DJ -

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP63-00084A000100060002-8
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 82
• Document Creation Date: December 12, 2016
• Document Release Date: March 19, 2001
• Sequence Number: 2
• Publication Date: June 27, 1955
• Content Type: HW

.,.tea e,;xL /r7
{d
TL
ta rl.4~ JA~ 6VL1
(aft...
up- tj I q'f 8 6, / 9 s o
DOC Declassification & Release Instructions on File - No referral
to DOC
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A00010006Q!O'8
CFEP DRAFTING GROUP
JEONOMIC DEFENSE POLICY REVIEW
Staff Study No. 5
Draft of June 10, 1955
Economic Significance of China Trade to
United States and ChinTrade Potential
This draft of Staff Study No. 5, "Economic Significance
of China Trade to United States and China Trade Potential", is
transmitted for your use in connection with the work of the CFEP
Drafting Group on Economic Defense Policy Review.
In compliance with the request of the Chairman of the
Drafting Group, the Executive Secretary, EDAC, is providing re-
production and distribution facilities as a service to further
the work of the CFEP Drafting Group.
Irving I. Kramer
Executive Secretary
Distribution:
CFEP DRAFTING GROUP
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
(1)
I
CONCLUSIONS
If the present financial controls (import controls, blocking, etc.)
exercised by the United States toward communist China were lifted, it
is estimated that imports of China products into the United States
could amount to over $60 million. A major segment of this trade would
probably be in hog bristles, with a lesser but fairly significant volume
in tung oil, cashmere and hies,
ally and io.the aggregate. ``
Other imports would be small individu-
(2) China would probably be interested in promoting exports to increase
exchange earnings in general, and to finance purchases in the United
States in particular. While United States importers could be expected
to be especially willing to resme the purchase of hog bristles, the
(3) Assuming that. United States exports to China were permitted in goods
which are now exportable to Eastern Europe, China" could be expected to
o
~~ ~
t U
d St
it
t
d
d ,.4 th
t t
r
n
e
e o
a
w
e
ex
ago u ng e n o years at an annual rate
%?in 0. t
of about $60 million. United States exports to China would probably
consist chiefly of steel mill products; machinery and toolp;, ins
't X-
trading terms.
lines would originate with the Chinese, and the response of United
States exporters would depend upon their ability to secure satisfactory
procurement of most other China products would probably depend pri,mari
upon the sales promotion efforts of the Chinese,
pha ,oeuticale; ferti?.iaera and dyestuffp. LIS'' ?t-"
(4) n etas` for the reourement of Unitetates goods in
- - Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
II
(~) While the United States at one time needed China products, some are
today preempted by the Soviet bloc and the others are replaceable by
substitutes or are available from other sources.
(6) The effect upon the United States economy of potential exports to China
at the level estimated in this study would be of ~inor importance..
While offering an added market and perhaps an-acceptable profit margin
to industrial and commercial firms participating in this trade,
potential exports to China would, even with same expansion, amount to
only a small percentage "of the total United States exports and would
have no discernible effect on the United States econo as a whole.'
(7) United States investments in the form of credits to finance exports to
(Mina might be needed to promote United States exports in coWetition
with other Free World suppliers. However, extended or extensive credit
risks would hardly be assumed by private firms without some form of
C8)
governmental support.
In view of the basic deterrents to Free World-Soviet' bloc trade --
a) the blocts self-sufficiency objectives; b) Free World restrictions
over exports of bloc priority requirements; c) inhibitions to normal
commercial intercourse inherent in relations with the bloc -- the long
term prospects for trade with China cannot be viewed as promising and
would probably not greatly exceed the amount predicted for the next
two years.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
SUMMARY
Assumed Level of Control
This study is based upon the assumption of trade restoration with communist
China at the same level of controls which now govern United States commerce with
Eastern Europe. Specifically, this would mean virtually no restrictions upon
imports into the United States from communist China. In the case of United
States exports to China, it would mean the continuance of an embargo of IL-I and
IL-II goods, and only occasional licensing of IL-In items.
Communist China's Present Trade Pattern
During 1950, 26 percent of China's total trade was with the Soviet bloc
while trade with Free World countries amounted to 71 percent of the total.
Preliminary estimates indicate that of China's total trade during 1951, 75 per-
cent was with the Soviet bloc and 25 percent with Free World countries.
In addition to military equipment, China's imports from Eastern Europe
include equipment for metallurgical, chemical, and machine tool industries;
power generating equipment; machinery; trucks; steel products; and metals.
China also imported raw materials such as petroleum and chemical products and
some essential c ansumer goods from Soviet areas. Exports to Soviet countries
have been mainly oils dins, iron ore and pig iron, antimony and tungsten.
China's} 4corde(mports]from the Free World have been chiefly raw cotton,
crude rubber, fertilizers and other chemicals, pharmaceuticals, iron and steel,
and machinery. Exports to the Free World have been largely foodstuffs, vege-
table oils, and coal. Unrecorded r43from Free World sources have consisted
mainly of steel products,~nd nonferrous metals 1
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
Current Chinese Trading Arrangements-
China's foreign trade is controlled and supervised by The China National
Import Export Corporation and by several additional agencies specializing in
particular products. Private traders participate to a limited degree, but
they are under strict government control. and are used chiefly to develop trans-
actions. The government allocates purchases and sales, establishes and admin-
isters trade terms, and takes over all private transactions for delivery and
settlement after the initial negotiations have been concluded.
Trading terms are customarily severe, often complicated and confusing,
and have been known to discourage the development of trade. There is, however,
some flexibility in trade terms which vary with the urgency of China's import
requirements and with conditions encountered in a particular source country.
Classic payment terms in the case of exports require telegraphic transfer at
the time of exportation. In the case of imports, payment is required 20 days
after discharge of cargo in China. Final acceptance of merchandise for import
and export rests with a Chinese testing bureau.
These terms have been explained by the Chinese as having been necessitated
by the fact that Free World actions with respect to trade and transportation
have developed risks which the Chinese cannot afford to assume.
Barter arrangements are concluded when feasible and trade with Japan is
chiefly on a barter basis. China products are sometimes "dumped" on a
trading partner in the sense that quantities are shipped in excess of a country's
requirements with the result that the goods are then disposed of a third
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
SECRET
country at market-depressing prices. Ip the case of more urgently needed
imports, the Chinese are known to offer considerably more favorable terms.
Shipments ordered via Gdynia of goods urgently needed by China are subject to
payment upon delivery in Gdynia.
Historical U.S-China Trade
Exports from the United States to China during 19118, the last representative
year prior to the communist takeover, reached a figure of $210 million, or about
2 percent of total United States exports to the world. Exports of foods, tobacco
and raw materials (mainly cotton) comprised about 46 percent, while manufactured
and finished goods made up about 64 percent of total United States exports to
China.
Imports into the United States from China during 1948 amounted to $117
million, or almost 2 percent of total United States imports from all countries.
Hog bristles and tung oil accounted for over 40 percent of total imports from
China. Other items in which there were the most substantial imports were hides
and skins, wool and carpets, embroideries, and tungsten.
Total value of U.S. imports from China during 1948 are shown to be up over
1937. however, with higher prices prevailing in 1948, actual imports from China
were probably about equal during these years, if not smaller in 1948. A major
increase occurred in Lung oil, bristles, tungsten, carpets and feathers; while
smaller gains are noted in hair nets, fibers and embroideries. U.S. imports of
eggs, furs and skins, silk and tin dropped off notably. Total U.S. exports to
China in 1948 were almost five times the size of exports in 1937. However, much
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-4-
SECRET
of this larger trade was financed by aid funds which were spent chiefly for
food grains, cotton, machinery,, fertilizers and pretoleum products. Higher
prices for most U.S. exports during 1948 also contributed to the increase.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
Potential U.S. Imports from China
Certain China products can be considered as being available in China for
export to the United States. They may also be regarded as having marketability in
the United States, in most cases by reason of their special characteristics which
have in the past won ready acceptance in the American market, with only nominal
competition from domestic or foreign goods. Items in this class include hog
bristles, cashmere, hair nets, wool, embroideries and lace, and chinaware. Other
items -- raw silk, tung oil, feathers and eggs --may also regain a market in the
United States, but only by overcoming stiff competition and possibly inhibited by
restrictive regulations based on non-economic defense considerations.
There are reasons to believe that in general there may be more compelling
forces to develop United States-China trade, both as to imports and exports, on the
part of the Chinese than by the United States. China's import requirements for
industrial products are well known; and it is reasonable to assume that she will
attempt to procure some of these from the United States. Furthermore, China would
be expected to promote exports to the United States in order to earn exchange for
the procu;rem^ent of urgently needed goods in other countries. With the exception of
d A-~z
tung oil, China products likely to be saleable in the United States cannot be'con-
N
sidered as essential, and would therefore appear in the American market only through
trade promotion. The U.S. interest in this respect is quite likely to be consider-
able less than that of the Chinese.
Somewhat different circumstances exist in the case of hog bristles. This is
the item in which trade is most likely to occur and in the largest volume. However,
it is felt that American consumers can get along without Chinese bristles by using
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-6-
SECRET
European bristles and suitable American synthetics which are being constantly
improved in quality and are growing in popularity. Commodity technicians believe
that the current U.S. consumer preference for Chinese bristles, which is the prin-
cipal reason for assuming the resumption of their procurement, would probably be
dissipated within two years or so if an import ban were continued.
In the case of tung oil, the United States can be expected to have an annual
import requirement for the immediate future. However, in the absence of Chinese
tong oil from the American market, other foreign sources of supply, chiefly
Argentina, and to a lesser. extent Paraguay, have been, and will continue to be,
more than sufficient to supply the American import requirement. In addition, the
President might be asked to exercise his power to seek a Tariff Commission study
which could lead to the establishment of import limitations in the event that
foreign imports were found to interfere with domestic production and the U.S. price-
support program. While tung oil is essential, Chinese tong oil is not needed, and
the status of this item as a potential China export to the United States is somewhat
tenuous.
The balance of the China products are considered to have a potential market in
the United States only because they have characteristics which have promoted their
sale in the past. They are generally not in strong competition with other products.
Their maretability, in the United States would hardly depend upon their essential-
ity, but almost entirely upon promotional efforts. Chinese promotion might be
anticipated in order to provide exchange for the procurement of industrial products
essential to the Chinese economy. Promotional efforts by American importers could
be expected in items like cashmere, hair nets, embroideries, silk, and possibly
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
(million U.S. dollars)
Tung oil .................. 6.6
Raw bristles .............. 40.0
Raw silks ................. 1.35
Embroideries and lace..... 1.0
Cashmere .................. 3.0
Eggs and egg products..... .5
Wool and carpets.......... 1.0
Tungsten.** ... o..* ... 0.0.. 0
Hides, skins and furs..... 2.5
Feathers and down......... 1.0
Other China products...... 5.5
Total 62.45
- ' -
SECRET
carpet wool and pelts. However, unless Chinese trading terms were to be modified
to a form more palatable to the American importers, their interest in promoting
trade in these items would probably not be very.great.
Estimates of annual imports into the United States of specified China products
that might be developed during the next two years are as follows:
Under Chinals program of industrialization, she can be expected to continue
to emphasize the importation of capital machinery and equipment. Inasmuch as a
large portion of capital goods are classified as strategic and will presumably
Potential U.S. Exports to China
continue to be embargoed to China by the Free World, including the United States.,
it can be expected that most of China's'import requirements will be sought in
Soviet countries. There is no reason to believe, A5;f6 that China's present
Q preponderance of trade intercourse with Soviet areas will be substantially
lessened.
Nevertheless, China has found it important, and possibly to a degree desirable,
to procure a significant volume of goods from Free World countries in the present
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
Stage of her intensified industrialization program. With the elimination of the
C- " embargo against t "s m t 'o China ~b~ , # include ir~.th@ _C ~-
Speciial' ,t- (steel mill products, etc.) it is more than likely that Free World
exports to China will increase,, emphasis on procurement in Soviet areas continu-
ing to be in those items subject to the Free World embargoes.
In general, it may be expected that procurement in Free World countries will
continue in the goods now moving to China, such as raw cotton; chemicals and
fertilizers; pharmaceuticals and medicinals; machinery and equipment;. professional
and scientific instruments; electrical goods; and steel products. With the resump-
tion of trade relations with the United States, it is difficult to predict whether
potential purchases from the United States will mean an expansion of China's
imports from Free World areas, or whether such trade would simply displace imports
from Free.World countries
here China has already established supply sources. It
is probable, however, that the level of imports from Free World areas will increase
somewhat, particularly in view of the trade potential in those items now on the
China Special List. It is probable too that some purchases from the United States
will displace imports from other free World countries.
China's procurement efforts in the United States will probably be most active
in those goods in which there are efforts at procurement under existing U. S. total
embargo conditions.,. It is probably in these items that United States supplies might
displace some of the market already established by other Free World areas. Goods in
this category include pharmaceuticals; electrical items; chemical specialties
including dyestuffs; fertilizers; and professional instruments. The sale of United
States steel products (plates, bars, tubes, etc.) would probably supplement
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
-9-
SECRM!
procurement from other countries, although it may be expected that American
blackplate and tinplate secondaries might have a favorable position in the China
market.
In the preparation of this survey., some recognition has been given to such
factors as traditional China procurement interest; current procurement in Free
World markets; the requirements of China's industrialization plan; Chinese consumer
needs,-"and competition from other supplying Free World countries. One of the least
predictable of the elements in the picture is the rigidity of Chinese trading terms
and the capacity of United States exporters to adapt to them.
It is likely that in the conduct of foreign trade under difficult trading
terms., United States manufacturers and traders might not be willing to match the
promotional efforts of competitors in other Free World areas where foreign trade
is of greater national economic importance. Barter and broad-scale bilateral trad-
ing arrangements are at variance with the United States foreign trade pattern. Yet
such arrangements,(upported at least tacitly by the governments of Free World coun-
tries trading with China,Iare the fabric of China's trade relations with the W?
Granting a readiness on the part of American'traders to set aside their presumed
reluctance to participate in such arrangements, their bargaining position vis-a-vis
the Monopolistic and monolithic-China National Import Export Corporation would be
weak relative to that of Western European and Japanese competitors in the absence
of organization, support,, and possibly even programming, at least at the trade
association if not the United States governmental level. Furthermore., China's
procurement of less urgently needed requirements may very often be arranged for in
countries which need China produce or are willing to accept it for future
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
_10-
SECRET
distribution to a third country. This type of arrangement would probably not be
very popular with American traders.
