OIR/DRF CONTRIBUTION TO SIE-3:

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79S01011A000100030006-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 24
• Document Creation Date: December 9, 2016
• Document Release Date: July 10, 2000
• Sequence Number: 6
• Publication Date: January 17, 1952
• Content Type: REPORT

5.3 9a 9
Approved For Release 6Q O8/29 : CIA-RDP79SO1011 OOO1O 030006-0
Copy No.
UP SIM
Ti
? OIR?DRJ 'Im'sam T'It TO 8.3:
NKM.M. AND &AM can
Jeulaz r 17, 302
State Dept. declassification & release instructions on file
MAZWK Cr
STM
WTM or I 1 =cs x+ess cs
Divi814ft of Aeeeamh for Far $oat
TOP
s SEC= .
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Releaser 0 08/29 : CIA-RDP79SO1011AQ 030006-0
TOP SECR
SJP$
T,Tcu
Vbeat is the mat status the 3s~ation of the - of
eme
The t8 and the leading Vestera European industrial nations had applied
selective embargoes against Caeanunist China since July 1950. The US has en-
forced free December 19s 1950 a complete trade and shipping embargo against
?Caimsaai,t China. Pursuant to the May 18, 1951 UN General "sietbly resolution,
same 43 nations have applied selective trade embargoes against the shipment
to Caaenznist China of "arses, ammunition and implements of war, atonic energy
materials, petrole n, transportation materials of strategic value, and items
usef u1 in the production of ens, aaeeaaaniticn, and Implement* of war." Tba'
contraband lists and the enforcement measures, which are determined by each
country ImdIV1dua217# are not uniform.
Important non -cmoperntiag nations outside the Soviet bloc include Indla',
Pakistan, Dams and Ceylon. These countries have indicated that their
failure to declare an embargo against Cc^ ist China was due to the fact that`
they exported =all amounts, if any, of strategic goods and were therefore Un,,
?vill to exacerbate needlessly their relations with Canunirt China,
Switzerland, an important world supplier of certain precision Instruments and
industrial equip>ost1 had shown little cooperation in esabatgodng strategic
shipaesinte to Comundst China until the end of 1951, but is now applying
controls.
Tar, net effect of those embargoes - both the total trade embargo
applied by the DS and the selective export controls applied by other free
world countries ?- has been an increase in the cost, a change in the couposia
tIou,y and a reduction in the 'total voluaee, of COMIMianist China ?s imports from
top SECRET
s$c l TIc
Approved For Release 2000/08/29: 1011A000100030006-0
 Approved For Release W8/29 : CIA-RDP79S01011AQ0 OOP030006-0
TOP SSChW
SECVR Mil'A TIM
the West. It to to be noted, however, that selective embargoes alone
can limit the range of imports available to Cane ist China but not
necessarily the total volua, of"1nports, since Crmmimist China can iaport
noanbargoed ordosmrodities to the extent of its exchange resources. The
present embargoes, with the .xcepticn of that of the U5, permit the
ehipeeennt to CceMuni.t China of a wide range of goods defined as non-
strategic. Such goods are typical]y chemicals and dyes pr1aari3y for the
textile and other oaasueeer goods industries, paper, textiles, foodstuffs,
textile machi,rq, and other machinesq and aetal nanufacturbs considered
to be of a wa-milltary nature, All of the recorded exports of ooopireting
countries to Comisuaist China are in this category and constitute the btt2k.
of the chi s of ac*' ovjst countries to Communist China.
While these bane been substantial shipments of goods frost naam
cooperating countries to Communist China, these, with the exception of
5,000 tons of Ceylonese rubber and same Swiss industrial aachinery,a , have
been nod-strategic in character, ccrosistisg aaia4 of .rev cottan gram
Pakistan and jute and cotton textiles fraa - India.
n. Whataze the causes of less than 100 jggwt lent
lzbargoed goods are being shipped to Coomuniet China from cooperating
non-Soviet countries both lsgal37, through transehipeant via third nod.
cooperating countries, and Illegally, through mn ggling. Through these
two channels,, Ccrostuiist China is receiving such ccnrodities as p.troleun,
rubber tires, and embargoed machinery itsmis. The nagnitude of ouch.
shipants is uncertain; it is believed to be significant but snail in
relatiase to the lsgitinate trade. Such shipments n be increasing,
TOP SEC17H,"j'
Approved For Release 2000/0
11 A000100030006-0
 Approved For Release +0f 08/29: CIA-RDP79SO1011AW01 0030006-0
TOP SXMW
sr~CtlBi~TIO~ 3
although their expansion is restricted 1w the high cost of sbipaeent,
the limited availability of shipping and other facilities for such
purposes, and the gradual iamrproveMent and exponsiaee of enforcemdat
Manures against such shipments by cooperating countries.
