater concessions from the United
States. He told the Romanians in 1979, for instance, that China
would watch the results of Vice President Mondale's visit to
China in August to help determine the positions it would take
when negotiating with the Russians. Similarly, in January 1982,
as 'tension with the United States over arms sales to Taiwan rose,
he'told the Italian Communist paper "L'Unita" that China would
indeed be willing to talk to the Soviets.
Li, who is currently in poor health and quite frail, will
probably touch only briefly on matters of substance.
Nonetheless, it is possible that he will include a frank
statement on arms sales to Taiwan in his opening remarks.
2
SFCRFT 25X1
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
SECRET
Zhao Ziyang
As Premier and a member of the Politburo Standing Committee,
Zhao Zivana plays a
major role in China's foreign policy.
he is the head of a high-
level party Foreign Affairs Group that debates and makes
decisions on sensitive foreign policy initiatives. But Zhao's
chief concern is the management of China's modernization
program. In foreign affairs, he tends to concentrate on
bilateral issues and on international economic policy.
Zhao's strategic views, to the extent that he has expressed
them, appear to be in line with those of Deng. Zhao has been
most closely involved with the implementation of policy toward
Asia and the Third World. In 1981, for instance, Zhao traveled
throughout ASEAN and led efforts to build support for China's
Kampuchean policy. Last year. Zhao took a largely symbolic trip
to 11 African states.
Zhao appears increasingly to be charged with management of
US-China relations, however, and has a special stake in
furthering trade and technology transfer. He is personally
involved, for instance, in a US corporation's effort to establish
a joint coal mining venture in Shanxi Province. Recently, he has
lobbied US businessm d officials to increase investment in
Chinese industries.
In his meetings with the President, we expect Zhao to
reiterate the same themes he did in January. He has repeatedly
expressed his interest in making the official trip a successful
one and, as the President's host, he will want to set the tone
for the entire visit. We believe that Zhao will focus on
bilateral economic matters and continue to press for US
concessions on a variety of issues, including: greater access to
US technology; easing of COCOM restrictions; concessional US
funding for joint ventures; Presidential assistance in amending
the Foreign Assistance Act; US support for China's position on
the Asian Development Bank; and US assurances that it will
continue to follow a one-China policy.
Hu Yaobang
As Deng Xiaoping's chosen successor, Hu Yaobang is probably
the most important leader the President will meet with the
exception of Deng himself. In his capacity as head of the
party's Secretariat and a member of the Politburo's Standing
Committee, Hu Yaohanq plays an important
implementing foreign policy decisions.
government reorganization in 1982, Hu Ya
considerable control over the Chinese fo
role
Since
obang
reign
in formul
the party
has gaine
policy ap
ating and
and
d
paratus,
and,
has
placed tru
sted
25X1
associates in the Foreign Ministry--including Foreign Minister Wu
Xuegian
25X1
3
SECRET
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
25X1
I
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
JLLIlL 1
Unlike Deng Xiaoping, Hu does not have long experience in
foreign affairs--although he has gradually begun to extend his
grasp. He has been primaril .'concerned with intern 1 ty and,
ideological matters. Hu 25X1
began to assume a leading role in articulating China's foreign
policy in the spring of 1981, when he delivered a major address
onChina's relations with the US and the Soviet Union. In
September 1982, he formally enunciated China's "independent
foreign policy" line, in a speech to the 12th Party Congress. He
has promoted China's ties with the East European Communist
parties--travelling to Romania and Yugoslavia in May 1983--and
has indicated his interest in improving relations between. China
and other Eastern Europen countries. Hu has also begun to play a 0
key role in China's relations with North Korea and Japan.. In
June 1983 Hu escorted Kim Chong-il during a visit to China,
giving implicit Chinese backing to him as Kim Il-sung's
successor. Hu also visited Japan last November--his f' rip.
abroad to a modern industrial power. 25X1
Hu does not appear to,have clearly articulated views on .the
Soviet Union. He did not become directly involved in the Sino
Soviet rivalry and probably does not share the bitterness of"Deng
Xiaoping and the old guard toward the Soviets. Although Hu has
been sharply critical of Soviet behavior toward China on
occasion, he appears to have favored the establishment of a=more
balanced relationship with the USSR I late 1970s, 25X1
Hu, was among the
ideological obstacles in the way of normalizing relations-wi:th ,
the. Soviets. In addition, Hu recently praised the Soviet-Union -.
Although. Hu has: publicly supported current efforts to
improve relations with the United States, he'is not as closely
identified with this policy as Deng. Hu appears to be suspicious
of ?the West in general and particularly of the United States.
Last November, for instance, Hu warned that Premier Zhao'sv'isit
would be cancelled if the United States did not repudiate the'- 25X1
language in the Pell Resolution and the ADS rider to the IMF
funding bill. He has also vigorously criticized US policy toward
Taiwan publicly and privately. Hu also told
We believe that Hu's perceptions of the United States are
limited by his lack of exposure to the West. He was clearly
impressed by the sophistication of Japanese society that he
witnessed during'his November visit. Moreover, he has ,
demonstrated tolerance to new ideas-and a willingness-to absorb
different points of view. We believe that Hu would.be:receotive
to;an invitation to visit the US and that ti the US
wou1rl be significantly altered by it. 25X1
4
SECRET
25X1
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Hu is not the cold, calculating strategic thinker that Deng
is. In conversations with foreign officials, he is often
extremely animated and sometimes appears to exceed his brief. He
also has a fervor and an intensity that surpasses that of the
other leaders with whom the President will meet. Based on the
record of his past conversations, we expect Hu to address briefly
and pointedly China's concerns about US policy but to show
greater interest in discussing bilateral economic cooperation and
Chinese domestic matters. In his meeting with former President
Carter, in August 1981, for example, Hu reviewed the direction of
China's domestic policy and his own role in it.
Deng Xiaoping
As the first among equals on the Politburo's six-man
Standing Committee, Deng establishes the agenda in China's
foreign policy, makes the key decisions, and is the leadership's
primary strategic thinker. Deng has consistently supported the
maintenance of a firm strategic relationship with the United
States, and has sought' US assistance and technology for China's
modernization program. At the same time, he has been the most
staunchly anti-Soviet member of China's current leaders.
the late 1950s and early 1960s. Deng has long shared Mao
Zedong's view that the Soviet Union has been, attempting to
Deng's deep distrust of the Soviets is rooted in his
participation in the bitter Sino-Soviet ideological disputes of
encircle and to dominate China. In 1979-80,I 25X1
Deng argued against improving relations 25X1
with the ovie s, and, we believe, agreed to enter into talks
with Moscow in 1982 primarily on tactical qrounds. More
recently, in February, Deng told a US delegation that the Soviets
will become "more rigid" in their olic toward China during the
transition in Soviet leadership. 25X1
Deng has advocated close strategic ties with the United
States since 1974, when he began taking part in high-level
discussions with US visitors, including Henry Kissinger and
President Ford. At the time of normalization, Deng proclaimed
that US-China ties had a "long term strategic significance" and
proposed the formation of a United Front against the Soviet
Union. Although Deng has acceded to the shift in China's foreign
policy toward a more independent stance--and has associated,
himself with the more nationalistic aspects of that policy--he
haq indicated that his strategic views have remained constant.
