THE ECONOMIC DEVELOPMENT OF COMMUNIST CHINA THROUGH 1957

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• Collection: General CIA Records
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• Document Creation Date: December 23, 2016
• Document Release Date: April 30, 2013
• Sequence Number: 1
• Publication Date: April 30, 1954
• Content Type: REPORT

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PEeRE-T,
ECONOMIC INTELLIGENCE REPORT
THE ECONOMIC DEVELOPMENT OF COMMUNIST
CHINA THROUGH 1957
CIA/RR 33
30 April 1954
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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ECONOMIC INTELLIGENCE REPORT
THE ECONOMIC DEVELOPMENT OF COMMUNIST CHINA
THROUGH 1957
CIA/RR 33
(CRR Project 15.134)
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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FOREWORD
. The problem undertaken in this report is the assessment of the
economic development of Communist China through 1957 in the light of
the internal consumption needs of the population, the human and
natural resources of the country, the plans of the regime, trends in
production and investment, domestic and foreign trade, and the po-
sition of the regime with reference to the Korean War. Communist
China, for the purposes of this report, consists of all territories
now under the control of the Chinese Communist government -- Man-
churia, China proper, Suiyuan, Sinkiang, Tibet, and Inner Mongolia.
It has been assumed for the purposes of this report that in
general there will be a continuation of the policies toward Communist
China now followed by the USSR and by the NATO powers and the other
non-Communist countries.
In a backward country such as Communist China, part of the back-
wardness is manifested in a lack of reliable statistics for esti-
mating current production of many kinds of goods and services. Even
reliable population and Tabor force figures are lacking for China.
The first step the Chinese Communist regime had to take in order to
prepare a plan of economic development was to start a national
census and set up a statistical bureau to gather the necessary
statistics for national planning.
Although any set of quantitative estimates of economic activity
in Communist China must suffer from the inherent weakness of the
statistical base, there must be a starting point from which to
measure the possible rate of growth of the Chinese Communist economy.
In lieu of adequate statistical data, many assumptions have been
made as to the proportions of the labor forCe and as to price re-
lationships within and among sectors of the economy, in order to
arrive at estimates leading to an estimate of the gross national
product (GNP) for 1952. The resulting estimate of GNP is probably
conservative. It must be considered provisional and subject to
refinement and correction as more complete and reliable data are
received, and it must be used with reservation in international com-
parisons because of the margin of error which is implicit in some
of the basic data. The assumptions, data, and methods used in
arriving at estimates made in this report are treated only briefly
in the appendixes.
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CONTENTS
Page
Summary and Conclusions
1
I. Human Resources and Technology
13 '
A. Population and Population Pressures
13
1. Total Population
13
2. Population Densities
14
3. Population Growth
15
4. Emigration
15
5. Human Fertility
16
6. Health and Nutritional Requirements
19
B. Industrialization, Urbanization, and Availability
of Industrial Labor
24
C. Status of Education and Technical Training
30
D. Soviet Technical Aid
34
II.
Administration and Planning
39
A. Administrative Framework
39
B. Economic Planning and Implementation of Plans .
41
C. Soviet Influence in Chinese Communist Economic
Planning and Development
47
Functional Aspects of the National Economy
49
A. Financing of Economic Development
49
B. National Budget
49
1. Expenditures
49
a. Military Expenditures
b. Investment in "National Economic
49
Construction"
50
c. Welfare, Education, and Propaganda
53
d. Administrative and Other Expenditures
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54
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_ _ _ _ _ _
2.
Revenues
Page
54
a. Agricultural Taxes
54
b. Industrial and Commercial Taxes
55
c. Profits of State-Owned Enterprises
55
d. Credits, Loans, and Insurance
e. Other Revenues and Balance from Preceding
56
Year
56
C.
Banking System
57
1.
Private Banks
57.
2.
Functions of the Government Banks
58.
D. Currency, Prices, and Consumption
IV. Growth of the National Economy
A. Gross National Product
6o
63
63-
1. Gross National Product in 1952
67
2. Comparison with US Gross National Product . . ?
?
67
3. Comparison with Pre-Communist Peak Production ?
?
70
B.
Factors Determining Growth
71
1. Agriculture
71
a. Production
72
b. Productivity
72
c. Agricultural Policies
d. Range of Possible Increases of Agricultural
76
Production and Exports
85
2. Modern Industrial Sector
90
a. Coal Industry
90
b. Electric Power Industry
96
c. Ferrous Metals Industry . . . .. .....
99
d. Nonferrous Metals Industry
100
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Page
e. Petroleum Industry
104
f. Chemical Industries
105
g. Engineering Industries
109
h. Armaments Industry
111
i. Cotton Textile Industry
114
j. Construction Industry
116
k. Communications
116
C.
War-Supporting Capabilities
125
1. Elements of Weakness
125
2. Elements of Strength
128
D.
Economic Growth, 1953L57
131
V.
Regional Distribution of Economic Activity
143
A.
General Description
143
B.
Regional Distribution of Gross National Product .
146
C.
Regional Variations in Per Capita Production . . . .
148
D.
Relative Importance. of Major Sectors by Regions . . .
151
E.
Degree of Concentration of Economic Activity . . . .
152
VI.
Domestic and Foreign Trade
155
.A.
Domestic Trade
155
1. Volume and Selected Commodity Movements .
155
2. Trading Organizations and Controls
156
3. Domestic Trade as a Source of Government Income
158
4. Probable Developments in Domestic Trade by 1957 .
160
B.
Foreign Trade
160
1. Changes in Commodity Composition Of Trade . .
161
2. Balance of Payments
168
3. Future Trends in Foreign Trade
171
VII.
Balance Sheet.of the Korean War
173
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A. Credit Side 173
B. Debit Side
Appendixes
Appendix A. Regional Distribution of Economic Activity
in Communist China
? Appendix B. Methodology
175
179
197
Tables
1. Population Densities in Communist China, 1950 14
2. Food Supply and Utilization Pattern in Communist China,
1952-53 21
3. Estimated Breakdown of the Labor Force of Modern Industry.
in Communist China, 1950-51
25
4. Urban Population of Communist China, 1950 26
5. Percentage Distribution by Economic Sectors of the
Economically Active Population of Selected Countries 28
6. Estimated Breakdown by Level of Training of the Labor
Force Employed in Modern Industry in Communist China,
1952
29
7. Distribution of Students in Specialized Curricula in
Colleges and Universities'in China, 1946-47 and 1952 . 32
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Page
8. Analysis of Sample of About 600 Soviet Advisers and
Technicians Sent to Communist China in 1953 35
9. Communist China: Total Budget Figures and Percentage
Increases, 1950-52, 1953 Plan 50
10. Budget of Communist China, 1950-52, 1953 Plan 51
. 11. Expenditures on Investment in "National Econatic Con-
struction" in Communist China, 1952, 1953 Plan 53
12. Trend of Expenditures for Welfare, Education, and Pro-
paganda in Communist China, 1950-52, 1953 Plan 53
13. Proportion of Total Revenues of the Chinese Communist
Government Contributed by State-Owned Enterprises,
1950-52, 1953 Plan
55
14. Production Trends in Modern Industry in China by Eco-
nomic Sector, 1931-52 64
15. Sector Indexes for China, 1931-52 66
16. Gross National Product of Communist China by Economic
Sector, 1952 68
17. 1952 Gross National Product of Communist China Compared
with the US 69
18. 1952 Gross National Product of Communist China in 1952
Compared with Composite Pre-Communist Peak Production 71
19. Agricultural Supply Situation in Communist China, 1952
20. Wheat and Rice Yields in Selected Countries, Selected
Years, 1934-52 77
21. Agricultural Tax Rates in Kwangtung Province Communist
China, 1953 82
? 73
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Page:
22. State Income from Agricultural Taxes in Communist China,
1950-52, 1953 Plan 83
23. Rounded Estimate of Produdtion and Consumption of Chemical
Fertilizers in the Soviet Bloc, 1952 87
24. Estimated Annual Production of Agricultural Commodities
in Communist China, 1953-57
25. Production of Selected Commodities and Services in China,
1931-52
26. Indexes of Investment in Capital Construction in the
Electric Power Industry in Communist China, 1950-52,
1953 Plan
27. Estimated Nonferrous Metals Position of Communist China,
1952
93
97
101
28. Estimated Annual Rate of Production of Nonferrous Metals
in Communist China, End of 1957 103
29. Estimated Chemicals Position of Communist China, 1952 . . 106
30. Estimated Annual Rate of Production of Chemicals in
Communist China, End of 1957 107
31. Major New Construction Projects in the Machine Industry
in Communist China Under the Five Year Plan 110
32. Major Reconstruction and Expansion Projects in the Machine
Industry in Communist China Under the Five Year Plan . . 110
33. Production of Ammunition in China, 1948, 1950, and 1952 . 113
34. Cotton Yarn and Cotton Cloth Production in Communist
China, 1949-52, 1953 Plan, and 1957 Plan 115
35. Comparison of Communist China with Other Countries in the
Production of Selected Commodities and Services; 1952 . 126
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36. Comparison of Communist China and the USSR with the US
in the Production of Selected Commodities and Services,
,1952 129
37. Population of Communist China and Selected Countries of
South and Southeast Asia, Selected Years 130
38. Rates of Increase of Industrial Production in China,
1936-43, 1953, and 1953-57 ? 133 '
39. Government Investment in Industry in Communist China,
1950-53 137
40. The Industrial Sector and Industrial Investment in the
Economy of the USSR in 1928 and the Economy of Commu-
nist China in 1952 138
41. Comparison of Imports of Capital Equipment by the USSR
in 1928 and Communist China in 1952 141
42. Estimated Rates of Increase of Gross National Product in
Communist China by Economic Sector, 1953-57 - 142
43. Gross Value, Value Added by Production, and Net Value of
Selected Commodity Production in Communist China, 1951 . 147
44. Regional Distribution of Selected Commodity Production
in Communist China, 1951 149
45. Gross Regional Product Per Capita in Communist China,
1951 150
46. Regional Distribution of the Product of Agricultural and
Local Processing Industries and Manufacturing and Mining
Industries, as Percentage of Total Regional Surplus in
Communist China, 1951 152
47. Commodity Composition of the Foreign Trade of China,.
Yearly Average, 1936-38 162
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48. Commodity Composition of the Trade of Communist China
with Non-Bloc Countries, 1950-52 165
49.
Value of the Trade of China with Non-Bloc and Bloc
Countries, 1938, 1948-53 169
50. Foreign Trade Balance of Communist China, 1950-53 .
. . . 170
51. Value of the Trade of Communist China with Non-Bloc
Countries, First Three Quarters 1953 171
52. Regional Distribution of Gross Value of Production of
Agricultural Goods in China, 1936, 1943, and 1951 . 180
53. Regional Distribution of Gross Value of Production of
Text.iles in China, 1936 and 1951 183
54. Regional Distribution of Gross Value of Production of
Rubber Tires in China, 1951 184
55. Regional Distribution of Gross Value of Production of
Bituminous Coal in China, 1936, 1943, and 1951 185
56. Regional Distribution of Gross Value of.Production of
Crude Petroleum in China, 1936, 1943, and 1951 186
57. Regional Distribution of Gross Value of Production of
Electric Energy in China, 1936, 1943, and 1951 187
58. Regional Distribution of Gross Value of Output of Ferrous
Mining and Metallurgy in China, 1936, 1943, and 1951 188
59. Regional Distribution of Gross Value of Production of
Nonferrous Metals in China, 1936, 1943, and 1951 . . . . 189
6o. Regional Distribution of Gross Value of Production of
Basic Chemicals in China, 1936, 1943, and 1951 192
61. Regional Distribution of Gross Value of Production of
Weapons and Ammunition in China, 1943 and 1951 194
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Page
62. Regional Distribution of Population and Labor Force
in China, 1951 195
Figure 1.
Illustrations
Following Page
Major Organs of the Central People's
Government
'i4
Figure 2.
Budget of Communist China, .1950-53 .
50
Figure 3.
Clommunist China: Selected Budget Items,
1950-53
56
?
Figure 4.
China: Sector Indexes, 1931-52
66
Figure 5.
Communist China: Gross National Product,
Percentage Contribution of Sectors, 1952 .
68
Figure 6.
Communist China: Gross National Product
by Sectors (Compared with the US) . . .
70
Figure 7.
China: Production Trends for Selected Com-
modities, 1931.-52
90
Figure 8.
China: Production Trends for Selected Com-
modities, 1931-52
90
Figure 9.
China: Production Trends for Selected Com-
modities, 1931-52
90
Figure 10.
Communist China: Production of Selected
Commodities and Services, Peak Year and
1949-52
90
Figure 11.
Communist China: Gross National Product
and Population by Region, 1951 150
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Figure 12.
China: Wheat Traffic Flow (Prior to
'World
Following Page
War II)
156
Figure 13.
Communist China:
POL Traffic Flaw, 1952 .
156
Figure'14.
Communist China:
Coal Traffic Flow, 1952 .
156
Figure 15.
Communist China:
1948-52
Indexes of Foreign Trade,
172
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(ORB Project 15.134)
Tilt ECONOMIC DEVELOPMENT OF COMMUNIST CHINA
THROUGH 1957*
Summary and Conclusions
Communist China has reached a crossroads where it must decide a
number of crucial policy questions concerning the allocation of its
resources and the trend of its international economic relations --
questions which have a vital bearing on its planned. economic develop-
ment. All these questions are summed up under the one general heading
of the capital accumulation and investment policy of the regime.
Communist China is beginning its industrialization program as an
old but predominantly agricultural economy, largely dependent on '
agricultural income for support and development, with a low level of
industrial production. On this economy is being imposed a system of
organization which has been proved by Soviet experience to be highly
efficient in attaining rapid industrial growth and an increase of
war-supporting capabilities. Many indigenous factors raise the question
of whether China is suited for this system of ultra-rapid organizational
and industrial development.
One great problem of Communist China is to increase agricultural
exports to the extent needed to finance imports of capital goods, in
the face of the consumption needs of'its huge and growing population.
The population of Communist China in 1950 has been officially esti-
mated at 487 million.** If, in the absence of war, the Chinese Com-
munist regime continues its policies of welfare improvement, epidemic
prevention, flood control, and food distribution, and if it does not
drastically limit food consumption, the population might increase from
1 to 1.5 percent per year. Thus, based on the 1950 population, an
increase of 33 million to 53 million might be realized by 1957 giving
a total of about 520 million to 540 million. This increase would
* The estimates and conclusions contained in this report represent
the best judgment of the responsible analyst as of 15 March 1954.
** Recent information indicates.that this estimate may have been too
low.
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normally necessitate an increase of the food supply of 5 percent to
8 percent during this period. An increase of about 5 percent prob-
ably can be realized under average conditions, and this, coupled with
better distribution of available supplies, should make possible an
increase of population within the range of 1 to 1.5 percent per year
through 1957. Recent official statements from Peiping suggest that
the Communist regime may follow the Soviet example of the years
1929 to 1934 -- to increase exports of agricultural crops even if
this entails the limiting of food consumption and of population
growth. Rapid industrialization does not offer significant relief
to the pressure of Chinese population on the land, for the urban
population is already large enough to provide sufficient unskilled
labor -- presently underemployed or engaged in native trade and
industry -- for the modern industries that may be established by
1957.
Another great problem of Communist China is to find skilled
labor and technicians for its industrialization program. The re-
patfdation of Japanese from Manchuria and the withdrawal of thousands
of the most competent Chinese Nationalist technical personnel have
left gaps in responsible positions in manufacturing and mining
industries which have been only partially filled by Soviet nationals
and newly trained Chinese. The regime has attempted to reshape its
educational system to meet its expanding needs, but the educational
reform undertaken appears to be inadequate to provide the 150,000 to
200,000 technicians estimated by the Chinese Communists to be re-
quired for their economic development and educational program each
year for the 5-year period 1953-57. Soviet educators have been
assigned to assist in technical training, and thousands of Chinese
students have been sent to the USSR for study, while the recently
announced Soviet aid program provides for Soviet supervision of
factory personnel for an initial period of operations after new in-
dustrial installations are completed. Thus the solution of this
problem depends to a considerable extent upon continued Soviet
technical aid.
In the relatively short period they have been in power, the
Chinese Communists have made considerable progress toward complete
control of economic activities. Having passed through the stage of
reconstruction of existing plants and having established the frame-
work for detailed statistical reporting and planning, the Chinese
Communist economy reached a new stage in August 1953 with the an-
nouncement of a more detailed type of over-all economic development
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plan, the Five Year Plan (1953-57). The Plan calls for'the building
and reconstruction of 91 new enterprises and the installation of
equipment for 50 enterprises already in existence. The USSR is to
provide technicians and equipment, project supervision; training for
Chinese cadres, and management through the stage of initial operation.
The Plan includes projects in the fields of iron and steel and non-
ferrous metallurgy, coal mining, oil production and refining, hydro-
electric and thermal power, conservancy, machine building (automobiles,
tractors) antifriction bearings, blast furnaces, rolling mills, tur-
bines, generators, lathes, mining equipment), chemical and synthetic
rubber factories, and pharmaceutical products.
In summarizing Chinese Communist progress in economic planning
and implementation thereof to date, it may be said that the three most
important over-all objectives are industrialization, particularly the s
expansion of heavy industry; a higher degree of self-sufficiency;
and military preparedness. There are-also regional policies stressing
development of the Northeast (Manchuria) and the Northwest. Plans
for industrialization give emphasis to technical training in the
educational system and in industry; increased geological exploration
to discover additional mineral resources; employment of unskilled
manpower wherever possible, as in the transportation sector; and
Soviet technical and material assistance. Resources are to be di-
verted from the agricultural and consumer goods industries to heavy
industry through, direct allocation of scarce resources and also
through fiscal and price policies.
Accumulation of capital is to come primarily from abstention from
current consumption, this abstention being enforced through profit-
inflated prices on products from the socialized sector, through taxa-
tion of various kinds, through exactions from agriculture, and through
voluntary saving by the population. Current allocation of investment
favors the development of heavy industry at the expense of possible
further expansion of internal trade and light industry. Foreign
trade is controlled by the government to support the industrialization
program by giving priority to imports of investment goods.
Probably the most important export of the USSR to Communist China
is a system of social organization comprising techniques for political
and economic regimentation; for the development of the economy under
centralized planning; and for manipulation of population, labor force,
and material resources to further the achievement of economic plans.
The dependence of Communist China on the USSR for guidance in planning
and for technical aid and equipment is an important factor in Soviet
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influence on Communist China. The economic integration of Communist
China within the Soviet Bloc will undoubtedly increase in proportion
to the amount of Soviet aid extended. As the Chinese Communist in-
vestment program develops, the need for such aid will continue
rather than decrease, and integration probably will become closer,
therefore, during the period of this estimate.
The budget of Communist China for 1950-52 showed an increase in
expenditures from approximately US $3.4 billion in 1950 to US $8.1
billion in 1952, the latter being about one-third of the estimated
GNP of the same year. The planned budget figure for 1953 represented
a further increase to US $11.6 billion. Although military expendi-
tures in absolute terms remained at about the same level between 1951
and 1953, the percentage of total expenditures devoted to the military
'establishment fell during the 1950-53 period from 40.7 percent of
actual expenditures in 1950 to 22.4 percent of planned expenditures
in 1953. The budget figures for-economic development projects showed
substantial increases over the same period. The 1951 figure was
99 percent over 1950, and the 1952 figure was double that of 1951.
A further increase of 40 percent over 1952 wae planned for 1953.
The sharp rise in expenditures from 1950 to 1953 was underwritten
In large part through appreciable rises in industrial and commercial
taxes and in profits from government enterprises. In 1949 the pri-
mary tax basis for Chinese Communist political and military power was
the grain tax in kind, when about 30 percent of the main crops were
taken in the agricultural tax. Since then, the proportion of total
revenue from the socialized establishment has increased, rising from
12.5 percent in 1950 to 30 percent in 1953, while the percentages of
revenue from the agricultural tax and the taxes of private industries
and commercial enterprises have relatively diminished, dropping from
27.5 percent and 43 percent, respectively, in 1950 to 11 percent and
37,5 percent in 1953. The increase in revenue from state enterprises
and cooperatives reflects the rapid seizure of control by the state
over much of the economic activity in domestic and international
trade and banking, and the even more rapid expansion of the socialized
sector of industry.
The tentatively estimated gross national product (GNP) of
Communist China in 1952 was 524.5 trillion yuan, equivalent to approx-
imately US $25.5 billion. Of this total, agriculture contributed
41.7 percent; and trade, food processing, handicraft, and native
transportation contributed 29 percent. The modern industry sector
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contributed only 13.6 percent, and the government sector 10.3 per-
cent, of the total GNP. The primary concern of the Chinese Communist
regime is to achieve a substantial increase in the production of
modern industry during the period of its First File Year Plan (1953-
57). A projection of estimates based on Chinese Communist production
goals for 1953 and a Soviet general description of the Five Year Plan
indicates that the regime will attempt approximately to double the
product of the modern industry sector by 1957. This achievement'
would involve an annual rate of increase of the total industrial pro-
duct of about 15 percent compounded annually for the 5-year period
1953-57. Considering merely the natural resources, the existing
capacity, and the growth potential of the modern. industry sector, it
is estimated that the. Chinese Communist regime, with Soviet technical
aid, can approximately achieve the goal of industrial,production by
1957. Considering the food supply and educational difficulties al-
ready mentioned, however, the actual growth may well be somewhat
less during this period.
Even granting the possible achievement of this goal, Communist
China would still have a very small total industrial product as com-
pared with any modern industrial nation. Its 1957 rate of production
of machine tools is planned to be only 22,750 units; of electric
power, 15 billion kilowatt-hours; of. crude steel, 5 million metric
tons*; of rolled steel, 2.2 million metric tons; and of coal, 73 mil-
lion metric tons. Its total GNP would increase only about 26 percent
through 1957.
Although these figures and comparisons reveal the inadequacy of
the Chinese economy to support a modern war, it would be misleading to
conclude that Communist China does not possess significant capabilities
for defensive, local, and harassing warfare in the Asian milieu. Com-
munist China stands today as the foremost Asian military power. The
Korean War has demonstrated not only the immediate dependence of Com-
munist China on the USSR for all types of heavy mechanized military
equipment but also the assimilation by the Chinese Communists of a
certain degree of proficiency in the use of Soviet-supplied equipment.
The Five Year Plan of Communist China is designed to alleviate some-
what its dependence on Soviet military equipment by 1957.
The notable progress of Communist China in restoring production
of many key commodities and services nearly to, or in gome cases above,
the highest peaks achieved previously under Japanese and Chinese
* Tonnage figures given for commodities in this report, if not other-
wise indicated, are in metric tons.
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Nationalist administration brings the Chinese Communists to a point
Of departure where their own essential competence and Soviet aid
? must determine further progress in achieving planned increases of
production.
Agricultural production lags behind industrial production, having
reached an over-all level in 1952 of only about 98 percent by value of
the 1936 peak. Communist China still remains a predominantly agricul-
tural economy, 70 percent of its total labor force being employed in
agriculture and 70 percent of its total exports for 1952 consisting of
'agricultural productions. An increase of agricultural production and
control of harvested output are basic factors in the ability of the re-
gime to accumulate capital for investment in industry. For this purpose,
the regime may attempt to enforce control of consumption by price-fixing,
collection of higher taxes in kind, and further forced purchases of food
products for export. Collectivization of?agriculture is the goal of the
regime, but enforcement of this policy probably will be tempered during
the period through 1957 by considerations of reducing resistance on
the part.of the peasants and of maintaining production at a high level.
Present agricultural taxes in kind extract for state use as much as
30 percent of total grain production. This facilitates state control
over food prices, makes possible large profits for government trading
corporations, permits state allocation of supplies for export, and
contributes to the capital accumulation objective.
It is not anticipated that any major increases in agricultural
output can be achieved during the period of this estimate as a result
of the state's irrigation and land reclamation projects of mechaniza-
tion of agriculture. Since the percentage increase of total culti-
vated land resulting from such projects would be very small, a large
increase in agricultural production could come only from other forms
of increased capital inputs, especially in the form of fertilizer.
These measures, if undertaken on a large scale, would conflict with
the immediate aims of the state in allocating capital resources to
industry. It is believed, however, that under average crop condi-
tions total agricultural production in Communist China during the
period of this estimate may be increased by 8 to 10 percent over
estimated 1952 production. The over-all possible increase of agri-
cultural exports that might be achieved during the period of this
estimate is believed to be as much as US $200 million over the 1953
level.
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In the modern industry sector the performance of Communist China
in restoring production to previous peak levels, thanks to Soviet aid,
has been outstanding, especially in the fields of railroad transpor-
tation services, electric power, and iron and steel production. The
output of coal in Communist China is adequate for its own needs and
for some exports. The Five Year Plan calls for a 60-percent increase
in annual coal output, with use of additional modern mining equipment,
from 46 million metric tons in 1952 to 73 million metric tons by
1957.
Because of the removal of electric power generating equipment by
the USSR from Manchuria in 1945; power production reached a low of
3.8 billion kilowatt-hours in 1946. Recovery began after the Com-
munists assumed power. By 1953, Soviet replacement of generating
equipment and some installations of new capacity had restored total
Chinese production to 7.6 billion kilowatt-hours, only slightly below
the previous peak. The Chinese Communists' Five Year Plan, as-de-
scribed by the USSR, calls for doubling power production by 1957.
Development of the power industry is a primary factor in the whole
industrial development scheme and probably will be a limiting factor
in progress in the metallurgical industries during the period of
this estimate. Only if Soviet aid is forthcoming in the measure
promised -- which is uncertain -- would it be possible to attain the
stated goal of doubling 1953 power production by 1957.
In the ferrous metals industry, Communist China reached its peak
production of 1,875,000 metric tons of pig iron, 1,222,000 metric tons
of crude steel, and 850,000 metric tons of refined steel in 1952. This
accomplishment was possible mainly because of Soviet aid in restoring
blast and open-hearth furnaces and rolling mill facilities which the
USSR had removed from Manchuria in 1945, and also because of the fact
that the Japanese had never used to full capacity the furnaces and
milling equipment which they had originally installed. The Five Year
Plan calls for increasing the production of crude dteel by 4 to 4.5
times and of rolled steel by 2.5 times over 1952. The accomplishment
of this Plan, which is deemed feasible, will depend largely on
further Soviet assistance in supplying technical equipment and in in-
creasing furnace and mill capacity. If the Plan is achieved, pro-
duction will reach the rate of 5 million metric tons of crude steel
per year and 2.2 million metric tons of rolled steel per year by the
end of 1957.
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The current production in Communist China of nonferrous metals,
with the exception of copper, is sufficient for the needs of the
country and leaves a surplus for export. Communist China is still,
the world's major producer of antimony and tungsten. It exports
most of its production in the form of concentrated ores and must im-
port nonferrous metals in finished form, largely because of its lack
of smelting and refining facilities. Exports of antimony, tungsten,
lead, and zinc concentrates and of refined mercury are important
sources of foreign exchange for the industrial program of Communist
China. The Five Year Plan calls for installation and improvement of
Chinese Communist refining facilities for tin and probably for the
other nonferrous metals. Meanwhile, exports of the concentrated ores
and of refined mercury probably will increase as means of capital
accumulation, if foreign markets can be expanded.
Communist China has increased the production of refined petrol-
eum products from indigenous sources (including oil shale). Produc-
tion in 1953 reached the highest level yet recorded, 555,000 metric
tons per year. This amount is about equal to civilian requirements
for refined products, leaving all military requirements, about 1 mil-
lion metric tons in 1952, to be imported from other Soviet Bloc
countries.
The industrial chemicals industry in Communist China is in its
incipient stage. Although restoration to previous peak capacity has
been fairly complete, production is far short of requirements for
industrial development purposes and will remain so during the period
of this estimate. The announced Soviet program of economic aid in-
cludes the construction of new fertilizer plants to help cover
Chinese requirements for chemical fertilizers, which are in short
supply in the world market and in the Soviet Bloc. It is estimated
that, even with its planned increases in chemicals production,
Communist China will be proportionally almost as dependent on imports
of chemicals for its industrial and fertilizer requirements in 1957
as at present.
The rubber industry in Communist China has been reoriented toward
producing more of the country's requirements of truck and automobile
tires, besides continuing to produce rubber footwear and bicycle tires
for national requirements. From the estimated production of more than
300,000 sets of motor vehicle tires per year in 1953, it is estimated
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that production may increase by 1957 to 700,000 tire sets, which would
be sufficient to meet national requirements. The industry is depend-
ent on imports of natural rubber from Ceylon.
The engineering industries of Communist China are heavily depend-
ent on the USSR for capital goods and technical assistance. The Five
Year Plan is designed to reduce this dependence. The production of
machine tools in 1952 is estimated at approximately 6,500 units, and
the production of antifriction bearings at about 430,000 units (the
latter being about one-fourth of Chinese Communist requirements).
The USSR has promised to help Communist China increase production of
machine tools to 22,750 units by 1957, and the required expansion of
antifriction bearings output is estimated to approximate 1 million
units by that time. The estimated annual requirements of bearings
in Communist China then will be about 2 million units. Integrated
production of heavy industrial equipment probably will be undertaken
before the end of 1957, including trucks, tractors, locomotives,
'electronic devices, and marine engines. Communist China probably
will still be dependent, however, on imports of all these items and
on Soviet technical assistance to meet its requirements for such
items in its Five' Year Plan.
The armaments industry of Communist China in the past has been
subject to dispersal and regional orientation in accordance with the
demands Imposed successively by local war lords and by the Chinese
Nationalist, Japanese, and Chinese Communist regimes. There are no
recent comparable periods of armaments production for the whole of
China, because of the different regional jurisdictions under which
local production was divided. Indigenous munitions production has
not been adequate for the military needs of any political adminis-
tration in recent decades and is not now adequate for Chinese Com-
munist military needs. The Chinese Communists are shipping a small
amount -- about 2/000 metric tons monthly -- of their available
supplies of military equipment to the Viet Minh forces in Indochina.
It is believed that Chinese Communist munitions production is only
approaching the point where it can supply the peacetime requirements
of the regime's military establishment for light arms and ammunition.
For the period of this estimate, the Chinese Communists probably will
continue to depend on the USSR for artillery, tanks, motor vehicles,
and aircraft.
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The cotton textile industry of Communist China maintains its
status as one of the most efficient of Chinese Communist industries.
Fifty percent of capacity still remains in private hands, the govern-
ment having taken over from the Nationalists the other 50 percent of
capacity, previously owned by the Japanese. Production is at a
high level, consistent with the availability of domestically produced
raw cotton.
The cement industry in Communist China -- the principal indicator
of construction activity -- is expected to increase its production
from 1,750,000 metric tons in 1952 to at least 3 million metric tons
in 1957. An increase of 20 percent per year in cement production
would be practical through 1957, according to requirements.
The railroad transportation system of Communist China is being
extended to meet the expanding needs of the economy. New lines are
being built to connect the Ch'eng-tu - Chungking line with the
Lung-hai Railroad at Tfien-shui, thus providing a.rail link from
Szechuan Province to the coast. The Lung-hal line also is being ex-
tended westward from Lan-chou toward Sinkiang, and construction is
under way on another line from Pao-t'ou in Suiyuan Province to
Ulan-Bator in Inner Mongolia. These ambitious projects probably
will not be completed by 1957. When finished, they will provide two
more links connecting Communist China with the USSR. The Chinese Com-
munist park of freight cars was about 52,000 to 59,000 in 1952. Freight
originated in 1952 amounted to approximately 131 million metric tons,
and performance was estimated at 59,461 million ton-kilometers. 'The
planned increase of freight haulage for 1953 is 7.4 percent. Par-
ticular weaknesses of the Chinese Communist railroad system are the
high rate of utilization of rolling stock; slowness of line replace-
ment; and the existence of a single connecting link between China
proper and Manchuria, the Chu-chou - Heng-yang single-track bottle-
neck between two lines in Kwangtung, the train ferry crossing at
Nanking - P'u-ktoul and the transshipment ferry crossing at
Hankow - Wu-chang. More double tracking is needed on the main lines
in Manchuria and on the north-south lines.
Highway construction is being pushed, especially in Sinkiang to
connect with the USSR and in the 'south to link with Indochina roads.
Soviet highway engineers are assisting in the extension and recon-
struction of roads, and new bridges are of Soviet design. The
civilian truck park, mainly government-owned, is only about 52,000
vehicles, but this is being increased with US, UK, Soviet, Czecho-
slovak, and German models.
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The formerly efficient inland water transport system.of the Chinese
Natibnalists is now underutilized by the Communists because of the re-
orientation of internal trade from east-west to north-south. The
Yangtze, Sungari, and West rivers; however, are still heavily utilized
for link traffic between systems, and north-south traffic is important
between Dairen, Yingkow, Chinwangtao, Ta-ku, and Tsingtao in the north
and Shanghai and Canton in the south. Coal and grains are the most
common bulk commodities shipped. The dependence of Communist China on
Soviet Bloc and chartered Western vessels for ocean shipping repre-
sents a serious weakness of the Chinese water transport system. Coast-
al and river shipping in the various areas is closely.controlled by
regional navigation administrations.
The Chinese Communist telecommunications system is seriously under-
developed in relation to the present needs of the government and the
expanding economy. Services are concentrated mainly in the industrial-
ized and heavily populated areas of the East and North China regions.
.Types and makes of equipment are many and varied, and lack of standard-
ization handicaps efficiency. The Chinese Communists are now beginning
to manufacture their own equipment, depending heavily on Soviet Bloc
exports and technical assistance. Telegraph wire lines increased 24
percent and telephone lines 15 percent from 1949 to 1952. Radio tele-
graph and broadcasting continued to fill the gaps where wire lines have
not yet been extended. The government depends heavily on radio broad-
cast and receiver facilities for news services and for maintaining
order, cohesion, and discipline in the country., Extension of tele-
communications services and equipment manufacture is an important item
of the Five Year Plan, but Communist China probably cannot even
approach self-sufficiency in equipment manufacture during this period.
Domestic trade is one of the Chinese Communist government's prin-
cipal sources of revenue. Control of trade within China has been
vested in about 30 state trading organizations, and although private
enterprise still handles the largest share of domestic trade, the
government exercises strict control through price-fixing and monop-
olies of wholesale, storage, and transport media. Cooperatives
handled about 60 to 70 percent of all government purchases of
agricultural products in 1952. Through taxes in kind, commodity
taxes, purchases at low fixed prices, charges for government services,
and profits of government trading enterprises -- all connected with
domestic trading operations -- the government collected about
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75 percent of its total revenue in 1952. Domestic trade, associated
with the tax system, is thus a principal source of capitafaccumulation
for investment in industry and probably will continue to be so through
the period of this estimate.
The pattern of prewar Chinese foreign trade can be summarized in
two general points: (1) the trade was almost exclusively with the West,
and (2) it consisted of exchange of primary products for food, industri-
al raw materials, and manufactured goods. Compared to this the 1953
trade pattern shows two significant changes: (1) the geographical re-
orientation, so that over 70 percent of total Chinese trade is now with
other Soviet countries, and (2) increasing emphasis on imports of heavy
industrial and military items -- at the expense of food and consumer
goods. The 1953 trade turnover increased over the 1952 estimate of US
$2,000 million and is tentatively estimated at approximately US $2,400
million. The percentage of trade with the rest of the tloc and with
the West remained approximately the same as in 1952. The volume of
the foreign trade of Communist China for the period 1953-57 will depend
largely on (1) its ability to increa6e its exports of agricultural and
nonferrous mineral products, (2) a further expansion of markets re-
sulting either from possible relaxation of Western trade controls or
from further demand from Bloc markets or from both, and (3) the size of
Soviet credits to Communist China. It is believed that Communist China
can increase its total exports by at least 25 percent over 1953.
In weighing, from the point of view of economic policy, the ad-
vantages and disadvantages to the Chinese Communists of cessation or
intensification of hostilities in Asia, it is necessary to take a
particular moment in time -- the present -- on which to balance the
choices of alternative uses of resources and labor and available ma-
terial wealth. The costs of the Korean War up to this point have
been borne and accounted for; the choice now lies between allocating
resources in the same way or using them more constructively. The
possibility that Communist China can carry through the Five Year Plan
while supporting further military operations of the magnitude of 1952
in the Korean War or even more intensified hostilities is very doubtful.
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I. Human Resources and Technology.
A. Population and Population Pressures.
1. Total Population.
The size of the population of China is unknown. Until
very recently there had been no census in an official sense, nor had
any reliable vital statistics register been maintained either by the
local governments or by the central government within the past
century. A detailed census by households was begun in preparation
for the 1953 elections of representativesto the Chinese Communist
People's Congress, but this has not yet been completed. The range
of official estimates in recent decades is wide. The Chinese Post
Office census of 1926 reported a total of over 485 million for China
proper* and Manchuria. The addition of 11 million for Inner Mon-
golia, Sinkiang, and Tibet gives a round total of 496 million. The
1910 census of the Chinese Board of the Interior concluded that the
population for China proper and Manchuria was between 323 million
and 343 million. 1/** The latest official estimate of Chinese
population is one of 487 million for 1950, which was promulgated by
the Chinese Communists for adoption and use throughout China. 2/***
Although there may be some controversy over the population estimate,
it is generally agreed that China now has a population of about
500 million. The base estimate of Chinese population used in this
report is the Chinese Communist official figure of 487 million for
1950.
* China south of the Great Wall -- that is, exclusive of Inner
Mongolia, Suiyuan, Ningsia, Tsinghai, Sinkiang, and Tibet.
50X1
*** This figure is believed to represent the Communist efforts at
registration in areas where land reform was effected, with estimates
for cities added. A recent claim indicates that the government be-
lieves the current census will show a considerably higher total.
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2. Population Densities.
China is characterized by an extraordinarily uneven
spatial distribution of population. Demographic studies show that
in China proper there are 350 million to 1.i00 million persons living
on only about one-third of the land area. Over the whole of Com-
munist China, densities vary from about 1 person per square mile in
Tibet to over 1,000 persons per square mile in the valleys and
deltas of the Yangtze and Yellow rivers. 3/ The average density is
about 250 persons per square Mile in China proper, but the 8 most
densely settled provinces have over 350 persons per square mile.
Table 1 gives the population densities in Communist China as of
1950.
Table 1
'Population Densities in Communist China 4/
1950
?
Region a/
Total
Population
(Millions)
Estimated Area
(Thousand
Square Miles)
Average
Population
per
Square Mile
Northeast (I)
42
350
120
Inner Mongolia..(II)
2
260
8
North (III)
67
230
291
East (IV)
141
250
532
Central and
South (V)
137
44o
311
Southwest (VI)
71
520
137
Northwest (VII)
23
1,230
19
Tibet (VIII)
4
47o
2
Total
487
3,750
a. Regions, numbered from I through VIII, are as designated in
Section V, A, below. See also CIA Map 12577, 2-53, China: Communist
Administrative Divisions - 1953.
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3. Population Growth.
For the next decade population growth in Communist China
will be determined by the extent of control achieved over the death
rate, Since the birth rate probably will remain high and vary within
rather narrow limits. If, in the absence of war, Communist China
improves its public health service, completes irrigation and flood
scontrol projects, extends the tilled area by mechanized farming in
regions of light rainfall, constructs railroads and roads, and
industrializes, then the rate of growth for the period of this
estimate might easily equal that of India between 1931 and 1941,
about 1.5 percent per year. If it is assumed that the population in
1950 Was 487 million people, then the population increase through
the period of this estimate would be about 53 million, to a total of
about 540 million by 1957. If fewer of the improvements mentioned
above are accomplished or if food consumption is restricted, or both,
then the population increase, might not exceed 1 percent per year.
This might result in a population increase of about 33 million, or a
total of 520 million by 1957. Thus the total population by 1957 may
be between 520 million and 540 million.*
4. Emigration.
For centuries the Chinese have been a colonizing race.
Their movement from heavily populated areas to sparsely occupied
regions has been limited, however, by (a) the reluctance of the
Chinese to leave their ancestral homes and (b) foreign immigration
barriers. During the last several centuries, Southeast China has
witnessed an increasing stream of emigrants from the thickly popu-
lated coasts of Fukien and Kwangtung to the southern tropical
peninsulas and islands, where they have contributed to the develop-
ment of the wealth of the area. In the crowded areas of Shantung,
Hopeh, and Henan, the people have been less venturesome until
recent decades. The development of railways, commerce, and
industries in Manchuria has attracted millions of settlers and
migratory laborers from North and East China. Besides this area
* A Chinese Communist broadcast from .Peiping on 29 March 1954
indicated that incomplete results of the current census suggest a'
present total population of about 560 million. This would indicate
that the 1950 population estimate was too low and that an increase
of 1 to 1.5 percent would bring the population by 1957 to
582 million to 594 million. 5/
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of colonization, the nearby districts south of the Gobi Desert
offer good pastoral opportunities, especially since the opening of
the Peiping - Kalgan - Pao-t'ou railway. The light and unreliable
rainfall of this region, however, makes settlement and livelihood
risky until irrigation can improve productivity. Notwithstanding
climatic conditions, North China has thus had an open area for
colonization adjacent to its entire northern border, but the move-
ment has nearly reached the practical limit, pending further
irrigation, 6/ except in parts of Manchuria. It is estimated that
at present over 1 billion people live in East and South Asia. There
remain no great open areas to be settled. The unsettled or sparsely
settled tropical areas of Asia -- Borneo, New Guinea, Sumatra, parts
of the Philippines, Indochina, and Burma -- are subject to coloni-
zation by their own nationals and are not open to free Settlement
and exploitation by the Chinese.*
Emigration as a permanent solution would be quite
inadequate even if much greater opportunities were available.
European experience has shown that when populations are large and
when death and birth rates are high, the loss even of great numbers
of people by emigration does not do a great deal to relieve popu-
lation pressure, unless industry is developing so fast as to
absorb the major portion of the natural increase. In the Asian
countries of low average income, where industry is developing
slowly and some emigration has been going on for centuries, tem-
porary relief of pressure on subsistence reduces the death rate,
so that more of the children born survive, and the gaps caused by
emigrants are quickly filled by those children saved from an early
death. 7/
5. Human Fertility.
The underlying cause of the mass poverty of many
districts -- and indeed of many of the economic problems of China --
is the extremely high birth rate, variously estimated at 40 to 45
live births per 1,000 persons per year. Because of the fundamentally
social origins of this tendency, a radical modification in the
inherited social philosophy of the people is required if the birth
rate is to be reduced significantly. The original economic justi-.
fication for the propagation of large families was the need for
* .The USSR has not indicated that Siberia is open to large-scale
immigration of Chinese.
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maximum cooperative effort in bringing swamps and jungles under
cultivation in the early, formative periods of Chinese history.
Ancestor worship and the later Confucian teaching gav to this need .
the authority and strength of religious practice. The custom,
Ilaving survived that phase of economic development in which it was
formed, now contributes to excessive multiplication of the popu-
lation. The continued social value that is placed on male progeny
to perpetuate the family has caused early marriage, concubinage,
and a high birth rate.
In the existing situation, Chinese Communist economic
policies must inevitably influence both birth and death rates.
Unless the Chinese Communists are to fail in their attempt to
build a powerful society, cthey must face the urgent problem of the
waste of human energy involved in rearing children and in training
workers who die before their labor and skill can be utilized. That
the Chinese Communists have recognized this necessity has been
evidenced by their programs of training midwives, establishing
health centers, instituting compulsory inoculation, moving food
supplies to deficit areas, and providing regular food supplies to
selected groups .of workers. The extension of these programs must
inevitably lead to a declining mortality rate and an increase of
population. Sooner or later the Chinese Communists may be forced
to the conclusion that, in order to realize investment from increases
in national income, population growth must be held in check. They
may thus reach the conclusion, as the government of India has done,
that the most practical method of limiting population growth would
be to promote the use of mechanidal or chemical methods of con-
trolling human fertility.
At present, however, the Chinese Communists do not
acknowledge the logic of this argument. They have said that "the
employment problem, that is, the feeding problem, in Shanghai and
other places is entirely the outcome of the brutal and ruthless
exploitation of imperialism, feudalism, bureaucratic capitalism, and
the Kuomintang reactionary government. Under the People's Government,
only a few years are needed to solve entirely the unemployment pro-
blem, or the feeding problem ... in North China, Northeast China,
and other places." The Chinese Communists go further, indeed) to
assert:
"The fact that China has a vast population is an
excellent thing. Even if her population increases many-
fold, she fully has the means to deal with this -- this
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means is production. The absurd theory advanced by Western
bourgeois economists like Malthus that the increase in
food cannot keep up with the increase in population has not
only been utterly refuted theoretically by Marxists, but
has also been entirely refuted by facts in the post-
revolution Soviet Union and liberated areas in China." 8/
Assuming the official Communist population estimate and
the above-mentioned rates of increase, China will require from 5 to
8 percent more food in 5 years and from 10 to 16 percent more in 10
years in order to maintain its present level of subsistence and
maintain the current percentage of food production allocated to
exports. The potential increase of agricultural production will be
required largely to support the growing population, and the allocation
for export, therefore, of a larger proportion of agricultural pro-
duction, compared with the present, would require further reduction
of the already,low subsistence level. By corollary, lowering the
subsistence level to increase exports would tend to raise the mor-
tality rate.
