DEPENDENCE OF COMMUNIST CHINA ON THE SOVIET BLOC FOR INDUSTRIAL DEVELOPMENT

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A001900010001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 39
• Document Creation Date: December 27, 2016
• Document Release Date: August 27, 2013
• Sequence Number: 1
• Publication Date: January 1, 1961
• Content Type: REPORT

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SECRET
N? 151
Economic Intelligence Report
DEPENDENCE OF COMMUNIST CHINA
ON THE SOVIET BLOC
FOR INDUSTRIAL DEVELOPMENT
CIA/RR ER 61-1
January 1961
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
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SECRET
Economic Intelligence Report
DEPENDENCE OF COMMUNIST CHINA
ON THE SOVIET BLOC
FOR INDUSTRIAL DEVELOPMENT
CIA/RR ER 61-1
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.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
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FOREWORD
The need for an assessment of Communist China's dependence on the
Soviet Bloc for industrial development became urgent late in the sum-
mer of 1960 when the recall of many Soviet advisers indicated that the
Sino-Soviet conflict was beginning to affect economic relations be-
tween China and the rest of the Bloc. This report confines itself to
a discussion of those industries whose development still depends to
a substantial degree on support from the Soviet Bloc. The role of
such support in each of these industries is described in Section II,
following a brief description in Section I of the history of Soviet
Bloc technical and material support for China. Estimates of the
prospects for Chinese industrial development through 1965, both with
Bloc support and without it, are presented in Section III.
The report does not deal with (1) sectors of the Chinese Communist
economy having little dependence on outside sources, such as agricul-
ture, transportation, light industry, and mining; (2) non-Bloc sources
of machinery and technical assistance; and (3) international financial
relations, including China's problems of financing imports.
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CONTENTS
Summary and Conclusions
I. Over-A11 Bloc Programs for Supporting the Industrial-
Page
1
ization of Commanist China - 3
A. Industrial Growth, 1952-59 3
B. Bloc Aid Projects 4
C. Bloc Technical Aid and Technicians 6
D. Self-Reliance and the Declining Soviet Role . . . 7
II. Role of Bloc Support in Selected Important
Industries 9
A. Aluminum Processing 10
B. Steel 11
C. Electric Power 14
D. Cement 16
E. Chemicals 18
F. Electronics 20
G. Naval Shipbuilding 22
H. Aircraft and Missiles 23
I. Ground Force Weapons 24
J. Nuclear Energy 27
III. Effects on the Chinese Economy of a Withdrawal of Bloc
Assistance
A. Short-Run Impact
B. Impact Througli 1965
1. On Industrial Production
2. On Industrial Investment
3. On Technological Development
28
28
28
29
29
31
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Tables
1. Estimated Growth of Chinese Industry, Actual'
and Hypothetical, 1952 and 1959
2. Estimated Production (1959) and Capacity (1965)
of the Steel Industry in Communist China
3. Major Items of Equipment of the Chinese Communist
Ground Forces, 1960
4. Estimated Industrial Production in Communist China,
1960 and 1965
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DEPENDENCE OF COMMUNIST CHINA ON THE SOVTET BLOC
FOR INDUSTRIAL DEVELOPMENT*
Summary and Conclusions
The rapid industrialization of Communist China is being accom-
plished with the substantial help of other Bloc countries, from whom
China is importing more than half a billion dollars worth of machinery
and equipment each year. The core of the program for industrializa-
tion consists of 291 large industrial installations which the USSR is
helping build and about 100 smaller installations for which the Euro-
pean Satellites are supplying the key equipment. About half of these
plants have been completed. In addition, members of the Bloc during
the past decade have sent more than 10,000 technical experts to China,
have supplied China with the technical books and blueprints essential
to industrialization, and have trained thousands of Chinese students
and workers in various scientific and technical fields.
Bloc support enabled Communist China to expand production of heavy
industry from 1952 to 1959 at an annual average rate of about 30 per-
cent, compared with an estimate of about 20 percent if China had relied
only on its own resources. This outside support also has had a vital
effect on the quality of China's industrialization, enabling China to
produce such prestige items as jet aircraft, submarines, tractors,
trucks, and television sets. The joint Sino-Soviet emphasis during
the First Five Year Plan (1953-57) on creating a Chinese machine build-
ing industry has meant that, as of late 1960, Chinese industry could
satisfy nearly all the equipment needs of small and medium installations
in the fields of metallurgy, industrial chemicals, oil refining, and
electric power.
The Chinese Communists recently have been pointing to these ac-
complishments as evidence of their ability to industrialize rapidly
by themselves from now on -- if the need should arise. Whether they
really believe this or are merely minimizing the value of .Soviet aid
for political reasons, there are still many branches of Chinese indus-
try** that will continue to depend heavily on the Bloc for development,
at least through 1965.
* The estimates and conclusions contained in this report represent
the best judgment of this Office as of 15 December 1960.
** See II, below.
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Communist China was reminded of this dependence in the summer of
1960, when the USSR withdrew large numbers -- possibly the great
majority -- of its technicians from China. Although the full impact
of this action cannot yet be evaluated, the Chinese have admitted
that it already is having serious consequences. In the event of a
sudden complete break in relations between Communist China and the
rest of the Bloc, severe dislocations in the Chinese economy would
result during the 'period that alternate sources of supply were being
established, and over the long run such a break would confront China
with formidable problems in moving ahead to technologically complex
industries. If Bloc countries canceled all contracts to export capital
equipment, China would have difficulty switching to non-Bloc suppliers,
both because even the smoothest of transfers would take a long time
and because China probably would be reluctant to establish close eco-
nomic relations with industrial countries of the non-Communist world.
It follows, therefore, that without Bloc support, the leaders of
Communist China would have to moderate their overweening ambition to
industrialize at a headlong pace, although growth would still be rapid.
Industrial production in 1961-65 would grow at a rate of, say, 10 per-
cent per year instead of the presently projected rate of 16 percent.
China would have to cancel or delay many sophisticated development pro-
grams now scheduled, including possible programs for producing atomic
bombs and the related delivery systems.
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I. Over-All Bloc Programs for Supporting the Industrialization
of Communist China
When the Chinese Communist regime was established in October 1949,
Chinese industries were in bad shape. The only important heavy indus-
trial base, in Manchuria, had been looted and wrecked by the Soviet
Army at the end of World War II. Industries in port cities like
Shanghai were oriented toward producing textiles and other consumer
goods, not toward the capital goods wanted by a regime determined to
repeat the classic Soviet pattern of rapid industrialization.
In spite of their weak base, the Chinese Communists in a single
decade built up an impressive industrial complex approaching that of
Japan in size but not in quality or variety of output. This feat
could not have been achieved without substantial outside support in
the form of technology and equipment.* Effective support was sup-
plied by the USSR, which undertook a comprehensive program, running
from 1950 through 1967, to help build 291 large industrial installa-
tions in China. These plants are the core of an industrialization
effort that is designed to give China by 1967 an industrial establish-
ment exceeding that of Japan or the UK in the production of basic in-
dustrial commodities. By 1967 this industrialization effort, if suc-
cessful, should make China self-sufficient in such basic industries
as the coal, electric power, metallurgical, and machine building in-
dustries. Construction of the large new factories has had high pri-
ority for Soviet machinery and engineering experts. The European
Satellites have also made important contributions of machinery and
technical experts. During the past decade, Bloc technical advice and
factory equipment have been transferred in quantities that often have
taxed the ability of Chinese skilled personnel and construction organi-
zations to make full use of them. From the Chinese point of view, it
has been a program of maximum, or nearly maximum, scope. In short,
China has been engaged in forced-draft industrialization with the USSR
supplying much of the draft.
