CHEMICAL INDUSTRY: PLANTS, PRODUCTS, MARKETS, SUPPLIES, PRICES, GOVERNMENT CONTROLS/LIGHT INDUSTRY PRODUCTS AND SUPPLIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00926A007600810006-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 23, 2016
• Document Release Date: February 11, 2013
• Sequence Number: 6
• Publication Date: December 17, 1954
• Content Type: REPORT

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SECRET
CENTRAL INTELLIGENCE AGENCY
INFORMATION REPORT
COUNTRY China REPORT
SUBJECT Chemical Industry:- Plants, Products; Markets, Supplies,
Prices, Governtent Controls/Light Industry Products
and Suprlies
50X1 -HUM
HIS DOCUMENT CONTAINS INFORMATION AFFECTING THE NATIONAL. DEFENSE
OF THE UNITED STATES, WITHIN THEMIANING OF TITLE II, SECTIONS 700
AND 704, OF THE U.S. CODE, Al AMENDED, ITS TRANSMISSION OR WOVE.
LATION OF ITS CONTENT' TO OR RECEIPT BY AN UNAUTHORI2E0 PERSON IS
. . .?? ?. ? . .
THIS IS UNEVALUATED INFORMATION
DATE DISTR./7Dec 54
NO. OF PAGES 8
NO. OF ENCLS.
SUPP. TO
REPORT NO.
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1.
2.
the important uee or ethyl alcohol in China
It is converted into acetic acid glaaiala and used for industrial solvents
,(ie lacquer paint snlvent) and for riadiaal and pharmaceutiaal purposes. Dnx-
ing the Japabeae occupation it was used as a substitute for motor fel., mixed
with sulzarn'ic ether; but aarrently his is unnecessary, as 7:actor 2nel is
available.
e large produce
productiorL
estimate of the total
(a) All major distilleries in Shanghai except the Farimex Company and the 50X1-HUM'
Tung Chi CT sp) Alcohol Factary on Great Western Road have been shut down
either because of machinery breakdowns, lack of technicians, or both.
no definite figures on the production capacity of the Tung Chi factory. The
Farimex Distilling Works is located at 751 Avenue Rol Albert and reported a
capacity of 700 gallons a day in 1939 but now reports a capacity of 1200 gal-
]ons a day due to the Installation of improved machinery and enforced Communist
labor. (Farimex was formerly owned by European mechanical engineers who super-
vised the production, installation and fitting of the machinery.) Of possible
interest in this connection is the Far Eastern Oxygen and Acetylene Company
formerly French-owned, located at 200 Rae Zicawei. It is a minor producer
(700 gallons daily) of acetylene and oxygen for welding purposes. This fac-
tory also has orders for CO2 which it has been so far unable to fill. Tempo-
rarily Farimex is filling them.
(b) Plants which have been closed, but can be expected to be reactivated when
and if production know-how increases are described below: 50X1-HUD
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ial STR IBLITI ON 4 1 STATE ARMY NAVY AIR FBI ORR-Ev
This report is for the use within the USA of the Intelligence components of the Departments or
Agencies indicated above. It is not to be transmitted overseas without the concurrence of the
originating office through the Assistant Director of the Office of Collection and Dissemination, CIA.
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3.
(1) The 1arges is Pootung Alcohol Distilling Company.
[ It was partially dismantled before the
Japanese occupation and the machinery removed to the interior.
It was able to produce approximately 40oo gallons per day.
(2) The second largest .distillery was the Mei Lee Alcohol Factory situ-
. ated in the Hongkew district. It had a capacity of 1400 gallons per
day, its machine was obsolete
Industrial machinery is a sore subject in China todaY?50X1-HUM
It is next to impossible for the Chinese to produce good machinery,
even if they have the blueprints for it: there are not enough skilled
technicians and laborers to accomplish it. In an attempt to alleviate
the situation; classes in industrial machinery and engineering are
being conduoted by the USSR advisors; assisted by Hungarian and Czeoho-
slovakian advisors. 50X1-HUM
(3) The Eurasia Chemical Company had a daily capacity of 700 gallons per
day.
ethyl alcohol processed into aoetaliehyle for the production of acetic
acid
The Communist government is experimenting
with catalytic VOCOSE$615. the experimental station is lncated
behind Jessfield Park where an area of perhaps 6o mow ( approximateligum
10 -a (3 e ) is roped off. It is surrounded by a .boo fence; &Ards
are stationed at every gate. Within it are big yards for storage; and one
comparatively small building. This installation is next to the Dawalu Yeast
Factory (owned by Danish and German personnel before the Commnnist government
took over),
r three years ago. "C
lexperimAntation in this field began only two
rade" (fun) Line, the military controller\ \
boasted LLn May 195l-that the .Compist goverment wa550X1-H UM
\was unable to
making aoetic acid glacial tut
produce one. Neither was any available on the open mssrket.