There exists a considerable degree of inefficiency and
underemployment in small-scale and service industries in the cities
of China, so that as modern industries are developed, they will find
that the available urban labor force is more than adequate in numbers
.(if not in training and skills) to meet the possible requirements for
industrial labor for the 5-year-industrial development program. Thus
industrialization alone, during the first few 5-year plans, cannot
reduce subsistence pressure on the land resulting from the normal
increase in agricultural population unless there is a corresponding
increase of capital investment in agriculture to increase agricul-
tural production. This would conflict with the immediate need for
capital for industrial investment. Given the base figure of
487 million population in 1950, and the estimated percentage
increases in population and in agricultural production, however,
over-all population pressure probably will not reach explosive pro-
portions by 1957. If, however, the census now under way in Communist
China 9/ reveals a present population substantially higher than thee
estimates, a rapid rate of increase in population will compound the
difficulties that the Communists face in implementing their plans.
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.6. Health and Nutritional Requirements.
In China, where there has been less than 1 modern medical
doctor per 4o,000 people, the influence of public health and medical
programs on the population has thus far been more exemplary and
local than generally effective. Of the estimated mortality of 35 per
1,000, or 15,750,000 per year, about 6.7 million (that is, three-
fourths of those not dying from old age) die from preventable
diseases such as gastrointestinal infections, tuberculosis, and the
infectious diseases of infancy and childhood, especially tetanus,
smallpox, dysenteries, and diarrheas. Missionary influence, the few
Western-trained doctors, and US aid probably have produced more
results than government measures. Scientific health programs have
hardly touched more than the 'educated elite, while general sani-
tation programs, such as the New Life Movement of the Nationalists
and the cleanup campaign instituted by the Communists under the
stimulation of their bacteriological warfare propaganda, have
apparently had little effect other than a modest improvement of
cleanliness in public places. Outside the model urban centers,
medical and health practices are those of a primitive society.
Maternal and infant mortality and Control of epidemics have been
the focus of public health measures under both the Nationalists
and the Communists, but war, famine, and disease have been the
principal determinants of the rate of growth. .After World War II
the National Health Administration of the Nationalist Government
had little opportunity to resume the splendid work which it had
initiated prior to 1937 and which it has since resumed in Taiwan.
The Communist regime recently has taken up the work under a small
allocation of funds from the national budget under the social,
cultural, and educational category.
A few nutritional surveys made during the war among
certain groups, such as school children and their families, suggest
a fair nutritional status, characterized by the usual Far Eastern
imbalance. These surveys indicate an average caloric intake
varying from a low.of.1,960 calories a day in Shantung to a high of
.3,500 in Kiangsi - Hunan. Despite great famine tolls in the past,
the average nutritional standard observed in Chinese urban and rural
areas appears more favorable than in India. The Chinese peasant is
.not prevented by religious scruples from obtaining as much of a
balanced diet as he can produce.
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Most Chinese live on a diet comprised almost exclusively
of cereals and vegetables, to which a little vegetable oil may be
added in the course of preparation. Rural families derive 86 percent
of their caloric intake from grains and seeds and their byproducts;
only 6 percent is derived from meat, fats, and fish. Unlike the
Mongols and Tibetans, the Chinese practically never use milk, cheese,
and butter. They are fond of eggs, pork, and fowl, and of fish,
crabs, and other seafoods, but most of these animal proteins are
beyond the means of the masses of workers. 10/
Table 2* shows the estimated supply and utilization of
food in Communist China for the crop year of 1952-53, with the per
capita caloric intake equivalent of each kind of food available for
consumption for an estimated total population of 48o million.
Table 2 indicates a net average caloric intake of 2,011 calories
per capita per day. This estimate provides a rough definition of
the "subsistence level" of the population referred to above. It
suggests that, unless increasing agricultural production keeps pace
with the increase in population, an official policy of augmenting
food exports may have serious consequences in undernourishment
and debility and possibly social unrest among the affected popu-
lation.
This brief description of the standards of health and
nutrition in China indicates that an energetic program of public
education in the principles of public health, hygiene, sanitation,
and nutritional diets is required if the mortality rate is to be
reduced generally, or even particularly among the trained per-
sonnel employed in government administration and industries. Such
a program would be particularly important among government workers,
whose resistance to infectious diseases is lowered by overwork and
long hours. Improvement in this respect was recognized as urgent
in 1952, when, for example, an examination of employees of the
People's Bank in Shanghai showed that 60 percent were suffering
from active tuberculosis. A more vigorous public health program
has been instituted under the current Five Year Plan, including
compulsory inoculations where epidemic diseases threaten, training
of midwives, and establishment of public health centers. The Five
Year Plan calls for the annual graduation of 40,000 medical and
nursing personnel. Whether this goal and the improvement of
general health and nutrition standards among the masses of
* Table 2 follows on p. 21. .
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Table.2
Food Supply and Utilization Pattern in Communist China 2/* 12/
1952-53
Utilization c/
Supply Nonfood Uses Supply for Food
(Thousand MT) (Thousand MT)
Commodity
Production
Stocks
and/or
Net Trade
Total.
Supply
Seed and
Waste
Feed
Industrial
Total
Tbtal
Gross
(Thousand
Mr)
Extraction
Rate (Percent)
Total
Net Food
(Thousand
MT)
Per Capita
Kilograms
ger Year
Grams
per Day
Calories
per Day
Cereals
Wheat
22,482
-100
2e_O82
3 131
216
479
3 826
18,556
85
15,773
32.86
20.03
314
Rice, ftnglutinous
45,207
-570
447E37
2,712
477
3,151
41,486
77
30,700
63.96
175.23
so
Rice, Glutinous
2,519
2,519
153
151
304
2,215
70
1,550
3.23
8.85
32
Subtotal Rice
147,726
-570
47,156
2 865
590
3,455
43,701
32,250
67.19
184.08
661
Other Grains
Barley
6,997
6,997
881
2,449
490
3,820
3,177
80
2,542
5.30
14.52
48
Oats
814
814
93
203
296
518
50
259
.54
1.48
6
Corn
10,783
-220
10,563
887
1,266
212
2,365
8,198
8,198
17.08
46.79
.167
Millet
9,663
-200
9,463
578
946
189
1,713
7,750
90
6,975
14.53
39.81
136
Proso Millet
1,393
1,393
103
125
97
325
1,068
90
962
2.00
5.48
18
Kaoliang
10,730
-200
10,530
.771
1,580
1,264
3,615
6,915
90
6,223
12.96
35.51
122
Miscellaneous Grains
1,300
1,300
121
1/
780
901
399
-80
319
0.66
1.81
6
Subtotal Other
Grains 2/
41 680
-620
41 060
3 434
6,569
3 032
13 035
28,025
25,178
53.07
145.40
503
Total All Grains
111,888
-1,290
110,598
9 430
6 785
' 4,101
20,316
90,282
73,501
153.12
419.51 E/
1 478
* Footnotes for Table 2 follow on p. 23.
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Table 2
Food Supply and Utilization Pattern in Communist China 2/ 12/
1952-53
(Continued)
Utilization 2/
Supply Nonfood Uses Supply for Food
(Thousand MT) (Thousand MT) .
Commodity
Stocks
and/or
Production ?Net Trade
Total
Supply
Seed and
Waste
Feed
Industrial
Total
Total
.Gross
(Thousand
_21)_
Total
. Net Food
Extraction (Thousand
Rata (Percent) mT)
Per Capita
Kilograms
per Year
Grams
per Day
Calories
Per DAY
Potatoes
Sweet Potatoes
31,859
31,859
5,097.
6,372
1,593
13,062
18,797
184797
39.16
107.29
104
White Potatoes
2,362
2,362
? 614
165
142
921
1,441
1,441
3.00
8.22
6
Subtotal Potatoes
34,221
34,221
5,711
6,537
1,735
13,983
20,238
20,238
42.16
115.51
110
Cane Sugar
375
+59
434
434
434
0.90
2.47
10
-Pulses and Oilseeds
Vegetable Oilseeds
16,470 g/
-1,175 h/
15,295
1,815
507
7,885
10,207
5,088
5,088
10.60
29.04
102
Broad Beans
3,478 1/
-
3,478
452
70
522
2,956
2,956
6.16
16.88
58
Field Peas
2,972
2,972
381
743
178
1,302
1,670
1,670
3.48
9.53
33
- Fruits and Vegetables
55.0 1/
150.68
39
Meat
- Beef and Veal-
624
-5 W
619
619
619
1.29
3.53
6
Buffalo
355
355
355
355
0.74
2.03
3
Pork
4,408
-73 11/
4,335
908
1/
908
3,427
3,427
7.14
19.56
40
Mutton and Lamb
131
-4 11/
127
127
127
0.26
0.71
1
Goat
122
122
122
122
0.25
0.68
1
Poultry Meat '
285
-5 h/
280
280
280
0.58
1.59
3
Subtotal Meat
5,925
-87
5 838
908
908
4,930
4,930
10.27
28.10
54
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Table 2
Food Supply and Utilization Pattern in Communist China 2/ 121
1952-53
(Continued)
Utilization 2/
Commodity
Supply
(Thousand MT)
Nonfood Uses
(Thousand MT)
Supply for Food
Total
Gross
(Thousand
Total
Net Food
Extraction (Thousand
Rate (Percent) Ipill
Per Capita
Production-
Stocks
and/or
Net Trade
Total
Supply
Seed and
Waste Feed Industrial
Total
Kilograms
per Year
Grams
per Day
Calories
per Day .
Eggs '2/
645
-50
595
_MI)_
595
595
1.24
3.40
5.
Fish
4,000
9
3,991
3,991
3,991
-
8.31
22.77
14
Fats and Oils
Vegetable Oils
1,590
-50
1,540
237
237
1,303
1,303
?
2.71
7.42
66
Pork Fat
908
908
908
908
1.89
?
5.18
42
Subtotal Fats
V.
and Oils
2,498 -
-50
2,448
R21
g2/
. 2,211 .
2,211
4.60 ?
12.6o
108
Total
_
V
295.84..
2 011
a. Excluding alcoholic beverages. g. Includes soybeans, peanuts, rapeseed, sesame, cottonseed, and miscella-
b. Estimated to include 90 percent to 95 percent of food supplies available for neous. . .
cbntumption. h. Includes oilseeds for military requirements in North Korea.
c.? Because of the lack of information on stocks or reserves, it has been neces- i. Includes estimate of 340,000 tons for Manchuria.
essary to assume in the food balances that stocks were canceling. j. Estimated per capita consumption.
-d. Included in industrial column. k. Meat equivalent of liveweight exports.
.
e. Excludes wheat. V 1. Pork fat, cuts, and bacon listed below as pork fat.
f. May not add to total due to rounding. m. Shell egg equivalent.
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population can be accomplished 'within the period of this estimate is
questionable in View of the magnitudeof the undertaking. Probably
principal emphasis will be placed on improvement of health standards
among students, laborers, and government workers and generally in
urban areas, where better results are -essential to the success of
the industrialization programs and where health measures can be
better enforced.
B. Industrialization, Urbanization, and Availability
of Industrial Labor.
Numerous influences in Communist China are.effective toward
delimiting the importance of the family and breaking down the
observance of social traditions and customs. Among these is modern
industry.* The effects of industrialization are mainly felt locally
in the cities of the Yangtze and Canton deltas, at the seaports, at
focal points along the railways (north and south, and especially in
Manchuria), and in the parts of West China in which factories were
established during the Sino-Japanese War, 1937-45. A considerable
and expanding mass of industrial workers -- a new type in China -- is
concentrating in the urban areas and separating from the family-
centered life of the countryside and from the direct influence of
old traditions and social customs. A great many of these workers
are women, whose participation in factory industry signifies their
increasing economic independence and the gradual disintegration of
the old clan system. 11/ This industrial development is greatly
needed, both to strengthen all sectors of the economy and to
initiate social changes which would affect many more people than
those immediately involved. China's excessive population prevents
the solution of its growing problems of support through the auto-
matic social processes which were occasioned by industrialization
in Europe and Japan. Any real solution of these problems must be
effected through modernization together with educational developments
to influence the fertility of the Chinese peasant population.
Of a total labor force of 229 million to 267 million
workers in 1950-51, about 195 million to 227 million -(85 percent) are
rural workers, of which number 172 million to 200 million are farm
workers 12/ -- that is, about 75 percent of the total labor force. 13/
The figures for farm labor are of necesdity only approximate, because
of the wide seasonal fluctuation in the agricultural labor force.
The percentage of the total labor force which is in agricultural work
varies according to season from a probable low of 60 percent to a
* The term modern industry ad used by the Chinese refers to those
shops using eleatric or steam motive power and employing 30 or more
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probable high of 90 percent. Subsidiary employment is important
for many farmers who perhaps might more properly be classified
as part-time farmers. The forestry labor force?, numbering about
200,000, is comprised almost completely of part-time farmers.
About 18 million fishermen on the inland rivers, lakes, and ponds
likewise are part-time farmers.
Only 20 to 25 percent of total employment is in non-
farm work, a small part of which (not over 4 million to 5 million
workers) is absorbed in modern industry. Table'3 gives an
estimated division by industrial categories of the numbers of
laborers in modern industry in 1950-51..
Table 3
Estimated Breakdown of the Labor Force
of Modern Industry in Communist China
1950-51
Thousands
Industry'
Labor Force
Coal
Ferrous Metallurgy
Other Mining
Textile
Electric Power
Engineering
Rail Transport
Water Transport
Communications
Munitions
Miscellaneous
400 to 480
80 to 100
275 to 450
600 to 700
95 to 110
225 to 275
550 to 600
1,000 to 1,200
50 to 100
260 to 400
600 to 700
14/ a/
15/ ?
Y-61
17/
12/
19/
20/
21/
22/
23/
137
Total ? 4,135 to 5,115
a. For 1950 only.
b. Composed of building materials, chemicals, tobacco,
' clothing, and food'processing.
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The urban population of China -- besides that part
dependent on modern industry -- consists of families dependent
for their livelihood on old-style industry (shops without
power machinery and employing lees than 30 workers), handicrafts,
wholesale and retail distribution, construction, native transpor-
tation, trades, commerce, coolie labor, government administra-
tion and services, office work, schools, and the professions. The
labor force of these groups is estimated at 30 million to 35
million. 24/ The distribution of urban population in city
groups is set forth in Table 4.
Table 4
'Urban Population of Communist China 25/
1950
Population as
Population Number of Population Percent of
Group Cities (Millions) Total
Over 1 Million
8
16
3.3
100,000 to 1 Million
76
20
4.1
10,000 to 100,000
1,200
25
5.1
Total
61
12.5
The figure of 61 million for the total urban population of China
may be compared with a similar total for the US of 63 million.
The urban population of China, which is already large in relation
to industrial employment, indicates a serious condition of un-
employment or underemployment among city dwellers. At least it
represents a characteristically low productivity per. worker which.
the industrialization plan would seek to improve by mechanization.
The Communist policy of eliminating a considerable portion of
private trade and service employment has probably contributed to
urban .unemployment to an extent not fully compensated by increased
employment in government 'service. Industrialization would also ?
displace many more workers now employed in small-scale and handi-
craft industries.
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The modern industry sector of the Chinese economy
presently includes only from 8 to 10 percent of the total poten-
tial urban labor force. The urban population thus contains a
potential labor force sufficient -- at least in numbers of workers
to support an industrial development of considerably greater
magnitude than the current program.
Table 5* shows different stages of industrial develop-
ment reflected in the occupational distribution of the population
in various countries. It will be seen that the process of indus-
trialization does not simply involve the absorption by industry of
part of the agricultural population. The most important fact to
be observed is that, as the portion of the population engaged in
industry increases, so also does the percentage of all the other
major occupational groups except agriculture. ? In particular, the
part of the population engaged in commerce and transportation in-
creases along with that in manufacturing. It is probable that at
the end of the Five Year Plan, in '1957, the distribution of popu-
lation in the labor force in Communist China will not differ
greatly from the present, because of the limited capacity of the
nonagricultural sector, to absorb the unemployed-and underemployed
labor in the cities and to provide, for the growth of population,
much less to absorb- any considerable part of the surplus agrarian
labor force.
Accurate quantitative data on the supply of skilled
and technical personnel are lacking, but the rough estimates which
are presented in Table 6** indicate that skilled labor is as
scarce as common labor is abundant. There is a fair supply of
foreign-trained Chinese in a few categories of top-level engineers
and scientists. In fields needed for the development of heavy
industry, the supply of top-level personnel is short, and in all
industrial fields the supply of middle-grade technicians and skilled
supervisory personnel is wholly inadequate for the proposed ex-
pansion of industry outlined in the Five Year Plan. In the most
industrialized area, Manchuria, skilled and supervisory personnel
was provided for the most part by the Japanese. Repatriation of
the Japanese, a great many of whom were in responsible positions
in manufacturing, mining, or transportation, left a large gap which
has been only partially filled by Soviet nationals and by migration
* Table 5 follows on p. 28.
** Table 6 follows on p. 29.
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Table 5
Percentage Distribution by Economic Sectors of the Economically Active Population
of Selected Countries a/ 2Y
Country
Year
Agriculture
? and. Fishing
Mining and
quarrying
Manufacturing
? and Handicraft
Construction
and Building
Administrative, Per-
sonnel, Domestic, and
Professional Services
Commerce and
Transportation
I.
Typical Industrial
Countries
US
1940
18
2
'6
23
7
22
22
UK
1931
6
41
N.A.
24
23
Belgium
1930
17
6
36
6
14
21
Germany
1939
26
2
32
7
17
.15
Italy
1936
48
0.7
22
? 5
10
12
Japan
1947
53
2
17
'
4
2
12
USSR
1951
58
16 12/
4
lo
11
II.
Less Industrialized
Countries
Chile
1940
35
6
17
3
12
14
Portugal
1940
49
0.7
- 15
5
16
9
Hungary
1941
48
1
23
N.A.
11.
9
Finland
1940
57
0.1
16
2
7 ?
9
Poland
1931
65
1
16
N.A. .
7
8
III.
Countries Lagging in
Industrial Development
Egypt
1937
71
0.1
8
2
7
10
Brazil
1940
67
' 3
10 sj
7
9
Colombia
1938
n
2
10
2
3
3
India
1931
67 .
0.2
10
N.A.
9
7
China .
1952
75
3
6
0.2
2
3
,
a. Variations in statistical Methods and practice detract from the precision of the percentages; also, the figures refer to different years. Thus
the percentages Shown for the different countries are not strictly comparable, although they show with sufficient accuracy the differences among
countries in occupational distribution and, by implication, the changes in distribution resulting from economic development.
b. Includes mining,.
C. Includes conistruction.
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Table 6
Estimated Breakdown a/ by Level of Training
of the Labor Force Employed in Modern Industry
in Communist China 27/
1952
Thousands
Industry
Total
Managerial
Technical
Skilled Unskilled
Coal
48o
18
462 b/
Ferrous Metal-
lurgy c/ 28/
100
10
16
74
Other Mining d/
360
36
324
Textile e/
700
70
630
Electric Power
100
17
8
25
50
Engineering
250
10
12
80
148
Rail Transport
f/
560
40
20
50
.450
Munitions
260
52
91
117
Miscellaneous g/
1,825
200
1,625
Total
4,635
493
4,142
.
a. The estimated breakdowns of persons employed in modern
industry are extremely rough and are intended only to provide
indications of theorders of magnitude involved.
b. 1950 figure.
c. Excludes persons engaged in the mining of iron ore, and in the
mining and processing of manganese, tungsten, and other minerals
used primarily as ferroalloys.
d. Total is the rounded median value given in Table 3. Breakdown
of the total obtained by applying percentages estimated for antimony,
gold, and cement, amounting to about 11 percent of total employment.
e. Breakdown was obtained by applying that obtaining in the USSR
in 1938, which is believed to be typical for China.
f. The percentage distribution for line maintenance was applied
to the total. Apprentices are included in unskilled.
g. Includes water transport (employing 1 million to 1.2 million);
communications (employing 75,000); and building materials, chemicals,
tobacco, clothing, and food processing (employing 600,000 to 700,000).
The distribution was obtained by averaging the distributions for the
other industries except engineering-and munitions. This total mis-
cellaneous category differs from the miscellaneous shown in Table 3,
above, because in this, table is included a large amount of small-
'scale native industrial and services employment.-
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from other parts of China. Next to the demographic problem and
the related capital scarcity, the most serious problem of Communist
China in. carrying through its first Five Year 'Plan will be to
provide the necessary numbers of managerial, skilled, and technical
personnel for its industries and.for government administration.
C. Status of Education and Technical Training.
The Chinese. Communists have inherited four basic problems
in the educational system of China: lack of facilities, high
degree of illiteracy (80 percent), the traditional preference of
students in China for cultural education rather than practical
training, and the complicatea system of writing in ideographic
symbols. The Chinese People's Political Consultative Conference
in Peiping, facing these problems (among others) in September
1949, set forth the state policy toward education in the cultural
ana educational section of the Common Program* adopted at that
time. The two avticles in the Common Program dealing most specif-
ically with education are as follows:. 29/
Article 46: The method of education of the People's
Republic of China is the unity of theory and practice.
The People's Government shall reform the old education
system, subject matter and teaching method systemati-
cally according to plan.
Article 47: In order to meet the widespread needs of
revolutionary work and national construction work,
universal education shall be carried out, middle and
higher education shall be strengthened, technical
education shall be stressed, the education of workers
during their spare time and education of cadres who
are at their posts shall be strengthened, and revolu-
tionary political education shall be accorded to
young intellectuals and old style intellectuals in
a planned and systematic manner.
* The Common Program expressed the policies and concepts which would
guide the government until the People's Congress, which was to be
called in 1953, could adopt a constitution.
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Under this general directive the Ministry of Education
opened a drive against illiteracy. A system of adult classes and
schools for workers was inaugurated in which condensed or accele-
rated courses are taught. Using a simplified method of alphabetic
script to facilitate learning the Chinese characters, winter
literacy bchools for adults were opened; courses and teaching
methods were siMplified; and on-the-job, part-time, and shOrt
courses of technical training for workers were established. In
further implementation of the directive the Chinese Educational
Workers' Handbook divided the formal school curriculum into 6 years
of primary school, 6 years of middle school (junior and senior
high school), and 4 years Of higher education. Under the previous
system in China, the majority of rural sbhools comprised only the
first four grades. Thus the expected substantial expansion of
middle school and higher educational enrollment must-await develop-
ment of the upper primary grades. It is believed, therefore, that
at least 5 years will 1;le required to provide sufficient primary
and middle school graduates for the projected increase of enroll-
ment in higher educational institutions. Enrollments for 1951-52,
as announced by the Minister of Education, 30/ were 49 million
primary school students, '3 million middle school students, and
219,000 students in higher educational institutions.
Chinese students have been traditionally unwilling to enter
training-for vocations as engineering and technical specialists. As
late as 1937 there were three classical students to each student in
science. Subsequent strenuous efforts by the Nationalists to re-
dress this balance resulted in practically equalizing the, two groups.
The Communists have gone much further under the Ministry of Higher
Education in drastically reorganizing universities and colleges
along more specialized lines, with particular emphasis on engineering.
Table 7* shows the distribution of enrollment in 194-6--I-7, by
specialized curricula, under the Nationalists as compared with that of
the new registrants in 1952. In order to enforce further specialization
of students in subjects needed for the reconstruction of the economy,
the Chinese Communists have completely eliminated private control
of the educational process and as far as possible have replaced
professors of Western leanings with trusted Communists. Those'
removed consisted of a nucleus' of well-trained professors, Western-
trained Chinese for the Most part, and a number of Western nationals.
* Table 7 follows on p.32.
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Only a,few of the Western-trained Chinese were retained in respon-
sible positions, and only after being subjected to Communist
indoctrination.
Table 7
Distribution of Students in Specialized Curricula
in Colleges and Universities in China
1946-47 and 1952
Percent of Total 21
1946-47
(Enrollment)
1952
(Registration)
Arts
12
7
Law and Government
22
1
Commerce and Economics
11
4
Engineering
19
.
51
Science
7
8
Medicine
8
10
- Teaching
14
13
Agriculture
7
6
There were 215 higher institutions in China in 1948 --
55 universities, 79 independent colleges, and 81 technical
institutes. 32/ The Chinese Communists claim that the total of
higher institutions in 1951 was 251. Most of the increase probably
is accounted for by the founding of new technical institutions and
teacher-training colleges and by the subdivision of previously
existing higher educational institutions. 33/ The teaching pro-
fession has been assigned top priority (jointly with construction,
activity) in the job allocations of graduates. The announced
plan provides for an increase .of the number of teacher-training
institutions by 2i times in the next few years. In view of the
removal of the Western-trained professors and the withdrawal
of the Nationalist teaching staffs, the contemplated expansion
in science and engineering courses would appear to be too
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rapid for the available supply of competent professors if quality
of instruction is to be maintained. This limitation is especially
noteworthy in view of the fact that the same skills are sorely
needed for the expansion of industry.
The official Chinese Communist forecast of personnel
requirements for national economic construction during the ensuing
5 or 6 years was announced in late 1951. The annual requirements
are approximately 100,000 technicians, 300,000 teachers, 40,000
medical and nursing personnel, and at least 150,000 workers in
government and commerce.' If the enrollment claim of 3 million
middle school students is accepted as accurate, it is evident ,that
the output of vocational graduates is still considerably below the
requirements. To these must be added 80,000 to 100,000 middle school
graduates who are needed to enter higher training, making a total
required middle school output of nearly 700,000 annually. Since the
total enrollment is spread over 6 years and since some attrition
occurs in the progress to higher levels, little more than one-tenth
of the 3 million middle school students, or 300,000 per year, can
complete the full middle school Course. Total enrollment in higher
institutions is now in the neighborhood of 220,000 students,. with
an annual graduation of 16,000 to 20,000. These rates of graduation
-axe less than one-half the rates necessary to supply the 150,000 to
200,000 "high level" technicians, teachers, and medical personnel
estimated by the Chinese Communists as required for the economic
development program each year for the next 5 years. The graduation
rate could be measurably increased only at the sacrifice of quality,
by advancing graduation and by further relaxing standards to reduce
the number who drop out before graduation. Deficiencies in general
technical training and the lowering of academic standards, however,
will have an adverse effect on efforts to train personnel for higher
professional and administrative grades. Simultaneously, extreme
specialization will make for occupational immobility of?labor and
tend to increase rigidity in the economic structure.
The shortage of qualified personnel emerges as one of the
most serious weaknesses of the Chinese Communist program for develop-
ment of heavy industries under the first Five Year Plan. Communist
authorities, in reviewing the first 6 months' progress of this plan,
revealed their displeasure with' the bungling of their poorly trained
technicians and executives. The Peiping People's Daily, while
stoutly defending the plans and goals set by the government, lashed
out at administrative and labor organizations for the following
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technical and administrative mistakes: "Many factories failed in their
first half year program because of disorder in enterprise control and
unstabilized method of promoting production; failure to effect proper
use of workers' creative ability and working character, causing poor
discipline among workers and thereby seriously injuring production
programs; failure in the taslc of reinforcing political consciousness
in enterprises." Another commentary stated: "Disorder is a direct
result of the serious phenomenon of absence of responsible men in
factories." 34/
Thus it seems evident that the existing higher educational
system in Communist China, even with the sending of many Chinese
students to the USSR for technical studies and with the presence of
Soviet teachers and educational advisers in China, is inadequate as
yet to overcome serious shortages of various grades of skilled per-
sonnel. In view of the rapid rate of planned industrial growth
over the next 4 years, these shortages will probably not be pro-
portionately reduced.
D. Soviet Technical Aid.
The systematic elimination of Japanese and Western nationals,
from the mainland economy has left the Chinese Communists more and
more dependent on the USSR for technical assistance to compensate
for their own lack ,of trained personnel. Communist China has
recently acknowledged substantial present and prospective assistance
from the USSR in the renovation and construction of 141 "large"
projects. The announcements from both the Soviet and the Chinese
sides indicate that in each case where Soviet engineering assistance
or equipment is used, the aid envisions the assignment of Soviet,
personnel who are to remain to see the project through to completion
and into the operating stage of the plant, at which time trained
Chinese personnel can take over.
No reliable totals are available on the number of Soviet
nationals assigned to Communist China. Nor is it possible to
indicate the extent tb which Soviet technical missions have replaced
Japanese personnel and former Nationalist technicians. Soviet tech-
nical assistance may have fluctuated considerably, for the Chinese
press contains expressions of thanks to numbers of teams who have
returned after completing their missions. 35/
an estimated 70,000 Soviet military personnel and
technicians arrived in China in the spring of 1950.
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ouA1
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50X1
It 50X1
appears that during 1950 and 1951 advisers and technicians on rail-
way maintenance and operations, military construction, and military
end items production predominated. During 1952 and 1953, more
emphasis was placed on economic planning and on other technical
capacities discUssed below. The general nature of the assignments
of Soviet personnel in Communist China in 1952 may be inferred from
a Japanese broadcast based on information from Japanese repatriates,
whose accuracy as to numbers, however, cannot be verified. 36/ The
numbers given were as follows: Army, 12,000; Air Force, 4,000;
Navy, 3,000; "political," 5,000; industry and communications, 10,000;
educational, 2,000; agricultural, 2,000; and financial and economic,
2,000. 37/ Table 8 contains a summary of available information 50X1
concerning the advisory and technical capacities 5UX1
of some 600 Soviet technical nonmilitary personnel. They are pre-
sumed to Ile a representative sample of an unknown total of such
personnel assigned to China. This is probably the best available
indiction of the mutual Sino-Soviet interest in fulfilling the
relative needs of Communist China in these categories.
Table, 8
Analysis of Sample of About 600 Soviet Advisers,
and Technicians Sent to Communist China in 1953
Percent. /*
of Sample 2:1
Technical Trade and Procurement Representatives
21.3
Education, Printing, and Publishing Specialists
12.5
Agriculture, Forestry, and Fishery Specialists
10.3
? Health and Social Services Specialists
8.2
Information Services
8.0
Machine Building
4.8
Light Industries
4.7
Railroad Transportation
4.2
* Footnote for Table 8 follows on p. 36.
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-Table 8
Analysis of Sample of About 600 Soviet Advisers
and Technicians Sent to Communist China in 1953
(Continued)
Nonferrous Metallurgy
Percent
of Sample a/
4.o
Paper and Pulp Industries
3.5
Electric Power Industry
3.2
Ferrous Metallurgy
3.2
Telecommunications and Equipment Industries
1.8
Road Communications
1.8
Motor Transport
1.7
Defense, Finance, Economics, and Geology
Advisers .
1.5
Water Transportation
1.3
Trade Union Advisers
1.0
Coal Industry
0.8
Chemical Industries
o.8
Geodesy, Meteorology, and Cartography
0.5
Construction Materials Industry
0.2
Architecture
0.2
a. Because of rounding, percentages do not total 100.
It should be noted that the relative percentages of technicians in
Table 8 do not indicate their relative capabilities or their
influence in the economic planning and development of Communist
China. Some categories of technicians, such as those in the "Defense,
Finance, Economics, and Geology Advisers" and the "Architecture"
categories, for example, may have muctl greater influence in the
over-all planning and direction of the-5-year development program
than those in the larger percentage categories. Likewise, the .
advisers in the "Coal," "Chemical," and "Electric Power" industries
may have much greater influence in increasing production than those
in the larger categories.
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Table 8 gives merely an indication of the relative numbers
of Soviet personnel in various categories assigned to Communist
China. In this ranking it is important to note especially the per-
centages of personnel assigned in the first 5 categorieq, which
include more than 60.percent of the total sample. It is apparent
from these percentages that the numerical ranking of Soviet tech-
nicians assigned to China emphasizes (in this order) Soviet and
Chinese Communist interests in the fields of Sino-Soviet trade
development; development of the Soviet type of education in Com-
munist China; increase of production in the extractive industries
of Communist China; improvement of the health, welfare, and demo-
graphic control services of Communist China; and the exchange of
information between Communist China and the USSR.
Aside from the matter of numbers of technicians, several
general conclusions can be drawn from available information on
the course of developments in Communist.China as to the nature and
importance of Soviet technical aid to Communist China:
1. A form of the Soviet system of economic planning and
control is being imported into Communist China and is in process
of application in the national economy. This form prescribes
detailed statistical reporting of production facilities and output
in all fields of economic activity; centralized allocation of
certain basic raw materials, semimanufactured goods, machine tool
equipment, electric power, and transportation services; centralized
planning and control over foreign trade; and over-all economic
planning which attempts to take into account the scheduled needs
and requirements of the various sectors and branches of the economy.
The Chinese Communists themselves admit their dependence upon
Soviet advisers and experience in the planning and execution of
their economic development program.
. 2. Soviet technical aid to Communist China takes many
forms in actual application: dominating control by the Russians in
the industries and government of the Dairen-Port Arthur area; joint
participation of the two parties in joint?stock companies under
Soviet administrative control in air transport services and in
mineral and petroleum development companies in Sinkiang; Chinese
administration with Soviet subordinate directors in the economic
enterprises of Manchuria; Soviet engineering project supervision
and initial operational control in construction projects undertaken
under the Five Year Plan; a teacher-pupil advisory relationship in
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over-all economic planning and detailed execution of parts of the
plan; procurement and sales relationships in international trade;
and a creditor-debtor relationship between the USSR and Communist
China in Soviet financing of Chinese Communist economic 'development.
All of these relationships are mattersof mutual agreement and give-
and-take.
3. The trend of Soviet technical aid is toward greater
control over Chinese investment. The Chinese Communist Five Year
Plan, beginning from a year of "basic construction" in 1953, with
production goals for each industry and sector, has been integrated
to a certain degree with the Soviet Five Year Plan, with the USSR
supplying the technical aid and scheduling the production of equip-
ment for 141 "large" renovation and construction projects, and
with Soviet training of Chinese personnel to take over operation of
the enterprises after an initial period of Soviet direction. The
USSR has taken over for Communist China many procurement and trade
services and the clearing of some foreign exchange transactions
with the SovietBloc.
4. Both ideologically and through the Party 'apparatus, the
Soviet-Chinese Communist relationship takes the form of a partner-
ship, with the USSR in the senior position. This relationship
involves Chinese Communist amalgamation, economic and politidal,
with the Soviet Bloc, both by reason of Chinese Communist desires for
integration with the international Communist order, with the con-
sequent prestige which is associated with the leading position of Com-
munist China in Asia, and by reason of the economic backwardness of
Communist China and its desire to obtain more and more Soviet tech-
nical assistance and equipment to support its development, both
military and industrial. In this sense, Soviet technical personnel
are officially welcomed in Communist China as members of the
international Communist fraternity, kindred spirits in the enter-
prise to extend Communist world domination.
5. Thus Soviet technical aid to Communist China is one of
the means of implementing the separate aims of the USSR and Com-
munist China, as well as their mutual aim of demonstrating to the
.rest of Asia the effectiveness of the Soviet system and the advan-
tage of association with the Soviet Bloc.
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II. Administration and Planning.
A. Administrative Framework.
In the Chinese Communist constitutional structure the highest
organ of state power is to be an All-China People's Congress, chosen
by the elective process with universal suffrage -- as the Communists
understand these terms.. This body was to be called into being in
1953.* Until itis established, the Chinese People's Political Con-
sultative Conference (CPPCC), which approved the Common Program in
.September 1949, has the title to supreme authority. The CPPCC meets
only once in 3 years and will act only in an advisory capacity after
the establishment of the All-China People's Congress. A National
Committee which meets semiannually is authorized to act for the CPPCC,
but the real power lies with the Chinese People's Government Council
(CPGC), which is scheduled to meet every 2 months and which is anal-
ogous to the Presidium of the Supreme Soviet in the USSR. This
council consists of a chairman, 6 vice-chairmen, and 56 members, all
elected by the CPPCC. It includes most of the ranking members of
the Chinese Communist Party. Under the CPGC.are four subsidiary
organs (see Figure 1**): * (1) the Government Administrative Council,
which has the functions of implementing policy directives, directing
subordinate cOmmittees and ministries, and supervising regional
governments; (2) the People's Revolutionary Military Council, which
directs the armed forces; (3) the Supreme People's Court, which is the
highest judicial organ; and (4) the People's Procurator-General's
Office, which is responsible for enforcing government laws and'
regulations.
Under the Government Administrative Council; which is com-
parable to the Soviet Council of Ministers, is the Committee of Finance
and Economics (CFE), which is presently the senior organ for admin-
istering the economy. In late 1952 the Central Planning Bureau was
replaced by a high-level State Planning Committee, which is composed
of 5 leading Communists concurrently holding key positions in the
other administrative agencies. A State Statistical Bureau has also
been set up as part of a general reorganization for implementation
of the Five Year Plan. These new organs are apparently centralized
coordinating agencies for enforcing uniform reporting of production
and inventories and the precise allocation of resources. It is pos-.
sible that the CFE may be superseded by these organs.
Up to 15 April 1954 this.Congress had not assembled.
** Following p. 44, below.
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Under the CFE come- the Economic Ministries listed in Figure 1.
In late 1952, 2 ministries of Machine Industry were set up;. a Ministry
of Trade was replaced by a Ministry of Foreign Trade and one of Com-
merce (domestic trade); and a Ministry of Food was established in
addition to the 3 Ministries of Agriculture, Forestry, and Water Con-
servancy. Also, a Ministry of Construction Engineering and a Ministry
of Geology were set up.
Six administrative regions were established by the central
government: the Northeast (Manchuria), North, East, Central-South,
Southwest, and Northwest. In addition, an Inner Mongolia Autonomous
Region and a Tibetan Autonomous Region were established, and a certain
degree of autonomy within the regions was given to smaller minority
groups. In each of the administrative regions there are military
committees and administrative committees. Under the adminietrative
regions are the provinces and also municipalities which are independ-
ent of the provincial governments.
In late 1952 a reorganization set out to combine the adminis-
trative and military committees into single regional committees. The
general result was to strengthen administrative control of the central
government by minimizing the role of regional governments, increasing
the direct administrative authority of the central government over
the provinces and municipalities, and giving the central ministries
greater local responsibility. The provinces in turn are divided into
hsien, or counties.
Parallel with the administrative hierarchy is the administra-
tive structure of the Communist Party itself, organized on the prin-
ciple of "democratic centralism." The role of the party as "the
leader of the revolution" is reinforced by the dual membership of
Communists in the Communist Party hierarchy and in the consitutional
structure. All Politburo members in the top echelons are senior
Communists with party membership running back 20 to 25 years and, al-
most without exception, predating the "long march" of the mid-1930's.
With the exception of Po 1-Po, the former Minister of Finance, no
officials of note have been purged. There is no firm evidence of
significant factional splits which Mao Tse-tung has been unable to
control. 38/ The multiparty front and the five-sector class society
function in a practical way only to provide the focus for issues of
Communist class warfare through which certain groups are progressively
expropriated, liquidated, exploited, or impoverished for the benefit
of the state's capital accumulation program. The secret police
function for the same purposes as elsewhere in the Soviet Bloc.
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During the period from 1949 to 1952 the Communists consoli-
dated their power under a smokescreen of educational and propaganda
campaigns. The "Agrarian Reform" movement was one of thepe cam-
paigns. The "Resist America and aid Korea" movement and the
"Counter-revolutionaries Suppression" movement were accompanied by
more systematic_ police control over all parts of the society and
the elimination or "re-education" of individuals and groups that had
had close ties with the West. The "Increase Production, Practice
Economy" movement and its predecessor, the "Three-Anti's and Five-
Anti's" movement, were part of the process of establishing tighter
inspection controls over managers and accounting departments of all
firms and of enforcement of capital levies and heavy tax schedules
required for military and economic mobilization. A continuing
Marxist indoctrination campaign and a "culture" campaign at one and
the same tiwe establish tighter control over warkers, the educational
system, and the arts and glorify Soviet regimentation over Western
"imperialism."
Huge numbers of associations have been set up on every con-
ceivable basis from pseudopolitical parties to international-friend-
ship associations, such as the Sino-Soviet and the Sino-Indian
Friendship Associations. Semiofficial organizations like the trade
unions, various professional associations, and the All-China Feder-
ation of Industry and Commerce for local business groups also are
channels for Communist regimentation of Chinese society.
B. Economic Planning and Implementation of Plans.
Once a ComMunist regime has established its political
security by means of the Party apparatus, the regional military
commands, the police system, the cadre corps, and the civil admin-
lstrative organization, its first concern is to gain control of all
economic resources and to organize the manpower to exploit these re-
sources to the end that all. economic activity is directed toward
ac,..waulation of capital under the control of the state for investment
in heavy industry, military end items, and (to a lesser extent) con-
sumption goods industries. In the relatively short period they have
been in power, the Chinese Communists have made considerable progress
toward complete control of economic activities.
Under compulsion of their ideology, as well as of their own
technical inadequacy and inexperience, the Chinese Communists have.
resorted to the USSR as a model of economic organization in the same
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way that they have sought the advice of Soviet technicians in steel
mill operations and have emulated Soviet organizational techniques in
the Party and government. Probably the most important export of the
USSR to Communist China is a complete system of economic organization
comprising techniques for political and social regimentation, for
the planned development and allocation of resources, and for control
over the population and labor force.
Within the framework of the organization described in the
preceding section, the State Planning Committee and the State Statis-
tical Bureau function to make precise estimates of direct investment
requirements and of indirect investment effects. These estimates must
be internally consistent in maintaining a proper proportion among the
major components of each: for example, within the industrial sector
among coal, steel, electric energy, and so on. Estimates of capital
equipment requirements must be realistic in relation to available
supplies. The planners must then allocate capital goods to the indi-
vidual producers In accordance with their current and future production
goals. Material inputs for semifinished goods and end items must be
estimated by the Committee, and flow schedules of raw materials and
semifinished goods must be constructed which will insure that each
producer is allocated, and receives, sufficient inputs to maintain his
production schedule, but no more. Efficient operation of such an
economy requires great refinement of technique, balanced judgment,
knowlege, experience, and centraliied control by the responsible
planners. With its long experience the Soviet planning apparatus
still appears to suffer from inherent shortcomings; many of its more
refined methods are no more than 5 to 7 years old. It is indeed a
tremendous taskfor the Chinese -- even with Soviet help -- to create
an apparatus, train cadres, and operate an allocational economy in
a society that has not realized close political unification for
decades and is economically fragmented to a degree not experienced in
most Western countries for two centuries.
The central planning and administrative organs require a vast
and continuous flow of statistical information from the field. De-
tailed, timely statistical data fed to the central organs from the
field provide the raw material from which over-all plans can be con-
structed and allocations of resources for investment and consumption
can be made. Such detailed reporting of all categories of agricul-
tural and industrial assets and production must be regularly scheduled
and submitted by due dates so that the central organs can formulate
general plans and can check and revise sectional plans submitted by
industries and by provincial and regional administrations.
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The Ministries listed in Figure 1* are the channels through
which reports are submitted to the central statistical and planning
organs and through which administrative control is exercised. Im-
mediately superior to the ministerial structure is the Committee on
Finance and Economics (CFE), which is charged with budget adminis-
tration and with supervision and coordination of the economics
ministries, and which reports directly to the Government. Adminis-
trative Council. In 1952-53, three important changes occurred:
(1) a central State Statistical Bureau (attached for the time being
to the CFE), was formed, charged with collecting all statistics for
the use of central organs and with coordinating and supervising
statistical work on all levels; (2) the' Government Administrative
Council incorporated an important new staff in the form of the State
Planning Committee .(replacing the old Planning Bureau of the Com-
mittee on Finance and Economics); and (3) the regional administra-
tions lost a great deal of their autonomy to the central government
organs. It was particularly significant that the previously pio-
neering Northeast Administration became the prototype for the over-all
planning and control administrations. Kao Kang, its former head
and apparently a rising star in the Communist hierarchy, moved up to
head the Planning Committee.**
Revising the previous system of conflicting, too numerous,
over-complicated, and detailed forms which had previously handicapped
the planning system under the Committee on Finance and Economics, the
new State Statistical Bureau on 7 September 1953 promulgated a direc-
tive reforming the reporting system. 4o/ A strictly coordinated and
centralized statistical system was adopted, as ordered in the direc-
tive establishing the Bureau. 41/ On 2 October 1953 the Statistical
Bureau released its first communique on economic development, which
covered the year 1952. This communique illustrates one of the dif-
ficulties faced by the Bureau and the Planning Committee in their
over-all planning -- namely, that the relative proportions of private
to state industry are still rather large, 42/ private industry being
still responsible for about 42 percent of the total value of in-
dustrial output in 1952.
* Following p. 44, below.
