CHINESE COMMUNIST CAPABILITIES AND PROBABLE COURSES OF ACTION THROUGH 1960

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• Sequence Number: 1
• Publication Date: January 5, 1956
• Content Type: NIE

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NIE 1 3 ? 5 6
5 January 1956
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NATIONAL INTELLIGENCE ESTIMATE
NUMBER 13-56
(Supersedes NIE's 58; 13-54; 10-7-54)
CHINESE COMMUNIST CAPABILITIES
AND PROBABLE COURSES OF ACTION
THROUGH 1960
'
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
INTELLIGENCE ADVISORY COMMITTEE
on 5 January 1956. Concurring were the Special Assistant,
Intelligence, Department of State; the Assistant Chief of
Staff, Intelligence, Department of the Army; the Director
of Naval Intelligence; the Director of Intelligence, USAF; and
the Deputy Director for Intelligence, The Joint Staff. The
Atomic Energy Commission Representative to the IAC and the
Assistant Director, Federal Bureau of Investigation, abstained,
the subject being outside their jurisdiction.
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PETV!PA"-R: -
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257
COPY NO.
ASSISTANT DIRECTOR.ONE
(0/65/P
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June 1953.
WARNING
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TABLE OF CONTENTS
Page
CONCLUSIONS 1
DISCUSSION 3
I. DOMESTIC PROBLEMS 4
Political Situation
4
Party Leadership
4
Popular Attitudes and Support. ..
7
The Economy
7
The Five Year Plan
8
The Industrial Outlook
10
Manpower Problems
13
Agricultural Outlook . . . . . ? .......
14
Outlook in Transport Facilities
16
Foreign Trade and Soviet Assistance
17
Military Situation
19
Army
19
Air Forces
20
Navy
20
Nuclear Capabilities
21
Communist China in 1960
21
II. SINO-SOVIET RELATIONS
22
III. PROBABLE CHINESE COMMUNIST COURSES OF ACTION
IN ASIA
23
The Chinese Communist Estimate of the Situation ?
24
Main Lines of Chinese Communist Foreign Policy .
25
Specific Courses of Action
26
Taiwan
26
Indochina
27
Korea
27
Japan
27
India
28
Burma
28
Indonesia
28
Malaya
28
CONFIDE i L
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CHINESE COMMUNIST CAPABILITIES AND PROBABLE
COURSES OF ACTION THROUGH 1960
THE PROBLEM
To estimate: (a) the political, economic, and military strengths and weak-
nesses of Communist China; (b) Sino-Soviet relations; and (c) Chinese Commu-
nist courses of action through 1960.
CONCLUSIONS
1: The Chinese Communists have firmly
established their control throughout
mainland China, and are energetically
attempting to reorganize economic and
social institutions and build military
power along the lines of the Soviet model.
With Soviet help, the armed forces have
been greatly strengthened and to a large
extent modernized, and economic output
has for the most part reached or sur-
passed previous peaks. As a result of its
achievements and growing power, Com-
munist China's prestige and influence in
Asia have greatly increased. (Paras.
10-12)
2. The Chinese Communist regime is
determined to convert its primarily agri-
cultural economy into an industrialized
Soviet-style state. To this end it has
scheduled large investments over the
next few years and, to mobilize resources
for the program, has taken measures to
restrain consumption and to step up its
program for socializing agriculture. In
pursuit of its goals, the government will
encounter serious problems in the lack of
trained personnel, in peasant resistance
to government control, and in growing
apathy or opposition among the people to
the regime's austerity measures. More-
over, as Peiping confronts these problems
and attempts to deal with the difficulties
of socialization, shifts in the influence of
leaders may occur and purges may be
expected, especially at lower levels. How-
ever, we believe that Peiping's control
apparatus will be adequate to maintain
the stability of the regime. (Paras. 29-
30, 33-34, 45, 94)
3. We estimate that by 1957 the Chinese
Communists will attain many of the goals
of their first Five Year Plan, which
emphasizes heavy industry, though there
will be shortfalls in steel, pig iron, trucks,
petroleum products, and food crops. (See
table and note on page 12.) They will
probably not be able to develop cer-
tain of their planned capacities. The
gross value of industrial output will prob-
ably increase about 75 percent during the
1
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Plan period as against the goal of 98 per-
cent. By 1960 the Chinese Communist
industrial base, which in 1952 was less
than one-third that of Japan and pro-
duced only a limited range of manufac-
tured goods, will have greatly expanded,
though production in key industries will
still be well below that of Japan in 1954.
Communist China will still require con-
siderable Bloc assistance to meet its
economic needs. We believe that agricul-
tural output will increase by about 10
percent instead of the 23 percent planned
by the Chinese Communists but that this
will not necessarily affect their industrial
goals. However, should agricultural out-
put fail to make this limited increase,
industrial goals will almost certainly be
adversely affected. (Paras. 42, 59, 92, and
Chart II, page 9.)
4. Communist China, with extensive So-
viet aid, will have further strengthened
and modernized its armed forces by 1960.
In the absence of extensive US counter-
action, Peiping will retain the capability
to overrun South Korea, Taiwan, and
mainland Southeast Asia. However,
Communist China will still suffer from
military weaknesses, particularly air de-
fense deficiencies and lack of an adequate
indigenous armaments base. We have
no evidence that Communist China pos-
sesses any nuclear weapons, and it has
only a primitive nuclear research capa-
bility. However, if the USSR were to
provide the necessary equipment and
technicians, the Chinese Communists
could in a short time achieve the capa-
bility to use nuclear weapons. (Paras.
91, 93)
5. The relationship between Communist
China and the USSR has become one of
an alliance bound together not only by
NO0014' 2
ideological ties, but by common hostility
to the US, military interdependence, and
the mutual advantages of concerted dip-
lomatic and "revolutionary" activities.
Peiping's military and economic depend-
ence on the USSR will cause it to con-
tinue to give Moscow's views great
weight on major questions of global pol-
icy. However, Peiping's tactical position
in many areas gives it considerable poten-
tial for influencing Moscow. Although
potential conflicts of interest exist, we
believe that common objectives and mu-
tual advantage, and Peiping's continuing
dependence on Moscow, will serve to pre-
vent any significant weakening of Sino-
Soviet ties at least through 1960. (Paras.
95, 98-100, 102-103)
6. Chinese Communist foreign policy will
continue to be focused on gaining control
of Taiwan, reducing Western (and espe-
cially US) influence in Asia, and extend-
ing their own in the area. Peiping will
continue to pursue policies emphasizing
political rather than military action as
long as its objectives are acceptably
served by this means. The major factor
in this consideration will be their esti-
mate of the risk of US military counter-
action; thus Communist China will
probably emphasize political action over
the next two or three years. The Com-
munists may again resort to military
action at any time they estimate that
the benefits to be obtained will outweigh
the military consequences of such action.
In behalf of the joint Sino-Soviet policy
of "competitive coexistence with the capi-
talist bloc," Peiping is likely to play up to
neutralist and nationalist sentiment in
Asia, manipulate the Indochina and Tai-
wan issues to divide the West, and exploit
such vulnerable situations as ROK-Japa-
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_'00WfOnnitt6' 3
nese and Indian-Pakistani tensions to
win further Asian support for the Bloc.
The Chinese Communists will probably
endeavor to have their approach to inter-
national problems characterized as
conciliatory and flexible, but Bloc policy
will probably permit no major concessions
to the West and its Asian allies. At times,
in fact, Peiping will probably assert its
power ostentatiously, but within the gen-
eral limits of Bloc strategy, in order to
reaffirm its particular claims and preten-
sions. (Paras. 105-106, 112-113)
7. The Chinese Communists will prob-
ably continue their buildup in the area
opposite Taiwan and the offshore islands
in order to increase pressure on the US
and Nationalist positions. They probably
do not intend to attack Taiwan so long
as the US maintains its commitments to
the Nationalists, but they may expect to
induce a gradual erosion of the Nation-
alist position. Moreover, unless Peiping
comes to believe that it can obtain the
offshore islands by negotiation, it will
almost certainly conduct probing opera-
tions against them. If the Chinese Com-
munists became convinced that the US
would not assist in defense of the islands
with its own forces, or react in strength
elsewhere, they probably would attempt
to seize them. Should Peiping's forces
successfully occupy the Nationalist-held
offshore islands without incurring US
military retaliation, there would be an
intensification of the campaign to obtain
Taiwan. (Para. 119)
8. Peiping will continue its efforts, in con-
junction with the Hanoi regime, to ex-
pand Communist influence and control
in South Vietnam by attempting to dis-
credit and undermine the authority of
the Diem government through propa-
ganda and diplomacy. Even if the Viet
Minh are delayed in extending their con-
trol over South Vietnam, Peiping will
probably not encourage the Viet Minh to
renew open hostilities. However, at some
point Peiping probably will encourage
increased Viet Minh guerrilla activity in
South Vietnam. Actions beyond that
phase would probably depend upon the
effectiveness of Diem's counteraction and
the response of the US and the SEATO
powers. (Para. 121)
9. The possibility of a Communist-ini-
tiated war in the Taiwan Straits, Viet-
nam, Laos, and even Korea will continue
to exist. Moreover, Peiping would almost
certainly react with force if Communist
control of North Korea or North Vietnam
were seriously threatened. It would al-
most certainly retaliate to any sharp in-
crease in the level of Nationalist attacks
against the mainland. (Para. 116)
DISCUSSION
10. The basic objectives of the Chinese Com-
munists appear to be: (a) to develop a Soviet-
style state in China with a strong industrial
economy and a modern military establish-
ment; (b) to eliminate Western (and espe-
cially US) influence and power and to achieve
dominance in East Asia; (c) to establish con-
trol over Taiwan and other areas which they
regard as traditionally Chinese; (d) to achieve
recognition as a major world power; and (e)
in general, to promote the goals of interna-
tional communism.
11. Since its formal establishment in Peiping
in 1949, the Communist regime has shown
flexibility, skill, and ruthless determination
CONFIDENTIAi
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and has made significant progress toward the
achievement of its goals. Its authority is
firmly established and its control effective
throughout the mainland area. War-torn and
neglected industry and communications were
largely rehabilitated by 1952, production in
most important sectors has reached or sur-
passed prewar peaks, and socialization on the
Soviet model is well advanced in all fields
except agriculture and retail trade. The
armed forces have made great progress in
the evolution from lightly armed formations
to well-organized regular units with modern
Soviet equipment.
12. The regime has also greatly enhanced the
influence and prestige of Communist China
in Asia. Its power and ability to influence
Asian developments were demonstrated in
Korea and Indochina. Its stature among
Asian states has been enhanced by its skillful
diplomacy at Bandung and by the establish-
ment of contact with the US on the ambassa-
dorial level. Strong pressures have developed
in the Free World for a reduction of controls
on trade with Communist China and for its
entry into the UN. Meanwhile, the Sino-Soviet
alliance has given Peiping considerable stra-
tegic security and access to the material re-
sources of the Bloc, both of which have greatly
reduced Peiping's vulnerability to non-Com-
munist pressures.
13. However, during the period of this esti-
mate Peiping almost certainly will not sus-
tain the momentum of its first five years. The
Chinese Communists have only recently come
to grips with the basic problems involved in
the creation of a socialized national economy,
and these will be difficult to resolve even with
the benefit of Soviet experience.
I. DOMESTIC PROBLEMS
14. The Chinese Communists define the pres-
ent stage of their internal development as
"the transition to socialism." While they are
relying on Soviet experience, their tactics con-
tinue to be modified by Chinese Communist
experience and by flexibility toward groups
which they regard as basically hostile. Pei-
ping has sought to utilize the party's monop-
oly of power and the state's direct control of
4
economic key points to coerce the remaining
private producers of goods and services into
accepting socialist economic forms. Periods
of pressure and social change have been fol-
lowed by brief respites. This tactic of "ten-
sion and release" has been applied in recent
years both to unnerve the populace and to
destroy whatever cohesiveness and independ-
ent leadership the intellectuals, private entre-
preneurs, and well-to-do peasants may have
possessed.