A. Industrial Growth, 1952-59
A hypothetical estimate may be made of the rate at which in-
dustrial production would have grown in Communist China during 1952-59
if there had been no Bloc support. In light industry, which the
Chinese largely have built up themselves and in which much capacity
was idle in 1952, dependence on Bloc equipment and technical aid has
* Communist China has not needed much support in the form of finan-
cial aid. Except in the early years of the Communist regime, China
has been able to export enough agricultural products, light industrial
and consumer goods, and minerals to pay for imported capital equipment.
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been small. In heavy industry, however, it is estimated from trade
and investment data that at least half the increase in total output
achieved during 1952-59 was made possible by Bloc machinery and techni-
cal aid. On the premise that Bloc support was responsible for none
of the progress in light industry and for 50 percent in heavy indus-
try -- conservative estimates -- the actual growth of industry from
1952 to 1959 may be compared with a hypothetical situation of no out-
side support, as shown in Table 1.*
As shown in Table 1, the ratio of the value of heavy indus-
trial production to the total rose from 37 percent in 1952 to 61 per-
cent in 1959. Almost certainly heavy industry could not have achieved
its 1959 position of preeminence over light industry if it had had to
rely for development on Chinese domestic resources or on the technology
and machinery that could have been smuggled through the embargo imposed
against Communist China during much of that period. An aspect not
brought out in the above figures, but to which the Chinese Communists
attach great importance, is their attainment with Bloc support of the
capability of producing prestige items like jet airplanes, submarines,
tractors, trucks, large electric generating equipment, and metalcutting
machine tools. Bloc support -- especially Soviet support -- has been,
in other words, the means by which China has pushed ahead into the
technologically complex fields that must be mastered if a nation is to
become a modern industrial power.
B. Bloc Aid Projects
Soviet support for Chinese Communist industrialization is being
provided mainly through long-term agreements covering 166 factories,
either completed or under construction, as well as through 125 addi-
tional projects to be built during the next few years. Four agreements
signed between 1950 and 1956 make up the first group, under which the
USSR agreed to provide $2.025 billion** worth of equipment and all
necessary technical help for construction of 166 major installations.
By the end of 1959, $1.35 billion worth of Soviet equipment for these
installations had been delivered, and 130 projects had been completed.
During the early phase of industrialization, the program concentrated
on the mining, metallurgical, and electric power industries; recently,
the emphasis has been shifting to more complex fields such as machine
building, chemicals, and electronics. Under the second group of 125
projects, the USSR promised in August 1958 to give "technical aid" for
47 industrial projects of unstated size and in February 1959 agreed to
* Table 1 follows on p. 5.
** Unless otherwise specified, all dollar values in this report are
in terms of US dollars.
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Table 1
Estimated Growth of Chinese Inpstry, Actual and Hypothetical
1952 and 1959
Light industry
value added
Heavy industry
value added
Total
Average annual increase,
1952-59 ?c/
All industry
Heavy industry
1952
1959
Actua1
Actual
Hypothetical 2/
Billion Yuan 10/
Percent
Billion Yuan b/
Percent
Billion Yuan b/
Percent
5.7
63
13.6
39
13.6
53
3.3
37
21.4
61
12.3
11.7
9.0
100
35.0
100
25.9
100
21
16
31
21
a. Assuming no outside support.
b. 245 yuan equal US $1 in. trade with non-Communist countries; 1 yuan has equaled approximately
1 ruble in Sino-Soviet trade. Values in this table are given in terms of 1957 prices.
c. Average annual rates of growth are computed at the compound interest rate between the terminal
years (1952 and 1959).
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furnish 31.25 billion worth of equipment by 1967 for 78 plants which
were described as "giant industrial enterprises" in the fields of
metallurgy, chemicals, petroleum, machine building, electrical machin-
ery, and others.
The European Satellites have supplemented the Soviet programs
by helping to build 68 projects initiated during the First Five Year
Plan (of which 44 were completed by the end of 1958) and subsequently
signing agreements to help build about 4o more projects. Except for
an electronics combine built by East Germany near Peking, Satellite
projects have been comparatively small. They include power stations
and plants for producing cement, plastics, paper, and sugar.
C. Bloc. Technical Aid and Technicians
Bloc technical aid has been just as important as the supply of
equipment to the development of industry. in Communist China. Under an
agreement with the USSR for scientific and technical research in China,
signed January 1958 and extending through 1962, this technical suppO't
became more comprehensive. To draw closer to world standards of com-
petence in a significant number of selected scientific fields by 1967 --
the goal of a 12-year Chinese plan initiated in 1956 -- the Chinese
would require considerable outside aid. If a slower rate of develop-
ment were acceptable to Communist China, it could, without outside aid,
gradually expand its scientific and technical capabilities by using a
small group of able Chinese scientists as a nucleus.
The Bloc has transferred technology to Communist China in the
following ways: (1) by supplying a vast quantity of blueprints and
technical information without charge; (2) by dispatching advisers and
technicians to perform a wide variety of tasks including supervising
installation of machinery, troubleshooting, advising Chinese ministries
and planning commissions, and teaching in Chinese institutions; and
(3) by training Chinese technicians and researchers in Bloc countries.
By October 1959, according to Chou En-lai, about 11,000 Soviet
and 1,500 Satellite technical experts had worked in Communist China at
one time or another. According to other official reports, China in
the past 11 years has sent about 7,000 students (including 1,400 post-
graduates) to the USSR for study and 8,000 persons to Soviet industrial
establishments for on-the-job training.
The need for Soviet technicians in Communist China declined as
the Chinese became increasingly able to do technical work themselves.
In the future, China will need fewer experts, but the ones who do come
will have to be of very high caliber. Soviet construction teams
assigned to China in the past often included foremen, geologists,
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draftsmen, and even welders. What China most needs at the present
time are high-level consultants and teachers for research institutes.
The majority of the Soviet experts were withdrawn from Commu-
nist China in the summer of 1960. The initiative for the withdrawal
came from the USSR, which .presumably wanted to remind the Chinese of
their continued dependence on Soviet economic assistance. Peking, for
its part, has been stressing self-reliance, but the scope of the with-
drawal is far greater than Peking bargained for. It remains to be
seen whether the withdrawal is permanent or whether new groups of
Soviet technicians will be sent to China.
D. Self-Reliance and the Declining Soviet Role
As recently as the spring of 1960, Chinese Communist statements
often acknowledged that Soviet aid was still important and would be for
some time to come. Recently, reflecting the chill that has come over
Sino-Soviet political relations, Chinese spokesmen have avoided men-
tioning the Soviet role specifically, although they still occasionally
acknowledge China's backwardness and need for aid from some unspecified
source.* Nevertheless, a main emphasis in the current propaganda line
is to 'rely on our own efforts to build our country into a great, rich,
strong socialist power." Other Chinese Communist statements made in
August and September 1960 claimed that China can do virtually all its
own designing of new factories and make most of the machinery it needs.
These probably are overstatements for propaganda effect, be-
cause it seems unlikely that the Chinese Communist leadership has
changed its mind in the space of a few months about the value of Soviet
support. Nevertheless, it is true that the Soviet role in the Chinese
industrial development program, although still important, has been de-
clining gradually. There are two reasons for this decline: (1) the
Chinese Communists have become increasingly able to design and manu-
facture equipment for new factories and (2) since 1957 Peking has
emphasized construction of indigenous small-scale plants to supplement
the large-scale plant program based on Soviet aid projects. The small
plants with their simple machinery and processes can more readily be
built and operated in China than can large, complex factories.
Although usually inferior, the products of small plants have been
useful in meeting local and rural needs.
* For example, top economic planner Li Fu-chun, in an article pub-
lished in Red Flag in mid-August 1960, admitted that "we still have
practically nothing to speak of in many fields of science and tech-
nology" and that "the greatest possible help from abroad should be
obtained in socialist construction."
