A GENERAL SURVEY OF COMMUNIST CHINA'S RAPID INDUSTRIALIZATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A000900170001-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 12
• Document Creation Date: December 9, 2016
• Document Release Date: August 3, 2000
• Sequence Number: 1
• Publication Date: March 21, 1960
• Content Type: BRIEF

CONFIDENTIALApproved For Relea 1.003A000900170001-3
29
CIA/RR CB 60-17
Copy No. _
21 March 1960
CURRENT SUPPORT BRIEF
A GENERAL SURVEY OF COMMUNIST CHINA'S RAPID INDUSTRIALIZATION
OFFICE OF RESEARCH AND REPORTS
CENTRAL INTELLIGENCE AGENCY
This report represents the immediate views of the
originating intelligence components of the Office
of Research and Reports. Comments are solicited.
This document contains information affecting the national defense of
the United States, within the meaning of the espionage laws, Title 18
USC, Sections 793 and 794, the transmission or revelation of which
in any manner to an unauthorized person is prohibited by law.
P.gJrJI VVGU rVl RGIGQJG L,(Ulmn1TAt*
03A000900170001-3
 JE:,%TIAL
Approved For Releaseft M922&UA ,Q EZ Tn1003A000900170001-3
A GENERAL SURVEY OF COMMUNIST CHINA'S RAPID INDUSTRIALIZATION
Since 1949 The Chinese Communist regime has dedicated itself
to the achievement of world power through the rapid industriali-
zation of its economy. The monopoly of political power possessed
by Mao Tse-tung and his colleagues has enabled the regime to mobi-
lize the manpower and natural resources of China for industrial
development in a manner impossible for past Chinese governments.
The Chinese Communists, using the USSR as a general model but also
experimenting with new approaches and methods, have socialized
China's economy and have initiated an extraordinarily ambitious
program of industrial expansion. Communist China has made im-
pressive progress in moving toward its goal of becoming a modern in-
dus-trihlid world power. The gross national product (GNP) of
China has expanded at an average rate of about nine percent per
year since 1952. Industrial production in the same period has
expanded at a rate of about 20 percent, or more than double that
of GNP. The very rapid expansion of production of steel, coal,
and machine tools indicates the priority given to expansion of
heavy industrial production (see chart, next page). For the
period through 1967, the rate of growth of Chinese Communist
industry, although declining, will still be at a high level.
It is believed, for example, that the annual rate of growth of
industrial production over the next decade will ultimately de-
cline to about 10 percent, the present rate of growth of the
USSR's industrial output.
The Period of Reconstruction (1949-52)
During the period of reconstruction (1949-52) the regime con-
centrated on stabilizing and restoring the badly disrupted economy
of Communist China. The entire railroad system came under one
management for the first time and was restored at least to its
prewar level of performance. Production of cotton textiles-in
the centers of light industry on the East coast was restored.
The regime began the restoration to production of the heavy
industrial base established by the Japanese in Manchuria. In
1952, about 1,000,000 tons of steel were produced at Anshan;
roughly' 60,000,000 tons of coal were mined throughout China;
and electric power output, centered primarily in Manchuria and
around Shanghai, reached seven billion.. kilowatt hours. The
Chinese Communists introduced an effective tax system, controls
over movements of goods between rural and urban areas, and price
controls in their efforts to stabilize business and to combat
inflation. The state-owned enterprises inherited from the Chinese
Nationalists formed the nucleus of a nationalized economy which
was expanded rapidly throughout this and later periods.
The First Five Year Plan (1953-57)
The Chinese Communist First Five Year Plan (1953-57) was a
period of building up capacity in heavy industry--steel, coal,
cement, and basic machinery--and of using the industrial capacity
already in existence far more intensively. Roughly two-thirds
of the increase in industrial production during this period came
from additions to capacity, and one-third was due to the greater
utilization of industrial plants in existence before the plan
was undertaken. During this period, production of crude steel
increased from 1,300,000 tons in 1952 to 5,350,000 million tons
in 1957. At Anshan, the heart of the iron and steel industry,out-
put was tripled.
21 March 1960 CIA/RR CB 60-17
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Machine building received top priority in investment, about
one-fourth of all industrial investment going to increase capacity
for production of machine tools, conventional military weapons,
aircraft, ships, electronic equipment, trucks, freight cars and
locomotives, and textile equipment. Most of the equipment to
expand capacity came from the USSR and the European Satellites.
The machine building industry, which previously had been oriented
primarily toward repair, moved on to increasingly complex manu-
facturing.
The Trans-Mongolian Railway was completed, new lines were
added in western China and Fukien, and the line extending north-
west from Lanchow toward the Soviet border was begun. Expansion
of coal production and electric power output was rapid but fell
short of the growing needs of the economy. Considerable emphasis
was placed on the building up of skilled manpower by attendance
at technical schools, by on-the-job training, and by training
in the USSR.