** In line with Soviet experience, it is possible that in the near
future the CBE will be abolished and its functions taken over by the
Administrative Council and its staff, the Planning Committee, to
which the Statistical Bureau will then be attached or moved up as a
separate staff to the Council. 39/
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The most recent statements on the subject indicate that the
regime is about to follow in the footsteps of the USSR after it
abandoned the New Economic Policy in the late 1920's. The general
policy to be pursued is one of limiting consumption to secure greater
output of producer goods and to increase exports of agricultural
products. This policy in turn requires tightened controls over private
industry and its gradual absorption. Popular resentment against the
government for the suffering caused by this policy will be minimized
by placing the blame on private traders and private businessmen. On '
27 October 1953, Li Wei-han, Vice Chairman of the-Government Adminis-
tration Council, made what appears to be a major policy statement to
a plenary session of the All-China Federation of Industrial and Com-
mercial Circles, an organization representing private industrialists
and traders. The Major points of IAJs speech may be summarized as
follows /IV:
That China is in the stage of "gradual transition to Social-
ism"; that the state has adopted a policy of "utilization, re-
striction, and reconstruction toward private industrial and
commercial enterprises," which still constitute an important
segment of the economy;
That, having encouraged and-assisted the private enter-
prises to develop into a system of state capitalism, the
state will continue and intensify this policy so that the
state capitalist enterprises will gradually be transferred
into Socialist enterprises; and
That the principal oldjedtives are greater production,
efficiency, and better integration of the private sector
with state plans.
It is impossible to eStimate precisely how far the government's policy
of absorbing private industry will have proceeded by the end of 1957.
Several other important defects existpd in the economic plan-
ning and allocational system. National economic plans, particularly
construction plans, were primarily compilations of projects sent up
from below. These were often overambitious, ill-conceived in design,
oblivious of the availability of requisite raw materials and capital
equipment, and so unrealistic and mutually inconsistent that the
central organs could not readily revamp them in proper proportions
without having more precise, detailed information at hand. In the
Spring of 1953 it was found necessary, after checking the individual
projects sent up from below, to cut b'ack the over-all capital
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Figure 1
People's Procurator-
General's Office
.11,1?11
COMMUNIST CHINA
MAJOR ORGANS OF THE
CENTRAL PEOPLE'S GOVERNMENT
ALL-CHINA
PEOPLE'S CONGRESS
Chinese People's
Government Council
Chinese People's Political
Consultative Conference
People's Revolutionary
Military Council
State Planning
Committee
GR 1506 CIA, 12-53
? 11=?4111=1
Supreme
People's Court
Government
Administrative Council
Committee of Finance
and Economics (CFE)
State Statistical
Bureau
Economic Ministries
Heavy Industry
Fuel Industry
Light Industry
Textile Industry
First Machine Industry
Second Machine Industry
Construction Engineering
Geology
Food
Finance
Foreign Trade
Communications
Commerce
Railways
Posts, Telegraph, and Telephone
Agriculture
Forestry
Water Conservancy
Labor
People's Bank
Maritime Customs Administration
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construction about 30 percent. The 1953 goal for electric power,
which originally called for an increase of 27 percent over 1952, was
reduced to approximately 18 percent. 44/ For machine tools the
original goal of an increase of 34 percent in 1953 over /952 was re-
vised downward to an increase of only 4.6 percent. 45/ The more
precise and detailed reporting system established under the State
Planning Committee and State Statistical Bureau is designed to elim-
inate these planning defects.
Raving passed through the state of reconstruction of exist-
ing plans, and having established the framework for detailed statis-
tical reporting and planning, the allocational economy of the Chinese
Communists reached a new stage in August 1953 with the announcement of
a more detailed type of over-all economic development plan. This
consisted of the building and reconstruction of 91 new entei-prises and
the installation of equipment for 50 enterprises already in existence,
for which the USSR was to provide technicians and equipment) project
supervision, training for Chinese cadres, and management through the
stage of initial operation. In describing the progress of Chinese
Communist economic development to date and Soviet assistance in the
projected Five Year Plan) a Pravda article of 28 September 1953
stated:
"The scope of the tasks for the first Five Year Plan
may be described by the fact that in 1953 alone recon-
struction and building is scheduled for 21 Metallurgical
and chemical plants, 24 large machine building plants,
24 thermal and hydroelectric stations and railroad lines
with an overall distance of more than 600 kilometers.
"The objective of the recently signed Soviet-Chinese
Agreement is to render economic and technical assistance
to China in fulfilling the first Five Year Plan. It ghe
agreement/ anticipates the fulfillment by the S.U. of pro-
jected plans and the supply of equipment for the building
and reconstruction of 91 new enterprises, and the equip-
ment for 50 enterprises now in existence, as well as other
types of technical aid ... . /he Plan includes projects
in the fields of iron and steel and nonferrous metallurgy,
coal mining) oil production and refining, hydroelectric
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and thermal power, conservancy, machine-building (auto-
mobiles, tractors, ball bearings, blast furnaces, rol-
ling mills, turbines, generators, lathes, mining equip-
ment), chemical and synthetic rubber factories, and
pharmaceutical production.7 ... Aside from the ful-
fillment of projected work and the supply of machinery
with Soviet organization, China will be given technical
aid in construction, the assembly of equipment, and
expansion in operation.
"In the process of setting up national cadres for
the building and operation of new enterprises, by re-
quest of the governments of the People's Republic of
China and of the Soviet Union, a considerable number
of Soviet specialists will be dispatched to China.
Many Chinese workers and technical engineers will study
the production practices in Soviet enterprises."
In summarizing the progress to date of the Chinese Communists
in economic planning and the implementation thereof, it may be said
that their broad policy aims are the same as Soviet aims. The three
most important over-all objectives of Communist China are these:
self-sufficiency, military preparedness, and industrialization. There
are also regional policies stressing development of the Northeast
(Manchuria) and the Northwest.
Plans for heavy industry give emphasis to technical training
in the educational system and in industry, increased geological ex-
ploration to discover additional natural resources, employment of
unskilled manpower wherever possible (as in investment in the trans-
portation sector), and Soviet technical and material assistance.
Resources are to.be diverted from the agricultural and consumer goods
industries to heavy industry through direct allocation of scarce
resources and through fiscal and price policies.
The fiscal measures to be used were described at length by
Kao Kang in a speech commemorating the third anniversary of the
founding of the Communist regime. Accumulation of capital is to
come from three sources: profits and special capital replacement
funds from the income of industry, taxation, and savings deposits of
the people. Profits are to be channeled from light industry and
textiles and from internal trade to heavy industry. International
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trade also is controlled to push the exchange of consumer goods for
those commodities required in the industrializing of the country. In
addition, savings deposits have been promoted to drain off consumer
purchasing power into investment expenditures.
C.. Soviet Influence in Chinese Communist Economic Planning
and Development.
The extent of Soviet aid to Communist China is clearly a
key element of the development program. Aside from their membership
in the international Communist party, which looks to the Kremlin for
leadership, the Chinese Communists seem to have taken the Soviet
system as their working model and their blueprint for the future.
There is little concrete evidence as to the degree to which Soviet
influence -- other than ideological.-- is decisive at the policy-
determining level of the Chinese Communist Government Administrative
Council. The Soviet relationship to the Chinese Communists appears
to be generally advisory, or teacher-pupil, in nature. Soviet tech-
nicians exercise considerable influence over Chinese Communist
economic planning at both the national and industry levels. The
Chinese cadres, managers, and others directing economic activities
are continually urged to take full advantage of Russian "advanced"
technology and greater experience. Manchuria and Sinkiang are the
regions where the USSR exercises the greatest direct control over the
economy. In general, however, it is. certain that Soviet control
over the Chinese Communists, is not so direct as Soviet militarycon-
trol of the European Satellites. The extent to which the USSR is
willing to give the Chinese Communists important assistance in their
investment program probably depends on Soviet confidence in the loy-
alty of Communist China to the direction of the Kremlin in inter-
national relations.. Soviet influence is probably most effectively
exerted through the dependence of Communist China on Soviet military
and technical aid and equipment to implement its rise in political
power and prestige. This means that the administrative integration
of oommunist China with the Soviet Bloc will undoubtedly increase
in proportion to the amount of Soviet aid eXtended, because, as
the investment program of the Chinese Communists develops, their own
technical requirements will necessitate their continued dependence
on Soviet technical aid. Hence, the connection between Communist
China and the USSR probably will become closer during the period of
this estimate, in economic planning, in the interchange of Chinese
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agricultural and raw materials for Soviet industrial and military
equipment, in Soviet technical aid and supervisory instruction to
Chinese industrial and military establishments, and in the exten-
sion of the Soviet system of economic organization within the
Chinese economy. On the other hand, Chinese Communist economic
capabilities for independent action will increase in proportion to
the growth of Chinese heavy industry. The eventual aims of the
Chinese Communist ruling hierarchy, like those of their Soviet
prototypes, remain the achievement of industrialization, military
preparedness, and national self-sufficiency. The inconsistency of
the Chinese Communists' aim of self-sufficiency with their present
dependence on Soviet aid constitutes a possible source of resentment
or friction between the two regimes during the period of this esti-
mate.
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III. Functional Aspects of the National Economy.
A. Financing of Economic Development.
The process of industrialization in a backward country involves
a radical shift in the pattern of resource allocation, reducing the pro-
portion allocated to the production of raw materials, food, and other
consumer goods and increasing the proportion allocated to the produc-
tion of plant and equipment. If expansion can be financed by borrowing
from abroad, the normal supply of consumer goods will stillibe avail-
able or may even increase significantly. To the extent, however, that
industrialization cannot be financed by foreign loans, capital forma-
tion must depend on domestic savings or the use of unemployed resources.
For rapid industrial growth, it is essential that a considerable pro-
portion of any 'increase that occurs in GNP be saved and invested in
industry and associated services. Both the government budget and the
banking system are instruments for carrying out this program.
B. National Budget.
Total figures on the budget of Communist China, for the years
from 1950.to 1952 46/ which are given in Table 9* (and graphically
presented in Figure 2**) show an increase in expenditures from US $3.4
billion*** in 1950 to US $8.1 billion in 1952, the, latter being about
one-fifth of the estimated GNP of the same year'. The budget figure
for 1953 (also in Table 9) showed a further increase to US $11.7 bil-
lion.. Even when this figure is deflated to allow for changes in the ?
price level, it is evident that a substantial increase has taken place.
1. Expenditures.
a. Military Expenditures.
' Military expenditures in the budget of Communist China
rose from US $1,4 billion in 1950 to US $2.5 billion in 1951 and are
said to have dropped to US $2.1 billion in 1952,'excluding funds for
military construction which probably were included' under investment
expenditures. As much as One-third of total military expenditures in
1952 may have gone for military constructions Of current expenditures
on the armed forces, a relatively small part went for air forces and
,naval forces (in that order), by far the greater part being allocated
to the ground forces 47/ Expenditures of US $2-6 billion were planned
for 1953.
* Table 9 follows on p. 50.
** Following p. 50, below.
xxx At the exchange rate of 20,040 yuan to US $1.
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Table 9
Communist China: Total Budget Figures
and Percentage Increases
1950-52,
1953. Plan
1950
1951
1952
1953 (Plan)
Budget (Billion Current US $)
a/
3.4
5.9
8.1
11.7
Percent of Increase per Year
74
37
44
Budget (Billion 1952 US $) a/
4.2
6.1
8.1
11.9
Percent of Increase per Year
45
33
47
a. Calculated on the basis of 20,040 yuan to US $1.
Although military expenditures in absolute terms re-
mained at about the same level for 1951-53, the percentage of total
expenditures devoted to the military establishment fell during the
1950-53 period. In .1950, military expenditures were 40.7 percent of
total expenditures; in 1951, 35.6 percent; and in 1952, 22.6 percent.
They amounted to 22.4,percent of planned expnditures in 1953. A.
breakdown of budget figures for 1950-53 is given in Table l(0* and
graphically illustrated in Figure 3.**
. b. Investment in "National Economic Construction."***
The budget figure for what is called "National Eco-
nomic Construction" shows substantial increases, the figure in 1951
being doUble that of 1950, and that of 1952 being almost double that
of 1951. From 1950 to 1953 the percentages of total allocations in
this category increased from 25 percent of the total budget to almost
45 percent. In 1953 an increase of about 40 percent over 1952 was
planned, a rough breakdown of which is shown in Table 11.xxx*
* Table 10 follows on p. 51.
** Following p. 56, below.
*** "National Economic Construction" is to be distinguished from the
more comprehensive term "National Construction" (see Tab]e 10), which .
includes investment in welfare, education, and propaganda.
XX-XX Table 11 follows on p. 53.
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300,000
200,000
100,000
Figure 2
BUDGET OF COMMUNIST CHINA, 1950-53?
(8,/lions of Current Yuan)
REVENUES
Other Revenues
Credits, Loans and Insurance
Profits of State Owned Enterprises
3%,
Agricultural Taxes 27Z
?
Industrial and
Commercial Taxes
01
43%
SS
iep
41%
36/
1950 1951 1952 1953
13224 CIA, 4.54
300,000
200 ,000
100,000
EXPENDITURES
Surplus and Reserve Funds 25
Other Expenditures 20
Administration
Military Establishment
Weli lrp
fa:edE,garnl,
Education
an
Investment 25/
01
1950
? This interpreted to be a consolidated budget including expenditures
and revenues of municipalities and administrative areas.
24%
1951
1952
kL5
44%
1953
1953
INVESTMENT
EXPENDITURES
24%
4%
14%
12%
46%
Other
Trade and Banking
Railway and
Telegraph
Agriculture and
Water Conservancy
Industry
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Table 10
Budget of Communist China ?!/*
1950-52, 1953 Plan
Values in Million Current Yuan
Expenditures
Military Establishment
National Construction
1950 Actual
Percent
of Total
1951 Actual
Percent
of Total
1952 Actual
Percent
of Total
1953 Plan
Percent
of Total
28,274,282
40.68
? 50,608,137
35.62
42,777,000
22.62
52,253,700
22.38
Economic Construction
17,354,457
24.98
35,106,331
24.70
73,069,900
38.62
103,527,600
44.34
Welfare, Education,
and Propaganda
7,552,453
10.91
13,436,569
9.45
22,332,500
11.80
34,807,500
14.90
Administration
13,132,648
18.91
17,457,229
12.28
19,336,900
10.20
23,779,600
10.19
Other Expenditures
1,767,385
2.55
2,413,364
1.71
5,702,300
3.00
3,647,000
1.56
Surplus and Reserve
Funds (including
unspecified alloca-
tions)
1,352,900 12/
1.95
23,063,570 LI
16.24
26,059,500 12/
13.76
15,483,700
6.63
Total Expenditures
69 434 394
100.00
142,083,600
100.00
189,278,100
100.00
233,499,100
100.00
Footnotes for Table 10 follow on p. 52.
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Table 10
Budget of Communist China 2/
. 1950-52, 1953 Plan
(Continued)
Values in Million Current Yuan
1950 Actual
Percent
of Total
.1951 Actual.
- Percent
of Total
1952.Actual
Percent
of Total
1953 Plan
Percent
of Total
Revenues
Taxes
Agricultural 19,104,788
27.51
21,699,218
15.27
25,602,326
13.53
25,661,551
10.99
Industrial and Commercial 29;878,314
43.03
58,477,836
41.16
68,983,051
36.44
87,468,763
37.46
Other 5,32412/
.00
950,621
22/
.67
1,632,823
12/
.85
1,554,886
12/
.67
Profits of State-Owned
Enterprises 8,694,678
12.52
30,535,709
21.49
46,578,800
24.61
69,985,200
29.97
Credits, Loans, and Insurance 3,276,181
4.72
5,681,881
4.00
2,510,000
1.33
10,280,000
4.40
Other Revenues and Balance
from Preceding Year 8,485,109
12.22
24,738,335
17.41
43,971,100
23.24
38,548,700
16.51
Total Revenues 69,434,394
100.00
142,083,600
100.00
189,278,100
100.00
233,499,100
100.00
a. This is interpreted to be a consolidated budget including expenditures and revenues of municipalities and-administrative areas'.
b. These figures include some residual amounts which were not detailed by Po 1-Po but are added here to complete the total balance
of expenditures and revenues which he specified.
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Table 11
Expenditures on Investment
in "National Economic Construction"
in Communist China
1952, 1953 Plan
Billion Current Yuan
Year Industry
1952 N.A.
1953
Plan 47,633.8
Agriculture
and Water'
Conservancy
7,289.2
11,768.3
Railroad Trade
and and
Telegraph Banking Others Total
9,001.4 N.A. N.A. 73,069.9
14;850.5 4,483.2 24,791.8 103,527.6
Welfare, Education, and Propaganda.
Increases in absolute amounts of current yuan expendi-
tures for welfare, education, and propaganda from 1950 to 1953 are sub-
stantial. The percentages of total expenditures on this account also
increased by about 30 percent from 1950 to 1953, as shown in Table 12.
The increase represents primarily the expansion of technical training
for inddstrial development.
Table 12
Trend of Expenditures for Welfare; Education,
and Propaganda in Communist China
1950-52,
1953 Plan
Percent
1950
1951
1952
193 Plan
Increase over Previous Year
78
66
56
Proportion of Total Expenditures
11
9
12
15
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d. Administrative and Other Expenditures.
Administrative and other expenditures have increased
in absolute amounts but not so much as expenditures for investment or
for welfare, education, and propaganda.
2. Revenues.
The sharp rise in expenditures from 1950 to 1953 has in
large part been underwritten through appretiable rises in industrial
and commercial taxes and in profits from the socialized enterprises.
a. Agricultural Taxes.
The primary tax basis for Chinese Communist politi-
cal and military power in 1949 was the grain tax in kind. It is
estimated that at that time 30 percent of the main crops were taken
in the agricultural tax. The Minister of Finance 48/ stated that
the 1950 tax burden of the peasants would be more than 21 percent of
the total agricultural income in the "old liberated areas" and would
average more than 19 percent of the total for the whole country. It
is believed that local and provincial surtaxes, which were abOlished
in 1952-53, were not included in this estimate. In any case, the
tax burden on the peasants has probably been understated.
On 16 June 1952 a directive was issued to establish
a system of progressive rates and to eliminate local surtaxes, Which
often exceeded the official rate of 15 percent of the regular taxes
of the central government. The central agricultural tax is levied
on an estimated normal yield, thus penalizing those farmers who pro-
duce below it and giving an incentive for producing over the norm. ?
In North China, for example, the central government tax is 22 percent
of the officially estimated normal yield, with surtaxes bringing the
total tax up to about 25 percent of the output of taxable acreage --
that is, everything except the output of the first mou of land. The
revenue appears to have varied in about the same proportion as
Chinese Communist claims of increases in yields of the main crops.
As a component of total income, however, the agricultural tax has
sharply decreased relative to industrial and commercial taxes and
profits of state-owned enterprises.*
* See Table 10, p. 51, above, and Figure 3, following p. 56, below.
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S-E -C -R -E -T
b. Industrial and Commercial Taxes.
There are 11 general nonagricultural taxes in Commu-
nist China, the most important of which are the customs and salt lev-
ies, taxes on manufactures and on wholesale sales, the capital tax,
stamp taxes, and various other excise and license taxes. Some of
these revenues are collected and retained by the local governments,
and some are collected by the central government and are shared by
the two levels of government.
The business and industrial tax system of Communist
China is concerned both with fiscal aims and with social and politi-
cal aims, alloWing tax concessions to government enterprises and
groups which the government wishes to build up, and discriminating
against private commerce which it wishes to delimit or destroy. Thus
tax rates on the middleman's profits, generally considered as unearned
income in Communist countries, are high. On the other hand, heavy
basic industry and iron and steel receive a tax reduction of 40 per-
cent; chemicals, a tax reduction of 30 percent; and books and station-
ery, a tax reduction of 20 percent. With respect to excise taxes,
necessities are taxed at a lower rate than luxuries like wines and
cigarettes, which are taxed at 28.57 percent and 55.54 percent re-
spectively. These two taxes, together with the tax on yarn at 13.04
percent, represent more than 60 percent of the total commodity tax
for 1950.
c. Profits of State-Owned Enterprises.
Profits of state-owned enterprises have increased sub-
stantially from 1950 to 1952. The increase in 1951 over 1950 was 25
percent, and in 1952 was 52 percent over 1951. An increase of 50 per-
cent over 1952 was projected for 1953, compared with the 27-percent
increase budgeted for revenue from industrial and commercial taxes.
Table 13 shows the annual increase in the share of total revenues
contributed by profits from state-owned enterprises during 1950-53.
Table 13
Proportion of Total Revenues of the Chinese Communist Government
Contributed by State-Owned Enterprises, 1950-52, 1953 Plan
Percent
1950
1951
1952
1953 Plan
Proportion of Total Revenues
12.5
21.5
24.6
30.0
Annual Increase in Proportion of
Revenues
72.0
14.4
22.0
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S -E -C -R -E--T
The percentage of total revehue derived from profits
of state enterprises has increased from 12.5 to 30 percent, whereas
the percentages of revenue from the agricultural tax and the taxes
on private industries and commercial enterprises have relatively
diminished from 27.5 percent and 43 percent, respectively, in 1950
to 11 percent and 37.5 percent in 1953.* The increase in revenue of
state enterprises and cooperatives reflects the rapid acquisition by
the state of, much of the economic activity in domestic and inter-
national trade and banking and a more rapid expansion of the state-
operated industriesowhich are favored by state policies.
d. Credits, Loans, and Insurance.
Revenues under the heading of Credits, Loans, and
Insurance are believed to include the proceeds of bond sales to the
public, borrowing from the People's Bank (that is, expansion of the
currency issue), interest on loans of the People's Bank which had
been made to other banks and government enterprises, premiums on
government 'insurance, and possibly the credit received from the
USSR on trade account.
Two loan drives have been made within Communist
China; In 1950 a bond issue of 200 million shares Was floated, each
share to be worth enough yuan to buy a selected list of commodities.
This drive was planned to bring in between 2.25 trillion and
4 trillion yuan, depending on the expectations of the budget planners
as to the average price of a "fen" unit fcir 1950. In 1951 a drive
for funds for heavy armaments was launched to help finance the
Korean War. It was claimed that 5,025 billion yuan were raised in
this drive. The credit from the Soviet loan of 1950 would account
for an average of at least 1,200 billion yuan each year from 1950
through 1953.**
e. Other Revenues and Balance from Prebeding Year.
The item "Other Revenues and Balance from Pre-
ceding Year" is believed to include, besides the funds carried over
from the preceding year, the foreign exchange profits on foreign
trade transactions and inward remittances of overseas Chinese, book
profits from revaluation of government assets, capital levies
* See Table 13, p. 55, above, and Figure 3.
** Proceeds of US $60 million per year computed at the exchange rate
of 20,040 yuan equal US $1, in effect during 1952. The new official
exchange rate introduced in December 1952 is 23,430 yuan equal US-$1.
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CHINA
?
?
SELECTED BUDGET ITEMS, 1950-53
TOTAL AND PRINCIPAL ITEMS
100
80
60
a)
ca.
20
10
OF BUDGET EXPENDITURES
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GR 1505 CIA, 12-53
1952
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+
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----hi
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ttri 4)
1950
1951
1952
1953
Graphs plotted on semi-logarithmic P50X1
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S -E -C,-R -T
against offenders in the so-called anticorruption drives, seizures
of gold and silver bullion, and possibly the proceeds of export
sales of opium.
These entries probably reflect considerable juggling
of the accounts from year to year. The campaign against tax evaders
as part of the so-called anticorruption campaign in the first half
of 1952 probably contributed a.substantial part of this figure by
recovery of past taxes and collection of fines. Before this cam-
paign the government was faced with a serious budgetary crisis, which
was surmounted by the capital levies made in the drive. The vari-
ability of the "other" revenues from year to year indicates their
unpredictable nature resulting from improvised, extreme measures
adopted to garner "surpluses" for the state from the victims of its
policy of eliminating the propertied classes.
C. Banking System.
Toward the close of the Kuomintang period there were already
visible trends toward the development of the four government banks
and the diminution of the importance of the private banks. After
the Communist government came into power, the Central Bank of China
with its sole issuing authority and clearinghouse was renamed the
People's Bank of China and was designated the central bank of China.
On 3 March. 1950 the Government Administrative Council pro-
mulgated "Decisions on the Unification of State Financial and
Economic Work," in which the People's Bank was officially appointed
as the central organ for the control of the money supply of the
country, and in which it was indicated that all state bank would
set up additional branch offices to act on behalf of the national
treasury. Up to the end of October 1951, more than 5,300 offices
of the People's Bank were established and nearly every hsien (county)
had access to facilities of the bank. Branches and agencies of the
Peuple's Bank have been extended to streets, factories, schools, and
government organs in the cities and towns and in markets in rural
areas.
1. Private Banks.
Commercial banks are under the close control of the
-People's Bank but are forced to serve the public in handling about
40 percent of routine banking transactions on behalf of the People's
Bank. Private banks cannot accept deposits from any government
agency and have to submit to the People's Bank various detailed
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S -E -C -R-E -T
periodic reports, including a Weekly report on all deposits and
loans. As the examining agency, the People's Bank can investigate
any bank at anSr time. Banking reserves, based on average weekly
deposits; have to be maintained in the People's Bank in the amount
of 7 percent to 15 percent for demand deposits and 3 percent to
8 percent for time deposits. The banks also are required to keep
a cash reserve of 10 percent against demand deposits and 5 percent
against time deposits.
Beginning in 1950, the People's Bank sponsored a move-
ment to consolidate individual private banks into syndicates in
order to permit pooling of their resources, to direct thBir loan
policies, and to participate with them in the making of industrial
loans.* This policy resulted in the following developments: the
establishment of five consortia of private banks; a number of
mergers of formerly independent banks; the formation of several
"joint" banks with participation of the People's Bank in stock
ownership; the participation of all of these and the People's Bank
in joint enterprises, such.as agricultural loan extension and
investment in industrial, mining, and cooperative enterprises; the
general use by all banks of the People's Bank's facilities for bill
collection and check clearance; and a great reduction in the number
of banking institutions. On the receiving side of the credit which
became available as deposits increased were the industries, mining
enterprises, and agricultural producer cooperatives approved by
the government as worthy recipients of credit. The producer
credit cooperatives have increased in number and size in parallel
development with the centralization of the banking business. 49/
2. Functions of the Government Banks.
The banks of Communist China appear to be restricted to
the minimum functions of a banking system. There is no investment
activity of banks in common stocks and bonds or in the sale of
securities or commodities. The aim is mostly to assist in the
development of the national economy by channeling capital into
approved productive enterprises.
The centralized clearing function is the most power-
ful device for controlling the economy. All national and local
government organs and enterprises, military units, public schools,
* Those with government participation in stocks and management.
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hospitals, cooperatives, and other popular organizations must set
up accounts with the local People's Bank. All transactions, whether
local, national, or international, must be cleared through the
People's Bank, and no direct cash payment is allowed. Duplicate
copies of the business contracts of all government organs are
deposited in the Bank, and funds received from and sent to the
national treasury by all the aforementioned "units" are handled
through the bank. No commercial credit relations such as loans,
drafts, and advance payment for goods ordered are allowed among the
various "units." Loans contracted for a specific purpose cannot
be used for any other purpose. In this way the government is able
to maintain surveillance over the activities of its agencies and
employees, to observe the progress of its plans, and to enforce
budgetarY allocations.
Private enterprises are required to deposit their
currency holdings in banks and to use the checking system more
extensively 50/ so that the People's Bank will be able to observe
private transactions also.
The interest rate, another instrument of control, is
used to force state enterprises to practice cost accounting --
by making interest an explicit cost -- and to speed the turnover
rate of capital. It influences private business to engage in
desired types of development, attracts individual economic
activity toward cooperative'enterprises,and encourages savings and
investment. With respect to savings, the interest is highest for
fixed long-term deposits which can be utilized for industrial
investment, and it declines as. theperiod of the deposit becomes
shorter. As for loans, the rate of interest for heavy industry is
lower than for light industry and lower for industry in general
than for commerce and trade.
In order to encourage saving on the part of the public,
the People's Bank initially tied the value of deposits to a bundle
of goods in order to preserve the real value in the face of rising
prices. This measure mitigated the inflationary hoarding of goods,
and, in June 1952, when prices became stabilized, it was discontinued.
Another device was the "prize winning" deposit, a lottery system in.
which depositors participated in the hope of winning one of geveral
large prizes.
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The branches of the People's Bank throughout the country
serve not only to promote and centralize savings deposits, thus
facilitating currency control, but also to collect taxes on behalf
of the government. The vigor and efficiency with which this function
has been performed apparently have aided the government greatly in
its fiscal management.
D. Currency, Prices, and Consumption.
The Communists came to power in 1949 in a period of hyper-
inflation, and much of their effort has been directed toward .
stopping inflation. Extreme shortages were lessened by e5cpansion
of output from 1950 to 1952. Because of .inCreasing control over
available supplies of consumer goods by state trading and coopera-
tive organizations, the government was in a position to reduce
inflationary pressures by allocating commodities to those regions
where there were shortages. In addition, the money supply was
held in check by unifying the currency in the issue of the People's
Banks, by enforcing a tight money policy, by capital levies, and by
vigorous collection ol taxes. At the end of 1950 the average price
index was about twice as high as that for the end of 1949, an
appreciable price rise but less rapid than in the days of hyperin-
flation in early 1949. In 1951, prices increased only 13.7 per-
cent over the previous year, and by the end of 1952 it was claimed
by Po 1-Po in his budget speech that wholesale prices of 52
principal commodities in 6 important cities had fallen by 6.2 per-
cent.
What happens to prices over the period 1953-57 will depend
largely on the methods used to finance the industrialization pro-
gram. If a good part of investment is financed by use of the
printing press or by bank credit, then there will be an increase
in aggregate demand for real resources, which will be inflationary
in effect. Taking money on deposit from individuals is generally
counterinflationary to the extent that individuals thereby are
influenced to refrain from bidding for goods. Securing funds by
taxation also is counterinflationary in that the effective demand
on the part of the public for goods and services is reduced to
enable the government to invest more in heavy industry.
That the Chinese Communists expect to finance their Five
Year Plan,with its primary aim of developing heavy industry, by
extracting sacrifices of consumption from the people is revealed
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4.
S-E-C-R-E-T
in an editorial of 30 October 1953 in the People's Daily, organ of
the Central Committeeof the Chinese Communist Party. The editorial
indicates that the regime is drawing on Soviet experience in the
early 1930's, when the psm exported food to pay for its imports of
industrial equipment, and when the industrialization program was
pressed in spite of a crisis in agricultural production that led to
millions of deaths from starvation. The editorial stated that the
Soviet people "did experience shortages of agricultural products and
consumer goods during the national industrialization period. Also,
because of the above situation, ? a goods distribution system re-
quiring goods purchasing certificates was enforced." The Chinese
people were informed that they "must be willing to sacrifice) to prac-
tice rigid economy in all'matters, to be economical of food, education
expenditure, and yardage goods." .Thus forced saving by means of
strict control of consumption through rationing, price fixing, forced
purchases, and taxation is the method of capital accumulation by
which the Chinese Communist Party will attempt to carry out its
first Five Year Plan.
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IV. Growth of the National Economy.
The period from 1931 to 1952 in China was complicated by the
series of political upheavals resulting from the Sino-Japanese war
and the civil war that followed. Data on the Chinese economy are
scanty at best, and economic information from 1936 to 1945 is even
harder to get because the economy of China was under various pOlitical
jurisdictions. In general, trends are manifested in four time-spans
from 1931 to 1952. From 1931 to 1936, economic trends were relative-
ly homogeneous for what is now Communist China. From 1937 to 1945,
Manchurian development proceeded rather rapidly, but the picture was
spotty for the Japanese-occupied areas of China proper, including the
important industrial cities, while local developments also occurred in
the areas under the control of the Chinese Nationalist government.
The years 1945 and 1946 were low years for economic output for all parts
of China. From 1945 to 1949, there was a period of increasing produc-
tion in most sectors, ending in a drop resulting from the disruptions
of civil war. In the period from 1949 to 1952, production again in-
creased, generally reaching in Manchuria the level attained under the
Japanese from 1941 to 1946 and in China proper the level attained in
the period from 1935 to 1938.
Table 14* shows the production trends in principal sectors of the
economy from 1931 to 1952.
A. Gross National Product.**
The over-all index for the gross national product (GNP) of
China shows an increase of 13.3 percent in 1952 compared with 1936.
From 1950 to 1952 the yearly increase in GNP reflected mainly restor-
ation to previous levels of production rather than new additions to
productive capacity. In 1950, GNP was 99.2 percent of 1936. Output
in 1951 was 6 percerit over 1950, and output in 1952 represented an
increase of 7.7 percent over 1951. Table 15 shows the sector indexes,
1931-52.*** These are graphically represented in Figure 4.*xxx
* Table 14 follows on p. 64.
** The methodology used in computing GNP is explained briefly in
Appendix B.
xxx Table 15 follows on p. 66.
*xxx Following p. 66, below.
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Table 14
Production Trends in Modern Industry in China, by Economic Sector E/*
1931-52
Unit
1931
1932
1933
1934
1935
1936
1937
1938
1939
1914-0
1941
Textiles
Million US $
970.0
935.0
969.0
896.0
970.0
Electric Power
Billion KWH
2.4
2.4
2.7
2.9
3.3
3.8
4.o
4.5
5.0
5.6
6.3
Pig Iron
Thousand MT
478.1
522.5
606.7
631.4
558.4
689.1
909.4
970.1
1,389.6
1,572.8
1,507.0
Coal
Million MT
27.3
26.4
28.5
32.8
35.8
39.3
36.9
31.9
38.5
46.8
58.8
Chemicals
Million US $
.
33.9
Engineering
Million US $
80.3
95.7
106.0
128.2
152.1
200.0
145.3
136.8
186.3
213.7
229.1
Railroads
Billion MT Ka
17.0
25.3
26.4
35.5
Cement
Thousand MT
397.0
622.0
559.0
840.o
1,026.0
1,245.o
1,309.0
1,332.0
1,286.0
1,377.0
1,490.0
Nonferrous Metals
Million US $
37.2
32.5
34.9
36.7
42.3
53.9
48.4
44.5
48.6
45.8
56.0
Munitions
Grains
Million US $
Billion US $
8.8
9.5
9.3
8.3
9.2
9.5
8.6
8.8
8.8
(76.4
7.6
12/
(96.8)
7.7
Meat and Fish
Billion US $
5.1
4.8
4.7
4.4
4.3
4.2
4.1
4.o
Steel (Finished)
Thousand MT
25.4
135.3
369.6
413.9
458.1
45o.o
452.o
* Footnotes for Table 14 follow on p. 65.
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Table 14
Production Trends in Modern Industry in China by Economic Sector 2/
1931-52
(Continued)
Unit
1942
1943
1944
1945
1946
1947
? 1948
1949
1950
195i
1952
Textiles
Million US $
927.0
910.0
728.0
1,038.0
843.0
974.0
Electric Power
Billion KWH
6.9
7.5
8.0
5.0
3.8
4.2
4.3
4.8
5.2
6.3
7.6
Pig Iron
Thousand MT
1,857.7
1,885.1
1,215.0
110.6
1.3
5.7
24.6
205.0
915.0
1,150.0
1,875.0
Coal
Million MT
65.1
62.8
62.5
19.3
17.3
20.4
20.2
22.7
30.0
37.2
45.8
Chemicals
Million US
43.0
7.5
15.2
31.0
38.5
Engineering
Million US 1
247.9
290.6
290.6
217.1
116.2
114.5
92.3
75.2
148.7
a7.1
333.0
Railroads
Billion MT Km
3.8
5.3
3.9
39.7
51.5
59.5
Cement
Thousand MT
1,908.0
1,829.0
1,442.0
42.0
208.0
609.0
700.0
466.0
900.0
1,500.0
1,750.0
Nonferrous Metals
Million US $ 49.9
43.3
27.0
11.6
7.3
12.0
14.8
14.2
28.7
36.2
45.0
Munitions
Million US $ (100.4) 12/
(90.5) y
(85.8) Y
(138.4)12/
(229.9) y
230.7
356.5
521.6
Grains
Billion US $ 8.0
7.8
8.7
7.9
9.3
93
9.7 .
8.6
8.9
8.9
9.3
Meat and Fish
Billion US $
3.9
3.8
3.7
3.7
3.7
4.1
4.2
4.4
4.7
4.8
4.8
Steel (Finished)
Thousand MT
463.6
493.4
382.4
12.0
8.6
60.8
30.0
81.2
320.4
564.o
824.0
a. Where dollar values are given, the Chinese output is valued in terms of 1952 US prices.
b. Figures exclude output of Manchuria and of Communist controlled territory.
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Table 15
Sector Indexes for. China
1931-52
Percent
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
191.4.7
1948
1949
1950
1951
1952
Total Agricultural Output
92.3
95.2
100.0
94.1
86.5
86.6
.81.7
81.6
81.0
80.3
85.0
80.9
90.7
92.6
96.3
90.0
94.2
95.9
98.3
Modern Manufacturing
77.9
79.0
82.3
89.8
100.0
88.4
84.1
74.2
102.0
110.3
133.5
Military End Items
100.0
109.0
274.6
424.4
620.8
Iron and Steel
45.0
100.0
213.8
236.5
281.6
289.4
285.6
311.9
326.4
237.9
11.9
3.8
26.4
14.4
47.3
193.1
311.7
455.9
Minerals and Metallurgy
51.9
54.a
57.9
65.7
80.7
100.0
99.5
92.1
100.1
111.0
125.6
140.9
137.9
117.0
33.6
30.3
44.5
50.2
46.0
83.9
109.7
136.0
Modern Transportation
100.0
148.9
155.6
209.0
22.1
31.0
23.1
233.7
303.1
349.8
Trade, Food Processing,
and Handicrafts
87.4
89.1
92.4
94.2
93.7
100.0
93.6
90.0
90.3
89.0
86.9
86.4
85.4
87.1
82.1
85.9
89.1
91.0
85.9
93.2
96.4
100.0
Government
73.3
73.3
76.0
85.7
93.6
100.0
170.5
202.8
247.9
GNP
93.6
100.0
99.2
105.1
113.3
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200
100
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60
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CHINA
SECTOR INDEXES, 1931-52
(1936 =100)
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1931 1935 1940 1945 1950 1952 1931
1950 1952
1000
800
600
400
200
100
80
60
40
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Figure 4 50X1
?
GR1501 CIA, 12-53
?
. , PIG JR0 .AND STE
' I ! I it ? ! , ? ! Lit _1
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1935
1940
1945
1950
1952
Graphs plotted on semi-logorithmk50X1
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S-E-C -R-E-T
The growth in the government sector was the most important
change in the economy from 1936 to 1952. The Chinese GNP in 1952,
other than the government sector, was 106.6 percent of 1936, but when
the government sector is included,the index is 113.3 percent. The
large expansion in the army,'in the administrative bureaucracy, and
in large-scale construction under the Communists accounts for the
fact that the 1952 index for the government sector is 247.9 percent
of 1936.
1. Gross National Product in 1952.
The tentatively estimated GNP of Communist China in 1952
was 524.5 trillion yuan. Of this total, agriculture contributed by
far the largest portion, 41.7 percent. Trade, food processing, handi-
craft, and native transportation (all being in the nature of agri-
cultural or small-scale handicraft industry) together contributed
the next largest portion of the total, 29 percent. The modern industry
sector (including manufacturing, minerals and metallurgy), and modern
transportation (so classified by its use of modern motive power and
the larger number of workers per enterprise) contributed the third
largest portion, but this was only 13.6 percent. ' The go'rernment sec-
tor, consisting of services paid for by the government. and including
not only administrative personnel and the armed forces but also
workers on various construction projects and teachers and students,
constituted the only other large portion of the GNP, 10.3 percent.
The totals for the sectors in yuan and in percentages are summarized
in Table 16.* Figure 5** shows the contributions ,of the various
sectors. graphically. It will be noted from these comparisons that
agriculture is the main support of the Chinese economy and that the
agricultural, small scale, and handicraft enterprises are still more
important than modern industry.
2. Comparison with US Gross National Product.
The GNP of China and of the US in 1952 have been valued
in both yuan and dollars to the extent permitted by the available price
data. The ratios of output in Communist China to output in the US are
quite different when valued in yuan from what they are when valued in
dollars. There is a particularly great difference in the industrial
sector. The industrial sector is of much greater importance .in the
Table 16 follows on p. 68.
** Following p. 68, below.
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Table 16
Gross National Product of Communist China by Economic Sector
1952
Agriculture
Modern Industry Sector
(1)
Value Added
(Trillion Yuan)
(2)
Percent
(Yuan)
(3)
Value Added
(Million US $)
(4)
Percent
(US $)
(5)
Ratio
(Thousand Yuan
per US $)
218.8
41.7
20,259
53.0
10
Manufacturing
(39-6)
(7.6)
(1,105)
(2.98)
36
Minerals and Metallurgy
(26.7)
(5.1)
(520)
(1.32).
51
Modern Transportation
( 4.8)
(0.9)
(320)
(0.81)
15.
Total
71.1
13.6
1,9145
'5.0
Trade, Food Processing, Handicrafts,
and Native Transportation
152.3
29.0
10,153
26.2
15
Government
53.8
10.3
4,138
10.7
'3W
Other
Domestic Service
(10.0
(1.9)
(770)
(1.96)
Imputed Rent
(18.5)
(3.5)
(1,422)
(3.62)
Total_
28.5
5.4
2,192
5.7
Total.
524.5
100.0
38,687 12/
100.0
a.- Weighted average of preceding GNP sectors.
b. This total, which is the sum of the column, does not represent the equivalent ua $ total of value
added by the various sectors of the Chinese Communist economy. The equivalent total, US $25.5 billion,
is reached by using the geometric average of the ratio of the total yuan figure in column (1) to the
yuan value of the US GNP in 1952 and the ratio of the dollar figure in column (3) to the dollar value
of the US GNP.
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COMMUNIST CHINA
GROSS NATIONAL PRODUCT
PERCENTAGE CONTRIBUTION OF SECTORS
1952
AGRICULTURE
41.7%
OTHER
5.4%
GOVERNMENT
10.3%
MODERN SECTOR
(Manufacturing,
Minerals and Metallurgy,
Modern Transportation)
13.6%
TRADE,
PROCESSING,
HANDICRAFT,
NATIVE TRANSPORTATION
29.0%
524.5 trillion yowl = 100%
GR1500 CIA, 12-53
Figure 5 50)(1
50X1
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GNP of the US than in that of China, and largely for this reason the
ratio between the total GNP of China and that of the US in dollars is
significantly different from the ratio in yuan. When the two GNP's are
valued in dollars, Chinese output in 1952 is 11.2 percent o' US GNP.
Valued in yuan, however, Chinese GNP is only 4.8 percent of US GNP.
The geometric average of these two ratios is 7.4 percent and is con-
sidered to be the bet basie for comparing the over-all output of
goods and services in the two countries. Using this geometric average,
the value of the Chinese GNP is $25.5 billion at 1952 prices.
Table 17 gives the geometric average of the ratios be-
tween Chinese output for major sectors of GNP and US output for these
sectors. This comparison is also presented graphically in Figure 6.*
Table 17
1952 Gross National Product of Communist China
Compared with the US
Sector
Chinese Output
As Percent of,
US Output 2/
Agriculture
90.7
Industry (including Handicraft
and Processing)
2.7
Transportation
2.0
Government
12.1
All Other Services
5.6
Total
7.4
a. Geometric average of the percentages. See Appendix B.
This comparison emphasizes the small share of industry and trans-
portation in the Chinese economy. The Chinese GNP is 7.4 percent of
US GNP, but the output of Chinese industry, even when handicraft out-
put is included, is only 2.7 percent of the output of US industry.
Transportation is only 2 percent. Agricultural output, on the other
hand, is very nearly equal.
4( Following p. 70, below.
9
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There is no simple relationship between the sector con-
tributions to GNP in China and in the US and the relative economic
capabilities of the two countries. Comparative outputs of specific
commodities of strategic significance are described below in this
report. The ability of Communist China to support military campaigns
in Asia is only partly dependent on large-scale industry. Neverthe-
less, this comparison of GNP's does show the relative stage of de-
velopment of Chinese Communist industry in the modern world and the
distance the Chinese Communists' program of industrialization will -
have to go before Communist China can be classed as an industrial
country.
3. Comparison with Pre-Communist Peak Production.
The index of estimated pre-Communist composite peak pro-
duction* for the sectors of GNP other than the government sector is
110.5 percent of 1936; the 106.6 index for 1952 is still short of the
pre-Communist peak.
. Table 18** compares output of the various sectors of GNP
in 1952 with the estimated composite pre-Communist peak. The peak is
estimated on the basis of the highest output of each of the various
commodities in the years from 1931 to 1948. Where possible, different
regional peaks were also taken into account to arrive at a combined
peak.
The failure of GNP (except for the government sector) to
reach its pre-Communist composite peak is more than accounted for by
the shdrtfall of agriculture and the trade, food processing, and
handicraft sectors. Thus in the remaining portion of GNP, including
the modern industrial sectors, the Communists have achieved by 1952 an
increase in effective capacity over any past period." Specifically,
modern manufacturing, iron and steel, and military end item production
are above past peaks. ?