Deng ,has an important political stake in relations with the
United States. Deng personally orchestrated the normalization of
relations and agreed to set aside the issue of US arms sales to
Taiwan at that time. More important, Deng's policy of opening to
the West for aid in China's modernization rests on good relations
5
SFrPFT
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
with the United States. Deng has stated his own disappointment 25X1
that bilateral relations have not been more fruitful. In
addition, when relations with the United States soured
critics were able to'use,the un u i ee25X1
expectations of normalization and US actions toward Taiwan to
question Deng's domestic and foreign policies. Deng has .
reflected these pressures in the occasional bitterness of his
criticism-of the United States. 25X1
We believe that Deng's first objective in his talk with the
President will be to establish good rapport. Deng will seek to
win the President's sympathy for China's point of.view, on.key
issues, such as Taiwan, and to stress the two countries' mutual
interest in promoting stability on the Korean peninsula and
cooperating on other complex problems. Deng can be unusually
blunt, intense and manipulative. Although we do not believe that
Deng will behave in this manner with the President, the President
should be prepared for some frank remarks bout US policies e.g.,
with..regards the Third World. 25X1
On Taiwan, Deng, may formally ask the President to take steps
to'rescind the Taiwan Relations,Act by the end of his-term--as
Zhao Ziyang suggested in January. At a minimum, Deng will ask
the President to manage the TRA in a manner that least harms
Chinese interests and to observe the provisions of the August
Communique. Deng may also press for fewer US restrict-ions on the
transfer of sophisticated technologies and US circumvention of,
COCOM restrictions. 25X1
Deng will want to probe the President's think-ing.on China's
strategic importance to the United States and expect to be
treated as an equal. Deng and other Chinese leaders recently:
reiterated to the CSIS delegation their sensitivity.to being...
trea,ted.as a "junior partner", and.their unhappiness over b,eing,,
relegated to the status of. a regional rather. than.global factor
in,US strategic calculations. They have noted with some concern
that the United States has steadily strengthened its military
ties with Japan and South Korea--ost 25X1
Chinese concerns into consideration.
We expect Deng to reiterate that .China sees the Soviet Union
as,the nrimar.y threat to Chinese security and that China supports
the US. military buildup against the Soviets. De.ng, however,, is
also likely. to argue that the United States has regained the
initiative from the Soviets and should now pursue less aggressive
policies to avoid alienating natural opponents of the Soviets.
Deng told the US delegation in February,. for. example, that the US
"policy of confrontation" with the Soviets in Europe allows the
Soviets to exploit anti-war sentiment and to drive a wedge
between the United States and NATO. -.Zhao Ziyang similiarly urged
6
SECRET
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Finally, Deng probably will want to discuss Korea. Deng has
long been concerned with maintaining stability on the'Korean
peninsula and excluding Soviet influence by preserving good
relations with North Korea. Deng has been actively involved in
relations with the North--including his role as an go-between in
seconding the North Korean proposal for a confederal solution--in
part to balance these aims. Deng may not present any new ideas
but indicated to the CSIS delegation that he would like to
explore with the President the notion of confederation as a'
solution for Korea, and for Taiwan and Hong Kong as well. As he
said in February, "We must work out of some blind alleys that we
are in."
7'
SECRET
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
W&hinpn. Q C. 20505
DIRECTORATE OF INTELLIGENCE
15 March 1984
Deng-Zhao Talks with Brzezinski--An Assessment
Although it is easy to overinterpret the sometimes delphic
pronouncements of Chinese leaders, Deng and Zhao's remarks to
Zbignew Brzezinski and other members of a Georgetown University
delegation on 22 February strike us as revealing a good deal
about current Chinese foreign policy concerns.
The Chinese have often used visits by such unofficial US
groups for tactical purposes--to air their concerns in strong
terms, thus hoping to place subsequent official visitors on the
defensive even before their arrival. In this case, however, both
Deng and Zhao appeared anxious initially to signal their
satisfaction with Zhao's visit in January and President Reagan's
April trip, and to highlight the strategic and economic
importance China continues ttach to close rel.ations with the
United States.
Both became defensive and critical of US policy only after
some members of the delegation accused China of inconsistency in
its policies. In rebuttal, Deng and Zhao sought to cast
themselves as friends offering advice, but they strongly
criticized US foreign policy in general and toward China in
particular over the past few years. We believe this sharp
reaction reflects underlying Chinese fears of being relegated to
a less important strategic role in US calculations and a deep
seated Chinese concern that China will be treated as less than an
equal by the United States--just as Moscow dealt with Beijing
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Council
request. Questions and comments are welcome be addressed
to the Chief of the China Division
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
25X1
-25X1
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Shifting Strategic Assessment
The Chinese assessment of the strategic balance has changed
significantly over the past few years. During much of the 1970s
China saw the US and its NATO allies on the defensive and Soviet
power and influence expanding. Hence, China favored a "united
front". strategy to check Soviet expansion and viewed
normalization of relations with es as a key
ingredient of that strategy.
But, since 1980 the Chinese believe the balance has begun to
shift back in favor of the West. The United States and its
allies have greatly strengthened their military power and resolve
in the face of the Soviet challenge, while the Soviets have
become increasingly beset by domestic and foreign policy
problems. Deng indicated the Chinese see little chance of that
25X1
25X1
From China's perspective this shift has had both positive
and negative consequences, some of which Beijing clearly did not
anticipate. Over the short run, for example, it has lessened
Chinese concern over the Soviet threat to their security. It has
also allowed them Ito drop their call for a united front, to
distance themselves from the United States publicly, and to adopt
a more flexible strategy toward the Third World designed to
enhance Chinese influence and combat the Soviets. The Chinese
have been particularly critical of those US policies toward the
Third World they regard as counterproductive and as playing into
Soviet hands, such as US support for Israel. China's resulting
"independent" policy also reflected its deep suspicion of US
policy on Taiwan. 25X1
But as the United States has moved to rebuild its military
strength and political resolve, the Chinese fear it has:
-- Stimulated US-Soviet competition in Asia that threatens
to weaken China's position and thus make it even less of
a factor in the strategic calculations of both
superpowers.