Annual exports from the United States to communist China that might be realized
during the next two-year period are given herewith:
(millions U.S. dollars)
Foods, beverages and tobacco
.5
Animal and vegetable oils & fats
0
Textiles fibers and manufactures
2.0
Paper and products
1.5
Base metals and manufactures
(excl. steel semi-mfrs. & mfrs.)
1.0
Steel semi-manufactures
10.0
Steel manufactures
3.5
Electrical machinery, apparatus &
appliances
3.0
Transport vehicles & equipment
1.0
Machinery (except electrical)
5.0
Chemicals - medicinals & pharmaceuticals 10.0
Chemicals - fertilizers
7.5
Chemicals - dyestuffs
5.0
Chemicals - other
50
Professional
and scientific instruments
4.0
Photographic
and watches
equipment & supplies
1.0
Total
60.0
Significance to U.S. of Potential China Trade
The estimated trade potential with China within the next two years, based upon
the continued embargo of the shipment of the more strategic industrial goods to
that country, cannot per se be regarded as having vital significance to the United
States economy.
From the standpoint of essentiality, there appear to be only three China
products - bristles, tung oil and tungsten - which are needed as raw materials
for United States industries. However, in two of these-bristles and tong oil--
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 11 -
SECRET
substitutes and supplies from other foreign sources have practically offset the
unavailability of these products from China. Tungsten might become available from
China on a more economical basis than from Free World sources. However, in view of
present Soviet bloc preemption of Chinese tungsten, and the questionable wisdom of
restoring a communist area as a major source for this metal, it would probably not
be feasible to count on Chinese tungsten as a likely or completely desirable import.
The potential market for American goods in China at the level indicated irk
this study, or even at a considerably expanded level, does not appear to offer any
significant prospect to the American economy. The omission of China as a trading
partner during the past five years without any noticeable economic effect generally
supports this view. Basic elements of importance to American foreign trade, i.e.,
the need for foreign materials and for foreign markets to help stabilize our own
economy and the economies of Free World countries, are not present in the picture
of potential trade with China.
U.S. Investment Potential in and Significance to Trade With China
The term "investment" is used here to indicate the extension of long term
credits to finance exports of capital goods, and not as outlays by American
nationals to finance industrial development. Investment under the latter concept
would not appear to be a possibility.
Potential exports of United States goods to China during the next two years
can take place in any volume only in the event that exporters can comply with
Chinese trading.terms of a nature found acceptable in other Free World countries.
China will continue to emphasize the procurement of industrial goods and capital
equipment. Although U.S. drugs, dyes, fertilizers, and cotton may figure in her
Approved For Release 2001/08/27 ; CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
SECRET
import procurement to some extent, it is in the field of industrial development
equipment in which China may be expected to seek credits.
'While the extent of credit financing of exports by Free World countries to
China is not known, several of them have government export credit guarantee and
insurance facilities which guarantee credits to exporters for a substantial value
of a transaction up to five years/for capitgoodsA The magnitude of U. S.
exports will depend to an appreciable
degree upon the acceptance by American
exporters of terms which may include the extension of credits, particularly in the
case of competitive goods offered by other Free World countries. Extension of
credits by American exporters to finance exports to Chia could hardly be expected
without government guarantees to match those provided by Free World governments.
Long Range Potential U.S. Trade With and Investment.. in China
Certain elements, which will probably be present in-the international scene
for some time, appear to discourage the development and growth of U.S.-China trade
and the extension of commercial credits to finance such trade. They are (1) the
obvious Soviet world interest in achieving self-sufficiency in economic goods and
a reduction of reliance on commerce with the Free World; (2) the Free World Joint
efforts to continue to deny the exports of strategic goods to the Soviet bloc; and
(3) the Soviet bloc preference for importing economic developmental goods of a
strategic nature.
With emphasis in China upon industrial development and military potential,
state-controlled procurement from foreign sources can be expected to be in hard
goods and raw materials. Potential consumer needs which may be permitted fulfill-
ment will be satisfied mostly from internal production and Soviet bloc sources.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/087 CU RDDP63-00084A000100060002.8
At presefnt, Free World trade with the Soviet bloc has been estimated to amount to
only one-half of one percent of the bloc's total gross national product. In 1953,
Soviet bloc exports to the Free World w pre aboi}t $1.6 billion and imports were.
14.1 / 7. ""C -- - -
$1.4 billion. China's total foreign trade' ith. the bloc is estimated at $1.65
billion and trade with the Free 'Warlyd at $550 million.
There is evidence., however, that production of industrial equipment in Soviet
countries is inadequate to meet China's full import requirements. With the relaxa-
tion of CHINCOM controls to permit the United States and Western Europe to export--
items now permitted for export to Eastern Europe, China could be expected to seek
increased imports from Free World sources. It is likely that while considerably
increased buying of industrial goods from Western countries would take place during
the immediate future, the maximum procurement might not take place until later when
trading principals have had an opportunity to become adjusted to new trading prac-
tices and arrangements. To the extent that the granting of credit might be a factor
in the expansion of exports to China, it is felt that maximum possibilities might,
not be realized within the space of two years, and that there might be room for
additional trade beyond the expiration of this period. Even in the long view,
however, it is difficult to believe that under the existing and foreseeable forces
separating the two worlds, there can be a resumption of a kind of commerce with
China which would greatly exceed the estimates for the immediate-future,
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 14 -
SECRET
CONMJNIST CHINA'S TRADE PATTERN
Since 1950 China has succeeded in increasing its foreign trade and has
concentrated on importing military equipment, capital goods, and industrial
raw material. In 1950, China's total trade was estimated at $1,082 million,
of which $282 million, or 26 percent, was with the Soviet Bloc. Trade with
Free World countries totalled about $800 million or 74 percent of the total.
Preliminary intelligence estimates indicate that China's total trade for
1954 will be $2,200 million, of which $1,650 million, or 75 percent, will
have been with the Soviet Bloc. Trade with the Free World for 1954 is
expected to total $550 million or 25 percent of the total.
Except for military equipment received on a grant basis and Soviet credits
of $300 million for the period 1950-54 China appears to have financed its
imports from the European Bloc countries with its own exports: principally
soy beans, vegetable oils, grains, antimony, coal, iron ore, rolfram--and
pig iron. Some of these exports to Eastern Europe have been diverted or re-
sold to Western countries, in part for the account of European Bloc countries,
In addition to military equipment, China's imports from Eastern Europe include
equipment for metallurgical, chemical and machine tools industries, power
generating equipment, machinery, tracks, steel products, and metals, these
capital goods comprising one-third of the total imports from the Bloc. In
addition China imported raw materials such as petroleum and chemical
products, and essential consumer goods.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 15 -
SECRET
Since 1951 China's trade with Free World countries has been substantially
in balance. It has imported principally raw cotton, crude rubber, ferti-
lizer and other chemicals, iron and steel, and machinery, and has paid for
them mainly with exports of foodstuffs, vegetable oils, and coal.
Of China's recorded imports from the Free World in 1953 (derived from
exporting countries' trade statistics) of $280-million., the values of the
principal commodity groups were as follows: (in millions of dollars)
cotton, 16; rubber, 54; drugs, 40; other chemicals, 55; metals, machinery,
and equipment, 70; miscellaneous, 35. For the first half of 1954 the values
were as follows: cotton, 35; rubber, 17; drugs, 20; other chemicals, 25;
metals, machinery, and equipment, 10; miscellaneous, 30.
It is estimated that China's total recorded trade with the Free World
e dropped from $585 million in 1953 to $550 million in 1914,
althb gh i.na's total trade (including that with the Bloc) will again
reach $2,200 million. Free World exports will have dropped from $280
million to $268 million.
Western Europe's exports in 1954 will hive dropped to $71 million from
$100 million in the previous year. Hong Kong wi hi dropped from $95
million to$68 million, and Ceylon (rubber) from $55 million to $48 million.
On the other hand, Japan wil have risen from $5 million to $15 million,
and Pakistan (cotton) from $4 million to $36 million. The total for all
other areas will have risen from $21 million to $34 million.
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
-16-
SECRET
In addition to China's recorded imports (that is, recorded by Free World
countries as exports to China),, it is estimated that unrecorded imports
totalled $93 million in 1953, of which $65 million (mostly iron and steel)
was from Western Europe by virtue of transshipments via Eastern Earope,
and the remainder largely by smuggling through Macao and Hong Kong.
China's exports outside Eastern Europe, as recorded for 1953 by the Free
World countries concerned, are estimated at $323 million. Exports to
Western-Europe in 1953 amounted to approximately $110 million and consisted
mainly of vegetable oils and oil seeds, egg products, and cereals. Western
Germany ($35 million) and the United Kingdom ($30 million) were the major
markets in this area. Of the remainder, approximately $115 million were
exported to Hong Kong, Malaya and Macao, consisting largely of foodstuffs
and native products for the resident Chinese population in those areas.
Exports to Ceylon ($40 million) consisted largely of rice in exchange for
tubber. It is estimated that China's exports to the Free World w4 l ha
dropped to $282 million in 19511, although a breakdown of this figu , i
not immediately available.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 17 -
SECRET
PAST PATTERN AND SIGNIFICANCE OF U.S. EXPORTS O CHINA
Exports from the United States to China during 1937 amounted to $49.5
millions out of total United States exports of $3.3 billions, or about 1.4
percent. During 1948,9 the last representative year before the communist take-
over of the China mainland, United States exports to China amounted to about
$240 millions out of total exports of '$12.5 billions, or about 1.9 percent.
The Chinese import interest in United States goods in 1948 included com-
modities in all of the principal groups. The more important volume was in
textiles and manufactures, $65.9 millions; machinery and vehicles, $45 millions;
vegetable food products, $37.5 millions and miscellaneous products, $25 millions.
More specifically, principal exports were in the following commodity classifica-
tions raw cotton, $64 millions; grains and preparations, $37 millions; petro-
leum products, $13.9 millions; aircraft and parts, $11.7 millions; tobacco and
products, $8 millions; vehicles and parts, $8.4 millions, steel mill products,
$7.6 millions; electrical machinery and apparatus; $5.6 millions; engines and
turbines, $5 millions and industrial machinery, $4.6 millions.
The following table presents the values of total U.S. exports, and of
principal commodity groups and items, to the world and to China, for the years
1937 and 1948. There are also indicated the percentages which these exports to
China are of total U.S. exports for these years and in these categories.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 18 -
SECRET
U.S. Exports to World and To China, 1937 and 194B
Total Value and By Principal Commodity (coups and Items.,
Together With Percentages Exported to China
(Thousands U.S. Dollars)
Principal To All Countries
% of
To China
% of
Groups & Items
Total U.S. Total U.S.
1937 1918
1937 Exports 1948 Exports
Total U.S. Exports......
3,298,929 12,493,998 ?
49,545
1.4
239,787
1.9
Vegetable Food Products
& Beverages .........
282,601 2,152,592
1,028
37,496
1.7
(ains /3c Preparations
94#143 17014657
153
.2..
37,305
2.2
VegetableProducts,
Inedible.. ..........
209,150 562,106
7,353
3.5
13038
2.3
Rubber & Allied Prod.
32,079 131, 30
479
1.5
4,282
3.3
Tobacco & Mfrs......
134,520 286,961
6,671
4.9
8,410
2.9
Textile & Mfrs........
467.525 1.35 066 .
843
.15
65,946
4.8
Rain. Cotton .......
37 ,040 510,935
584
...2
64,025
12.5
Wood &.Pa er..........
136.264 248,181
4,016
3.0
8,365
3j-
Petro eum Products....
3762239 686,883
5.507
1.4
13.947
2.0--
e s&Mfrs.........
494.602 1 124,631
12276
2.5
12 280
1.1
Steel Mill Products.
88,091 636,910 .
8,79
9.9
7,588
1.2
Machine & Vehicles
838,017 3.678.006
10,582
1.2
45.016
1.2
Electrical Mach. &
Apparatus.........
112,576 491,212 .
1,188
1?0
5,619
1.1
Engines, Turbines
and:Parts.........
15,546 195,774
118
.7
''4,900
2.5
Textile, Sewing &
......
10,960 1.52,166
?141
1,3
5,193
3.4
Industrial Machinery
240,471 380,876
1,874
.78
4,609
1.2
Aircrg't Parts &
Accessories.......
39,404 154,146
3,962
10.0
11,719
7.6
Vehicles & Parts....
412,183 1,272,071
2,829
.7
8,385
-7.0
153,335 777,428
3,8900 2.5
15,258
Miscellaneous Products
111,669 674,860
2,691 2.4
25.416
3.8
Incl. Photo goods,
Scientific equip.,etc.)
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 19
SECRET
While the Chinese communist government, operating through its foreign trade
organ, the China National Import Export Corporation (CNIEC), is the sole
purchaser and seller of imports and exports, private Chinese import and
export houses do exist to develop and consummate transactions on behalf of
CNIEC. The extent to which CNIEC is directly involved in transactions is
not clear. It has been indicated that in exporting the Chinese merchant is
only a middle man, with no control over the shipment after he has made the
sale. Apparently the authorities have reserved the right to switch ship-
ments arbitrarily without notifying the exporter.
Monthly regional quotas are established for purchases and sales, with no
departures permitted from these plans despite the attractiveness of offers.
Firms may operate only within their own region. Chinese trading firms have
complained to their contacts that they are largely in the dark as to the '
types and quantities of purchases and sales which CNIEC will authorise. The
orders they have solicited are submitted to CNIEC in competition with other
merchants and without advance knowledge of the acceptability of the product.
The Chinese government has set up a system of floor prices for principal
export commodities. The rationale behind this action is along these lines:
The terms of trade with the West have been traditionally unfavorable to
China. Predominantly agricultural, China has only vegetable and animal
products for export, whose prices are set on the world market. The prices
of China's imports are less flexible, as competition among industrialists is
more limited. Floor prices are calculated to permit the accumulation of
larger exchange reserves and presumably the earning of greater returns for
agricultural producers.
Western importers are pursuing two courses in dealing with the floor price
problems (1) develop barter; and (2) break down floor prices by bard
Western bargaining. In a barter deal price is set for any transaction
solely by reciprocal demand. The foreign customer makes a definite pro-
posal to the Chinese merchant, indicating what commodities are considered
for exchange and at what prices and conditions. This proposal is then sub-
mitted to the Chinese authorities and either accepted, rejected or modified.