* See Figure 10, following p. 94, below, and accompanying explanation. .
** Table 18 follows on p. 71.
a
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Figure 6
COMMUNIST CHINA
GROSS NATIONAL PRODUCT BY SECTORS
(Compared with the US)
100%
TOTAL GNP
13134 CIA, 4-54
r A
US
Communist China
100%
2.0%
TRANSPORTATION
100%
AGRICULTURE
100%
PA
GOVERNMENT
100%
INDUSTRY
(Including handicraft
and processing)
100%
5.6%
7/ A
ALL OTHER
SERVICES
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Table 18
1952 Gross National Product of Communist China
Compared with Composite Pre-Communist Peak Production
1936 = 100
Sector
Percent of
GNP (1952)
1952
Index for Estimated
Pre-Communist Peak
Agriculture
41.7
98.3
104.9
Modern Manufacturing
6.1
133.5
131.5
Military End Items
1.5
620.8
319.0
Iron and Steel
2.3
455.9
326.4
Minerals and Other
Metallurgy
2.7
136.0
163.2
Modern Transportation
0.9
349.8
209.0
Trade, Food Processing,
and Handicraft
29.0
100.0
105.6
GNP (excluding
Government)
. B. Factors Determining Growth.
106.6 110.5
1. Agriculture.
The importance of the agricultural sector in the Chinese
Communist economy may be judged from the facts that (a) agricultural
taxes in kind (grossly undervalued for tax purposes) contributed
about 13.5 percent of the national budget revenues in 1952; (b) agri-
cultural product amounted to an estimated 41.7 percent of GNP in
1952, the largest share contributed by any one sector of the economy;
(c) the agricultural labor force (including underemployed and surplus
labor living on the land) amounted to about 70 percent of the total
labor force; and (d) exports of agricultural products amounted to an
estimated 70 percent by value of total exports in 1952. It is be-
cause of this heavy dependence on agriculture -- for the livelihood
and support of so large a share of the population, for budget revenues,
and for exports -- that an increase of agricultural production be-
comes a primary determining factor in the ability of the regime to
accumulate capital for investment in industry. Control of consumption
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may be enforced to some extent by price-fixing, by the collection of
taxes in kind, and by forced purchases of food products from which the
allocation of supplies for export provides the means of exchange for
capital imports.
a. Production.
By making strenuous efforts to increase production,
to push exports, and to control consumption, the Chinese Communists
achieved an agricultural supply situation in 1952 which permitted
substantial exports of agricultural products. Production then repre-
sented roughly 98.3 percent of the peak of 1936. The agricultural
supply situation of 1952, including imports and exports, is set forth
in Table 19.*
b. Productivity.
Approximately. 80 percent of the 500 million popula-
tion of China cultivate 14.4 percent of the total land area of China. 51/
This percentage of cultivated land is based on the Communist claim of
122 million hectares under cultivation. 52/ The area of 122 million
hectares actually includes multiple crops so that the actual landarea
under cultivation is less than 122 million hectares. This compares with
an estimate of 109 million hectares (272 million acres) from independ-
ent sources. The amounts of additional land suitable for exploitation .
for agricultural purposes is unknown. An additional area of roughly
85 million acres classed as. "arable" undoubtedly includes grazing land
and land that could be brought under cultivation by extensive.develop-
ment efforts. 53/ With substantial investment in irrigation facilities
and machinery and other operating equipment, more land can undoubtedly
be opened for agricultural purposes. However, this is an expensive as
well as a relatively slow process. In sum, the Communists are faced
with.a difficult prOblem in the expansion of agricultural production
Indeed, much of the terraced land already under cultivation yields very
low returns per man-year. -With too many people on the cultivable
land, increased output can more readily be realized from better seeds
and cultivation practices- and more fertilizer, -- that is, from higher'
productivity per unit of land -- than from bringing more land into
cultivation. Overpopulation has the attendant phenomenon of extremely
small, fragmented farms. Before the Communist land reform program,
Suiyuan Province in the Northwest had the largest average farm
(11.26 acres), Kwangtung Province the smallest (only 1.94 acre); the**
* Table 19 follows on p. 73.
** Text continued on p. 76.
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Table 19
Agricultural Supply Situation in.Communist China
1952 .
Thousand Metric Tons a/*
Commodity
PrOduction
Exports
Imports
Broad Beans
Field Peas
3,478
2,972
Negligible
Negligible
Negligible
Negligible
Barley
7,000
0
0
Otas
810
0
0
Wheat
22,480
100
0
Flour (Wheat)
14,990
0
0
Rice (Paddy)
47,730
570
0
Millet
11,060
200
0'
Kaoliang
10,730
200
0
Corn
10,780
220
0
Sorghum and Other Grains
1,300
0
0
Potatoes
29,600
0
0
Sugar (Raw Value)
375
7
Sugar (Refined)
65.7
Oil Cake b/
_
6,200 to
125
N.A.
6,700
Tung Oil
88
4o
o
Soybeans c/
8,900
875
0
Soybean Oil
260
35
o
Rapeseed
2,950
15
0
Rapeseed Oil d/
750
N.A.
0
Peanuts e/
2,300
250
0
Peanut Oil
210
0
0
Sesame
800
25
o
Sesame Oil
228
0
0
All Other Vegetable Oils S/
175 to
N.A.
N.A.
200
Poultry g/ h/
438
7
Negligible
Poultry Meat.i/ h/
285
Negligible
Negligible
Eggs h/
645
50
Negligible
Fish h/
4 ,000
8
1.5
Sheep an4 Goats j/ h/
602
10
Negligible
* Footnotes to Table 19 follow on p. 74.
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Table 19
Agricultural Supply Situation in Communist China"
1952
(Continued)
Thousand Metric Tons
Commodity
Production
Exports
Imports
Swine j/ h/
Cattle and Water
Buffalo g/ h/
Meat Lc/ h/
Industrial Woods 1/
Fuel Wood 5/ (Million Cubic
Meters) n
Paper Products o/
Hemp, Flax, Ramie, and Jute
Silk (Raw Basis) q/
Cotton (Ginned Baas)
6,482
2,180
5,640
10,000
15,000
410
44
4.4
609
70
10
25
o
.
0
Negligible
N.A.
1.4
1
Negligible
Negligible
Negligible
60
Negligible
140
15 2/
'a
4o
Cotton Cloth (Million Linear
Meters) 1,200 N.A. N.A.
Cotton Yarn 410 N.A. 1
Wool (Grease Basis) 34 11 6.8
a. Unless otherwise stated.
b. This ds roughly 90 percent of the difference between weight of
the raw seeds produced and the oil output of the same.
c. Yellow.
d. Factor used: 10 percent food, seed, waste: 28 percent oil
1950-53A0J. For lower exports of seeds.
e. Unshelled basis.
f. Consists of total of rough figures for cottonseed oil, flax oil,
hemp oil, tea seed oil, castor oil, perilla oil, and sunflower.
g. Estimated liveweight.
h. Does not include Tibet, Sikang, or Sinkiang.
i. Estimated dressed weight.
j. Estimated liveweight of animals produced for slaughter or export.
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Table 19
Agricultural Supply Situation in Communist China
1952
(Continued)
K. Includes beef, veal, buffalo, pork, mutton, lamb, and goat meat,
and slaughter fats, fat cuts, lard, and bacon, and estimated carcass
weight of live animals exported. This estimated carcass weight in
1952 amounted to 50,000 metric tons.
1. Defined as all wood not burned for fuel. Includes all processed
and fabricated products derived from industrial wood.
m. Includes all wood burned for heat, generation of power, and so on,
for domestic or industrial purposes.
n. Cubic meters (roundwood), which is a measure of solid wood con-
tent, not a stock measure.
o. Includes all productions of pulp and paper, including newsprint,
paperboard, writing papers, and other papers.
p. Raw jute, Hessian cloth, and gunny sacks: Conversion factors
10 oz. for Hessian cloth, 2-1/2 pounds for gunny sacks.
q. Does not include silk waste or wild silk.
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mean size in China was 3.67 acres.2)2/ The average amount of cultivated
or arable land per family of five is very low; at the Communists' popu-
lation figure of 487 million, it is only 2.7 acres.'
In a predominantly agricultural economy, cereals form
the bulk of the diet. An estimate of the composition of the supply of
foodstuffs in 1952 which was recently published by the Chinese Commu-
nists gives the following percentages of gross food output for several
commodities: rice, 41.6 percent; millet, corn, kaoliang, and potatoes,
40.0+ percent; and wheat, 10.0+ percent.* 22/ For the major cereala,
productivity per unit of land approximates that in the US, but the
output per man is much lower; in China 4 workers out of 5 are required
to provide subsistence for the population, as compared with 1 out of
7 in the US, which also has a better balanced diet. .56/ Despite the
very large labor inputs, productivity per unit of land hardly exceeds
that of the postwar US. Chinese agricultural productivity reflects
very low capital inputs, which are primarily restricted to buildings
and land, a few hand tools, and perhaps a draft animal, all used with
a primitive technology. Table 20** compares productivity per acre
for wheat and rice in China with productivity in selected other calm-
tries.
c. Agricultural Policies.
Chinese Communist policy on the organization of
agricultural production may be divided into three distinct stages: land
reform, the present mixed policy .of encouraging various types'of co-
operative cultivation (but not at the expense of decreasing production),
and the collectivization scheduled for the future. In carrying out the
land reform program, the Chinese Communists had two objectives; to
achieve political power and (within the limits set by that Objective)
maintain the level of production.*** 2// For this reason the ?
kulaks**** were not liquidated. Only the landowners were dispossessed,
although some of the kulaks lost part of their land. The result was a
* Presumably broad beans, peas, green vegetables, meat, and fish.
account for the remainder. In any event, this breakdown approximates
the. relative order of magnitude.
** Table 20 follows on ID.. 77.
*** Land reform was carried out under the provisions of tie "Law" of
the National Agrarian Conference of September 1947. Owing to certain
"excesses" which it encouraged, and to confusion of "kulaks" with
landowners and middle class peasants with kulaks, the law was replaced
in 1950 with a law more favorable to the kulaks. East and South China
were reformed under the 1950 law.
**** The classification system varied from province to province, and
was related to ownership of draft animals and implements as well as to
land.
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Table 20
Wheat and Rice Yields in Selected Countries LEY
Selected Years, 1934-52
Bushels per Acre
Year
Wheat
Japan
India
US
USSR
China
1934-38
12.8
6.9 2/
8.7
7.9
10.6 12/
1947
13.3 ?
4.8
12.4
7.8
10.9
1948
15.8
6.6
12.1
7.3
11.9
1949
17.2
6.5
10.0
, 7.4
9.4
1950
17.6
6.5 .
11.1
7.8
9.6
1951
20.3
6,6
10.8
8.3
9.9
1952
21.3
6.2
12.4
8.4
9.4
Rice
1934-38
36.3
13.6
24.7
21.5
25.3 2/
1948
40.8
11.7
24.1
20.5
26.0
1949
40.1
11.5
24.8
20.5
24.0
1950
40.1
10.2
26.8
20.5
24.5
1951
37.6
10.6
26.1
20.5
24.1
1952
41.3
N.A.
27.7
20.5
24.8
a. 1937-39.
b. 1931-37.
c. 1934-38, Manchuria 17.9.
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vast leveling process which transformed the majority of the peasants
into "middle peasants." Reducing the average size of the plot, by
giving the poorer and landless peasants an average-size plot, tended
to reduce the margin between production and consumption and thus to
inhibit capital accumulation. Substitution of more capital for
labor by any means other than collectivization thus became more
difficult.
The Chinese Communists are presently attempting to
encourage various types of cooperative production units. The first is
the "mutual aid team," in which draft animals and implements are pooled
for the most important field tasks. Accounts are settled after the
harvest on a basis of "work units." Land and equipment remain pri-
vate property, and membership varies from year to year. In the second
type -- the agricultural producer cooperatives -- land, labor, and
equipment are pooled, and the land is cultivated jointly. Each house-
hold, however, retains a garden and/or orchard plot. It appears that
some of the implements and draft animals are joint property and some
are still formally private property. Division of produce is based
upon work units, with allowances for privately owned land units and
for jointly and privately owned tools; thus a part of the produce
accrues to the cooperative for the purchase of more tools, seeds, and
fertilizer. In 1952, various types of mutual aid teams reportedly
numbered more than 8 million, while there were some 3,600 agricultural
producer cooperatives, mainly concentrated in the northeastern
provinces. 59/
During 1953, emphasis was placed on consolidating and
strengthening existing mutual aid teams and agricultural producers'
cooperatives. In North China, for example, some 2,600 producers' co-
operatives were changed into mutual aid teams. 60/ Recently there
have been signs that the campaign for socialization of agriculture is
to be stepped up. The Communists, however, assert that peasants
should organize into groups "spontaneously" as the benefits of the
alleged higher productivity of socialized agriculture becomes apparent.
A broadcast from Peiping on 9 November 1953 quoted an
editorial from the People's Dailv which exhorted the cadres to pub-
licize among the peasants the part they must play in economic construc-
tion during the period of transition to socialism:
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"If the peasants do not carry out large-scale
production; they will be unable to meet the needs of
the nation and those of the peasants themselves, and
will also cause difficulties for national industrial
construction and for a portion of the peasants who are
desirous of making a living from agricultural pro-
duction. ... If the peasants do not unite to carry out
large-scale production, not only will it be impossible
for the rural living standards to keep up with those
of the cities, but owing to the inherent Weakness of
the 'small-farmer' economy and expansion of capitalist
fleecing, there will surely be many poverty-stricken
peasants. ... The method of consolidation ... is
entirely on a voluntary basis. First, ... mutual aid
teams ... next ... agricultural producers' cooperatives
and supply and marketing cooperatives. In the
future, ... collective farm and supply and marketing
cooperatives ... ."
This report and the introduction of rationing* clearly
.suggest that Communist China is continuing its version of a Soviet-
type program of state control of agricultural output for capital ac-
cumulation purposes, possibly involving lowering the subsistence level
and raising the mortality rate. This evidence indicates that the
regime is preparing to promote higher forms of collectivization and
to increase the pressure on peasants in carrying out it- crop collec-
tion and allocation program.
Collectivization remains the eventual goal, but the
attainment of this goal, the Chinese Communists admit, presupposes a
more advanced stage of industrialization to make available the neces-
sary capital equipment. It is believed likely that collectivization
will proceed more rapidly in the Northeast, where cultivation units
are larger and where mechanized dry land farming can be applied on
presently uncultivated areas. Planned irrigation projects in the
* Rationing of wheat and flour in Harbin, Peiping, and Tientsin may
be related to the underfulfillment of crop production goals in 1953.
There have not been reports of the bringing in of supplementary sup-
plies of other grains to alleviate a shortage.
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Northwest and in Suiyuan and Chahar Provinces may also provide the land
for investment of capital equipment on large-scale state-owned collec-
tive farms. The success of these collective enterprises might then
stimulate the incentive to extend the socialization of agriculture in
the present areas of small-unit intensive cultivation. This develop-
ment, however, depends on the completion of the irrigation projects
and on the availability of capital equipment from imports and from
the developing industry of Communist China. Limited progress may be
anticipated in this effort during thes period of this estimate. In
view of the emphasis on increasing production and the apparent resis-
tance of peasants to further stages of collectivization, however, it
is believed unlikely that any forced major changes in agricultural
organization will be attempted through 1957 in areas where the tra-
ditional agrarian institutions are so firmly rooted.*
The agricultural taxation policies of the Chinese
Communists have three basic objectives: (1) to eliminate the advantage
of land ownership, (2) to assure tne state a large and Stable supply
of grain, and (3) without compromising these two objectives to
stimulate productive efforts by eliminating the capriciousness of the
agricultural tax systeM as it existed under previous regimes.
In 1952 in Communist China there were four basic
systems of agricultural taxation in force. They were alike in that
all agricultural taxes were in kind and the peasant was responsible
for transporting the grain to the collecting point. In Manchuria
the tax was levied as a proportion of estimated normal yield with no
exceptions; the rate varied by province from 21 percent to 23 percent
except in Jehol, where it was only 15 percent. 61/ In North China
a somewhat similar system obtained: a uniform rate of 24.2 pounds
of millet per taxable mou with an exemption of one mou per house-
hold.** 62/ Where agrarian reform had recently been carried out --
in the Central-South, East, Northwest, and Southwest areas -- a pro-
gressive system Obtained. Rates varied from 7 percent to 30 percent
of normal yield, with an exemption of 165 pounds of grain per capita.
In those areas where agrarian reform had not yet been carried out --
largely restricted to a,few minority areas by 1952 -- progressive
* The conflict in Chinese Communist motives in respect to collec-
tivization is referred to under I, above.
** A taxable mou is defined as one producing 1 picul, or 110 pounds,
of millet. (A mou is approximately one?sixth of an acre.)
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rates ranging from 3 percent to 42 percent were levied.* Sur-
taxes levied by local authorities were not to exceed 15 percent of the
basic tax but often did so.
In 1953, after the establishment of a tax policy of
class differentiation in the villages of the so-called "old areas" --
where /and reform was implemented before 1950 -- the Chinese' Communists
planned to extend the progressive tax rates. L./ All local surtaxes
were abolished in 1952. Z./ To what degree the new rates have been
promulgated in the old areas is not clear, but the changes in the
land tax in 1953 in Kwangtung Province are apparently typical of rates
which have been and are being introduced elsewhere. All households in
which the "average annual agricultural income per capita is not over
150 shih catties L195 pound17" of the staple foodstuff are exempt from
the tax. Households with larger average incomes are taxed at pro-
gressive rates, ranging from 6 percent for incomes in the range. of
151 catties to 200 catties to 25 percent for incomes of 1,451 catties
and above. LT./ Income is calculated on the basis of the "average
normal yield," and the cadres are strictly admonished to estimate the
yield fairly and to permit no abuses. If yields exceed the estimate,
the peasant is permitted to retain the surplus; the tax rates remain
stable. On the other hand, the peasant must bear the burden of the
normal tax on a poor harvest when this is not occasioned by a natural
disaster. Special reductions or exemptions are promised in case of
severe floods or other natural calamities. Table 21** sets forth
the agricultural tax rates in Kwangtung.
It is not clear how much of total agricultural in-
come is paid in taxes, but it was reported as 17 percent of gross
output in the areas controlled by the Communists in 1949. The Com-
munists claim that the share of the agricultural tax in tOtal state
income has declined since their accession to power, as shown in
Table 22.*** By means pf this tax the government procUres an esti-
mated maximum of 30 million tons of grain for its purposes.****
* It is not clear whether or not any tax exemption was allowed
on these areas.
** Table 21 follows on pa 82.
*** Table 22 follows on p. 83. See III, above, for relative pro-
portions of agricultural-taxes in state revenues
xxxx An additional 10 million tons is purchased at low fixed prices
by the state-controlled cooperatives. Total tax and obligatory sales
of grain to the state thus constitute as much as 30 percent of total
grain production. ?.2/
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Table 21
Agricultural Tax Rates in Kwangtung Province, Communist China
1953
Grade
Average Annual Agricultural Income
Per Capita in I?d
(Catties)
Taxation Rate 12/
(Percent)
1
2
151 to 200
201 to 250
6
7
3
251 to 300
8
4
301 to 350
9
5
351 to 400
10
6
401 to 450
11
7
451 to 500
12
8
501 to 550
13
9
551 to 600
14
10
601 to 670
15
11
671 to 740
16
12
741 to 810
17
13
811 to 880
18
14-
881 to 950
19
15
951 to 1,050
20
16
1,051 to 1,150
21
17
1,151 to 1,250
22
18
1,251 to 1,350
23
19
1,351 to 1,450
24
20
1,451 and above
25
a. A catty ..1-1/3 pounds.
b. Agricultural households with a per capita income of 150 .
catties or less are exempt.
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Table 22
State Income from Agricultural Taxes in Communist China 12/
1950-52, 1953 Plan
1950 1951 1952 1953 Plan
Sum Sum Sum Sum
(Trillion Percent (Trillion Percent (Trillion Percent (Trillion Percent
Yuan) of Total Yuan) of Total Yuan) of Total Yuan) of Total
19.1 27.6
21.7 15.3
25.6 13.5
25.7 11.0
Traditionally, credit has been one of the most serious
problems of the Chinese peasantry. Although precise figures are lack-
ing, most of the rural credit came from pawn shops and private loans,,
always at very high interest rates. It is estimated that interest
charges on most loans averaged 3 percent to 6 percent per month. 71/
The Chinese Communists have greatly expanded the role of the state
banking system in the rural areas, and some rural credit cooperatives
have been formed, mostly in North China. The press in Communist China
reports that agricultural credit is more plentiful and much cheaper
than in the past, but this assertion is doubtful in view of the
magnitude of the need.
Total investment in the agricultural sector is diffi-
cult to estimate because (1) a large part of total investment is made
by the peasantry from resources which do not pass through the market
and for which there are no statistics, and (2) the state's monetary
outlays for major conservancy and reclamation projects are probably
more or less limited to the food consumption of the workers and much
corvee labor is used. Thus the data for agricultural investment con-
sist only of certain reported outlays by the state, certain known
minimum peasant purchases, and very rough estimates of investment
from the peasants' incomes. In any case, major changes in agricul-
tural output in the short run can result only from increased capital
Inputs in the form of fertilizer and to a lesser extent from con-
servancy projects.
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Comparison of the budgetary allocations to agricul-
ture with those to industry, transportation, and other sectors is
possible only for 1952 and 1953 (see III, above). According to the
communique issued by the Statistical Bureau, the share of the Min-
istries of Agriculture and Conservancy in total investment in 1952
was 16 percent, compared to 56 percent for the six industrial minis-
tries and 28 percent for the transportation and communications
sector.* 72/
A very limited amount of data is available concerning
the introduction of Soviet-type animal-drawn field equipment and other
types of agricultural machinery into North and Northeast China. The
Department of Agriculture of the Northeast Administratilie Area plans
to lend to farmers 170,000 sets of such implements in the period
1953-57. 73/ Production of Soviet-type Implements and machinery (in-
cluding cotton gins and rice threshers) was reportedly 80,000 units in
the Northeast in 1951, 20 percent of these being plows. Plans for
1952 called for production of 340,000 units. 74/ Reports of sales of
implements in China proper are numerous but usually concern only small
areas, preventing any precise aggregation. It is believed that Man-
churia and Northwest China are the only areas Where any significant
numbers of animal-drawn implements will be introduced in the near
future. In the remainder of China, most of the "implements" being pro-
duced are of the hand type --.factory-made hoes, spades, rakes, and
the like -- which are a real improvement over handmade wooden
implements.
It is estimated that in 1952 some 5,850,000 tons of
oil cake were available for use as fertilizer. 75/ In addition
400,000 tons of chemical fertilizers were applied to the land. Of
these amounts, 2.5 million tons of oil seed and chemical fertilizers
moved through the Supply and Marketing Cooperatives in 1952, the
planned allocations of which to the major crops were as follows:
rice, 32.5 percent; wheat, 17.0 percent; tobacco and industrial
crops, 12.0 percent; and cotton, 38.5 percent. 76/
* It is also estimated that, if the investment made by local author-
ities were included, total investment in the agricultural sector would
be about double that made by the Central Government. It is not known
precisely what the Chinese Communists Include in the term which is
rendered as "investment."
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It is apparent from the foregoing that allocations for
agricultural investment in the national budget are small, both abso-
lutely and in relation to the importance of building up agricultural
production as a means of capital accumulation.
d. Range of Possible Increases of Agricultural Production
and Exports.
The over-all future goals and policies of the Chinese
Communists are not ascertainable from their many published discussions
of economic plans. Only generalized production goals for agriculture
.have been given, in a speech by Teng Tzu-hui, Diredtor, Rural Work
Department, Central Committee, Chinese Communist Party. In this speech,
entitled "Rural Works; Its Basic Mission and Policy," Teng asserts that
the development of agricultural production especially food production)
is the first Objective of Chinese Communist agricultural policy. Teng
gives 160 million metric tons as the food production of 1952. He then
states the objective for the first Five Year Plan as an increase of
30 percent over 1952 output. That is to say, the 1957 goal in food
production is to be 208 million metric tons. Further, he states, '"It
is hoped that after two Five Year Plans, or a little more time than
*that, we may attain or approach the goal of the annual production of
from 275 to 300 million metric tons of food."
Chinese. Communist agricultural production can be in-
creased in two ways: either by increasing inputs into agriculture or
by more rational combination of inputs. The major input factors which
could be beneficially imported fall under two headings -- Capital in-
puts and inputs of technical services. Under the first heading fall
capital inputs (1) for the extension of cultivation to land not now
used; (2) for increasing the yield on land presently cultivated, by
means of additional fertilizer, irrigation, chemicals to control plant
disease and pests, and draft power and equipment for more timely cul-
tivation; (3) for mechanization where it will result in more intensive
cultivation. Under the second heading fall inputs of technical
services (1) in engineering fields dealing with irrigation and water
conservancy; (2) of genetic specialists for improving plant types and
animal breeds; (3) of agriculturalists to provide management for the
more effidient combination of inputs.
All the above-listed inputs are relatively scarce dn
Communist China'. Unless imports of the above input factors, especially
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S-E-C-R-E-T
fertilizer, are made in large quantities, the stated production goals
can probably not be achieved.
Even with unlimited access to sources of supply in both
the Soviet Bloc and the Western world, it is doubtful that technological
and management imports could affect production in Communist China within
the length of time specified. The experimental and testing procedures
for improved seed and livestock are long-term projects. Even after im-
proved and adapted types are created, they must be widely distributed
before having an effect on total production. The time lag between the
creation of a new type and its general use is substantial.
It is generally accepted that Chinese Communist agri-
culture is on a low technological plane as compared with Western agri-
culture. By and large, its cultivating practices are the same today
as during the past several centuries. Crops are cultivated with simple
hand tools and with a limited dependence on animal draft power. Seed
selection and animal breeding for increased production are not widely
practiced py the peasant, except for certain rudimentary selective
practices which are age-old. The weaknesses of Chinese agriculture
are low output per man and inflexibility in respect to transforming
land use, cultivating practices, and technology to a higher plane in
order to achieve greater output per man. That such a system can be
transformed only at great cost and over a long period of time would
seem to be the prospect, according to the previous experience of other
nations.
As to the possibility of increasing agricultural pro-
duction by the use of additional fertilizer, the experience of Japanese
agricultural supervisors in Formosa prior to 1945 and of Chinese spe-
cialists working with the US ECA mission to China in 1948-49 indicated
that, under conditions of proper control and distribution, the rational
application of chemical fertilizers to the present acreage of rice
(besides the organic fertilizers presently applied) would yield ap-
proximately double the tonnage of chemical fertilizers in additional
rice.* Other crops would be similarly benefited by additional chemical
fertilizers. A large. increase in availability of chemical fertilizers
commensurate with Communist China's needs could come about only through
* For example', the properly controlled application of 7.5 million tons
of chemical fertilizers to present rice acreage in China might increase
total rice production from the present 47,730,000 tons per year to 62
million tons per year.
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?
S-E-C-R-E-T
increased fertilizer production not only in Communist China but in
Other manufacturing countries. Only relativelysmall additional
agricultural Yields by this means may be accomplished by the end of
1957. Table 23 shows the estimated figures of production and con-
sumption of chemical fertilizers in the Bloc in 1952. Each of the
producing countries in this group consumes all of its production.
Table 23
Rounded Estimate of Production and Consumption
of Chemical Fertilizers in the Soviet Bloc
1952
Million Metric Tons
Country
Quantity
USSR
4.5
East Germany
2.7
Communist China.
0.4
2/
Poland
0.4
Czechoslovakia
0.2
Bulgaria
0.1
Hungary
0.1
Rumania
0.05
Total
8.45
a. Including imports.
The best prospects for substantially increasing Chinese
Communist supplies of chemical fertilizers within the period of this
estimate appear to lie in the possible resumption of trade 'with Japan,
in the promised rehabilitation by the USSR of the chemical industries
of North Korea, in the possible expansion of trade with the Western
world, and in the increase of Chinese Communist production. Japan
might possibly be able to supply 300,000 to 400,000 metric tons from
its existing chemical factories. If the rehabilitation of the chemical
industries of North Korea begins in early 1954, supplies at the rate
of 200,000 to 300,000 metric tons per year might begin to be available
to Communist China by mid-1955. An additional 200,000 to 300,000 metric
tons might possibly be Obtained from the expansion of Chinese Communist
-87-
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S-E-C-R-E-T
trade with the West. The projected increase of Chinese Communist pro-
duction of chemical fertilizers might begin to yield an additional
200,000 metric tons per year by mid-1955. Thus, depending upon the
rate of progress in all these possible developments, Communist China
? might possibly be able to obtain additional supplies of chemical fer-
? tilizers to a maximum of 1 million metric tons per year by 1955.
Since an increase of agricultural production remains the principal
source of investment funds for Chinese Communist industrialization
goals, it is believed that high priority may be assigned to such a
program.
The ability of Communist China to expand its export
of agricultural products and the ability of the rest of the world to
import_ them are subject to a number of limiting factors both political
and economic. Historically, China has been both an importer and an
exporter of agricultural commodities. Analysis of the agricultural
trade of China in the pre-Communist period reveals two important
general points: .(1) Imports of agricultural commodities have been
mainly for food and clothing, consisting of rice, wheat and flour,
sugar, and raw cotton; and (2) exports of agricultural commodities
have consisted mainly of industrial raw materials and some foods --
hog.bristles, silk, tung oil, soybeans, soybean oil, various other
vegetable oils, eggs, egg products, and tea.
Of these commodities, the various oils and oilseeds
are at present the most important potential export group. Rice
occupies a special position as a possible export commodity. Whereas
rice, prior to the period of Communist control, was imported, now it
is being exported to India and to Ceylon in exchange for rubber. In
view of the Chinese grain position, the rice export program represents
a serious effort to secure rubber for Communist China and for reexport
to the other Soviet Bloc countries. With some sacrifice of consump-
tion, Communist China has obtained rice for export by efficient tax
collection and by the government purchasing program, even though rice
production has not reached the prewar peak.
As for vegetable oils, the export aims of the Chinese
Communists appear to be twofold: (1) To maintain the maximum level
of exports of vegetable oils and seeds commensurate with the require-
ment of the domestic economy, and (2) to provide a sufficient supply
of raw materials to keep the oil processing facilities, primarily
under government control, operating at near capacity. Although pro-
duction is only slightly below the prewar level, existing trade in
a
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S-E-C-R-E-T
vegetable oils and oilseeds is well below the prewar level. The
Korean War occasioned the first major exports from China to its
former markets in Western Europe, where the demand was largely to
build up stocks; as soon as this was accomplished, non-Spviet Bloc
European demand fell sharply. In 1952, European imports of vege-
table oils fell to only a fraction of the 1951 level. Prospects
of re-establishing the prewar trade relationships with Japan are
indeterminate. Japan could be expected to import about 250,900 to
500,000 metric tons of oilseeds and an equal amount of oilseed
cake. With fulfillment of production plans for fats and oils in
the European Satellites, their imports of vegetable oils and oil
materials from China should diminish. Exports from China to the
Bloc countries thus appear dependent upon the success or failure
of production plans in those countries. The USSR is importing
finished oils in greater amounts from other sources but apparently
depends upon imports from China to raise the standard .of consump-
tion under its present policy.
In respect to cotton textiles, if the Chinese Com-
munists approach their goals of increased cotton production, the
markets of the Satellites and Asia would provide sizable demand
for textile exports under conditions of free trade. A 30-percent
increase in cotton production over the 1952 estimate is considered
reasonable. The positions of other miscellaneous potential exports
are varied. The tea produced in China has generally been a low-
quality product in comparison with other Asian tea production. In
the past, exports have been of the brick type, largely going to the
USSR. There is no reason to expect much change in this position.
China has the potential to supply hog bristles near any previous
? export level, depending on demand) which has been somewhat reduced
by the development of synthetics as substitutes. Silk is in much
the same position. Eggs and egg products can probably be exported
in greater quantities than now, since Western Euroie was previously
a major market and probably would become so again, political aspects
as-
In summary, it appears that if the Chinese Communists
assiduously pursue a program to obtain and apply additional supplies
of chemical fertilizers, they can increase their export surplus of
rice, especially to India (without, however, raising the consumption
levels of their own people), although a partial crop failure in any
year would wreck the program. In respect to vegetable oils and oil-
seeds, it appears that the present level of production of between
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S-E-C-R-E-T
1.7 million and 1.8 million metric tons of vegetable oils and over 17
million tons of oil-bearing materials can be substantially increased.
Thus the Chinese Communists have the ability to meet any reasonable
export opportunities for vegetable oils and oilseeds; they have cur-
rently lost their Western European markets to the US, but the USSR is
striving to raise its consumption standards partly by use of Chinese
agricultural products. Tea and silk exports may be increased slightly,
and exports. of hog bristles, eggs, and egg products may be increased
substantially. It is estimated that the maximum possible increase
over 1953 resulting from all these efforts might be as much as US $200
million per year in additional capital funds obtained from increased
exports of agricultural products within the period of this estimate.
It is not possible to predict whether all the condi-
tions will obtain to enable the Chinese Communists readily to achieve
the level of agricultural production which their ambitious indus-
trialization and export programs require. Rather, it is possible only
to project the level of production through 1957 on the basis of past
performance of the economy: this would give an over-all increase of
roughly 8 to 10 percent, with increases of some export crops as high
as 30 percent by 1957. Larger capital inputs and more rapid assimila-
tion of improved techniques, as discussed above, might enable earlier
realization of these possibilities. The projected estimates of agri-
cultural production are given in Table 24.*
2. Modern Industrial Sector.**
a. Coal Industry.
. Since the rise to power of the Chinese Communists,
coal production has increased from 22.7 million tons in 1949 to 45.8
million tons in 1952. Production in 1953 reached an estimated 50.2
million tons. Thus It would appear that the Chinese. Communists have
sufficient coal for their own consumption and for export to the USSR,
Japan, and North Korea. 77/
* Table 24 follows on p. 91.
** Table 25, which follows on p. 93, presents a summary of pro-
duction statistics from 1931 to 1952 of the important industrial com-
modities which are discussed under the Modern Industrial Sector.
These figures are presented graphically in Figures 7, 8, 9, and 10,
which follow p. 94.
?
-90-
S-E-C-R-E-T ?
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3000
? 2000
Thousands of Metric Tons
1000
800
600
400
200
100
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40
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10
8
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2
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0

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1
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1931
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
1935
1940
1945
1950 1952
Graphs plotted on semi-logarithmic paper. 50)(1
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
SECRET
Figure 8
PRODUCTION TRENDS FOR SELECTED COMMODITIES, 1931-52
100--1-7 . ? i. ? :... ? t.::: :. .. 1. .?: ? ? . --..4.... : .4_,:_f__LI ?.- ?
80 -r--: ---- ?,7. . ?
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4
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! CHEMICALS
Doto unavailable for missing 'years
,
I ? I
1931 1935 1940 1945 1950 1952
100
80
60
40
8
6
4
1
1931
RA LWA y 7
Data unavailable far mis'irig yeors;
- - ? ?
. ,
1935
GR1503 CIA, 12-53
1940
1945
1950 1952
Graphs plotted on semi-logarithmic paper.
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
50X1
50X1
? Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
1000
800
600
400
200
60
40
20
10
CHINA
PRODUCTION TRENDS FOR SELECTED COMMODITIES, 1931-52
Figure 9
_.?NONEERRO_US_LME_T_ALS
1931
15
10
8
2
1
1935
1940
1945
1956 1952
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t.
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1931
1935
GR 1504 CIA, 12-53
1940
1945
1950 1952
1000
800
600
400
200
r0
0
v, 80
0
. _
Billions of U S Dollars
60
40
20
10
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MIL
ITARY END , 'ITEMS t
unovoi able tor missing yec;rs
1935
1931
15
10
8
6
4
2
1
1940
1945
;
1950 1952
4
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,... 4
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1931
1935
1940
1945
1950 1952
Grophs plotted on semi-logorithmic paper.
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
50X1
60
SO
40
'E.
30
o 20
10
70
60
c"o
50
t 40
? 30
c;
20
10
8
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0
4
^ 2
I-1-
-42 ? 3
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Figure 10
COMMUNIST CHINA
PRODUCTION OF SELECTED COMMODITIES AND SERVICES
Peak Year and 1949-52
RICE
1937 1949
1950
COAL?
1951
1952
1942 1949 1950 1951
? Anthracite and Bituminous.
MACHINE TOOLS
1952
1949
1950
1951
MERCURY
1952
0I
- 1939 1949
4
g 2
-c
1950
13133, CIA, 4-54
1951
1952
25
? 20
g
??..2-' 15
Io
WHEAT
? 1936 1949
8
04
0
g2
0i0
20
400
g 300
200
100
1950
1951
ELECTRIC POWER
1952
1944
1949
1950
1951
ANTIMONY'
1952
500
400
300
0
-t2, 200
? 100
2000
1.1 1200
eoo
^ 400
Thousands of Metric Tons
COTTON YARN
/N
1931 1949
1950
PIG IRON
1951
1952
? 1943 1949
10
6
4
2
1950
1951
TUNGSTEN?
1952
nr
1937 1949 1950 1951 1952 - 1935 1949 1950 1951 1952
?MetalIC content of produced ores.
CRUDE OIL
01
1943 1949 1950 1951 1952 1936 1949 1950 1951
?Lead metal and concentrate
from scrap and refined ores.
30
25
Ss' ^ 20
`-t- 15
?Meto/tc content of produced ores.
LEAD'
1952
.
0
t
0
Thousands of Metric Tons
COTTON CLOTH
1200
1000
800
600
400
200
1500
1200
1936 1949 1950 1951 1952
CRUDE STEEL
900
600
300
0
16
12
4
0
20
16
12
8
4
1943 1949 1950 1951 1952
TIN'
1938 1949 1 50 1951 1952
?Metallic content of concentrates.
ZINC?
1936 1949 1950 1951
?Lead metal and concentrate
from scrap and refined ores.
1952
70
60
-2 ? 50
,F2 40
30
? 20
10
800
txt
1-2
600
0.400
-8
200
12
10
.51 ^ 8
6
Thousands of Metric Tons
0
1942 1949 1950 1951 1952
Nopper me of from scrap and refined ores.
"Excludes scrap copper.
RAILROADS
1941
1949
1950
1951
REFINED STEEL
1952
1943 1949
1950
COPPER?
1951
1952
30
25
20
15
10
ALUMINUM?
0
1949 1950 1951 1952
?Metallic content of produced ores.
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50X1
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? ?
Estimated
S-E-C -R-E-T
Table 24
Annual Production of Agricultural Commodities
in.Communist China 78/
1953-57
Million Metric Tons (except as indicated)
Commodity
1953
1954
1955
'1956-
1957
Silk
Hemp
Cotton Cloth a/*
Cotton (Ginned Basis
Cotton Yarn
5
44
1,300
653
466
5
44
1,400
700
486
5
44
1,500
750
506
5
44
1,600
800
526
5
44
1,700
86o
550
Wool (Grease Basis)
34 .7
35.4
36.1
36.7
37.14
Tung'Oil
85
85
85
90
loo
Soybean Oil
250
275
300
325
350
Rapeseed Oil
750
790
800
815
825
Peanut Oil
200
200
200
200
200
Barley
6,800
6,800
6,900
6,900
7,000
Sugar
383
391
400
408
416
Wheat
22,200
22,700
23,100
23,500
24,000
Potatoes
34,837
35,453
36,068
36,683
37,300
Corn
10,500
10,600
10,600
10,700
10,800
Kaoliang
10,300
10,300
10,400
10,400
10,400
Millet,
10,400
10,400
10,500
jo,600
10,600
Rice (paddy)
46,500
47,5oo
48,000
48,5oo
49,000
Flour (Wheat)
14,800
15,100
15,400
15,700
16,o00
Oats
800
800
800
800
800
Sorghums
and Other Grains
1,300
1,300
1,300
1,300
1,300
Peanuts
2,000
2,000
2,100
2,200
2,300
Soybeans
8,500
9,000
9,000
. 9,400
9,600
Sesame Oil
200
200
200
200
200
Rapeseed
2,750
3,000
3,000
3,200
3,300
Sesame
775
800
800
810
820
All Other
Vegetable Oils
175
185
190
195
200
Oilcake
6,500
6,750
6,850
6,950
7,000
Paper Products
450
490
525
575
600
Footnotes
for Table 24 follow on p. 92.
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S rE -C -T
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S-E-C-R-E-T
Table 24
Estimated Annual Production, of Agricultural Commodities
in Communist China 78/
1953-57
(Continued)
Million Metric Tons (except as indicated)
Commodity
1953
1954-
.1955
1956
1957
Industrial Wood b
_
11
12
13
13
14
Fuelwood b/
15
15
15
15
15
Meat c/
5,750
5,870
5,960
5,970
5,970
Cattle and
Water Buffalo d/
_
2,224
2,270
2,270
2,270
2,270
Swine d/
6,611
6,743
6,878
6,880.
6,88o
Sheep and Goats d/
614
626
639
652
665
Fish
4,000
4,000
4,000
4,000
4,000
Eggs
658
671
684
698
712
Poultry d/
447
456
465
474
483
Poultry Meat
291
297
303
309
315
Field Peas
2.9
3
3
3
3
Broad Beans
,3.2
3.5
3.5
3.5
3.5
a. Million meters.
b. Million cubic meters.
c. Carcass weight.
d.. Estimated live weight of animals slaughtered.
- 92 -
S-E-C -R -E -T
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Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0 "
S-E-C-R-E-T
Table 25
Production of Selected Commodities and Services in China 22/
1931-52
Coal
Electric Power
Pig Iron
Crude Steel
Refined Steel
Crude Oil
Machine Tools
Copper 2/*
Aluminum 2/
Antimony 2/
Tungsten 2/
Tin 2/
Mercury
Lead 2/
Zinc f/
Railroads
Cotton Yarn
Cotton Cloth
Unit 1931 1932 1933
Million MT 27.3 26.1 28.5
Billion KWH 2.4 2.4 2.7
Thousand MT 478.1 522.5 606.7
Thousand MT 26.0
Thousand NT
Thousand MT
Thousand Units
Thousand MT 0.5 0.4 0.5
Thousand MT
Thousand MT 14.4 14.1 14.2
Thousand MT 3.4 1.1 2.9
Thousand MT 8.6 7.2 8.3
Thousand Flasks o.6 rpm 0.01
Thousand MT 8.5 8.2 9.1
Thousand MT 14.7 10.6 10.6
Billion MT Km
Thousand MT 431.8 414.3 423.2
Million Meters 801.4 864.8 938.6
* Footnotes for Table 25 follow on p.94.
1934 1935 ? 1936 1937 1938 1939
32.8
2.9
631.4
50.0
35.8
3.3
558.4
181.8
25.4
0.5 o.4
16.3
3.2
8.0
0.01
8.5
13.3
15.2
7.4
11.0
1.3
12.3
12.9
381.2
999.4 1,035.6
- 93 -
S-E-C-R-E-T
39.3 36.9 31.9
3.8 4.0 4.5
689.1 909.4 970.1
394.4 466.6 484.9
135.3 369.6 413.9
129.0 113.0
0.3
14.3
5.0
12.9
1.7
27.7
15.3
17.0
406.7
1,219.2
?
0.4
17.1
7.2
13.4
1.7
9.9
12.7
38.5
5.0
1,389.6
546.9
458.1
118.0
0.4 1.3
10.6
7.3
15.4
2.1
5-5
6.9
13.3
6.1
14.2
4.9
6.6
5.3
25.3
1940
46.8
5.6
1,572.8
538.8
450.1
118.0
1.6
7.6
4.8
10.7
2.7
9.2
7.3
26.4
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1941
58.8
6.3
1,507.0
568.4
14.52.0
137.0
2.1
8.o
6.4
11.4
3.6
10.3
9-9
35.5
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Table 25
Production of Selected Commodities and Services in China 22/
1931-52
(Continued)
Unit
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
Coal
Million MT
65.1
62.8
62.5
19.3
17.3
20.4
20.2
22.7
30.0
37.2
45.8.
Electric Power
Billion KWH
6.9
7.5
8.0
5.0
3.8
4.2
4.3
4.8
5.2
6.3
7.6
Pig Iron
Thousand MT
1,857.7
1,885.1
1,215.0
110.6
1.3
5.7
24.6
205.0
915.0
1,150.0
1,875.0
Crude Steel
Thousand MT
741.8
893.1
450.7
160.2
7.5
25.1
11.4
140.0
611.0
866.0
1,222.0
Refined Steel
Thousand MT
463.6
493.4
382.4
12.0
8.6
60.8
30.0
81.2
320.4
564,o
850.0
Crude Oil -
Thousand MT
186.0
260.0
191.0
188.0
87.0
70.0
95.0
125.0
172.0
228.0
315.0
Machine Tools
Thousand Units
.