-- Raised in turn the prospect that China will have even
less leverage with the United States over Taiwan as time
Deng and Zhao's complaints and advice to the delegation
should he seen as reflecting these concerns and therefore as
self-serving. Both, for example, emphasized that the United
States should temper its military buildup and seek to ease
tensions with the USSR by seeking an arms accord. They also held
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
the'United States should avoid military actions in the Third
World or close association with the so-called four unsinkable
aircraft carriers--Taiwan, South Korea, South Africa and Israel.
In our view, China would prefer to see a rough strategic
parity maintained that gives China maximum maneuverability and
leverage on both sides. Increased superpower tensions and arms
competition in particular will.only complicate China's ability to
deal with resulting growth in Soviet military capabilities in
Asia. The Chinese are also concerned that the Soviets might
still succeed in driving a wedge between the United States and
its European allies by exploiting public concern in Europe over
the deployment of more US missiles there.
At the same time, China wants to develop closer economic,
political and perhaps even- military ties with the United States,
but to avoid tarnishing its reputation with the Third World and
"progressive" parties in the developed countries, or with
nationalists at home concerned with the issue of Taiwan.
Deng also criticized US policy in East Asia, especially US
support for allies and friends such as South Korea and Taiwan,
asserting that this impedes the search for stability in the
region. Deng stressed his desire to get out of the "blind
alleys" of the past which, in the case of Korea, could result in
what he called a "slide into war." He referred to President
Carter's troop withdrawal plan as a "good idea." He offered his
own.vaguely defined proposals stressing "confederation" as a
means to stabilize the situations not only in Korea and Taiwan,
but also Hong Kong, Macao, and the Nansha (Spratly) Islands. We
believe Deng sees a stronger United States as less willing to
compromise on issues such as Taiwan and Korea on terms
advantageous to China or its North Korean ally.
Finally, Deng and Zhao focused on alleged US unwillingness
to modify US laws and procedures (e.g. Taiwan Relations Act,
Export Administration procedures) to accommodate China. This
again reflects in part China's concern that. the United States no
longer needs China as much as in the past as a strategic asset
against the USSR, and therefore will be less likely to
accommodate Chinese interests. Zhao was especially outspoken in
asserting that China "will never agree" to be a "second class
partner" of the United States, but will resist just as it
resisted Soviet efforts in the past to make China a "junior
partner."
SFCRET
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
15 March 1984
Sino-Soviet Relations F_
We expect China and the Soviet Union to remain suspicious,
wary antagonists, continuing to arm against each other and to
manuever in an effort to restrict each other's power and
influence in Asia. The current series of Sino-Soviet talks are
likely to contribute to a gradual- expansion of contacts,
especially in economic areas, and a reduction in tensions, but w
foresee no major breakthrough on key security issues.
Many factors divide the two sides:
-- Moscow's refusal to halt its unrelenting buildup of
military power in Asia or reduce its continued close ties
with Vietnam, Afghanistan, and Mongolia.
-- China's determination to counter a perceived long-term
Soviet effort to intimidate and subjugate China with
military power and political encirclement.
-- Historical, territorial, racial and ideological grievances
felt deeply by leaders in both Moscow and
Beijing. 25X1
The impasse in relations continues to center on China's
demand that Moscow remove the-so-called three obstacles to Sino-
Soviet relations--the Soviet occupation of Afghanistan, support
for Vietnam in Kampuchea, and Soviet military deployments along
the Sino-Soviet border and in Mongolia. Evidence of a continuing
deadlock on these questions includes:
This memorandum was produced by t-h_e China Division of the Office
of East.Asian Analysis-in response to a National Security Council
request. Questions and comments are welcome and may be addressed
to the Chief of the China Division
25X1
25X1
CONFIDENTIAL
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-R6P04T00367R000201410001-5
-- Chernenko's public refusal early this month to deal with
China on issues affecting third countries.
-- Soviet stationing--as of late last year--of TU-16 bombers
in Vietnam.
-- Sino-Vietnamese armed tension during the current dry
season.
-- Sino-Soviet propaganda exchanges over Vietnam and Mongolia
in February and March.
-- Continued steady buildup of other Soviet forces in Asia--
especially SS-20s. 25X1
Nevertheless, for tactical reasons both sides will continue
gradually to progress in secondary areas:
-- Moscow seeks to normalize relations to drive a wedge
between the United States and China.
China seeks to reduce tensions, increase its maneuvering
room in the US-Soviet-Chinese triangle, and project a more
nonaligned image in the Third World. However, it still
regards the Soviet Union as its principal security problem
and its strategic interests as largely compatible. with
those of the United States.
China's growing contacts with Moscow parallel its emphasis
on an "independent" foreign policy--an attempt to rely less .
explicitly in the United States as a strategic counterweight to
Soviet power, and more on diplomacy to counter Soviet pressure.
But, China clearly recognizes that it runs grave risks if it goes
too far in easing tensions with the USSR.
- It could alarm and alienate the United States and Western-
oriented countries that provide an essential counterweight
to Soviet pressure on China and are a vital source of
economic and technical help for China's modernization.
-- It could reduce Soviet incentive to compromise and confirm
Moscow in its hardline Dolic- of military pressure and
Thus, progress in relations remains confined to secondary
areas:
-- Trade doubled in 1983 and is expected to increase 60
percent in 1984 to a level of $1.2 billion--still far
below Sino-US trade.
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
111E N I I (11
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
-- Two separate forums for talks at the vice foreign minister
level have been established--one to deal with "bilateral"
issues and another to discuss "global" issues.
-- Soviet Deputy Prime Minister Arkhipov is slated to visit
China in May--the higest level Soviet official to visit
China in 15 years. Arhkipov reportedly will discuss
increased economic cooperation. Meanwhile, the Chinese
and Soviet foreign ministers have agreed in principle to
meet, but no date or venue has been set.
-- Low level cultural, sports and scientific exchanges have
resumed. Each side is to exchange 100 students this year,
and the USSR has agreed to study refurbishing a few
Soviet-supplied plants in China.
-- Moscow has muted most anti-China polemics; Beijing
continues to attack Soviet foreign policy but has stopped
criticism of Soviet "revisionism."
In the near future, Beijing will probably continue to use
its carefully modulated interchanges with the USSR to contain
Sino-Soviet tensions, increase its leverage with the United
States, and demonstrate Chinese "independence". It is no .
accident that Beijing scheduled Arkhipov's visit in May on the
heels of President Reagan's visit to China, and plans tentatively
to send defense Minister Zhana Aioing to the United States the
following month.
Moscow, while concerned about the possibility of Sino-US
ties, especially in the military sphere, seems generally
satisfied with the gradual improvement in Sino-Soviet exchanges,
and has little incentive to offer a far reaching initiative
designed to meet China's demands on the three "obstacles." The
Soviets also would like some sort of an agreement and will
probably continue to seek some common ground with China on
bilateral , security issues, without accommodating China's
There is a low possibility (5-10 percent chance) that events
such as a sudden change in leadership in Moscow or Beijing, a
sharp deterioration in US relations with either Moscow or
Beijing, or the outbreak of war in Korea, could prompt China and
the USSR to move toward greater accommodation than anticipated.