Political Situation
15. The government of Communist China has
recently been reorganized, with control fur-
ther centralized in Peiping. Although the
constitution of September 1954 vests formal
governmental responsibility in the National
Peoples' Congress, this body is primarily a
forum for publicizing already decided policy.
Between the infrequent sessions of the Con-
gress, most of its functions are exercised by
its Standing Committee. The Standing Com-
mittee has nominal supervision over the State
Council, which in turn directs all the central
government ministries, including the Ministry
of Defense, and supervises the operation of
provincial and local governments and the gov-
ernments of "autonomous" minority areas.
(See Chart I, page 5.)
16. Party Leadership. The Chinese Commu-
nist party dominates and controls the gov-
ernment structure. Although we have little
information on the distribution of power with-
in the party, the supremacy of party chair-
man Mao Tse-tung appears absolute. Mao is
Chairman of the party Politburo and of the
Secretariat of the Central Committee, as well
as formal head of the government.
17. Mao's position under the new constitution
requires a less active role in the formal direc-
tion of governmental affairs, and important
areas of influence appear to have been dele-
gated to other leaders. Liu Shao-chi, who
ranks next to Mao in the party hierarchy,
seems to control the party organization; Chou
En-lai, who ranks third in the Politburo, has
become the dominant figure in government
administration and foreign affairs; and Chen
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CONFIDENTIAL
COMMUNIST CHINA
PARTY AND GOVERNMENT ORGANIZATION
CHINESE COMMUNIST PARTY CENTRAL PEOPLE'S GOVERNMENT
NATIONAL PARTY CONGRESS
(Supposed to flee every three years
to elect Central Committee, has not
met since 1945, but scheduled to
meet in 1956)
THE CENTRAL COMMITTEE
(Currently lieu 4/ regular members and
27 alternates)
POLITICAL BUREAU
Mao Tse-tung?CHAIRMAN
Liu Shao-chi
Chou Endai
Chu Teh
Chen Yun
Kang Sheng
Peng Chen
Tung Pi-wu
Lin Po-chu
Chang Wen-tien
Peng Te?huai
Lin Piao
Teng Hsiao-ping
THE SECRETARIAT
Mao Tse-tung?CHAIRMAN
Liu Shao-chi
Chou En-/al
Chu Teh
Chen Yun
Teng Hsiao-ping?SECRETARY GENERAL
25110 12-55
PEOPLE'S REPUBLIC OF CHINA
O***Mao Tse-tung?CHAIRMAN
***Chu Teh? VICE CHAIRMAN
NATIONAL DEFENSE COUNCIL
***Mao Tse-tung?CHAIRMAN
(15 Vice Chairmen)
(81 Members)
SUPREME STATE COUNCIL
(ad hoc advisory body)
NATIONAL PEOPLE'S CONGRESS
(1226 delegates elected every four years
by lower level congresses?meets yearly.)
STANDING COMMITTEE
'''Liu Shao-chi?CHAIRMAN
***Peng Chen?SECRETARY GENERAL
(13 Vice Chairmen)
(65 Members)
STATE COUNCIL
??* Chou Endai,PREMIER
(10 Vice Premiers')
(31 Ministers)
(5 Commission Heads)
COMMISSIONS
State Planning:**Li Fu-chun?CHAIRMAN
National Construction:**Po l-pa?CHAIRMAN
Physical Culture and Sports
Overseas Chinese Affairs
Nationalities Affairs
MINISTRIES
Finance
Food
Foreign Trade
Heavy I' dustry
Agriculture, etc.
CHART I
SUPREACIIOU PRETOPLE'S
***Tung Pi-wu? PRESIDENT
(3 Vice Presidents)
PROCURATOR GENERAL
**Chang Ting-cheng?CHIEF
PROCURATOR
(2 Deputy Chief Procurators)
8 GENERAL OFFICES
(Duties not known, believed
to coordinate workings of
several ministries.)
SPECIALIZED AGENCIES
People's Bank of China
New China News Agency
Religious Affairs Bureau, etc.
NATIONAL DEFENSE/
?**Peng Te-huai?MINISTER
(7 Vice Ministers)
PEOPLE'S LIBERATION
ARMY
(INCLUDING GROUND, NAVY,
AND AIR FORCES)
*Su Yu?CHIEF OF STAFF
DEPUTY CHIEFS OF STAFF,
**Huang Ko-cheng
f Li Ko-nung and others
DIRECTOR OF CADRES
DEPARTMENT AND POLITICAL
DEPARTMENT
**Lo Jung-huan
FOREIGN AFFAIRS
'? ? Chou Endai?MINISTER
'Chang Wen-tien ?VICE MINISTER
**Wang Chia-hsiang VICE MINISTER
Other Vice Ministers, Ambassadors,
Envoys, etc.
PUBLIC SECURITY
*La Jui-ching? MINISTER
17 Vice Ministers)
PEOPLE'S ARMED POLICE
? (500,000 Armed Troops)
* *Member of Politburo
* *Member of Central Committee
* Alternate Member of Central Committee
,* Formerly Director of the Social Affairs Department
of the Central Committee, may have special
responsibilities for security and intelligence.
i? As formal head of state, Mao is vested with broad
executive and appointive powers.
Official Communist commentators have described Mao's
office as being a "symbolic" one, and have stated that
the chairman and the standing committee constitute a
"collective head of state?suggesting that the formal
rank of Liu Shao-chi in the governmental hierarchy is
virtually equal to that of Mao.
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14001WPF"
Yun seems to have the largest role in economic
affairs. Although Chu Teh is a venerated
military leader and Vice Chairman of the
"Peoples Republic of China," he is nearly 70,
and Peng Te-huai, newly appointed as Minis-
ter of Defense, has assumed active leadership
of the armed forces.
18. The first high-level party purge since 1938
took place during 1954 when Kao Kang, state
planning chief and sixth-ranking member of
the Politburo, and Jao Shu-shih, party or-
ganizational chief, were removed from the
party and imprisoned together with a num-
ber of their associates. Kao's death has since
been announced, but Jao's fate is unknown.
Kao and Jao had both been veteran members
of the Central Committee and had been the
ranking party leaders in Northeast and East
China respectively until 1953.
19. While the actual details of the Kao-Jao
affair still remain shrouded in mystery, the
chief reason for the purge was probably an
effort by Kao, Jao, and their supporters to
broaden their own power. Despite official de-
nials, some differences over issues of domestic
policy may have been involved. Kao and Jao
may also have attempted to make common
cause with some of the military leaders, but
apparently with little success, since no rank-
ing military men have yet been involved in
their disgrace.
20. In any event, there is no evidence that
the purges have had any lasting effect on the
stability of the inner core of party leadership
or its ability to control the party. Simul-
taneously with the purge announcement in
April 1955, the party announced a new con-
trol commission to check on party discipline.
As the regime confronts the problems of so-
cialization, shifts in the influence of leaders
may occur and purges may be expected, espe-
cially at lower levels.
21. The question of Mao's successor will grow
in importance since Mao is now 62 and pos-
sibly in poor health. It is doubtful if any
individual in the event of Mao's death would
be in a position for some time to assume
the full authority held by him, and an effort
would probably be made to establish some sort
of collective leadership.
6
22. Liu and Chou would probably be in the
best positions to bid for pre-eminence. Liu,
second only to Mao in formal party listings,
is known as a theorist whose attention has
been largely focused on internal party mat-
ters. Chou has had a broader range of expe-
rience and contacts and has a reputation for
tactical elasticity. However, their expressed
views on major policies have not been in con-
flict. Barring any major setbacks to the re-
gime, the differing backgrounds of these and
other leaders appear more likely to serve as
complementary forces in implementing agreed
policy than as causes of serious conflict.
23. Although the prestige of the army and
the role of its leaders remain great, the direct
role of the army in planning and policy has
been steadily curtailed, particularly since the
dissolution of the regional governments in
1952-1954. The newly created National De-
fense Council appears to be largely an ad-
visory body less powerful than its predecessor,
the People's Revolutionary Military Council.
Control of most of the internal security forces
has been taken away from the armed forces
and placed under the Minister of Public Se-
curity. There appears to be increasing inte-
gration of the civil and military elements of
the government.
24. There isArm evidence of actual conflict
between professional military leaders and the
primarily political group. It is possible that
there may have been some sympathy among
military commanders for the alleged belief of
Kao Kang that "the party was created by the
army" and that those with party experience
in the old revolutionary base areas should
take precedence over nonmilitary leaders.
However, the high party status of many mili-
tary commanders gives them a vested interest
in the regime, and the long established sys-
tem of political officers within the army pro-
vides a constant check on the activities of
military leaders. We believe that there is
little prospect of differences which would
seriously affect the cohesion or stability of
the regime during the period of this estimate.
25. The Chinese Communist Party, with a
membership of over eight million or 1.33 per-
cent of the population, is substantially smaller
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in proportion to population than Communist
parties in other Bloc countries. Although
there is no shortage of potential members,
there is a serious problem in quality and po-
litical reliability. An eight-year program of
systematic political indoctrination was ini-
tiated in 1955 for some five million party
members and nonparty intellectuals. Despite
these efforts to improve the quality of the
party, governmental efficiency will continue
to be hampered by low levels of literacy and
by friction between old revolutionaries and
new bureaucrats.
26. Popular attitudes and support. Tight con-
trol and a series of repressive campaigns since
1951 have dissipated some of the support the
regime initially enjoyed, leaving much of the
populace disillusioned or disaffected. Dis-
content mounted during 1954 and civil dis-
obedience at the local level increased. Official
announcements allege that there were 364,604
cases of "subversion" and "economic sabotage"
from February 1954 to May 1955. These ac-
tivities occurred in both urban and rural
areas throughout Communist China. The
principal causes appear to have been local
food shortages resulting from the floods and
droughts of 1954, the pushing of grain col-
lection and agricultural socialization, and the
forced austerity program. Discontent seems
to be particularly marked among the peas-
antry, and at least one open "peasant revolt"
is admitted to have taken place in April 1955.
27. Communist efforts to remold the tradi-
tional Chinese social system have also met
with considerable resistance. Their attempts
to destroy family proprietorship and family
cohesion have generated widespread resent-
ment. The regime has slackened its efforts
to enforce its marriage law, and reform of the
family is now being attempted primarily by
the indoctrination of youth.
28. Chinese intellectuals, many of whom have
been educated in the West or exposed to
Western thought, also pose a serious problem
to the regime, which is still dependent on
their skills. The campaign to obtain their
conformity was accelerated in May 1955 when
Hu Feng, a writer who pressed for greater
freedom of expression, was accused of leading
a vast conspiracy against the state. Abject
confessions by intellectuals were published
and mass meetings were organized to de-
nounce and expunge "the remnants of Hu
Feng thought" in such widely diverse fields as
medicine and plant management.
29. At present, popular discontent is too spo-
radic and disorganized to pose a serious threat
to the stability of the Peiping regime. The
recent emphasis on security and the height-
ening of vigilance during the past year may
have been partly intended to provide a ra-
tionale for continued austerity and stringent
economic controls by creating an atmosphere
of fear and tension. The regime now has a
large and effective control system, including
an internal security force of about 500,000
men in addition to the army. At the local
level, a system of "security defense commit-
tees," "urban residents' committees," and
other mass organizations provides additional
controls which extend into every street and
small community. As the process of socializa-
tion progresses over the next five years, popu-
lar discontent, particularly in rural areas, is
almost sure to increase. However, the regime
will almost certainly be able to repress such
discontent.