0.5
4.4
5.5
6.5
Copper 2/
Thousand MT
2.4
2.2
2.4
0.6
0.9
0.9
0.5
1.8
6.0
12/
8.012/
10.0
Aluminum 2/
Thousand MT
15.0
25.0
25.0
25.0
Antimony 2/
Thousand MT
5.1
0.4
0.7
0.4
1.9
3.2
4.0
6.0
8.0
10.0
Tungsten 2/
Thousand MT
6.1
4.6
1.6
1.4
1.2
3.3
6.3
2.6
5.7
7.2
7.7
Tin g
Thousand MT
7.8
7.2
2.2
3.3
3.0
3.9
5.9
4.0
6.0
7.0
9.0
Mercury
Thousand Flasks
4.4
3.4
2.9
1.8
1.4
0.3
0.3
0.4
0.5
1.5
3.0
Lead 2/
Thousand MT
10.6
11.9
5.4
o.6
0.01
0.8
0.8
2.1
5.0
7.0
10.0
Zinc f/
Thousand MT
11.0
10.8
9.1
0.3
0.3
0.3
5.8
7.9
9.8
Railroads
Billion MT Km
3.8
5.3
3.9
39.7
51.5
59.5
Cotton Yarn
Thousand MT
408.0
400.0
322.0
446.6
354.0
410.0
Cotton Cloth
Million Meters
840.7
840.7
640.0
1,116.4
1,050.0
1,200.0
a. Copper metal from scrap and refined ores.
b. Excludes scrap copper.
c. Metallic content of produced ores.
d., Metallic content of concentrates.
e. Lead metal and concentrate from scrap and refilled ores. -
f. 1931-41 metal content of concentrate about 35 percent zinc; 1942-44 and 1950-52, about 48 percent.
- 94 -
S-E-C-R-E-T
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a
S-E-C-R-E-T
Investment plans for 1953 envisage concentration on
sinking and equipping new shafts and improving extraction facilities
at open pit mines as well as continuing mine rehabilitation projects
already initiated. Total capital investment for 1953 is planned at
3 times the total for the preceding 3 years. Investment in construc-
tion constitutes 50 percent of total investment; of this, 69.4 percent
is to be allocated to "new construction," 25.2 percent to remodeling,
and 5.4 percent to restoration. These percentages indicate the pri-
ority that is given to expansion of coal production capacity. 80/
Chinese coal reserves have been estimated at approxi-
mately 275 billion tons, of which North China contains 135 billion;
the Northwest, 105 billion; the Northeast, 11 billion; and the South-
west and Central-South, 10 billion each; East China and the Inner
Mongolian Autonomous Region divide the remainder of approximately 2
billion tons each. Although the Northeast ranks fourth in total coal
reserves, it ranks first in coal production because of the heavy con.-
centration of industry in that area. The Northeast produces probably
as much as one-half the total production.of.Communist China. 81/ ?
Chinese Communist exports of coal in 1952 amounted to
an estimated 3.8 million tons, of which the USSR received 3 million
tons, North Korea, 750,000 tons, Hong Kong, 28,000 tons, and Japan,
25,000 tons. 82/ Soviet requirements on the Trans-Siberian Railroad
accounted.for most of the exports to the USSR; other Soviet Bloc
imports of Chinese coal are not expected to increase during the period
of this estimate, mainly because of the long haul involved. Among
the non-Bloc countries, Japan is by far the best potential importer
of Chinese coal.
the maximum of coking coal that
could be imported per year from China would be 1,750,000 tons. 83/
Pakistan is importing 200,000 tons of Chinese coal under a barter
agreement, and Ceylon is interested in importing Chinese coal. 84/
China faces competition from India and Australia in the Asian markets
but may be relatively better able to supply coking coal.
The development of new coal mines in Communist China
is dependent on sizable imports or manufacture of new equipment and
supplies. Among the items required are steel cable, large pumps,
compressors, hoists, electric motors, mining combines, cutting machines,
drills, conveyors, mine cars, and mine locomotives. For technical
services, China will probably continue to be somewhat dependent on the
Soviet Bloc, particularly the USSR, until Chinese technicians show
-95-
50X1
50X1
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Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
S-E-C-R-E-T
themselves capable of engineering their own coal mines. It is sig-
nificant that the failure to meet planned quotas for the first half
of 1953 is attributed by the Chinese themselves "to lack of scientific
planning and management." 85/
The chief vulnerability of China in the coal industry
is the separation of the heavily populated areas from the coal fields.
Generally, coal is shipped from North.China to Central and South China,
where local production and shipment via railroad and barge cost more
than North Chinese production and shipment by sea. Other problems
include the continued use of old, worn-out equipment; ageing mines;
present inability to produce new equipment; and a shortage of tech-
nicians and skilled.workers. 86/ ,Soviet technicians are helping to
supply these deficiencies and are assisting the Chinese Communists
to build a coal mining machinery plant at Fu-shun. Improved technical
equipment is said to have enabled the Chinese Communists to increase
their production of coal from the same mines by 2-1/2 times., while
the completion of the mining equipment plant will nearly double the
Chinese Commhnist output of mining machinery. 87/
It is estimated that by 1958 the Chinese Communists
will still be dependent upon outside sources for some of the capital
goods required for the improvement of production facilities but will
probably be in a better position in regard to technicians and skilled
labor. Based on the wartime level of coal production, Communist China
is capable now of an annual production of about 65 million tons of .
coal. It is estimated that, with the projected improvements, Communist
China can expand its coal production from the 1953 estimated produc-
tion of 50 million tons to 72.8 million tons per year. The actual
level of production will depend on internal requirements and export
demand.
b. Electric Power Industry.
Since 1949 the fundamental tenet of Chinese Communist
planning has been the development of heavy industry, which is largely
dependent upon the generation of electric power for expansion of pro-
duction. By the end of 1952, the production of electricity in China
had increased from 4.8 billion kilowatt-hours in 1949 to approximately
8 billion kilowatt-hours. Revised plans for 1953 call for an added
increase of 18.3 percent over the 1952 figure, which would result in
a production of about 9 billion kilowatt-hours. ?.?../
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Announced 1953 plans for capital investment in the
electric power industry are shown in Table 26. 89/
Table 26
Indexes of Investment in Capital Construction
in the Electric Power Industry
in Communist China Lt/
1950-52, 1953 Plan
Year Index
1950 100.0
1951 175.0
1952 462.0
1953 (Plan) 2,032.8
a. Each year given as a percent of the 1950
base year.
The present capability of Communist China for manu-
facturing equipment for power plants is extremely limited. Hence,
almost all heavy generating equipment must come from other Soviet
Bloc countries, specifically the USSR. In February 1953 a special
agreement was signed in Moscow which outlined Soviet assistance to
China for the expansion and construction of new power stations. 90/
Restoration of the Suiho hydroelectric power plant was specifically
mentioned in connection with the Soviet grant of 1 billion rubles
to North Korea for rehabilitation. This plant formerly supplied
about 200,000 kilowatts -- about half its capacity -- to Manchuria.
Its temporary denial to Manchuria decreased the amount of power
available to the Chinese Communist economy as a whole by an estimated
10 percent.
The production of electric power in Manchuria in-
creased from 1.4 billion kilowatt-hours in 1949 to 3.9 billion kilo-
watt-hours in 1952. Announced plans call for an increase in 1953
of 44 percent over 1952, but if the cutback of the over-all planned
increase from 27 percent to 18.3 percpnt for all China is applied
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proportionately to Manchuria, the increase there will be 29.8 percent
in 1953. Present production of electric power in Manchuria amounts to
over 50 percent of the total power production of China. Other impor-
tant power production regions in China are East China, 24.6 percent;
North China, 13,2 percent; Central-South China, 7.2 percent; and the
rest of China, less than 5 percent. a/
The major input to the electric power industry, other
than labor, is fuel for the thermal power plant. With the exception
of a few scattered small hydro, diesel, and gasoline-driven plants in
China proper and three of the major power plants in Manchuria, all the
power plants are steam powered. Even the power plants in the coastal
cities, which formerly at times used fuel oil rather than coal, now
u6e coal almost exclusively. It is estimated that in 1952 in Manchuria,
2.4 million tons of coal were consumed in power production, and in
China proper, 3.7 million tons. In addition to fuel, there is also a
need for water-treatment chemicals, lubricating oils and greases, and
repair parts for all equipment. 92/
Communist China is heavily dependent upon Soviet tech-
nicians for the improvement of existing facilities and for the con-
struction of additional capacity. The Communists are placing great
emphasis, however, on the training of Chinese engineers and technicians
for the power industry. It now appears that the principal deterrents
to expansion of the Chinese Communist power industry are the lack of
capacity to produce generating equipment and of technicians to operate
the required generating equipment. Since this equipment is not plenti-
ful anywhere in the Soviet Bloc, Communist China cannot procure the
necessary supplies of major power station equipment except under its
agreement with the USSR. 21/ A recent Soviet announcement indicates
that, with Soviet technical aid and equipment plus Chinese production
of small generators, projects already committed will result in an in-
crease of 100 percent over 1952 production. 2Lq Therefore, if the
present and promised level of Soviet assistance, in the form of tech-
nical aid and generating equipment, is continued throughout the period.
of this estimate, it is possible that power production in Communist
China may reach an annual rate of 14 billion to 18 billion kilowatt-
hours by 1957.* Actual performance under this plan may be somewhat
* Methodology: This estimate was arrived at by estimating a gradual
increase in the rate of utilization of electric power and applying
this increasing rate of utilization to the previously estimated avail-
able power production capacities; tat is, applying the rate of increase
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less than this figure; earlier statements by the Chinese Communists
indicated they expected to achieve some of their goals by 1959.
c. Ferrous Metals Industry.
The estimated production of iron ore in. Communist China
in 1952 was 4 million tons; of pig iron, 1,875,000 tons; of crude steel,
1,222,000 tons; and of refined steel, 850,000 tons. 95/
. The iron and steel industry is centered at Anshan in
Manchuria.. Pig iron is also. produced at Penhsihu in Manchuria and to
a lesser degree at Shih-ching-shan and Taiyuan in North China. Ingot
steel is produced at Anshan and Taiyuan and at smaller plants in
Tangshan, Tientsin, and Shanghai. The chief rolling mill facilities
are in Anshan, Chungking, Shanghai, Taiyuan, Dairen, and Tientsin.
Anshan is the only modern integrated steel plant in Communist China,
however, and has the largest facilities for producing coke.. 96/
Announced plans for 1953 call for an increase of 14
percent in pig iron production over 1952, to reach a total of 2,100,000
tons, a 23 percent increase in crude steel output to reach a total of
1,610,000 tons, and a 34 percent increase in refined steel output to
reach a total of 1,140,000 tons. Iron ore production is considered to
be adequate, with a possible export surplus of 500,000 tons. Most of
the export will probably go to the European Satellites.
Information concerning the volume of investment is
lacking, but, as the reconstruction phase nears completion, investment
is presumed to be heavy and increasing. The reconstruction and expan-
sion of the Anshan metallurgical plant alone is one of the major invest-
ment items in industry.' It accounts for a major share of the crude
and, finished steel output. Although only 4 of this plant's 9 blast
furnaces are now operating, the USSR has promised to reconstruct one
of the inoperative furnaces so that it will soon be the largest in
China, and to convert three preparatory open hearths into open hearth
furnaces. In addition, a sheet' steel mill and a-seamless tubing mill*
in power production in proportion to the projected increase in indus-
trial activity. Assuming that China receives adequate supplies of
generating equipment, the average annual increase in production of elec-
tric power would be about 1.6 billion kilowatt-hours in .1953 through 1957.
in January 1954.
these mills probably began operations 50X1
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are Under construction at Anshan, while the rolling mill facilities of
the latter are being expanded to achieve a planned annual production
of enough steel rails to lay 2,200 miles of single-track line. Since
the Chungking rolling mill No. 101 is estimated to be producing enough
steel rails to lay 535 miles of single-track line per year, Communist
China now has two strategically located rail-producing centers -- one
in the Northeast and one in the Southwest -- to satisfy its current
rail needs. 97/
Considerable dependence is now placed and will continue
to be placed on Soviet engineers and technicians, who have already
trained several hundred Chinese workers in the practice of modern metal-
lurgical techniques. The expansion of the iron and steel industry of
Communist China is directly dependent on the continuance of Soviet Bloc
exports of heavy production machinery and other assorted fabricated
steel products. The USSR has promised to assist Communist China during
the next 4 years in increasing crude steel production by 4 to 4.5 times
the 1952 production and in increasing by 2.5 times the 1952 production
of refined steel. Therefore, if the USSR provides sufficient technical
aid and equipment for the expansion of the Chinese Communist steel
industry, it is estimated that the production of crude steel in China
by the end of 1957 will be at ?the rate of approximately 5 million
metric tons per year, and the production of refined steel about 2.2
million metric tons per year.*
a. Nonferrous Metals Industry.
Current production of nonferrous' minerals in ore or
concentrate form in Communist China is sufficient for the country's
needs of such metals, and leaves a surplus for export, with the excep-
tion of copper. However, nonferrous metals in semifinished or
finished form in some cases are lacking because of the dearth of
smelting and refining facilities in China. Table 27** presents the
estimated current nonferrous metals position of Communist China in
1952.
Communist China is still one of the world's major pro-
ducers of antimony and tungsten. Except for a few hundred tons consumed
* This estimate was Obtalned by multiplying the estimated 1952 crude
steel production figure by 4, and the estimated 1952 refined steel
production by 2.5. 98/
** Table 27 follows on p. 101.
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Table 27
Estimated. Nonferrous Metals Position of Communist China 22/
1952
Metric Tons
Mineral
Production
Exports
Refined Metal
Imports
Refined Metal
Requirements
Copper
Aluminum
Antimony
Tungsten
Tin
Mercury
Lead
Zinc
10,000Elf
25,000 12/
10,000 1/
15,000 d/
9,000 e/
3,000 E/
10,000 g/
9,860 IC/
225
25,000
9,500
15,000
9,000
1,500
0
9,300 i/
2,900
N.A.
0
N.A.
0
0
500
1140o
20,000
11,200
500
. N.A.
500 to 700
1,500
10,000
8,000
a. Copper metal from scrap and refined ores.
b. Metallic content of produced ores.
c. Metallic content of concentrates and possibly some refined
metal.
d. Concentrates, 65 percent 1403.
e. Metallic content of concentrates and possibly 1,000 tons
to 2,500 tons of refined tin.
f. Flasks of 76 pounds net, pure mercury.
g. Lead metal from scrap and refined ores.
h. Concentrates and 500 tons of refined metal.
I. Concentrates.
per year, production is allocated primarily for export, entirely to
the Soviet Bloc since the Chinese Communists came into power. 100/
In tin resources, Communist China is potentially the most important
tin-producing area in the Bloc (which is not self-sufficient in tin),
having an estimated reserve of 1.5 million metric tons of contained
tin. 101/ The entire production of tin concentrates in Communist
China, amounting to an estimated 12,000 tons of tin content in 1953,
is exported to other Bloc countries. Development plans call for the
doubling of refined tin production at Kochiu, Yunnan, which means a
total refined tin ingot production capacity of 5,000 tons by 1957.
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An important export of Communist China to the Soviet
Bloc is mercury, since the Bloc is believed to be barely self-sufficient.
It is probable that increasing amounts .of mercury are being consumed in
the Bloc in the production of fulminate of mercury, which is used as a
detonator in bombs, grenades, artillery shells, and mines. Soviet tech-
nicians have been engaged in mercury mining activities in Southwest
China, thus further indicating the emphasis placed on the need of
the Bloc for mercury. 102/
The Chinese Communists have never had more than an
experimental pilot plant for aluminum production and are, therefore,
dependent on imports of aluminum metal. China has large reserves of
commercial-grade aluminum ores, a considerable part of which is ac-
cessible to transportation. The development of an aluminum industry
in China must necessarily follow or parallel the development of large
power installations, either thermal or hydroelectric. 103/ Current
Chinese Communist official planning envisages an increase in the out-
put of aluminum at Fu-shun, Manchuria, with Soviet aid. 104/
Copper is in quite short supply in Communist China,
its domestic requirements possibly being as high as 20,000 tons a year,
or twice the estimated 1952 production; these requirements will prob-
ably increase rapidly as industrialization progresses. Although China ,
is devoting strenuous efforts to increasing production of copper from
deposits in Yunnan and Manchuria, it will remain dependent on the rest
of the Soviet Bloc for imports of its refined copper needs during the
period of this estimate. The present known copper ore reserved in
China -- as well as the possibility of increased copper production
from reserves -- render economically feasible an expansion of produc-
tion of copper to the extent of self-sufficiency. Meanwhile, since
the Bloc as a whole is a copper deficit area, the Chinese Communist
deficit in copper metal necessitates Bloc procurement from outside
sources. 105/
In August 1952 a Ministry of Geology was set up for
the purpose of expanding the planning and creation of geologic sur-
veys and the organization of recruitment and training of geologists.
The aim is to expand geological work 10 to 25 times in 1953, and
further measures are planned for 1954 and 1955. According to plan,
in 1953 over 3,500 geology students were to be trained in the Peiping
Institute of Geology and by 1956 over 9,000 students will have been
admitted for training each year. 106/
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Some of the factors which must be overcome if China
expects to increase its mining production are the following: lack
of modern know-how and equipment for proving of geological ore
reserves; generally primitive mining and treatment met4ods; lack
of modern production and local transportation equipment and facili-
ties and improved roads; and lack of skilled labor, engineers,
geologists, statisticians, and management. Table 28 shows the esti-
mated nonferrous metals production that Communist China can achieve
by the end of 1957, assuming that the other countries of the ,Soviet
Bloc continue to furnish increasing quantities of mining, drilling,
extracting, and refining equipment, plus technical advice.
Table 28
Estimated Annual Rate of Production of Nonferrous Metals
in Communist China a/
End of 1957
Metric Tons
Mineral Annual Production
Copper 16,000
Aluminum 60,000 12/
Antimony 16,000
Tungsten 20,000
Tin 15,000
Mercury 4,500 a/
Lead 15,000
Zinc 12,000
a. Methodology: These estimates are based on an analysis
of nonferrouJ metal ores production in China from 1949 to
1953, taking into account prewar peak production, existing
production capacity, and Soviet Bloc aid, by projecting
the current rate of production increase through 1957.
b. Including possibly 12,000 tons of refined metal.
c. Flasks of 76 pounds net, pure mercury.
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e. Petroleum Industry.
The current production of refined petroleum products
in Communist China, including Fu-shun production from oil shale, is
about 555,000 metric tons per year (3,885,000 barrels). The main
oil fields are located at Yumen in Kansu Province and at Wu-su in
Sinkiang. The important crude oil refineries, with total capacity
of 555,000 metric tons of refined products per year, are located at
Yumen, Wu-su, Tihwa (Sinkiang Province), and in Manchuria, and the
major shale 'oil refinery is located at FIJI-shun. The extension of
the Lan-chou rail line, which should reach the Kansu fields by the
end of 1954, should ease the distribution of petroleum and petroleum
products originating in the Yumen area. It is quite likely that the
Dairen refinery, the Dairen shale oil plant, and the Chin-hsi petroleum
refinery, all operating on crude oil received from Sakhalin, may cur-
rently be providing approximately 250,000 tons of refined products per
year to the Chinese economy. 107/
Current requirements of the civilian economy are esti-
mated at 500,000 tons per year, while military consumption under
conditions of the Korean War is estimated at 750,000 tons per year.
During 1952, China imported an estimated 1 million tons of petroleum
products from the Soviet Bloc. It was expected that this figure would
be exceeded in 1953. Most of these Imported petroleum products are
transported over the Trans-Siberian Railroad through the border towns
of Man-chou-li and Sui-fen-ho. Oil also is imported in bulk from the
USSR via the Amur river and thence via the Sungari. In 1952 a total
of 60,000 tons of oil was imported over this route. The present bulk
storage capacity, which is believed to be little greater than the 1949
capacity of 1.4 million metric tons, is located mainly in port cities,
Shanghai having the largest oil storage capacity of any city, that is,
over 430,000 metric tons. There is a growing need, however, for in-
creased bulk storage.facilities at the main inland centers of indus-
trial development. 108/
U,-der the current Five Year Plan, much emphasis is
placed on exploration, exploitation, and refining of oil, particularly
in Sinkiang Province, whose oil reserves, according to a Peiping
announcement, are estimated at 160 million metric tonsl-or about
60 percent of the totd1 petroleum reserves of China. Refinery capacity
at Yumen, Kansu, is to be "greatly increased." Allocations to geological
prospecting in the 1953 budget, which increased 600 percent over 1952,
reflect the effort being devoted to petroleum exploration. Almost
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all refining equipment and many of the engineers and technicians as
well must be imported from the Soviet Bloc. 109/
Since it is very probable that the extension of the
Lan-chou rail line to Yumen,oil fields will be in operation before
the end of 1957, it is estimated that Chinese production of POL
products will average about 700,000 metric tons per year through
the Five Year Plan period.*
f. Chemical Industries.
Since the current Five Year Plan 'of Communist China
stresses the expansion of heavy industry, a high priority is placed
on increasing the total output of such industrial chemicals as sul-
phuric and nitric acid, caustic soda, soda ash, synthetic ammonia,
calcium carbide, and coal tar chemicals. Table 29** shows the esti-
mated 1952 supply situation in Communist China as regards these
chemicals.,
Only fragmentary information is available concerning
the production of chemical fertilizers for agriculture, although an
expansion of production capacity is planned. Most of the ammonium
sulphate now being produced is in the form of fertilizer, of which
'the production capacity is estimated to be 187,000 metric tons
(20 percent nitrogen) per year. It is estimated that 290,000 metric
tons (20 percent nitrogen) of ammonium sulphate comprised at least
95 percent of total fertilizer imports in 1952.
In March 1953 the USSR agreed to assist Communist
China in equipping the chemical industry. Announced goals.do not
indicate the extent of planned expansion, but it is evident that
chemical industry planning for increased production is concentrated
first on restoring or replacing facilities built during the Japanese
era of industrialization in Manchuria and North China. In May 1953
it was announced that a new caustic soda plant was being built in
southern Manchuria and that a fertilizer plant had been built in .
Szechuan Province in Southwest China. Two sulphuric acid plants are
* This estimate is based on an analysis of current oil refinery
operating capacities, allowances for current expansion of old and
construction of new refining facilities, and an allowance for an
increase in production of approximately 100,000 metric tons per year.
.** Table 29 follows on p.106.
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Table 29
Estimated Chemicals Position of Communist China 110/
1952
Metric Tons
Chemical
Production
Exports
Imports
Sulphuric Acid (100 Percent)
Nitric Acid (100 Percent)
Synthetic Ammonia "
110,000
14,000
25,000
300
100
0
Caustic Soda (98 Percent)
25,000
7,500
50,000
Soda Ash
115,000
111,000
22,000
Chlorine
6,900
800
Calcium Carbide -
8,000
600
500
Ammonium Sulphate (20 Percent N)
120,000
290,000
Refined Benzol
11200-
loo
Toluol
2,160
45o
30
Phenol
209
150
800v
Xylol
720
20
Negligible
Refined Naphthalene
3,300
500
500
Cresol
417
130
70
reported to be in the planning stage, one in Lan-chou in Northwest
China and another in Hsiang-t'an in Hunan Province in South China.
Soviet Bloc assistance during 1953 and 1954 is expected to speed up
the completion of a total of 3 large and 5 small basic chemical plants.
In addition, 1 synthetic rubber plant and 2 large and 1 small pharma-
ceutical plants are or soon will be under construction. 111/
'The chemical industry has three basic requirements
for the fulfillment of planned production increases. These are produc-
tion equipment, technical Personnel, and raw materials. These three
basic requirements are the major limiting factors on Chinese chemical
production. Table 30* shows the estimated chemicals production that
Communist China will have attained by the end of 1957, assuming that
Soviet Bloc assistance is adequate to satisfy these conditions.
* Table 30 follows on p.107.
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Table 30
Estimated Annual Rate of Production of Chemicals
in Communist China a/
End of 1957 ?
Metric Tons
Chemical
Production
Sulphuric Acid (100 Percent)
230,000
Nitric Acid (100 Percent)
44,000
Synthetic Ammonia
55,000
Caustic Soda (98 Percent)
55,000
Soda Ash
205,000
Chlorine
10,000
Calcium Carbide
24,000
Ammonium Sulphate (20 Percent N)
270,000
Refined Benzol
17,76U.
Toluol
4,500
Phenol
430,
Xylol
1,500
Refined Naphthalene
6,900
Cresol
860
a. This estimate was based on an analysie of
present operating plant capacities, with due
consideration given to promised Soviet Bloc tech-
nical and material assistance, by projecting cur-
rent annual rates of increase for each chemical
through 1957.
With the exception of the motor tire industry, very
little current information is available concerning the production of
rubber goods.
v/The synthetic rubber industry of Communist Chins: is
still in the experimental phase. It is estimated that it will take
many years for China to become self-sufficient in natural rubber. In
the meantime, Chinese Communist /libber requirements are being satisfied
mainly by Ceylon. 112/ up to 45 percent of 50X1
the natural rubber imports of Communist China have been re-exported
to other Soviet Bloc countries.
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Much emphasis is being placed on the development of
rubber tree plantations on Hainan Island. It is possible that
10,000 metric tons of indigenous natural rubber may be produced by
1960, but a more probable production estimate is that slightly more
than half, or 5,600 metric tons, will actually be produced. Consump-
tion meanwhile is estimated at 30,000 to 35,000 metric tons per year,
with the rubber footwear industry consuming the largest proportion.
Since 1950 the Chinese Communists have been striving
to expand production of motor vehicle tires, particularly truck tires.
It is estimated that there are some seven tire plants in operation in
Shanghai, Tsingtao, Shen-yang (Mukden), Canton, and Tientsin. The
plants in Tsingtao and Mukden are the largest producers. By the end
of 1953, motor vehicle tire production in Chinese plants may exceed
300,000 sets.
Current planning envisages increased Soviet Bloc ex-
ports of production equipment to provide for the replacement of worn-
out machinery, as well as to provide for the expansion of the Mukden
and Tsingtao plants, whose capacities are expected to be doubled.
Recent information reveals that at least one of these plants (probably
the Tsingtao Plant) has been equipped to produce tires for MIG-15's
in use in North Korea. 114/'
Chinese imports of Soviet Bloc and non-Bloc tires
have steadily declined in quantity since 1951 and are now believed
to consist only of special-size tires which either are not produced
or are in limited supply in China, that is, 10.00 x 20 heavy duty
truck and bus tires, and tires for farming and roadbuilding equip-
ment.
In view of present operating plant capacities and
prospective imports of tire machinery from the Soviet Bloc, it is
estimated that Communist China by the end of 1957, will have the
capacity to produce about 700,000 sets of motor tires per year, which
will completely satisfy its requirements (except for special sizes).*
* This estimate has been formulated on the basis of annual produc-
tion capacity increases of about 50,000 sets per year.
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g. Engineering Industries.
The Chinese Communists are heavily .dependent upon
imports for capital goods. Their investment program for the period
of this estimate has been designed to reduce this dependency, particu-
larly as regards capital inputs in the basic industries -- coal,
electric power, iron and steel, and machine building. The estimated
1952 production of metal-cutting machine tools was approximately
6,500 units, and of antifriction bearings 430,000 units (the latter
representing about one-fourth of the Chinese Communist current esti-
mated requirements for bearings). 115/ Production of machine tools
in 1953 was expected to be increased by 4.6 percent, to approximately
6,800 units.
Tables 31 and 32* present the major new construction
and reconstruction projects under way in 1953-54 in the Machine build-
ing industries.
Fulfillment of the present Chinese program of indus-
trial expansion and development probably will be achieved mainly by
imports of technical aid and industrial machinery, and of electrical,
electronic, and transportation equipment from the Soviet Bloc. In
view of the small number of engineers and skilled workers and their
generally inadequate technical knowledge, it appears evident that the
immediate problem is to train enough engineers and skilled workers
so that a skilled manpower base may be established upon which future
industrial expansion may develop. At the present time, domestically
trained technical and administrative personnel continue to be inadequate
In number and knowledge, so that the deficit developing with industrial
expansion must be filled with Bloc personnel. 116/
By the end of 1957, the Chinese Communists will have
undertaken integrated production of such items of heavy industrial
equipment as trucks, tractors, locomotives, electronic equipment, and
marine engines; but it is estimated that, to obtain supplies of these
items sufficient for further industrial expansion, Communist China
will continue to find it necessary to rely on imports of most of these
Items within the period of this estimate. It is further estimated
that by the end of 1957, in view of the priority on expansion of pro-
ducer goods production in Communist China, the annual production of
* Tables 31 and 32 follow on p. 110.
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Table 31
Major New Construction Projects in the Machine Industry
in Communist China
Under the Five Year Plan
Industry
Name of Plant
Location
Date of
Initiation
Completion
Target Date
Machinery,
General
Northeast No. 1.Measur-
ing Instrument Plant
Harbin
1953
1954
Trai-yuan Heavy Machine
T'ai-yuan
1950
1955
Building Plant .
Machinery,
Textile
Ching Wei Textile
Machine Plant
T'ai-yuan
1951
1953
Machinery,
Farm Machinery Plant
Mukden
1953
1954
Farm
Machinery,
Electric
Northeast No. 4 Electric
Machinery Plant
Harbin
1951
1953
Automotive
No. 652 Automobile Plant
Harbin
1953
1954
Shipbuild-
ing
Shipbuilding Plant
Whampoa
1953
1956
Table 32
Major Reconstruction and Expansion
in the Machine Industry
in Communist China
Under the Five Year Plan
Projects
Industry
Name of Plant
Location
Date of
Initiation
Completion
Target Date
Machinery,
General
Northeast No. 1 Machine
Tool Plant
Mukden
1953
1954-55
Northeast No. 2 Machine
Tool Plant
Mukden
1953
1954-55
Pneumatic Tool Plant
Mukden
1953
1954-55
Machinery,
Mining
Fu-shun Machinery and
'Electrical Equipment
Fu-shun
1953
N.A.
Plant
Machinery,
Electrical
Northeast No. 7 Electric
Machine Plant
Mukden
1953
1951+-55
Machinery
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antifriction bearings -- a critical item -- will be about 1 million
units; this will be considerably less than the Chinese Communist esti-
mated annual requirements of about 2 million units, thus indicating '
continued reliance on foreign imports. (As regards machine tools,
annual production is planned to reach 22,750 units by 1957, depending
on Soviet aid and the schedule of activating newly constructed plants.)
h. Armaments Industry.
The armaments industry of Communist China today is
in the midst of a modernization program, but is not yet capable of
meeting all equipment requirements of the Chinese Armed Forces.
Arsenals have suffered looting by the USSR, by the Chinese Communists
(when they were afraid of recapture by the Nationalist), and by the
Chinese Nationalists when they were retreating to Formosa. The build-
ing of a modern armaments industry is stated to be of highest priority
in current economic plans. The Chinese Communists have acknowledged
'Soviet assistance in this effort, and it would be logical to assume
that standardization based on Soviet types of equipment is to be en-
forced as in the European Satellites. As the Chinese Communists pro-
ceed toward that goal, they are concentrating their productive effort
on infantry regiment equipment -- that, is$ small arms, machine guns,
mortars, and some light artillery 117/ -- and are still receiving the
large-caliber artillery, ? tanks, and other heavy equipment from the
USSR.
Small arms equipment is the major end item in the
Chinese Columnist armaments program. At least 200,000 pieces are
known to have been produced in 1952. 118/
Production of light artillery pieces is on the increase.
Production of recoiless rifles and rocket launchers does exist. 119/
It is indicated that the industry has been modernized so that it is
now on a level of production of about that of World War II. This level
of production is still inadequate for the needs of Communist China.
The geographical distribution of the armaments indus-
try differs substantially from that of other engineering industries
in Communist China, since the location of armaments plants has in
the past been determined more by considerations of short-range politi-
cal and military strategy than by longer-range, basic economic factors.
Most of the larger armament plants are located in or near large urban
areas with ready access to transportation and power facilities. Many
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of the small establishments, however, are located in areas remote
from cross-country transportation routes. Adjacent to past military
frontiers, they utilize portable generators for power supply and
pack animals for transport. In all, there are reportedly .about
160 arsenals in operation, employing about 260,000 workers. During
1950 and 1951, many small arsenals and repair shops were consolidated
particularly in the Central-South China area. 120/
At the present time the most important center of
armaments production in China is Mukden.
the Mukden arsenal and its branches are operating at 100 percent
capacity, employing about 30,000 workers, and accounting for about
one-half of the armaments production of Communist China. 121/ Mukden
arsenals reportedly are producing small arms, machine guns, and
mortars at a very high rate.
Reputedly, the second most important arsenal is
located at Tuai-yuan. This arsenal was re-
constructed along Soviet lines in mid-1950 and is now capable of
producing light artillery and various kinds of automatic weapons.
In 1949 it was reported as having a monthly production rate of
5,000 rifles, 1,300 machine guns, 300 mortars, and 48 mountain guns.
Other important arsenals are located in Chungking,
Cantqn, and Nanking. Soviet equipment for weapons manufacture was
furnished to the 21st, 24th, and 29th Arsenals in Chungking in 1950.
The 21st Arsenal is considered the fourth largest in China.
At Canton, the former Stonewell (Shih-ching) Arsenal
(renamed the South China Arms Factory) was expanded between September
1950 and June 1951 under plans drawn up by the Soviet Advisory Com-
mission. 123/ This plant is important in supplying the Viet Minh
forces in Indochina. It was reported In 1951 to be producing weekly
200 rifles, 100 machine guns, 56 mortars, and 4 antitank guns. 124/
Monthly production of ammunition was 3,000 rounds of mortar shells,
300,000 small arms rounds, and 5,000 land mines. 125/
The 60th Arsenal at Nanking was reported modernized
by early 1950, having been reequipped after the Nationalists had
moved out with the machinery. 126/ In 1951 it was engaged in produc-
ing submachine guns, small arms ammunition, mortar ammunition, and in
rebuilding rifles.
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Ammunition is being produced both at the arsenals and
in countless small workshops throughout China. Table 33 presents a
comparison of ammunition production in Nationalist China in 1948
with ammunition production in Communist China in 1950 and 1952.
Ammunition production is a field in which the Chinese have had long
experience and, are well able to turn out large quantities, particu-
larly in the small arms field. Nevertheless, huge quantities have
been required from the USSR to meet wartime consumption rates.
Table 33
Production of Ammunition in China
1948, 1950, and 1952
Thousand Units
Item
191.1.8 2/
1950 12/
1952 2/
Small Arms Ammunition.
403,700
432,640
532,800
Mortar Shells
3,059
1,740
2,040
Artillery Shells, All Types
182
98
5,436
Grenades
10,751
15,072
19,800
50X1
a. The 191.1.8 estimate excludes Communist production in
the Northeast District for which no data were available.
b. 1950 estimates were based on (1) past production,
and 50X1
(3) the condition and capacities of the arsenals re-
ported making the items In question.
c. Data were quoted on a monthly basis
applying to the first 3 months of 1952. Annual esti-
mates were Obtained by multiplying by 12.
In addition to the above more important centers of
production there are many smaller Ones about which little is known.
following the departure of the
Nationalists, arsenals were gradually put back into operation.
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After the intervention in Korea, there ensued a phase in which machinery
was removed from the arsenals in reach of aerial attack to other loca-
tions in China. When the attacks did not materialize, modern Soviet
equipment was brought in, together with Soviet technicians, and the
arsenals were modernized along Russian lines. Thus it is logical to
assume that production in 1952 was substantially higher than in 1951.
The armaments equipment needs of Communist China are
tremendous both because of Chinese ambitions in Asia and because of.
the nature of a Communist state. It must supply its regular field
forces (of which 878,000 were in Korea as of November 1953), the Public
Security Troops (a special burden of the Communist state), and in
addition the Peoples' Militia. These forces are broken down as fol-
lows 127/: field forces, 2,233,000, public security troops, 1,450,000,
and Peoples' Militia, 6 million -- a total of 9,683,000.
Communist China is making progress but is not yet
self-sufficient in the production of small arms, light and heavy
machine guns, mortars, and certain types of light artillery. The
same holds true for the production of ammunition for these types of
weapons. Communist China is now and probably will continue through-
out the period of this estimate to be heavily dependent upon Soviet
Bloc technical assistance and exports of such armaments as tanks,
antiaircraft and antitank guns, rocket launchers, and most types of
heavy field artillery, as well as their ammunition supply.
Any estimate of future Chinese strength must also con-
sider the extent of this Soviet aid. Supplies of weapons have been
streaming in at a rate of approximately twice that of Chinese produc-
tion. If, then, Soviet aid continues at the present high level and
Communist China produces to the utmost of its capacity, the accomplish-
ment of the Five Year Plan begun in January 1953 would result in a
modern army of over 2 million men in Communist China, which would
greatly enhance the military power of the Soviet Bloc.
i. Cotton Textile Industry.
The cotton textile industry, which is still 50 percent
in private hands, is among the most modern enterprises operating in
Communist China. It has made rapid recovery since the advent to power
of the Communists. At the beginning of 1952, the Chinese Communist
cotton spinning industry had a total of 5.1 million spindles, of which
approximately 4.8 million were in operation, thus ranking Communist .
China third in Asia and seventh in the world in cotton yarn production. 128/
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Strict government supervision is exercised through
the China Cotton, Cloth, and Yarn Corporation, a. government agency
which allocates raw cotton to mills and controls the disposal and
price of the finished product. Increasing government control is now
the most significant aspect of the industry, not only because textile
manufacture is of major importance to the Chinese economy but also
because it is the leading industrial producer and employer of labor
(over 50 percent) and is a major contributor to Chinese domestic and
international trade. 129/,
Between 80 and 90 percent of Chinese cotton textile
producing capacity is concentrated in the Shanghai, Tientsin, and
Tsingtao areas and in Southern Manchuria. Shanghai alone has. about
46 percent of Chinese spindlage. In 1952 and 1953 the emphasis was
on the development and expansion of the textile industry in such
areas as Wuhan, Canton, Sian, Lan-chou, Tihua, Nanking, and Chungking.
Table 34 gives cotton yarn and cotton cloth produc-
tion figures for the period 1949-53, based on Communist claims.
These figures have been projected through 1957 on the basis of an
expected average annual increase of about 10 percent for cotton cloth
and one of about 5 to lo percent for cotton yarn.
Table 34
Cotton Yarn and Cotton Cloth Production in Communist China 130/
1949-52, 1953 Plan, and 1957 Plan
Cotton Yarn
1949
1950
3,951
1952
1953
Plan.
1957
Plan
(Metric Tons)
322
446,615
354,000
410,000
466,000
550,000
Cotton Cloth
(Million Meters)
640
1,116
1,050
1,200
1,300
1,700
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j. Construction Industry.
The current Five Year Plan envisages the expansion of
such Chinese basic heavy industries as the metals, ful, power, heavy
machinery, and basic chemicals industries. The present trend is to
build up the existing industrial centers, particularly in Manchuria,
and simultaneously to develop and build new centers deep in the
interior so as to provide a relatively invulnerable base in the event
of attack. The cement industry is centered largely in the Northeast,
where 14 plants were built by the Japanese. A second but less dense
concentration is in North China. Other plants are scattered through-
out the country. The cement industry is taken as the key to construc-
tion activity, since it furnishes the principal ingredient of new
installations. Its development is vital to the growth of the Chinese
economy.
The Communist program of industrializing the country
creates a large demand for industrial buildings to house manufacturing
plants and offices and to provide roads and airfields to modernize
the transportation system, all of which require large quantities of
cement. In addition, military end items such as bunkers, pill boxes,
coast defenses, and other defensive measures require large quantities
of cement in their construction. Estimated production of cement for
1952 was 1,750,000 metric tons. Cement production in 1953 is expected
to increase by about 30 percent over 1952 to about 2,275,000 metric
tons. 131/
In view of the large quantities of cement that will be
needed to accomplish the main goals of the current Chinese Communist
Five Year Plan, it is estimated that by 1957 China will be producing
cement at the rate of about 3 million metric tons per year.*
k. Communications.
(1) Railroads.
? The ability of Communist China to support indus-
trial expansion and retain economic cohesion and political control, as
well as its ability to support possible military operations, depends
upon :the capability of its transport network. The Communist government
* A rough projection allowing an average annual rate of increase of
about 10 percent over the 1952 estimated production figure.
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recognizes this situation, as evidenced by their 1953 State Budget, 132/
in which transport and telecommunications are to receive 6.36 percent
of the 1953 state expenditures, following "national defense," "industry;"
and "social, cultural, and educational."
In capital outlay, the rail system probably receives
the greatest emphasis. When the Communists ascended to power, they took
over a rail net located primarily in the Northeast, North, and East
China regions with a few long extensions to the West, which loosely con-
nected nodes of industrial production and consumption. Since then the
railroads have been under complete government controls, and the govern-
ment has devoted attention to rehabilitating the existing lines and
constructing new lines to extend the existing net. At the end of 1952,
the net totaled 24,232 kilometers. New construction is primarily con-
centrated in the western regions and is undoubtedly based strongly on
strategic considerations, although economic factors are also important.
The Ch'eng-tu - Chungking, line was completed in 1952, and work to extend
this line th4ough to T'ien-shui-is now in progress. When completed, it
will provide the rich Cheng-tu Basin with a through rail connection to
the eastern part of the country for the first time. Also completed in
1952 was the T'ien-shui - Lan-chou line, which is being extended into
Sinkiang. This railroad serves the dual purposes of connecting the
Northwest with the rest of China and of stimulating the USSR to connect
its rail system in Kazakh ASSR with this line via Tihua. Planned for
future construction is another line from Pao-t'ou in Suiyuan Province
to Ulan-Bator in Mongolia. These are ambitious projects and will probably
not be completed by 1957, but it should be noted that with their eventual
completion Communist China and the USSR will be connected by two more
lines, which will markedly increase the capabilities of the USSR to move
material to China.
At the present time the rail net is capable of satis-
fying the demands of the economy in 1952, it originated approximately
131 million metric tons of freight, this being an increase from
110.5 million metric tons originated in 1951, 133/ and 99.2 million
metric tons originated in 1950. 134/ Total tonnage in 1952 included
such bulk goods as coal (33 million metric tons), timber (4,350,000 meter
tons), iron ore (4 million metric tons on short hauls), and grain
(3,750,000 metric tons). 231/ Since the Communists took over the rail
system, there has been a trend to utilize rail lines wherever possible
for movement of manufactured goods which had traditionally been carried
over water routes. Rail traffic volume is concentrated on North China
and Manchurian lines.*
* See Figure 14, following 13,1561 below.
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The Chinese plan to increase rail transport from
59,461 million ton-kilometers achieved in 1952 136/ to 63,800 million
ton-kilometers in 1953, a 7.4 percent increase. 1E/ It is to be
noted, however, that 4 primary weakness of the Chinese Communist rail
system is the continual capacity utilization of freight cars under
present operating methods; little or none of the car park is held in
reserve.
The Chinese railroad system is believed to have
other weaknesses. Although rolling stock is in good repair, 12?/ rail
replacement may be behind schedule. This weakness may be overcome
within the next five years by additional production from the new steel-
fabricating plant at Anshan, scheduled to begin operation late in 1958
with a planned yearly rail production sufficient to lay 2,200 miles of
single-track lines per Year. 122/
The rail net as it is presently constituted has four
major weaknesses. The first is that the Peiping-Mukden line via
Tientsin and Lin-yu, and running for a considerable part of its length
on the coast, is at present the sole link between China proper and
Manchuria, and by through connections with the.Trans-Siberian Railroad.
The Peiping-Jehol line is an alternate to the Peiping-Mukden railroad
and is presently being rehabilitated. With it in operation, the burden
on th-is route will be lessened; this alternate route, however, will
probably have a low capacity. With the completion of the rail lines
through Mongolia and Sinkiang mentioned above, the railroad traffic
capacity between the USSR and China will be further, enhanced. Second,
the 75-mile section of track between Chu-chou and Heng-yang is a
serious bottleneck on the main railroads connecting Canton and Indo-
china with Hankaw and Shanghai, as it forms the center of a large
carrying the burden of two main lines. This weakness could be overcome
by double tracking, but as far as is known, this is not planned. The
third major weakness is the fact that the Chinese rail net is cut in two
by the Yangtze River. Connections across the river are necessarily by
ferry at Nanking-Pukow, where the ferries are estimated to be capable of
handling line capacity, and at Hankay-Wuchang, where facilities are not
adequate. A railroad bridge across the Yangtze at Hankow is planned,
but it probably will not be completed within the next five years. 1122/
The fourth major weakness of the existing rail net is the lack of
double track on main trunk lines; the Peiping-Mukden and Harbin-Dairen
lines are the only double track lines in the entire system. Although
the present system can adequately handle present tonnage allocations,
planned industrial expansion during the next 5 years. should tax main
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lines in industrial areas. Double tracking on these lines could be the
answer, although no double tracking plans have been noted.