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According to official Chinese Communist statements, Chinese
industry in 1960 was producing about 90 percent of the nation's supply
of new machinery and equipment, compared with 60 percent in 1957, al-
though much of the increased production consisted of simple machinery
for agriculture and small plants. The Chinese have claimed that they
will produce 45 to 50 percent of the machinery needed to equip future
Soviet-aid projects; the proportion equipped by China during the First
Five Year Plan period reportedly was 30 to 50 percent. The Chinese
themselves apparently intend to do most of the design work on future
projects. The marked increase in Chinese competence in industrial con-
struction is illustrated by the following Chinese Communist statements
(the first, made in 1955, described the nature of Soviet aid during the
First Five Year Plan; the second was issued in 1959 in connection with
the agreement to build 78 new factories during 1959-67):
On the ... industrial projects which the
Soviet Union is helping us to build, she assists
us throughout the whole process from start to
finish -- from geological survey; selecting con-
struction sites; collecting basic data for de-
signing; designing; supplying equipment; direct-
ing the work of construction, installation, and
getting into production; and supplying technical
information on new types of products; right down
to the directing the work of the manufacture of
new products. (Li Fu-chun, July 1955)
.The Soviet Union will help with research and
designing services supply equipment, and
send the required number of Soviet experts to
the enterprises ... Chinese workers will be re-
ceived for ... technical practice in various
enterprises in the Soviet Union.
China's achievements in developing her na-
tional economy, particularly in expanding her
machine building industry and training skilled
engineering and technical personnel, permit her
to rely on herself in manufacturing the major
part of the accessory equipment needed for the
enterprises named in the agreement and under-
taking the work of surveying, prospecting, and
designing in connection with certain of these
enterprises. (Peking Review, February 1959)
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To state merely that the Bloc role in Communist China's in-
dustrial development is declining is misleading. First, the value of
Bloc projects under construction and planned for the Second Five Year
Plan (1958-62) is actually much larger than during the First Five Year
Plan (1953-57), but because over-all Chinese industrial investment has
been expanding even more rapidly, the proportion taken up by Bloc proj-
ects has declined. The Chinese imported 2.84 billion nines ($710 mil-
lion) wor-h of machinery to equip Soviet-aid projects during the First
Five Year Plan and have already imported 2.26 billion rubles ($566 mil-
lion) worth of such equipment in the first 2 years of the Second Five
Year Plan. The Chinese in 1958 and .1959 allocated about one-fourth of
all their industrial investment funds to Soviet-aid projects in con-
trast to 44 percent during the First Five Year Plan. In absolute
amounts, the Chinese invested 11 billion yuan in Soviet-aid projects
during the First Five Year Plan, of which one-fourth (about 2.84 bil-
lion yuan*) went for imported Soviet equipment and three-fourths for
domestically produced equipment and for construction costs. Finan-
cial data for Satellite projects are less well known than for Soviet-
aid projects, but the Soviet-aid program has been by far the larger.
Second, and even more important than the physical level of
Bloc deliveries of equipment, is the role of Bloc deliveries in
raising the general technological level of the economy of Communist
China. The continuous shift in Bloc support to higher levels of
technology is described in Section II, below, which assesses the
degree of China's dependence on outside help for the development of
specific important branches of industry.
II. Role of Bloc Support in Selected Important Industries
Heavy industry in Communist China has been developing rapidly and
now can be expected to satisfy nearly all of planned needs through 1965
for the following items: equipment for smelting and refining of copper
and aluminum, machinery for small and medium iron and steel furnaces
and steel rolling mills, simple coal mining machinery, oil drills, dis-
tillation and thermal cracking equipment for refining petroleum, in-
dustrial chemicals, small and medium turbogenerating equipment, rubber
tires, medium lathes, medium trucks, tractors, medium merchant vessels,
small naval vessels, small transport aircraft, radios, and television
sets.
The branches of heavy industry described in Sections A through J,
below, are those that still depend heavily on the Soviet Bloc for their
development through 1965. These industries, it is estimated, include
* One yuan has equaled approximately one ruble in valuing imports
from the USSR.
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the processing stages of aluminum and steel, large electric power sta-
tions, cement, selected chemicals (fertilizer, plastics, and synthetic
fibers), heavy and complex machine tools,* selected electronic equip-
ment, naval shipbuilding, jet aircraft, heavy artillery and tanks, and
nuclear energy.
Not all of these industries depend on outside help for both tech-
nology and capital equipment; the nature of dependence varies from
industry to industry. Communist China has mastered the technology of
most basic industries, such as aluminum, steel, and electric power
but needs to import capital equipment in order to develop these indus-
tries with the rapidity called for in present plans. On the other
hand, some industries, such as electronics, seem to have developed an
adequate production capability but will continue to require tech-
nical assistance from abroad. There remain a few highly complex in-
dustries, notably naval shipbuilding, aircraft, missiles, and atomic
energy, that depend for their development on both imported knowledge
and imported equipment.
A state of strong dependence on the Bloc may be said to exist when
Communist China is unable to turn to non-Bloc sources of technology
and equipment to replace Bloc sources. By this definition, China is
not heavily dependent on the Bloc for petroleum products, heavy ma-
chine tools, and antifriction bearings -- although imports of these
items from the USSR have been vital to the Chinese economy -- because
these products can be readily purchased from non-Bloc countries.
Military and atomic energy items, however, presumably will continue
under Western embargo to China. Moreover, the generally hostile
attitude of China toward non-Bloc industrial countries and its desire
to preserve economic Secrets will keep it from taking full advantage
of opportunities that do exist to acquire technology and equipment
outside the Bloc. It would be difficult for China to transfer con-
tracts for complete factories to non-Bloc manufacturers, especially
those contracts requiring the services of foreign technicians. It is
assumed in this report that most such contracts left unfulfilled by
the Bloc would be passed to domestic Chinese factories to fulfill as
best they could.
A. Aluminum Processing
Of the basic nonferrous metals important to modern industrial
economies -- aluminum, copper, lead, zinc, and tin -- aluminum probably
is the most difficult to process. Whereas the Chinese Communist
* Heavy and complex machine tools are not treated in a separate sub-
section but are part of the discussion of other subsections, such as
those that discuss steel and aluminum.
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machinery industry should prove during the next 5 years to be able to
make' the dies for drawing copper wire and most of the other machinery
needed to cast and shape copper, lead, zinc, and tin, China will have
to import most of the rolling mills, extrusion presses, and other fab-
ricating equipment needed to process aluminum metal.
Communist China, which planned to produce about 84,000 t9ns*
of aluminum metal in 1960 and to *port small quantities, is believed
to have plants capable of fabricating about 100,000 tons of metal.
The principal aluminum mill in China is one at Harbin that was built
in the mid-1950's with modern Soviet equipment. A small rolling mill
of pre-World War II vintage is still in operation at Shanghai.
Chinese Communist plans for expanding production of aluminum
metal are shown in the following tabulation:
Thousand
Year Metric Tons
1952
1960 84
1962 loo to 120
(Official target)
1965
250
(Estimate)
Producing the metal poses no problem to Colinunist China, which
has large deposits of aluminous shale and is planning to build and
equip aluminum refineries entirely by iteelf. China cannot, however,
make the rolling mill equipment and extrusion presses needed for
aluminum mills and has been planning to import such equipment from
Bloc countries. China will need to add about 150,000 tons of fabri-
cating capacity to its aluminum industry to match anticipated ex-
pansion of refinery capacity through 1965.
B. Steel
Communist China holds the classic Communist view that an iron
and steel industry should be at the core of any program for rapid in-
dustrialization and consequently gives extremely high priority to this
* Tonnages are given in metric tons throughout this report.
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industry. China has greatly expanded the large iron and steel com-
bine at An-shan and has been building two new combines at Wu-han and
Pao-t'ou, all with Soviet aid. Construction has also been proceeding
on five somewhat smaller iron and steel plants, which are being par-
tially equipped with Soviet and Satellite machinery, as shown in
Table 2.* Although the Chinese inherited some capacity from the
Japanese and have built some small plants on their own, most of the
industry consists of the Bloc-equipped plants, which are large, modern
mills capable of producing steel of standard quality and of rolling a
large part of the rails, pipes, beams, bars, and other shapes needed
for the Chinese construction and machinery industry. The ability to
produce a wide variety of alloy and special steels, however, is still
lacking. In 1959 the Chinese imported 825,000 tons of finished steel,
or nearly 10 percent of their steel product supply, principally in
the forms of silicon steel sheets for electrical purposes, carbon
steel sheets, alloy steels, and steel plates and tubes.