The Economy
30. The Peiping regime has stated that the
creation of a modern, industrialized economy
will, despite maximum efforts, require the rest
of the century. It regards this development
as essential to the transformation of Com-
munist China into a great power. To this
end, it is seeking to create an economy which
will eventually be capable of providing a full
range of military and capital goods, and which
would reduce Communist China's dependence
on the USSR. The Chinese Communists be-
gan in 1951 to develop a Five Year Plan for
channeling their resources to the development
of industry, especially heavy industry.
31. The years 1950-1952 were a rehabilitation
period during which the regime was able to
obtain with relatively small investments a
substantial increase in output and generally
to raise production levels to or above pre-
Communist peaks. However, even after the
-vigtowm,
(TN FIDENTIAL
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COW IDL" "
rehabilitation period the industrial base re-
mained extremely small. In 1952 Communist
China produced no trucks, tractors, automo-
biles, or airplanes; only an insignificant num-
ber of such important items as locomotives,
electric motors, and turbines; and only a small
number of the simplest types of machine tools.
Its output in the basic steel and electric power
industries was only about one-sixth that of
Japan. Moreover, while the Chinese Commu-
nists have tremendous human resources and
substantial power and mineral resources with
which to build a strong industrial base, the
quality and utility of these resources are lim-
ited. Some 80 percent of the people are illit-
erate and about 80 percent are peasants or
live in backward rural communities. Com-
munist China has one of the greatest land
areas in the world, but only about 10 percent
is under cultivation and almost all the re-
mainder is unsuitable for cultivation. It has
substantial mineral resources, but since many
are of poorer grades or in areas distant from
railroads and industrial centers, their devel-
opment and processing will be very costly.
32. Finally, the regime is faced with the seri-
ous long term problem of stretching its limited
resources to meet the requirements for capital
investment and the minimum needs of a pop-
ulation which is growing at a rate estimated
to be at least 1.5 percent annually. In mid-
1953 the population was recorded at 582.6
million in an official census, and it will prob-
ably total some 650 million by 1960.
33. The Five Year Plan. In mid-1955 the
regime, after considerable delay,. adopted a
comprehensive Five Year Plan (1953-1957).
(See Chart II, page 9, for major goals.) The
Plan is fairly rudimentary, modifications have
been introduced since its publication, and fur-
ther modifications can probably be expected.
Even though the Russians have given exten-
sive technical assistance, the Chinese Commu-
nists admittedly have encountered great diffi-
culties in drafting their plan. Its delayed an-
nouncement was officially attributed to the
lack of resource data, difficulties in the collec-
tion of statistics, lack of skilled personnel, and
inexperience in handling the problems arising
out of rapid development.
8
34. The Plan calls for a total state economic
and social expenditure of 76.64 billion yuan
($32.8 billion) .1 Funds for capital construc-
tion, i.e. investment in fixed assets, amount to
42.7 billion yuan ($18.1 billion) and are to be
apportioned as follows:
Billion
Yuan
Percent
of Total
1. Industry 24.8
58
a. Heavy
22.0
52
(1) Fuel and Power
6.8
16
(2) Machine Industry
6.9
16
(3) Iron & Steel, Chemicals,
Building Materials
6.5
15
(4) Other
1.8
5
b. Light
2.8
2. Transport, Posts, and
Telecommunications 8.2
19
3. Agriculture, Water Conser-
vation, and Forestry 3.3
8
4. Culture, Education,
and Health 3.1
7
5. Municipal Utilities 1.6
4
6. Commerce, Banking, and
Commodity Stockpiling 1.3
3
7. Other .4
1
Total 42.7
100
35. The main investment effort is being made
in heavy industry. To support the industrial
program, the regime plans substantial ex-
penditures on transportation and, to a lesser
extent, on health, education, and other social
projects. To achieve its goals in the other ma-
jor sectors - agriculture, light industry, and
trade - the regime apparently plans to rely
chiefly on organizational changes and, in the
case of agriculture, on stimulated investment
by the peasant and the cooperatives.
36. Basic to the fulfillment of program goals
will be the regime's ability to control the dis-
position of Communist China's economic re-
sources, particularly those in agriculture. To
this end, the "transition to socialism" has been
entered into aggressively. State-controlled
cooperatives in agriculture, trade, and credit
have been organized, and most of modern
I Converted at the official rate ($1=2.367 yuan)
which, because of probable overvaluation of the
yuan, overstates the value of the investment by
possibly 20 to 50 percent.
rnmmnrmi-1111
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CONFIDENTIAL
Thousonds of Metric Tons
COMMUNIST CHINA
ESTIMATED PRODUCTION OF CERTAIN COMMODITIES*
COMPARED WITH PRODUCTION IN JAPAN IN 1954
8000 ? 7.800 60
CRUDE STEEL 11
5,000
25111 12,55
952 954 957 960 954
COMMUNIST CHINA JAPAN
8000
6000
?c3
4000
"a
2000
COTTON CLOTH
9
50
12 40
30
g- 20
7,000
ELECTRIC POWER
000
952 954 957 960
COMMUNIST CHINA
`Production figures for 1954, 1957 and 1960 ore the some
as those in table on page 12, and are subject to the
qualifications noted thereto.
60
952 954 957 1960 954
COMMUNIST CHINA JAPAN
120
90
Z:21
954
JAPAN
Millions of Metric Tons
0
30
GRAIN
(Rice and Wheat)
96
CHART II
102
42,700
952 954 1957 1960 95
COMMUNIST CHINA JAPAN
952 1954 957 960
COMMUNIST CHINA
1954
JAPAN
crwrin
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41014111011iT
industry2 has been nationalized. A hard line
has been adopted toward the consumer, and
strict control measures, including forced grain
procurement, control of cotton production,
and food rationing have been instituted.
37. The regime appears to have based its in-
vestment plan on a realistic appraisal of its
control of mainland economic resources and
of the availability of Soviet credits. Between
1950 and 1955 it appears that GNP increased
by over one-half in constant prices, while
budgetary revenues more than tripled and
reached one-third of the GNP. The most sub-
stantial increases in revenues reflected "prof-
its" from nationalized enterprises. However,
the regime's future program through 1960
appears to contemplate a much slower rise in
the GNP and budgetary revenues, though they
will continue to increase relative to GNP, will
do so at a slower rate. (See Chart III, page
11.)
38. According to Chinese Communist budget
data, defense and economic construction have
accounted for about 70 percent of total ex-
penditures each year. However, the propor-
tion devoted to each of these categories has
been almost exactly reversed during the past
five years. In 1950, defense accounted for 42
percent and economic construction 26 per-
cent; in 1955 defense accounted for 24 percent
and economic construction 48 percent. De-
spite the percentage decline, budgeted military
expenditures in 1955 were at the highest level
since the regime gained power. The main-
tenance of military expenditures at the cur-
rent proportion of the budget would appear to
be consistent with the planned rate of eco-
nomic growth.
39. The industrial outlook. During the first
Five Year Plan, the Chinese Communists plan
to concentrate on developing the capacity and
production of heavy industry. Consumer
goods industries are to receive only about 11
percent of the total industrial capital con-
"Modern industry" is used by the Chinese Corn-
munists to mean factory and mine production,
largely exclusive of the output of handicraft in-
dustries.
10
struction funds. The 156 industrial projects
for which the Soviets have announced that
they will supply equipment and technical
guidance constitute, in cost, nearly half of the
industrialization program. Almost all are in
heavy industry and have been assigned top
priorities in the supply of domestic resources.
While planned targets in other sectors may
undergo subsequent major revisions, this por-
tion of the Plan is the least likely to be
changed substantially.
40. Although most of these 156 projects will
not be completed during the first Five Year
Plan, and some of the most important will
not be completed until after 1960, the follow-
ing descriptions of certain planned major
developments in heavy industry are given for
illustrative purposes. The heavy industry
program calls for major construction in the
Anshan iron and steel complex and the ini-
tiation of construction of large iron and steel
combines in the Wuhan area in central China,
and at Paotou in Inner Mongolia. Only the
first stage of development of the latter two
projects will have been completed by 1962.
By 1957 the Chinese Communists also plan to
complete their first aluminum plant (except
for a small pilot plant built by the National-
ists) and to double power generating capacity
over 1952.
41. We believe the Communist control of the
industrial sector of the economy is sufficiently
well developed to insure that whatever re-
sources are available will be directed to heavy
industrial projects. About 60 percent of in-
dustrial output comes from nationalized in-
dustries, and the regime directly controls
another 20 percent through cooperatives or
joint public-private .industries. Through the
placing of orders, control of banking, raw ma-
terial allocation, and product distribution, the
government effectively controls the output of
the remaining privately owned sector. Only
in the case of the individual handicraft enter-
prises, which engage about 10 million people
full-time, has the extension of state control
been delayed. During the period of this esti-
mate, the regime will almost certainly further
extend its control over industry.
rnnirliNKITIA1
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Other Rave
Credits, Loans and Insur
Profits of State Owned Enterer
Agricultural Ta
Industrial a
Commercial To
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CONFIDENTIAL
lama
COMMUNIST CHINA'S BUDGETS, 1950-55
( Billions of Current Yuan)
ues
roe
ses
XeS
ors
REVENUES
12.967
17.560
6.519 Kttr. 4?,"4
rA04
46x
43.0%
39%
28.050
26.237 .\\X
Other
3%
.1? ? S\
Taxes
21.762
4
42%
34%
35.5%
1950 1951 1952 1953 1954 1955
(Budget)
25099 12.55
Other Expendit
Administra
Def
EXPENDITURES
6.808
res
"
roe
4E5
Social, Cultural
and Educational
Economic Construction 25.5%
11.902
29,5%
16.787
VY0?/' ?
21.488
r7o0
/7/4
,
45%
40%
24.632
50%
29.737
we4
48%
1950 1951 1952 1953 1954 1955
(Budget) (Budget)
slew
CONHDENT1AL
CHART HI
ECONOMIC CONSTRUCTION
EXPENDITURES
14.274
11%
Other
12.316
14.5%
20%
Commerce and
Foreign Trade
14%
15%
8.595
Communications
and Transportation
14%
24%
9%
Agriculture, Forestry, Water
Conservancy, and Meteorolgy
4'
11%
14%
12%
36.5%
40%
Industry
Heavy and Light
46%
10%
5%
1953 1954 1955
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titn1FIL011-11
,C'AfirrriP 12
ESTIMATED CHINESE COMMUNIST PRODUCTION OF SELECTED COMMODITIES
FOR 1954, 1957, AND 1960
NOTE: The figures in this table should be used with caution. The estimates are subject to varying mar-
gins of error, some of which might be considerable. The 1954 estimates for certain of these commodities
should probably be regarded as a maximum, particularly for pig iron and crude steel, with respect to
which production in the quantities stated is predicated on maximum utilization of all possible facilities.
The estimated production of industrial products, as projected for 1957 and 1960, depends upon construction
or improvement of capacity, the assimilation of advanced techniques by the Chinese Communists, the
continuance of Soviet Bloc aid, and continued importation of capital goods from the West at approximately
present levels.
With the exception of pig iron, steel, trucks, and food crops, our estimates of 1957 production are of the
approximate order of magnitude of the Chinese Communists' goals. With respect to crude oil and gaso-
line, while production estimates are presently under revision, we believe that the Communist goals are
overly optimistic. The specific goals of the Five Year Plan are given in parentheses.