He claim ed to be a graduate of Yenohing Univer-
sity; but the nature of his questions about plant machinery and the varioas
chemical processes involved gave him away even more than his appearance, 50X1-HUM
He rose, fast in the Communist gosoerument and
is now in charge of the Bureau of,Wimical Industries located
in Hamilton, House. Govern ent bureaus change addresses quite often and it
is possible thst they are now in some new location.
raw materials
commonly used for alcohol production critical
supply of this fermentation material
Corn is preferred. Dried sweetpotatoes, barley, sea-damaged rice (rice
which has been wet by sea-water and thus ruined for use as food); small
quantities of artichokes, chicory or any other agricultural product contain-
ing starch, and in atothemocategory - molasses. Wusih, about 100 miles from
Shanghai on the way to Nanking, is the center of corn-production. Corn also
comes from Hankow, transported by junks. Sweet potatoes COMB from Nino,
in the south. Sugarbeet molasses comes from Harbin from the Halanke Sugar
Factory. It is -very difficult to obtain delivery in Shanghai owing to the
shortage of freight space. Molasses
is obtainable
in small quantities fros Canton from the sugar refineries there but it is -
very costly owing to the fact that it must be transported by railroad.
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All of these materials are needed for food and are in short supply.
However, they are requisitioned by the government inasmuch as alcohol is
needed for "medicinal" and chemical use.
alcohol wiled
as a motor fuel
available for fuel in Shanghai
motor benzol
the situation elsewhere in China
Enough gasoline is available. It is not of very good quality and is bad-
smelling (of sulphur fumes). But the supplyAseufficientto make the use
of alcohol unnecessary. A small quantity of motor benzol is available p
duced by the Shanghai Gas Company.
uses for fusel oil?
available in China
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The Farimex Company is the only Shanghai company which produces fv,11 oil.
It produces 4o gallons a month. The other firms have continuous refining
stills (wherein there is no separation of fusel oil). Its primary use is
for producing amyl acetate for technical use (le solvent for lacciwr paints).
A small quantity is used. for flavoring (such as artificial banana oil), and
is also converted into valeric acid and its esters. The price of flavorings
is high; and there is a ready market for it. It is bought mainly' by candy
manufacturers; mineral water manufacturers; and makers of cigarettes and, cigars.
(The sugar used with it comes from Poland and is available in large quantities.)
"Comrade" Ling told that the government was importing .large . 50X1-HUM
quantities of fusel oil from Manchuria. He mentioneata particular shiPment
of 2000 gallons transported by rail. The Farimex Company formerly collected
its fusel oil for two years, waiting until there was a sufficient quantity
for dehydration and, refinement. The usual process consisted of dehydration
by calcium chloride and rectification into the fractions of isopropyl alco-
hol; isobutyl alcohol and active amyl and isoamyl alcohol. The residue was
not usually used. (There are still some higher alcohols to be isolated but
,since no use existed for them they were not processed. In order to obtain
thenit would have been necessary to install a complicated vacuum type machine
which would have been impossible to construct in China.)
Shanghails requirements for caustic soda; soda ash; bleaching pow-
der and hydrochloric acid/
the dyeing factories use the
greatest portion of these products for dyeing the regulation Comaltn.iStwork-
ments uniform. (Only the military officials wear olive drab.) 'Caustic soda
is currently manufactured in Shanghai by the Yung Lee Soda Factory. It is
produced in a very primitive way and sold in livid; rather_than the usual
solid form. The sae factory also produces bleaching powder of about 50%
chlorine content. In addition to its use in the dyeing industry bleaching
powder is used in quantity for disinfecting water and treating swimming
pools (there are still several public and private pools in use in Shanghai).