But there is an at least equal possibility that Sino-Soviet
relations could worsen over the next few years as a result of
such events as Sino-Vietnamese conflict over Indochina, closer
US-Chinese military ties, or Soviet efforts to expand in the
fluid situation in Southwest Asia.
-3-
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
CONFIDENTIAL
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
27 March 1984
China and a Korean Dialogue
25X1
Since the Rangoon bombing in October, China has consistently
indicated it r f rs to play an indirect role in any Korean
dialo 'u e.
25X1
25X1
-- supported North Korea's reunification plan and its
tripartite talks proposal.
-- left open the door for later participation in talks
on Korea.
-- still opposed diplomatic cross-recognition of the two
Koreas. 25X1
We believe that the Chinese see little reason to change this
cautious approach, primarily because the prospects for any Korean
dialogue seem dim:
-- Pyongyang remains intractable in its call for 3-way
talks and on its basic goals, primarily withdrawal of
US troops from the South. We believe the North's
tripartite talks proposal is only a tactical maneuver
to engage the US in direct talks.
-- Seoul has all but rejected the North Korean proposal,
calling instead for direct talks with Pyongyang. The
South also wants at least.an implicit apology from
the North for the Rangoon bombing.
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Council
request. Questions and comments are welcome and may be addressed
to the Chief of the China Division
84-10068
25X1
25X1
C(INFTDENTIAL
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Beijing is further inhibited from pursuing a more activist
approach by its interest in maintaining strong ties with
Pyongyang. We believe the Chinese want to avoid antagonizing the
North Koreans, who for now clearly do.not want Chinese direct
involvement in a dialogue. Pyongyang instead wants to portray
Seoul as a US dependency, to avoid displeasing Moscow by its
exclusion, and to minimize Chinese contacts with the South
Koreans. China, moreover, does not want to be in a position
where it would be expected to seek concessions from the North
Koreans to keep the talks alive. Finally, the Chinese would like
fear could lead to improved Soviet-North Korean relations.
We believe China for the near term will continue its policy
of endorsing both the North's proposals and the need for
"peaceful" reunification of Korea. The lack of an explicit US
rejection of tripartite talks probably reinforces. Beijing's
inclination to adopt a wait-and-see approach. China meanwhile
can maintain its strong position in Pyongyang at a low cost to
other Chinese interests, such as improved ties with the United
States and Japan.
At the same time, the Chinese remain interested in reducing
tensions on the Korean Peninsula. China wants to keep North
Korea from turning to Moscow as a strategic counterweight to the
US-South Korean alliance, and. to avoid a conflict in Korea that
would pit Chinese forces against the US. Beijing has announced
that party leader Hu Yaobang will visit North Korea in early
May. We believe one of the key discussion topics during his
visit probablv will be status of North Korea's tripartite
proposal.
25X1
2
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
UUNFIDENTIAL
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
19 March 1984
Sino-Soviet Trade and Economic Relations
China's economic relations with the Soviet Union have
expanded significantly over the past two years, principally as
the result of the easing in political tension between the two
states. Trade has reached the highest level since the early
1960s, and China has apparently concluded that the USSR can play
a useful, supplemental role in China's modernization. We
believe, however, that the Soviet role in China's modernization
will remain small, in part because of Soviet inability to provide
technology as advanced as that available in the West and Japan,
and in part because of painful memories of the Soviet a lication
of economic sanctions against China in 1960.
Sino-Soviet trade will increase 60 percent in 1984 to a
projected value of $1.2 billion. This follows a doubling of
trade in 1983 and gives substance to a recent Chinese statement
on the "great potential" for economic and technical cooperation
with the USSR. The markets in the Soviet Far East for Chinese
textiles and other consumer goods and in China for Soviet timber,
fertilizer, and machinery provide ample room for further
expanding total trade which is still only about 15 percent of
Sino-US trade. Recent Soviet and Chinese comments that total
trade could reach $5 billion by 1990 suggest that Beijing may be
willing to consider a long-term trade agreement with Moscow.
China also reportedly has agreed to use Soviet assistance in
the technical upgrading of several industrial plants built by the
PRC with Soviet help in the 1950s. Because Beijing's leaders
remember past Soviet efforts to exploit China's economic
dependence for political purposes, we believe they will sharply
limit the number and activities of Soviet technical experts used
in China to help plant modernization. The Chinese also will not
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Council
request. Questions and comments are welcome and may be addressed
to the Chief of the China Division
Pf1NFTnFNTTAI
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 go so far in improving economic relations with Moscow that they
will jeopardize the much greater gains--in trade, technology, and
investment--China receives from its relations ith the Unit 25X1
States, Japan and other non-Communist states.
First Deputy Premier Arkhipov, who is slated to visit China
in May to discuss problems in trade and economic and technical
cooperation, will be the highest level Soviet official visitor in
15 years. We believe the Chinese will not accept any dramatic
new, Soviet proposal in the economic field until they see how the
overall policy of the new Soviet leadership toward China
develops. 25X1
-2-
CONFIDENTIAL
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Central Int igence Agency
Washington, a C. 20505
DIRECTORATE OF INTELLIGENCE
30 March 84
China and Japan: Building for the Long-Haul
Prime Minister Nakasone's recent visit to Beijing
underscores the convergence of Chinese and Japanese strategic and
economic interests. China looks to Japan both for help in
promoting its modernization program and in countering Soviet
expansionism and promoting regional stability.- Japan hopes that
support for China's modernization will enhance prospects for the
survival of a moderate leadership in Beijing, help to reinforce
China's "opening to the West," and reduce incentives for a Sino-
Soviet rapproachement.
-- During Nakasone's trip, both sides reaffirmed their
opposition to the increasing Soviet military buildup
in Asia, particularly the deployment of more SS-
20s. The two sides agreed to share information on
these Soviet missiles.
-- Premier Zhao used the occasion to stress that the
Soviet Union represents the primary threat to Chinese
security.
-- The Soviet media'have reacted sharply to the visit,
accusing China and Japan of "distorting" Soviet Asian
polices to "camouflage" US and Japanese military
intentions.
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Concil
request. Questions and comments are welcome and may be addressed
EA M 84-10077
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 -- Nakasone and his hosts reiterated their common
interests in peace on the Korean peninsula. The two
sides remained far apart, however, on the issue of a
Korean dialogue, with China repeating its support for
Pyongyang's tripartite proposal and.with Japan
endorsing Seoul's call for direct North-South
contacts. Hu Yaobang, moreover, stated that China
would "never" change its stance of promoting "from
the sidelines" Korean reunification and a reduction
of tensions there.