The high floor prices of Chinese exports are compensated for by a surcharge
on the price of imports imposed by the Western supplier. It has been indi-
cated that when the Chinese government became aware that barter was not
permitting increased profits it took measures to restrict barter to slow-
moving export commodities while reserving products in real demand for cash
sales.
The Chinese authorities have also established tie-in sales wherein foreign
buyers of desirable Chinese goods are required to take some of the less
desirable merchandise, with the consequence that even those slow-moving
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
?20
SECRET
items permissible for barter can sometimes be sold in cash,\transactions,
As to the second way of counteracting floor prices, by bard Western bargain-
ingo there had been strong competition among Chinese exporters with
admissions of their part that floor prices were not firm, There have been
later indications, however, that floor prices on items not permitted for
barter are being rigidly maintained,
Despite the generally unfavorable aspects of
oregoing discussion e fact remains that fairly extensive trade with
As of the latter part of 1954 payment terms offered by Chinese firms for
Western Europe-China trade wera as follows, Exports to China are generally
covered for payment by Letters of Guarantee (L G) to be opened by the Bank of
China in Londo=n., undertaking to reimburse the shippers with telegraphic trans-
fer (TT) in pounds sterling 15-20 days after discharge of the cargo at a
designated port in China. In addition the Chinese consignee reserved the
right to assert a claim for full or partial rebate from the shipper within
60 days where the local Chinese commmodity inspection and testing bureau found
the goods unsatisfactory. The decisions of the inspection and testing bureaus
were to be regarded as final, Western traders were resisting these terms.,
stating that they cou d not accept the Chinese bureau's analysis as final.,
that they were bei ng given no chance to discuss or review the inspection
bureaus' findings, but indicating a willingness, however., to be bound by the
findings of any mutually-agreed Western European commodity inspection and
testing organization, It should be noted that the Chinese have been willing
to make exceptions to policies and rules where the need is sufficiently
great. Thus several Western farms have been offered the privilege of receiv-
ing payment when goods of high priority leave the Polish port of Gdynia
en route to China,
Imports from China must be paid for through the establishment of an irrevo-
cable letter of credit, with telegraphic transfer (TT) reimbursement to be
made upon presentation of the shipping documents in China. The certificate
of the local Chinese commodity inspection and testing bureau as to the weight
and quality of the Chinese export product must be accepted as final.
In general, information respecting Chinese trading techniques is sketchy,
U.S, consular officers have hardly been. in a position to be very inquisitive
of foreign businessmen regarding heir Problems of trade with China, The
order to secure x..mum co _ rcial advan e,
the Free World is being conducted by China., totalling over $500 million for
for imports and exports for each of the paw, three years. In both the United
Kingdom and West Germany., responsible businessmen, at least tacitly supported
by their governments., are uniting to exact improved trading terms from the
Chinese. Des ite inheren reser atior~ as to such a rol ., serious nsider-
Lion would se to be in rder of the ssitiiity of th U,So Gove ent'a
joining the ? can basin ss o~uauaas,ty developing a ?ied U.S, ading
policy and p?o am toward 4Nina - and t the Soviet Bloc s a whole in
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
21 -
SECRET
Private merchants were reported to operate partly on their own account and
partly for government organizations., but for purposes of credit standing.,
they should be regarded as private merchants. Information on credit standing
was said to be available from banks authorized to deal in foreign exchange
and from trade associations and federations located in China,
The trading program of the Chinese Government is based upon the requirements
of the five year plan which is sub-divided into annual programs. As to
exports., some are subject to seasonal considerations and sales tend to be
concentrated in the fourth and first quarters. Normal variation in internal
requirements makes it difficult to predict availability for export,, but it is
possible to modify the internal consumption pattern to fit the necessary
export program.
No specific seasonal program for purchases was acknowledged., and it was indi-
cated that normal seasonal requirements generally set the pattern for the
timing of imports.
The major part of Chinata export trade is handled by various specialized
export corporations which are listed below. While the China National Import
Export Corporation does engage in export trade., the major portion is handled
by the export corporations.
The CNIEC is the major organization dealing in imports into China. This
organization maintains branch offices., but there is no fixed distribution. of
business between the central office and branch offices. However., the con-
sumption area of a particular item may oft indicate that the item is to be
procured by the branch office in that area.
The head office of CNIEC in Peking takes a major part in the development of
imports while the domestic branches of the organization. may play a major part
in the export field. CNIEC maintains a Berlin office which is a part of the
head office in Peking., and is represented by the China Resources Company in.
Hong gong on an agency basis. All of the export corporations have offices
in the main port cities except the Minerals Export Corporation,, which
operates from Peking,
List of Chinese Trading Organizations
IInistry of Foreign Trade, Peking
China National Import and Export Corporation,, Peking
Branches in Shanghai; Tientsin; Hankow; Canton;
Ts!ngtao; Dairen and Berlin. Agent in Hong Kong,
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 22
SECRET
China National Cereals, Oils and Fats Export Corp., Peking
China National Native Produce Export Corp., Peking
China National Animal By Products Corp., Peking
China National Silk Corporation, Peking
China National Tea Export Corporation, Peking
China National Foodstuff Corp., Peking
China Ocean Shipping Agency, Peking
China National Sundries Export Corp., Peking
China National Mineral Export Corp., Peking
China Ocean Transportation Company, Peking
China National Cotton, Yarn and Cloth Corp.., Peking
Sales to China have generally caused more difficulties in this respect than
purchases from China. Contracts have been found to be quite flexible and
25X1X4
For exports from China, the certificates of the Bureau o4. Testing and
Inspection should be regarded as final for purposes of original payment. In
the case of imports into China, certificates of reliable manufacturers or of
mutually approved bodies should be acceptable. In both cases, the buyer has
the right to submit claims for discrepancies in quality or weight not arising
from insurable causes. Exceptions to this procedure are also reserved, and
the CNIEC will probably continue to make payment dependent on final inspec-
tion in China in certain cases.
The CNTEC would not agree to arbitration under the rules of the International
Chamber of Commerce, sinde some of its member countries do not have diplomatic
representatives in China. However, the Chinese indicated that they would
study this procedure further. Arbitration should be carried out in the
country of the defendant. In case the named arbitrators could not agree,
the dispute would be referred to an umpire whose decision is final.
As to payments terms, the Chinese pointed to the reasons why they could not 25X1X4
accept terms which would make them the owners of goods on the high seas.
Certain trade and shipping restrictions against China introduce a risk of
Lng to face.
The Chinese recognized the problems and disadvantages arising from the resale
of their goods by Eastern European countries, and while agreeing in principle
with the suggestion that these sales be brought under control, they pointed
out the disadvantage of their holding large sterling balances for purposes of
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
23 -
SECRET
multilateral trade at the present time.
Arrangements with Japan
Originally, China-Japan trade was conducted on a barter basis in which
]etters of credit had to be opened simultaneously in both countries. The
Chinese, however, required that shipments from Japan be inspected in China before
counterpart shipments could be made to Japan.
A later'modification was intended to facilitate the movement and financing
of this trade by allowing a credit by the Bank of China to the Chinese merchant
involved in the transaction, in order to finance the procurement of goods for
export to Japan. The Chinese merchant would collect payment upon delivef'y of
goods on board carrier for shipment to Japan. Payment for imports from Japan
was made in sterling upon arrival; and inspection of goods in China.
This procedure proved to be inadequate and a further revision was made
under. which shipment of Chinese goods to Japan can be arranged based on a
guarantee that shipment by Japan to China of an equivalent value of goods take
place within 6 to 9 months. Payments in sterling are made after receipt. of
imports.
Arrangements have also been concluded for financing these transactions
directly through the London branches of the Bank of Japan and the Bank of China
rather than, as previously necessary, through the London branch of the Hong Kong
and Shanghai Bank.
The excess of Japanese imports over exports, since this trade is character-
ized as primarily barter, is explained by the larger Japanese purchases from
China of rice, soya beans and salt which were paid for in sterling,- and, Japan's
delay in making the counterpart shipments. The Japanese Ministry of Trade and
Industry has stated that efforts are being made to close the gap, but difficulty
has arisen in finding suitable counterpart exports which are.not embargoed.
Arrangements with West Germany
In general, the German exporters of goods to communist China have encoun-
tered about the same hindrances to the con summation of export transactions as
were faced by traders in other Free World countries. The practice by official
Chinese trading agencies of using private trading establishments mainly to
develop the most economical and desirable procurement opportunities for goods
having varying degrees of import priority into China would bring to an
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 24 -
SECRET
abrupt end numerous trade promoting activities. A free Chinese market per-
mitting easy access to market conditions and information by experienced
trading establishments would justify the pursuit of offers only within well
known market requirements.
The regionalization of trading activities in China with the establishment
of quotas for goods and exchange allocations for the various regions has
also served to complicate the sale of German goods to China.
Increasingly difficult payment terms have probably been the prime factor in
retarding the development of West German exports to China. Early in 1952,
a German exporter would receive payment 10 to 15 days after his goods had
been unloaded in a China port, with the Chinese given the right to recover
all or any part of their payment within 30 days if the goods failed to pass
Chinese inspection. In the case of German imports from China., the German
merchant would be required to make full payment before the goods were laden
on vessels in China, and in the event of unsatisfactory merchandise, there
was no recourse. In September 1954, The Chinese lengthened the payment
period in the case of German exports to 20 days after discharge of cargo in
China and set a 60-day period for consignees to make claims. Occasionally,
the payment period was fixed at 15 days. These more severe payment terms
together with the provision by the Chinese that their test would be final
as to acceptability of goods is reported to have caused the withdrawal by
several German traders from the trade and promised to reduce further the
volume of industrial and other German exports to China.
It should be noted that the above payment terms were not inflexible and that
the Chinese allowed more liberal terms in the case of items for which there
is an urgent demand in China. After some indication by the Chinese earlier
in 1954 of dissatisfaction with the routing of German shipments via Gdynia
because of serious delays in moving cargo through that port, there was again
a revival of interest in using this port later in the year. Certain speci-
fied items were being sought from a German exporter for shipment to China
via Gdynia with. payment upon arrival of goods in that port. In the case of
less urgently needed goods, the Chinese were offering to reimburse the German
exporter with T.T. after 15 days upon arrival of goods at a designated China
port. However, shipments would continue to be subject to final inspection
in China.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 25 -
SECRET
The attached material represents an effort (1) to identify the commodities
and commodity groups which could be freely exported from the United States to
China under an assumed degree of relaxation; (2) to evaluate a possible China
procurement interest; and (3) to cite some of the indications of historical and
recent trade patterns.
Identification of Commodities
Under the specified condition of control relaxation over exports to China,
the United States would be free to export (1) the range of gated commodities
now exportable without restriction. by other CHINCOM countries; and (2) the range
of "China Special List" commodities which are rated below IL-III and are now
subject to export embargo to China by all CHINCOM countries. No attempt is made
here to develop a "permissive list" of exports. A selection has been attempted
of some of the specific commodity groups more likely to be sought by the Chinese
(i.e., fertilizers, dyestuffs, medicinals) and to identify broad categories of
merchandise which can be more conveniently considered on such broad basis.
25X1 BOa
China Procurement Interest
The latter is the most dependable source of information respecting the move-
ment of goods in the range of unrated items exportable by CHINCOM countries, al-
though these trade data also include a certain amount of restricted goods shipped
to China through licensing errors, by virtue of exceptions, or for other reasons,
The other sources are useful guides for the determination of China interest in
rated goods which, under a specified degree of control relaxation, might be con-
sidered for shipment to China. However, it is necessary to eliminate highly=
rated items (copper, bearings, etc.) which would continue under embargo under the
U.S. application of the COCOM level of control,
Although the determination of items of import interest to China from Free
World sources can be readily made, it should be noted that many of these items,
although permissible for export by Free World countries, will be sought=in Soviet
countries when availability and trading circumstances warrant such purchases.
This will apply in the case of fertilizers, paper, steel mill products, and some
foodstuffs.
Trade Pattern
The most pertinent guide to the identification.of merchandise moving into China
from the Free World, ex-United States, is found in the export trade statistics
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-26-
SECRET
of these countries. These data are, however, not complete and accurate because
of classification differentials in the trade statistics of the various exporting
nations and because of the tendency of many countries to show combined exports
to China and Hong Kong, and sometimes to China and Macao and Formosa. Hong gong
continues to be a receiving point for a large volume of goods ultimately destined
for China, and the difficulty of estimating the extent of duplication adds to the
margin of error in the compilation of Free World trade with China.
No estimates are attempted here of the illegal movement of U.S. merchandise
to China. The various sources of information showing some of the items moving
to China identifiable as of U.S. origin serve only to indicate to some extent
the China procurement interest in U.S. goods. Although some figures are presented
to indicate the precontrol shipments of U.S. goods to China, these can hardly serve
to indicate more than an identification of goods having once found favor in the
China market, and a level of former trade as a basis for comparisons.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 27 -
SECT
FOODS, BEVERAGES & TOBACCO
I. Control Coverage
Items in this category are not rated and are exportable by Free World
countries, ex-United States, to China without restriction.
II. China Procurement Interest
China is primarily an agricultural country., generally self-sufficient
in basic foodstuffs. Some items (sugar, spices, tobacco., coffee) may
be sought in the West, but are usually available from Far Eastern
countries and Soviet areas. Except for emergency food import require-
ments developing from food deficiencies caused by flood and drouth
damage., China's major import requirements can be expected to be filled
by Far Eastern and Soviet countries.
III. Trade Pattern
Free World exports to China during 1953 amounted to $4.1 millions.
U.S. exports to China during 1948 amounted to $37.5 millions of foods
.and beverages, and $8.4 of tobacco and products.
IT. Potential U.S. Market
Chinese food importing interest as indicated by trade agreements with
Soviet countries, and by trading delegations of Free World areas is
as follows sugar from Poland and Indonesia; coffee and pepper from
Indonesia; rice., food beans and pulses from Burma; edible seaweed from
Japan, and tobacco from India.
Except for possible emergency food requirements, China's food require-
ments in the Western world may be expected to remain small and the; U.S.
participation in the China market very limited.