M. Wbat measures migDact be taken to increase the effloleaw of the
ambaw?
The efficiency of the present eeebargo Can be increased through
(1) proving the enforoessmt of present asasures, and (2) increasing
the auveber of. cooperating nations, and (3) expanding the list of sm-
baa'od aasdities.
]roving the sate t of present censures vould iayolve
stricter policing of amsexing and the Imposing of regulations
desiMeed to halt transshipesnt of embargoed goods, such as surveillance
and licensing of exports of embargoed goods to aon?oooperatinig third
countries and the deetial of shipping and port facilities of cooperating
Coatrie to Vessels carrying cargo to Caseumist China that has been
embargoed by the cauatsy of origin. It is probable, however, that such
zrasuzes aan be achieved ae y gradual],y and will not greatly increase the
present effectiveness of the enbargo against Caasnueist China.
Similarly an increase in the. weber of cooperating countries with
so change in the scope of the subergov would. not greatly increase the
present effect of the embargo are Cae?anist China. The present nave-coopeaet.
leg countries that trade an a significant scale with Ccemaaist China,'e.g.,
India and Pakistan, for the most part supply c0awdities that cane under
the VS enbarso but not under that of other free vorl4 cations, It. these
aauatries were brought in, efforts to prerveat traneehipeent of embargoed
camsaditles could be acre successful and is addition Coommist Ohina ws
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Releas6408Qj08/29 : p-- 8S01011AQ,Q0j0030006-0
remaining potential accarces for natural ribber (Coy].do 'and an )
would be vlrtual2y o].iminated. Partioipaticn in the embaagoi however,
would iavolvo ccasidersble political difficulties for the -pent].q
nc+cCoperatiNg oauatrjes. In the case of the south Asian cc atriesa
Which are particulazty vulnerable to Cbi?ese Ctnnist aspossIcas
Pax'tioipation in the embargo aeoa3d ssriousr undezsiae their attempts
to naiataia overtly a neutralist pc.iticn in the East-,test ocs-tlict.
T16s third possibility ?o an increase in the scope of controls .e
has by far the greatest potentialities for atteotia the oooncew of china
but at the sans time votald be the most difficult to obtain. As has been
pointed out abase? th .dminamt portion of the cc?oditi?s vich Ccmmist
-China a eras free the free world have been defined as am-strategic
in the ti r+eso1ntion. To amt these imports, the, participating countries
'would have to care, to a basic change in their cement Phil,,osophry' Of
eocu??io warfare against Ccwtaist China. Is effect they would have to
adopt` the position of the T -? that all exports to CwOunist China are
strategic in the Ofter+e that they contribute to the operation of the Chinese
CoaoMist ecas=W and therefore tend to increase its ni2itar9 potential.
If this position were also to include an embargo against ispo to froze
COMMMISt China,, it VaL d. result in a sharp reduction in C==Mist China oa
foreign excheage earnings and thus reduce its capability, to import am.
aodities fr the frog world thx qgh clandestine channels.
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Releas& 0008/29 : CIA-RDP79SO1011ApQ1 0030006-0
TOP 8ECT
gTION
The difficUltiea involved in. such a change in policy meet not be
underrated. The participating countries have agreed. to the present coeti?ole
asly with great relnotanoe and after considerable delay. '.though this
positica varise with chhasges is the prospects for an amistioe in Kcrea,
is general, thew oppose as increase in the scope of controls c political
ground .es fasvolviig isoreased tension between last and west, and as
ecaea?tc grounds- as involving losses from a rednotios in trade,-. higher
?nforoe?ast costs, a disntptiaa in foreign trade operation,, and in Be"
cases a violation Of traditiasal trading policies, Noreoter, they any feel
sbptioal with regard to the effectiveiess of a total embargo in view of the
possibility that Gist Chia.. caild continue to i port free world cm.
noditiec via transshipment through Soviet bloc countries or through nan?
cooperating fare world countries.