Unit
1954
Estimate
1957
Estimate
1960
Estimate
Coal
Coke
Electric Power
Pig Iron
Crude Steel
Tungsten
Copper
Tin
Lead
Zinc
Crude Oil
Gasoline
Ammonium Nitrate
Ammonium Sulphate
Motor Vehicle Tires
Cement
Locomotives
Freight Cars
Trucks
Electric Motors
Generators
Cotton Cloth (excluding
cloth made from hand-
icraft yarn)
Paper (machine made)
Food Crops
Timber
Million MT
Million MT
Billion KWH
Million MT
Million MT
1,000 MT
1,000 MT
1,000 MT
1,000 MT
1,000 MT
1,000 MT
1,000 MT
1,000 MT
1,000 MT
1,000 Units
Million MT
Units
Thousand Units
Thousand Units
1,000 KW
1,000 KW
Billion
Linear
Meters
1,000 MT
Million MT
Million cu. m.
80
5
11
3
2.2
19
13
12
22
9
27
300
577
5
50
5.5
0
985
93
5
490
159
21
113
7
16
4.2(4.7)
3.8(4.1)
24
14
17
23
14
-(2,000)
-(399)
44
500
760
6
200
8.5
0 (4)
1,000
225
5
650
168-177
(193)
20
140
11
19-23
_ 6
5
24
15
22
24
19
89
734
1,000
8
500
8.5
10-15
1,000
325
7
700
182-191
20
42. We believe that the Chinese Communists
will not achieve some of the specific industrial
goals of the Five Year Plan, particularly in
pig iron, crude steel, trucks, crude oil and
gasoline, and advance machine fabricating.
They will probably not be able to develop cer-
tain of their planned capacities. The regime
has not been able to maintain the planned
.40SOMPt
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rate of investment in fixed assets, and 48 per-
cent remains to be made in the last two years
of the Plan period. Furthermore, unit costs
for new plant construction have been exceed-
ing estimates, and further sharp economies
will have to be effected if planned investment
is to prove adequate to realize construction
goals. Moreover, because of a probable over-
statement of output of light industries in
1953-1954, we believe that the planned rate
of increase of production in light industry is
inadequate to realize the planned level of out-
put of consumer goods in 1957. Unless the
regime is successful in increasing the produc-
tion of cotton and other commercial crops,
it will probably also fall short of some of its
consumer goods industry goals. We believe
that the gross value of industrial output will
increase about 75 percent during the first Five
Year Plan rather than 98 percent as planned
by the Communists.
43. The growth of output has, in many in-
dustries, been accompanied by high costs of
production, deterioration of quality, and a
limited range of products, resulting in high
prices for industrial goods, shoddy merchan-
dise, and overproduction combined with
shortages in various industrial lines. These
conditions reflect the deficiencies existing in
skills, plant, and materials at current levels
of production, and the limited flexibility of
Chinese Communist industrial output. In
view of the present official pressure to expand
the volume of output, we believe problems of
waste will continue to plague the regime for
many years to come.
44. Manpower problems. The labor force is
believed to total around 300 million, which
would include around 95 percent of the males,
and 65 percent of the females over 14 years
of age. The nonfarm labor force numbers
only about 60 million, of whom approximately
4 million are government employees, 3 million
are in the army and security services, 19 mil-
lion are employed by business and industrial
enterprises, and the remainder are self-em-
ployed in trade, services, and handicraft in-
dustries. Some 16 million of the nonfarm
labor force are directly employed by the State
in the military, government administration,
13
and economic enterprises. The regime claims
that 5.9 million of the factory workers are
currently employed in the industrial sector,
an increase of more than 4 million since 1949.
45. Despite such basic problems as control of
its huge population and of underemployment,
the regime's most pressing manpower prob-
lem is a shortage of trained managerial and
technical personnel. The Communists tend
to complicate this problem by seeking to in-
sure political reliability as well as technical
competence in their trained personnel.
46. The Chinese Communists are continuing
their efforts to overcome shortages of trained
personnel by employing many thousands of
Soviet advisors and technicians. Many of
these teach in universities and in training pro-
grams connected with factories or with specific
development projects. Under the Five Year
Plan, Peiping is sending 10,000 students and
11,300 skilled workers to the USSR for train-
ing. Most important, the regime has sought
to expand the educational system and concen-
trate student interest in technical subjects.
The speed-up has produced poorly trained
engineers, and there are still too few qualified
secondary school graduates to satisfy the
needs of the economy and the growing capac-
ity of higher educational facilities. Peiping
now recognizes the need for more thorough
training, and has adopted the Soviet five-year
curriculum in most technical fields beyond
the secondary school level.
47. Although at both secondary and higher
levels of education a considerable percentage
of graduates will be drained off to staff the
expanding educational system, large numbers
of reasonably well qualified graduates will
eventually be available to help the regime
carry out its programs. We estimate that by
1960 Communist China will have 750,000-
800,000 college graduates, an increase of more
than 450,000-500,000 over 1952. The recent
development and planned expansion of the
educational system may be seen in the follow-
ing estimated enrollment figures, derived in
large part from Chinese Communist an-
nouncements:
CO ISWII5ENTIAL
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1952-
1953
1954-
1955
1957-
1958
1959-
1960
(in thousands)
Higher Education
189
252
434
600-650
Science
11
16
27
Engineering
66
95
177
Agriculture and Forestry
12
15
37
Medicine and Public
Health
24
29
55
Education
32
50
89
Other
44
47
49
Secondary Education
3,148
4,247
4,707
6,000
Primary Education (in
millions)
49.8
51.2
60.2
65.0
48. Scientific research activity in Communist
China is at a very low level. The basic policy
for utilizing Communist China's limited po-
tential in the scientific field has been to con-
centrate on training and on technical activity
related to industrial expansion. While re-
search activity will probably increase slowly,
scientific research and development will prob-
ably not make a very significant contribution
to the Communist Chinese effort to attain
economic and military self-sufficiency during
the period of this estimate.
49. Despite the expansion in education, Com-
munist China will continue during the period
of this estimate to experience deficiencies in
skilled labor and management and in trained
technicians. These deficiencies will be re-
flected in errors, waste, and losses in produc-
tion, and will be a limiting factor in Chinese
Communist progress toward Plan goals. How-
ever, it is unlikely that the shortage of skilled
personnel will cause a major setback in the
program.
50. Agricultural outlook. Around 250 million
acres, some 10 percent of Communist China's
land area, is under cultivation. Although the
Chinese Communists claim that another 10
percent of their land is arable, this figure is al-
most certainly too high. In any event, the
bulk of such land would require extensive irri-
gation or would be relatively unproductive be-
cause of short growing seasons, poor soils, or
low rainfall. Counting double-cropped acre-
age, the total area under crops is the equiva-
lent of 330 million acres, of which 300 million
acres are in basic food crops and 30 million
acres are in technical and other miscellaneous
14
crops. In addition Communist China has
large grazing areas which are not efficiently
utilized, and extensive fresh water fishing and
coastal fishing grounds. Communist China
has largely been deforested. However, the
timber reserves in northern Manchuria and
Inner Mongolia are believed to be adequate
to meet requirements beyond the period of
this estimate, although their remoteness pre-
sents difficult transport problems.
51. In the crop year 1954-1955, we estimate
that the Chinese Communists produced about
158 million tons of basic food crops and about
1 million tons of cotton, as against Chinese
Communist claims of 170 and 1.1 million tons
respectively. These crops plus fish, livestock,
and other technical or commercial products,
provided the Chinese people with a bare sub-
sistence standard of living, and the bulk of
the raw fibers for the domestic production of
clothing. Nevertheless, the Chinese Commu-
nists exported about $1 billion worth of agri-
cultural commodities which accounted for
about two-thirds of total Chinese Communist
exports in 1954.
52. The regime was faced with a tremendous
problem in establishing control over the mil-
lions of individual peasants. Since agricul-
tural products directly or indirectly provide
the major source of capital, the regime has to
obtain a maximum contribution from the
peasant to support its industrialization pro-
gram.
53. During the period while it was still con-
solidating its control, the regime sought to
maximize its take from the peasant primarily
by taxes and marketing policies. In 1953, the
regime increased its pressure on the peasants.
Compulsory sales to the state were imposed,
accompanied by a continuation of a nation-
wide campaign to form mutual-aid teams in
order to pool labor and equipment on a sea-
sonal basis. By the end of the year about
one-half of the 110 million peasant households
had been organized into such groups. These
teams were presented to the peasants as a
method for increasing output by mutual self-
help, but to the regime they represented the
first step toward agricultural socialization.
rirmirinctuTi
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*Veni=k047*4' 15
54. Pressure on the peasants increased still
further in 1954 and in the spring of 1955.
Compulsory sales quotas went up. Mass or-
ganization of small producers cooperatives
(in which land, equipment, and labor are uti-
lized collectively though private land owner-
ship is retained) began, and by the spring of
1955 the Communists announced that some
15 percent of peasant households had been
organized into 670,000 cooperatives. However,
there was some uncertainty in agricultural
policy. Thus in 1955, the regime, as a result
of peasant resentment to increased forced
sales in a poor crop year, fixed the quota at
the 1954 level for a three-year period. At the
same time, some 20,000 of the new coopera-
tives were disbanded because of poor adminis-
tration, too hasty organization, or member
noncooperation.
55. The period of ambiguity in agricultural
policy was apparently ended in July 1955,
when Mao called for accelerated socialization
and castigated those who had urged a slower
pace. He attributed the difficulties in sociali-
zation to errors in implementation. He urged
reliance on energetic leadership to induce
peasant cooperation and recommended the
dispatch of several thousand cadres from the
administrative centers to supervise rural
cadres in setting up cooperatives.
56. Mao outlined a time-table under which
half of the rural population would be organ-
ized in cooperatives by the spring of 1958.
Some of the cooperatives are to be consolidated
into larger units by this time. All of the farm
population is to be integrated into at least
small cooperatives by 1960. Mao stated, how-
ever, that agriculture would not be fully col-
lectivized until the mid-1970's.
57. The regime has probably accepted the po-
litical and economic risks of relatively rapid
socialization in agriculture both because of
doctrinal compulsions and because of the
practical need to control production sufficient-
ly to meet industrial raw material, export, and
urban consumption requirements. Taxes and
forced sales imposed on individual peasants
apparently could not -perform this task. The
regime appears to believe that, contrary to
Soviet and Satellite experience, socialization
can be accomplished without adverse effects
on production.
58. The Five Year Plan calls for a minimum
of central government investment in agricul-
ture. Only about 1 billion yuan or 2 percent
of capital construction will be allocated direct-
ly to agriculture, with some portion of another
6.6 billion yuan having indirect benefits to
agriculture through flood control, reclama-
tion, and other projects. The largest invest-
ment in agriculture wil be by the peasants
themselves. The Plan calculates peasant in-
vestment for the five-year period at 10 billion
yuan for new tools, replacement of fixed assets,
and expendable assets such as seeds and fer-
tilizers. The regime intends to undertake
such low cost programs as the distribution of
disease resistant seeds, insect control, double
cropping, planting of high yield crops, and ex-
panding the use of natural fertilizers. In
addition, the regime intends to manufacture
new-type farm implements, to increase sup-
plies of chemical fertilizers, and to make
modest increases in acreage under cultivation
and irrigation.
59. We believe that the Chinese Communists
will not achieve their major agricultural goals,
particularly in basic food crops. Although
the regime is planning to achieve a 23 percent
increase in total agricultural production dur-
ing the Five Year Plan period, we believe it
will be doing well to exceed a 10 percent in-
crease. In basic food crops, we believe the
Chinese Communists will increase production
over the Plan period by about 6-8 percent
rather than the 18 percent they are seeking.
This failure to achieve planned goals will be
the result of a number of factors the most
important of which are: the regime will prob-
ably not be able to insure that the peasants
make the investment expected of them; gov-
ernment investment will be probably inade-
quate; and the collectivization program will
probably have a depressing effect on produc-
tion.