Since 1957, large numbers of domestically equipped small
plants have been built to supplement production from the large plants.
After a false start in 1958 with native backyard furnaces, the Chinese
Communists switched to small plants of relatively modern design.
These small, semimodern plants produced 3 million tons in 1959, their
first full year of operation, and their capacity may have been in-
creased to about 7 million tons by the end of 1960. Such aggregate
figures are impressive, but the product of small plants has been of
low quality and has been of little value in meeting the demand for
steel products by machinery factories and in the industrial construc-
tion program. The smAll plants have been useful in meeting the non-
exacting standards of local construction, agricultural, and handicraft
Industries. Because of the limitations of small plants, it is probable
that the Chinese intend, after 1960, to push ahead primarily on the
basis of the large-plant program that at present relies on importing
technology and equipment.
Under the large-plant program, if all goes well, Communist
China will have, built up by 1965 a well-balanced, modern iron and
steel industry capable of producing an estimated 28 million tons of
standard grade steel, not counting production from small plants. To
carry out this program, China will have to rely heavily on the Bloc.
During the next 2 years the Bloc is to supply key equipnent for nearly
all new open hearths and rolling mills. The USSR is also helping
China build and bring into full operation three metallurgical machinery
factories at T'ai-yuan, Mukden, and Fu-la-erh-chi (near Tsitsihar in
Manchuria). These factories are already in trial production, producing
* Table 2 follows on p. 13.
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Table 2
Estimated Production (1959) and Capacity (1965) of the Steel Industry
in Communist China a/
Million Metric Tons
1959 Production 1965 Capacity
Major Soviet aid projects
An-shan
Wu-han
Pao-tiou
Tsitsihar (special steel plant)
Total
Plants partly equipped with Soviet
Bloc machinery
5.6
0.5
0
o.4
6.5
6.0
3.0
3.0
0.5
12.5
Ta-yeh
0.5
1.3
Trai-yuan
o.4
2.0
Chungking
0.9
1.5
Shih-ching Shan
0.7
1.3
Hsiang-Van
0
1.2
Total
2.5
7.3
Special steel plants equipped with
Japanese, Chinese, and Bloc machinery
1.1
1.2
Small Chinese-built plants
3.0 12/
7.0
Large plants mostly equipped with
Chinese machinery
0.3
7.5
Grand total
13.4 12/
22.2
a. The steel plants tabulated above are measured in terms of their
production of, or capacity to produce, crude steel. Finished steel
capacity for most plants may be rated at 75 percent of crude steel
capacity.
b. In 1959, few small Chinese plants had completed their rolling mill
components. Therefore, total rolling mill production was about 65 per-
cent of crude steel production, or 8.5 million tons.
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prototypes of large rolling mill equipment. It takes a long time to
achieve proficiency in this field, but, with Soviet advisory help,
these plants should be able after 1962 to manufacture most of the
basic equipment needed for new steel mills. China still will have
to import some special rolling mills and control instruments. China
also will have to import equipment (especially associated electrical
equipment and control devices) for electrical furnaces, which make
the alloys used in modern machine tools, chemical machinery, and jet
and rocket engines. A large increase in capacity and technological
level of furnaces producing alloys ib needed to support the rapidly
expanding machine building industry.
A complete breakoff in economic relations with the Soviet Bloc
would compel Communist China to reduce its plans for developing the
quantity and quality of steel production, but such a breakoff should
not greatly affect current operations. China should be able eventually
to complete all Bloc aid projects because some of the machinery prob-
ably has been delivered and China is rapidly acquiring the know-how
and factory capacity to produce the undelivered equipment. If thrown
on its own resources, China might be able by 1965 to complete all
known Bloc projects and some domestic projects, totaling about half
the 16 million tons of crude steel capacity to be added under the
present program for 1961-65. It also could further expand small
plants, especially if it wanted to maximize production to prove to
the world that China could not be effectively isolated. As noted
above, however, there is only limited need for additional quantities
of the inferior product of small plants.
C. Electric Power
The Chinese Communists realized from the start the importance
to their economic program of an adequate supply of electric power.
With substantial Soviet aid, they have steadily expanded the industry,
most of the time staying one jump ahead of industrial demand for elec-
tric power. Installed capacity of Chinese electric powerplants in-
creased from 2 million kilowatts (kw) in 1952 to 13.6 million kw in
1960, when the industry generated about 58 billion kilowatt-hours (kwia)
of electricity. These 1960 levels of capacity and output were not ex-
ceeded by the USSR until 1948. Of the 13.6 million kw of capacity
now in place, 6.5 million kw are in plants imported from the Bloc.
Unwilling to rely indefinitely on imports of electrical equip-
ment, the Chinese Communists gave high priority during the First Five
Year Plan (1953-57) to the construction of factories capable of pro-
ducing electrical equipment. By 1960 these Chinese factories were
capable of supplying about two-thirds of the machinery needed to ex-
pand electric power capacity. Assisted by the USSR, the Chinese have
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built turbogenerator factories at Shanghai and Harbin and factories
producing transformers, motors, and accessory equipment at Mukden
and Shanghai. A fourth important center of the electrical equipment
industry is being built in Sian with Soviet and East German aid, and
a fifth is going up at Chungking, also presumably with outside aid.
Production standards in the industry, although improving, are below
Bloc or world standards, primarily because management has been in-
experienced and under strong pressure to meet quantity goals. There
have been reports of large generators which operated far below rated
capacity upon installation.
The following tabulation, which shows in million kw the esti-
mated installation of turbogenerators in Communist China, illustrates
the growth of domestic ability to produce turbogenerators, the main
product of the electrical equipment industry:
Origin of Turbogenerators 1957 1958 1959 1960 1965 1961-65
Million Kilowatts
Imported
0.6
1.0
1.6
1.7
2.0
10.8
Domestic
0.2
0.7
1.5
2.5
5.1
21.4
4.
Total
0.8
1.7
3.1
4.2
7.1
32.2
Percent
Imports as percent
of total 75 59 52 40 28 34
Even after 1965, Communist China will need Soviet help to
carry out plans for huge hydroelectric stations on the upper reaches
of the Yangtze and Yellow Rivers. China cannot produce the turbo-
generators of 200,000 kw or more that are desirable for such projects
and is reported to have already placed orders with the Leningrad
turbogenerator factory to design and manufacture 50 turbogenerators
of 500,000 kw to be installed in the Yangtze River Gorge, probably
in the decade after 1970.
During 1961-65, Communist China apparently plans to increase
electric generating capacity from 13.6 million kw in 1960 to about
46 million kw in 1965. Of the capacity to be added, almost 11 mil-
lion kw are to be imported and about 21 million are to be produced
domestically, as shown in the above tabulation. If cut off from
Soviet Bloc support, China would be deprived of scheduled imports,
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which, because they consist primarily of large units, would be dif-
ficult to replace from domestic production. The transfer of manu-
facturing contracts for large projects to non-Bloc suppliers would
involve long delays. In addition, China would be reluctant to sign
contracts requiring the services of non-Bloc technicians.
Because the electrical equipment industry is already well
developed, even if poorly managed, Communist China's ability to main-
tain projected levels of production of turbogenerators probably would
be affected only slightly by a withdrawal of Soviet support. The com-
paratively small, standardized units that make up the bulk of domestic
production are types readily obtainable from non-Bloc manufacturers,
so that any failure in domestic production could be made up with non-
Bloc imports.