-- The Chinese agreed to allow separated Korean family
members living in China and South Korea to meet in
either those two countries or Japan. Premier Zhao
also suggested that China would favorably consider
participation in the 1986 Asian Games and the 1988
Olympics, both to be held in Seoul.
-- The long-term commitment by both sides to strong
bilateral ties was symbolized by the establishment of
a committee to promote Sino-Japanese friendship into
the 21st Century." 25X1
Over the past several years, China and Japan have pursued
parallel policies in Asia:
In Southeast Asia, both China and Japan provide
strong diplomatic support for ASEAN's efforts to
bring about a Vietnamese withdrawal from Kampuchea.
Both sides provide assistance to Thailand, with China
also supporting the Kampuchean rebels.
-- In Southwest Asia, both sides have condemned the
Soviet occupation of Afghanistan, and sought through
diplomatic and economic means to bolster Pakistan.
Beijing reportedly also provides arms and other aid
to the Afghan rebels.
-- In Northeast Asia, both states have sought to
exercise.a moderating influence over their respective
Complementary economic interests meanwhile have served to 25X1
further strengthen Sino-Japanese relations. China hopes to
acquire increased Japanese imports, financial credit, and
technology, as well as a larger Japanese market for Chinese
goods. Japan regards China as a potentially lucrative export
market, and as a significant source of raw materials.
-- During his recent trip to China, Prime Minister
Nakasone announced a seven year, 470.billion yen
(approximately $2 billion) development credit package
2
SECRET
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
JC',RG I
for.7 communications, energy, and transportation
projects.
The Japanese are considering about $3 billion in
Export-Import Bank loans to support Chinese coal and
oil projects.
Tokyo also has agreed to a one-time export of nuclear
reactor equipment, subject to on-site "visits" by
Japanese officials. Tokyo, however, is apparently
demanding stricter controls before it will sign a
bilateral nuclear cooperation agreement, allowing the
export-of more such equipment.
These mutual strategic and economic benefits serve to
minimize several latent problems in the relationship, such as
Chinese concern over the long-term implications of growing US-
Japan defense cooperation and Japan's extensive ties to Taiwan,
as well as Japanese concern over China's ability to maintain it's
current domestic and foreign policies. We thus believe both
sides will continue efforts to consolidate their relations and to
lay the groundwork for even closer ties.
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
CONFIDENTIAL
Central intelligence Agency
DIRECTORATE OF INTELLIGENCE
21 March 1984
China's Taiwan Policy
Since last summer, Beijing has revived its reunification
campaign. Deng Xiaoping and others have issued authoritative
statements designed to flesh out Ye Jianying's 1981 nine points
proposal to Taiwan by:
stressing both sides' commitment to one China and the
need for peaceful reunification;
calling for negotiations between the Chinese Communist
Party and the Kuomintang as equals;
proposing to make Taiwan into a special administrative
region with full control over its internal affairs and
continued access to international trading markets;
suggesting that anything short of full independence can
be discussed;
promising not to send Ch'inese troops or bureaucrats to
Taiwan and holding the door open for Taiwan's officials
to seek government positions on?the mainland;
rejecting Taipei's position that reunification be based
on its official ideology of the "Three People's
Principles" (civil liberties, Chinese nationalism, and
equal economic opportunities);
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Council
request. Questions and comments are welcomp And may be addressed
to the Chief of.the China Division
25X1
CONFIDENTIAL
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
leaving unclear whether Taiwan will be allowed to
purchase foreign arms after reunification;
offering Taiwan a limited role in international
organizations. Since 1981, Taipei has rejoined numerous
nongovernmental bodies through the "Olympic solution,"
by adapting a different name--China, Taipei--and flag.
China has recently suggested that a similar solution
could be used to resolve the ADB impasse; Taiwan,
however, has explicitly rejected this approach for
governmental organizations.
Such proposals are intended-to contrast Beijing's
"flexibility" with Taiwan's "intransigence" in order to:
-- induce Washington, as well as Overseas Chinese and
foreign businessmen, to encourage Taipei to enter
negotiations;
entice Taipei to be more flexible;
-- demonstrate to Washington Chinese interest in improving
Believing that US support for Taiwan--and particularly arms
sales--reinforces Taipei's refusal to negotiate, Beijing
continues meanwhile to demand that the US abide by its agreements
with China. During Zhao Ziyang's recent trip to the US, he
repeatedly emphasized that the Taiwan issue remains the key
obstacle to smooth progress in Sino-US relations. Zhao and the
Chinese media also called on the US to take concrete steps "this
year" to implement its commitments in the August 1982 communique 25X1
on arms sales to Taiwan.
At the same time, China wants to limit what it sees as the
growing influence of Taiwan self-determination sentiment.
Beijing recently has stepped up its criticism of self-
determination advocates, especially in the US. The Chinese also
have warned that a declaration of Taiwan independence, or the
continued refusal (over the long term) of Taipei to begin
reunifiqation talks could trigger the use of force to bring about
unity. 25X1
CONFIDENTIAL
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04TOO367ROO0201410001-5
Central Intelligence Agency
WishiVon. D. C. 20505
DIRECTORATE OF INTELLIGENCE
15 March 1984
China-Southeast Asia
Vietnam's occupation of Kampuchea and an increased Soviet
presence in Indochina remain among Beij-ina's primary security
concerns. Since China's first effort to "teach Vietnam a lesson"
in 1979, Beijing has followed a consistent strategy designed to:'
Force the withdrawal of Vietnamese forces from
Kampuchea.
-- Deprive Vietnam of its new client by promoting a
neutral government in Kampuchea.
-- Weaken and eventually break the Soviet-Vietnamese
alliance with the aim of removing the Soviet
military presence in Southeast Asia.
-- Bring about a leadership in Hanoi more responsive to
Chinese interests.
The key ingredients in that strategy' are:
-- Direct military pressure along the Sino-Vietnamese
border, tying down Vietnam's best troops and
equipment.
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Council
request. Questions and comments are welcome and may be addressed
to the Chief of the China Division
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04TOO367ROO0201410001-5
 -- Indirect military pressure by backing Kampuchean and
Laotian resistance groups.
-- Diplomatic efforts aimed at isolating Vietnam.
-- Pursuit of better relations with ASEAN to encourage
united opposition to the Vietnamese--with Thailand
as the keystone.
Soviet support for Vietnam.
China continues to insist on a settlement based on the
International Conference on Kampuchea formula--complete
withdrawal, neutralization of Kampuchea under UN supervision,
free elections. But in the October 1982 session of the Sino-
Soviet talks the Chinese offered a five-point proposal with some
modifications and inducements. These include:
-- Allowing a.Vietnamese withdrawal in phases within a
specified time period.
-- Offering to resume Sino-Vietnamese talks--broken off
in 1980--after the first increment of troops
withdraw.