Sulphuric acid, used by distilleries, is produced in Shanghai by the Kiangsu
Chemical Works in large quantities. It has a technical quality of 98% (660 Be).
the major industries consuming the chemicals listed above
Government dyeing works; textile industries, state-operated pharmaceutical
and medical centers and hospitals. Fusel oils are purchased by small private
firms.
InhAmicalR
No statistics are available to the general pane: if they are ever tabulated
at all they are never published and inasmuch as it is impossible to make
inspection trips under the Communist government this question must be answered
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10.
- 12.
13.
1k.
15,
in the most general terms of rumor and guess. In these terms
/all top quality chemicals, and medical and pharmaceutical supplies FLI.?e
imported. In many cases they are repackaged and sold under. Chinese labels.
The supply is entirely inadequate. As a cOnservative estimate more than five
times as much as is available could be put to immediate use,
several truckloads of acetic acid arriving in Shanghai,
was packed in wooden barrels painted
red (an internationally recognized way of packing this product). Each bar-
el contains 400 pounds. Other top quality chemicals are smuggled in\
chemical imports! \most important with respect to Shanghai's chemi-
aa industry To China's chemical industry
Caustic soda is one of the most important, for the textile and dyeing indus-
tries. Sulphuric acid, bleaching powder and large quantities of fertilizers
are priority imports. There was a rumor in June 1954 that the government
was beginning to manufacture aymonium sulphate in a plant located near Nan-
king, its capacity was nearly .10 tons a day (but_____
they are happy if they obtain one ..ton per ,day).
_e_pro_n,,moztextilcessi.,cheMics'.tedinto.Shanai
bleaching powder, caustic
soda,, acetic acid and .4710stuffs. Domestic, production is insufficient and
because the supply is inadequate, the lqUes are out of Sight.
important. dyestuffs produced domestically in "a?
,
Some carbp9XaCk.ie.being made, but in small quantities only. Some mineral
pigteOSYsUch as chrome yellow are being produced, but on an experimental
scale only, one was experimenting in this line and
is still there is a former flyer, half Chinese and half
Japanese. Ee is called W4 Hsiao-chieh
Before his experimentation with chrome yellow Wu spent some
time in jail being. questioned in connection with an explosion in a cellulose
nitrating plant he had worked in. Because of the bad safety precautions,
explosions of this nature are common in China, and since the Communists
always need a scapegoat, some employee is picked out for the bearing of
the blame. WU's friend (fnu) Liang, a former newspaperman and teacher of
jAktedelism is helping him with his experimentation. Aside from these small
efforts, there is no important activity in this field. -
the Tien Lee Nitrogen Works
principal products prollxed daily
this facto
can produce only a fraction of the fertilizer required by the Chinese
government and
chemicals
lit does not work with explosives or nitrating processes.
exported
from Shangha
Chemicals, with the possible exception of China wood oil, are not exported
in quantity from China. (China wood oil has been exported for years to Hong
Kong on the barter system.) Some coal tar products produced in NUkden are
exported, Probably there are some by-products of the oil industry currentl
being developed in Sinkiang province which are being exported.
a sample of some naraffin produced in Sinkiang\ was as
ellow as amber of very poor quality.
the Shanghai Gas Works
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16.
17,
18.
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-5-.
In 1952
It was heavily guarded everywhere. It was necessary to 'Awe
a sentry box and in order to do so a previous arrangement had to be made "
The daily production was a carefully guarded
secret, They were producing naphthalene fractions for us in disinfecting
paint (coal tar paint). Very Often the residue'was thrown into the river
(there,is no good use for it).
cal production centet
the importance of Shanghai as a hemi-
Shanghai/
s the only chemical pro- ,
duction center of any importance in China. It is also the center of light
induatty, such as it i.' In each field; Shanghai "wears baby shoes.." .Pro-
AmMigonrtechniques ate in their infancy. Work is crudely donen effinieftcy
is low. The laboring-element has taken control of the factories away from
management with inevitable result's. 50X1 -HUM
the State Pharmaceutical Plant No 3 in Shanghai
d The plant
is apparently unable to produce first quality medical and phartaceutical
supplies. For instance, liver injections produced by thia plant which should
contain 10 international units of active Vitamin B Complex, contains Only one
unit. Therefore. the patient must submit to 10 of the very painful injections
to obtain-theobenefita he would normally receive from one, and a hundred
injections instead of the usual ten prescribed for patients suffering from
anemia. Mbst doctors therefore prescribe imported pharmaceutical products.