An offsetting factor to these weaknesses is the
centralized control of all lines in the Ministry of Railroads which adds
an element of flexibility in the use of the transportation equipment and
should permit a higher rate of utilization than might be possible under
decentralized management.
(2) Highways.
Highway construction is being planned on conjunc-
tion with rail and water routes and with new highways connecting with
rail lines and/or ports to facilitie a more rapid movement of goods in
the interior areas. In addition to internal construction, the Commu-
nists are pushing construction on roads to the Northwest in Sinkiang
Province to link up with the USSR, construction or repair on roads to
the South to link up with' nets in Indochina, and construction to the
Southwest on the Tsinghai-Tibet highway designed to strengthen Commu-
nist control over Tibet.
The Communists have continued the UNRRA highway
rehabilitation program, restoring or constructing new roads at the rate
of about 8,000 kilometers per year. Although the Central Ministry of
Communications is responsible for regulations relative to management
and engineering standards, individual provinces appear to be responsible
for construction of all roads, either provincial or national. Labor
comes primarily from corvees, "anti-Communist corrective labor" groups,
or the military. About 46 percent of all highway mileage is concentrated
in the Northwest, with East China, Hunan, and the coastal areas in Hopeh
receiving a large concentration also. 141/ Generally, the roads are not
paved, except in urban areas, crushed-rock surfacing predominating.
Construction efforts of the Chinese Communists are
being supported by the USSR. New fixed structures, such as bridges, are
of Soviet design; Soviet technicians are involved in all important pro-
jects; and most of the new roadbuilding equipment is of Soviet make.
Soviet influence on Chinese highways is significant in that new and
stronger methods of road construction being introduced are increasing
the physical capacity of the roads for supporting heavier equipment.
Road maintenance is well organized but not extensive at present.
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The Chinese Communists are primArily dependent upon
the USSR for their motor-powered rolling equipment. The Chinese Commu-
nist government, however, is presently increasing its civilian truck in-
ventory with US, UK, Czechoslovak, and German models as well as with
trucks of Soviet make. The estimate of Chinese Communist truck inventory
for 1952 is 52,350 units. 142/ Military vehicles add considerably to
trucking potential. Animal-drawn vehicles, pack animals, and porters
still carry much of the tonnage moving over Chinese highways.
The importance of the highway system to the economic
scheme of individual areas varies greatly, from being the main trunk
transport system in areas such as interior Fukien and numerous areas in
the Northwest and Tibet, to being feeder routes to the rail and water
networks over most of the country. Long-distance motor transport is not
feasible in most areas; fuel is at a premium and under strict government
control. In 1952 the average length of haul was about 63 kilometers. 143/
Consumer goods, mainly foodstuffs, make up the bulk
of tonnage carried over the highways; building equipment, industrial
equipment, and petroleum products rise in proportion in and around urban
areas; the Wu-wei - Lan-chou highway carries heavy truck traffic in POL.
Total highway tonnage, however, is relatively small compared to railroad
and water traffic.
Trucking enterprise is at present primarily carried
out by government-sanctioned firms or by government-owned and -operated
joint transportation organizations, which have been set up to consolidate
supplementary transport, such as trucks and junks, so that produce could
be moved out of the rural areas more efficiently and the main transport
lines could be utilized in the most effective manner. These organizations
have improved rural transport and are at present an integral part of the
national transport system. This centralized, integrated commodity flow
is probably one of the more important innovations of the Chinese Com-
munist regime in the improvement of the economy.
(3) Water Transport.
Water transport is traditionally one of the most
important facets of the Chinese economy; on the lower order, small
sampans operate on creeks and canals with local produce, working up
through larger streams and canals to the main trunk river routes, the
Yangtze, the Yellow, the Sungari, and, to a lesser extent, the West and
North River systems in KNaangtung, and the north and south trunk coastal routes.
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Realizing its importance, the Communists have socialized water trans-
port almost completely through ownership, licensing, and commodity
control. Primary responsibility for shipping lies in the Central.
Ministry of Communications, and is executed through the Sea Transport
Main Bureau and the River Transport Main Bureau on the national level,
and the Provincial Departments of Communication and Joint Transport
Corporations on the local level. Inland and ocean transport account
for about 10 percent of all ton-kilometer performance of the Chinese
Communist transport network. In 1952, it is estimated that inland
water transport accounted for 5,400 million ton-kilometers and ocean
transport for 600 million ton-kilometers. This is far below 1936
levels when inland water transport totaled an estimated 20,300 mil-
lion ton-kilometers and ocean transport 2,200 million ton-kilometers.
The North China coastal area -- that is, that area
north of Wen-chou in Chekiang Province -- is under the administration
of the East China and North Sea District Sea Transport Administration
Bureau of the Sea Transport Main Bureau. It is estimated that these
organizations operate about 90 percent of the tonnage in the area,
and control Virtually all of it. Shanghai is the shipping center of
this area, with repair and construction facilities for the area, and
for the Yangtze. Dairen, Tientsin - Ta-ku, Tsingtao, Chinwangtao,
Chefoo, Ying-k'ou, Hai-chou - Lienyunkang, Wei-hai-wei, Lung-k'ou,
and Shih-tao .rank in about that relative order of importance within
the area. The shipbuilding and repair facilities of Dairen are
Chinese-owned but controlled by the USSR; no Chinese ships are re-
paired at Dairen, except in cases of emergency. Coal from Chinwangtao
and Dairen and POL from Tsingtao, Dairen, and Ying-Moul moving to
Shanghai, are the principal oceanborne commodities going south; grains,
the principal Commodity moving north. Approximately 2.5 million tons
of cargo were moved by government shipping during 1952 in this area.
The inland system in South China transports pri-
marily foodstuffs and consumer goods. The South China District Sea
Transport Administration Bureau administers the South China coastal
area -- that is, that area south of Swatow. Canton is the shipping
center, both for the coastal section and for the inland waterways
system extending up the West and North Rivers. Cargoes along the
coast are primarily strategic in nature, supporting military estab-
lishments in the delta region and especially on Hainan. Swatow,
Hoihow, Pakhoi, Tsamkong, and YUlin are the other major ports in this
area. The Chinese Communists are building up the merchant fleet in
this area, indicating their possible interest in opening the coastal
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route up the east coast between Swatow and Wen-chou, which is at present
served only by limited junk trade. British, Norwegian, and Danish
flag shipping sails out of Hong Kong on scheduled runs up the coast.
Sporadically, armed Communist merchantmen penetrate the area from
either the north or the south.
The Yangtze River Navigation Affairs Administra-
tion Bureau at Hankow is the control for shipping on the Yangtze,
which is the only connection at present between the rich Ch'eng-tu
Basin and the rest of China, and which is the major east-west trunk
route of the country. The Yangtze River system carries by far the
largest amount of commerce of the Chinese waterways. During the
first half of 1953, over 2.5 million tons of cargo were transport4ed
over it. 144/ Coal and grain are the primary commodities transported
on the lower reaches, while the stretch between Hankow and Chungking)
being the only link between the two areas, carries all classes of
consumer goods upstream and local produce, ores, and local manufactured
goods downstream. During 1952, building materials and industrial
goods replaced grain, cotton, and local agriculture as the principal
products carried on the system as a whole. Under the Communists, tow-
boats are replacing the traditional junks. Government shipping handles
over 70 percent' of all transport on the river, most of the remainder
being controlled by the government through Joint Transport Corpora-
tions. 145/
The Sungari River in northern Manchuria is impor-
tant in that it is a convenient transport link between China and the
USSR. Indications are that operations, centered at Harbin, are still
in the early stages of development. POL from the USSR, timber, and
coal are the main commodities moving on the river. Although frozen
from November .to April and subject to flood conditions in the spring
and fall, the Sungari probably will remain significant because of its
link with the Amur River and the USSR.
Chinese Communist water transport is adequate to
handle present internal requirements. Because of the reorientation
of traffic requirements to a north-south direction, the Communists
have not utilized' fully the existing river transport capacity. A
major problem facing the Communists has been obtaining cargoes to fill
the existing bottoms for river shipping. Communist shipbuilding plans
have been oriented toward replacement of existing barge tonnage and
repair of powered units, rather than toward expansion of river trans-
port capacity.
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The outstanding weakness in the Chinese Communist
flag ocean transport is its dependence upon other nations to furnish
vessels to handle large-scale overseas commerce. The largest vessel
? known to be in the ocean fleet is less than 7,000 gross tons. Trade
controls brought about by the Korean War and Nationalist harassment
from Formosa have also been retarding factors in any possible expan-
sion beyond Chinese Communist waters for Chinese Communist flag
merchantmen.
Water transport policy in Communist China is along
the following lines. First, it is aimed at obtaining complete control
over commodity movements and shipping organization. This phase of
policy has been implemented generally, and has had the effect of great-
ly improving commodity flow. Second, it attempts to improve operating
procedures and centralized control. This phase of the policy is now.
being implemented and will probably govern operations for the next
5 years. Third, it attempts to lower passenger fares and freight
rates.
Water routing will probably be expanded chiefly
in the area along the east coast, if possible. Improvements on river
segments in Northwest and West China are planned, but will be important
primarily only to the local economy. Expansion to overseas flag ser-
vice depends on a peaceful conclusion to the Korean War, no further
Chinese Communist aggression, and elimination by the Communists of
Nationalist interference. Until these requisites are met, the Chinese
Communists will continue to rely upon Soviet Bloc and non-Bloc ship-
ping for foreign commerce, and will utilize their own vessels in over-
seas coMmerce very little.
In summary, the Chinese Communist communications
system is now under complete government control. The Korean War has
had the negative effect on the system as a whole of diverting capital
investment to support the war effort instead of placing it on domes-
tic economic development. Thus major improvements on the transport
net to support the war effort were made in Manchuria, where the nets
were already the best in China. Because of the war, the Chinese Com-
munists have had to depend more upon Soviet transport technology than
would have been the case possibly if war necessity had not moved the
West to restrict trade in technical equipment. In the past the USSR
furnished a negligible part of such requirements.
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Since assuming power, the Communists have united
the transport networks to a degree never before known to the country.
This unification was a necessary measure for their enforcement of
economic controls; it will probably continue to be a motivating fac-
tor in their planned industrial expansion during the next 5 years.
()4) Telecommunications. 146/
In Communist China an estimated 80 percent of the
available telephone and telegraph service is consumed by industry and
government (civil and military). Telecommunications services are con-
centrated in the more industrialized and more heavily populated eastern
section of the country: East China is estimated to handle about 45
percent of all telecommunications services in China; North China,about
21 percent; Northeast China, 20 percent; and Central-South China, about
11 percent; thus totaling 97 percent for these 4 regions. The South-
west, Northwest, Tibet, and the Inner Mongolia Autonomous Region then
account for the remaining 3 percent. 147/
The types and makes of equipment are many and
varied, with little attempt made at standardization, thus influencing
the quality, continuity, speed, and costs of operation. In the larger
cities where dial-system telephone equipment and modern telegraph
equipment exist, the systems are probably fairly efficient. Elsewhere,
efficiency is undoubtedly law. Efficient operation of the telecom-
munications industry requires skilled manpower, which is scarce. Other
limitations contributing to this inadequate and inefficient system are:
a primary lack of production facilities needed to build up and maintain
the industry, difficulty in importing equipment and apparatus, and lack
of technological "know how" and technicians.
The Soviet Bloc is capable of aiding China in
respect to production of equipment, technical knowledge, and skilled
personnel. Aid has been rendered, but its extent is not known.
The 1953 investment plant 1/?13./ indicates that tele-
communications services are recognized as a vital element in the
buildup of the national economy of Communist China. Telegraph wire-
line has been increased 24 percent since 1949 to 133,000 kilometers
of line and 212-,800 kilometers of wire in 1952; telephone line has
been increased 15 percent since 1949 to 435,000 kilometers in 1952.
This stress will probably continue, and additions to the presently
inadequate plant are in process. The program for increasing automatic
dial telephone facilities and plant, as well as for modernization of
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telegraph equipment and operation, probably will be continued. Radio
broadcasting and receiver facilities will probably be increased and
improved, especially in the sparsely populated sections of the country,
as this medium can play a vital role in achieving order, cohesion, and
discipline among the populace. Service generally will probably continue
to be available primarily to the government.
C. War-Supporting Capabilities.
1. Elements of Weakness.
A good short-run measure of the limitations of Communist
China in waging a modern mechanized war is the present state of de-
velopment of certain important industries necessary for waging such
a war. These are the heavy metallurgical, machine tool, aluminum
and magnesium, chemical, civil aviation, railroad, and electric power
industries. The reason for selecting civil aviation as one of the
criteria is that, in, addition to providing an important supply of
pilots and personnel trained in aircraft. maintenance and operation,
this industry, can also supply planes., especially of the transport
type, for military operations. Civil aviation also stimulates the
construction and maintenance of airfields that can be used for both
civil and military purposes.
Table 35* indicates that those industries which are impor-
tant in waging a modern mechanized war are relatively small or unde-
veloped in China. If the status of these eight industries can be con-
sidered as a reasonable criterion for setting limits to the capacity
of a country to wage a modern war, it must be concluded that China
alone cannot support a war against a typical industrial country. Of
all the large countries, India is the only one whose industries are
about on a par with those of China.
Japan, a much smaller but more highly industrialized coun-
try, has a higher production in all the commodities listed except
crude oil. Japan exceeds China in the production of pig iron by 2
times, crude steel by almost 6 times, machine tools by 1-1/2 times,
sulfuric acid by 21 times, chlorine by 7 times, calcium carbide by
60 times, nitrogen and hydrogen in the form of synthetic ammonia by
20 times, and electric power by almost 6 times. Japan also has about
8 tines the petroleum refining capacity of China. By 1952, Japan had
not been allowed by the Allied powers to establish civil aviation lines.
Table 35 follows on p. 126.
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Table 35
Comparison of Communist China with Other Countries in the Production of Selected Commodities and Services 149/
1952
Item
Communist
China
India .
Japan
USSR
UK
US
Iron and Steel (thousand Mn)
Pig Iron and Ferroalloys
1,875
1,884
3,588
25,100
10,668
55,812
Crude Steel
1,222
1,608
6,996
34,300
16,380
84,516
Machine Tools (Machines)
Aluminum (thousand Mn)
6,500
2,700
9,000
85,000
60,000
....
180,000
(Smelter Production)
0
3.6
42.72
220
28.4
850,8
Magnesium (thousand Mn)
0
0
o
33
8
105.8
Chemicals (thousand Mn)
Sulfuric Acid
110
101 a/* ?
2,350 1/
2,500
1,355
11,700
Chlorine
6.9
5.1 2/
49.5 2/
265
200 2/
2,300
Soda Ash
115
45 2/
468.0 f/
865
2,500 1/
4,260
Calcium Carbide
8
5
485 E/
300
93 1/
620 Is/
Nitrogen and Hydrogen (in
the form of synthetic
-ammonia NH3)
25
10 1/
510 2/
616
300 2/
2,000
Oil (thousand Mn)
Crude Oil
315 2/
273
286
44,000
55
306,000
Refining Capacity
550
282
4,356
52,375
26,319
357,213
Civil Aviation (thousands)
Passenger Kilometers
37,732
378,468
0
N.A.
1,978,524
25,030,572
Cargo (net-ton kilometers)
3,333
24,252
0
N.A.
71,412
650,928
Railroads (billion
net-ton kilometers)
59.5
.46.9
38.0
738
36.0
897.6
Electric Power (billion KWh)
7.6
6.2
43.2
117.0
62.0
398.9
* Footnotes for Table 35 follow on p. 127.
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Table 35
Comparison of Communist China with Other Countries in the Production of Selected Commodities and Services 149/
1952
(Continued)
a.
1950.
h.
1949.
b.
1950.
i.
1950.
c.
1950.
j.
1948.
d.
1951.
k.
1949.
e.
1951.
1.
1950.
f.
1951.
m,
1951.
g.
1951.
n.
1949.
o.
not.
Chinese figure
includes shale oil; the others do
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Table 36* compares US production in the same industries
In 1952 with that of China and the USSR combined. Column 3 shows
that the US production of the commodities listed surpasses produc-
tion in the two Soviet Bloc countries from 2 to 8-1/2 times. These
comparisons must be made with caution, however, because the US, to
achieve minimum goals, must allocate a portion of the output of
these industries to many uses which the Russians and the Chinese
Communists regard as of low or negligible priority.
It appears, in addition, that the contribution of Com-
munist China to the USSR-China combination is' quite small: 7 per-
cent in pig iron; 3.4 percent in crude steel; 7 percent in machine
tools; no contribution in aluminum and magnesium; 4.2, 2.5, 11.7,
and 2.6 percent in sulfuric acid, chlorine, soda ash, and calcium
carbide, respectively; 3.9 percent in synthetic ammonia; 0.7 percent
in the production of crude oil; and 0.1 percent in refining capacity.
China also has 7.5 percent of the total USSR-China railroad freight
net ton kilometers and 6.1 percent of the electric power. These
percentages would be considerably smaller if the contribution of
Communist China to the whole Soviet Bloc were calculated.
2. Elements of Strength.
Although Communist China does not have the industrial
capacity to support a modern mechanized war, it does have the capa-
bility to fight a limited war in Indochina, Malaya, Burma, or prac-
tically any other place in South Asia. To engage in warfare with
an unindustrialized country, Communist China needs only manpower,
small arms and ammunition, small field Pieces, and the necessary.
transportation.
As shown in Table 371** both the total population and
the number of persons in the 15- to 65-year age group of China are
considerably greater than those of any other country in South Asia.
Communist China is also overwhelmingly superior over these coun-
tries in the production of light weapons and ammunition. Assistance
from the Western countries probably could compensate for the deficiency
of other South Asian countries in small arms production and am-
munitions but the great superiority of Communist China in manpower can-
not be overcome. The terrain and the type of warfare which the Chinese
* Table 36 follows on p. 129.
** Table 37 follows on p. 130.
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Table 36
Comparison of Communist China and the USSR with the US in the Production of Selected Commodities and Services
1952
Combined Production
Item of Communist China and USSR
US Production
. 1952
Ratio of Column (2)
to Column (1)
Contribution of Communist China
as a Percentage of .Column (1)
Iron and Steel (thousand MT).
Pig Iron and Ferroalloys
26,975
55,812
2.1
7
Crude Steel
35,522
84,516
2.4
3.4
Machine Tools (Machines)
91,500
180,000
1.96
7
Aluminum (thousand MT)
220
851
3.9
o
Magnesium (thousand MT)
33
106
3.2
o
Chemicals (thousand MT)
Sulfuric Acid
2,610
11,700
4.5
4.2
Chlorine
272
2,300
8.46
2.5
Soda Ash
980
4,260
4.3
11.7 -
Calcium Carbide
308
620
2.0
2.6
Nitrogen and Hydrogen (in
the form of synthetic
ammonia NH3)
641
2,000
3.1
.3.9
Oil (thousand MT)
Crude Oil
44,315
306,000
6.9
0.7
Refining Capacity
52,925
357,213
6.7
0.1
Civil Aviation 2/
Railroads (billion net-ton
kilometers)
798
898
1.1
7.5
Electric Power (billion KWH)
125
399
3.1
? 6.1
a. No estimates available for the USSR.
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Table 37
Population of Communist China and Selected Countries
' of South and Southeast Asia
Selected Years ,
Country
Year
Total Population
Population of Age Group
15 to 65
China 150/
1950
487,000,000
283,000,000
India ? .
1952
367,000,000
151/
212,860,000
152/
Indochina 153/
1952
30,000,000
17,400,000
Thailand 1577
1947
17,443,000
9,607,000
Burma 1557--
1952
18,900,000
10,395,000
Ceylon 156/
1946
6,657,339
3,949,397
Malaya 157/
1947
4,878,438
2,685,342
probably would utilize would, moreover, preclude the use of large
amounts of mechanized equipment, in the production of which the West
is superior. .
Despite the seeming inadequacy of the Chinese economy,
in terms of the capacity of basic industry, it would be misleading
to conclude that Communist China does not possess significant capa-
bilities for engaging in defensive, peripheral, and harassing war-
fare. The economy of Communist China possesses more than adequate
military manpower to substitute for more complex weapons and fire-
power. The limited industry of Communist China has demonstrated its
capability of mass production of simple but effective light weapons,
including small arms and light artillery. Logistical support, from
the economy to the combat zone, can be maintained with the abundant
manpower (using such devices as the primitive A-frame and carrying
sticks) and light transport equipment of the Chinese. The economy
lying behind the Chinese military machine is fully capacle of engaging
in large-scale land warfare on the Asiatic mainland, in harassment,
in peripheral encounters, or in defense of its boundaries.
The Korean War has demonstrated the dependence of Com-
munist China on the USSR for all types of heavy and mechanized equip-
ment, as well as its limited ability to maintain logistical support
to the front lines for heavy offensive action.
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D. Economic Growth, 1953-57.
There are two principal factors which prevent a forecast
of economic growth in Communist China through 1957 being made with
firmness -- the inapplicability of historical Chinese growth trends
and the necessity for making a series of assumptions with respect
to the principal parameters which govern future development. .
Past economic development, unfortunately, provides no reliable
index to the future. The period from 1950 to 1952 was a period of
restoration of industrial production to pre-Communist peaks and there-
fore a period of rapid growth over the low level of 1949. Henceforth
industrial growth will depend primarily upon new plant construction, .
which in turn will depend upon the amount of capital accumulation
achieved. The absolute amounts of production achieved from new capa-
city will depend upon the assimilation of Soviet industrial techniques
by the present Chinese labor force, which has relatively few higher-
level technicians. Moreover, the application of the Soviet system to
the Chinese environment, under conditions of national unification
under a strong police-state regime which is firmly committed to in-
dustrialization, makes the only previous period which shows a-trend --
1931 to 1944 -- an inadequate and unsatisfactory criterion by which
to judge the untried capabilities of the Chinese Communists.
The approach to the problem used in thisreport is to estimate
the future production of each important industry on the basis of
announced Communist goals and of estimates of potential increase of
production and then to aggregate the projections and compare the result
with the estimated possible rate of investment (savings) and prospects
for importing capital equipment. The performance of the USSR during
the period from 1928 to 1932 in terms of rate of growth and equipment
imports is used as an analogy. The preliminary individual industry
projections are not careful forecasts but merely samples to form the
basis for sector forecasts. Only for agriculture is the forecast a '
careful estimate based on the potentialities within the industry. The
resulting forecasts, therefore, are theoretical projections of esti-
mates of possible growth for the modern industrial sector as a whole
and for GNP as a whole, but not for any particular industry except agri-
culture.
The assumptions which are necessary in order to draw cOnclusions
from this theoretical discussion relate to certain possible difficulties
of the economic development program of Communist China. The assumptions
.are as follows:
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1. The next 4 years will be a period of relative peace.
2. There will be no loss of production due to serious
social unrest or resistance.
3. The Soviet Bloc will continue to be willing to sell
capital equipment and technical aid to Communist China, and Communist
China will be able to pay for such imports.
4. The supply of skilled manpower -- managerial and
administrative as well as technical -- will grow as fast as real
capital:
5. Soviet technical aid will be sufficient to assure that
the organizational efficiency of Communist China will grow concomitantly
with the rest of the economy.
6. Savings will increase relative to consumption. The
Chinese CoMmunIsts will not be forced to allocate a higher proportion
of resources to consumption than planned, because of
a. Major crop failures.
b. Increase in population.
c. The need to provide incentives to agri-
cultural workers in order to maintain or
increase production.
Table 38* shows the rates of increase of industrial produc-
tion in China from 1936 to 1943, in 1953, and projected from 1953
through 1957. Column (1) of this table shows past trends of production
of certain selected items, which are taken as representative samples
of the modern industry sector in China. Column (2) shows the official
plan for 1953, Column (3) the official plan for 1957, and Column (4)
the preliminary projections based on the trends and plans.
The targets of the Chinese Communist government announced in
Pravda seem to indicate a goal of self-sufficiency. Although the
planned increase in machine tool output is large -- 28.5 percent per
year -- this item makes up a relatively small portion of total en-
gineering output. It is supposed that general machine output will
increase at about the same rate as output of mining equipment, for
* Table 38 follows on p. 133.
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? ? ? ? ? ?
Table 38
Rates of Increase of Industrial Production in China
1936-43, 1953, and 1953-57 158/
(2) (3) (4)
Industry
1936-43 Trends
Annual Compound
Rate, Percent
of Increase
Plan for 1953
Percent of
Increase over
1952
Plan for 1957
Annual Compound
Rate of Increase
Estimated Annual
Increase 1953-57
Annual Compound Rate
Engineering
16.5 a/*
64.7 b/
14.4 c/
Machine Tools
? 4.6
28.5
28.5
Electrical Equipment
17.0
Power Generators
190.6
Electric Motors
41.2
Other General Industrial
Equipment
153.0
15.0
Mining Equipment
15.0
15.0
Transportation Equipment
10.0
Railroad Equipment
10.0
Automotive Equipment
15.0
Shipbuilding Equipment
10.0
Textiles
6.o d/
Cotton Cloth
10.5
Cotton Yarn
9.0
Paper and Pulp
7.9 e/
8.o d/
Electric Power
10.0
18.3
15.0
15.0
* Footnotes for Table 38 follow on p. 135.
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Table 38
Rates of Increase of Industrial Production in China
1936-43,
1953, and 1953-57 158/
(Continued)
Industry,
(1)
(2) (3)
(4)
1936-43 Trends
Annual Compound
Rate, Percent
of Increase
Plan for 1953
Percent of Plan for 1957
Increase Over Annual Compound
1952 Rate of Increase
Estimated Annual
Increase 1953-57
Annual Compound Rate
Building Materials
8.0
Cement
6.o
29.7
12.0
Chemicals
5.0
30.0
15.0 f/
Caustic Soda
31.0
Nitric Acid
34.3
Ammonium Nitrate
32.0
Modern Food Processing
1.0
Rubber
8.0 g/
Mining and Metallurgy 12.0
Zinc. 32.0
Lead 34.6
12.0 11/
15.0 d/
15.0 -a-.7
Copper 28.6
15.0 d/
Tin 49.o
15.0
15.0
Coal
10.0
10.0
Limestone 29.7 i/
12.0
Petroleum 29.0 -
18.0 j/
Iron and Steel 4.5
23.7
Crude Steel 13.3
39.0
39.0
Rolled Steel
20.0
20.0
Military End Items 15.0 k/
15.0
Weighted Arithmetical Average for the Modern Indastry Sector
14.5 1/
Possible Range of Annual Increase for the Modern Industry Sector.
12 to 18
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Table 38
Rates of Increase of Industrial Production in China
1936-43, 1953, and 1953-57 158/
(Continued)
a. This was the trend in Manchuria, 1936-43.
b. Exclusive of railway equipment.
c. Weighted average of the others.
d. CIA estimate.
e. It is assumed that the Chinese Plan for 1954 refers only to modern paper manufacturing.
f. It is estimated that chemicals will increase 30 percent the first year, as planned, and will then
increase 10 percent annually during the next 4 years.,
g. Approximately three-fourths of rubber production is used for the manufacture of shoes, which, it is
estimated, will grow at the same rate as textiles. Most of the remaining one-fourth is used for the
manufacture of rubber tires, which probably will increase as fast as the.dutput of automotive equipment.
See B, 2, f, above, for estimate of latter.
h. This is a weighted average calculated from the nonferrous metals in Table 27, Section IV, B, 2, d plus
coal, limestone, and petroleum.
i. Since limestone is the chief ingredient of cement, it is assumed that the planned increase in the
latter will also apply to the former.
j. It is assumed that petroleum output will increase the first year by 29 percent as planned and then fall
to 10 percent per year for the next 4 years as the base becomes larger.
k. 1940-52 trend.
1., Average per year for the whole 5-year period.
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which a goal has been announced, and that output of electrical equip-
ment will grow somewhat faster than electric power, which has a planned
annual increase of 15 percent. The production of transportation equip-
ment, an import item, probably will rise at a more rapid rate than
planned increases in transportation capacity.
Wherever announced targets of 1957 production were available,
average annual compound rates were calculated from them and used in
the projections shown in Table 38. It is estimated that output of
the textile industry, which is one of the most efficient industries in
China, will increase slowly. Since 40 percent of the supply of paper
is imported, it is believed that efforts will be exerted to eliminate
the necessity for purchasing so much paper abroad. The yearly rates
of increase from 1954 to 1957 in building materials, chemicals,* and
mining and metallurgy (excluding coal) are smaller than the announced
rates for 1953 because it is believed that the initial rate cannot be
maintained in the 4 subsequent years. Although the past record of
production of military end items is unreliable as a basis for pre-
dicting a future trend, it has been projected at the approximate
average rate of 15 percent a year which prevailed from 1940 to 1952
because of the emphasis the Chinese Communists have placed on pro-
duction of such equipment. The consumption requirements for small
arms and ammunition have declined as a result of the termination of
the Korean War, but considerable attention probably will be given to
attaining self-sufficiency in heavy artillery and similarly complicated
weapons.
On the basis of industry-by-industry projections, the pre-
liminary rate of increase of the modern industry sector is estimated
to be between 12 percent and 18 percent per year for the period through
1957.
Growth of industry is generally associated with an increase
in the supply of real capital, and the rate of growth of the modern
industry sector in Communist China will be largely determined by the
ability of Communist China to obtain machinery and equipment from
industrial countries and to allocate resources to the building of
plants, buildings, and public utilities.
In 1952, gross investment through the budget in Communist
China was about 14 percent of GNP, investment in industry was about
* See B, 2, f, above.
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46 percent of total investment, and gross industrial investment was
approximately 60 percent of total value added by industry. Table 39
shows the investment of Communist China in industry, 1950-53.
Table 39
Government Investment in Industry
in Communist China
1950-53
(1)
1950
(2)
1951
(3)
1952
(4)
1953
1.
Gross Investment
(Billion Yuan)
17,356
35,110
73,699
103,528
2.
Gross National Product
(Billion Yuan)
N.A.
N.A.
524,500
N.A.
3.
Ratio Line 1/Line 2
N.A.
N.A.
0.14
N.A.
4.
Gross Industrial Investment
(Billion Yuan)
N.A.
N.A.
33,902 a/
47,631
5.
Total Value Added by Industry
(Billion Yuan)
N.A.
N.A.
56,300
N.A.
6.
Ratio Line 4/Line 5
N.A.
N.A.
0.60
N.A.
a.
1953 gross industrial investment was to be 46 percent of total
gross investment. It is assumed that the percentage is the same for
1952. This percentage is consistent with Po I-Po's statement that
output of heavy industry and machine industry in 1953 would be 47.13
percent greater than in 1952.
Caution is advised in using the budget allocations as a basis
for estimating investment, for the following reasons:
1. It is not known what part of total investment conies
from the budget. It is assumed that the volume of private investment
is quite small.
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2. It is not known what part of the annual returns (profit
and loss accounts) Of government enterprises are entered in the national
budget.
3. It is not known how much of gross investment is for net
addition to plant and capital equipment and how much is for repair and
replacement of obsolescent plant and machinery.*
4. In addition, it is not known whether gross industrial
investment includes working capital.
5. It is not known whether. the budget investment category
includes subsidies to industry.
Table 40 presents comparisons between the Soviet economy in 1928
and the Chinese Communist economy in 1952 -- both then being in the
initial stage of their first Five Year Plans.
Table 40
The Industrial Sector and Industrial Investment
in the Economy of the USSR in 1928 '
and the Economy of Communist China in 1552
USSR China
Industrial Sector as Percentage
1928
1552
of GNP
31
122/
13
Gross Industrial Investment
as Percentage of GNP
6
160/
6
Industrial Investment as Per-
centage of Gross Value Added
by Industry 15 60
As can be seen in Table 4o, the industry sector was much
larger in the USSR even before the first Five Year Plan than in
* It is estimated that 44 percent of engineering output in 1952,
for example, was devoted to repair.
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Communist China in 1952. Table 40 also indicates that industrial in-
vestment is larger in relation to industrial output in Communist
China in 1952 than in the USSR in 1928.
It is a reasonable hypothesis that, of the total amount of
approximately 34 trillion yuan allocated to gross industrial invest-
ment in Communist China in 1952, about 50 percent* is used for build-
ing factory buildings and other types of structures. Labor and
materials for this branch of activity are available in Communist China.
About 17 trillion yuan would then be left for machinery and equip-
ment. Converted into dollars,.this would be about US $736,956,000.**
Some simple machines probably can be fabricated domestically, but the
complex machines -- the types of heavy capital equipment -- which are
characteristic of an industrial society will have to be imported if
Communist China is to industrialize rapidly. The supply of and the
demand for Chinese exports will determine the amount and character of
these import.s, as illustrated by the following figures for 1952:
Million US $
Value.of,exports of Communist China
in 1952 1,050
Deduct roughly estimated imports
of raw materials and consumer
goods 350
Balance available for imports
of capital equipment, etc.,
in 1952
700
Since one of the objectives of Communist China is to enlarge
and modernize its military establishment and Since it does not have
the capacity to produce many complicated military end items, part of
the export surplus probably will be devoted to the purchase of.mili-
tary equipment such as airplanes, heavy artillery, and vehicles.
Because of the priority which the Chinese Communist regime assigns
to military development, it is assumed that 25 perdent of future im-
ports, not including raw materials and consumer goods, will be devoted
* In the USSR the figure was 60 percent.
** Using the official rate of 23,000 yuan per dollar.
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to this purpose, which would leave about US $525 million for machinery.
Add to this, say, US $60 million per year in the form of credits from
the USSR, and it can then be said that Communist China will have in
the neighborhood of US $600 million to spend for capital equipment,
which will contribute to the future increase of production.
Since the value of the output of all kinds of machinery in
the Soviet Bloc is about US $14 billion,* the Bloc presumably can sup-
ply these commodities without great difficulty, if the Kremlin wishes.
This amount of machinery would be about 4.3 percent of the value of
Bloc machinery production. Exports of these items by the other.coun-
tries of the Bloc would probably retard their own development some-
what, but the effect would be small. One of the assumptions underlying
this discussion is that, during the period of this estimate, the rate
of population growth will not force a decrease in the proportion of
agricultural production that is exported over present levels. Depending
on world markets, over-all exports, including the industrial, agri-
cultural, and nonferrous mineral products, may grow to the extent of
50 percent by 1957 as compared with 1952. Thus Communist China would
be able to pay for its imports of machinery, and this requirement
would not be a bottleneck in the industrialization program. Soviet
policy toward the industrialization of Communist China is nevertheless
a critical factor in the forecast of the rate of growth. The USSR
could retard the rate of development through restrictions on the
volume of capital goods exports to China and through manipulation of
the terms of trade to the disadvantage of Communist China.
Table 41** shows that Communist China in 1952 and the USSR in
1928 were both dependent on imports of capital equipment in their
industrialization program. In addition, it can be seen in Table 40
that industry was relatively more important in the USSR when its first
Five Year Plan was initiated than it is in Communist China today.
Table 40 also shows that Communist China in 1952 invested proportionately
4 times as much of its gross product of industry in capital equipment
as the USSR did in 1928. These comparisons suggest that, if this rate
of investment continues, the gross industrial production of Communist
China during the period from 1953 to 1957 could increase at least as
rapidly as 15 percent per year, the average rate at which gross indus-
trial production increased in the USSR from 1928 to 1937.
* US $10 billion for the USSR and US $4 billion for the European
Satellites.
** Table 41 follows on p. 141.
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Table 41
Comparison of Imports of Capital Equipment
by the USSR in 1920 and Communist China in 1952
USSR 161/ China
1927? 1952
Imports of capital Equipment
as Percent of GNP 2.7 2 to 4
Gross Industrial Investment
as Percent of GNP 6.0 6.0
Imports of Capital Equipment
as Percent of Gross Indus-
trial Investment 45.0 .30 to 50
Imports of Capital Equipment
as Percent of Gross Value
Added by Industry 9.0 20 to 30
In view of the estimated rate of investment of the Chinese
Communist government and the predicated capacity to save, it is
believed that an annual rate of growth of about 15 percent for the
modern industry sector is reasonable for the next 4 years, with
12 percent to 18 percent as a range. If this rate of growth is
realized, the real output of the modern industry sector in 1957
probably will be about double that in 1952.
On the basis of the foregoing estimate for the modern industry
sector and Table 41,the best estimate that can be made for the other
sectors, the GNP of Communist China would increase annually at a rate
between 4 and 5 percent from 1952 through 1957,. or about 26 percent
for the 5-year period. The probable range would be from 3 to 6 per-
cent per year. A wider range is given for GNP than for industrial
production because of uncertainties in agriculture. (The Soviet GNP
increased about 6.75 162/ percent per year from 1928 to 1937.)
Table 42* summarizes the estimate of the estimated annual
rate of increase of the GNP of Communist China from 1953 to 1957.
* Table 42 follows on p. 142.
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Table 42
Estimated Rates of Increase of Gross National Product
in Communist China by Economic Sector
1953757
Sectors Percent
Modern Industry 14.5
Agriculture . 1.6 163/
Modern Transportation 7.0
Government b/ 7.0
Trade, Food?i'rocessing and Handicraft 3.0 c/
Personal Services 1.6
Gross National Product 4.6 d/
a. The 1953 plan calls for a 7.4 percent increase in
railroad capacity over 1952. It is estimated that
all modern transportation will increase at about the
same rate through 1957.
b. This item includes labor force for construction
projects. It is estimated that the government sector
will increase faster than the GNP but not so fast as
the modern industry sector.
c. It is estimated that trade will increase at about
the same rate as industrial and agricultural produc-
tion, that food processing will increase as fast as
increases in agricultural production, and that handi-
crafts will remain constant.
d. This is a weighted index (weighted by estimated
value added in 1952).
Although it is possible that the modern industry sector will
increase about 15 percent annually through 1957, the industrial base
of Communist China is so small that at the end of the 5-year period
it would still be a relatively undeveloped country according to
Western standards.
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V. Regional Distribution of Economic Activity.
Compared with other nations in their early historical stage of in-
dustrialization, Communist China has a relatively advantageous spatial
dispersion of economic activity and resources. The modest degree of
concentration of industrial activity that is apparent in China today
is in considerable measure a function of the requirements of economy
from large-scale operation and a slender investment outlay rather than
a function of the concentration of the available physical resources.
China has the population and natural resources for a well-dispersed
and nationally and regionally self-sufficient industrial society. The
historical pattern of industrial investment has tended to create an
uneven distribution of industrial capacity by industrial sector and by
economic region, and the diverse character of foreign investments in
various parts of China has led to diverse local and regional produc-
tion complexes. The division of modern China into opposed warring
camps has led to further regional and local dispersal of economic
activity. This division has also resulted in a significant degree of
regional autarky.
The intranational and intraregional dispersal of economic activity
which obtains in Communist China today may be expected to continue --
indeed, to increase in intensity -- over the period 1952 through 1957.
The regional ubiquity of dense settlement patterns, of fuel and power,
and of ferrous metallurgical resources creates a basic condition for
further regional and local dispersal of economic activity.
A. General Description.*
Northeast China (Region I) continues to dominate the
modern industrial production of China, although its importance to
China as a whole in this respect probably has diminished somewhat
since 1936, and its importance has diminished markedly compared with
1943. Region I has a strong agricultural base, producing about 10
peient of the food supply, although the region has less than 9
* The Communist Administrative Divisions established by the
Chinese People's Republic define the boundaries of the regional
framework of the Chinese economy used in this report. See CIA Map
No. 12577, 2-53, China: Communist Administrative Divisions - 1953. U.
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percent of the population. The region exports to the rest of China
and to the world coal, heavy manufactures, and vegetable seeds and
oils and receives industrial raw materials, complex capital goods,
and some textiles and food.
The Inner Mongolia Autonomous Region (Region II) remains a
largely undeveloped agricultural region. The region is an exporter of
animals, animal products, and vegetable oil seeds and oils and is an
importer of grain and light manufactures.
North China (Region III) achieves regional prominence as the
seat of the government and for its agricultural poverty and mineral
abundance. The area produces a substantial crop of wheat and coarse
grains but must import large quantities of grain to support its popula-
tion. The exports of the regiOn (besides political controls and edicts)
are coal, animal by-products, textiles, groundnuts, heavy industrial
machinery, and chemicals. As the seat of government and military head-
quarters, the national center of education, and a transit area for
interregional and international trade and transportation, it maintains
its regional status probably not seriously below the level of economic
activity and income of the national economy.
East China (Region IV) has been the historical site of Chinese
manufacturing, the center of light industry primarily owned and oper-
ated by foreign capital. Today the region remains the center of light
industry, although its percentage share of this output has been reduced.
Inward orientation of the Chinese economy has brought with it an effort
to increase the heavy industrial base of East China and to diversify
its industrial structure. Region IV has significantly increased its
percentage share of iron and steel, appliances, shipbuilding, and ma-
chine production, although its percentage share of the textile industry
has declined. These gains have been made largely at the expense of a
decline in the percentage share of industrial production in Central and
South China (Region V). The large urban population of Region IV makes
it a food deficit area, although it has a rich agricultural hinterland.
The principal interregional exports of the area are textiles and light
engineering products.
Central and South China (Region V) is the principal agricultur-
al region of China and the major mining center of ferroalloying metals
and nonferrous minerals. The importance of Region V is emphasized by
the fact that over 4o percent of the Chinese GNP is produced by the
agricultural industry. Region V is a large exporter of agricultural
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commodities, particularly rice, to East and North China. The area
also exports a significant value of ferroalloys and nonferrous min-
erals. Central and South China has lost a considerable part of its
1936 percentage share of income from manufacturing, although it has an
excellent heavy industrial base and a large rather highly concentrated
population. The sarea is a' net importer of textiles and light manu-
factures and trade services.
Southwest China (Region VI) has enjoyed a rather meteoric rise.
in economic. activity in the past 15 years as a result of its position
as the bastion of the Chinese Nationalists in the Sino-Japanese War and
World War II. The region of the upper Yangtze is relatively remote
from the main channels of communication and trade in China. Yet South-
west China has today about 15 percent of the nation's population, a
largely self-sufficient (in some cases surplus) agricultural sector,
and the raw material resources as well as some of the productive capac-
ity fora modern industrial economy. The exigencies of a war situation
compelled an accelerated exploration and development of the Southwest,'
the result of which was the most rapid rate of economic growth of the
major regions of China. Region VI is essentially self-contained. It
exports some agricultural goods, ferroalloy metal concentrates, and
nonferrous metals and receives in exchange some light manufactures and
machinery.
Northwest China (Region VII), like the Inner Mongolia Autono-
mous Region (Region II), is relatively underdeveloped.. Until recent
years, during which the tempo of exploration and development ofmin-
eral resources has increased, the region was characterized by subsist-
ence sedentary agriculture in its eastern reaches and a nomadic civi-
lization based upon animal husbandry in the west. Cotton culture has
been rapidly expanded in recent years and cotton Constitutes the prin-
cipal export of the region.. Region VII contains the only proved com-
mercial production of crude petroleum in Communist China. The region
has the natural resources for at least a modest industrial base, cer-
tainly for an industrial base many times its current level of achieve-
ment. The region is a net exporter of cotton, wool, rare minerals, and
crude and refined petroleum and. an importer of light manufactures, en-
gineering equipment, and some grain.
The Tibetan Autonomous Region (Region VIII) has been loosely
associated with Communist China largely as a result of the latter's
intervention in Tibetan internal affairs. Little detailed infor-
mation is available about Tibet, which is a land of vast distances
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both horizontal and vertical. Most of its area is uninhabitable.
Some subsistence agriculture is carried .on in the less inhospitable
mountain valleys on the periphery of the great central highland.
There is a small surplus of fur, wool, and hides' moved out by
caravan and exchanged for textiles and light manufactures.
B. Regional Distribution of Gross National Product.
The above general description of the regional distribution of
production and of the regional flow of commodities in Communist China
is based on estimates of physical outputs for a sample of the major
produoing sectors (shown in detail in Appendix A, Tables 52 to 62).
The estimates include, where possible, figures for the years 1936,
1943, and 1951.
The year 1936 was selected because it generally represented the
peak level of the pre-World War II economy. The year 1943 was selected
because it generally represented the peak level of wartime activity.
The year 1951 was chosen because it represented the current regional
picture of Communist China and was susceptible to comparison with other
regional production available for the Soviet Bloc. In the absence of
detailed local price quotations, it is impossible to indicate the pre-
cise magnitude of error in the estimates of the value produced in the
various regions. The error would be relatively small (plus 5 to 10
percent) in the populous eastern regions, but it might be as large as
plus or minus 25 percent in the western regions and Tibet.
An analysis of regional distribution of productive activity
based upon physical commodity production necessarily omits a wide range
of productive services. No regional breakdown of regional contribu-
tions to GNP has been made in the fields of transport and trade serv-
ices, and no estimates have been made of the regional distribution of
government and professional services. Most of these services are a
function of population and income, which are, in turn, functionally
related to the commodities of which the production has been regionally
distributed below. It is believed at this stage that imputation of a
distribution, of' trade and service expenditures based on the distribu-
tion of physical production in value terms probably involves a smaller
margin of error than any attempt to distribute the value of these
activities independently.