60. The estimated increase in food output ap-
proximates the estimated population growth,
but since agricultural exports constitute less
than 3 percent of total farm output, the re-
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gime can probably meet its export goals, the
proceeds of which are vital to the industrial
program, though this might require further
squeezing of domestic subsistence levels.
Therefore, failure of the regime to achieve its
agricultural production goals by the margin
indicated will not necessarily affect its in-
dustrial goals. However, the regime will be
handicapped by its inability to employ ma-
terial incentives to obtain planned increases
in productivity and continuing rapid urban
growth, where costs and standards of living
are higher, may make it difficult to restrain
rises in consumption. Moreover, should farm
output fail to make the limited increases we
have estimated, industrial goals would almost
certainly be adversely affected.
61. Outlook in. transport facilities. Commu-
nist China lacks country-wide modern trans-
port facilities. A rail net exists in the indus-
trial areas of Northeast China and railroads
extend to almost all other industrially de-
veloped sections of the country. In most other
areas, primitive forms of transport are relied
upon to meet distribution needs. A rough
measure of the state of transport facilities in
Communist China is apparent from a com-
parison with India:
Communist
China
(Population:
600,000,000)
(Area:
3,800,000 sq. mi.)
India
(Population:
380,000,000)
(Area:
1,200,000 sq. mi.)
Rail lines
16,000 mi.
34,000 mi.
Motor roads
90,000 mi.
163,000 mi.
Inland water-
ways
60,000 mi.
5,500 mi.
62. However, Chinese Communist railroads,
on which the industrial sector of the economy
primarily depends, apparently have been able
to meet the growing military and economic
requirements. Based on estimated produc-
tion figures3 and estimates of percentages of
production carried by rail, we believe that ap-
proximately 144 million tons of such bulk
commodities as coal, construction materials,
food crops, timber, and ferrous metals would
These estimates are subject to the qualifications
prefaced to the table on page 12.
have been moved by rail in 1954. In addition
to the foregoing, the railroads almost cer-
tainly transported substantial quantities of
other goods such as machinery, military
equipment, POL, and consumers goods. It
should be noted that large quantities of heavy
bulk cargo, such as coal, were moved relatively
short distances.4
63. Existing rail facilities were used to near
maximum capacity. The Chinese Commu-
nists have apparently attained a considerably
higher level of car utilization than is current
in US practice and slightly above that attained
by the USSR. In so doing, rolling stock was
probably overloaded and undermaintained,
with reserves apparently cut to a minimum,
although the Communists have increased the
capacity of rolling stock repair and manufac-
turing facilities.
64. The Chinese Communists claim that the
extensive inland water system carried 20 mil-
lion tons in 1954 by modern waterway trans-
port exclusive of junks. It is estimated that
river junks carried a large portion of the
nation's total freight in 1954, particularly in
the Yangtze and Pearl River systems. Inland
waterways, although not fully exploited, are
a major transport facility for bulk traffic.
Only a small portion of the rudimentary road
net is of all-weather type. Roads provide im-
portant support for the area opposite Taiwan
and the main support for economic develop-
ment in the northwest. Civil air transport is
The Director of Intelligence, USAF, and the
Deputy Director for Intelligence, The Joint Staff,
do not believe that there is sufficient intelligence
to estimate with accuracy the tonnage carried
by Chinese Communist railroads. Fragmentary
and often ambiguous Chinese Communist an-
nouncements indicate that the railroads origin-
ated tonnages as high as 150 to 180 million
metric tons in 1954. However, rail operational
intelligence as interpreted by the Director of
Intelligence, USAF, and the Deputy Director for
Intelligence, The Joint Staff, indicates a capaci-
ty in terms of freight cars, locomotives, and
other facilities sufficient only to originate a
tonnage of about half this figure or about 80
million Metric tons. Until better intelligence
is available, we believe it can only be estimated
that the actual tonnage originated in 1954 was
somewhere between these wide extremes.
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largely limited to flights between Peiping and
and a few other cities; the civil air fleet com-
prises some 50 light transports.
65. The Chinese Communist merchant fleet is
small and relatively obsolete, and Communist
China must rely on foreign flag shipping to
carry all of its overseas trade as well as a
small but strategically important portion of
its seaborne coastal freight. Coastal shipping,
including both inshore junk traffic and ocean-
going freighters, provides the cheapest method
for moving bulk cargoes between the major
ports of Dairen, Tientsin, Shanghai, and Can-
ton. However, because of Chinese Nationalist
operations, all coastal freighters calling at
ports from Swatow north to Wenchow are of
non-Communist registry. In the Yellow Sea
area coastal shipping offers an alternate
transport facility to ease the pressure on the
single rail connection between Manchuria and
North China. Along the southeast coast it is
the principal means of transport. It is esti-
mated that Chinese Communist registered
ocean-going coastal shipping (over 1,000
GRT) carried approximately 87 percent and
foreign flag shipping engaged in coastal trade
carried about 13 percent of a total of 6.3 mil-
lion metric tons in 1954. We are unable to
estimate the tonnage carried by the inshore
junk traffic.
MERCHANT SHIPPING ARRIVING IN COMMU-
NIST CHINESE PORTS IN 1954 BY REGISTRY*
Non-Communist Number
United Kingdom 518
Japan 97
Norway 80
Sweden 32
Denmark 35
Italy 23
Netherlands 17
Finland 18
France 14
Germany 4
Panama 4
Pakistan 2
India 2
Morocco 1
Non-Communist TOTAL 847
Bloc TOTAL 158
This table excludes vessels under 1,000 gross
registered tons. These totals represent the ac-
tual arrivals, each ship being counted as many
times as it arrived in a Chinese port from a non-
Chinese port.
17
66. The first Five Year Plan allocates 7 billion
yuan, or 16 percent of the total investment in
fixed assets, for transportation, with the ma-
jor share going to railroads. Some 5,800 kilo-
meters of new trunk and branch rail line are
scheduled for construction during the Five
Year Plan. (See Map 1, for major projects.)
In addition, approximately the same amount
of trackage is scheduled for logging lines,
spurs, yards, and double tracking. A con-
siderable proportion of this construction was
probably motivated by strategic as well as eco-
nomic considerations. In addition, the Plan
calls for a total production of 550 locomotives
and 33,000 freight cars during the five year
period.
67. Plan goals for production of freight cars
are probably realizable, though there may be
some shortfall in the locomotive program.
This production of rolling stock, and the ex-
tent of trackage expansion that is likely to
be attainable, will probably, unless a substan-
tial proportion of these facilities is diverted
for purely military purposes, be adequate, or
nearly so, to support the Chinese Communist
development program. The Trans-Mongolian
railroad, with a capacity when fully operative
of about 2.7 million metric tons each way per
year, which will probably, go into operation
early in 1956, will also lessen Communist
China's present dependence on seaborne trade.
However, even with this new line the inter-
ruption of seaborne trade would reCluce Com-
munist China's foreign trade sufficiently to
cause serious delays in its development pro-
gram.
68. Foreign trade and Soviet assistance.
Communist China is dependent on imports for
essential elements of its industrial and mili-
tary programs. Fifteen percent, or $2.75 bil-
lion, of capital construction expenditures un-
der the Five Year Plan are allocated for im-
ports of machinery and equipment, while
expanding industrial output is increasing im-
port needs for raw materials and other pro-
duction requisites. However, except for grants
and credits supplied by the Soviet Bloc, Com-
munist China's ability to obtain such goods
is presently limited by its dependence on agri-
cultural exports. Agricultural commodities
accounted for about two-thirds of total Chi-
Pniurinrm-ri Al
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nese Communist exports in 1954. Chinese
Communist ability to trade is also adversely
affected by the complete closure of the US
market and by lesser restrictions maintained
by other Free World countries on exports to
Communist China. Finally, Bloc markets are
apparently having difficulties absorbing cer-
tain Chinese Communist exports.
69. The Chinese Communists announced that
their total foreign trade in 1954 amounted to
the equivalent of roughly $3.4 billion. Al-
though they claim that their foreign trade was
"fundamentally in balance," we believe there
was probably an excess of imports covered by
Soviet Bloc credits. While the nature of such
imports and Soviet property acquired by such
credits in 1954 is not known, there are indica-
tions that the total value could have been as
high as $400 to $500 million.
70. Communist China's trade became increas-
ingly oriented toward the Bloc in 1954. Trade
with the Asian and European Satellites in-
creased significantly over 1953 levels and re-
mained at approximately the same level with
the USSR, excluding that covered by Soviet
credits. Even after taking into account Satel-
lite resales of Chinese Communist goods to
non-Bloc countries, the Bloc still accounted
for about three-fourths of Communist China's
trade.
71. In 1954 the value of Chinese Communist
total trade with the Free World was greater
than in 1952 and probably approximately the
same as in 1953. However, there were sharp
increases in trade with Japan and Pakistan.
The recorded exports of the principal non-
Communist countries to Communist China in
1954 were:
(in US $ millions)
Hong Kong
67
Ceylon
48
Pakistan
26
West Germany
21
Japan
19
UK
18
Egypt
11
France
8
Malaya
7
India
6
Italy
5
Other
36
TOTAL
272
The tonnage of Free World exports to Com-
munist China has increased steadily from
497,000 tons in 1952 to 692,000 in 1953, and to
858,000 tons in 1954.
72. The Chinese Communists have stated that
their foreign trade in 1954 totalled over 9 mil-
lion tons. We believe that this is an incom-
plete figure, and that the total may have
amounted to between 10 and 11 million tons.
About 5.1 million tons moved by sea compared
to 4.8 million tons in 1953. Almost all of Com-
munist China's trade with the non-Commu-
nist countries, and about 25 percent of its
trade with Bloc countries, was carried by sea.
The bulk of Communist China's trade with the
Bloc was carried overland.
73. To meet requirements of the Five Year
Plan, the Chinese Communists propose to in-
crease total foreign trade by 65 percent during
the period, primarily through expanded ex-
ports of minerals, handicraft products, and
agricultural products. It is estimated that
Communist China could readily expand its
exports of coking coal and iron ore (e.g., to
Japan) without substantial new investment.
However, Communist China may have trouble
marketing increased quantities of handicraft
and higher priced agricultural products to
Bloc countries because there is a question of
the ability of the latter to absorb such in-
creases or profitably to re-export them. The
decline of Chinese Communist exports to the
Free World has stimulated Free World produc-
tion and use of substitutes for some traditional
Chinese Communist products.
74. Although increased trade with the Free
World would almost certainly develop if pres-
ent trade controls were relaxed to the level
maintained with the European Bloc, such in-
creases would probably not constitute a sub-
stantial reorientation of Chinese Communist
trade. Such a relaxation of trade controls, if
it included those of the US, would not greatly
increase Communist China's ability to secure
commodities not now available through trans-
shipment, but would permit an increase in
exports to markets not now open and would
reduce import costs on certain items. We be-
lieve that such a relaxation of controls could
increase Communist China's annual import
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capabilities by about $150 million, of which
about two-thirds would be-due to the reduction
of US controls. The total of $150 million is
roughly equal to about a quarter of Commu-
nist China's imports of capital goods, includ-
ing iron and steel, and about 5 to 10 percent
of the adjusted value of Communist China's
capital investment program in 1955. To that
extent, the buildup of Communist China's
economic and military potential could be ac-
celerated. There would also be a reduction
in internal Bloc transport costs, amounting to
approximately $100 million equivalent. It is
impossible for us to allocate such savings as
between Communist China and the other Bloc
countries. A relaxation of controls would in-
crease flexibility in planning, procurement,
and shipment. However, it probably would
not result in any significant changes in Com-
munist China's basic foreign or domestic poli-
cies.