The application of a total embargo would impose a particularly serious
burden on corg, yet the participation of cagkoog in such as embargo
watld be essential. Coned tics of trade with Caumtuiist China would seriously
inpair Eocgkoog ?s socscnic position aid at the ease time would, invite
Chinese Cammuist retaliation through political subversion or possibly
outright iBilitary aggraesics:
TOP S QB
SECti m Ia(
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Release~~OQ08/29 : CIA-RDP79S01011AQPQU0030006-0
M W
UP S,.ECUR T m 1
IV. What are tbs _carabilities of as mbai oto brim arc to bear as
at
A. Whet bas bees tbs offs-at of oosts'oo1 measures to date?
1. What has beer the Lffeat ate. Caamasiart China ? s?
Caesar -4 et Chine Is trade with IM-Camosusist caamtries 3'n 1950 and, 1951,
is- emtlaaateds are fol1an a (in atlliaas of VS dollar.
nporte Exports balance
J'aa-lei 1950 212 170. /
58
JUa.Dec 1950 .302. 230 ?
72
Jaa?J ae 1951. 380 120 .
260
tae-Dtoc 1951 130 100 ?
30
a . es a imm es or as uggling but not for tr nsshi at of
veetea:n goods via Soviet blooaiotantries.
b. Prelimiaasry.
The sharp reduetiosa is 1951 exports to the fame vorld 'inns due in large
part to ocaetroam unposed 1 t1w VS ?cad Japan, vhioh tagetbsr had taken nearly
half of the 1950 exports. Also, varwi*duoal shortagse of textiles, forced
a rsduatiaaa of textile exports to ]mgkz g and, Scentbsestt Asia is 2 = over
r
1950. Y : 1 iaamasiag ems of lReaoburiaoa grain and anoyrbeaas froa
several Imadred tlbousaad toots is 1950 to over oee aaiLMcu tons in 1951, total
exports to am-Commdet oc tries were aaaiatainod at a little ever half of
the 1950 sutece.
Darts eeapsaded rapidly 1* 1950, oosatiamed to rise to peak levels in
I
the tirmt. half of 195, and then dropped ehrirp4 in the latter part of the
year, While the exchange sesaaraes and Soviet fiaanoial'assistanae available
to the O chase Cattsatsiste are not lgaoncsaa it appears that sub ial' for.in
eahsage balances were acted is 1950 (In addition to sanding from
an III
M
Approved For Release 2000/08/29 CIA-RDP79SO1011 A000100030006-0
 Approved For Releasc 0 08/29 : CIA-RDP79SO1011A4190400030006-0
UP 83 .'
7
szporte, poea:Lw as mach as $150 ai1lica aueau 4.ly Vero Boom" frm
rasmittanoes we purchases of private rds at gold and foSSRiga aarri*cy)
and vets spent for 1 sports la the first half at 151. 3,Roarte in the
latter half of 1953. appear to have be limited to aumost foreign
exaha ge' ea adage. fxm expels arid other sources (prluardlq r ittaaaes)o
from non-Communist soureea
The onkmitlas at importa/duriarg this period is entimated as
folla+a 6
(in sai1,licse of tE dollars)
Ja n.J me .1 4Dea
1950
Raw oa ton
95
Crude bier
6o
Iron and it"I
60
x6ry, soul mrvm.
55
Cheetoa1a, dyes
55
other
90
6gg3.ed .goodtea
a
Total 43,5
1. 1951
35
12A
30
5
3
7
30
35
20
380 130
a o pas+ ~' , tires, mater vehioln parts, alto. 1950 data
bawd .cu Chinese Ccm=dmt figursu Vbioh Re?d not ahem w igg1iag.
These figures do not IN02WO tieatez goods trwshipped via Soviet
b1a+o tri?s.
The 'versa" at Imports incarmed st China as a result of
tutee trade corals can be assessed aLV ix tares of thd;lr effeat an
Ocumadst China oa total 3s part patextialItleer, Witbwt alloviaag for
offset. c ? t s Erma the Soviet bloc, these pt tiazlities may
is said to have lees reduced. In three. -repeats t (a) the lames at m tea
is the lE and Japan. reduced Ocomudst 0)zt, Is potential foruiga ezoh e
earnings fray eta and. in this swee its IwPWt capabd,litiec3
Approved For Release 2000/08/
1 A000100030006-0
 Approved For ReleaseQOQW08/29 : CIA-RDP79S01011A, ROjOO30006-0
TOP
(b) the eked, to resort iac s2ag)y to OuggLixg, tsmeehi ueat, and
ume wive sources of evap1y raised the it cost of ita d am-
aaaodities; and (o) an a reaauit of its inability to obtalm 002t AIR
emberroed ooModitiee fz the West, Caiaiet QM aara . =g forced to expert
part of ita .foram same eat as iaayports fauna the West that
fauna its po2at of view were Use desisablo theca, the embaaoed oca>lmodities o
TIM iMpoAauce of these tore factors will be assessed separately belov0
The at effect of ooatro3.. sgaiaart; Cceaaaist ChIM ?e eupmte oeanot
.be precisely detendmd without kmawledge ` of the reaUooat ca tmd prim of
such egorte, or at the labrs and aaateriala iaatrolVed la their ant m
Hamer, 2* view of the specialised character of certaix eaa porter and the
luf2exib1ltties of the Chinese oovmWs it, aaay be estiaaaated am a b1gW
ep?oulaative basis that E and Japanese oc trol aeaa s seduced Caaasaamist
ChIma oe tata]. eovWmge eaaaaiegs by app ezimtely MILlicas, its excha age
same frog a -Goviot caauaartaaiCee by scat moat aaaaost-, aaad its'- Ses aaetimal
paeodnotios by amt Use.