The extent of imports of the se items from Free World countries,, which
amounted to $4.1 during 1953, can be assumed as a guide for estimating
potential future import requirements. In the absence of unusual famine
conditions in China, it is unlikely that the level of annual imports
during the next two years would greatly surpass the 1953 volume. It
would be over-optimistic to believe that the United States share of
trade in these items wculd exceed $.5 million on an annual basis.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
-28
SECRET
ANIMAL AND VEGETABLE OILS & FATS
I. Export Control Coverage
Nothing in this category is subject to international controls toward
China.
fl. China Procurement Interest
Since there is no Free World restriction against experts of these items.,
it is assumed that recent China imports are representative of her current
import requirements. Import interest during 1953 was indicated chiefly
in coconut Al., and to a lesser extent in marine and fish oils., total
imports reaching about $4.7 millions.
III. Trade Pattern
Free Wor34 exports to China during 1953 were as follows:
Coconut oil
from Malaya $1.9 millions
from Hong Kong .08
free Ceylon 2.428
Marine & fish oil
from Hong Kong .281
TOTAL I.6 9 millions
U. S. exports during 1948 were:?
Animal fats $ 109842
Veg. oils &
fats-edible 698
Veg. oils &
fats-inedible 142 063
TOTAL 3, 3
IV. Potential U. S. Market
Trade agreements show import procurement plans for edible oils from
Indonesia and Czechoslovakia and inedible oils from Indonesia.
Unless the China requirement shou]d swing from coconut oil to fats and
oils available in the United States., it is likely that Far Eastern
countries will continue to meet China's requirements for these items.
There is no reason to believe that China would find it economical and
desirable to shift. from the procurement of relatively inexpensive
vegetable oils in nearby Asian countries to the pa?chase of American
fats and oils which would generally be more costly, China's emphasis
on industrial development would indicate the use of probably limited
U.S. dollar exchange for other types of American products. No procure-
ment of these products is anticipated for export to China during the next
two years.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 29
SECRET
TEXTILES FIBERS AND MANUFACTURES
I. Control Coverage
These are uarated, except for nylon parachute cloth.
II. China Procurement Interest
The principal recent buying interest has been for raw cotton, wool tops,
and cotton and jute manufactures.
Cotton production in China is estimated at about one-third more than pre-
war and has reached 3.2 million bales. The textile industry has expanded,
showing an estimated production of 466,000 metric tons for 1953 and a
target of 550,000 metric ton s for 1957.
Procurement from Free World sources in 1953 of raw cot ton amounted to
about $18.6 millions. Free World exports of wool tops to China during
1953 amounted to $18.8 millions; textile manufactures, $7.9 millions; and
other fibers and manufactures, less than 11 million.
IV. Potential U.S. Market
Pakistan is the chief supplier.of raw cotton. Egypt ranks second. Wool
tops are being obtained from.:the United Kingdom. Current imports of other
textile fibers from Free World sources is nil. Import interest has been
indicated to trade delegations' and in trade agreements as follows- fabrics
from Poland; rayon and wool tops'-from the United Kingdom; synthetic fibers,
cotton textiles and fishing. nets from Japan; textiles from France; and
rayon, cottoV,mod wool yarn and cotton fabrics from Italy.
China is. likely to continue to show an import requirements, particularly for
cotton, for some time to come. Procurement in the United States is possible,
but would depend upon availability of credit, competitive prices, promo-
tional effort and payments arrangements.
Even though it may be expected that substantial import requirements of cotton
will continue in the near future, it is difficult to establish the extent
of China's cotton procurement from Free World sources. A more conservative
view might be that a continued expansion of the textile industry can be
expected, but that the additional cotton requirements for expansion may be
met from expanded local cotton production. Under such circumstances, total
import requirements during the next two years might not exceed the level of
1953 imports which reached $18.6 million. Provided that U.S. cotton can
be offered at prices competitive with cotton from Pakistan and other aDurces9
and trade terms could be met, U.S. cotton imports might reach a substantial
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 30 -
SECRET
TEXTILES FIBERS &
MANUFACTURES (Continued)
portion of China's impart requirements. There is, he revers a single
important impediment factor. China's availability of U.S. exchange
could for some time to come be regarded as seriously limited, and
.official China policy could therefore be expected to emphasize that the
purchase of U.S. goads be in industrial lines, particularly when raw
material can be obtained from Asian countries where some market could be
expected for the products of China's light industries. If U.S. cotton
were imported., the volume would probably not exceed $2 million on an
annual basis for the next two years.
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 31 -
SECRET
PAPER AND PAPER PRODUCTS
I. Control Coverage
Nothing in this category is subject to international controls above the
China List eaeept uncoated dielectric paper which is rated IL III.
China Procurement Interest
Estimated Chinese paper products output during 1953 was 1450 million metric
tons. Target production for 1957 is placed at 600 million metric tons.
Free World imports from China are recorded at $6.3 millions in 19S3 and
are believed to be finer papers such as parchment, drawing, etc.
The level of the substantial recent imports from Free World countries
probably indicative of the extent of China's current interest in paper
imports, since there is no prohibition by Free World oountries,ex-united
States, against shipments to China. Some paper is reported to have been
imported from the Soviet bloc.
in. Trade Pattern
United States exports during 1918 amounted to $6.5 millions which con-
sisted largely of bond paper and cigarette paper. Of China's total
paper products imports during 1948 amounting to about $13 millions, about
$5.2 millions was newsprint and some $4.7 millions cigarette and bond
paper.
Total paper and paper products shipped by the Free World, ex-United States
to China in 1953 is valued at $7.8 millions.
The following import procement interest has been indicated trade agree-
ments: paper (probably newsprint) and paperboard from Finland; paper
(probably newsprint) fro `Po, az d; and cigarette paper from Italy.
Some interest in the procurement of Free World paper and products will
probably continue. The U.S. share of the China market possible in certain
paper specialities would probably not be large. 1tong the factors which
would determine the develo>pme t of any market in China for U.S. items in
this category are availability of credit, competitive prices and quality,
promotional effort and payments arrangements.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 32 _
SECRET
PAPER & PAPER PRODUCTS
(Continued)
There is probably only a limited basis for expecting that imports from
Free World sources in these items in the near future will be greater
than the 1953 level which was $7.8 million. The potential is probably
greatest for paperboard products. However, it caald be expected that
on a long term basis, China will develop her cunt production facilities
for paperboard. During the next two years however, U.S. suppliers could
expect to sell paperboard and paper specialties (particularly cigarette
paper) to China providing China is willing to grant these items an import
priority from the United States equal to other industrial products which
would make a more important contribution to her economic goals. A maxi-
mum of $1.5 million might be considered on an annual basis for the next
two years.
Approved For Release 2004/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 33 -
SECRET
BASE NBTALS & MANUFACTURES
(Excl. Steel Semi-mfrs & Mfrs.)
I. Control Coverage
Items included in this group are copper, nickel, aluminum, lead, zinc
and tin semi-manufactures. Except for two items, these are rated IL-III
and higher. The two items rated below IL-III, suitable for electrifica-
tion of homes and buildings, are (1) flexible metal tubing and (2) single
or multicore electric power cables insulated with paper and metal sheathed.
II. China Procurement Interest
There are indications that China has an import requirement for large quan-
tities of metal products in the IL-III and higher ratings for the expansion
of her electrical energy production program. Heavy import requirements
have been frequently identified for copper cables and mires. Since strictly
accurate characterization is generally not possible in the information
developed about this trade, the extent of China's interest in the procure-
ment of the building materials type of electrical wiring and conduits is
not known.
III. Trade Pattern
Total U.S. exports of all copper manufactures to China during 19148 amounted
to $1.7 millions. The bulk of this trade was in electrical energy producing
and conduction material.
Nonferrous metals shipments to China via Macao from Western countries during
1953 in circumvention of CHINCOM controls is estimated at about 750 tone.
Seaborne shipments of these items from Soviet bloc countries in 1953 are
estimated at about 15,900 tons, 2,300 tons of which is estimated to have
originated in Western countries.
IV. Estimate of Potential U.S. Market in China
China could be expected to buy these permitted exports from Free World
countries in some quantity since they are needed in her building program
and their importation from Free World sources would free her limited
copper supplies for use in the manufacture of copper products which will
continue to be embargoed for shipment to China by those countries. Heavy
overall copper products requirements on Soviet bloc countries would also be
reduced in favor of those items now procureable in the Free World. The
extent of import procurement from all sources and from the United States'
can be only a guess. If annual imports during the next two years from
all Free World areas reach $3 million, the United States share could
conceivably be as much as $1 million.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 CIA-RDP63-00084AO00100060002-8
- 34 -
SECRET
STEEL SEMIMAN UFAC TUPES (STEEL MILL PRODUCTS)
I. Control Coverage
With the exception of alloy and stainless steel products (i.e., electri-
cal sheets, etc.) the bulk of the steel mill products category is rated
in the China Special List, below the IL-Ill level.
II. China Procurement Interest
Steel products are known to have a high procurement priority in China.
Special purchasing emphasis has been on steel sheets and plates, gal-
vanized and mild; blackplate; pipes and tubes including galvanized;
angle bars and tinplate. Chinese production of many of these items
supplies only a small part of requirements. There is evidence of a
considerable import requirement which cannot be satisfied by Soviet bloc
areas and is currently sought in and satisfied to some extent by diver-
sions from Western Europe.
III. Trade Pattern
During 19148, U. S. shipments of steel mill products to China amounted to
slightly more than $7.5 millions. During 19538 Free World shipments to
China are recorded as 110,000 tons valued at $19.3 millions.
Unrecorded transshipments of steel of Western European origin in 1953 via
Soviet bloc countries amounted to about 220,000 tons valued at about $50
millions, and were probably chiefly seaborne. These were largely in cir-
cumvention of the CHINCOM embargo on iron and steel shipments to China
imposed during the latter half of the year. Similar unauthorized trans-
shipments via Macao amounted to about 7,000 tons. Soviet bloc shipments
of steel seaborne amounted to about 95,100 tons. Soviet bloc overland
shipments of stee4are estimated at from 200-300,000 tons and comprised
steel especially ordered for urgent Chinese requirements, as compared with
standard sizes and shapes brought in from Western countries.
IV. Estimate of Potential U.S. Market in China
China's industrialization program will continue to consume important
quantities of steel products for sane time to come,, and internal produc-
tion, although gradually expanding, will supply only a small part of her
requirements. Since most of the carbon steel mill products are at present
not exportable to China from Free World countries,, the potential Chinese
demand is difficult to weigh. Steel purchases have had a high priority
from Soviet coiitries, and the substantial diversions from European coun-
tries indicate an unsatisfied demand and an interest in procurement from
Western countries. An import interest in Free World steel is also indicated
in the reports of trade delegations from France, United Kingdom and Japan.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 35 -
SECRET
STEEL SEMIMANUFACTURES
(STEEL MILL PRODUCTS) Continued
The U.K. delegation reports noted Chinese requirements in t-Laplate., steel
plate and tubes, There is also evidence of British prime tinplate being
smuggled via Hong Kong to China. It is believed that imports from Free
World countries,. including the United States, would reach substantial
proportions with the relaxation of controls, gang the factors which will
determine the development of any U.S. market in China will be the availa-
bility of credit., competitive prices and quality., promotional effort and
payments arrangements.
It is probably in this single category of U.S. induct: al goods that the
largest export potential to China could be considered. In many of these
items., United States suppliers would face stiff competition from other
Free World suppliers. However., the United States could be expected to
recover if not surpass the historical record of exports to China in prime
tinplate' and tinplate and blackplate waste and secondaries in which the
United States was a major historical supplier and in which an interest in
U.S. origin plates of this kind c ontinues to be indicated. It is not un-
reasonable to expect that the extent of procurement of steel products from
Free World countries during 1953 which reached about $70 million may re-
flect the annual import requirements from all Free World sources in the
near future, It is difficult to anticipate a possible annual export of
U.S. steel products to China in excess of $10 million for the next two
years., chiefly in view of extremely aggressive corupetiti.on to be encoun-
tered from steel producers in the United Kingdom., West Germany., Belgium
and Japans and the factor of only a moderate interest generally shown by
U.S. suppliers. While merchant exporters might be expected to show more
interest in seeking markets in China, the expected Chinese special trading
terms and attitudes would generally rule out any except direct sales by
U.S. suppliers.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 36 -
SECRET
STEEL MANUFACTURES
I. Control Coverage
Band tools make up the bulk of this category in which there may be an
import procurement interest. Practically none of the hand tools are
rated internatiaaally.
II. China Procurement Interest
The traditional dependence of the Chinese economy, with its low level of
mechanization and vast manpower resources, upon hand tools is well known.
China's emphasis upon the introduction of improved farm tools to advance
agricultural production will continue to require hand tools in far greater
volume than can be produced locally. There is at present a known demand
in China for imports of all types of hand tools, and exchange is generously
authorized for such imports. Tools in most popular demand are saws, saw
blades, screwdrivers, files, chisels, hammers, and drills.
III. Trade Pattern
U.S. exports of steel manufactures (largely hand tools) during 1948 amounted
to almost $1.8 millions. Exports from Free World countries, ex United States,
during 1953 a oumted to almost $4,4 millions. There is evidence of Chinese
procurement of tools of American origin via diversion through third countries.
IV. Potential U.S. Market
There is reason to believe that China will procure these items in greater
volume from Free World sources during the next two years than during 1953
when imports amounted to about 14.4 million. Many items in this line of
U.S. origin are known to be in demand in China, particularly those which
have become popular in China in the past. In many of these lines, price
competition is a limited factor, with quality, adaptability and reputation
often scoring sales. It could be estimated tlat total imports from Free
World countries may reach $7 million with the U.S. share about one half,
or $3.5 million, on an annual basis.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 37 -
SECRET
ELECTRICAL MACHINERY, APPARATUS & APPLIANCES
I. Control Coverage
Most of the items have important industrial uses, have high strategic
ratings and are not considered potential exports to China. Items which
might be considered for export to China are (1) those rated below IL-III,
comprising the non-specialized types of radio transmitters and receivers
and parts; telecommunication cables and non-specialized telegraphic in-
struments including components; and (2) the unrated items which include
domestic appliances; small lifts and escalators; air conditioners of
limited capacity; fluorescent lighting equipment; miscellaneous domestic
appliances including refrigerators and fans; domestic telephone equipment;
domestic radio receivers and parts including tubes. This latter category
may now be exported to China by Free World countries, ex UnitedStates.
II. China Procurement Interest
The 1953 Chinese investment plans show that telecommunications services
are regarded as a vital element in the industrialization program. Do-
mestic production facilities and manpower for the operation of services
are limited and chief reliance for technical equipment and training has
been on the USSR which has made some available to an unknown extent.