Moving to normalize Sino-Soviet relations depending
settlement of the Kampuchea issue.
Thus far, the Chinese show no signs of relenting--their
policy costs them little while Beijing believes Hanoi is paying
dearly. Nevertheless, China expects Hanoi to hold out for at
Beijing's strategy has some obvious weak points that Hanoi
tries to exploit:
-- Several ASEAN states regard China as a greater long-
term threat to their security than Vietnam because
of Chinese ties with local Communist parties and
overseas Chinese.
c
-- Chinese aid to the Communist Khmer resistance forces
is interpreted in some ASEAN and Western capitals as
a desire to see Pol Pot return to power. Beijing
maintains Pol Pot's group is the most effective
fighting force and points to the aid it gives the
non-Communists.
-- Without Thai cooperation China could not pr
adequate support for the Khmer insurgents.
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
J L V 1\ L 1
And, even though Beijing has increased its ability to
conduct a wide variety of military actions against Vietnam the
credibility of its threats to teach Hanoi a "second lesson" has
actually diminished. Indeed, we believe China would be reluctant
to undertake major offensive operations against Vietnam unless
Thailand's security or the existence of the Khmer resistance were
clearly threatened. The reasons:
-- Cost: Beijing suffered 20,000 casualties in 1979
and spent at least $1 billion.
-- Vietnamese strength: Hanoi has nearly doubled its
troop strength along the border since 1979 while
upgrading its equipment.
-- Soviet presence: The Soviets have beefed up their
naval and air assets in Cam Ranh Bay--making Chinese
air and sea operations against Vietnamese-held
islands more risky.
ILLEGIB
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Central Intelligence Agency
Washington. D. C.20505
DIRECTORATE OF INTELLIGENCE
16 March 1984
China: Leadership and Succession
Deng Xiaoping, 79 and formally only the third ranking member in the
Communist Party, is the most powerful man in China. Since his ascendance in
1978, Deng has generally controlled the policy agenda, using it to reverse
some aspects of Mao Zedong's legacy and to promote his own vision of a stable,
prosperous China. He and his allies have enjoyed a string-of modest successes
in their efforts to overcome political opponents, to focus economic activity
on improving the general standard of living, and to reform China's sprawling
bureaucracy. Deng has had failures as well, the most notable being an
inability to refurbish the public image of the Communist party after two
decades of political strife and oscillating policies.
Successors
Deng recognizes that he has little time remaining to accomplish all his
goals. To continue his program and preserve his reputation for posterity,
Deng has installed younger, politically compatible leaders in the top party
and state posts. Party General Secretary Hu Yaobang,.68, has been a protege
of Deng for more than 40 years. Premier Zhao Ziyang, 64, has no longstanding
personal ties to Deng but nevertheless is a capable and pragmatic lieutenent
who shares Deng's views.
Most of what Deng has attempted to do over the past five years has a
succession angle. Hu and Zhao have generally shared in Deng's victories over
political rivals, and they also stand to gain from economic and bureaucratic
reforms. Indeed, they have staked their careers on achieving progress in
these areas. The three-year party "rectification" campaign--an effort to
reindoctrinate veteran members, recruit educated young leaders, and purge the
politically unreliable--is being run by Hu Yaobang with an eye to making the
party more loyal to reformist goals and reformist leaders, such as himself.
Hu and Zhao seek to raise a new generation of party members who are more
This memorandum was produced by the China Division of the Office of East Asian
Analysis in response to a National Security Council request. Questions and
comments are welcome and may be addressed to the Chief of the China Division
EA M 84-10065
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07 CIA-RDP04T00367R000201410001-5
sophisticated and professionally competent than the party's peasant old
guard. If able to effect broad personnel changes, they will simultaneously be
expanding their own political bases. 25X1
After Deng
Should Deng die soon, however, we believe Hu would not immediately
inherit Deng's place as first among equals in the leadership. Although Hu may
have stronger credentials than any other leader of his own generation, he
remains distinctly junior to Deng's peers on the Politburo. Moreover, we
believe that Hu has only thin support among senior military officers, a group
he has actively cultivated. In our view, only a leader whose standing and
personal connections in the party approximates Deng's could assume Deng's
crucial roles of broker, conciliator, and final decisionmaker. Deng's peer.
group has scant reason to defer to Hu and would likely prefer that Deng's
authority gravitate to one of their own, such as President i iannian or
National People's Congress Chairman Peng Zhen. 25X1
In the post-Deng period, collective rule is probable, at least until a
new pecking order is sorted out. We believe that the leadership would choose
to avoid a divisive power struggle, which would convey all the wrong signals
both in China and abroad. Given Hu's impulsive nature, however, we cannot
rule out the possibility.that a blunder or series of missteps by Hu might
provoke a concerted move by party traditionalists to replace him. Barring
that, Hu would likely remain the titular head of the party,'presiding rather
than ruling,.holding on until the gerontocrats left the scene. For the longer
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04TOO367ROO0201410001-5
%.vi'lr IUCI1 I IML
Central Intelligence Agency
Washington, D. C. 20505
DIRECTORATE OF INTELLIGENCE
20 March 1984
China: Economic Reforms
In the last five years, China has instituted a series of
economic reforms aimed at using market forces to supplement the
planning apparatus. Specifically, the reforms seek to reduce
direct government involvement in economic affairs, encourage
entrepreneurial initiative, and motivate the work force by more
closely linking pay to productivity. The reforms continue to
face opposition from ideologues, who decry their departure from
Marxist dogma, and from cadre at all levels, who resent the
erosion of their own authority resulting from the reforms.
Reforms in Place
The most sweeping and successful changes thus far have come
in agriculture, where over three-quarters of the land is now
un ed the effective control--though not legal ownership--of
peasant households. Peasant farmers are free to market and
retain the income of production above the amount contracted for
by the government.
In industry, enterprises that formerly remitted all but a
small share of their profits to the government now retain a
significantly larger share, which they may use to pay bonuses or
invest in new facilities. In finance, provincial governments now
have greater discretion in spending locally generated revenues.
In commerce, free markets reappeared in cities and the
countryside with official sanction, and enterprises are permitted
to sell some of their product outside the government-run
commercial system. In the credit sector, bank loans are
gradually replacing government grants as sources of fixed and
working capital.
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Council
request. Questions and comments are welcome and may be addressed
to the Chief of the China Division
CONFIDENTIAL
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04TOO367ROO0201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
The government has even given its blessing to some very
limited forms of private enterprise, though the number of
individuals engaged in privately owned production or service
activity is still only about 2 percent of the nonagricultural
workforce. Ownership of capital continues to be strictly
controlled by the ent, and we do not expect these controls
to be eased.
The Report Card
To date the reforms have yielded mixed results.