The red*atias is import capabilities sesultiaiag frm the effect of
the Omba$goes cm the wait coat of iapcets is etiU men difficult to
defeatism a IeawavailabiAitr of US cotton has feroed Camsulart Chiaaa to
purchase Pakistan cattm at halt agala as aioh as the tE price and any
other prducte foaaerlyy mmue t faa+a the US are bola bcght at a substantial
price increase fraaat Westem luropea The cost of au4ZLA seeds is pzabably
Bauble their aamal ooat n Ta asnaequeraos, the increase in iaaa;port costs
is 29 l as a result of the eabargOes My way veU hays exceeded $50 aiilieK,
BEGS ICW
Approved For Release 2000/08/29 : CIA-RDP79S01011A000100030006-0
 Approved For Release P8/29 : CIA-RDP79SO1011AQQptO3OOO6-0
TOP Smmw
>SRtli1 ~ AJ!T
Ar ,fine 3951 the selective esbaxgoes fairly WITIectivaly covered
shi~s to Ohiaa of rubber, pStxblsua, may iron and steel pftducte,
and certain vebioles, amohiseiy', and natal aamatacturea. Is the latter
half of 3I9,rh Ceeeessaist Chian to iaOMe fr ma --0 at ,Oaastrieo cca-
sisted ahiefay of rev neteri,ale to alaintain came a goods productiaa0
Gulag to an oftsettiag increase is itVorts f the Soviet bloc,
the actual "boss" of ii orte sustained by Caenmaeist China frm these
the factors was caseidexabsy loss than the eetia ted reductim in its
1,Vcrt potentialities. The USSR apparently bas s ad. Gist China
14th its ess+aat2*3. reguireueats for patrols and tzeaspoxt egniIseat
and Caaa?attat Cbdma*s stoooft of natural rebbr appear to be anple for
its current reguiroaents over the next year or two (available Ce rlcnese rub.
bar has not been ' ,axed owlag;to disputes over price aad ehippin
manta) 0 0a the other load, the Soviet bloc has not been able or
vt1i t g to. dozwrite in full the seductim is C" " ist OM a ve orts
,
Eros the ft vv Var2d of rev c tton, lubrioants, and other prsduoea' ? goods o
The extent to v2d.oh the Sonri,et bloc has supplied Comiusist Chan with
its reguf a for capital goods that are a sbaxgeed by the West
cannot be dete=lnedo Apart fi'o the epeoifio ameeodities involved, it is
evident that Wosteis trade oaatrale have involved poets for the Cassuniot
bloc as a 3,e is sustaipieg eooeiado activity in Ceasn'4 t China,;
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Releas fl /08/29 CIA-RDP79SO1 01 14OW0030006-0
TOP SECRET
SECUR NF It &TION 10
2. Bova has this "loss" of imports affected the industrial se went
of Communist China us econotpy
Q +hich industries have been affected and what is their
a ortanoe
As a result of the economic consolidation of the Chinese
mainland the stringent system of economic controls imposed by the
Chinese Cotuniat authoritieso industrial output in Communist China
has increased rapidly over the past three years. 10ith the exception of
the heavy industry in Manchuria, industrial production in 1951 is re-
ported to be equal to or above peak production levels achieved in the
past. Moreover, current plans call for an increase in the output of
State-owned industries which. accounted for half of the total output
in 1951 --w by 27 percent in 1952 over 1961. Thus far the increase in
industrial production has been achieved largely with existing plants
and has required only moderate amounts of new capital goods for repair
and maintenance. The contribution of imports to industrial recovery
has consisted of these capital goods and to a greater extent of pro-
duoers goods.
The "loss" of Imports Communist China incurred as a result of the
embargoes has not been reflected, therefore,, in a decline in output.
But it is evident that output in 2951 did not increase as much as it
would have increased had the embargo not been applied. The cotton
textile industry is the clearest and most Important example. Although
cotton textile output is reported to have reached an all-time record
level in 1951, it failed by one-fifth to reach the planned target.