The above data suggest that by relying solely on domestic
production and on imports of minor equipment from non-Bloc sources,
Communist China could expand its electric power industry to a capacity
of 35 million kw in 1965, some 25 percent below the presently antici-
pated total of 46 million kw. In, terms of power generated, the indus-
try could produce 150 billion kwh instead of the 195 billion kwh
presently projected. Even so, China would rank with such major in-
dustrial countries as Japan and West Germany, which generated 82 bil-
lion and 95 billion kwh, respectively, in 1958.
D. Cement
Cement production facilities in Communist China consist of
three types: (1) plants of various sizes established before 1949 and
renovated and expanded with Bloc help; (2) large plants (annual capac-
ities of 300,000 to 1 million tons) built since 1949, entirely with
Bloc equipment; and (3) small plants (capacities of less than 100,000
tons) built since 1957 with equipment supplied by Chinese machinery
factories. Production of cement by these categories was as follows
in 1959:
Type of Plant
Production
(Million Tons)
Percent
Pre-1949 plants
7.4
60
Post-1949 large plants
32
26
Small plants*
1.7
14
Total
12.3
100
* Excluding native kilns, which were established in large numbers
in 1958 but mostly replaced with small plants of relatively modern
design in 1959.
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Communist China does not produce the large gears and rotary
kilns used in large cement plants, nor is it presently planning to
begin quantity production during the next 5 years. Although China
can make the equipment, it seems to have made an economic or strategic
decision to import cement plants rather than to divert the capacity
of heavy machine building and boiler factories -- now geared up to
produce metallurgical and electric power equipment -- to the produc-
tion of cement-making machinery. Under this policy China has signed
long-term contracts, running from 1961 through 1965, with East Germany,
other Bloc countries, and Denmark, for the importation of complete
sets of equipment for large cement plants with a total annual capacity
of about 8 million tons. The Danish contract is unusual in that it
is the only complete factory of any type that China is known to have
ordered from a non-Bloc country. Although forced to tell its Danish
supplier the altitude and atmospheric pressure under 14hich the plant
would operate, China has refused to divulge the location of the plant.
Communist China cannot readily make equipment for large cement
plants without interfering with higher priority work, even though the
light machinery plants in China can produce large quantities of ma-
chinery for small cement plants. The regime has been vigorously push-
ing local construction of small plants, which show promise of being
economical and of producing a good-quality product.
Information on negotiated imports and plans for expanding
production in small plants suggests that by 1965 Communist China
hopes to produce cement in the following quantities:
Production
Type of Plant (Million Tons) Percent
Pre-1949 plants
8
27
Post-1949 large plants
12*
40
Small plants
10
33
Total 30 100
If cut off from Bloc sources of machinery, Communist China
would have difficulty continuing the program for building large plants.
It could not quickly turn to non-Bloc suppliers, because equipment
negotiated for at this late date could not be manufactured, installed,
and brought into full operation much before 1965. The operation of
existing cement plants would also be affected if the Bloc cut off the
* Eight million tons from plants established during 1961-65.
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flow of spare parts to the industry. Because the manufacturing pro-
cess in cement plants is highly abrasive, equipment is subject to
rapid physical deterioration and must be replaced frequently.
If the Bloc suddenly stopped supplying equipment, Communist
China undoubtedly would try to accelerate the small-plants program to
cushion the blow. The seriousness of the loss would depend on how
rapidly China could build small plants in large numbers and get them
running smoothly and economically.
E. Chemicals
The chemical industry of Communist China has been heavily
dependent on Bloc equipment and technical assistance. Bloc assist-
ance (primarily Soviet, East German, and Czechoslovak) has extended
from technical assistance, in some instances only the supplying of
blueprints, to the construction and equipping of complete plants.
Plants producing synthetic ammonia and nitric acid, nitrogen fer-
tilizer, pharmaceuticals, dyestuffs, synthetic fibers, plastics, and
synthetic rubber have been the major beneficiaries of Bloc assist-
ance. The Chinese have needed only minor assistance in the produc-
tion of most basic industrial chemicals, including sulfuric acid,
soda ash, and caustic soda.
The USSR began to help develop Communist China's chemical
industry as early as 1950 when it started remodeling and expanding
the Dairen chemical center, originally built by Japan. Subsequently,
the USSR has completely equipped plants producing nitrogen fertilizer
(Kirin, T'ai-yuan, and Lan-chou), dyestuffs (Kirin and T'ai-yuan),
calcium carbide (Kirin), synthetic rubber (Lan-chou), pharmaceuticals
(T'ai-yuan and Shih-chia-chuang), and starch (Shih-chia-chuang).
Czechoslovakia has equipped a fertilizer plant at Chin-t'ang, and East
Germany has supplied equipment and technical assistance to synthetic
fiber plants at Pao-t'ing and Peking. Although all these plants are
completed, most are still operating below their original designed
capacity. Soviet technical assistance has been given also to the new
plants at Nanking and T'ai-yuan that produce phosphorus fertilizer
and to the recently expanded nitrogen fertilizer plant in Nanking.
The scope of Communist China's ambitions for its chemical in-
dustry is shown in the following tabulation of estimated production
of selected chemicals:
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Metric Tons
Chemical
1960
1965
Sulfuric acid
1,400,000
3,600,000
Caustic soda
420,000
940,000
Nitric acid
430,000
800,000
Nitrogen fertilizer
(in terms of
20 percent N) 1,900,000 5,500,000
Plastics 17,000 (1958) 200,000 (1962 Plan)
Synthetic fibers Negl. 100,000 (1962 Plan)
Communist China probably can expand production of most basic
industrial chemicals, including sulfuric acid and caustic soda, by
itself. Technical problems are few, and equipment to produce these
items can be made by the chemical equipment industry, which manufac-
tures a growing range of chemical equipment, including acid-resistant
pumps and air and refrigeration compressors, as well as more complex
items such as oxygen-making equipment.
Chinese Communist ingenuity has not solved the problem of how
to make nitrogen fertilizer in large quantities by indigenous means.
The bottleneck is the high-pressure equipment needed to make synthetic
ammonia, a vital input for quantity production of nitrogen fertilizer.
Although Czechoslovakia is believed to be supplying a plant to produce
layered hi -pressure vessels, with which China will then be able to
equip its own synthetic ammnnia factories, this Czechoslovak plant
probably will not reach significant levels of production for several
years. China will also have to develop a capability for making high-
pressure compressors for this industry.
Meanwhile, Communist China has been forced to purchase a large
amount of equipment from Bloc countries to build up the fertilizer
industry. It reportedly has contracted with East Germany, Poland,
and Czechoslovakia to supply 3 or 4 nitrogen fertilizer plants each
by 1962 and has planned to expand the Soviet-built plants at Kirin,
Tiai-yuan, and Lan-chou with more Soviet equipment. Because nitrogen
is the principal nutrient deficiency in Chinese agriculture, these
planned imports are a key element of the Chinese program for expand-
ing agricultural production in the next few years. It is estimated
that without Bloc equipment, production in 1965 of synthetic nitrogen
fertilizer would be only about 60 percent of the production presently
projected -- that is, 3.3 million instead of 5.5 million tons. If
Bloc aid ceased, the Chinese might increase their imports of nitrogen
fertilizers and try to obtain plant equipment and technical aid from
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non-Bloc countries, although any transfer of contracts from Bloc to
non-Bloc suppliers for building complete plants would entail long
delays.
The Chinese Communists have little competence or experience
in designing, constructing, and equipping plants to produce synthetic
organic chemicals and synthetic materials, such as fibers, plastics,
and rubber. These sectors of the chemical industry would be very ad-
versely affected by a withdrawal of Bloc support. The loss of Bloc
sources of supply of spare parts and technical assistance might even
reduce the level of production and the quality of those chemicals
goods now being produced as the result of previous aid, especially
in plants equipped with machinery that is not yet manufactured in
China. In this event, however, China probably could turn to Japan
and Western Europe for equipment and technical assistance needed to
maintain production at existing facilities.