It is necessary first to expand the sample of gross production
within each sector to the total gross product for the sector. This
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step is achieved by use of the production data by industrial sector.
It may be noted here that the discrepancy between sample sector total
and sector total is accounted for by production for which no informa-
tion is available to make a regional distribution. The expanded totals
are set out in Column 1 of Table 43. It is then necessary to net these
gross totals to eliminate intersector purchases and sales. Essentially
this procedure consists of an estimate of the value added to the final
product by the producing or processing sector. Estimates of value
added by production for each of the sectors used were Obtained and are
presented as percentages in Column 2 of Table 43. The last column of
Table 43 represents the net value added by production for each of the
eleven sectors for which data were available.
Table 43
Gross Value, Value Added by Production, and Net Value
of Selected Commodity Production in Communist China
1951
Billion Yuan
Sector
Gross
Value of
Output a/
Value
Added
(Percent)
Net
Value of
a/ Output b/
Agriculture
Textiles and Clothing
Rubber and Rubber
Products
Bituminous Coal
Crude Petroleum
Electric Power
279,585.19
39,672.00
3,623.10
6,641.83
1,051.88
3,800.00
88
25
45
65
84
40
246,034.97
9,918.00
1,630.40
4,317.19
883.58
1,520.00
Ferrous Mining and
Metallurgy
18,287.00
68
12,435.16
Nonferrous Mining and
? Metallurgy
1,230.75
74
910.76
Engineering
10,735.00
50
5,367.50
Chemicals
5,510.30
24
1,322.47
Weapons and Ammunition
19,936.79
33
6,579.14
Total -
391,230.71
74
290,919.17
a. See Appendix B.
b. Column 1 x Column 2.
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The net products Obtained in Table 43 have been entered as
totals in the last column of Table 44* opposite the appropriate sec-
tor. The totals have then been distributed regionally in the same
ratio as the gross product of the sector Sample shown in Tables 52 to
62 in Appendix A. (Engineering production constitutes an exception
to this procedure in that regional employment indices were used to dis-
tribute the engineering industry product to the regions.) The sector
products of each region have then been added and each regional product
divided by the sum of the regional products. The resulting quotients
have been employed to represent the respective regional shares of
gross product.
C. Regional Variations in Per Capita Production.
A comparison of the regional distribution of economic activ-
ity in Communist China (as roughly indicated in Table 44) with the
regional distribution of population (shown above in Table 37) shows
wide variations in the subsistence level as between regions. The
results of such a comparison are shown in Table 45** and Figure 11.***
Examination of North China (Region III) indicates that this
region supports about 14 percent of the population with less than
10 percent of the GNP, as represented by the expanded sector samples
shown in Table 44. According to this calculation, which does not in-
clude government, trade, and transportation services, North China
Ms a per capita GNP of $36.48 (us $ 1951) compared to a $53.52.
average for China as a whole. Inclusion of the omitted services. in .
the regional gross products would probably compensate for a signif-
icant portion of the discrepancy between the North China and the
national average per capita product, since North China serves as the
national center of government services (including military head-
quarters and education). Furthermore, the agricultural sector
product is probably undervalued for North China. An understatement
of the share of GNP of North China may have resulted from the employ-
ment of average prices for the coarse grain category. The average , ?
prices of the coarse grain produced in North China are somewhat
higher than the average prices employed for China. A detailed
analysis of these differences indicates that the maximum distortion
* Table 44 follows on p. 149.
** Table 45 follows on p. 150.
*** Following p. 150, below.
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Table 44
Regional Distribution of Selected Commodity Production in Communist China
1951
Billion Yuan (Valued Added)
Commodity
I
II
III
IV
V
VI
VII
VIII
Total
Agriculture
24,849.53
1,722.24
21,651.08
68,397.72
80,699.47
36,659.21
11,317.61
738.11
246,034.97
Textiles and Clothing
664.51
0
1,001.72
7,111.20
495.90
456.23
188.44
o
9,918.00
Rubber and Rubber Products
370.10
0
223.37
1,036.93
0
0
0
0
1,630.40
Bituminous Coal
1,653.48
30.22
1,623.26
246.0
341.06
181.32
241.76
o
4,317.19
Crude Petroleum
0
0
0
0
0
0 .
883.58
o
883.58
Electric Power
640.58
16.13
166.45
310.21
90.72
27.97
7.97
0.12
1,260.15
Ferrous Mining and Metallurgy
8,592.70
0
1,119.16
870.46
895.33
957.51
o
o
12,435.16
Nonferrous Mining and Metallurgy
457.20
0
0
0
202.18
251.38
0
0
910e76
Engineering
3,113.15
0
751.45
966.14
268.38
214.70
53.68
o
5,367.50
Chemicals
685.04
o
290.94
-292.27
29.09
25.13
o
o
1,322.47
Weapons and Ammunition
3,282.99
0
1,013.19
440.80
763.18
894.76
184.22
o
6,579.14
Total
11.14,309.28
1,768.59
27 840.62
79,671.82
83,785.31
39,668.21
12,877.26
738.23
290,659.32
Percent of Total
15.2
0.6
9.6
27.4
28.8
13.7
4.4
0.3
100
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Table 45
Gross Regional Product Per Capita in Communist China
1951
Current US $
Region
Per Capita Product 2/
I Northeast 93.17
II Inner Mongolia 66.52
III North 36.48
IV East 52.45
V Central and South, 53.68
VI Southwest 49.48
VII Northwest 47.74
VIII Tibet 54.64
All-China Average 53.52
a. Dollar estimate used for the distribution is the
deflated dollar estimate of Chinese GNP given in
Section IV,. A, 2, above.
which could have occurred from the price differentials would result
in an increase of about 4 percent in the share of North China.
The relatively high level of per capita GNP in Northeast
China (Region I) seems intuitively reasonable, although there may be
a limited element of overstatement of the region's position because of
its more complete statistical reporting system.. Region I contains a
highly productive agriculture together with the major concentration of
Chinese manufacturing industry.
The per capita GNP of the Inner Mongolia Autonomous Region
(Region II) appears to be high relative to Northwest China (Region VII)
whose economy is similar in most respects. Again, the influence of a
more comprehensive reporting system, largely developed under Japanese
control over the productive parts of the area, may account for some
measure of the apparent discrepancy. The relatively lower population
density in Region II would tend to indicate a higher per capita prod-
uct than would obtain in Region VII.
The high level of per capita production in the Tibetan Auton-
omous Region (Region VIII) does not seem consistent with available
knowledge of the area. The data provide the basis only for an
intuitive comparison with other areas.
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I
Figure 1 1
COMMUNIST CHINA
GROSS NATIONAL PRODUCT AND POPULATION
BY REGION ?1951
72
84
96
108
120
132
? ?
?????-! .,/ )
.1. ..i s ?
,-.,
)
I
,,.\,?60 ?
15.2
o
s.
MONGOLIA
S.
*ww.,
Stet,: ,SHAlpfut
Ute)
IC4 4IVD NIA Aim? ?
die ????
?
r'
........
I.
;-? ....
\.
c
I) A:N.! Y.. BHUTAN
8.73
1951 1951
,/
14.08
9.6
1951 1951 C
tA0(den r?i?
op?,,.shan
I.
4.4 4.93
I I
1951 1951
? valkkil ?
#,PSN
NSS
VII
, 0 W
Y E
S E A
? a
p
VIII
27.95
coirsiA
0.3 0.3
1951 1951
28.8 28.71
s s A
133 14.82
84
Chungking
1951
Gross national product 470.5 trillion yuan
Total population 476.5 million
5.9
= Percent of total gross national product
r---4-4?I Percent of total population
?...-- International boundary
Region boundary (Communist-1951)
7 190 290
160 260 abo
490
660 Kilometers
690 Miles.
1951 1951
VI
o K'un-ming
1951 1951
?Canton
B UR M A."71-4 \.VIETN A
LAOS
t"A
C.
ciTHAILANI4
?-???t
GULF OF
TONKIN
108
got*
110140
.41,cp.0
(port)
SOUTH
CHINA
S E A
Some boundaries shown on this map are de facto bound-
aries (1953), not necessarily recognized as definitive by the
United States Government.
120
48
36
24
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Per capita production estimates of the remaining regions ap-
pear to be almost routine in their consistency if the fundamental ag-
ricultural and processing base of the Chinese economy is kept firmly
in mind. Central and South China (Region V) is the agricultural core
of the Chinese economy. This region has less variation from optimum
crop conditions than any other economic region. The area has a
trading complex almost as great as that of East China (Region IV).
East China, with a somewhat weaker agricultural base but a stronger
manufacturing and trade economy, closely approximates the per capita
position of Central and South China. Regions VI and VII, Southwest
and Northwest China, respectively, contain the two modern centers of
Chinese population and agriculture. Both of these regions have sig-
nificantly expanded their role in the Chinese economy. The modern
program of development, much of it under the impetus of war, has
raised the per capita product of these remote regions to a level only
slightly lower than that of the representative regions of the estab-
lished areas of central and eastern China.
D. Relative Importance of Major Sectors by Regions.
The present state of research on the regional distribution of
economic activity in China (as in most Western nations) is not suf-
ficiently advanced to permit a detailed accounting for the origin or
distribution of regional production by major sector of the economy.
Section IV, A, above, indicates the portion of Chinese GNP produced by
major sector of the entire national economy. It is not possible to
produce comparable data for economic regions because the data which
supplement the regional contribution already embrace a certain amount
of production from the services and trade sectors, data which cannot
be separated without much more detailed information and analysis than
can be developed on the subject at the present time.
A division between agricultural production and local processing
and manufacturing and mining production has been derived from the mate-
rial presented in Table 44 and is included here as Table 46.* Table 46
purports only. to indicate the relative significance of these two areas
in each of the concerned economic regions. The dominant role of agri-
culture in comparison with manufacturing and mining in the Chinese econ-
omy is well demonstrated by the data in Table 46. It is important to
* Table 46 follows on p. 152.
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note that only Region I (Northeast China) of those with any significant
element of manufacturing and mining activity has an average per capita
product in excess of the all-China average.
Table 46
Regional Distribution of the Product of Agricultural and Local
Processing Industries and Manufacturing and Mining Industries,
as Percentage of Total Regional Surplus in Communist China
? 1951
Percent
Region
Agriculture and Local Manufacturing and
Processing Industries Mining Industries
I
Northeast
56.1
43.9
II
Inner Mongolia
97.4
2.6
III
North
77.8
22.2
IV
East
85.8
14.2
V
Central and South
96.3
3.7
VI
Southwest
92.4
7.6
VII
Northwest
87.9
12.1
VIII
Tibet
99.9
0.1
Total
84.6
15.4
The estimates of regional product for each of the economic re-
gions should not be construed as definitive in the sense that they rep-
resent an accurate allocation of Chinese GNP by region of origin. It
is believed that the above estimates constitute an approximation of the
relative regional distribution of economic activity in China, suffi-
ciently reliable to aid Substantively a further detailed analysis of
the Chinese economy.
E. Degree of Concentraiion of Economic Activity.
The section of the analysis of regional distribution of eco-
nomic activity will be confined exclusively to the location of manu-
facturing and mining activity. Production of specific agricultural
commodities in China is localized to some extent by the climate, al-
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though China with its wide spread of latitude and elevation, its con-
tinental and coastal exposures, possesses almost every known type of
crop condition. Because of the range of basic agricultural conditions
available, there are no significant barriers to the production of a
wide variety of agricultural commodities in large quantities, except
for quantity production of tropical rain forest commodities.
The degree of concentration of mining and manufacturing activ-
ity is basically a function of the definition of the measure of con-
centration. Concentration may be measured by three somewhat different
criteria: (a) the extent of spatial separation of production and con-
sumption of a commodity or series of commodities; (b) the extent of
spatial separation of productive capacity for a single commodity; and
(c) the extent of spatial separation of productive activity as a com-
plex. Each of these criteria describes a relevant index of concentra-
tion from the point of view of the capability and/or vulnerability of
the national or regional economy.
The economic activity of Communist China in 1951 presents a
unique condition of highly dispersed economic activity for a nation in
the present stage of economic development of China. Although there
exists a modest concentration of economic activity on counts (b) and
(c) above, this degree of concentration reaches its highest point in
the Mukden area, which accounts for less than 5 percent of aggregate
mining and manufacturing production and at its highest point only about
10 percent of the production of any major sector shown in Table 46.
The highest concentration of a single commodity in Mukden is 50 percent
of the machine tool production of Communist China. Anshan contains
about 60 percent of the ferrous metallurgical output of China. Produc-
tion of chemicals is highly localized at present, but output is low and
concentration is required to secure an approach to optimum size of
plant. Much of the apparent concentration of regional output is a
result of the establishment of workable?size plants in industries which
are characterized by economies of scale.
Northeast China (Region I) presently accounts for about 40
percent of the modern mining and manufacturing activity of China. The
percentage share of this output produced in Region I has declined
sharply since 1943. It is also worthy of note that existing levels
of production in Region I are distributed over several principal pro-
ducing centers within the region, of which the principal one is Mukden.
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No country in industrial history other than China has been
characterized by such a broad (spatially speaking) industrial base at
such an early stage in the nation's industrial development. The di-
verse foreign concessions in the early industrial history of China,
the dense settlement pattern over a vast subcontinent, and the division
of the nation by modern warfare have .all conspired to create a wide-
spread dispersal of manufacturing and mining activity.
The intranational and intraregional dispersion of economic
activity which obtains in China today will certainly continue to
characterize the economy through 1957. The regional ubiquity of coal
and ferrous metallurgy resources, together with the high population
densities which characterize the principal economic regions, create
a basic condition for the further dispersal of industry. Regional
cost data on the production of coal, iron, and steel are presently
unavailable. However, if sufficient capital were available it seems
likely that the program of additional dispersal of manufacturing
activity might well lead to a reduction in the total cost of production
of many of the manufactured commodities considered in this report.
In summary, it may be indicated that China in its early stage
of economic development has a unique position in that its manufacturing
and mining activity is highly dispersed. This dispersal seems likely
to be continued over the period of the estimate.
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VI. Domestic and Foreign Trade.
A. D6mestic Trade.
1. Volume and Selected Commodity Movements.
-Quantitative statistics for total volume of trade within
-
China are not available. It is, however, possible to calculate sta-
tistics for certain segments of the economy. The Chinese Communists.
reported that in 1952 the 50X1'
railroad system originated approximately 131 million metric tons of
freight, 164/ this being an increase over the 110.5 million metric
tons originated in 1951 165/ and 99.2 million metric tons originated
in 1950.-166/. The bulk commoditieS carried in internal rail transport
in 1952 are estimated to consist primarily of coal (33 million tons),
timber (4,350,000 tons), iron ore (I1-.Million tons on short hauls),.
grain (3,750,000 tons), soybeans (2.7 million tons), and quantities
of raw materials and manufactured goods. In addition, goods moving
in international trade and military supplies bulked. large in the total
freight carried. The rail traffic volume was concentrated on the
north-south and connecting lines in North China and Manchuria.
For the waterways system, on the Yangtze River alone in
the first half of 1953, the Chinese reported 2.5 million tons of freight
transported (this figure not including wooden craft and motor-sail ves-
sels) 167/ Coastal shipping, limited in volume primarily to the northern
coastal area, carried approximately 3 million tons in 1952, coal beirig
the principal commodity carried (primarily to Shanghai).
The accompanying traffic flow maps (Figures 12,13, and 14*)
are designed to illustrate producing areas, flow, and consuming areas
for three selected commodities. Except for Figure 12 (showing the flow
of wheat), only general magnitudes of flow are shown, since the esti-
mates on which the maps are based may have a wide margin of error.
Figure 12 is illustrative of the flow of most agricultural produce.
Although the producing areas differ (notably in the cases of rice in
the Szechuan Basin and along the middle and lower Yangtze, and corn,
wheat, and soybeans in Manchuria), the flow patterns are Similar in
that agricultural produce moves primarily over the water network
wherever possible. This map, taken from prewar data, does not in-
clude Manchuria in its description. At present, most wheat Moves
into Manchuria through the port of Dairen, as shown by the non-
* Following p.156, below.
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volume line extended from Shanghai.
Figure 14 is illustrative of traffic flow over the Chinese
rail net generally. It also shows the continuing reliance which the
Chinese place on water transport for coal. Most coal tonnage moving
southward by rail and destined for Shanghai is transshipped into
Shanghai by water. Thus, if the coastal route from Chlin-huang-tao
to Shanghai were severed, readjustment or restriction of other freight
movements would be necessary in order to move the same volume of coal
to Shanghai by rail; in such an event, alternative supplies of coal ?
depending on river transport would probably be used.
Figure 13 illustrates an entirely new flow pattern com-
pared with the prewar situation. Whereas before the war all Chinese
petroleum was imported by ship, now rail transport from the USSR and
production from the Kansu oil field orient the flow pattern from the
north and west as well as from the east. Petroleum is imported
through the ports indicated, but specific distribution systems are
not known.*
2. Trading Organizations and Controls.
The Chinese Communist government has steadily expanded the
socialized control of both domestic and foreign trade through state
monopoly trading corporations on the wholesale level and cooperatives
on the retail level. Private-trade, while ostensibly encouraged by
the government, is completely controlled by the state direction of all
commodity allocations and prices.
Effective trade control was established with the adoption
of centralized trade laws in March 1950. Under these laws the Central
Ministry of Trade became the center of all state, cooperative, and pri-
vate trade in China and was responsible for "general planning of all
State and cooperative trade, confirming the plans of economic and
financial activity of the main State trading corporations ... dis-
tributing working capital and goods for the state trading network,
establishing State optimum prices, and carrying out public control
over private trade." 168/
Following the splitting up of the Ministry of Trade in
August 1952 into the Ministries of Commerce and of Foreign Trade, the
control of the state trading corporations was also split, with purely
50X1
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CHINA: WHEAT TRAFFIC FLOW
(Prior to World War II)
Figure 12
50X1
10e tie Ili 4,- --.1 lig-
\
116 IB !if) 2211+
. .
.
)---7
.1?i ...... .--,
/
%
...
. i
-40-. ?,....
/ ...
- ?38
\ \
A
/
(
\
-36
pa1
-34
.........%
?....0
/
1
i
.0"
/
/
Sian
r
i
P
/
l...
????

..) !
?PeipingI1l
0T'ang-shan
/
..........
A
/ 1 1 Tientsin
(I /..`...1
/ 1 II
fl / Ch'ing-yilan
I
I
1
1
/
I
4
s
4
Yil-rzu
iShih-men
(Panting)
/
Lung-k'ou
/
Chefoo Wei-hai-wei
Chou-ts'un
Wei-hsien
.) )
I;. i ?Han-tan
Tsingtao
pa
1
1
pa
A
?
Lao-ho-k'ouo
1
-32 ?
?
el/
.30
l-ch'ang
Sha-shih
/ /
? 'ai-feng"?
Chs? t- - Sficho
h
Chi-ning
Huai-yin
Tung-hal
Ch'u-hsien
Chiang-t T' ien
Nan-rung
NANKING
Hankow
0
Wu-chin 0
? Wu-hsi
Hangchow
(iane-chou)
/
/
Han-yang y /
/ Shao-hsing ? Yin-hsien
... ) ?...% t...? /
k. \Renew))
ss ?
I .... j t
\ r ?"" ?
-- I ? /.0
/ i ? ...- ''''' ?...-?-.1
L'.1 1/1 Ch'ang-teo .1...0 ...1
1 1 1
/
1 i
\- 1 Nan-ch'ang
r? 28-
.0...." \ Wenchowo
-28 I /
S Ch'ang-sha
/ t
/ 1 n
C. / 0 1 ..--?"' ,-,,,, 1
5./ 50 100 Miles
1.
%,...'"...
/ 1 i i LI 1 1
0 50 100 Kilometers
t
..,
)/
../..- ) "./ SOURCE:
\ /0
< i / Shen, T. F1., Agricultural Re-
f / sources of China. Cornell
26 University Press, Ithaca, 26-
/
1.....1\ I /
/ Foochow?
1951; figure 16, page 193.
......" 1
1 110 l II2 .0 11.4
.47
Shanghai
40-
38-
36-
34-
32'
30-
11.6! 11,8 I.O ( 2.2
12945 12-53
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COMMUNIST CHINA
P.O.L. TRAFFIC FLOW: 1952
Relative rail traffic flow
shown in thousands of
metric tons.
Figure 13
Water transport link
Overseas import
(Volume shown by the same scale as for rail traffic.)
GENERAL BASIC INFORMATION
International boundary
International boundary, indefinite
Administrative-area boundary
Province boundary
Communist capital
Communist province capital
Selected railroad
LOK-01'142tOO
,o9
108"3
Chio-ch'uon.
a
tChtticlrSanh' wou
cc cone
?ang.
13,
shan
? {-loin' a'
9-> lzu.Yang
Lan?ch136;'\
Ting.hsi
Lei-yang .
12946 CIA, 12-53
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Figure 14
COMMUNIST CHINA
COAL TRAFFIC FLOW: 1952
2,600
2,500
--2,000
1,500
Relative rail traffic flow
shown in thousands of
metric tons.
- 500
300
100 and under
Water transport link
Producing point (Mine area)
Exports
?? ????? ??
??????????.%????%--.?
? ? ? ?
International boundary
International boundary, indefinite
Administrative-area boundary
Province boundary
Communist capital
Communist province capital
Selected railroad
.Fu?shih
ss) Lo Ho
, ChianY
an?hsiel,)
Chin?ch'eng-
chiang
I?shan
Cao Bane rif
uvg?ching
Chen-nan-kuang?rning
NAM
12947 CIA, 12-53
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a
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domestic organs coming under the Ministry of Commerce and purely
foreign organs under the Ministry of Foreign Trade. Organs in-
volving both types of trade were reorganized with units under both
ministries. At present, control of all trade with China is vested
in 30 state trading corporations. Control of these corporations is
centered at Peiping, and generally extends out through regional
centers to cities and provinces. Although the operating organi-
zation is governed by the type of product handled, the organization
of the General Merchandise Corporation is typical of the organi-
zation of the other corporations generally.* This corporation,
under the central Ministry of Commerce, is-organized along two
operating channels: control, or administrative, apd business, as
below 169/:
Ministry of Commerce
China National General Merchandise Corporation
Peiping
Provincial Corporations
Central Wholesale Depots
(Regional)
Provincial or City) Whole-
sale Depots
General Merchandise Stores Local Market
* During the first part of 1953, trading corporations were re-
organized with the purely national, regional, provincial triangular
organization replaced by an organization such as the General
Merchandise Corporation given above. Indications are that very
similar reorganizations have taken place in all state trading
corporations.
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The Provincial Corporations are the administrative con-
trol channel for the main corporation. The Central Wholesale Depots,
combining the function of former Regional Depots and National Cor-
poration Procurement and Supply Depots, handle procurement,
processing, pricing, and packaging of local light industrial goods,
and shipment to provincial and city wholesale depots. These depots,
in turn, handle wholesaling for local markets, and supplying goods
for General Merchandise (Retail) Stores within their respective
areas. Within the three provinces of Honan, Hupeh, and Hunan, the
Corporation maintains 48 of these General Merchandise Stores.
? Private enterprise still handles the largest share of
Chinese Communist domestic trade, although it is heavily controlled
by the government's fixing of wholesale and retail prices and its
monopolies of wholesales, storage, and transport media. Private
trade in China at present is composed of the following: genuine
private corporations; so-called "private" corporations wherein the
government holds the controlling stock and which, for all practical
purposes, are government enterprises; and the individual entre-
preneur, whether storekeeper, wandering peddler, or handicraftsman.
In the retail field, cooperatives have received much
government emphasis. In 1952, cooperatives handled 10 percent of
the total of all state and private retail trade. On the marketing
side, they handled 60 to 70 percent of all government purchases of
agricultural products in 1952. ? Organized under the China National
Federation of Cooperatives, which is supervised by the Ministry of
Commerce, the cooperative movement reaches through regional and
provincial federations to county and municipal organs. Cooperative
growth has been very rapid under the Communists, with 18 million
Members at the end of 1949 increasing' to 80 million by the end of
1951 and to 140 million by the end of 1952. However, membership is
not evenly distributed throughout China, the Northeast, North, and
East Regions being the most advanced. Members in the Northeast in
1951, for example, constituted 42.7 percent of the rural and 24 per-
cent of the urban.population, 170/ whereas as late as early 1952
they constituted only 3.7 percent of the total population of the
Southwest. 171/
3. Domestic Trade as a Source of Government Income.
The Chinese Communist government places a major reliance
upon the trading sector of the economy as a means of mobilizing and
capturing all types of resoures. Resources are appropriated by
the state in four ways -- through commodity taxation, through
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purchase at fixed prices, through charges for government services,
? and through accumulation of the profits of state trading companies.
Other than agricultural taxes in kind, commodity
(excise) taxes are levied at the wholesale level. The rates are
designed so as to exempt' producer goods and tax consumer necessities
at a more or less moderate rate but to apply very high rates to
luxury commodities. Thus in relation to wholesale prices the
effective commodity tax rate is about 3 percent on wheat flour,
13 percent on cotton yarn and matches, 30 to 40 percent on wines
and alcoholic beverages, about 30 percent on'flue-cured tobacco,
and 55 percent on cigarettes. It is roughly estimated that in 1952
the state collected about 20 trillion to 25 trillion yuan, 20 percent
of total revenues, from commodity taxes. 172/
Marketing spreads for the government monopolies are kept
deliberately large so as to insure a high yield for the state in
trade to the advantage of the state budget and simultaneously to re-
duce the purchasing power of the' population. For example, in Shanghai
the China National Cotton Yarn and Cloth Corporation paid _5,250,000
yuan in 1952 for a bale of cotton yarn bought from industrial spin-
ners 'and then sold it wholesale at 7,450,000 yuan. Since all
factory-spun cotton yarn must be sold to this corporation, the latter
was able to earn more than 40 percent on all sales of yarn. .173/
The China National Salt Corporation, exercfsing a complete trade
monopoly, in 1952 bought salt for 1 million yuan per metric ton and
then sold it for 2.3 million yuan (based on Hankow wholesale price),
thus realizing 130 percent on all sales of salt. i71/
In the field where most Chinese are affected, the China
National Cereals (Food) Corporation was able to procure grains for an
average price of 675,000 yuan per metric ton (this average includes
grain procured as tax-in-kind, valued at 630,000 yuan per metric ton,
as well as grain purchased at 1 million yuan per metric ton) 175/ and
sold them for an average price of 1,264,000 yuan per metric ton, thus
realizing an average of about 45 percent on sales of all grains.
It can be roughly estimated that in 1952 about 25 trillion
yuan, constituting approximately half the total net revenue from government enterprises, were derived from state trading. The total profits
of government enterprises, both national and local, constituted
29.97 percent of total budget revenues'. 176/
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4. Probable Developments in Domestic Trade by 1957.
State control of trade has been achieved by the Communists.
Within the next 5 years this control can be little more intensified
than it is at present. The state monopoly corporations probably will
emphasize operational efficiency, and any reorganization of the state
trading program will be oriented along efficiency lines. The coopera-
tive movement probably will continue to grow, according to past
trends, with the Northwest and Southwest receiving the greatest
emphasis. Private traders probably will suffer from persecution as
scapegoats for the government's policy of restricting consumption of
consumer goods and maximizing state revenues for the benefit of
its capital investment program. Private trade probably will continue
to be tolerated under more severe state control, but its share in
total retail turnovers will probably diminish. The number of state-
controlled corporations probably will increase more gradually than in
the past 3 years. The trading sector will continue to be a principal
source of state revenue, with the spread between cost and retail
selling price adjusted to the government's need for accumulating
capital, and regulating marketing.
B. Foreign Trade.
The commodity composition and geographical distribution of
the foreign trade of Communist China have undergone a drastic reori-
entation since 1938. The composition of imports has changed from a
major emphasis on consumer goods and foodstuffs to a pronounced
emphasis on capital goods, fabricated intermediate industrial pro-
ducts, and industrial raw materials. Substantial exports of textiles
and fibers have been replaced in part by exports of foodstuffs.
Otherwise the commodity composition of exports remains substantially
unchanged. Geographically, Chinese foreign trade has shifted from
almost 100-percent participation in Western and Japanese markets to
less than 30-pereent participation in these markets.
The planned program for industrial development of Communist
China will continue to require large-scale imports of capital equip-
ment, fabricated intermediate industrial products, and industrial raw
materials.
In order to increase exports substantially; Communist China
will have to find new markets for its agricultural* and industrial
* See the discussion of possible increases of agricultural exports
in Section II, B, above.
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raw materials -- new markets for commodities which are at present
depressed on the world markets as a whole. China must exchange these
depressed raw materials largely for industrial hard goods which are
in relatively high demand in the Bloc, or which must be purchased in
hard currency areas.
A summary analysis of the requirements of Communist China for
capital equipment imports proportionate to the planned industrial
growth of the country from 1953 to 1957 has been -outlined in Section
IV, D, above.
1. Changes in Commodity Composition of Trade.
The pattern of prewar Chinese commodity trade is shown
in Table 47.* In general two points stand out: (1). the trade was
almost exclusively with the West and (2) it consisted of exchange of
primary products for food, industrial raw materials, and manufactured
goods. Compared to this the 1953 trade pattern shows two significant
changes: (1) a reorientation, so that over 70 percent of total
Chinese trade is now with the Bloc and (2) increasing emphasis on im-
ports of heavy industrial and military items at the expense of food
and consumer goods.
The total 1952 Chinese imports can be broken into three
major categories: imports from the USSR, about 54 percent of the total;
from the Satellites, about 18 percent of the total; and from the West,
about 28 percent of the total. 177/ It is believed that the 1953
division of Chinese imports between the West and the Bloc was about
the same as 1952, roughly 30 percent and 70 percent, respectively.
Of the 70 percent of total Chinese imports accounted for
by the remainder of the Bloc those from the USSR amounted to between
1,500,000 and 2,000,000 tons, estimated to have been shipped overland,
and an additional 120,000 known to have moved by sea. These overland
shipments included some 800,000 to 1,000,000 tons of petroleum,
150,000 to 200,000 tons of military equipment, and 500,000 to 800,000
tons of other materials, chiefly iron and steel-, machinery, and metal
products. 178/ Chinese Communist imports from the rest of the Bloc --
the European Satellites -- amounted to a total of about 670,000 tons.
This included 400,000 tons of iron and steel, 100,000 tons of machinery
and vehicles, 95,000 tons of sugar, ammonium sulphate and paper,
17,000 tons of petroleum and 58,000 tons of miscellaneous items. 179/
* Table 47 follows on p. 162.
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Table 47 12/* .1169/
Commodity Composition of the Foreign Trade of China
Yearly Average 1936-38
Thousand $ US
Imports
Total Trade
Value of Trade
Value
Percent
With West
With Soviet Bloc
Foodstuffs
71,567
13.4
71,550
17
Industrial Raw Materials
30,184
5.7
30,111
73
POL
30,631
5.7
30,578
53
Chemicals
42,174
7.9
41,942
232
Textiles
76,110
14.3
75,819
291
Metals and Manufactures
52,686
9.9
51,987
699
Machinery and Transport Equipment
77,653
14.6
76,737
916
Other Manufactures-
45,132
8.5
44,779
353
Miscellaneous Transactions and Commodities
106,781
20.0
.105,560
1,221 12/
Total
532,918
100.0
529,063
3,855
Exports
Foodstuffs
'169,024
46.8
168,356
668
Industrial Raw Materials
74,982
20.7
74,888
94
Coal
12,326
3.4
12,323
3
Chemicals
7,242
2.0
7,227 .
15
* Footnotes for Table 47 follow on p. 163.
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Table 47 21 180/
Commodity Composition of the Foreign Trade of China
Yearly Average 1936-38
(Continued)
Thousand $ US
Total Trade Value of Trade
Value Percent With West With Soviet Bloc
Exports
(UaTTEUed)
Textiles
25,830
7.2
25,592
238
Metals and Manufactures
8,466
2.3
8,-463
3
Other Manufactures
24,087
6.7
24,064
23
Miscellaneous Transactions and Commodities
29,512
10.9
39,338
174 2/
Total
361,11.69
1000
360,251
1,218
a. Adjusted to include the foreign trade of Manchuria.
b. Trade of Manchuria with the Soviet Bloc amounting to $95,000 included under
Miscellaneous Transactions and Commodities.
c. Trade of Manchuria with the Bloc amounting to $169,000 included under Miscellaneous
Transactions and Commodities. .
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Practically all imports from the Satellites cane by ship
While almost all imports from the USSR came overland. The estimates
of shipments by sea were compiled from ships' manifests,and the de-
scription of cargoes therein is not in sufficient detail to provide
accurate value figures. The tonnage figures, however, are probably
'reasonably reliable. The figures on overland shipments are generally
speculative in nature, being primarily dependent on consumption and
production estimates and refugee and repatriate reports.
Table 48* gives the commodity composition of Chinese Com-
munist trade with NOn-Bloc countries 1950-52. Commodity composition
of Chinese imports from the non-Communist countries changed substan-
tially during 1953. Raw cotton imports dropped from 43 percent of
total imports from the non-Communist countries in 1952 to 5 percent in
1953. During the -same period rubber imports increased from 9 percent
of the 1952 total to 20 percent in 1953. Iron and steel and machinery
and metalwares imports increased from negligible amounts in 1952 to
110,000 tons and 20,000 tons, respectively. Chemical, drug, and paper
imports from non-Communist countries also showed advances during the
same period 181/
The goods which China has received from the Soviet Bloc
fall for the most part into the following categories: (1) machinery,
including communication and transportation equipment, to enlarge China's
industrial capacity; (2) raw materials and certain chemicals needed in
refining and smelting processes; (3) agricultural machinery, ferti-
lizer, and insecticides; (4) fabricated iron and steel; (5) petroleum;
(6) paper; and (7) war material. According to refugee reports, Soviet
iron and steel is being used on such projects as the Dairen dockyards,
construction in Harhin, and construction and repair of mainline rail-
roads. 182/ Despite the increased output of iron and steel in Commu-
nist China, requirements for special shapes and high quality materials
are believed to have necessitated large imports.
. In addition to iron and steel, shipments of heavy machinery
and equipment were made to some 50 plants under construction or re-
habilitation pursuant to the Sino-Soviet economic aid agreements, which
included two blast furnaces, several steel rolling mills, steam and
hydro power plants totaling some 300,000 kw capacity, and a number of
mines and machinery and chemical plants. The 1953 trade agreement pro-
vided for Soviet shipments, in addition to the above items, of supplies
for industry and transport and agricultural machinery. Industrial
* Table 48 follows on p. 165.
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Table 48
Commodity Composition of the Trade of Communist China
with Non-Bloc Countries '2,/* 183/
1950-52
Imports
1950
(Thousand
Current
$ US)
1951
(Thousand
Current
s us).
1952
(Thousand
Current
s us)
1952
(Percent)
Foodstuffs
43,357
7,165
1,732
0.6
Industrial Raw Materials ?
156,865
198,978
133,012
49.3
POL
12,206
1,461
27
0.01
Chemicals
86,908
98,040
73,799
27.3
Textiles
27,931
4,602
9,038
3.3
Metals and Manufactures
70,188
48,823
6,207
2.3
Machinery and Transport
Equipment
26,301
45,222
12,177
4.5
Other Manufactures
42,207
26,596
33,645 12/
22.5
Miscellaneous
51,957
45,87o
Total
519,920
476,757
269 637
100
Exports
Foodstuffs
188,901
164,175
135,956
38.6
Industrial Raw Materials
152,636
181,756
138,837
39.4
Chemicals
16,044
19,574
6,389
1.8
Textiles
55,398
16,010
15,203
4.3
Metals and Manufactures
6,890
2,421
546
0.1
Other Manufactures
25,748
13,049
55,054 2/
15.6
Miscellaneous
35,021
73,880
Total
1180,638
1170,865
351,985
100
* Footnotes for Table 48 follow on p. 166.
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Table 48
Commodity Composition of the Trade of Communist China
with Non-Bloc Countries 2/ 183/
1950-52
(Continued)
a. Trade statistics in this table are based on an analysis of the
trade returns of non-Communist countries trading with China. This
method of calculating foreign trade is subject to a number of limita-
tions. The major limitation for purposes of this report is the
difference in commodity and country classifications employed by the
various "recording countries," thereby making it impossible to de-
termine accurately total trade or its commodity composition. Two re-
porting factors produce an overstatement of Chinese foreign trade. The
first is connected directly with the unique position of Hong Kong as an
entrepot for China. Because of the transit nature of the trade of
Hong Kong, traders in the recording countries tend to list China as the
source or aestination on their export and import declarations, although
Hong Kong receives and also records this traffic. This double-counting
factor was reduced to some extent, for from 1950 to 1951 particularly,
many Western traders deliberately indicated Hong Kong as the documentary
destination of the bill of lading but then re-routed the ships to China
as soon as they were at sea. The second factor, also a result of the
recording system, is a variation of the double-counting factor. Since
in many countries trade with Hong Kong and Taiwan and perhaps Macao and
Korea is repotted as trade with China, shipments that are destined for
or originate in countries other than China are reported as trade with -
China. If Countries report Hong Kong trade separately, another
difficulty arises. The China trade of these recording countries is
thus understated to the amount of trade that goes through Hong Kong to
China. Generally, adjustments for these factors are impossible when
deriving the commodity pattern of trade, although it is possible to
make adjustments for a few major commodities. The above values have
thus been adjusted only for FOB and CIF.
b. Includes Miscellaneous also.
c.? Includes Other Manufactures and Miscellaneous. This figure also
includes $90,000 for machinery.
supplies would include important tonnages of such semi-manufactures as
nonferrous metals and chemicals, while automotive vehicles have been
imported in large numbers These
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imports are believed to have accounted for the remaining tonnage of
estimated overland shipments.
While the known 1953 figures are in all cases tentative
estimates, it is evident that the pattern of Chinese commodity imports
is now heavily weighted to those goods needed to build and run a grow-
ing heavy industry. With the exception of rubber and cotton, these
goods are obtained from the Bloc -- primarily the USSR.
Reflecting the change in source of imports, the export
trade of Communist China is now primarily directed toward the Soviet
Bloc. 1953 exports to the Soviet Union Consisted primarily of agri-
cultural products and industrial raw materials. This is a composition
similar to that of exports tb the West in prewar years.
As with Chinese imports, its exports to the Bloc can be
divided between those going overland to the USSR and those going by
sea to the East European Satellites. Chinese shipments to the USSR
in 1953 are estimated to have totaled 2.5 to 3.5 million tons. This
included 1.5 to 2 million tons of agricultural products, and is re-
ported by defectors and refugees as well as Communist press statements
to have consisted of pork, tea, peanuts, soybeans, peanut oil, wool,
and: silk. These products and others including tobacco, fruit, jute,
and hides are included in the 1953 protocol of the Sino-Soviet trade
agreement. 184/
Coal exports
are even more tentative.
the Chinese have a contract to supply
200,000 tons of coal per year from the Fushun coal mine to the USSR.
In addition, Japanese repatriates have reported that considerable ship-
ments were made to the USSR from other coal mihes in Manchuria. For
present purposes coal exports to the USSR via overland routes are
roughly assessed at 500,000 tons, but it is recognized that the volume
of such shipments may have been very much higher. Refugee reports also
indicate that cement is another major export commodity in terms of ton-
nage. It is believed that most of the output (180,000 tons per year)
of the former Soviet-operated cement plant at Dairen is being shipped
to the USSR, and it is conceivable that additional shipments are made
from cement plants in northern Manchuria.
China is a major world producer of tungsten and antimony
and an important source of tin and magnesite. Most of the production
of such ores and concentrates is now exported to the USSR. In ad-
dition, the iron and steel industry in Manchuria probably had an ex-
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port surplus of several hundred thousand tons of pig iron. Since
only small quantities of pig iron have been identified as moving by
sea to the Eastern European Satellites, it may be presumed that large
quantities are shipped overland to meet steel mill requirements in the
Soviet Far East. Finally, part of the output of the former Soviet-
operated chemical plant in Dairen is reported to be exported to the
USSR, but the specific quantity cannot be determined.
In addition to the above exports to the USSR, the Chinese
Communists are believed to have shipped by sea about 100,000 tons of
cargo of an unknown composition to the Soviet Union. during 1953. 185/
Total 1953 Chinese Communist exports by sea to the
Satellites are believed to have amounted to about 770 thousand tons,
consisting of 360 thousand tons of iron ore, 170 thousand tons of food
products and the remainder mainly unidentified cargo. 186/ Exports to
the West fall into a similar commodity pattern. Total exports to the
West amounted to about $320 million in 1953, which is about 15 percent
higher than 1952.
2. Balance of Payments.
China's total trade in 1953 is estimated to have increased
by approximately 15 percent over 1952. This represents an increase .
over the 1952 estimate of more than $300 million. Although part of this
increase resulted from trade with non-Communist countries, the bulk of
it was accounted for by an increase in the level of Sino-Soviet Bloc
trade. Table 49* indicates the changes since 1938 in the value and
geographical distribution of China's foreign trade.
Before World War II, practically all the foreign trade of
Communist China was with Japan and the West. In the 1936-38 period,
Japan accounted for 40.2 percent of trade turnover and was the major
trading partner of China. The US accounted for only 13.7 percent.
After World War II, the West continued to play a major part
in China's trade. Even in 1950, after the Communists had seized power,
China's trade with non-Bloc countries was still 74 percent of its total
trade. In 1951, however, this percentage dropped sharply to less than
40 percent and in 1952 dropped to 28 percent. It is estimated that, in
1953, trade with non-Bloc countries remained at approximately this same
percentage even though it increased in value.
* Table 49 follows on p. 169,. An index for the fOreign trade of Com-
munist China for the years 1950-52 (1938 = 100) is graphically presented
in Figure 15, which follows p. 172, below.
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Table 49
Value of the Trade of China with Non-Bloc and Bloc Coulltries 187/
1938, 1948-53 '
Million Currbnt $ US
Total
Year Trade
Non-Bloc
Countries
Soviet B]Toc
Trade 2/
Non-Bloc Trade as
Percent of Total Trade
1938 12/
939
935
4
99.5
1948
1,115
1,109
6
99.4
1949
833 E/
833
Negligible
100
1950
1,100
815
285
74
1951
2,164
845
1,319
39
1952
2,100
585
1,515
28
1953
2,415
670
1,745
28
a. It is probable that Communist China has included in Soviet Bloc
accounts Western goods imported from or Chinese goods exported to the
Bloc or carried on Bloc vessels, regardless of origin or final desti-
nation.
b. 1938 is taken as a representative prewar year.
c. A rough adjustment of data for price level changes suggests that
physical volume of trade in 1948 and 1949 was less than half that of
1938. By 1951, however, physical volume of trade seems to have re-
gained the 1938 level, as the gain in Bloc trade more than offset the
decline in East-West trade.
Table 50* indicates that China achieved an export surplus in
1950 of approximately $50 million after many years of unfavorable trade
balances. The favorable balance was obtained as a result of an export
surplus with the Soviet Bloc offsetting a deficit with the West. But
in 1951 the growing need for Chinese Communist imports to support a
substantial war effort wiped out this modest surplus. Total Chinese
Communist imports in 1951 were about 50 percent higher than the exports,
* Table 50 follows on p. 170.
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Table 50
Foreign Trade Balance of Communist China
1950-53
'Million $ US
Imports
USSR
Satellites
Soviet
Bloc
West
Total
1950
103
7
110
415
525
1951
615
145
76o
530
1,290
1952
557
173
730
320
1,050
1953 Plan
1,185
350
1,535
1953 Actual
855
350
1,205
Expprts
1950
153
22
175
400
575
1951
415
145
560
315
875
1952
567
213
785
265
1,050
1953 Plan
885
350
1,235
1953 Actual
890
320
1,210
for an estimated net adverse balance of $415 million. Of this balance
for 1951, more than half, or $215 million, was on Western account.
The share of the Soviet Bloc in total Chinese Communist
trade rose rapidly in 1951 under (a) the impact of Soviet exports of
military goods to China, (b) Western trade restrictions as a result
of the Korean war, and (c) increased Chinese demands for capital equip-
ment which then could only be obtained from Soviet Bloc markets.
A statement by Liu King-i, Chinese Communist Deputy Chair-
man of the All-China Federation of Labor, at the Third World Congress
of the WFTU in Vienna in mid-October 1953, claimed that -the total im-
ports and exports of Communist China were in balance in 1952. It is
also tentatively estimated that 1953 trade was virtually in balance.
Trade with both Bloc and non-Bloc countries increased in
1953 over 1952 but fell short of the announced Chinese plan. The major
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shortfall was in imports from the Bloc where the plan called for a large
import surplus. The plan also called for an increase in the percentage
of trade with the Bloc but .preliminary indications are that the Bloc's
share of trade was no greater than in 1952. 189/ Breakdown by geo-
graphical area of Chinese Communist trade with non-Bloc countries is
shown in Table 51.