75. Peiping has exploited the issue of trade
controls to divide the US from its allies and
has charged that US insistence on controls is
responsible for economic difficulties in Japan,
Thailand, the Philippines, and other Asian
countries. If controls were relaxed, Peiping
would continue its propaganda campaign
? against the US, but would seek to expand
trade contacts with other Asian states, espe-
cially Japan, and would continue to use trade
as a means of penetration and trade offers as
an instrument for political warfare.5
76. An increase in trade controls on Commu-
nist China alone would probably increase the
volume of transshipped goods but would not
appreciably retard Communist China's in-
ternal development. However, if all Western
countries now applying controls were to apply
an embargo on Chinese imports similar to
that now observed by the US, Communist
China would lose markets now taking almost
20 percent of total exports. Since Bloc mar-
kets are .not believed to be readily expandable,
it is probable that Communist China's import
' capabilities would be reduced proportionately,
The political effects of reducing trade controls
are considered in SNIE 100-56, "Political Effects
of a Relaxation of Controls on Trade with Com-
munist China,? 17 January 1956.
unless Soviet Bloc credits were increased.
Such a reduction in export earnings would
probably significantly retard Communist
China's internal development.
77. Soviet credits have been an important
factor in helping Communist China obtain im-
ports. The value of announced Soviet eco-
nomic aid totals $430 million, made up of a
$300 million credit extended during 1950-1954
for rehabilitation and reconstruction, and a
$130 million credit extended in 1954. In addi-
tion, Chinese Communist budget announce-
ments since 1950 have indicated that other
Soviet credits have been given to Communist
China. In 1954, the amount appears to have
been $400 million. In 1955, the amount ap-
parently was larger, with the major portion
earmarked for military purchases.
Military Situation
78. The power of the Chinese Communist re-
gime is based on the strength of its armed
forces and its great reservoir of potential mili-
tary manpower. Since the end of the Korean
War, Communist China has strengthened and
to a large extent modernized its military
establishment. However, it continues to de-
pend on the USSR for heavy armaments, com-
plex equipment, POL, and almost all naval
and air equipment.
79. Army. The Chinese Communist army
consists of about 2,500,000 men organized in
115 infantry, 22 artillery, 4 cavalry, 3 armored,
and 1 to 3 airborne divisions, as well as other
miscellaneous units. Approximately 40 per-
cent of army strength is located in North and
Northeast China and Korea, and another 40
percent in East and Central South China,
with relatively few troops in the interior. (See
Map 2.)
80. Substantial improvements in organiza-
tion, equipment, and training have been made
since the end of the Korean War. Actual
strength of most infantry divisions is esti-
mated at 15,000 men, and division organiza-
tion includes an artillery regiment of 36 field
pieces. Tank regiments are believed to be
organic to the army troops of 2 of the 37
armies and to 16 of the 115 infantry divisions.
CONFIDENTIAL
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Standard armored division equipment in-
cludes 80 medium tanks, 8 heavy tanks, and
8 self-propelled guns. Twelve of the artillery
divisions are field artillery, standard equip-
ment of which includes 108 pieces of calibers
up to 152 mm. However, the amount of
equipment actually present in armored and
artillery units is believed to be somewhat less
than TO&E.
81. General army morale is believed to be
high because of increased professionalization
and ideological indoctrination as well as the
privileged social status accorded the soldier.
The adoption of universal conscription in July
1955 will probably increase service morale by
fixing the terms of service and rationalizing
induction methods. However, a significant in-
crease in general popular disaffection, par-
ticularly among the peasants, might adversely
affect the morale of many servicemen.
82. The numerical strength of the Chinese
Communist army will probably not increase
through 1960 unless the Chinese Communists
feel themselves faced with imminent large-
scale war. However, beginning in 1958, the
conscription law will increase the body of
trained reserves by requiring reserve duty of
most of the estimated 450,000-600,000 troops
to be discharged annually and an unspecified
number of men under 40 with no previous
service.
83. By 1960 the army is expected to have com-
pleted the process of incorporating a tank
regiment and increased artillery and heavy
weapons into each infantry division. Stand-
ardization of light weapons of Chinese Com-
munist manufacture and heavy armaments of
Soviet manufacture will be virtually complete.
84. Chinese Communist vulnerability to air
attack has caused them to place considerable
emphasis on antiaircraft defense. Most com-
bat divisions now include antiaircraft battal-
ions for local protection. Five antiaircraft
divisions and some 19 independent antiair-
craft regiments have been identified. Fire
control equipment, especially radar, appears
to be in short supply. With expected increases
in equipment and further training during the
period of this estimate, the Chinese Commu-
nists will probably develop a substantial anti-
aircraft capability.
85. Air Forces. Chinese Communist air (in-
cluding naval air) forces have an estimated
total strength of 2,270 planes (including 1,485
jets) and about 80,000 personnel. Through
1960 the principal offensive air weapon will
be the jet light bomber force, which presently
consists of an estimated 310 BEAGLES and
which will probably reach approximately
590 by 1960. Although presently stationed
mainly in bases near Korea and Taiwan, this
bomber force could be redeployed so as to
reach any target in Asia north of the Malay
Peninsula and the southern Philippines. (See
Map 2.) It is handicapped by lack of combat
experience and fighter escort capability. Com-
munist China has only 10 piston medium
bombers (BULLS) , and is expected to have no
more than 60 by 1960. These could reach
targets as far away as Guam and Singapore.
It will probably not acquire its first jet
medium bombers before 1960.
86. Communist China's air defense capability
lies mainly in its estimated 1,175 jet fighters,
and its core of combat veteran pilots. This
force is considered combat-ready under visual
operating conditions. Replacement of the few
remaining piston fighters with Soviet jets
should be completed by mid-1956, and the de-
velopment of an all-weather force will prob-
ably begin shortly thereafter. Some 570 all-
weather fighters may be added to the air force
by mid-1960. Total fighter strength will prob-
ably reach a peak of about 1,600 jet fighters
in mid-1958. Despite difficulties in construc-
tion and supply, Communist China has great-
ly improved its base structure in the coastal
area opposite Taiwan.
87. Navy. With the aid and technical advice
of the USSR, the Chinese Communist navy
has reached a present modest strength of 4
destroyers, 13 submarines, 50 patrol escorts
and gunboats, 118 motor torpedo boats, 13
mining vessels, and 56 amphibious craft. A
number of small Soviet vessels may recently
have been delivered to the Chinese Commu-
nists along with the transfer of Port Arthur.
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88. Although there are indications that the
USSR may have recently helped the Chinese
Communists launch an accelerated program
of naval construction, the development of the
navy through 1960 will probably continue to
depend primarily on material received from
the USSR. The Chinese Communists will
continue to possess sufficient air and naval
strength to control the air and sea spaces
necessary for amphibious operations in the
Taiwan Straits and offshore island areas pro-
vided the US does not intervene. They will
develop a capability for medium range sub-
marine operations and will probably further
develop their mine warfare and surface capa-
bilities for conducting defensive operations in
coastal waters. These factors, coupled with
existing air power, will probably give them
during the period of this estimate a significant
capability to oppose hostile forces operating
in coastal waters.
89. Naval air force strength (included in
paragraph 85) is 185 planes and 4,700 per-
sonnel. The development of Chinese Com-
munist naval aviation has recently received
considerable emphasis, probably reflecting a
need to perform standard naval missions such
as support of amphibious landings, antisub-
marine patrol, convoy escort, search and
rescue, reconnaissance, and mining. It is also
possible that, following the Soviet pattern, the
defense of certain coastal areas and bases is
assigned to naval air. In any event, it is
known that re-equipment of the naval air
force with jet aircraft is being given high pri-
ority.
90. The Chinese Communists have sufficient
conventional amphibious type ships to provide
lift for 35,000 to 45,000 troops with some
armor, supporting weapons, and limited trans-
portation, or a maximum of 70,000 lightly
armed infantry troops. As of mid-1955 the
Chinese Communist merchant marine in-
cluded 111 vessels (1,000 GRT upward) total-
ling 278,000 gross tons with an estimated car-
go capacity of 417,000 long tons. Utilization
of this shipping could provide additional lift
for about 200,000 troops. However, consider-
ing the special problems of phasing, control,
and protection of forces peculiar to an am-
phibious operation and the necessity for logis-
tic resupply and reinforcement lift capacity, it
is estimated that a Chinese Communist initial
assault force would be limited to 75,000-100,-
000 troops.
91. Nuclear capabilities. We have no evi-
dence that Communist China possesses any
nuclear weapons, and it has only a primitive
nuclear research capability. However, if the
USSR were to provide the necessary equip-
ment and technicians, the Chinese Commu-
nists could in a short time achieve the capa-
bility to use nuclear weapons. A recent Soviet
pledge to supply a 6,500 kilowatt nuclear re-
actor, a laboratory for handling radioactive
materials, and an unspecified number of 25
Mev cyclotrons to Communist China in the
next few years and to train Chinese Commu-
nist atomic scientists could, if carried out,
lead to a small Chinese Communist nuclear
research program by 1960. This aid appears
to be of most use in such fields as medicine
and biology, and additional Soviet assistance
of a different nature and on a scale much
larger than announced would be required to
initiate a nuclear weapons or power program.
Communist China in 1960
92. Through 1960, the Chinese Communist
economy, barring such unforeseen contingen-
cies as a major war or a series of natural
disasters, will probably have continued to ex-
pand, although at a lower rate than during
the ,first Five Year Plan. The bulk of modern
industry will probably be state-owned and
most peasants will be in some form of cooper-
ative. From 1952-1960 Communist China
will probably have about tripled its electric
power output, more than doubled its coal pro-
duction, and increased the value of its ma-
chine industry some two and one-half times.
However, even with these substantial in-
creases, Communist China's industrial base
will remain small. Crude steel production
probably will not be more than 5 million tons,
or some 2.8 million tons below Japan's 1954
leve1.6 Its estimated electric power output of
about 21 billion KWH will be 39 billion KWH
below the 1954 Japanese output. Moreover,
See note to table on page '12.
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at best the rate of increase of agricultural
production will only approximate the growth
of population. Under these circumstances,
the regime will continue to have great diffi-
culty in meeting its increasing investment and
export requirements. Finally, continued de-
pendence on the sources outside Communist
China for a wide range of complex industrial
items and a shortage of skilled technicians
will complicate planned economic develop-
ments.
93. The Chinese Communists will have greatly
increased their military capabilities. Against
indigenous military forces, Peiping will re-
main capable of overrunning South Korea,
Taiwan and the offshore islands, and main-
land Southeast Asia. However, Communist
China will still suffer from military weak-
nesses, particularly air defense deficiencies
and lack of an adequate indigenous arma-
ments base. Chinese Communist dependence
on the USSR for vehicles, POL, and almost all
complex military equipment will continue
through 1960. Communist China will prob-
ably be self-sufficient only in light weapons
and individual equipment.
94. The control system will be under increas-
ing pressure. In particular, increased de-
mands for food will conflict with the regime's
program to develop large reserves and to in-
crease exports of foodstuffs and the acreage
devoted to industrial crops. Although the re-
gime might make some modifications of its
investment program in the event of a series
of bad crop years to increase the availability
of consumption goods, it probably would not
make major concessions. Its control mechan-
ism will probably be adequate to enforce prog-
ress toward its economic goals, but the re-
gime will probably have to resort to purges
and to terror, particularly against the peas-
ants. Popular support for the regime is like-
ly to decline further among peasants and in-
tellectuals, and the party itself may lose much
of the esprit that characterized the revolution-
ary period.