Expansion in this field has, however, been retarded by difficulties in
importing necessary equipment and apparatus.
The principal Chinese procurement interest lies in those important items
which will presumably continue to be embargoed for .shipment to China by
the Free World. It is in this field where China can be expected to grant
high priorities for import; and these requirements will be expected to
come from Soviet countries.
There is evidence that China is currently buying some of the unrated items
as well as those rated below IL-III. It is likely tba t her interest in
imports of these items from the Free World will continue, but will probably
not be greatly expended inasmuch as they are chiefly consumer-type goods.
III. Trade Pattern
U.S. exports to China in 1918 amounted to $5.6 millions. Free World, ex-
United States, sales to China during 1953 are recorded at over $7.3 millions.
(Continued)
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
_3g_
ELECTRICAL MACHINERY, APPARATUS & APPLIANCES (Continued)
Among the factors which will determine the development of any market in
China for U.S. products in this category are availability of credit,,
competition price and quality-rise, promotional efforts, and payments
arrangements.
The extent of importation into ChinNTf, wns in this category from Free
World areas, which amounted to $7.3 ur33nng 19539 will probably not be
greatly exceeded in the near future. It can be expected that some of
these items will be sought in the United States, particularly re'rigeratorse
lighting fixtures,, air conditioners, lifts and domestic appli4ncas.
Annual U.S. exports to China during the next two years would probably not
exceed $3. million.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
39 -
SECRET
TRANSPORT VEHICLES AND EQUIPMT
I. Control Coverage
(a) The heavier and more strategic types of vehicles and equipment
in which Chinese import procurement could be expected are rated
in the IL-III and above range. These include such items as
floating docks, tankers, merchant vessels., ice-breakers, certain
coastal and fishing craft, turbine locomotives and diesel loco-
motives., and front and rear drive automotive vehicles.
(b) Items rated on the China Special List below the IL-III level
include small watercraft (fishing vessels)., motor vehicles
including tractors, trailers and motorcycles and railway rolling
stock of limited size and capacity.
(c) A rather small range of unrated items includes passenger autos
of 6-passenger capacity., motor scooters, tricycles under one-half
ton capacity. These are now exportable by Free World countries,
ex-United States, to China.
II. China Procurement Interest
China's main import interest lies in the higher-rated items. Imports
in this range of goods are believed to be taking place from Soviet bloc
countries,, particularly railway rolling stock, trucks and buses.
China's economic planning includes transportation development which
will continue to require substantial transport equipment. By the end
of 1957, China expects to undertake integrated production of heavy
equipment including locomotives and marine engines; but before that
date, China will have to rely upon imports for most of her require-
ments in transport equipment.
Transport equipment of Western origin which was transshpped via
Soviet ports amounted to 200 tons in 1953. Seaborne imports from
the Soviet bloc countries in 1953 amounted to about 30,500 tans.
Soviet origin transport equipment included auto vehicles in large
numbers. Some of the items rated below IL-III would probably be
sought from Free World areas. The interest in such imports would
probably be limited by exchange priorities for strategic items. Only
a small volume of the unrated items are being purchased from Free World
sources.
III. Trade Pattern
Free World, ex-United States, exports to China during 1953 amounted'to
less than $.5 million. U.S. exports to China during 1918 amounted to
$8.3 millions; but this figure consisted largely of items above the IL-III
category.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
40:
SECRET
TRANSPORT VEHICLES AND EQUIP NT (Continued)
IP. Potential U.S. Market
Some purchases of auto vehicles and parts from the United States could
be expected. Although these items are at present available from the
U.B. and other European countries, there is no indication of any sub-
stantial procurement in these countries,, such limited buying reflect-
ing China's policy of emphasis on industrial goods. A trade agreement
with Italy includes plans for procuring Italian motorscooters and motor
bicycles. Despite the special appeal which might be shown by the
Chinese for the American motor car., it is difficult to assume that there
would be more than a moderate demand. Among the factors which will de-
termine the development of any market in China for U.S. transport items
are availability of credit, competitive prices and quality., promotional
effort and payments arrangements.
As a purely arbitrary figure., related somewhat to the picture of very
limited imports from Fee World countries during 1953, the annual sale
of as much as $1 million of these goods by the United States to China
for the next two years would seem to be extremely optimistic.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-41-
SECRET .':
MAQ3~ (EXCEPT ELECTRICAL)
I. Control Coverage
General categories and their ratings are as follows:
A. Power Generating Machinery
Most of the items in this classification are the heavier and highly
strategic items which are rated IL-III and higher. Rated items below
IL-III include the low strategic value types of welding equipment and
wires, small internal combustion engines, and small power generating
and transmission plants. Unrated items in this category: None.
B. Agricultural Machinery and Implements.
These are generally unrated.
C. Tractors
These are generally unrated in the lower power brackets.
4-wheel, 100 brake h.p, or over are rated IL-I.
D. Office ?Machinery
Generally unrated.
E. Metalworking Machinery
Generally rated, except machine tools designed for making
civilian hardware.
Fe Mining, Construction and Industrial
The more strategic items are, generally rated, with the bulk falling
within IL-I, II & III, and therefore not considered for export to
China. Items below IL-III include certain limited-scope mining
machinery; portable power tools designed for metal working,, mining
and transportation servicing; jacks of 10-ton capacity and over
and materials lifting` equipment (i.e., fork-lift tracks); metal
spraying equipment; small, self-propelled road rollers; small bull-
dozers; small excavators including power shovels; and certain
foundry plants. Many unrated items such as light builder's equip-
ment; low pressure compressors, cement making machinery; concrete
mixers; woodworking machine tools; tile and pottery making machinery,
textile machinery excluding synthetic fiber; soap makingmacl inery,
sugar making machinery and many other food making and'procesoing
types.
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
_42-
SECRET
U. Bearings
All rated.
II. China Procurement Interest
Procurement interest ranges practically over the entire field of
machinery. Among the machinery., most of it rated, believed to be cur-
rently procured in the Soviet areas are mining machinery; trucks; some
tractors; textile machinery (unrated) and agricultural machinery
(unrested).
Free World., ex United States., exports to China during 1953 in the
several categories of machinery are reported as follows;
Power generating- - - - - - - - - - - - - - $1.0 millions
Agricultural- - - - - - - - - - - - - - - - nil
Tractors ------------- - - - - - nil
Office machinery- - - - - - - - - - - - - - 2.3
Metalworking machinery- - - - - - - - - - - 1.3
Mining, construction, indust. - - - - - - - 7.5
Bearings -- - - - - - - - - - - - - - - - - nil
Other ---- - - - - - - - - - - - - - - - 0.6
Total .8 millions
The Chinese are heavily dependent upon imports of capital goods' While
their investment program through 1957 is designed to develop local pro-
duction, in order to achieve ti;.is China will need to import industrial
machinery and transportation equipment, and most of this will have to
come from the Soviet bloc. By the end of 19579 an integrated production
program will probably have.-:been started in such heavy industrial equip-
ment as trucks, tractors., locomotives,, and marine engines. China
appears to be satisfied with her own production of textile machinery
and equipment for the present. In addition to value of Western ship-
ments of machinery items to China in 1953, Western transshipment via
Soviet bloc is estimated at about 79000 tons and procurement in Soviet
bloc countries at about 389100 tons.
Interest in procurement from Western countries is reported by trade
delegations recently visiting China from United Kingdom, France and
Japan.
III. Trade Pattern
(See item II)
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 43
SECRET
IV. Potential U.S. Market
Some demand for United States nonstrategic machinery and equipment
may be expected. Among the factors which will determine the develop-
ment of any market in China for U.S. machinery are availability of
credit, competitive prices and quality, promotional effort and pay-
ments arrangements, An example of the kind of Western competition
likely to be faced by American exporters is a U.K. business offer to
supply China with British textile machinery under a three-year pay-
ment plan with a guarantee that if superiority of British equipment
is not proven payments will be cancelled.
The level of Free World exports to China in these items which reached
$12.8 daring 1953 will probably be exceeded in the immediate future.
It is this line of goods which China needs to advance her industriali-
zation program and which are usually given the highest priority in
procurement from external sources. While no imports of agricultural
tractors and agricultural implements from Free World countries are
indicated during 1953, the procurement of these items from Free World
areas could be expected as the farm collectivization program becomes
more advanced. It may hot be too optimistic to estimate that annual
exports from the United States for the next two years could reach
$5 million.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
44
SECRET
CRWCAIS -- Medicinals & Pharmaceuticals
Control Coverage
None of these items are on international embargo lists and may be
freely exported to China by Free World countries, ex-United States.
II, China Procurement Interest
While procurement interest is indicated in almost the entire range,
special emphasis has been shown in sulphas, antibiotics, vitamins
and anti-malarials. Faced with exchange limitations, China has per-
mitted imports of a large volume of these and other pharmaceutical
items. Large shipments of wonder-drugs have been made through inter-
mediate merchants in Hong Kong. Free World exports to China during
1953 amounted to $35.2 millions. Some imports of Soviet bloc pharma-
ceuticals was made during 1954. The recency of the development of
wonder-drugs renders earlier trade data unrepresentative. United
States shipments to China of medicinals amounted to $3.2 million in
1948.
III. Trade Pattern
(See Item II)
IV. Potential U.S. Market
Future procurement interest in China for substantial quantities has
been indicated by trade missions from U.K., France and Japan. The
heavy concentration of effort in procuring many U.S. pharmaceuticals
for illegal diversion to China through third countries is indicative
of a demand for these items of U.S. origin. It is quite likely that
this interest wilt]. continue, and purchases at some level could be ex-
pected. Among the factors which will determine the development of any
market in China for U.S. products in this category are availability of
credit, competition price and quality-wise, promotional efforts, and
payments arrangements.
It is quite possible that the level of Free World exports of these items
to China, which amounted to $35.2 during 1953, will be exceeded some-
what during the next two years. Although the shipment to China of
these items were unrestricted from Free World areas (ex-United States),
and they were in ample supply, it is indicated from attempts at diver-
sion of U.S.-origin items, particularly wonder drugs, and vitamins,
that there is a demand for U.S.-origin drugs which would probably
replace present procurement from other Free World countries. It would
be reasonable to estimate that annual sales of these items during the
next two years might be as high as $10 million.
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
45 -
SECRET
CHEI[ICAIS - Fertilizers
I. Control Coverage
Free World, ex-United States, may ship freely to China.
He China Procurement Interest
The increase of agricultural output is an integral part of China's
economic planning, with the use of additional fertilizers as one of
the more important factor a in the achievement of this objective. An
increased local production is planned which would see an output of
about 270,000 tons of ammonium sulphate by 1957. Use of fertilizers
beyond this can be expected provided it is available. The best import
availability prospects appear to be North Korea, Japan and Western
countries. If the annual rate of consumption reaches 1 million tons
by 1955, imports from Western countries could reach 200-300,000 tons,
III. Trade Pattern
U.S. exports to China during 1948 amounted to slightly more than
$1 million. Free World exports during 1953 are known to have taken
place in substantial amounts, although the full quantity is not known.
Large shipments are recorded from Hong Kong, originating mostly in
Belgium,, Netherlands and U.K., and amounting to over $8.8 millions.
Imports from USSR have been made as late as first quarter 1954.
China's future import procurement plans include Western countries.
Import interest is reported by trade delegations from United Kingdom.,
France and Japan. A U.K. mission visiting China at the end of 1954
reports final purchase plans for 60,000 tons of ammonium sulphate.
Procurement will also probably be made in USSR. Procurement in the
United States could also be expected provided transactions could be
arranged. Among the factors which will determine the development of
any market in China for U.S. fertilizers will be the availability of
credit, competitive prices and quality, promotional effort and payments
arrangements. Estimated minimum annual sales to China at about 15
million and a maximum of about $7.5 million could probably be anti ci-
pated.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-. 46
SECRET
CHEMICALS - Dyestuffs
I, Control Coverage
Except for a small number of items on the China Special List (rated
below IL-III) most dyestuffs are freely exportable from Free World
producing countries to China,
II, China Procurement Interest
Although China's textile industry (heavy consumer of dyestuffs) has
riot greatly exceeded prewar output, some expansion can be expected.
Domestic production of dyestuffs is inadequate, and procurement in
Free World areas, ex United States, indicates substantial import
requirements. It is probable that this situation will continue for
some time to come. Unrestricted availability in Free World areas
and the established reputation of U. K. and German dyes would indicate
a continued procurement in these and other Free World areas, although
some imports from Soviet areas is indicated,
117. Trade Pattern
China ' s purchases of coal-tar dyestuffs, natural indigo and tanning
extracts during 1953 from Free World areas, ex-United States amounted
to $19.2 millions. United States exports to China during 1918 amounted
to about $4.5 millions.
IV. Potential U.S. Market
Since procurement from Free World, ex united States, sources has been
unrestricted, it can be assumed that China's current purchasing level
is related to her needs and. her ability to finance imports. Considerable
potential procurement in Free World producing areas has been indicated
by trade delegatiaas to China from U0K., France and Japan. It is
probable that a market for some China products in the United States
would result in the procurement of sane U.S. dyestuffs. Among the
factors which will determine the development of any market in China for
U.S. goods in this category are availability of credits, competition
price and quality-wise,, promotional efforts and payments arrangements.
It is possible that imports into China from Free World;.. countries in the
immediate future will not greatly exceed the amount. ? imported during
1953 which was $19.2 million. The United States could hope to break
into this trade to an extent, but probably not much more than U.S. exports
during 1918 which amounted to $4,5 million. Estimated annual U.S. exports
to China during the next two years might reach about $5 million,
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 CIA-RDP63-00084A000100060002-8
- 47 -
SECRET
CHEMICALS - Other
Control Coverage
The important industrial chemicals such as carbon black, chromium
compounds, clycols, clycerine, methyl chemicals, nitric acid, acetic
acid, sulphuric acid are on international embargo lists.
Items which might be considered for export to China are limited to
(p.) items rated below IL-III, which include cresylic acids, paraffin
wax, acme rubber solutions; and (2) items now freely exportable by
Free World producing countries, ex-United States, which are aerated
and include alkalis (sodium hydrosulphite, silicate, carbonate, hydro-
xide, nitrate and bicarbonate) insecticides and fungicides, detergents,
solvents, alcohols and fatty alcohols (i.e., butyl) titanivis dioxide,
zinc oxide; boric acid, paints and materials, and many chemical
specialties,
II. China Procurement Interest
China's industrial planning places a high priority on the production
expansion of certain industrial chemicals such as sulphuric acid,
nitric acid, caustic soda, synthetic ammonia, calcium carbide, and
coal tar chemicals. Achievement will depend upon acquisition of
technical equipment and personnel for which Soviet countries are the
only source. Current procurement interest is known to include many
items which will not be exportable by Free World countries to China.