Table .51
Value of the Trade of Communist China with Non-Bloc Countries
1953
Thousand $ US
Imports (Fob)
101,703
178,209
279,912
Europe and Western Hemisphere
Near East) Asia, Oceania
Recorded Trade Imports
Plus Adjustments for Unrecorded Trade
70,000
12/
Total Estimated Imports
350,000
2/
Exports (Cif)
European and Western Hemisphere
105,251
Near East, Asia, Oceania
278,606
Recorded Trade Exports
383)857
Less Adjustments for Double Counting by Hong Kong
.and Country of Final Destination ,
65,000
Total Estimated Exports
320,000
a. Official Western Sources - derived and unadjusted - com-
piled by Department of Commerce.
b. Tentatively estimated on basis of Chinese claims of total'
foreign trade.
c. Rounded.
3. Future Trends in Foreign Trade.
Chinese trade over the next few years will depend partly
on political factors, partly on the internal economic policies of
Communist China and its ability to increase production of export
commodities, and partly on the line of credit which may be advanced
by the USSR. Communist China would probably benefit from suspension
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of Western trade controls in that a wider range of investment goods
would be available in larger quantities while Chinese Communist exports
would remain much the same -- agricultural products and raw materials.
The primary effect of lifting Western trade restrictions would be in-
creased Imports from the West of certain essential commodities which are
in short supply in the Bloc such as machinery, antifriction bearings,
and chemicals.
The reasonable increase in volume of Chinese Communist trade
that might be expected to result over the next few 'years would probably
not amount to more than 50 percent of the 1952 volume with the resulting
level of trade being at about the same volume of foreign trade as in 1931,
in terms of constant prices. 1931 trade marked the highest level in the
last 30 years. It is estimated that soybean and tung oil production can
be substantially increased during the period despite increased domestic
consumption of these commodities. Part of the planned increase in coal
production could be earmarked for export to the Soviet Far East and to
Japan. If Japan could pay in hard currencies or in materials which
Communist China needs, possibilities of increased exports of coal, iron
ore, salt, and soybeans to Japan would be favorable. If need be, export
of Hainan iron ore could be maintained at the present rate or even in-
creased, despite the desirability of retaining this high-grade ore for
expanded domestic steel production. Export of tin, tungsten, antimony,
and magnesite could probably be increased if production were stepped up
and foreign markets were available.
Some imports of cotton from Pakistan and Egypt will
probably continue although the inCreased production of Communist China
has reduced this need. In Pravda of 28 September 1953, the USSR
announced its intention to assist the Chinese from 1953 through 1957
in constructing and equipping 91 new industrial installations and 50 in-
stallations already being built or reconstructed. Thus Communist China
will probably Import an increasing volume of capital goods and technical
services from the USSR. Moreover, it is. probable that the Chinese
Communists will continue to import a. considerable quantity of war ma-
terial.
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20000
10000
5000
1000
500
Figure 15
COMMUNIST CHINA
INDEXES OF FOREIGN TRADE, 1948-52
100
50
INTRA-BLOC TRADE
10
5
1948
13135 CIA, 4-54
1949
Plotted
on a semi-logarithmic grid
1950
1951
(1938 = 100)
1952
120
100
80
60
40
20
0
1948
TOTAL TRADE
120
100
80.
60
40
20
0
1948
1949
1950
1951
1952
IMPOR
S AND EXPORTS
......
?
.._
-I
/
?
--, .... ,
__.....
.....--
120
100
80
60
40
20
0
1948
1949
1950
1951
1952
EAST-WEST TRADE
1949
1950
1951
1952
50X1
50X1
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VII. Balance Sheet of the Korean War.
A. Credit Side.
Throughout the entire period of the Korean War the Chinese --
Communist regime has made notable progress in restoring production, es-
tablishing economic controls, and launching a Five Year Plan of economic
development. This progress has been described in the preceding sections
of this report. Some of this achievement is apparently attributable to
the zeal and ruthless determination with which the regime has undertaken
its organizational tasks in accordance with the Soviet system of regimen-
tation of the entire economy. To the Communist world and to the other
countries of Asia the Korean War provided a test of the competence of the
Chinese Communist regime and of the Soviet system both to support the war
effort and simultaneously to restore production and lay the foundations
for further economic development under the Five Year Plan,. War necessity,
therefore, was a stimulus to organizational efficiency in the urgent res-
toration of production in almost all categories to previous peak levels.
Because of their involvement in the Korean War, the Chinese Communists
required more support from the USSR, and internal economic conditions in
Communist China necessitated more severe and rapid organization of man-
power and REricultural and industrial resources than would, have been
occasioned by the initial planning phase of the industrialization
program. Soviet technical and military aid was given in ample measure
to assure the necessary accomplishments.
A catalogue of the achievements of the joint Chinese Communist-
Soviet efforts could not distinguish between the gains made as a result
of the working of the Communist organizational system in laying the ground-
work for the industrialization program and those which were derived from
the stimulus and necessities of the Korean War. It is possible merely to
list those progressive steps which have been realized as part of the joint
organizational effort, as follows:
1. The Chinese Communist regime, with Soviet aid and advice,
has established internal economic controls sufficient to maintain its
stability, to reduce to impotence the previously well-entrenched landlord
and entrepreneurial groups, and at the sane time to extend its authority
over all of mainland China, Tibet, and Hainan.
2. The regime has been able with Soviet technical aid to
restore agricultural and industrial production approximately to previous
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peak levels, to inaugurate a Soviet-type economic planning system of in-
dustrial development, and at the same time to provide economic support for
the war effort. The restoration of agricultural production and its more
even distribution within the country have been particularly significant
in eliminating dependence on grain imports and in making the country al-
most self-sufficient in cotton fibers.
3. By an increase of exports and by Use of Soviet credits,
the Chinese Communists have been able not only to import capital equip.-
ment for the rehabilitation and improvement of their industries but also
to pay for at least a part of the Military equipment supplied by the
Russians.
4. The Chinese Communist railroad transport system and com-
mUnications networks have been sufficiently rehabilitated and improved
not only to provide better distribution and to serve the political needs
of the internal economy at its present increasing level of activity but
also to provide logistical support for Korean War operations. In addition,
the Chinese Communists have been able to lend some rolling stock and to
supply thousands of railroad workers to assist North Korean railroad repair
and maintenance.
5. The Chinese Communist regime has been able to establish
its influence in Asia, obtaining recognition of five of the major coun-
tries of Asia -- India, Pakistan, Burma, Ceylon, and Indonesia -- and to
carry on trade with them. In doing so it has reversed its previous pat-
tern of trade, actually exporting rice -- always a deficit item in
China -- in exchange for rubber and cotton. The regime has also been
able to export military supplies to the Communist rebel forces of Ho Chi
Minh in Indochina to the extent of 2;000 metric tons per month as of
early 1954, and it has lent help to subversive forces in India and Burma.
. 6. Communist China has teceived from the USSR -- probably on
a reimbursable basis -- equipment for a modern air force and heavy artil-
lery,.antiaircraft guns, ammunition, tanks, and trucks sufficient to
support a progressively increasing combat consumption of such equipment .
up to the last days before the truce.
7. Communist china has received from the USSR -- probably on
a "lend-lease" basis -- quantities Of light military equipment, in addi-
tion to the light arms and ammunition which it provided from its
own manufacturing resources. These supplies together were sufficient
to support 1.5 million to 1.75 million men in active combat in the
field.
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8. The Chinese Communist air force, with aircraft and train-
ing officers from the USSR, has received training and combat experience
in modern warfare, and possibly half of the Chinese Communist ground forces
have been rotated in service in the war. The Chinese Communists, by their
record in the Korean War, have established their prestige and pre-eminence
as a military power in Asia and as an ally of the leading Communist power
in eliminating Western influence and "imperialism" in'Asial and at the same
time they have carried out their internal economic rehabilitation program.
B. Debit Side.
In the Communist calculation, labor and material goods are expend-
able as long as they are expended for the good of the state. They are
replaceable, if necessary, by further expenditures of labor and material
goods. If, according to the Communist rationale, the Korean War has served
the purpose of building up the power and prestige of the Chinese. Communist
regime -- as it would appear to have done up to the point of the truce --
the costs to them would have been well spent. Further continuation of the
war is another matter.
The Obvious items of costs of Chinese Communist participation in
the Korean Wax can be easily catalogued, although the definite amounts
thereof are not so clear:
1. As mentioned in Section III, above, the budgeted expenses
for maintenance of the military establishment have increased from US $1.4
billion, or 4o percent of the budget, in 1950 to US $2.6 billion, or 22
percent of the budget, allocated in 1953. The increase in absolute amount
of military maintenance costs is probably largely attributable to the Korean
War.
2. Chinese-manufactured light arms and ammunition consumed by
the Chinese Communist forces in Korea -- although not sufficient to cover ?
their war needs -- would probably be about adequate for peacetime require-
The war consumption of such materiel probably represents a consid-
erable part of the military budget.
3. In addition, some hundreds of millions of dollars probably
have been spent in 1950-52 for modern military equipment imported from the
USSR.
4. In Section VI, B, above, the USSR was shown to have supplied
the Chinese Communists with some quantities of military equipment on a
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nonreimbursable, or "lend-lease," basis. At the same time, as Stalin said
in his speech of October 1952 before the Congress of the Communist Party,
goods exchanged in international trade between socialist countries are to
be paid for at prices negotiated in the market, and, as Vyshinsky said in
the United Nations in December 1952, the USSR is selling munitions to Com-
munist China. It is, therefore, deduced that the USSR probably supplies
Communist China on a nonreimbursable basis only apart of the total Soviet
shipment of military goods -- perhaps only such munitions and military
equipment as were obsolescent or superfluous for use by the USSR -- and
that new types of equipment, such as jet aircraft, tanks, trucks, heavy
artillery, antiaircraft guns, and relevant ammunition, are sold to Communist
China. If this is the case, the magnitude of the cost to Communist China
of purchasing modern military equipment from the USSR would be an important
deterrent to continuing or intensifying the war while simultaneously trying
to implement its Five Year Plan.
5. The tanks, aircraft, artillery, and trucks which Communist
China has already received and paid for are ready assets for training and
for maintenance of the military power and prestige of Communist China in,
Asia.
6. At the same time, the development of its armaments industry,
which is a considerable item in the industrialization of Communist China,
can be realized only to the same degree as the development of the electric
power, ferrous and nonferrous metallurgical, and chemicals industries.
Therefore, concentration on achieving their industrialization goals would
enable the Chinese Communists sooner to attain a greater degree of self-
sufficiency in armaments production.
7. Under war conditions in any country the distribution of
imports, domestic manufactures, and agricultural products must be subordi-
nated to requirements for military transport over the internal railway
ystem. Diversion of rolling stock in Communist China to troop transport
and supply of the troops in Korea resulted in faster attrition of railway
equipment and greater need for replacements than would have been the case
if only peacetime requirements had ha rl to be met. The same is true of
motor transport. In addition, a small number of freight cars and several
thousand trucks sent to Korea were destroyed. If this diversion of trans-
port services to wartime uses were to continue, it would Obviously-handi-
cap the improvement and extension of the rail and motor transport systems
for industrial development purposes.
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8. As discussed in Section VI, B, above, Western trade con-
trols not only have limited the availability of certain types of industrial
equipment which are in short supply in the Soviet Bloc but also have re-
stricted Chinese Communist markets for their exports. It was estimated
that the possible expansion of Chinese Communist exports, as a fesult of
possible relaxation of Western trade controls, might facilitate an increase
of exports over 1953 to the extent of at least UB $250 million. Now that
agricultural and nonferrous minerals production has been restored nearly
to previous peak levels and now that Communist China needs to increase ex-
ports in order to pay for imports of Soviet industrial equipment, the denial
of this expanded market is probably more important to the Chinese Communist
regime than it has been in the past. Continued denial of Western markets
would represent a cost to the Chinese Communist regime in terms of lost sales
opportunities and possible serious delay in the realization of its indus-
trialization program.
9. The cost in Chinee Communist human casualties in the war
has amounted to an estimated 525,000 killed and 390,000 wounded in action.
These costs in disciplined and more or less trained manpower are proportion-
ately much greater. for a country in the incipient stage of economic develop-
ment of Communist China than for a more advanced country, even though the
wealth of untrained manpower of Communist China is capable of extensive
technical training. As discussed in Section I, above, the Chinese Communist
shortage of technicians and inadequate technical training program render
more difficult the implementation of the Five Year Plan. This difficulty
is enhanced by the diversion of the services of transport, communications,
industrial and medical workers, and their equipment to war purpotes.* The
availability of these worker for peacetime technical service and training
purposes would mitigate the shortages of such technicians for the industrial
development program. the utilization of
regular army troops on irrigation, land reclamation, farming, railroad, and
highway construction projects in various parts of Communist China. Besides
the war casualties and the enhanced need for technicians, the diversion of
military forces to North Korea and Easikern Manchuria prevents their part- 50X1
time employment in economic construction work and necessitates additional
expenditures for employment of more civilian workers on such projects.
* For example, it was reported that during 1952 hospitals as far south as
Hankow and Canton were filled with wounded soldiers transported there from
North Korea under medical care and that Chinese Communist railroad workers
had to be sent to Korea to assist in the repair and maintenance of North
Korean railroads.
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In weighing, from the point of view of economic policy, the advantages
and disadvantages to the Chinese Communists of cessation or intensification
of hostilities in Asia, it is necessary to take a particular moment in time
-- the present -- on which to balance the choices of alternative uses of
resources and labor and available material wealth. The costs of the Korean
War up to this point have been borne and accounted for; the choice now lies
between allocating resources in the same way or using them more construct-
ively. The possibility that Communist China can carry through the Five
Year Plan while supporting further military operations of the magnitude of
1952 in the Korean War or even more intensified hostilities is very doubtful.
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APPENDIX A
REGIONAL DISTRIBUTION -OF ECONOMIC ACTIVITY IN COMMUNIST CHINA'
The tables in this appendix, Numbers 52 through 62, are the sup-
porting tables for Section V, above. The figures in all of these
tables are CIA estimates. The regions numbered from I through VIII
it these tables are as designated in Section V, A, as follows:
I, Northeast; II, Inner Mongolia; III, North; IV, East; V, Central
and South; VI, Southwest; VII, Northwest; and VIII, Tibet.
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Table 52
Regional Distribution of Gross Value of Production of Agricultural Goods in China
1936, 1943, and 1951
Billion Yuan
- Year Commodity
Region
Total
Estimated
Margin of
Error
(Pertent ?)
I
II
III
IV
V
VI
VII
VIII
1936 Bread Grain
1,444.96
0
5,524.86
16,489.57
12,027.18
4,462.38
2,549.93
0
42,498.88
5
Other Grain
13,421.60
265.25
10,185.56
12,572.80
8,169.67
5,994.63
2,440.29
0
53,049.80
5
Rice
970.39
o
298.58
20,825.99
36,501.46
15,750.12
298.58
0
74,645.12
5
Cotton
362.65
0
3,421.52
6;228.12
4,131.06
756.83
867.21
0
15,767.39
5
Vegetable Oil
4,610.15
86.98
2,667.51
9,452.26
7,538.61
4,059.25
579.8928,994.65
Unknown
10
Wool (Grease)
405.90
0
992.21
211.97
112.75
76.67
2,376.79
333.74
4,510.03
10
Silk (Raw)
N.A.
0
N.A.
2,025.86
4,100.29
811.74
0
0
6,937.89
10
Potatoes
o
0
1,906.50
7,872.00
7,400.50
3,054.50
266.50
0
20,500.00
5
Roundwood
2,240.00
960.00
768.00
2,560.00
2,560.00
2,560.00
768.00
384.00
12,800.00
20
Sugar
45.31
0
0
1,325.38
2,588.45
1,704.86
0
0
5,664.00
5
Swine
1,344.38
103.41
1,206.49
4,188.25
6,566.76
3,274.77
551.54
N.A.
17,235.60
Cattle
461.63
115.41
656.21
2,029.90
3,707.35
621.76
1,008.33
N.A.
8,600.59
Total
25,306.97
1,531.05
27,627.44
85,782.10
95,404.08
43,127.51
11,707.06
717.74
291,203.95
(310,915.20) La/
Regional Percent of
Total
8.7
o.5
9.5
29.5
32.8
14.8
4.0
0.2
100
?
a. Tatal incIading commodity production which has been reported but for which no regional distribution is available.
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Table 52
Regional Distribution of Gross Value of Production of Agricultural Goods in China
1936, 1943, and 1951
(Continued)
Billion Yuan
Region
Estimated
Margin of
Error
Year Commodity I II III IV V VI VII VIII Total (Percent 1.)
1943 Bread Grain 1,284.06 0 3,813.34 13,891.48 10,700.71 5,836.76 3,385.33 o 38,911.68 10
Other Grain 14,175.87 264.15 7,572.21 9,157.09 6,163.42 4,754.64 1,937.08 0 44,024.46 10
Rice 847.20 O. 169.44 17,960.84 26,941.28 10,392.44 169.44 o 56,480.64 10
Cotton N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
. Vegetable Oil N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Wool (Grease) N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Silk (Raw) N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Potatoes N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Roundwood N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Sugar 39.87 o o 1.166.33 2,277.83 1,500.28 o o 4,984.31 10
Cattle N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Swine N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Total
Regional Percent of
Total
16,347.00 264.15 11,554.99 42,175.74 46,083.24 22,48442 5,491.85 o 144,401.09 (177,410.75) 2.1
11.3 0.2 8.0 29.2 31.9 15.6 3.8 o 100
1951 Bread Grain 1,382.52 0 4,105.68 14,956.42 11,521.05 6,284.21 3,644.84 o 41,894.72 10
Other Grain 16,021.06 298.53 8,557.83 10,349.01 6,965.68 5,373.53 2,189.21 o 49,754.85 10
Rice 996.47 0 199.30 21,125.17 31,687.76 12,223.37 199.29 0 66,431.36 10
Cotton 708.81 0 3,715.15 2,835.25 3,397.41 464.40 1,099.88 o 12,220.90 10
Vegetable Oil 3,635.92 80.21 2,459.59 7,753.06 8,421.43 3,635.92 748.57 0 26,734.70 10
Wool (Grease) 364.56 0 646.44 120.26 75.17 60.13 2,232.47 259.33 3,758.36 io
a. Total including commodity produttion which has been reported but for which no regional distribution is available.
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- Table 52
Regional Distribution of Gross Value of Production of Agricultural Goods in China
1936, 1943, and 1951
(Continued)
Billion Yuan
Year Commodity
Region
Total
Estimated
Margin of
Error
(Percent 11)
I
II
III
IV
V
VI
VII
VIII
1951
(Continued)
Silk (Raw)
o
o
o
1,289.10
268.56
232.75
o
o
1,790.42
10
Potatoes
o
o
2,046.85
9,572.96
14,674.34
4,943.93
251.92
0
31,490.00
10
Roundwood
2,800.00
1,200.00
960.00
3,200.00
3,200.00
3,200.00
960.00
480.00
16,000.00
20
Sugar
393.93
0
0
519.11
2,183.19
585.37
0
o
3,681.60
5
Swine
1,433.12
358.28
1,188.50
4,166.80
5,959.90
3,720.60
447.80
N.A.
17,225.00
Cattle
525.00
131.25
645.95
2,006.7G
3,513.90
798.65
981.83
N.A.
8,603.28
Total
28,261.39
2,068.29
24,525.29
77,843.85
91,868.39
41,522.86
12,755.81
739.33
279,585.19
(300,896.141+)W
Regional Percent of-
Total
10.1
0.7
8.8
27.8
32.8
14.9 ,
4.6
0.3
100
? a. Total including commodity production which has been reported but for which no regional distribution is available.
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Table 53
Regional Distribution of Gross Value of Production of Textiles in China
1936 and 1951
Billion Yuan
Year
Commodity
Region
Total
Estimated
Margin of
Error
(Percent .?)
I
II
III
IV
V
VI
VII
VIII
1936
Cotton Yarn
540.42
0
1,324.90
13,632.58
1,830.46
0
104.60 ,
0
17,432.96
10
Total
540.42
0
1,321.90
13,632.58
1 830.46
0
104.60
0
17,432.96
Percent of Total
3.1
7.6
78.2
10.5
0.6
100.00
1951
Cotton Yarn
1,016.55
0
1,532.42
10,878.64
758.62
697.93
288.28
0
15,172.44
10
Wool Yarn
12.75
0
19.40
94.53
1.25
8.18
2.49
0
138.60
10
Total
1,029.30
0
1,551.82
10,973.17
759.87
706.11
290.77
0
15,311.04
Percent of Total
6.7
10.1
71.7
5.0
4.6
1.9
100.00
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Table 54
Regional Distribution of Gross Value of Production of Rubber Tires in China
1951
Billion Yuan
Estimated
Region Margin of
Error
Year Commodity I II III IV V VI VII. VIII Total (Percent -I-)
1951 Ribber Tires 24.97 . 0 15.07 69.96 0 0 0 0 110.00 . 50
Regional Percent of
Total 22.7 0 13.7 63.6
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Table 55
Regional Distribution of Gross Value of Production of Bituminous Coal in China
1936, 1943,
and 1951
Billion Yuan
? Region
?
Estimated
Margin of
Error
Year Commodity
II
III
IV
V
VI
VII
VIII
Total
(Percent
-0
1936 Coal
2.578.88
14.95
2,421.90
1,278.22
717.60
373.75
89.70
0
7,475.00
10
Regional Percent
of Total
34.5
0.2
32.4
17.1
9.6
5.0
1.2
0
100.00
1943 Coal
4,714.12
95.48
3,616.15
2,398.83
369.97
596.73
143.21
0
11,934.49
10
Regional Percent
of Total
39.5
0.8
30.3
20.1
3.1
5.0
'
1.2
0
100. 00
1951 Coal
2,543.82
46,49
2,497.33
378.58
524.71
278.96
371.94
6
6,641.83
50
-Regional Percent
of Total
38.3
0.7
37.6
5.7
7.9
4.2
5.6
0
100.00
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Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Table 56
Regional Distribution of Gross Value of Production of Crude Petroleum in China
1936,. 1943, and 1951
Billion Yuan
' Year Commodity
1936 Crude Oil 0 0 0
Percent of Total
Output
1943 Crude Oil 0 0 0.
Percent of Total
Output
1951 Crude Oil 0 0 0
Percent of Total
Output 0
?
IV
V VI VII VIII Total
2.87
385.12 0 385.12
100.00
0 0 1,051.88
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100.00
1,051.88
100.00 100.00
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- Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0 ?
S-E-C-R-E-T
Table 57
Regional Distribution of Gross Value of Production Of Electric Energy in China
1936, 1943, and 1951
Billion Yuan
Region
Estimated Margin
of Error
Year Commodity I II III IV V VI VII VIII Total (Percent ?)
1936
Power Production
674.50
0.95
220.21
817.76
177.811-
8.36
0.38
0.0
1,900
3
Percent of Total
35.50
0.05
11.59
43.04
9.36
0.44
0.02
0.0
100
1943
Power Production
2,158.88
45.37
516.00
720.75
217.88
76.50
14.62
0.0
3,750
10
Percent of Total
57.57
1.21
13.76
19.22
5.81
2.04
0.39
0.0
100
1951
Power Production
1,601.46
40.32
416.12
775.53
226.80
69.93
19.53
0.31
3,150
20
Percent of Total
50.84
1.28
13.21
24.62
7.20
2.22
0.62
0.01
100
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Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Table 58
Regional Distribution of Gross Value of Output of Ferrous Mining and Metallurgy in China
1936, 1943, and 1951
Billion Yuan
Year
Commodity
1936 Pig IrOn
Finished Steel
Coke
Molybdenum
Tungsten
Total
Percent of Total
1943 Pig Iron
Finished Steel
Coke
Molybdenum.
Tungsten
Region
_ 1 II III IV
1,046.12 0 120.45 6.55
2,425.25 0 o o
237.76 0 59.44 N.A.
O o o o
O o o o
3,709.13 o 179.89 6.55
81.1? 0 3.9 0.2
3,280.86 o 139.69
8,702.69 0
835.2 o 208.8
21.67 o
Total 12,840.42 o 348.49
Percent of Total
1951 Pig Iron
Finished Steel
Coke
Molybdenum
Tungsteh
Total
Percent of Total
91.8 o 2.5
1,767.66 o 168.24
7,349.75 o 950.31
564.48 o 141.12
14.55 o
9,696.44 0 1,259.67
70.3' 0 9.1
3.58
0
N.A.
0
0
3.58
0.05
V VI VII VIII Total
82.49 48.44 5.24 o 1,309.29
o o o o 2,425.25
N.AI N.A. o o 297.20
0.18 o o o 0.18
543.24 o o o 543.24
625.91 48.44 5.24 o 4,575.16
13.7 1.0 0.1 ? o 100.0
21.49 132.52 3.58 0 3,581.72
o 141.51 o o 8,844.20
N.A. N.A. o o 1,044.00
0.44 o o o 22.11
498.96 0 0 o 498.96
520.89 274.03 3.58 0 13,990.99
3.7 1.9 0.05 o 100.0
98.33 Negligible 0 2,185.00
1,021.08 0 0 10,109.70
N.A. o o 705.60
o o o 14.85
o o o 778.68
1,119.41 0 o 13,793.83
8.1 o o 100.0
74.29 76.48
788.56 o
N.A. N.A.
O 0.30
O 778.68
862.85 855.46
6.3 6.2
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C.
Estimated Margin
of Error
_Percent 1)
10
2
20
10
10
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
5
5
20
10
10
10
10
20
20
20
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
S-E-C -R-E-T
Table 59
Regional Distribution of Gross Value of Production of Nonferrous Metals in China
1936, 1943, and 1951
Billion Yuan
Region
Estimated Margin
of Error
Year
Commodity
I
II
III
IV V
VI
VII
VIII
Total
(Percent ?)
193'6
Bauxite
19.00
0
0
0 0
0
0
0
19.00
Copper
N.A.
0
0
0 0
20.04
0
0
20.04
Aluminum, Primary
0
0
0
0 0
0
0 -
0
0
Aluminum, Secondary
N.A.
N.A.
N.A.
N.A. N.A.
N.A.
N.A.
N.A.
N.A.
Lead V
N.A.
0
0
0 57.34
10.12
0
0
67.46
Lead Concentrates
186.49
0
0
0 0
0
0
0
186.49
Zinc
N.A.
0
0
0 17.69
8.71
0
0
26.40
Zinc Concentrates
N.A.
0
0
0 162.66
0.49
0
0
163.15
5
Mercury
0
0
0
0 0.17
0.65
0
0
0.82
5
Tin
0
0
0
0 152.64
541.18
0
0
693.82
5
Antimony
0
.0
0
' 0 315.78
0
0
0
315.78
15
Gold.
53:36
0
0
6.35 34.30
33.03
0
0
127.04
Total
258.85
0
0
6.35 740.58
614.22
0
0
1,620.00
Percent of Total
16.0
0
0
0.4 45.7
37.9
0-
? 0
100.0
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Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Table 59
Regional Distribution of Gross Value of Production of Nonferrous Metals in China
1936, 1943, and 1951
(Continued)
Billion Yuan
Estimated Margin
of Error
Year
Commodity
I
II
III
. IV
V
vi
VII
VIII
Total
(Percent t)
1943
Bauxite
3.80
0
0
0
0
0
0
0
3.80
. 25
Copper
103.47
0
0
0
0
32.67
0
0
136.14
Aluminum, Primary
360.30
0
0
0
0
0
0
0
360.30
15
Aluminum, Secondary
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Lead
164.90
0
0
0
22.74
1.90
0
0
189.54
Lead Concentrates
24.21
0
0
0
0
0
0
0
24.21
Zinc
212.50
0
0
0
6.93
11.55
0
0
230.98
Zinc Concentrates
99.62
0
0
0
N.A.
N.A.
0
0
99.62
Mercury
0
0
0
0
0
1.64
0
0
1.64
5
Tin
0
0
0
0
77.17
308.68
0
0
385.85
20
Antimony
0
0
0
0
9.43
0
0
0
9.43
5
Gold
39.02
0
0
1.95
27.31
29.26
0
0
97.54
15
Total
1,007.82
0
0
1.95
143.58
585.70
0
0
1,539.05
Percent of Total
65.5
_
0
0
0.1
9.3
25.1
0
0
.100.0
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Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0 ?
S-E-C -R-E-T
Table 59
Regional Distribution of Gross Value of Production of Nonferrous Metals in China
1936, 1943, and 1951
(Continued)
Billion Yuan
Year
?
Commodity
Region
Total
Estimated Margin
of Error '
(Percent f)
I ?
II
III
IV
V
VI
VII
VIII
1951
Bauxite
11.40
0
0
0
0
0
0
0-
11.40
11-20-00.
25
CotTer
378.00
0
0
0
0
42.00
0
0
25
Aluminum, Primary
0
0
0
0
0
0
o
o
d
Aluminum, Secondary
21.05
0
0
?
0
0
0
0
0
21.05
Lead
116.64
o
o
o
? 11.66
1..30
0
0
129.60
Lead Concentrates
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Zinc
6.40
o
o
o
3.20
3.20
o
o
12.80
Zinc Concentrates
84.00
o
o
o
N.A.
N.A.
0
o
84.00
25
to 50
Mercury
0
0
,0
0
0.15
0.57
0
0
0.72
25
Tin
0
0
0
o
82.48
292.44
o
o
374.92
20
Antimony
0
0
0
0
176.26
0
0
0
176.26
20
Gold
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Total
617.49
0
0
0
273.75
339.51
o
o
1,230.75
Percent of Total
50.2
0
0
0
22.2
27.6
0
0
100.0
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Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Declassified in Part- Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Table 60
Regional Distribution of Gross Value of Production of Basic Chemicals in China
1936, 1943, and 1951
Billion Yuan
Year . ? Commodity
Region
Total
Estimated
Margin of
Error
(Percent 2)
I
III
IV
V
VI
VII
VIII
1936 Sulfuric Acid
366.52
0 _
4.21
33.70
12.64
4.21
o
o
421.28
20
Nitric Acid
29.05
0
0
24.98
4.07
0
0
.0
58.10
14'
Ammonia
0
0
27.78
11.91
0
0 '
0
396.90
10
Caustic Soda
.357.21
23.11
0
71.10
71.10
12.44
0
0
0
177.75
20
Soda Ash
20.03
0
266.06
o
o
o
,o
o
286.09
20
.Chlorine
13..92
0
8.70
26.68
8.70
o
o
o
58.00
20
Calcium Carbide
40.50
0
9,00
40.50
0
0
0
0
90.00
10
Benzol
7.60
0
0
0.40
0
0
0
0
8.00
20
Toluol
2.85
0
0
0.15
0
0
0
0
3.00
20
Phenol
1.71
0
0
0.09
0
0
0
0
1.80
20
Cresols
3.51
0
0
0.19
0
0
0
0
3.70
20
Xylol
3.16
0
0
0.17
0
.
0
0
0
3.33
20
Naphthalene
24.70
0
0
1.30
0
0
0
0
26.00
20
Total
893.87
o
359.07
227.04
49.76
4.21
0
0
1,533.95
Regional Percent of
Total
58.3
23.4
14.8
3.2
0.3
100
1943 Sulfuric Acid
316.12
0
4.58
114.53
18.33
4.58
0
0.
458.14
20
Nitric Acid
337.56
o
o
52.87
16.27
o
o
o
406.70
20
Ammonia
243.65
0
0
11.92
3.63
0
0
0
259.20
20
Caustic Soda
71.46
0
71.03
49.49
10.66
10.66
o
o
213.30
30
Soda Ash
228.35
0
156.20
0
0.
11.89
0
0
396.44
10
Chlorine
22.04
0
8.70
17.98
.4.64
4.64
o
o
58.00
20
Calcium Carbide
162.00
0
8.64
45.36
o
o
o
o
216.00
10
Benzol
108.00
o
6.00
6.00
o
o
o
0
120.00
10
Toluol
10.20
0
0.60
1.20
0
0
0
0
12.00
20
Phenol
3.06
0
0.18
0.36
o
o
o
o
3.60
20
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?
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
S-E-C-R-E-T
Table 60
Regional ril.stribution of Gross Value of Production of Basic Chemicals in China
1936, 1943, and 1951
(Continued)
Billion Yuan
Region
Estimated
Margin of
Error
Year Commodity
I
II
III
IV
V
VI
VII
VIII
Total
(Percent I)
1943
(Continued)
Cresols
6.29
o
0.37
0.74
o
o
o
o
7.40
20
Xylol
5.65
o
0.33
0.67
0
o
o
o
6.65
20
Naphthalene
44.20
o
2.60
5.20
o
o
o
o
52.00
20
Total
1,558.58
0
259.23
306.32
53.53
31.77
oo
2,209.43
Regional Percent of
_
Total
70.6
11.7
13.9
2.4
1.4
100
1951 Sulfuric Acid
104.27
o
2.37
94.79
23.69
11.85
o
o
236.97
20
Nitric Acid
44.82
o
o
29.88
o
o
0
o
74.70
50
Ammonia
66.42
o
o
95.58
o
o
o
o
162.00
50
Caustic Soda
106.65
o
65.18
53.32
4.74
7.11
o
o
237.00
20
Soda Ash
200.26
o
2104.35
o
o
4.09
o
o
408.70
10
Chlorine
26.91
o
8.97
26.91
2.07
4.14
o
o
69.00
20
Calcium Carbide
110.88
o
5.04
10.08
o
o
o
o
126.00
15
Benzol
40.87
o
14.13
0.84
o
o
o
o
55.84
10
Toluol
7.61
o
2.63
0.16
o
o
o
o
10.40
10
Phenol
1.49
o
0.51
0.03
o
o
o
o
2.03
lo
Cresol's
2.76
0
0.95
0.06
o
o
o
o
3.77
20
Xylol
2.82
o
0.97
o.o6
o
o
o
o
3.85
20
Naphthalene
17.13
o
5.92
0.35
o
o
o
o
23.40
20
Total
732.89
o
311.02
312.06
30.50
27.19
o
o
1,413.66
Regional Percent of
_
Total
51.8
22
22.1
2.2
1.9
100
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Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Table 61
Regional Distribution of Gross Value of Production of Weapons and Ammunition in China
1943 and 1951
Billion Yuan
Estimated
Region Margin of
Error
Year Commodity I II III IV V VI VII VIII Total (Percent
1943 Small Arms' 225.56 0 112.78 37.59 37.59 263.15 75.18 o 751.85 25
Machine Guns 213.07 0 106.54 0 0 213.08 0 0 532.69 25
Artillery ? 0 0 0 0 0 6.40
o 0 6.40 25
104.19
Mortars 130.23 0 26.05 0 0 0 0 ' 260.47 25
Artillery Ammunition 843.16 o 60.23 o o 301.13
445.00 o . o 1,204.52 25
Mortar Ammunition - 889.99 0 148.33 0 0 0 0 1,483.32
1,44o.00
216.00 432.00 25
Small Arms Ammunition . 576.00 0 72.00 72.00 72.00 0 25
Total
2_lL
878 01 0 669.93 109.59 109.59 1,764.95 147.18 0 5,679,25
..._ _
Regional Percent of Total 50.7 11.8 1.9 1.9 31.1 2.6 100
1951 Small Arms 169.31 0 135.45 101.59 101.59 101.59 67.72 0 ' 677.25 25
Machine Guns 155.26 o 77.63 38.82 58.22 58.22 o o 388.15 25
Artillery 43.20 0 17.28 4.32 4.32 17.28 0 0 86.40 25
Mortars 187.11 0 .41.58 41.58 62.37 83.16 0 0 415.80 25
Artillery Ammunition 5,852.10 0 1,463.02 487.68 975.35 975.35 o o 9,753.50 25
Mortar Ammunition 2,087.63 0 379.57 189.78 379.57 759.14 0 o 3,795.69
4,820.00 25
Small Arms Ammunition 1,446.00 o 964.00 482.00 723.00 , 723.00 482.00 0 25
. Total- 9,940.61 o ' 3,078.53 1,345.77 2,304.42 2,717.74 549.72 0 19,936.79
Regional Percent of Total 49.9 15.4 6.7 11.6 13.6 2.8 100
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- - - - - -
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
S-E-C -R-E-T
Table 62
Regional Distribution of Population and Labor Force in China
1951
Millions
Region Estimated Margin
I
II
III
IV
V
VI
VII
VIII
Total
of Error '
(Percent)
Total Population
41.6
2.3
67.1
133.2
136.8
70.6
23.5
1.4
476.5
12.0
Percent of Total Population
8.73
0.5
14.08
27.95
28.71
14.82
4.93
0.3
100.0
Rural Population
33.7
2.1
60.7
121.3
123.1
57.4
21.3
1.3
420.9
12.0
Percent of Rural Population
8.00
0.5
14.42
28.82
29.25
13.64
5.06
0.3
100.0
Farm Population
29.1
1.8
53,0
93.5
109.4
53.7
20.0
1.4
361.9
12.0
Percent of Farm Population
8.04
0.5
14.64
25.86
30.23
14..84
5.53
-0.4
100.0
Total Labor Force
21.8
1.2
35.2
69.9
71.8
37.0
12.3
0.8
250.0
12.0
Percent of Total Labor Force
8.73
0.5
14.08
27.95
28.71
14.82
4.93
0.3
100.0
Rural Labor Force
17.8
1.0
31.9
63.8
56.0
30.1
11.2
0.8
212.6
12.0
Percent of Rural Labor Force
8.34
0.5
15.02
30.00
26.32
14.20
5.27
0.4
100.0
Farm Labor Force
15.1
0.9
27.4
48.5
56.7
27.9
10.3
0.8
187.6
12.0
Percent of Farm Labor Force
8.04
0.5
14.64
25.86
30.23
14.84
5.53
0.4
100.0
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Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
Declassified in Part - Sanitized Copy Approved for Release 2013/04/30: CIA-RDP79R01141A000300060001-0
S-E-C-R-E-T
APPENDIX B
METHODOLOGY
I. Production.
The data for the production indexes and the GNP estimate for 1952
are derived from estimates of annual production for an extensive list.
of commodities. Production data on the Chinese economy ate difficult
to spcure, particularly for the years from 1937 to 1945 and after
1949, when the Communists came to power. The systematic derivat;.on
of production estimates has been omitted from this report, as too
extensive and complex for publication in its, present state.
The production estimates given for agricultural production are in
general more complete and exhaustive than production estimates for the
other sectors. Estimates for the years after 1937 are more difficult
to derive, but agricultural outputs are estimated with a range of
error of plus or minus 10 percent.
Estimates of output of minerals and metallurgy rank with agri-
cultural production estimates in their general reliability. Diffi-
culties exist in inferring output for the years from 1949 to 1952,
since in most cases Communist claims for increases for these years
over previous years and over past peaks must be matched with other
Information on production for earlier years.
CIA estimates of manufacturing output have many gaps both because
of the lack of information for the years from 1937 to 1949 and the
incomplete coverage of commodities produced. Added to these problems
is the difficulty in distinguishing between modern manufacturing and
handicraft output. The estimated increase for modern manufacturing
may have been offset by decreases in handicraft production, thus
affecting the validity of the indexes.
II. Valuation.
Chinese prices for 1952 were used to weight the estimates of
physical output. In general, the use of 1952 prices gives greater
weight to manufacturing Output relative to agricultural output than
Chinese prices from 1931 to 1936, and greater weight to industrial
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output relative to agriculture than 1952 US prices. The 1952 Chinese
prices, however, represent the best picture of the present allocation
of economic resources in China.
Three general sources were used to secure the 1952 prices. (1) The
Economic Abstracts, FBIS, 190/ give quotations in the wholesale markets
of various cities in East China, Hankow in Central-South China, and
Chungking and other cities in Southwest China. Price quotations' from
North China and from Northeast China are conspicuous by their absence.
In addition-, these sources include some wholesale prices for Shanghai
and for Tientsin for consumer items. (2) FDD summaries of newspaper
price quotations in. Shanghai and Tientsin were available both for pro-
ducer goods and for consumer goods. 191/ (3) The Standard List of
Commodities published by the Ministry of Fuel is also a source. 192/
Many gaps in prices remain after exploiting these sources, both
in commodities and in regional coverage. The firm data consist of
city wholesale prices. Crucial questions remain as to the markup
from the producer level to the wholesale level and between wholesale
and retail prices. The extent and impact of the present tax system
on prices is another important gap in our information.
III. Value Added for Sectors.
A. Agriculture.
The list of agricultural commodities was very extensive and
was taken to be exhaustive of the output of this important sector.
From the gross value of the 1952 output, valued at estimated farm
prices, costs were subtracted, including seed, feed, fertilizer, and
the like.
B. Minerals and Metallurgy.
The gross value of commodities for which production estimates
were available was very nearly complete. In 1936 in China proper,
miscellaneous minerals such as pyrites, kaolin, fireclay, gypsum, and
alum, were 15 percent by weight of salt, limestone, fluorspar, and
antimony, and so 15 percent of the gross value of these commodities
was taken as the gross value of miscellaneous minerals. For each com-
modity the percentage of gross value that was value added was taken
from CIA estimates.
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C. Modern Manufacturing.
The gross value in 1952 of sectors within manufacturing a
to be secured in terms of the commodities for which production data were
available. Only in the case of engineering output was there a gross
value estimate for the whole sector, and even this estimate was in terms
of 1936 prices. A price index was applied to the grbss value of engi-
neering to convert the estimate to 1952 prices. For other sectors
assumptions had to be made as to the portion of the total value of the
sector covered by the commodity list. Two procedures were used for
this purpose:
1. Labor Force.
Out of the various labor force estimates, starting from
the ranges given in CIA estimates, an estimate was made as to the labor
force in each sector. An over-all total for the labor force in modern
manufacturing ,was available independently of subtotals, and percentages
of total labor engaged in each sector were available for China proper
in 1936 and for Manchuria in 1941. Wherever labor force estimates were
used, the assumption made was that gross value of output per worker was
on the average the same in the rest of the sector as for the cOmmodities
for which gross value was estimated.
2. Gross Value of Commodities in Relation to Sectors.
A census of Manchurian industry in 1941 193/ was avail-
able that showed the relationship of the value of the output of in-
dustries -- such as cement or cotton textiles -- to the total value of
the sectors that include them. This census is considered to reflect .
more accurately the 1952 gross value relationship for Manchuria between
the values represented by the commodity lists and the sectors to which
they belong than a breakdown of labor force data alone. For China
proper, in the case of textiles, the gross value of relationship to be
found in Ou Pao San's national income estimates for China in 1933 was
used.
Gross value of output of sectors in China proper was
derived from the value of representative commodities, using proportions
of labor force employed in the production of listed commodities to total
labor force of the sectors. While the results are subject to a large
margin of error, direct valuation of the commodities listed would have
been an obvious understatement of the value of output, since the same
was not sufficiently comprehensive.
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In general, the percentage of value added in relation to
gross value given in the census for Manchuria in 1941 was used for
'estimating value added for modern industry in 1952. This census is _
more complete in its classification of commoaities and in its informa-
tion on value added than any other source after 1933.
Value added for Manchurian industrial output is considered
as typical of average production conditions for modern manufacturing in
China as a whole. The 1941 period is more comparable with 1952 both in
point of time and in terms of economic circumstances than the period
prior to 1936.
IV. Transportation, Trade, Government, and Other.
The State Department, OIR, estimate of value added for the
'railroads and for other modern transportation was used in this re-
port. 194/ The estimate for the value added by government was also
substantially the same as.the OIR estimate.
The first step in estimating value added by trade, food pro-
cessing, and handicraft was to total estimated final sales in the
producing sectors. This total did not include handicraft output
other than processed agricultural products. The total was then
matched against Communist statements of total trade in 1952, and
the residual was taken as the estimated handicraft output other
than processed agricultural products. The value of the total sales'
minus the receipts realized by the producing sectors yielded the
value added for trade, food processing, and handicraft together.
This procedure is subject to a large margin of error, but some of
the possible errors in estimating markups in the sales of commodities
would affect the relative share of GNP contributed by the producing
sectors as against trade, food processing, and handicraft and would
not affect the total GNP itself.
Supplementary farm income was estimated as a percentage of farm
income from crops and livestock. 195/ After a rough check of imputed
rural rent, the OIR estimate was accepted. 196/ The value of personal
services including domestic help receiving pay was made on the basis
of estimated labor force engaged in personal services and an average
income per worker.
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V. Cross-Valuation of the GNP of China and of the US.
The output of goods and services in China in 1952 was valued at
US prices, and in a very rough way the output of goods and services
in the US in 1952 was valued at Chinese prices. These procedures give
two base.s for comparing the GNP of China and the US -- one using US
prices and one using Chinese prices. The variation between the two
comparisons was large. Any comparison between the US economy and an
underdeveloped economy would be likely to have significant differences,
but for CoMmunist China the comparison is made extreme by the forced
industrialization program and accompanying price policies. As the
Chinese industrialization program continues, however, the high prices
of producer goods that prevailed in 1952 are likely to drop relative
to agricultural prices. This would have the effect of lowering the
Chinese yuan valuation of the US industrial sector and therefore in-
creasing the ratio of Chinese GNP to US GNP.
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