Agricultural output is running at record levels, reflecting the
combined results of the reforms, better than average weather, and
price increases. In the industrial sector, however, productivity
remains low, and a tremendous waste of resources is continuing.
Reforms have also generated some new problems. Runaway local
investment has siphoned off funds and raw materials needed for
infrastructure projects that Beijing regards as key to its
modernization effort. Moreover, poor industrial performance has
prevented government revenues from increasing rapidly enough to
counterbalance expenditures. Continuous budget deficits since
We expect Beijing to push ahead with reforms albeit in a
groping fashion. Where reforms create unacceptable problems--
economic or political--Beijing will retrench, falling back on
command-style controls. We have already seen some
recentralization in a number of areas, such as foreign trade and
production of certain agricultural goods. Irrational prices
prevent market forces from yielding, efficient results, but so far
Beijing has proven reluctant to institute necessary price
adjustments. Therefore, we expect the reforms to yield only
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
19 March 1984
US-China Economic Relations
Prospects are good for improved US-China economic relations
in 1984. The tensions over technology transfer and commodity
trade, which last year dampened Chinese imports and left the
United. States a deficit for the first time since 1977; have
abated. The liberalization of US high-technology exports,.
combined with China's keen interest in acquiring machinery and
technology to upgrade its factories and transportation system,
should help revive US'sales to China.
Commodity Picture
US exports to China in 1984 should exceed the $2.2 billion
level of last year. Up to $1 billion in high-technology
contracts will probably be signed this year. Many of.these are
multiyear undertakings, thus the full amount will not be
reflected in 1984 trade. We do not expect the Chinese to buy
whole plants, except for used plants that become available
because of bankruptcy or replacement.
Grain sales could see moderate gains, even with continued
good Chinese harvests and improved internal distribution. Sales
of pesticides and fertilizers,,`especially phosphates, will
probably remain strong to support agricultural development; log
sales could increase as much as 20 percent. US exports of
synthetic fibers, however, will probably continue to stagnate.
Although China's requirements increased this year, most will be
supplied by Asian and European producers at prices about 10
percent below US offers.
Chinese exports.to the United States will continue to be
dominated by textiles and apparel, probably followed by petroleum
This memorandum was produced by the China Division of the Office
of East Asian Analysis.in response to a National Security Council
request. Questions and comments are welcome and may be addressed
to the Chief of the China Division
CONFIDENTIAL
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
25X1
I
25X1
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
products. Other important export goods will be chemical
products, footwear, and crafts. 25X1
Investment
US investment in China now exceeds $500 million. The
Industrial and Technological Cooperation Accord, the patent:-law
(approved 12 March), and pending agreement on a bilateral
investment treaty will bolster investor confidence and encourage
additional commercial ties. Some investments. will be prohibited
until agreement on nuclear cooperation is reached. and others may
be inhibited because China's patent law does not cpr All
technologies--chemical formulations, for example.
International Organizations
China will continue to join international economic
organizations. Beijing, a member of GATT's Multifiber
Arrangement since January, is now exploring the intricacies of
full GATT membership. Although unlikely in 1984, Chinese
accession to GATT would remove the last legal requirement for
Generalized System of Preferences status. China is also unlikely
to obtain membership in the Asian Development Bank this year, but
Beijing will continue to test th ADB for indications of support
for Chinese membership. 25X1
Potential Stumbling Blocks
Despite the improvement in Sino-US ties there is still a
potential for friction that could endanger economic relations..
In recent weeks, the Chinese have complained in the press and
through diplomatic channels about US sales of..arms to Taiwan. US
restrictions on Chinese exports, primarily textiles; also
irritate the Chinese leadership. Further, China is annoyed that,
in spite of relaxed US controls on technology sales, its
purchases are still delayed by COCOM approval procedures. Should
any of these irritants be aggravated or should Chinese tolerances
decline, Beijing could once again turn to other suppliers at the
-2-
CONEIDENTIAl
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
China: Highlights of Trade With the United States
Long-term grain
agreements signed
Wheat sales -
quadruple -
1 11 111 IV 1 11 111
1971 72
US Imports
US Exports
IV 1 11 111
73
IV 1 11 111
74
Cotton and synthetic
textile fibers sales
drop I
IV I II III IV I II III IV I II III IV 1 II III IV I II III IV I 11 III IV I II III IV I II III IV 1 11 III IV
75 76 77 78 79 80 81 82 83
Data from US Department of Commerce shows both
exports and imports on an 'f.o.b. basis.
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
19 March 1984
China: -Expanding Market for US Energy Firms
China's need for new technology, both to develop new energy
resources and to improve the efficiency of domestic energy
consumption, is a major reason for Beijing's decision to
strengthen commercial links with the West. China, we believe,
sees the United States as the best source for much of this
technology and access to it is a pivotal consideration in its
official dealings with the United States. This linkage may
provide a relatively stable underpinning for China's opening to
the United States. Beijing did not, for instance, allow the 1983
political and economic controversies with the United States to
impede the critical, offshore oil contract neqotiations that were
occurring at the same time.
Key areas in which energy technology is already forging
important commercial links between the two countries include
joint ventures for offshore oil exploration and development, coal
mining, and electric power development. Two areas of potential
cooperation--contingent upon solving difficult investment and
political.problems--include hydroelectric and nuclear power
development which some Chinese view as the likely dominant energy
sources in the next century (see Appendix).
In most of these fields, China believes the US holds the
most desirable technology; however, US firms usually face fierce
competition from European and Japanese firms. China, moreover,
has proved adept at playing these competitors against each
other. This competition will probably become more intense,
particularly when it comes to the financing of energy projects--
an area in which the United States appears at considerable
disadvantage.
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Council
request. Questions and comments are welcome and ma be addressed
to the Chief of the China Division
CONFIDENTIAL
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
25X1
25X1
 China's oil and coal export earnings--approximately $5
billion last year mostly from Japan but also including
significant gasoline sales to the United States--put Beijing in a
good position to pay cash for imported equipment. Official
concern over the possible need to reduce or even eliminate oil
exports, however, is causing Beijing to be very conservative in
-2-
CONFIDENTIAL
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Appendix: Selected Energy Projects
Oil and Gas
Offshore Oil Thirteen US firms have contracts to explore
and develop large sections of China's continental shelf. At
least 20 wells will be drilled in 1984, the first year of a
minimum three-year exploration effort. If successful, this
exploration will lead to long-term--up to 35 years--commitments
by the firms to-work in Chi a in an industry of vital importance
to Beijing.
Onshore Oil US firms are rapidly increasing sales of
seismic surveying and processing equipment--including high speed
computers--and secondary recovery technology needed by China to
maintain current onshore production rates.