TOP SECRET
SECURITY- HF'Ob.W.TION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Relea 2QQ0/08/29 CIA-RDP79SO101 AOQW 00030006-0
TOP SECRET 31
SECURE f OkM TION
primarily for lack of 500,000 bales of raw cotton. Communist China
secured less than 200,000 bales from Pakistan in 1951 (as compared
to 500000 bales in 1950) and in so doing drove the price of Pakistan
cotton far above US prides. The cotton mills in China were shut down
for six weeks in mid-sumamer and operated on a part-time basis there-
after until the arrival of the domestic cotton crop in October.
The effect on other industries was probably considerably less
eignifleant and in any event can only be surmised. There have been
reports of shortages of lubricants., industrial chemioals?,and,capital
goods for maintenance, and of delays in their delivery -- factors which
undoubtedly retarded production. In addition the Chinese Communists
have been making determined efforts to develop domestic production of,
and domestically produced substitutes for, many imported commodities.
This program has involved higher costs and a lower quality of output.
The effects of-the embargo on the growth of industrial capacity
in Communist China are also difficult to assess. Reduced access to
capital goods imports from the West, even after allowance is rode for
increased shipments from the URSR, undoubtedly has inhibited the
reactivation of part of the Manchurian plant. But it is questionable
whether, under the strains of the Korean war, Communist China could
at present afford to divert current resources to long-term investment,
particularly since a growth in industrial capacity now increasingly
requires the construction of new plant rather than the rehabilitation
of existing facilities. The evidence is accumulating -- as seen in
TOP SECRET
SECUR 'f' NF0 TION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 `Approved For Relep 2000/08/29 : CIA-RDP79SO1014000100030006-0
TOP SECRET 12
SECUEITY -SP- MON
recent changes in the type of com?odities the Chinese Communists are
purchasing in Hongkong, their willingness. to export coal and iron ore
for Japanese textiles and consumer goods, their reported cancellation
of heavy machinery orders from East Germany in favor of bicycles and
housewares, and the officially-announced postponement of the industriali-
zation program -- that Communist China is shifting from a developmental
to an anti-inflationary import policy,to combat the economic pressures
arising in the wake of the war,
b. what have been the effects on transportation? (CIA)
o. Have there been "seeondar
q" repercussions, such as conse-
H ences upon Communist Chinas monetary and fiscal
icu t. e ss
The heavy Korean war expenditures have created a budgetary
imbalance and strong inflationary pressures in Communist China, forcing
the government to adopt stringent policies in the attempt to estabilise
the economy, Although the strains imposed by the embargo are small in
comparison, they represent a reduction in the total resources available
to the Chinese Communists, and thus have contributed to the regime's
fiscal difficulties.
The reduction in gross national production as a consequence of the
embargo must, by oven an optimistic estimate, be considered small. The
disruption of export production was previously estimated to have reduced
output by j100 million and reduced imports of producers' goods may have
reduced net output by an at least equal amount. Nevertheless, a logs
of output in this segment of the economy is of great significance to
government operations. A large proportion of this production is secured
Approved For Release 2
79S0101lA000100030006-0
 Approved For Relea, 2000/09 s @&RDP79S010' 0100030006-0
SECURITY Rw-T ICS
for the support of the, government through import and export tariffs,
government enterprise profits, commodity taxes, etc., while the output
of consumer manufactures is an important means of mobilizing, through
urban-rural trade, the grain and agricultural raw materials to meet
military and urban requirements.
3. Have there been ~n~yy significant effects in the non-
industrial-zed segments : of ommun sit Gh na-a eoono
The non-industristixed segments of Communist China?s eoonomy have
few requirements for imported materials and have theref ore been little
affected by the embargo. bihile Communist China imported 1O million
of chemical fertilizer in 1950 and possibly somewhat more in 1951" ap-
parently for application on Kwangtung sugar cane, Shantung tobacco,
raw cotton in the chief growing areas,, as well as on State ft~rms to
produce impressive crops, these supplies have not been significantly
affected by the embargo in either their availability or cost,: The em-
bargo probably has reduced kerosene supplies in the interior with a
oils
consequent increase in the, substitution of vegetable-1 which alterna-
tively could have been exported,
4. What has been the effect of economic dislocations caused by
-
these controls on Common st Ch na s~arm-and T o r a a
-0-2 and A-9)
ghat domestic violence and what other disturbances which may
have posed si ni cant contro problems the Communists
have occurred as a result ooff present trade controlsf fiow
serious have these dif faculties been, in terms of? the Com-
munist re re rlnc esbishs f`i"rni po f#ioa coia#ra3 aver
the auntry? ~ . _ __....~%.._..__ , .__ __._ ..._.........._. _..~._
Military requirements are the prime cause of the economic strains
existing in Communist China at present, to .ihieh trade controls can
TOP SECALLT
SECURITY 1U OiMFtTION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 'Approved For Relea 2000/08/?O,,: J j DP79S010i 4000100030006-0
SECURITY INFORMATION 14
only be considered a small contributory factor. To the extent that
trade controls have reduced potential government revenues and the means
by which rural resources can be mobilised, thoy have been a factor in
forcing the Chinese Communists to raise taxes and in general. to apply
increased pressure on rural areas. While such measures have not re-
suited in any overt loss of political control, they may have helped to
dissipate the reservoir of good will and support which the Chinese
Communists formerly possessed, and my lead to an increasing lack of
cooperation with the administrative program.