II. SINO-SOVIET RELATIONS
95. During the past five years the relationship
between Communist China and the USSR has
Declassified and Approved For Release
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become a concert of interest and action in
which a substantial degree of mutual depend-
ence has developed. The two allies are linked
not only by ideological bonds, but by common
hostility to the US, by a military interdepend-
ence involving Communist China's manpower
and strategic location and the USSR's indus-
trial and technical capabilities, and by the
mutual advantages of concerted diplomatic
and "revolutionary" activities. While we be-
lieve that policies of mutual concern are
mutually determined, Peiping's dependence on
Moscow for arms, industrial resources, and
technical assistance will cause it to continue
to give Moscow's views great weight on major
questions of global policy. But Peiping's tac-
tical position in many areas probably gives it
considerable potential for influencing Moscow.
96. From the beginning, the Chinese Commu-
nist regime escaped Satellite status both be-
cause of the size and remoteness of China and
because the regime rose to power primarily
through its own efforts. The Communist
Chinese role in the Korean War gave Commu-
nist China additional bargaining strength in
dealing with the USSR.
97. Since late 1950 Soviet writers have ac-
corded Mao special honor for his contributions
to the "treasury of Marxism-Leninism" in the
field of strategy and tactics for revolutions
in "colonial and semicolonial" countries.
There were indications in the late summer of
1954 of unusual Soviet solicitousness towards
the Chinese Communists in Malenkov's public
reference to the "new situation in Asia" cre-
ated by the emergence of Communist China,
and in the unprecedented visit to Peiping
of Khrushchev and Bulganin. Communist
China's stature in the Bloc was further en-
hanced by Molotov's subsequent reference in
February 1955 to the "world camp of socialism
and democracy" as "headed by the USSR ?
or more correctly said ? headed by the Soviet
Union and the Chinese People's Republic."
98. Traditional Sino-Russian territorial rival-
ries along their 1,400-mile common border are
a potential source of friction between the al-
lies. Since the 18th century, China has re-
garded Tannu Tuva and Outer Mongolia as
Chinese territory. Although the Chinese Corn-
assiikii0a7
PAnirinnwri Al
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UUIMULIIi Wu_
Miltelre 23
munists now appear to have accepted Soviet
control of these areas, they may still be ap-
prehensive about Soviet influence in Sinkiang
and possibly about the recent Soviet interest
In developing previously neglected regions
adjacent to Sinkiang and Manchuria. How-
ever, the well-publicized Soviet withdrawal
from Dairen and Port Arthur indicates that
the Soviet leadership has taken steps to reduce
Chinese Communist sensitivity in the border
areas.
99. Sino-Soviet economic relations are anoth-
er area of potential friction. There have prob-
ably been disagreements over the level of So-
viet aid to Communist China's industrializa-
tion, and the Chinese Communists have al-
most certainly pressed for much greater aid
than the USSR is willing to grant.
100. Although there is no evidence of serious
friction or lack of coordination in Chinese
Communist and Soviet relations with other
Communist parties in Asia, there is a latent
possibility of strains developing in these rela-
tions. In North Korea the Chinese Commu-
nists increased their influence during the
Korean War, but Soviet-trained figures still
hold the most important positions. In North
Vietnam, geographic proximity has fostered
Chinese Communist influence, and the volume
of Chinese Communist propaganda support
and projected aid exceeds that of the USSR.
Chinese Communist influence on Japanese
Communism may also have increased with
the recent return of some Japanese Commu-
nist leaders from Communist China. The
Chinese Communists apparently control the
Malayan Communist Party, but their influ-
ence on the Indonesian Communist Party may
be offset by long established channels leading
to Moscow.
101. The intensity of the "liberate Taiwan"
movement in Communist China on a number
of occasions may have created apprehensions
among Soviet leaders. Chinese Communist
willingness since the Bandung Conference to
use diplomatic tactics to further their objec-
tives in Taiwan probably indicates that this
possible difference of emphasis is not now a
serious source of Sino-Soviet friction.
102. During the period of this estimate, Com-
munist China's power and its potential for
pursuing courses of action which could con-
flict with Soviet interests or desires will
probably increase. Communist China will
probably exert an increasing influence on
Asian opinion independent of that exercised
by the USSR. The growth in Chinese Com-
munist prestige might encourage some Chi-
nese Communist leaders to attempt to extend
Chinese influence over other Asian Communist
parties beyond the point desired by the USSR.
However, no major differences of interest in
Asia seem likely to develop during the period
of this estimate.
103. For a considerable time to come mutual
advantage, the existence of common enemies,
and a single ideology will almost certainly pre-
vail over lesser considerations to preserve close
Sino-Soviet ties which will probably continue
to be relatively impervious to outside manipu-
lation. Peiping probably believes that its alli-
ance with the USSR prevented UN forces from
broadening the Korean War and restrains the
US from action against the mainland. The
Chinese Communists will almost certainly feel
the need for continued protection until their
own power in the Far East is much further
developed.
104. Therefore, at least through 1960, Peiping
will almost certainly adhere to the alliance.
A lessening of East-West tensions would prob-
ably not significantly affect Peiping's estimate
of the continued need for the alliance, and
might ease pressure in Sino-Soviet economic
and military negotiations. A heightening of
tensions could create new problems for the
alliance, but would strengthen Peiping's de-
sire for solidarity, unless the USSR proved
unwilling to insure the security of the Peiping
regime.
III. PROBABLE CHINESE COMMUNIST
COURSES OF ACTION IN ASIA
105. In pursuit of its basic foreign policy aims,
Peiping will, during the next five years, prob-
ably concentrate on eliminating the Nation-
alist government and gaining control of all
Nationalist-held territory, eliminating West-
ern (and especially US) influence and power
in Asia, extending its own influence in the
voikkafraft
PrminnENITIAI
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_
441=fg- r 24
area, and achieving acceptance as the legiti-
mate government of China. The Chinese
Communists probably believe that time is on
their side. This conviction is based on a belief
both in the ultimate victory of the world Com-
munist movement and in the power of China
under strong central government. Leninist
doctrine and their own interpretation of re-
cent events have probably convinced them
that flexibility and even tactical retreats will
not seriously compromise their long term
prospects.
The Chinese Communist Estimate of
the Situation
106. The primary factor in determining the
manner in which Peiping will pursue its for-
eign policy objectives is its estimate of prob-
able US actions and reactions. It probably
considers the ultimate US objective in Asia to
be the elimination of the Chinese Communist
regime, but probably estimates that the US
does not intend, unprovoked, to attack Com-
munist China within the next several years.
107. Peiping almost certainly estimates that
open aggression on its part against either Tai-
wan or the ROK would lead to strong US
counteraction, probably including action
against mainland China and possibly includ-
ing the use of nuclear weapons. It probably
further estimates that an overt Chinese Com-
munist attack on any other non-Communist
Asian state would also entail risk of US mili-
tary- counteraction against the China main-
land. It probably also estimates that an overt
attack by the Viet Minh against any of the
Indochinese states might result in at least
local US military reaction, with such reaction
particularly likely in the case of South Viet-
nam. The Chinese Communists probably also
estimate that US military capabilities for the
concentration and effective application of
force in the areas of Korea, Taiwan, Indo-
china, and even the China mainland are still
superior to their own. However, there almost
certainly remain twilight areas in which they
are uncertain as to the intention or the ability
of the US to react, as in the event of attacks
on the Nationalist offshore islands or intensi-
fied subversive efforts in non-Communist
states.
108. Moreover, the Chinese Communists prob-
ably estimate that they have certain advan-
tages over the US in any primarily political
struggle in Asia. They almost certainly be-
lieve that the prestige of Communist China in
Asia will increase along with the military and
economic strength of their regime. They
probably estimate that the indigenous Com-
munist parties and, to a lesser extent, the
12,000,000 overseas Chinese in Southeast Asia
provide them with unique instruments for un-
dermining non-Communist governments. In
their view differences among the non-Com-
munist powers on Asian policy will make it
difficult for the US to take effective measures
against Communist expansion conducted
through measures short of overt aggression.
Moreover, they probably estimate that anti-
colonial, neutralist, and nationalist sentiment
will continue to aid their efforts to discredit
US motives in Asia. They probably also esti-
mate that American diplomacy is complicated
by commitments in other areas and by ex-
ternal and internal political pressures which
make it less flexible than their own.
109. At the same time, the Chinese Commu-
nists may recognize that serious obstacles
exist to the extension of their power: (a) in
most non-Communist states in Asia, nation-
alism is the dominant force and most leaders
of these states recognize the threat of a domes-
tic Communist movement to their independ-
ence; (b) despite occasional well-publicized
offers of technical and material aid, Chinese
Communist capital resources are insufficient
to help these countries gratify their desires for
industrial development; and (c) less impor-
tantly, in several of these same countries,
the influential local Chinese community is
still regarded with envy and suspicion.
110. The Chinese Communists are probably
not as concerned with the present strength
of SEATO as with the future possibility of an
expanded and strengthened anti-Communist
bloc in Asia. Their apprehensions on this
score probably center on Japan, in their view
the only Asian power which might signifi-
cantly augment anti-Communist power in
Asia during the period of this estimate. The
Chinese Communists probably also view India
Amessw
CONFIDENTIAL
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as a rival for Asian leadership. They prob-
ably also estimate that India would resent a
substantial extension of Communist influence
in South and Southeast Asia and be alienated
by overt Chinese Communist aggression in
these areas. Peiping apparently feels that an
attitude of outward respect for the positions
of Japan, India, and other Asian powers will
encourage their passivity and a tendency to
think in terms of Asian solidarity. It appears
to believe that such ostentatious maneuvers
as mutual declarations of fealty to "the five
principles" are likely to help allay Asian dis-
trust of Peiping's motives.
111. In Communist China's view the probable
basic hostility of France, the Netherlands,
Portugal, and probably even the UK is un-
likely to be effectively manifested because of
their political and military weaknesses and,
to a lesser degree, because of their desire for
trade with Communist China. Chinese Com-
munist hostility to these countries has there-
fore been subordinated to hostility to the US.
The Chinese Communist regime probably esti-
mates that so long as it exercises restraint
toward these countries, they can be of con-
siderable value to it, both in trade and in
inducing the US to modify its policies in the
Far East.
Main Lines of Chinese Communist
Foreign Policy
112. During the period of this estimate, Pei-
ping will almost certainly wish to avoid serious
military involvement with the US. For this
7 The "five principles," first subscribed to by Chou
and Nehru in April 1954 as the general principles
governing Sino-Indian relations, were defined as
"mutual respect for each other's territorial in-
tegrity and sovereignty, nonaggression, non-
interference in each other's internal affairs,
equality and mutual benefit, and peaceful co-
existence." Although reportedly inserted at
Nehru's insistence, the principles are standard
Communist cliches, closely resembling those used
in Soviet treaties both with Nationalist China in
1945 and with Communist China in 1950. Since
mid-1954, the principles have been major slogans
of Peking diplomacy and have been subscribed to
by U Nu of Burma and Ali Sastroamidjojo 'of
Indonesia in joint communiques with Chou as
well as by Ho Chi Minh and the USSR.
25
reason, we believe that Peiping is unlikely to
initiate open hostilities with its own forces,
except perhaps against the offshore islands.
Peiping probably would also be unlikely to en-
courage the North Koreans or the Viet Minh to
undertake large-scale military action because
it would probably estimate that such action
could not be carried out without ultimate
large-scale involvement of Communist China
with the US. However, during the period
Peiping will probably encourage expanded
guerrilla activity in Indochina. Although
Peiping will probably continue to sanction
other guerrilla movements now in existence it
is unlikely, at least in the early part of the
period, to provide the support necessary for
large-scale expansion of these activities.