F. Electronics
Since 1955, Communist China has acquired an impressive elec-
tronics manufacturing industry. Most of the capital equipment for
the new plants was supplied by the USSR and East Germany. Among the
major centers of production are Peking, Chieng-tul Nanking) and Shanghai.
Chinese capability to manufacture most types of standard receiving
tubes, circuit components, and simple finished items like radios and
television sets approaches that of the USSR. The quality of Chinese-
made components in radio samples tested in the US has been excellent.
Large-scale production of tubes began in 1959 when 43 million were
produced. By comparison, 1959 production was 17 million in East
Germany and 119 million in the USSR. China by 1959 or earlier had
also begun production of radio and television receivers (production
in 1959 was about 1.6 million and 10,000, respectively), navigational
aids and radar, and communications equipment like teleprinters, fac-
simile, and broadcasting and TV transmitters. Relying on substantial
Soviet material and technical aid as well as on Western technology,
Chinese laboratories have produced high-speed electronic computers,
some types of semiconductor devices including transistors, and a
fairly wide range of more advanced communications equipment, such as
medium-capacity microwave sets.
Assistance from Bloc countries has been the basic reason that
an industrially backward country like Communist China has advanced so
far in the highly complex field of electronics. China has been able
to draw on Bloc countries for designs of finished items and technology
and equipment for producing component parts. The Chinese also have
adapted or copied Western prototypes of a few items, such as test
equipment. The electronics industries in the US and the USSR employ
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many scientists to carry out theoretical research and product develop-
ment, activities the Chinese largely leave to their more advanced part-
ners. Beyond the research and development stage, the electronics in-
dustry is inherently labor intensive and well suited to China. To
overcome their technological backwardness, the Chinese Communists
have established several electronics institutes and given high pri-
ority to electronics in their long-range scientific program. Such
efforts are already beginning to pay off, but it will be many years
before they give China an independent capability for designing all
new electronics products.
By and large, the new electronic manufacturing facilities
already are fairly well developed, and little further plant expansion
is expected in the near future. From now on, development of the in-
dustry will depend mainly on Bloc supply of design information and
on the learning of production techniques by Chinese Communist engi-
neers. The Chinese also will continue to exploit available Western
prototypes and technical information.
With outside help, by 1963 or 1964 Communist China probably
will be able to produce much of the military and civilian electronic
equipment it needs, including scatter communications, radio direction-
finding equipment, shipborne anticollision radar, radars for early
warning and directing fighter aircraft in combat, and gunlaying radar.
One exception will be microwave equipment, needed in large quantities
for a high-capacity, secure radio network that is currently being in-
stalled to handle communications for the armed forces, high echelons
of the government, and Important branches of industry. Because of
special technical problems and because of inability to produce in
quantity special tubes and components used in this equipment, China
plans to import microwave equipment at least through 1965.
If deprived of Bloc advisers, technical information, and spe-
cialized components, the electronics industry in Communist China
probably would postpone some plans for producing complex modern equip-
ment. The industry probably would wish to concentrate its available
engineering skills on continuing production of present product lines
and on providing spare parts for existing equipment. For a while, it
might prove difficult to maintain even present levels of production,
because production of electron tubes, now apparently dependent on
tungsten wire from the USSR, probably would drop off unless sources
of supply were found in the non-Bloc world. For years the world's
largest producer of tungsten ore, China only recently completed fa-
cilities to make tungsten metal and shape or draw it into filament
wire; production in adequate varieties and quantities probably is
still a year or two off. China has been able to turn to non-Bloc
countries for civilian equipment, such as specialized test equipment.
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Its primary interest, however, is in electronics equipment for mili-
tary applications (it is estimated that 75 percent of Chinese tube
production is for military use). .A break with the Bloc would effec-
tively slow down present plans to make progress in military electronics.
G. Naval Shipbuilding
Communist China first produced large naval vessels in 1955,
under a program closely supervised by large numbers of Soviet tech-
nicians and dependent on the USSR for designs and many component
parts. By the end of 1960, 21 W-class submarines, 4 Riga destroyer
escorts (DE's), 18 Kronstadt subchasers, 10 minesweepers, and about
150 torpedo boats (PT/PGM classes) had been built. In addition to
these vessels, initial construction is believed to have started on a
Kotlin-type destroyer and one or more new types of conventionally
powered submarines.
The Chinese Communist shipbuilders now carry out their own
fabrication and assembly of naval-vessel hull structures, using do-
mestically produced steels, even the special steel used for submarine
hulls. The main shipbuilding deficiency at this time lies in the
production of marine components. Many of these components are now
in production domestically, but the more complex items, such as pro-
pulsion machinery, electronic equipment, armament, and possibly navi-
gational equipment, are still imported from the USSR. China has ac-
quired considerable experience in producing large marine diesel en-
gines, including types used to propel submarines as well as merchant
vessels. It has not, however, begun to produce large steam turbine
engines of the types used in destroyers and destroyer escorts. The
Chinese have designed and produced a fast patrol boat but in general
have a limited design capability and must rely on the USSR for designs
of most naval vessels.
Termination of Soviet aid would force cancellation of the new
program of building Kotlin-class destroyers and the new class of sub-
marines. It is unlikely that construction of W-class submarines could
continue, although further construction probably could be resumed in
2 or 3 years depending on how fast China learned to produce W-class
components.
Even if unable to build major combat vessels, Communist China
still could continue to build a variety of torpedo boats and other
small surface vessels up to and including subchasers. Because such
vessels would be highly valuable for patroling and defending the long
Chinese coastline, their construction would have high priority but
could take place initially only at the expense of merchant ship con-
struction, which might lag behind desired rates for a year or two.
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Another problem would be the difficulty in making spare parts
to maintain operating naval units. The Chinese Communists might have
to resort to cannibalization of some classes of vessels, such as the
four Soviet-supplied Gorkyy-class destroyers. Most of the submarines
probably could be kept in operation at lowered levels of effectiveness.
China should be able to solve most repair and maintenance problems by
1965.
H. Aircraft and Missiles
Shortly after the end of the Korean War, Communist China de-
cided to develop an aircraft industry to produce Soviet-type aircraft.
Relying on technical assistance received from the USSR, China was
able within a short period of time to establish factories capable of
producing in series the following aircraft: MIG-17 (Fresco) and
MIG-19 (Farmer) jet fighters, MI-4 (Hound) helicopters, and a single-
engine biplane used for light transport duties and dusting crops.
The MIG-19 is capable of reaching only low supersonic speeds, but
when the Chinese decided to begin producing the MIG-19 in 1957 or
1958, it was the most advanced fighter of proven design and in mass
production in the USSR. The Chinese are now making about 2 MIG-19's
per month at a complex of factories in MUkden. The airframes are
fabricated in China, largely from domestically produced components.
China also has a factory at Mukden that can make VK-1 and AM-9 jet
engines for fighters, but it must import some high-grade alloys for
the engines. The rapidly developing metallurgical industry in China
can make low-alloy steels and some grades of stainless steel but has
not yet mastered the difficult technology of making high-temperature
alloys and shaping them into components needed for jet engines, rockets,
and missiles. Nickel and chrome, main ingredients of most of these
alloys, are mined in insignificant quantities in China, if at all.
Besides alloys for engines, the Chinese aircraft. industry depends on
the USSR for original designs, ordnance, some electronic gear, instru-
ments,'and spare parts.
Assuming continued Soviet aid, the Chinese Communists probably
will expand production of MIG-19's while phasing out production of
MIG-17's. They might also soon begin producing a larger jet aircraft
at a complex of factories that has been built up at Sian since 1956.
These factories probably are now tooling up for production of an air-
craft like the Tu-16 (Badger) bomber or the Tu-104 (Camel) transport.
The Chinese are working hard under Soviet guidance to overcome their
deficiencies in the metallurgical field and may soon be able to pro-
duce all component parts of jet engines, if nickel and chrome ores
can be procured.