However, interest is also known far items rated below IL-III, including
paraffin wax, sodium paroxide, and a considerable range of other chemical
items exportable by the Free World, ex-United States, countries to China.
These includes
Stearic acid
Polysterenes
Potassium iodide
Sodium salicylate
Sodium hydrosulphite
Sodium bicarbonate
Sodium bromide
Sodium nitrate
Sodium hydroxide
Lead ascetate
Titanium dioxide
Synthetic resins
Ammonium nitrate
Boric acid
Copper oxide
Formic acid
Wintergreen oil
Exports during 1953 to China fran producing Free World countries,
ex United States, of unrated chemical products, exclusive of dyestuffs,
fertilizers and pharmaceuticals, amounted to about $12.8 millions.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 48 -
SECRET
CHEMICAIS -- Other (Continued)
IV. Potential U.S. Market
Chemicals in lines exportable by Free World producing countries to
China are being sought by the Chinese from many of the Free World
countries. Import interest was ascertained by trade delegations from
U.K., France and Japan. Import transactions are reported to have been
concluded with the British late in 1954. Imports are reported to be
made from USSR, and although items are not identified, it is probable
that emphasis is on items not available from Western countries. Sone
demand for U.S. chemicals (in addition to fertilizers, etc.) can be
expected. Among the factors which will determine the development of any
market in China for U.S. products in this category are availability of
credit, competitive price and quality, promotional effort and payments
arrangements.
Total imports into China from Free World countries during the next two
years may surpass 1953 imports of $12.8 million. It appears to be
reasonable to expect that United States annual exports to China of these
items during the next two years might reach $5 million.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 49 -
SECRET
PROFESSIONAL AND SCIENTIFIC INSTR1JMF TS
I. Control Coverage
The bulk of these items are of a highly strategic character in the upper
range of internationally-rated items. A smaller selection rated on the
China Special List below IL-III includes electrocardiographs; telescopes
and. binoculars; cartograph instruments; low range measuring and testing
instruments; many surveying and optical instruments; and certain elec-
tronic heating instruments. Unrated items in this field are within a
limited range only and include such items as certain X-ray equipment;
law capacity theodolities; and electrical measuring aid testing instru-
ments.
There is evidence of an import interest from Western areas of electrical
measuring instruments., theodolities., hardness testers and medical apparatus.,
including both the internationally-rated and unrated types. Attempts are
being made to procure the strategic types from Free World countries via
third country diversion.
III. Trade Pattern
United States exports of scientific and professional equipment to China
during 1948 amounted to almost $2 millions.
Imports of "instruments", probably mostly of the rated types, in 1953
from Soviet bloc countries, are estimated at about 1,000 tons valued at
about $5 millions. About 100 tons of this amount is estimated to have
been diverted from Western Europe. Recorded imports of unrated types
from Free World countries during 1953 amounted to $9.4 millions. Imports
from Western Germany amounted to about $3.3 millions, including testing
apparatus; geodetic instruments; precision scales; mathematical instru-
ments; measuring and testing instruments; physical and chemical in stru-
men ts; and scientific, optical and precision instruments.
In addition to efforts at diversion of rated goods of Western origin., a
continued interest can be expected by China in the procurement in Free
World areas, including the United States, of these items in the unrated
field. Chinese import interest has recently been reported by trade
delegations from United Kingdom., Japan, Italy, and France. Among
the factors which would determine the development d any market in China
for .United States products of this type are availability of credits,
competitive prices and quality., promotional effort and payments arrange-
ments.
Imports into China from Free World areas will probably be slightly higher
in the immediate future than imports during 1953 which were recorded at
$9.4 million (an incomplete figure). Annual imports from the United
States during the next two years might be expected tq, amount to $4 million.
Approved For Release 2001/08/27 : COA63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-50-
SECRET
PHOTOGRAPHIC EQUIPM N T & SUPPLIES AND WATCHES
I. Control Coverage
Unrated internationally,.except for high speed movie cameras and high
speed, flash, still cameras.
II. China Procurement Interest
Since there is little restriction on availability in Free World countries,
ex-United States, current imports from these sources may be indicative of
China's permitted import requirements.
III. Trade Pattern
Duing 1953, Free World supplied China with watches and clocks valued at
$22.3 million, and photographic goods valued at under $1 million. Watches
were chiefly of Swiss origin, with a substantial amount from Western
Germany. Photographic equipment and supplies, mostly film and paper,
came chiefly from the United Kingdom, Belgium and Western Germany.
United States exports to China in 19148 of all photographic goods amounted
to $1.1 millions.
IV. Potential U.S. Market
China import interest appears to lie chiefly in watches, with Switzerland
and Western Germany well established as suppliers. In photographic goods,
import needs are mainly for film and paper. Chinese import interest in
photo materials were indicated recently to a trade mission from Japan.
A demand for more than a token quantity of U.S. watches is not likely.
U.S. film and paper may have an attraction to the Chinese quality-vise,
but the following factors will determine the development of any U.S. market
in China for these goods: availability of credit, competitive prices,
promotional effort and payments arrangements.
Annual U.S. exports to China of clocks; watches; photographic paper,
equipment and supplies during the next two years could hardly be expected
to exceed $1 million.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 51 -
SECRET
PETROLEUM PRODUCTS
Virtually the entire range of petroleum products are rated and embargoed for
export to China by Free World countriese Principal procurement interest in
China is currently in kerosene, gasoline, diesel fuel and lubricating oils
and greases. None of these items bear a rating below IL-III and therefore
could not be considered for shipment to China under a relaxation permitting
shipments only of items below this level.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 52 -
SECRET
METAL ORES & SCRAP
All items in this classification are rated and subject to embargo
shipments to China by Free World countries. None of these items
bear a rating below IL-III and therefore could not be ocnstdered
for shipment to China under a relaxation of controls which would
permit shipments only of goods rated below this level.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
-53-
SEURET
PAST PATTERN AND SIGNIFICANCE OF U. S. IMPORTS FROM CHINA
Imports into the United States from China during 1937 amounted to
$99.4 million out of total imports into this country of $3 billion, or
3.3 percent. During 1948, a representative post-war and pre-communist
takeover year, United States imports from China were valued at $117.11
million out of total imports of $7 billion, or 1.7 percent.
A small number of Chinese products made up the major part of the
United States imports from China in 1948. Imports of hog bristles
amounting to $22.1 million and tang oil amounting to $26.2 million to-
gether accounted for over 40 percent of total imports from China. Four
additional imports, hides and fur skins valued at $11.6 million, wool
and carpets at $8.4 million, embroideries at $5.2 million and tungsten at
$4.1 million accounted for another 25 percent of the total.
The principal items making up the balance of the United States
imports from China in 1948 were ramie fibers, hair and manufactures, tin,
antimony, eggs, feathers and spices.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-54-
SECRET
U. S. Imports from World and from China, 1937 and 1948,
Total Value and by Principal Commodity Groups and Items,
Together with Percentages Imported from China
(Thousands U. S. Dollars)
Principal
Groups & Items
From All Countries From China
97.0
U.- S.
Value Value Total orts
113 1994$ 1937 1946 1937 19
Total Imports for Cone.-30 009?852 79078,066
Animal prod., edible.. 114,494 295;,188
Sausage casings.....
Eggs, egg yolks and
albumen.... < . O ... O
29373
99,428 1.17,364 3.3 1.
4.9192 1t716 3.7 006
475 2,180 351 91.4 73.9
Animal prod.,inedible: 222,392 393,375 27,138 37,933 12.2 9.6
Hides and skins,raw,
mostly goat & kid.
Furs & fur'mfgr6....-
Kolinski...ee..e.0
Iamb, kid, sheep
& goat......ee..
Bristlesoe.e...ee..e
Feathers.e....e.e.e.
713058 107;762 59514 23500 7e8 2.3
869178 164,480 13,757 9,107 16eo 5.5
1,502 3,12)4 785 1,049 52.3 33.6
28,898 77,888 4,575 3,,850 15.8 4.9
9,955 22,956 6,9737 22,135 67.7 96.4
3,247 7,664 1,064 3,922 32.8 51.2
beverages..eeee..e.. 738,873 L707489
Grains & prepara..
Veg. & prepara....
Oil.seedse.e.....ee
Vege oils &'fats,
edible..........
Fruits &'prepara..
Tea...e.se..e.eo.e
Spices.se.ee.e00..
25-175 609237
63,326 150,691
29,998
47-428
21,366
11,470
19,796
101,784
45-075
30,871
69316 4,569 0.9 0.3
1e
)438 1,078 1.7 1.8
591 313 0.9 0.2
-37'i- 14.5 3.1
3,415 508 11.4 2.6
70 847 0.1 0.8
828 769 3.9 1.7
41? 723 3.6 2.3
Cassia & cassia,
unground 720 1,059 315 592
Vega prod., inedible.
except fibers &
Tung oil.eeo.eee.. 20,1
Veg. dyeing &
tanning mat?ls.
7,828
780,980 2l,872 28,535
27
139 139
43.8
55.9
4.5
- 3?j
90.0
97.1
1.8
5.2
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
iG.7~ ioi?1GO e m s e e o o o e s e e e a*: '414 l w _.`,J e. / vv/ w ,~ e. J "I e_.
7,32 732 ' 10`n9
Cotton, semi-m nuf. a m,,090
Cotton manufacturea. e o ;s 07'D 9'10 y~ z " e1$ +.'
45080
Flax, hemp,, ramie
fibers & mfgrs...... 35,,427 33,840 5,609 6,,121
Handkerchfs, veg....
1.8
18.1
fiber except cote 48791 796 4 39333 5,196 70.0 68.2
Wool, urmianufact1red.. 96,315 307,673 78756 68031 8.1 1.9
Wool, manufactures 24,46 54 82O x`31 29496 3.6 4.5
Carpets & carpeting,
mats, etc.,,wools. 5'591... 20,204 819 28475 1401 12.3
Hair & hair .manuf..... 58589 l01577 28109 28837 37.9 26.8
Silks, rawo..,....,... 1068585 3,50406 5,068 393 4.8 2.6
Silk manufactures..... 11,088 x9393 597 469 5.4 1.9
Wood and papers.. ..ee::e306 469 987 44 390 1934 0:1 0.2
Wood & manufactures... 67.95~9 271 , 0. .0
Metals and manufactures. 280,780 875,9242 72866 10,628 2.8 1.2
Tungsten or?'&'con-.. '`
centrates.,....,.o.. 39260 89716 2,225 49102 70.0 47.1:
Tin bars, blocks,'pigs
etc..o.eoooeeo.eo.mo 1048285 1038982 5,,127 39199 4:9 3.7
Brass & bronze mfrs e e . 643 20a778 118 278 18.4 1.3
Antimor, ore,
metal content......- 2,105 6,652-';''A 201 29037 9.5 30.6
Chemicals..a...ee.e .e.. 102,578 11194112 819 291400 4. 2.2
Firecrackers...,....., 779 2,9049 596, 19809 76.5 88.3
0ther.me.e o.e.e..me 27 .985 19~3g792 39320 0.5 0.3
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 56 -
SECRET
TUNG OIL
I. Chinese Availability
Tang oil (also 1o own as wood oil or China wood oil) production in China was
estimated to have reached 88,000 metric tons in 1952, The production target for
1957 is set at 100,000 metric tons. Production prior to the communist takeover
of China amounted to 105,000 and 115,000 metric tons during 1947 and 1948 re-
spectively.
China placed considerable emphasis upon tong oil exports after World War II9
and it became the most.important single source for foreign exchange, At present,
tung oil is included in China's plan to expand agricultural production for the
purpose of earning foreign exchange.
The present percentage of production used locally as compared with availa-
bility for export is not kna n, but immediately after World War II when domestic
use included temporary uses as a substitute for other short supply materials
(instead of kerosene for lighting and fuel and for soap making) domestic consump-
tion was estimated at about 40 percent of production.
In normal times, prior to the communist takeover, China sent about 70 percent
of her tong oil exports to the United States, with European markets absorbing up
to 20 percent.
in 1948, U.S. production of tung oil amounted to 16.8 million pounds, while
imports in that year reached 133 million pounds, practically all from China. It
should also be noted that during 1953, China in effect "dtmiped" tang oil in the
European market by her practice of forcing the export of tong oil via barter
arrangements. As a consequence, European merchants found themselves holding
excessive quantities which they then offered in world markets, depressing prices
considerably.
II. Trade Pattern
Free World tung oil imports from China during 1953 amounted to about $11
million, with country participation as follows:
Hong Kong - - - - - - $5.8 million
United Kingdom - - - 1.5
Western Germany - - - 1,8
Japan --------
1.3
Australia ------
.3
Switzerland - - - - -
,1
Shipments to Hong Kong were largely re-exported. During 1953, Hong Kong re-
exports to principal destinations were as follows.
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
SECRET
United Kingdom - - - $2.5 million
Japan -------- 104
Australia - - - - - - .7
Canada - - - - - .3
Daring 1937, United States imports from China were 159 million pounds and
during 1948, they were 130 million pounds.
Seaborne shipments from China during 1953 to Soviet bloc countries were
reported at 6.6 million pounds,
III. Potential Market in U.S.
Consumption of tang oil in the United States has varied materially from year
to year. During the early postwar period when supplies were ample and the price
low in relation to linseed oils consumption exceeded 100 million pounds annually,
More recently, competing oils have become available at lower prices, and with the
appearance in increased volume of synthetic resin and rubber emulsion paints, the
use of tong oil is not expected to increase beyond the 50-60 million pound range,
During the current crop year, it is expected that consumption will reach
about 50 million pounds. Domestic production is estimated at 15 million pounds,
a reduction over average annual production by reason of frost damage. Estimated
imports, virtually all from Argentina and Paraguay, will amount to 25 million
pounds. The deficit in consumption requirements will be met by a reduction of
10 million pounds in the 34 million pound stocks held by the Commodity Credit
Corporation.,
It should be noted that tang oil and tong nuts may now be "imported free of
duty. However, the President is now empowered to ask the United States Tariff
Commission to determine whether future imports would interfere with the Department
of Agriculture price-support program or reduce domestic production and therefore
justify import limitations. The Commodity Stabilization Service required as of
May 26, 1955 that the weekly offering of tong oil for sale under competitive bids
be increased from 34 to 35 cars. This change in policy was made in an effort to
stimulate the purchase of surplus stocks for export.