6. To what extent have Soviet Bloc shipments to Communist China
offs- Western controls Estimate t-e ~cr osit on und v ume
of ov et Bloc trade with Caxnmun st China in t:hs punt year.
7.. Have the trt e negotiations J in Korea in anyway been attributable
to the economic situation in China.? (This point has been discussed in Section I B ."The Cost of the
'War and the Internal Situation in China" in OIR Contribution to NIE-55.)
TOP SECRET
sEcuR " 3FO 1rATI.c~N
Approved For Release 2000/08/29 CIA-RDP79SO1011A000100030006-0
 Approved For Relea a 2000/08/29 : CIA-RDP79S0104 000100030006-0
TOP SECRET
SECJR 'fU TION 16
Bo What would be the short run effeot of a total embargo of all imports
from all non-Soviet Bloo countries?
1. Assuming a continuation of current oontrole,.estimate the pattern
of imports for 19520, listing each major oommodity by volume and value.
The magnitude and pattern of imports from the none-Soviet bloc oounm
trios in the last half of 1961 probably forms a reasonable basis on whioh
to project 1952 imports from these oountrie.s. Ulost of the current controls
were in effect during this period, and it appears that imports were limited
to current foreign exchange earnin so On this basis, it -ay be estimated
that 1952 imports from non?Soviet bloc countries will be as follows:
C.I.F0
(us million)
Item
Unit
Unit Price
Volume
Value
RAW cotton
bale
$360.
200,000
$70
Crude rubber
ton
1,000
100000
10
Iron & Steel
ton
150
400000
6
Machinery &
natal mfrs:
ton
350
200000
14
Ammonium sulfate
ton
100
150,0000
16
Thdustrial
chemicals
...
memo
15
Dyes
m-
36
Pharmaceuticals
.~.
.~
.=
1g
Paper
ton
150
100,000
15
Gunny bags
ton
400
300000
12
Sugar
ton
150
200000
3
Cotton cloth
000 ydeo
250
200000
6
Other
..~
.
o,.
35
Total, legitimate imports
220
Petroleum ton 400
.500000
20
Other
20
Total, smuggled Imports
40
TOTAL IMPORTS
260
TOP SECRET
SECURTYINMIATION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Rele 2000/08/29 : CIA-RDP79S010`000100030006-0
TOP SECRET 16
SECURE!*1 ATION
It' is estimated that the magnitude and composition of imports from
the Soviet bloo countries in 1952 will be approximately the same as in
1951m Although such imports are very large, about 90 percent are believed
to consist of military deliveries, with the remainder consisting of petro.
leum, iron and steel, machinery to mast essential requirements, primarily
in ) nohuria4 On this basis, It may be estimated that 1962 imports from
Soviet bloc. countries will be as lblloerss
Item Unit Unit Price Volume Value
Petroleum
iron,, steel,
machinery, metal
mfrso
$200 450,000 090
Other
Iftlitary deliveries
TC+TAL
TOP SECRET
SECUR INY ION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Release 2000/081;q Qfif. DP79SO1 O 000100030006-0
2. If a total embargo on exports-to Communist China were imposed
by all non- viet b oo countries, what mould be the pu tern
Tr-Chinese Communist mi orts or he irSt twmonths
" ? .... _.__.
thereafter?
a. :tihat commodities would the USSR and the Eastern Europecan
satellites export to Communist China-7-Ghat upper limits
!'6u-3d be impose y ran orte~ion s or sgs ?
In the event of a total aniburgo against.'shipments to Communist
China by all non-Soviet bloc countries, it is assumed that the Soviet
bloc will make every effort to supply.Commmunist China's import require-
meats, subject to transport limitations and commodity availabilities.