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If the USSR discontinued technical aid and deliveries of com-
ponents, the Chinese Communist aircraft industry probably would be
forced to (1) suspend production of jet fighters in order to concen-
trate on repair and maintenance of the operating jet air force (even
so, some cannibalization might be necessary); (2) abandon the program
underway at Sian to produce a larger jet aircraft; and (3) redirect
research and development into more elementary fields. Deprived of
the capability to produce a turbojet transport or bomber, the Chinese
might attempt to produce a piston transport of the DC-3 size, probably
the most sophisticated model that the industry could design and pro-
duce locally during the next 5 years. Production of the helicopter
and biplane models probably would continue.
In order to modernize the Chinese Communist air defense sys-
tem, which now relies on MIG-17 and MIG-19 fighters, China will have
to acquire air-to-air missiles (AAM's) to mount on the MIG-19 or
develop an effective surface-to-air missile (SAM) system. Judging
from past Chinese practices in meeting military needs, it is presumed
that China is planning with Soviet aid to achieve the industrial
capacity to produce most types of missiles and eventually to estab-
lish an independent capability for missile research, development,
and production. The Chinese are believed to be in the very early
stages of a research and development program. They might be able
to produce simple short-range surface-to-surface missiles on their
own during the next 5 years, but they probably would be unable to
produce longer range surface-to-surface missiles, SAM's, or AAM's in
this period without substantial Soviet aid.
I. Ground Force Weapons
Since the Korean War, Communist China has advanced beyond the
stage of producing light equipment and into the production of medium
field artillery pieces, antitank guns, antiaircraft guns, and the
T-54 tank. Bases for producing this equipment are the Japanese-built
arsenal complex in Mukden, now reequipped with Soviet machinery, and
large new factories in Tsitsihar and Pao-tiou for which the USSR has
provided the necessary technology and equipment. China can produce
about eight major items of equipment. Estimates of current production
as well as the total Chinese inventory of major items of equipment are
shown in Table 3.* China can also produce ammunition for all its
ground force weapons, even those not made in China.
The most important item in production is the T-54 tank, a
modern medium tank needed to replace the obsolete T-34 tanks with
which the Chinese Communists are now mainly equipped. At present
* Table 3 follows on p. 25.
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Table 3
Major Items of Equipment of the Chinese Communist Ground Forces
1960
Units
Quantity , Estimated
Item in Inventory.21 Annual Production
Artillery
100-mm field/attack gun 70 Fewer than 50
122-mm howitzer 1,800 100
122-mm gun 800 None
152-mm howitzer 400 20
152-mm gun/howitzer 400 None
130-mm gun 75 None
Antiaircraft
37-mm AA gun 1,450 Ceased
57-mm AA gun 250 30
85-mm AA gun 1,350 None
100-mm AA gun 250 None
Rocket launcher
102-mm rocket launcher N.A. 100
132-mm rocket launcher 150 Negl.
140-mm rocket launcher 35 None
Armor
Medium tank (T-34/85) 2,600 None
Medium tank (T-54) 100 500
Heavy tank (JS-2) 60 None
Assault gun (SU-76/100) 800 None
Assault gun (JSU-122) 100 None
Assault gun (JSU-152) 100 None
a. Mostly of Soviet origin.
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production rates, the T-34's could be replaced in 5 years, but inven-
tories would still be relatively smR11. China now has fewer than
3,000 tanks, enough to equip 3 armored divisions and 70 armored regi-
ments attached to infantry divisions. The Soviet army, by comparison,
has 25 times as many tanks.
The ability of Chinese Communist arsenals to produce artil-
lery is especially weak. They are unable to produce artillery pieces
of sufficient range to fire from the mainland to the main island of
the Matsu group or the resupply beaches of Kinmen. They do not pro-
duce antiaircraft weapons of large enough caliber to be effective
against modern aircraft. The few', types ,spf light and medium artillery
they can produce are not manufactured in large enough quantities to
build up inventories, which are small compared with the needs of a
large, modern army.
By modern standards, the Chinese Communist armed forces are
deficient in the firepower. needed to support the foot soldier. They
have been correcting this deficiency steadily but not rapidly. Here-
tofore, the regime has concentrated on building up a heavy industrial
base that will permit modernization of the army at some future date.
By following this policy, Communist China has built up its metallurgical
and heavy machine building industries and is now in a position where
it could plan on expanding its arsenals and on increasing greatly the
production of a wider variety of major items of military equipment
during the next 5 years. The Chinese need not only the items in their
present inventory (see Table 3) but also larger, more mobile weapons
and more advanced rockets than they now have. China has nothing com-
parable to the self-propelled 203-mm howitzers and Honest John rockets,
standard items of modern equipment which the US has supplied tp Na-
tionalist China and South Korea. Such weapons are designed not only
to deliver high-explosive shells accurately over a long range but
also to fire tactical atomic shells. China cannot produce any weapon
suitable for delivering atomic shells.
In the absence of further Soviet technical assistance and
additional Soviet shipments of machine tools, it is believed that
Communist China can initiate trial production within 1 or 2 years
of all Soviet weapons currently used by the Chinese army. At least
two Chinese plants, the T'ai-yuan Heavy Machinery Plant and the
Dairen Steel Works, are now producing special steels for. small-arms
barrels and artillery tubes, and there are no other technological
factors that would prevent Chinese plants from manufacturing recoil
brakes and recuperators, traverse mechanisms, and other artillery \,
components.
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How soon Communist China could hope to begin producing more
complicated, larger, and more mobile types of equipment than it now
possesses would depend on the state of plans to expand Chinese arse-
nals, a subject on which little information is at hand. If the USSR
has already helped China tool up for production of new items, then
there should be few problems. If China has to equip its own arsenals
and do its own design work, then it might not be able to produce new
items in quantity during the period .of this estimate. Even if a pro-
gram for expanding arsenals is well advanced, Communist China has so
far to go that it probably will not be able to modernize its forces
solely with items of its own production during the next 5 years.
Even in a nonnuclear war, therefore, the Chinese Communists would not
be able to sustain major military operations against a modern armed
force without substantial additional quantities of Soviet weapons and
equipment.
J. Nuclear Energy
Information on the nuclear program in Communist China and on
the Soviet contribution to this program is fragmentary. In the
present state of Chinese competence the carrying out of programs to
produce fissionable materials requires substantial Soviet assistance
in the form of technicians, designs, and equipment. Recent evidence
strongly suggests that the USSR has given China more technical assist-
ance toward the eventual production of nuclear weapons than previous
information had indicated.
The USSR has provided Communist China with a nuclear research
reactor and is training Chinese nuclear scientists in the Joint Insti-
tute for Nuclear Research at Dubna in the USSR. The exploitation of
native uranium resources has been underway, with Soviet assistance,
since 1950. At least 10 deposits are now being worked, and ore with
a uranium metal equivalent of several hunared tons probably is being
mined annually and retained in China. The Chinese Communists probably
have initiated the processing of uranium ores into metals, probably
are building a plutonium production reactor, and may also be building
a U-235 gaseous diffusion plant.
The fragmentary evidence available points to 1963 as the most
likely target date for detonation by Communist China of its first
nuclear device, assuming no marked decline in Soviet aid. If such a
decline occurred, Chinese Communist progress in the nuclear field
would be retarded by a substantial but indeterminable amount.
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III. Effects on the Chinese Economy of a Withdrawal of Bloc Assistance
A. Short-Run Impact
A sudden withdrawal of Bloc material and technical assistance
would cause severe short-run dislocations in the Chinese Communist
economy during an initial period when Peking would be forced to re-
vise basic economic policies and seek alternate sources of supply.
Eventuallyl_non-Bloc sources or domestically produced substitutes
probably could be found for much of the petroleum products, metals,
and machinery and equipment that China now imports from Bloc coun-
tries, but until readjustment was made to the new situation, many
economic activities in China would have to go on short rations.