Foreseeable consumption requirements in this country can-be met from domestic
plus about 25 million pounds of imports from foreign-sources. At presents,
Argentina and Paraguay are in a position to supply most of the United States import
requirements. These two countries have recently undertaken to restrict exports of
tong oil and tong nuts in oil equivalent to a total of 24,4 million pounds, The
China oil is therefore not needed.
With the removal of import restrictions on Chinese oil, however, it could
be expected that china would offer for export to the United States a quantity of
30 million pounds annually, valued at about $6.6 million, based on a price of
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
-58-
SHCRET
22 cents per pound. Obviously, such a development might bring about a careful
examination of tung oil imports from the standpoint of our present price-support
program as well as feasibility of continued procurement of import requirements
an a long-term basis. This country might have to consider whether it would be
in the best interest to avoid discouragement of supplies from friendly and more
cooperative areas in favor of a potentially hostile and undependable source.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-59-
SECRET
HOG BRISTLES
I. Chinese Availability
Current annual Chinese bristles production, a by-product of hog production,
is estimated at about 19 million pounds. It is likely that China has the po-
tential to export bristles in a quantity to match previous export records. Total
pre-communist takeover exports from China amounted to 9,8 million pounds worth
$21.4 adllion in 1947 and 10.1 million pounds worth $16.7 million in.1948.
Free World imports of bristles from China during 1953 amounted to 8.1
million pounds worth $33 million. The principal importers of Chinese bristles
were Japan and France. Smaller imports are recorded for Netherlands, Italy,
Belgium, and Switzerland.
A February 1955 issue of an unofficial Hong Kong economic journal reporting
on Chinese production states that only odd-assortment bristles are being offered
in Hong Kong. Bristles in sets of 55 cases containing all assortments are offered
by China directly to overseas export markets bypassing Hong Kong.
Prior to the U.S. prohibition against the importation of Chinese bristles
over 80 percent of bristles imports were from China. The largest quantity of
Chinese bristles imported into the United States was 7.1 million pounds imported
in 1948. In 1950, when the price advanced, U.S. imports amounted to 2.8 million
pounds worth $27.4 million. Treasury Department initially excepted bristles from
the embargo on imports from China adopted December 1950, at the special request
of the Department of Defense, but has banned licensing of bristle imports from
China since February 1952.
United States Imports of Chinese bristles in recent years were as follows in
million pounds and million dollars=
Quantity
Value
1937
3.7
6.7
1948
7.1
22e1
1950
2.8
27.4
1951
1.3
13.3
1952
3* 3
17.2
Shipments of Chinese bristles to Soviet bloc
but the volume is not known.
III. Potential Market in U.S.
been reported;
Bristles are used chiefly in the manufacture of brushes of all kinds. The
American brush industry has indicated an overwhelming preference for Chinese
bristles which were in the past available in uniform dressing and in a wide range
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
-600
SECRET
of assortments The industry insists further that bristles from non-Chinese
sources are, generally less satisfactory, lacking the desirable characteristics
found in the Chinese bristles.
Stocks of Chinese bristles held by U.S. industr7p acquired prior to the em-
bargos are practically exhausted. Although the use of nylon as substitute ma-
terial for brush making has become widespread, undoubtedly encouraged by the
prohibition against Chinese bristles, and the use of paint spraying equipment has
become populars a substantial portion of the market continues to prefer bristle
brushes of acceptable quality even at a price differentiae of three to one in
favor of nylon brushes.
While the resistance by the trade to the substitution of nylon may not be
warranted on technical grounds, the fact remains that preference has been de-
veloped for good bristle brushes and there is a strong likelihood that Chinese
hog bristles would again find favor in the American markets probably in sub-
stantial volumes This estimate is buttressed by the fact that foreign brushes
manufactured of Chinese bristles were building up substantial markets in the U.S.
since our bristle embargo to such a point that the Treasury Departments after
strong American industry pressures finally imposed an embargo on the Vmportation
of all brushes made abroad of Chinese bristles.
The Lbited States normally imports about 6.5million pounds of hog bristles
annually valued at about $21 million, Of this total, China formerly supplied
about 85 percent or 5.5 million pounds valued at $16.5 million.
There might prove to be a demand in the thited.States for about 8 million
pounds of Chinese hog bristles even at approximately $5 per pound for at least
two years. At the end of this period., inventories would have been replenished
and the demand would probably decline to about 6.5 minim pounds with a corre-
sponding price decrease.
It should be pointed out that if Chinese bristles were admitted into the
United States, it is felt that the current program of conversion to synthetics
would probably be abandoned and that this might have serious effects in the event
of a later emergency. It is held that if Chinese bristles are kept off.the
American market for another years or preferably twos the acceptance of synthetics
which are being constantly improved would be so general that Chinese bristles
would not be a major factor as a required industrial product.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8 .
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-61-
SECR'E"T
RAW SILK
I. Chinese Availability
Raw silk production in- Chita since World War II has been about one-third of
prewar production. Output during 1953 amounted to about 69,500 bales (one bale
equals 133-1/3 lbs.), and production plans are for an annual yield of about
82,000 bales through 1957. China is reported to have the capacity to increase
production substantially providing internal and export requirements, which were
originally reduced by the availability and preference for synthetic fibers, may
again be revived. Requirements in Soviet bloc countries are reported to have
declined, with the result that China has turned her attention toward the greater
domestic utilisation of this product as fabrics and clothing.
II. Trade Pattern
Japan had been the principal supplier of silk to the united States when the
silk trade flourished, while Chinese silk generally went to European countries.
U.S. Imports during 1937 were valued at $5 million or about 5 percent of U.S.
imports, and in 1948 they amounted to only $.4 million or 2.6 percent of total
U.S. silk imports.
During 1953, Free World imports of raw silk from China was recorded at about
$13 million, with the bulk moving to France and Switzerland. Soviet bloc countries
are reported to have been customers during 1952 for most of China's silk exports.,
taking about 11,000 bales out of total China exports of 14,500 bales. Soviet
bloc requirements during 1953 are reported to have been considerably reduced.
It is difficult to foresee a substantial market for Chinese silk imports
into the United States. This product never counted heavily in imports from China
during the days when silk imports were substantial. Now that synthetics have
generally replaced silk consumption, the probably limited U.S. requirements would
not indicate very important demands for China silk in view of availability from
another source and the likelihood that importers would be faced with unfavorable
trading terms. In addition, China continues to demand a high price for raw silk
in world markets.
It should be noted that, independent of consumer requirements., the`United
States did provide an exception to its December 1950 ban on the importation of
Chinese goods to permit imports of silk waste for the strategic stockpile. In
1951, such imports totalled 387,000 lbs. valued at $225,000; in 1952 they totalled
295,000 lbs valued at $315,000. Licensing was suspended in 1952, and no imports
were received thereafter. It is possible that strategic requirements for this
product may develop again.
China never was a major supplier of cultivated raw silk to the United States.
Because of superior quality, packaging, and grading, the Japanese product is
SECRET
Approved For Release 2001/08/27 CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-62-
SECRET
preferred. There would have to be a very large price differential in favor of
Chinese silk to attract much business. It is difficult to see imports exceeding
100,000 lbs, annually valued at about $400,000.
Tussah silk is currently being used extensively because of style trends in
apparel fabrics. How long this demand will continue is uncertain, but a decline
is more probable than a further increase.
China is the world's leading source of tussah silk and if the style trend
mentioned continues, China imports could amount to about 50,000 lbs, a year or
a volume of about $200,000.
China is also the largest producer of silk waste and noils. These are also
in current demand, along with tussah silk, in blends for apparel fabrics. Silk
noils and waste are a stockpile item, but further additions to the stockpile are
not likely.
The foreseeable market for Chinese noils and waste might be 750,000 lbs.
annually valued at about $1 per pound.
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 63 -
SECRET
ElIB1 IDERIES AND LACES
I. Chinese Availability
Embroideries and lace production has in the past been a significant
item in the economically important field of handicraft industries. In
an economy generally over-populated and unmechanized, there was ample
room for the development of cottage industries which yielded products for
the export market and provided a livelihood for millions of persons.
There is a paucity of information on the present status of handicraft
production, and with emphasis on industrialization and collectivization,
and the discouragement of profit making, it would appear that cottage
industries would retrogress, particularly in production for export.
There is, however, an official recognition by the present regime of the
economic importance of handicraft production, not alone for domestic needs
but for export as well. This is indicated by the organization of coopera-
tives in order to eliminate private enterprise in this field; and in their
programs for training in various kinds of art design for products to be sold
in domestic and foreign markets; and in government actions providing credits,
improving standards and promoting sales.
II. Trade Pattern
China's total exports of embroideries and laces and exports to the
United States prior to the communist takeover are shown below in millions
of U. S. dollars:
Total
To U.S.
1937
11.9
7.2
1938
7.8
4.8
1947
2.0
.8
1948
2.4
1.4
The Japanese occupation and World War II disrupted production, and only
slight recovery was indicated by 1948.
United States statistics show imports from China of these items in
1948 amounted to $6 million. The larger amount reported in U.S. statistics
as compared with exports shown by Chinese reports may result from the
former reflecting imports via third countries, particularly Hong Kong.
III. Potential Market in U. S.
As in the case of other Chinese hand-made items, such as wool carpets,
Chinese embroideries and laces could probably again be marketed in the'
United States providing they retain the peculiar qualities of pre-communist
production. China could be expected to offer this type of merchandise for
sale in the United States as an exchange earner. United States imports
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 64 -
SECRET
will also depend upon the adaptability of U. S. importers to more difficult
Chinese trading terms.
It should be noted that United States imports, of embroideries from pre-
communist China were often on the basis of original fabrics sent to China
by U. S. embroideries merchants where they were subjected to embroidering,
appliqueing and other hand detailing. It is not likely that this procedure
would again be developed under the present communist regime. Some handker-
chief business might develop with China and in addition there might also be
some trade in embroideries of completely native origin. Such imports from
China on an annual basis during the next two years could readily exceed $1
million, provided promotional efforts were forthcoming and trading terms
were not too difficult.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
65
SECRET
CASHX=
I. Chinese Availability
Cashmere wool, as distinguished from sheepst wool, also produced in
China, is the fine, soft., silky hair of the Cashmere goat raised on the
Himalaya slopes of Asia and is obtained by combing the animal instead of
shearing. The reputedly finest cashmere is therefore produced in Z.bet,
China and Outer Mongolia (USSR). India is also a producer of a somewhat
comparable cashmere. Iranian cashmere is coarse and generally not competi-
tive with the Himalaya cashmere.
Mere are no data on the current or recent cashmere production in
China, nor is this item mentioned in communist Chinas official plans for
agricultural production as related to financing necessary imports. However,
existing data show considerable exports of cashmere to Japan and demand for
Chinese cashmere in the United Kingdom and Austria. Also, during 1950,
just prior to the effect of the U'. S. embargo against imports from China,
Chinese cashmere imports came into the United States in significant volume.
Chinese cashmere has traditionally been very popular among U. S. manu-
facturers of sweaters and scarfs, and currently while Chinese raw cashmere
is not procurable, there is an up-surge of imports of cashmere manufactures
from Japan, Austria and United Kingdom, which are made from Chinese cashmere.
It is reasonable to expect that with the availability of some U.S. products
for export to China, the communist Chinese would be able and willing to
export cashmere to the United States in order to finance the purchase of
essential U. S. products.
II. Trade Pattern
United States imports of Chinese cashmere daring the period prior to
the effect of the embargo on Chinese imports are as follows,
1948 8979571 pounds
1949 190639833
1950 2,0199395
Free World import data for 1953 do not generally show trade in cashmere
separately, but include it with groups of similar materials. Japan is
known to have imported 1.1 million pounds valued, at $3.1 million during
1953. In addition, offers have recently been reported in the Hong Kong
market for sales to the United Kingdom.
III. Potential Market in U. S.
It is reasonable to anticipate a potential market for this product in
the United States in the event the embargo is lifted. Although the volume
may not be as significant as in some of the other desirable China products,
SECT
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 66 -
it could, however, be considerable. It is even not unlikely that the United
States could become the principal market for Chinese cashmere since
cashmere manufactures are largely luxury items which have an established
appeal in the American market. Anrnal imports of cashmere from China during
the next two years could exceed $3 million.
.Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-67-
SECRET
H3GS AND MG PKIDUCTS
1.
Chinese Availability
China's plan for expanding agricultural production as a means of
financing necessary imports from the Free World as well as from the Bloc
includes a target for 1957 for the production of 712,000 metric tons-of
eggs. Production during 1953 were estimated at 658,000 metric tone.' The
Chinese communist press reports that during 1953, about 7 percent of
domestic egg production was exported. Eggs have been a 'traditional China
export to Western countries; and it is quite probable that China will con-
tinue to place emphasis upon both increased production and a greater
diversion of production for export.
Chinese eggs and egg prodacte exports comprise the following
gories: frozen whole eggs; frozen.. albumen and yolks, separated; o e
g powder; dried albumen and,. spry egg yolk; salted boracic liquid yolk,
and salted benzoate liquid yolk. The first four categories 'are packed for
export in sealed tins and the: latter two classifications `are`-packed' for
export in wooden barrels.
Authorities have recently established export standards for the various
egg products. Future plans for expanded egg production include the'develop-
ment of modern chicken farms to supplement the traditional production on a 11 1 11 ,, -1 1.
small scale in practically every country household.
II. Trade Patern
Eggs and egg products imported,by Free World countries from China
during 1953 amounted to $30.3 million, or about 7.2 percent of total Free
World imports from China. Country:-participation was as follows:
United Kingdom - - - - - - - - $11.1
Hong Kong - - - - - - - - - -- 9.4
Western Germany--------" 4
France - ---- ------ .2
Italy .6
United States imports during 1937 amounted to almost $2.2 million.
During 1948, China egg exports, not fully recovered from war conditions,
were lower than pre World War-II, and imports into the United States
amounted only to about $300,000? Unknown quantities were shipped to the
USSR during 1953 via rail.