Natural Gas Atlantic Richfield and Santa Fe, the first
contractors for offshore oil exploration, have already made a
natural gas discovery that may be large enough to warrant
development of a petrochemical/fertilizer complex. The discovery
has been marred, however, by rill ship and its
80 member US-Chinese crew.
Coal Mining
Beijing spent $1.13 billion on coal mining equipment and
technology purchases from the West. in 1978-82 and is looking for
$5 billion in foreign investment in China's coal mine development
through the 1990s. China has turned to European and Japanese
suppliers for mining machinery, but favors US suppliers in
several key areas:
Open Pit Mining The Chinese want US firms to help develop
production at huge coal mining areas in northern China. Talks
with Occidental Petroleum for development of the $1 billion
Pingshuo area have stalled over financial details and marketing
responsibility. although some equipment for Pingshuo is on
Coal Slurries US firms are the preferred vendors--both
Bechtel and Fluor provided feasibility studies last year--for
several coal slurry pipelines that Ch.ina is considering building,
but negotiations with other suppliers, primarily Japanese, have
Mining and Processing Equipment China signed an agreement
in October 1983 to purchase US power shovel technology, and
negotiations are under way for coal washing and drying equipment,
quality samplinn aniiinmant and fluidization and gasification
technology.
-3-
('(INFTBFNTTAi
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 CONFIDENTIAL
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5 25X1
Electric Power
A 1979 technology transfer agreement with Westinghouse is
helping China to produce 300 MW turbine generator units and will
eventually lead to production of 600 MW units as well. Beijing
may 'seek modifications of these units for use in nuclear power
plants. US firms are also leading contenders for supply of
computerized grid management systems and are providing technical
training for Chinese managers. US expertise has been used to
help plan China's ambitious hydropower efforts but the Chinese
now appear to be leaning toward Japanese firms for the actual
purchase of construction equipment and technology. US firms may
play an important role in China's nuclear power plans, contingent
upon the signing of a US-China nuclear power agreement.
-4-
.CONFIDENTIAL
25X1
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
uuivriur_n1i1iL
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
19 March 1984
China: Nuclear Power Prospects
China is one of few countries in the world still optimistic
about the use of nuclear power. No, nuclear plants are on line--
nor will they be until probably the early 1990s--but Beijing
hopes to have 5 to 10 plants operating by the year 2000,
contributing at least 10,000 megawatts (MW) or 5 percent of the
county's power requirements.
Beijing has been trying to develop indigenous nuclear power
technology since 1970 and now has a relatively small (300 MW)
plant in an early stage of construction near Shanghai. The
thrust of the Chinese nuclear program is to import at least two
1800 MW turnkey plants along with the technology to begin
building such plants. Even the domestically designed plant is
slated to use considerable Western technology, including a
Japanese built reactor vessel, West German coolant pumps, and
US-designed turbine/generator units.
France, which has signed several nuclear agreements with
China since 1978 but still has not made a sale, leads in the
competition to provide the turnkey plants. Prominent Chinese
officials now state that Framatome has won a contract to provide
an 1800-MW plant to be constructed near Hong Kong. Hong Kong has
been" asked to help finance the plant in return for a large share
of the power output. We expect Framatome will also be awarded
contracts to build a similar plant northwest of Shanghai.
China has long preferred US nuclear technology--not being
content with the Westinghouse derivative technology offered by
Framatome--but has been prevented from purchasing US plants
because of Beijing's unwillingness to agree to certain non-
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to ,a National Security Council
request. Questions and comments are welcome and may be'addressed
to the Chief of the China Division
('(1NFTDFNTTAI
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 proliferation provisions in US export control regulations.
China, according to press reports, last month accepted similar
Japanese provisions including "friendly" visitation rights by the
Japanese and appears close to such an agreement with West Germany
and the United States. 25X1
China is already attempting to sign contracts with US firms
for consultation and engineering. help for the French reactors--
still prohibited under US law--and has carried out extensive
negotiations with Westinghouse and General Electric for the
supply of nuclear reactors. It is also discussing the purchase
of two surplus 1300-MW power reactors from TVA. Financing of
such projects--providing a nuclear agreement is reached--could
still be a major hurdle, however, as China is reluctant to borrow
at commercial or even EX-IM Bank rates. A direct purchase would
be a major strain on the country's already pressed electric power
investment budget. 25X1
-2-
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
19 March 1984
China:, Changes In Military Industrial Develo men
Policy--Implications'for the United States
China is merging its military and civilian R&D organizations
in order to strengthen its scientific and technological research
capabilities. At the same time, military industries--most
notably the six military machine-building industries--are being
integrated with civilian industry to enlarge their contribution
to the overall development of the economy.
A series of organizational and policy changes introduced
since 1981 will have a major impact on future Chinese military
and civilian industrial activity:
o Planning of military and civilian S&T and industrial
activity will be increasingly centralized.
o Military and civilian research institutes and factories
will be consolidated into specialized research and
production combines.
o Acquisition of advanced foreign technologies and equipment.
will be stepped up.
The closer military-civilian relationship will pose new
problems for the United States in monitoring Chinese weapons
programs and in implementing the export control system:
o The merger of military and civilian institutes and
factories into specialized combines will further obscure
Chinese progress in the strategic and special mission
areas; so will newly tightened security measures in
This memorandum was produced by the China Division of the Office
of East Asian Analysis in response to a National Security Council
request. Questions and comments are welcome and may be addressed
to the Chief of the China Division
SECRET
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
Chinese research and production facilities and on Chinese
personnel.
o Determining the military or civilian status of end-users
of US and Western technology exports will become far more
difficult.
o if China follows through on its stated preference for
acquiring US technologies, other members of COCOM may
become even more reluctant to agree to further
liberalization of export restrictions.
o The new policies also increase the likelihood of closer
military linkages to joint ventures and similar technology
transfer mechanisms. These types of transactions may
become a more sensitive issue in COCOM deliberations than
the export of articular pieces of equipment and
machinery.
We believe that Beijing will benefit from these changes in
several ways:
o There will be a more systematic ordering of priorities.
This could eliminate some of the wasteful duplication of
past Chinese efforts to acquire technology and equipment
.abroad.
o Although military needs will remain paramount, civilian
industry will also profit from increased. access to
technology developed or acquired for military purposes.
o Increased production of civilian goods by military
industry should also be a plus--for the military in terms
of greater use of idle capacity and increased revenues;
for the civilian economy in terms of larger quantities of
badly needed producer and consumer goods.
The concentration on key industrial and S&T projects implied by
these policy changes may already be beginning to bear fruit.
China's new "Galaxy" super computer was developed by combining
the talents of both military and civilian research organizations
-2-
SECRET
Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
25X1
 Sanitized Copy Approved for Release 2011/06/07: CIA-RDP04T00367R000201410001-5
oecrVL
Sanitized Copy Approved for Release 2011/06/07 : CIA-RDP04T00367R000201410001-5