Soviet bloc countries should be. able to supply approximately half (in
value terms) of the imports which Communist China would otherwise
have received from the West --.the iron.and steel, most of the machinery
and metal manufactures, industrial chemicals, ammonium sulfate, dyes,
pharmaceuticals, paper, petroleum, and some miscellaneous items. Such
imports, estimated at $131 million, represent approximately half a
million tons of cargo. The movement of this tonnage would require the
employment of an additional 25 Liberty-size vessels (averaging two
trips annually) in the trade between Eastern Europe and Communist China,
and in view of the difficulty of organizing this service quickly, it is
estimated that in the first year of a total embargo only two-thirds of
this tonnage, valued at $100 million, would be secured. There would be.
consequent reductions in the bulkier and less essential items, such an
ammonium sulfate and papere
b. What might be the pattern of imports smug "led into Communist
China a~uring the rst year's
Under a total embargo by non-Soviet bloc countries against ship-
ments to Communist China it is probable that enforcement would improve
Approved For Release 2000/08 $Q1RDP79S01011A000100030006-0
SECURE -N Of .t TION1
 Approved For Releaa 2000/08/29 : sC,~ IA--T DP79SO1014A000100030006-0
TOP SECURITY I (F . TION 18
but that the incentives for smuggling would increase. It is estimated,
then, that smuggling would continue at 1>bI levels ~- about $0 million --
but would tend to shift to items of small bulk and high value (drugs,
motor vehicle parts, chemicals,, etc.).
cd What imports would be "lost" as a result of the total
eat ate wou d exit i' on e- our~` renfoon ro1.s were
off eot?
The "loss" to Communist China asa result of a total embargo
by non-Soviet bloc countries against shipmonts to Communist China would
bo a reduction of potential imports by about 1120 million, or approxi-
mutely 30 percent of total non-military imports. The commodities which
would be "lost" to Communist China would consist chiefly of raw cotton,
gunny bags, rubber, cotton cloth, sugar, some specialized machinery and
miscellaneous items.
3. How would this "loss" of imports affect the industrial segment
of Communist China's economy
a. Effeot on industrial production.
The effect of this "lose" of imports upon industrial output
is likely to be concentrated in the textile industry. The failure to
secure raw cotton imports may be expected to reduce prosptotive textile
mill output by nearly 10 percent. To a considerably smaller degree the
lose of other imports such as natural rubber, and miscellaneous pro-
ducers' goods would reduce output of other consumers' goods. In general,
it is probable that the Chinese Communists would be unable. to increase
industrial output in 1952 in accordance with their announced goals, but
TOP SECR;T
SECURI N'Z . CATION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Releaye 2000/08/29 : CIA-RDP79S010t40001 Q$Q030006-0
TOP SECRET
SECLTRITIN . atiTION
they should be able at least to maintain current levels of production.
b. ghat would. be
the effect on transportation? What would be
the consequences of these effects to the rest of the
econo ? (CIA)
o. what would= be the seconcarm repercussions, such as oonse-
~ueuenos upon ommurn s China s none ry and f sca
i f cu ties
A total embargo would ornate additional economic d-tffipulties
for Communist China. Export markets in non-Soviet bloc countries, esti-
mated to be able to absorb 4200 million of export production, would be
lost, and there would be u not reduction of total imports of X120
million, largely of producers' goods. As pointed out in IV. A..3. o.
above, although the reduction in gross national production is small,
the reduction occurs in a segment of the economy on which the government
relies heavily for fiscal support and which is highly important in in-
creasing the productivity and output of the economy.
4. Would there be any significant effects in the non-industrialised
segments of Communist China?s economy?
A total embargo may be expected to reduce substantially imports
of chemical fertilizer, which arc used to a limited extent on certain
industrial crops and by State farms. The loss of these imports, however,
would not seriously affect the output of these crops in view of avail-
able substitutes of domestic organic fertilizers, ?includinzr bean cake,
bone meal, etc.
6. What would be the effect on Communist China's Arsmy and Air
Force? - an A-23
TOP SECitET
SECUL,IT' U 'U CATION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Relee 2000/08/29 : CIA-RDP79S010JA000100030006-0
TOP SECRET 20
SECURITY MR-W TION
6. Would further political problems of controlling the country be
created as a result of this embargo? "'
No new problems are likely to be created but existing problems
might be intensified. As pointed out in IV. A. 6 above, the effects of
the embargo are small but contributory to the -,eneral economic str"ins
of the war effort.. A,totul embargo would add to the pressures on the
government to take drastic and harsh deflationary measures at the risk
of further losses in popular support and of undermining the morale and
efficiency of its administration.