III. Potential Market in U. S.
Trading arrangements concluded recently by China with foreign trading
delegations indicate that exports will be available to Italy, Burma, United
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 68
Kingdom, Japan and France. Some demand in Soviet countries is being met, a
West German merchant reporting that egg products would not become available
until the end of 1954 due to heavy deliveries to the Soviet bloc.
Chinese egg products were once salable in the United States to .
bakeries, restaurants and food processors, chiefly on the basis of the price
factor. Presumably, if prices are attractive and U. S. domestic production
does not reach surplus proportions (the U. S. Government has not purchased
surplus eggs under the price support program since 1950), American industrial
and institutional users might again find it advantageous to buy Chinese eggs.
U. S. annual imports from China during the next two years could not
be expected in any great volume, probably not in excess of $,5 million.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
69
SECRET
WOOL AND CARPETS
I. Chinese Availability
China has traditionally been and continues to be an important wool producers
Output in 1954 has been variously reported at 77.9 million and 115 million pounds.
About 'A percent of wool production is carpet wool which possesses the following
characteristics: ivory-white color; rich in lustre; highly elastic; very light,
soft and pliable; and long fibers ranging from 4 to 5 inches in length.
The production of woolen carpets in China has for a long time been an
important industry. In addition to the availability of particularly suitable
wool for carpet making, some of the other characteristics of Chinese carpet
making are weaving by hand (a hand made carpet, properly made, can last more
than 60 years); their beautiful designs which include classical oriental and
Chinese art, landscapes, nature subjects, rich and colorful national designs and
other subjects; and an effective blending of colors. Present production is re-
ported to emphasize the Tunhuang mural type which reproduces popular national
designs.
Chinese official plans for wool and carpet production are not known. It is
noted, however, that estimated production of wool has increased in 1954 over 1952,
and that the five-year plan includes increased production through 1957.
II. Trade Pattern
China's current exports of wool and wool carpets cannot be fully ascertained.
Only all shipaents are recorded to tree European areas. Trade arrangemeste with
Free World countries do not name these items as potential China exports,,.; Wool is
reported to be included as an item of China export to USSR in the 1953 Sino-USSR
trade agreement, and large quantities of wool are reported tobe moving by rail
from China to ,~he USSR, No carpet trade is indicated.
Total Chinese wool exports in 1948 amounted to 11 million, practically all
shipped to the thited States. Prior to World War II, in 1937, total wool exports
amounted to $5.7 million with $3.9 exported to the tlhited States. U.S., statistics
show imports of wool from China in 1948 valued at $5 million. Total wool carpet
and rugs exported by China in 1948 were valued at %L-4 million with $1.3 shipped
to the united States. U.S. trade statistics show imports from Ching of. these items
in 1948 valued at $2.5 millions
III. Potential Market in U.S.
Chinese wool for carpet making and Chinese carpets have in the past! found a
ready market in the United States in a fairly important volume. This trade has
its origin after World War I when Persian and Turkish rugs were in short supply.
At one times wool imports were admitted into the United States subject to a
refund of tariff provided the wool was used for making floor coverings.
Approved For Release 2001/08/27: CIA-RDP63-00084A000100060002-8 ,
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-70-
SECRET
There is reason to feel that Chinese carpet woos. and some carpets would
again find a market in the United States provided all artificial barriers could
be overcome. The reputation of the Chinese carpet for its artistic designs and
for Chinese carpet wool as a superior carpet material would undoubtedly help to
create some demand in the United States,
Artificial obstacles to a resumption of this trade are unknown factors. It
cannot be predicted, for example, whether American importers would be able to meet
Chinese trading terms, nor is it possible to predict what efforts the Chinese
would make to redevelop the U.S. market.
There are, however, additional factors. Wool as a carpet fiber has declined
greatly in importance in the United States, Moreover, in recent years, pur-
chases of carpet wool have tended to shift to Argentina, India, Pakistan, and
other areas. It is felt that in order to compete with other U.S. suppliers,
China carpet wool would have to be offered at a lower price. Even if a market
could be developed, it would appear that annual U.S. imports from China of $1
million for the next two years would be the maximum, It is expected that
Chinese rugs would not be imported in anything except nominal quantities.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
-71-
SECRET
TCJMST5N
I. Chinese Availability
China is a major producer of tungsten. Except for a small quantity
used locally, the bulk of her production is earmarked for export. Produc-
tion reached 15,000 metric tons (concentrates, 65% WO) during 1952; and
the produc ,lion target for 1957 under the 5 -year plan Is 20,000 metric tons.
Increased production, however, will depend upon the procurement of mining
machinery and equipment from, Soviet areas.
II. Trade Pattern
United States imports from China in 1948 amounted to $8.7 millions
which was about 47 percent of total imports from all sources. Except for
a few hundred tons used locally, China's production is currently allocated
for export to the USSR and Soviet bloc countries under trade agreements
reached with these areas. Thus, although there was an exception from the
U. S. import ban on Chinese'goods in 1951 and 1952, tungsten imports were
negligible, amounting to 18,000 lbs. in 1951 valued at $41,000, and 42,000
lbs. in 1952, valued at $170,000.
III. Potential Market in U. S.
The United States Government has included tungsten in its stockpile
program. Inventory as of the end of 1954 stood at about 80 percent of
the long term objective.
The United States production of tungsten, gradually expanded in recent
years, reached a total of 6,214 short tons in 1951. Imports for consumption
in that year amounted to 3,188 short tons. Total availability in the
United States was therefore 9,402 short tons in 1951 as against consumption
requirements of almost 12,000 short tons. Known world production daring
1951 was estimated at about 50,000 short tons to which China contributed
15,800 short tons, or about 31 percent of total world production.
Reliance by the United States upon imports for a considerable portion
of consumption requirements and the fact that China is a major producer
accounting for ,]most one-third of world production suggests the possibility
of renewed U. S. procurement interest in Chinese tungsten. However, China
availability is particularly uncertain in view of her commitments to the
USSR and Soviet bloc countries. In addition, China's trading terms, in the
event she were to offer tungsten for export to the United States, could be
expected to discourage procurement by U. S. importers. This factor might,
however, not be an obstacle to imports in the event purchases were to be
considered by the U. S. Government for stockpile purposes.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
-72-
SECRET
Other important factors bearing on the national interest of the United
States should also be considered in evaluating the potential procurement
of tungsten from China.
After China's tungsten had become unavailable to the Free World
countries, other sources of this metal have been developed and expanded.
If China decided to make this metal available to the Free World, it would
probably be offered at prices under the world market. If this occurred,
it could have the effect of driving many tungsten enterprises in the Free
World out of business. It should be recalled that the Chinese have developed
such a situation in the past and virtually controlled the world sale of
tungsten.
Thus, the United States might have to consider whether her best
national interest dictated the admission of Chinese tungsten imports which
might have the effect of again curtailing Free World production and
increasing our dependence for this important metal upon an unpredictable
source. Because of this factor and the present Chinese policy of selling
tungsten exclusively to the Soviet areas, no potential U. S. procurement
estimate is considered feasible.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
rya -
SECRET
HIDES, SKINS and FURS
Introduction
There are two main types of hides and skins covered in this review.
one which. is primarily used in the production of leather and the other
chiefly for fur purposes. Both of these types are then subdivided into sub-
groups, the first covering those from domesticated animals and the other
from wild animals. For purpose of presentation the type of hides and skins
used for leather will be referred to as "Hides and Skins" while the varieties
for furs will-be hereafter referred to as "Pelts".
I. Chinese Availability and Trade Pattern
There has been a sharp drop in the number of domesticated animals
in China due to two important factors., the first being urgent need for addi-
tional food and the second the Communistic activity in eliminating large
land and flock owners. As a result, availability of hides and skins from
domesticated animals is currently sharply below that prevailing in 1948. In
1948s U. S. imports of these types from China totaled $2.5 million and con-
sisted chiefly of goat., kid, and deer skins and Indian water buffalo hides.
For the same reasons outlined above, pelts available from
domesticated animals are now in much lower supply, than prevailed during 1948.
ibis covers primarily goat., k d , sh ep and l a m b skins. L i . t t l i of ation
is available regarding availability of types from wild animals but partial
data indicating the volume ofexports in recent years from this area would
show that shipments have been at a very substantially lower scale. There
is nothing to indicate that supplies of pelts from either the domesticated
or wild animals will be any greater in the immediate future than they have
been in the immediate past.
II. Potential Market in U. S.
Leather Hides and Skins
There has been a decline in recent years of most of the types of
hides and skins we formerly imported from China. This, combined with the
fact that potential supplies in the country of origin are also reduced,
would indicate a potential volume must smaller than that which prevailed
when trade channels were open. It is estimated that the annual volume under
existing supply and demand conditions would decline from $2.5 million in
1948 to about a half million dollars and that this trade would consist
chiefly of goat and kid skins and water buffalo hides. A small volume of
deer skins would also be included.
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
74
SECRET
b. Pelts
there has been a sharp decline since 1948 in the fur business in
the United States. As a result of this drop, imports currently have de-
clined by 70 percent frcmn that rate which prevailed formerly. Added to this
fact is the reduced supply of domesticated livestock which furnished a sub-
stantial portion of the pelts purchased from China are also down considerab
indicating less availability. Therefore,q the bulk of the trade in the
future would consist primarily of pelts from wild animals, principally
kolinsky, weasel, and marmot. It is estimated that this trade which had an
annual value of $9.7 million in 1918 would have a current yearly value of
$2 million.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
- 75 -
SECRET
FEAT3EI AND DOWN
I. Chinese Availability
No specific data are available respecting current production of feathers
in China, or China's plans to use this by-product as an earner of foreign
exchange. An examination of existing data on recent trade with Free World
countries indicates that feathers and down exports contribute substantially
to China's foreign exchange potential. Imports of feathers and down by Free
World countries daring 1953 amounted to 6.9 million pounds worth about $4.5
million. According to China's trade statistics, pre-communist exports to
all destinations amounted to U.S million pounds worth $2.7 million in 1937
and 7.2 million pounds worth $1.1 during 1948.
Early 1955 reports on the Hong Kong market in Chinese feathers (During
1954, large quantities of Chinese feathers were shipped to Hong Kong for
reexport to European countries) indicated that heavy purchases by European
buyers and supply difficulties caused feathers prices to register sharp
rises. New stocks of certain types were not available, and exporters had to
approach speculators for supplies en demands from Germany persisted. Grey
duck feathers were in heavy demand from England and Germarpr, but supplies
shortage drove the price too high to complete transactions.
II. Trade Pattern
During 1953, imports by certain Free World countries from China were
as follows:
Million lbs.
Million $
West Germarq
3.6
$3.3
Hong Kong
2.9
.8
Switzerland
.3
.3
Japan, Italy and France also imported Chinese feathers, but in nominal
quantities.
Hong Kong continued to play an important role as a transshipment point
for Chinese feathers and down during 1954, importing 4.3 million pounds
valued at $2.2 million. During this period, Hong Kong imports of feathers
from China amounted to almost two-thirds of total Free World imports. Hong
Kong's exports of feathers during this period were principally to Western
Germany, with smaller amounts going to Norway and the United Kingdom.
United States imports from China before the communist take-over anwn d
to 3 million pounds valued at $1.1 in 1937 and 7.9 million pounds valued at
$3.9 in 1948?
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 76 -
An exception was made to the general ban on imports of Chinese goods
in December 1950 to permit the importation of feathers and down to meet
the requirements of the U. S. strategic stockpile. General imports-of these
products were 14.6 million lbs. in 1951 and 3.6 million lbs, in 1952: valued
at $7.0 million and $5.6 million respectively. Licensing was suspended in
1952, and 1953 importations against residual licenses amounted to 371,000
lbs valued at $300,000.
It is possible, in the absence of a U. S. import ban, that if`there
were to be a resumption of procurement interest in the United States,
Chinese availability might not be sufficient to supply a very large U.S.
requirement in view of the very active interest currently being shown in
this product by European buyers. Unless China's availability were to be-
come considerably greater, which cannot be expected within ashort time,
Chinese feathers might tend to be priced out of the consumers market, par-
ticularly in the light of the availability of substitute products.
Requirements for U. S. strategic needs might revive, however.
Daring the last few years foam rubber and other items have taken an
increasing share of the pillow and upholstery market from feathers and down.
So mach so, that some of the U.S. feather processors have gone out of busi-
ness and this country has been exporting feathers.
The situation is so confused that it is very difficult to guess'at
the potential U. S. market. If Chinese prices were about $1 per lbs.,
annual exports to this country might reach 1 million pound during the next
two years.
Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
 Approved For Release 2001/08/27 : CIA-RDP63-00084AO00100060002-8
- 77 -
SECRET
OTHER CHINA PRODUCTS
Separate surveys have been undertaken in the case of ten specific
China products selected principally on the basis of their important posi-
tion historically as pre-communist China exports to the United States. In
addition, many of these items are believed to generally have the attributes
both as to China availability and U.S. demand which would give them a place
in future trade with China. The ten items explored accounted for about 84
percent by value of total China exports to the United States during 1948,
which is regarded as a representative post-war year for commerce with pre-
commnnia t China.
There are several additional China products which have not historically
moved to the United States in any considerable volume, but which have by
reason of their unusual quality and appeal found same access to American
markets. 9hese might be regarded as showing likelihood in again being sold
in the United States, possibly on a more substantial scale than in the past.
Some of these items which may be considered to have better prospects in this
respect are listed herewith:
Chinaware and prcelain
Straw hats and straw braids
Lacquer and lacquer products
Cloisonne
Hair and hair nets
Spices and sauces including ginger and cassia
Furniture - rattan, reed and seagrase
Musk
Chinese medicines and ingredients thereof
Since some of these are the products of cottage or home industries,
their future availability for export is not certain. However, there are
indications that the present Chinese regime is giving attention to the
organization of these industries in order to encourage production for ex-
port. So far as the future demand in the United States is concerned,
most of these items are peculiar to China and have been demonstrated to have
qualities which have in the past given them ready access to the American
market.
Potential United States importations from China on an annual basis
during the next two years are considered practical for some of these items
and categories, which'are given as follows:
Chinaware and porchlain-- -----------
Human hair and hair nets-------------
attan furniture-------------------
Spices, sauces and oils---------
lacquer and cloisonne products-------
Total
.8 million
3.0 million
1.0 million
.5 million
.2 million
5.5 million
SECRET
Approved For Release 2001/08/27 : CIA-RDP63-00084A000100060002-8