Light industry, which was relatively well developed in pre-
Communist China, received a much lower share of investment resour-
ces than heavy industry. Investments were eight to one in favor
of heavy industry during this period. Light industrial produc-
tion was still subject to the fluctuation in the size of indus-
trial crops. The chemical industry, a weak industry at the
beginning of this period, received a relatively low priority
in investment allocations until late 1956, and the absolute level
of production in the chemical industry remained small even though
the percentage increases in production were large.
The Second Five Year Plan (1958-62)
Tv,- ,,the Second Five'.i.Yea.e r=Plan;;* 9.5& 62)..d Chinese
'.Cc mmurrists~ l
expanding productive capacity in the basic industries and widening
the range and technological complexity of industrial production.
In the first two years of the Second Plan, the program of ex-
panding capacity in heavy industry has been continued on a
crash basis. The expansion of iron and steel production has
in certain ways been disproportionately large--compared with
{>'
the expansion of machine building, for example. The Chinese Com-
munists have emphasized the key commodity approach--steel, coal,
grain, and cotton being the four most important commodities.
During the plan period, production of more complex indus-
trial goods such as tractors, aircraft components, and naval
vessels will be expanded. In machine tools China will turn
out a wider variety of products, including a larger number of
automatic and precision types. Nevertheless, the Chinese will
remain deficient in production of heavy metalforming machinery
for the duration of the plan. In the field of electronics the
Chinese will shift from production of prototypes to mass pro-
duction of relatively complex items. Soviet aid to China will
reach its zenith during this period. The equivalent of about
US $300,000,000 in equipment and technical assistance for major
industrial projects will be received on the average each year
from the USSR. Several of the European Satellites will assist
China in the construction of major industrial installations.
This aid will be neither a gift nor a loan; the Chinese are
operating on a pay-as-you-go basis. The Chinese are now, for
the most part, taking over supervision of the new modern fac-
tories, the Soviet technicians now being relegated to a trouble-
shooting role. Training during this period will shift toward
greater emphasis on development of higher skills, but mass train-
ing in literacy and simple industrial skills will continue.
21 March 1960 CIA/RR CB?=-60-17
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cunFlOENTIAf
 CONFIDENTIAL'
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The Third Five Year Plan (1963-67)
The Chinese Communist Third Five Year Plan (1963-67) is
expected to be a period of further reduction of dependence on
outside sources for machinery and technical assistance, and
of a change from emphasis on sheer output to emphasis on quality
as well. During this period, China should become self-sufficient
in basic industrial commodities, although industry will be orient-
ed toward coal instead of oil as its principal source of energy.
China will rank as the leading Asian industrial power on a crude
aggregate basis. In terms of per capita output, Japan will re-
main ahead. Industrialization will begin to have a real impact
on. agriculture, which will receive increasing supplies of equip-
ment and chemical fertilizers. Specifically, China will be able
to produce machinery of standard types and sizes to equip new
iron and steel plants and both thermal and hydroelectric power
stations. China will be able to meet domestic requirements for
ships, trucks, tractors, railroad rolling stock, electronic equip-
ment of standard design, and essential military weapons (of a
conventional type). By the end of this period, the technological
gap between China and the USSR will still exist. China will re-
main dependent on the USSR, but this dependence will be consider-
ably less than at present. By 1967., China's industrial output
will be about one-quarter of the industrial output of the USSR.
Reasons for Rapid Industrial Growth
The past and present rapid industrial growth in Communist
China has been possible for several reasons, as follows:
(1) Under China's "command economy," there is an enforced
will and a driving energy to succeed, which are demonstrated by
vigorous implementation of economic plans, incredibly hard work
by people at all levels, mass training to provide the necessary
engineers and skilled workers, and a national pride in the suc-
cess achieved.
(2) A large and increasing proportion of the resources has
been allocated to investment at the expense of consumption. At
the present time, more than a quarter of the total output of
China is being plowed back into the building of productive capacity.
(3) Industrial equipment and processes have been. supplied
by the Soviet Bloc and constitute an effective cutting edge in
China's rapid advance toward mastery of complex industrial
techniques.
(4) Finally, there are tremendous natural resources avail-
able, resources that are being exploited for the first time on
a national scale.
The absolute size of Communist China's population has not
been, nor should it become, a barrier to industrial progress.
Rather, the barrier is the population increase, amounting to
approximately 2.5 percent or 17,000,000 people per year, a
rate not far below the estimated rate of growth in agriculture.
The power of the central regime is possibly great enough to en-
force a rigorous: birth control program, but at present it?.pxof sses
to regard the increase in China's population as an economic asset.
In any case, China's growing industrial strength will make the
pressure of population on land a less serious threat in that in-
creased domestic resources will be available for transfer to the
agricultural sector and an increased volume of manufactured goods
21 March 1960 CIA/RR CB 60-17
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will be available for export to southeast Asia in return for food.
The level of per capita food consumption, however, will remain
low by standards of other industrialized countries including
the USSR.
25X1A
Analysts>:
Coord
M
21 March 1960 CIA/RR CB 60-17
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