7. What effect might these economic dislocations and military and
political pro ems ave upon communist China's foreignpolicy?
a. The effect upon peace negotiations in Korea?
The effect of a total embargo, in adding to the existing
economic strains in Communist China, would enhance the advantages of
a peace settlement for the Chinese Communists.. It is unlikely, however,
that the additional economic pressures or the imminent prospect of such
pressures would in the short run compel the Chinese Communists to make
conowssions that would in their mind entail a threat to their security,
a serious loss of prestige or a breaoh in their relations with the USSR.
b. The effect upon a possible invasion of Southeast Asia? (G-2)
c. The effect upon relations with the USSR?
The effect of a total embargo would be to increase existing
economic strains in Communist China and to increase its dependence upon
the Soviet bloc for imports. While it is assumed that the USSR would
make strenuous efforts to meet Communist China's import requirements,
TOP SECRET
SECURM IN l~'c~ ,MATION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 'Approved for Rele sp 2000/08/29 : CIA-RDP79SO1014000100030006-0
TOP SECRET 21
SECURITY IN :;CATION
it is evident that the Soviet bloc countries cannot fully net Com-
munist China?s needs and that the deliveries which are made will be
at conoiderable sacrifice to their own domestic requirements.. If the
Soviet bloc in large measure wets Communist China?s requirements,
despite the costa involved, its relations with Communist China would
tend-to be maintained if not strongthened; on the other hand if the
Soviet bloc largely fails to fulfill these obligations, the area of
potential friction. between the UISR and Communist China would tend to
be broadened.
TOP SECRET
SECURITY NiOt A7ION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 Approved For Releaee 2000/08/29 : CIA-RDP79S010000100030006-0
TOP SEC" T
ShOUIt 'Y - NFORATION 22
6. What would be the lon -run effect of a total embargo of imports
from all non-Soviet boc oountriesT .
Over the next five years it may be-expected that the adverse
economic effects of a total embargo would be modified with the rationaliza-
tion of the economic dislocations and the adjustment of the eoonozr to the
changed conditions. Communist China's imports from the Soviet bloc coun-
tries, as indicated in B. 2. a. above, might increase moderately, while
Communist China?s import requirements, particularly the major one of raw
cotton, could be materially reduced through the development of domestic
production or of domestically-produced substitutes.
Under these conditions it is probable that the present level of in-
dustrial output could be maintained, provided the Chinese Communists can
continue to maintain their controls over the economy to mobilize domestic
resources. It is clear that there can bo little expansion of industrial
capacity, not only because of the inability to secure substantially in-
creased capital goods imports, but primarily because of the continuing
strains of the war which will militate against and may even result in
net disinvestment in the industrial sector of the economy.
D. That limitations would there be to the imposition of full
embargo?
(Discussed in Section III.)
TOP SLCRET
SECUR LATION
Approved For Release 2000/08/29 : CIA-RDP79SO1011A000100030006-0
 SIGNATURE RECORD AND COVER SHEET
DOCUMENT DESCRIPTION
REGISTRY
SOURCE onvw't to
CIA CONTROL. NO.
DOC. NO.
DATE DOCUMENT RECEIVED
DOC. DATE ?
22 Jawary 1952
COPY NO. oZ
LOGGED BY
NUMBER OF PAGES o
NUMBER OF ATTACHMENTS
now
-
ATTENTION: This form will be attached to each top secret document received by the central intelligence agency or classified top secret
within the CIA and will remain attached to the document until such time as it is downgraded, destroyed, or transmitted outside of
CIA. Access to top secret material is limited to those individuals whose official duties relate to the material. Each alternate or assist-
ant top secret control officer who receives and/or releases the attached top secret material will sign this form and indicate period of
custody in the left-hand columns provided. The name of each individual who has seen the top secret document and the date of han-
dling should be indicated in the right-hand columns.
REFERRED TO
RECEIVED
RELEASED
SEEN BY
OFFICE
SIGNATURE
DATE
TIME
DATE
TIME
NAME AND OFFICE SYMBOL
DATE
A/
a
/5~
/&add n
C.
/~~
X 1A9a
25X1A9a
X11
I
?
'- -
? ~ r,..~g
s3i
yr
~-
OF DETACHMENT: When this form is detached from top secret material it shall, be completed in the appropriate spaces below and
{fitted to central top secret control for record.
SECRET MATERIAL DETACHED FROM THIS FORM WAS:
DED ^
D ^
BY (Signature)
`~D (OUTSIDE CIA) TO
OFFICE
DATE
-8 39-1
II