113. Although the Communists may again re-
sort to military action whenever they estimate
that the benefits will outweigh the military
disadvantages of such action, Peiping will
continue to pursue policies emphasizing po-
litical rather than military action as long as
its objectives are acceptably served by this
means. The major factor in this considera-
tion will be their estimate of the risk of
US military counteraction; thus Communist
China will probably emphasize political action
over the next two or three years. In collabo-
ration with the USSR, Communist China will
pursue a policy of "competitive coexistence
with the capitalist bloc." The Chinese Com-
munists will endeavor to have their approach
to international problems characterized as
conciliatory and flexible, but joint Sino-Soviet
policy will in fact permit no major concessions
to the West. Moreover, both parties may feel
that the development of occasional crisis situ-
ations would weaken the diplomatic position
of the US and strengthen neutralism, without
seriously prejudicing their own "coexistence"
posture. Communist China will also be under
some pressure, more so than the USSR, to
manufacture crises in its external affairs to
provide a pretext for imposing new production
and austerity drives at home. For these rea-
sons, we believe that although Peiping will
continue to profess support for the "five prin-
ciples" there will be times when it will assert
its power ostentatiously, but within the gen-
4$10049,ft.-
CONFIDFNTIAI
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tJUflUL I int_
eral limits of Bloc strategy, in order to re-
affirm its particular claims and pretensions.
114. By 1960, if Communist China follows a
course of political rather than military action,
most non-Communist countries will probably
have recognized Peiping and established nor-
mal economic relations with Communist
China, and it will:probably have been accepted
into the community of nations as the major
Asian power. In this situation, its position
in the Sino-Soviet Bloc will have been en-
hanced and the Chinese Communists will
probably have a greater degree of flexibility
in their relationship with the Soviet Union.
115. Peiping's diplomatic activities on behalf
of the Bloc policy of "competitive coexistence"
will be concentrated in Asia and the Middle
East, where there is a disposition to accept
Communist China as a "former victim of
imperialist and capitalist oppression." Com-
munist China's role in this effort will be to
play up to neutralist and nationalist senti-
ment in Asia; to manipulate the Indochina
and Taiwan issues to divide the West; and to
exploit vulnerable aspects of intra-Asian rela-
tions such as ROK-Japanese and Indian-Paki-
stani tensions. The Chinese Communists will
almost certainly continue their efforts to dis-
credit US actions and motives throughout
Asia, insisting that US policy is disguised
colonialism and is directed toward a war in
which "Asians will be used to fight Asians."
In particular, they will attempt to frustrate
US efforts to develop a basis for military co-
operation among free Asian, states. Peiping
will emphasize the advantages of technical
and economic assistance from Communist
countries as well as "mutual self-help" among
underdeveloped countries. They will also seek
a reduction in Western military, commercial,
and other privileges in the area. Chinese
Communist propaganda on these themes will
seek primarily to keep anti-Communist Asians
on the defensive over the issues of "colonial-
ism" while the base for future Communist
advances is strengthened. Communist China
will encourage wherever possible the forma-
tion of popular-front type governments in
which the Communist influence would be sig-
nificant and the Chinese Communist pattern
26
of anticolonial "people's democracy" studied
and admired. While to the US Peiping policy
may appear uncompromising, to many Asian
states it may appear conciliatory and flexible.
116. The possibility of a Communist-initiated
war in the Taiwan Straits, Vietnam. Laos,
and even Korea will continue to exist. More-
over, Peiping would almost certainly react
with force if Communist control of North
Korea or North Vietnam were seriously threat-
ened. They would almost certainly retaliate
to any sharp increase in the level of National-
ist attacks against the mainland.
Specific Courses of Action
117. Taiwan. Peiping is committed to the
"liberation" of all Nationalist-held territory,
and defines the Taiwan issue as an internal
one in which foreign interference will not be
tolerated. For the period of this estimate,
however, Chinese Communist courses of ac-
tion toward the offshore islands and Taiwan
will be determined largely by their estimate
of US reactions.
118. Since the Bandung Conference in April
1955, the Chinese Communists have attempted
to advance their claims to Nationalist-held
territories more by diplomacy than by military
action. However, Peiping has emphasized
that its current willingness to take over Tai-
wan "peacefully, if possible," should not be
interpreted as an abandonment of its basic
objective. Chinese Communist efforts will be
concentrated on reducing morale within the
Chinese National government and within the
mainland Chinese community on Taiwan, in
the expectation that Nationalist leaders may
ultimately be induced to negotiate with Pei-
ping over Taiwan's assimilation into Commu-
nist China. The Chinese Communists will al-
so continue trying to force US agreement to a
bilateral or multilateral conference, at which
their object would be to induce the removal of
US military protection from Taiwan.
119. The Chinese Communists will probably
continue their buildup in the area opposite
Taiwan and the offshore islands in order to
increase pressure on the US and to weaken
morale on Taiwan. While the Chinese Com-
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CONflUtm UAL
jsicumadidpoo--
munists probably do not intend to attack Tai-
wan so long as the US maintains its commit-
ments to the Nationalists, they will almost
certainly conduct probing operations against
the offshore islands. If the Chinese became
convinced that the US would not assist in the
defense of these islands with its own forces,
they probably would attempt to seize them.
Should Peiping's forces successfully occupy
the Nationalist-held offshore islands without
incurring US military retaliation, there would
be an intensification of the campaign to ob-
tain Taiwan.
120. Indochina. We believe that the imme-
diate Chinese Communist objective in Indo-
china was secured at Geneva when the Viet
Minh were granted full control of North Viet-
nam. Peiping may have believed that it also
received an implied commitment for the de-
livery of South Vietnam in July 1956, and that
in any event conditions had been created
which would make it difficult for the US to
intervene. However, we believe that the Chi-
nese Communists now estimate that the US
would make a strong effort to frustrate an
extension of Communist control to the south.
121. In conjunction with the Hanoi regime,
Peiping will continue its efforts to expand
Communist influence and control in South
Vietnam. Through coercion, subversion, and
propaganda the two Communist regimes will
attempt to discredit and undermine the au-
thority of the Diem government, and to em-
barrass that government and the US on the
question of nationwide elections. In addition,
the Chinese Communists will continue diplo-
matic efforts to isolate the Diem government
from the Western nations and the Asian
neutrals. Even if the Viet Minh are delayed
in achieving a settlement, by elections or
otherwise, favorable to the extension of their
control over all of Vietnam, the Chinese Com-
munists probably will not encourage the Viet
Minh to renew open hostilities. However, at
some point they probably will encourage in-
creased Viet Minh guerrilla activity in South
Vietnam. Their actions beyond that phase
would probably depend on the effectiveness of
Diem's counteraction and the response of the
US and the SEATO powers.
Declassified and Approved For Release
27
122. In Cambodia and Laos, the Chinese Com-
munists will combine pressure and induce-
ments to encourage neutralist sentiment, to
weaken ties with the West, and to stimulate
subversion of the free governments. We be-
lieve that if the Pathet Lao position were
threatened by Royal Government action, Pei-
ping would encourage the Viet Minh to assist
the Pathet Lao to the extent necessary to pre-
serve the Pathet position. It is less likely
that the Chinese Communists will encourage
the Pathet Lao to undertake aggressive mili-
tary action outside of their present group-
ment area, at least while the International
Control Commission remains in being and in
the absence of greater evidence of popular
support for the Pathet Lao within Laos.
Should South Vietnam fall to the Viet Minh,
Communist support for subversion and para-
military operations in Laos and Cambodia
would almost certainly be increased.
123. Korea. The Chinese Communists, in
common with the USSR, hope to secure a with-
drawal of UN forces from Korea and a reduc-
tion of US influence there and eventually to
subvert the ROK. As a means of putting
pressure on the US to withdraw its troops, the
Bloc will probably urge new negotiations on
unification and "relaxation of tensions." To
further this end, there may be additional with-
drawals of Chinese Communist forces. The
Communists will almost certainly refuse any
settlement in Korea which endangers Commu-
nist control of North Korea or fails to offer
better prospects than at present for eventual
Communist control of all Korea.
124. Japan. Communist China seeks to fore-
stall the re-emergence of Japan as a major
military and political power in Asia and, in
the short run, to weaken Japan's links with
the US by exploiting US-Japanese policy dif-
ference. Peiping's tactics will probably con-
tinue to rely upon the manipulation of domes-
tic opposition to the policies of the Japanese
conservatives, the inducements of Sino-Japa-
nese trade, and the application of direct pres-
sures upon the Japanese government. Com-
munist China will probably be able to increase
semiofficial contact with Japan through trade
and cultural missions and will probably step
up its campaign to normalize relations.
rnuinFNTIAL
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- -
125. Communist China will probably continue
to support the current line of the Japanese
Communist Party in avoiding acts of violence
and working for a popular front. However,
should any Japanese government undertake
an extensive rearmament program or reverse
the present policy of permitting the expansion
of unofficial relations with Peiping, Commu-
nist China might publicly revert to the posi-
tion that Japan is a major threat to peace
and launch a campaign of threats and intimi-
dation designed to reinforce leftist opposition
within Japan.
126. India. Although Communist China al-
most certainly regards India as a rival, it will,
at least during the next two or three years,
probably seek to encourage India's present
neutralist stand, which has furthered the aims
of Sino-Soviet diplomacy by bolstering neu-
tralist sentiment generally throughout Asia
and the Middle East. Thus, Communist China
will stress those interests it shares with India,
and will probably keep its attempts to expand
its influence in the Indo-Tibetan border area
just short of the point where the Indian gov-
ernment's antagonism could no longer be con-
cealed.
127. Burma. In the next two or three years
it will probably be Peiping's minimum ob-
jective to prevent Burma from abandoning
its present neutral position. Beyond that,
Communist China will be working to distort
Burma's neutrality, by encouraging tighter
Burmese bonds with Communist nations. The
threat of its military power will continue to
reinforce Communist China's diplomatic cam-
paign emphasizing offers of friendship and
peaceful cooperation. Peiping will almost
certainly attempt to exploit Burma's financial
28
and economic problems to bring about closer
Burmese-Chinese Communist ties. Moreover,
the Chinese Communists will retain their
capabilities for subverting the minority peo-
ples along Burma's eastern frontier.
128. Indonesia. The Indonesian Communist
Party (PKI) is the strongest indigenous Com-
munist party in non-Communist Asia and the
Chinese Communists probably estimate that
its capabilities will continue to be maximized
by emphasizing a "peaceful" attitude to-
ward the Indonesian government. Commu-
nist China will probably continue its efforts
to enhance the chances of PKI participation
in a national front government by itself ap-
pearing to support Indonesian nationalist
objectives. Even if the PKI were excluded
from the new government which will come
into office in the spring of 1956, the Indo-
nesian Communists would probably be en-
couraged by the Chinese Communists to con-
tinue working for a popular front primarily
by penetration, propaganda, and organiza-
tional work.
129. Malaya. Communist China probably
hopes, by encouraging Malayan nationalism,
to force a British withdrawal from Malaya
under conditions that would increase local
Communist prestige. Peiping probably esti-
mates that its capability to achieve this end
is enhanced by the continued colonial status
of the area, and in Singapore by the predomi-
nant overseas Chinese population. Peiping
will almost certainly continue to encourage
Malayan Communists to work for popular
front governments, to extend control over
Chinese youth and the labor movement, and
to maintain their guerrilla organization.
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0 100 390. 390 790 Nautical Miles
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Selected (peripheral) air bases ore
shown with 690 nouticol-mile radius
of IL-28 (Beagle) bomber with ex-
0 100 360 500 700 Statute Miles o
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SECRET
90
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25107 CIA, 12-55 swegau
Declassified and Approved For Release @50-Yr 2013/08/12 : CIA-RDP79R01012A007000040001-1
?rni\iginCRITI A i
Declassified and Approved For Release @50-Yr 2013/08/12 : CIA-RDP79R01012A007000040001-1
LQIIFIDENTIAL
,41101ET
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Declassified and Approved For Release @50-Yr 2013/08/12 : CIA-RDP79R01012A007000040001-1