Transportation would be affected by a severe shortage of diesel and
fuel oil for ships and of motor and aviation gasoline, until a large
flow of oil products from non-Bloc sources began arriving. Chinese
machine building industries are unprepared to begin producing spare
parts for much of the vast quantity of Bloc machinery received in
recent years, especially for types of machinery not yet made in China.
During an interim period it is expected that the lack of spare parts
would prolong the period of breakdown of some equipment, such as
large rolling mills, forges, presses, lathes, turbogenerators, cement
plant and chemical equipment, airplanes, and ships. The departure of
Bloc technicians has already put additional strains on the thin do-
mestic supply of technicians, the situation being most severe in those
industries at the frontier of Chinese technology.
The leadership in Peking, being occupied with political as
well as economic aspects of the Sino-Soviet dispute, might be slow
in determining new economic goals, policies, and priorities and in
giving guidance to administrators trying to allocate effectively
scarce inputs of petroleum products, transportation, electric power,
repair parts, and skilled manpower.
B. Impact Through 1965
After initial adjustments were made, Communist China would
still be faced with long-run problems of building up production in
industry and expanding into new industrial fields. These problems
would force the leaders to moderate their overweening ambitions to
industrialize ata headlong pace. Growth rates of industrial pro-
duction and capital construction would decline markedly. The regime
would have to reduce or cancel many sophisticated development pro-
grams now scheduled, including those for producing atomic boobs and
the related delivery systems.
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In terms of the highly ambitious scope of Chinese Communist
hopes, the setback would be considerable. For an underdeveloped
agrarian country, however, China would still have an impressive
ability to build up industries and expand industrial production.
Communist China's achievements in expanding industrial production
rest not only on assistance from the Bloc but also on the high pro-
portion of gross national product devoted to investment and on the
energy and ruthlessness of the leadership. If Bloc assistance were
withdrawn, the other two factors would remain and the expansion of
production would continue, although in a distinctly different pattern.
1. On Industrial Production
Chinese Communist industries will vary widely in their
need for Bloc support over the next 5 years. Some, such as the
nitrogen-fertilizer industry and most military industries, could not
achieve more than a fraction of planned targets without the continua-
tion of Bloc technical and material assistance. At the other end of
the scale of dependency are industries that are producing coal, basic
industrial chemicals, tractors, and trucks -- industries that have
largely outgrown the need for outside help. In the middle of the
scale are industries like steel, electric power, and electronics,
which are fairly well developed and which China can expand by itself,
but more slowly than if Bloc help were forthcoming. Over-all growth
in industrial production, which probably will be closely related to
the growth of steel and electric power, may be estimated from trends
in these two industries as described in II, B, and II, C, above,
where it is estimated that a cessation of Bloc support would lower
the outlook in 1965 for generating electric power from 195 billion kwh
to 150 billion kwh and for producing steel in large, modern steel com-
bines from 28 million tons to 20 million tons. These data suggest
that over-all industrial production in 1965 might fall 25 percent be-
low presently projected levels, if China were deprived of economic
support of the Bloc. Estimated data for steel, electric power, and
aggregate industrial production are shown in Table 4.*
2. On Industrial Investment
Communist China has been counting on Bloc countries to
supply the necessary equipment and technology to help build up to 200
large, modern industrial plants that will be the heart of the Chinese
investment program from 1961 to 1965. These facilities include metal-
lurgical, electric power, chemical, and machine building plants.
Recent trends in trade and investment suggest that plants for which
Table 4 follows on p. 30.
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Table 4
Estimated Industrial Production in Communist China
. 1960 and 1965
1965
Industrial
Category Unit 1960 With Bloc Help No Bloc Help 1
1
Steel 21
Million
metric tons
12
28
20
Electric power
Billion kwh
58
195
150
Over-all industrial
production 12/-
Billion Yuan
43
91
68
Average annual in-
crease in indus-
trial production 2/ Percent 16 10
a. Production of large, modern steel mills.
b. Value added by industry, in 1957 prices.
c. Between the terminal years (1960 and 1965).
the key equipment will be of Soviet and Satellite origin will make up
about 20 to 25 percent* of the over-all Chinese industrial investment
program from 1961 through 1965. The comparable proportion during the
First Five Year Plan (1953-57) was 44 percent (see I, DI above).
If Bloc countries canceled all contracts to export capital
equipment, Communist China would-have difficulty traneferring them to
non-Bloc suppliers, both because any transfer would take a long time
and because China probably would be reluctant to have close relations
with industrial countries of the non-Communist world. Amass can-
cellation of Bloc contracts, therefore, would force China to cut back
the industrialization program and would revise the program's funda-
mental character for a few years at least. Because most of the Bloc-
equipped plants are designed to produce heavy capital equipment and
* Total industrial investment for the 5-year period 1961-65 is pro-
jected at 175 billion to 200 billion yuan, on the assumption that it
probably will average 15 to 17 percent of gross national product.
Investment in Bloc-equipped plants may total 42 billion yuan, assum-
ing.that imported capital equipment -- estimated to be 8.5 billion
yuan -- will take up 20 percent of total construction costs in these
plants. This figure of 42 billion yuan is approximately 20 to 25 per-
cent of the projected total industrial investment of 175 billion to
200 billion yuan.
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industrial materials, a Chinese investment program from which Bloc-
equipped plants were deleted would necessarily give less emphasis to
heavy industry than to light industry and less to industry than to
agriculture.
s That the Chinese Communists would not accept such a set-
back without a struggle was made clear by Chou En-lai While speaking
on 30 September 1960 to an international audience gathered in Peking
for the National Day celebrations. Referring to "our road of develop-
ment," Chou said that "no difficulty, coming from whatever quarter,
can cow the long-suffering Chinese people ... ; it will only arouse
us to make even greater efforts to overcome difficulties and advance
bravely."
Chou En-lai did not spell out What form these greater
efforts might take. If he was thinking of increasing the emphasis
on small plants that can be built and run by the Chinese Communists
themselves, he might compound Chinese economic difficulties, because,
in general, China does not need more of the low-quality, high-cost
product produced by these plants. The leaders in Peking in late 1960,
moreover, were stressing goals of quality, efficiency, and low costs,
and they may reject a solution that relies on further expansion of
small plants. Rather than order an increase in possibly abortive
construction efforts, the leaders, at least privately, might come to
accept the fact that worthwhile opportunities for investment would
shrink without Bloc equipment. In this case they might allow invest-
ment to decline as a proportion of gross national product while con-
centrating their energies on trying to run the economy smoothly and
on expanding facilities for technical education.
3. On Technological Development
The Chinese Communists have been trying to master modern
technology in many fields under. Soviet tutelage. With this help,
China should by 1965 have acquired adequate technological competence
in most basic industries and have trained a small corps of scientists
able to offer research and development support of high standard to a
selected number of high-priority projects. Without further Soviet
aid, however, China would have to curtail many of the more advanced
elements of its industrial research and development program. The
withdrawal of Soviet Bloc technical aid would mean (a) the cessation
of delivery of vast quantities of technical information, including
information on atomic energy, missiles, and many chemical processes;
(b) the withdrawal of remaining Bloc experts from China; and (c) the
return home of Chinese technicians and researchers being trained in
the USSR.
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In this contingency, Communist China probably would try
to learn more from the West than it now does, but such efforts would
be inhibited by Western reluctance to share information in military
fields or to sell China industrial secrets and by limited Chinese
contacts with non-Communist industrial countries. For example, China
probably would be unwilling to send students to non-Communist coun-
tries or to hire non-Communist industrial experts and scientific
teachers -- two of the most important means of acquiring modern tech-
nology.'
Communist China would have difficulty breaking techno-
logical ties established during a decade of heavy reliance on Soviet
technology. China now looks to the USSR for spare parts and replace-
ment equipment, and younger Chinese engineers and high-level tech-
nicians have been learning Russian and not Western languages.
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