There have been several unfortunate results from anticholera serum; government-
produced and distributed. Several children died from one batch. A dentist
Was able to save-his own son 12 years old in the nick of time by 50X1 -HUM
injections of'imported,penicillin.
chemical troducers ir Shan ai
ac uired b the government
(a)I
government control
individual producers
5nv4 IRA
50X1 -HUM
hey are all controlled. Although the constitution does not outlaw
. private enterprise; the Communists hate taken over all of these businesses
through one ruse or another. the 50X1 -HUM
constitution currently being drawn up for ratification in January 1955
will prohibit private enterprise of any kind. -
(b) The most common ways of taking over an enterprise are:
(l) Through domination by the labor 'union. All workmen are obliged
to belong to the union; whose elected spokesman then requires the,
owner to provide office space and mealsfor one or more high level
?Union offieials (actually they are labor bureaucrats). The officials
? then post a schedule for required indoctrination. In most factories
classes meet for two hours before the working day begins And for two
hours afterwards, To miss one of these classes involves severe
punishment; the laborer can be dismissed for non-attendance and
will be automatically blacklisted for employment elsewhere. There
have been some exceptions; when low communist officials have been
related to workmen and have closed their eyes to absences; but these
seem to occur on a low level only; the higher echelons of officialdom
are stricter, Wages, working hours and social provisions are dic-
tated by the union bosses. No appeal is allowed the private owner.
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If there is any question or resistance on the part of an owner he ie
likely to be forcibly detained in his offices or in the offices pf
the labor bureau for as long as 10 days.. This has bappened to several
One Maria fingi,,Shanghai representative of
the medical supply firm was detained 50X1-HUM
her offices for two days and nights while negotiations were taking
place :tor the ,closing of the branch. The workmen asked an enormous
amount of severance pay. The government regulation requires that
the ovneropay three months salary as severance, but it is rare
that. the unions members are satisfied with, only three months salary.
firl.* Iliad to pay one month's !salary for each year. the
laborer had worked, in addition to eight months' salary per man. 50X1-HUM
(2) Another means of control. is through the assignment of. a, military
controller to the premises. This official is usually accompanied
by a,teohnicaloexpert. The. controller takes over the financial end
of the business ad the, technician supervises machinery and labor.
Bank records, books and safes are, immediately sealed by the con-
troller. The 'technician! brings in his own men and assigns' them
to strategic factory positions. 50X1-HUM
after the Communists took, over four political men were..
assigned to eaph 10 men employed, to watct and report on their
actions and reactions. The controller and technician then take
over the best office-space and begin their reorganization of the
factory on communist lines. The owner is relegated to SCM4 small
closet somewhere and is usually most happy to accept whatevezete.
1,5 offered by the ,Communists for.his property. ,H
,
.(3) If neither of the. above controls is considered adequate, a. tax,
bUreanrepreSentative arrives and demands to see the company books.
Office space is requisitioned and all records are opened to him
He then proceeds to find taxable flaws in books and records. until
he has whittled down the cash surplus sufficiently to ruin the
business... bring the course of such machinations, no, shipment can
leave, the factory. until the tax representative has inspected, sealed
and stamped it. .Inasme:nh as he is free to come and go as he likes,
there have been many instanoes of work stoppage for considerable
periods until such time as the tax official has decided to reappear
in his office, or: if there, to seal and release the shipment.
Technical representatives who are often in utter ignorance of the
machinery they supervise, have been known to put entire plants out
of commission by speeding up the revolutions per minute of machines
which,are: obviously not designed for higher speeds,, and by making -
other easily avoidable blunders. Hard won efficiency in the chemi-
calOprodtCtion field'has.hit a new low.with communist supervision.
20. Matket prices of chemicals
Acetic Acid: In January 1951 imported acetic acid could be obtained for
JMP$9500 per pound. In March .1954 the same acid. cost JMP$38 thousand
(equal to US$1 on: the black market). The locally made variety was
market listed at J1P$27othoueand,but none was available.. Even the
imported variety at 4MP$38 thousand wasscarce.. :One of the last,
remaining private chemical producing plants was buying at JMP$50
thousand per pound from the local Utopia Chemical Laboratories,
located in the Hongkew district. The quality was adequate (it was
obviously repackaged, imported acid).
Sulphuric Acid: In 1950-51 sulphuric acid made by the Kiangsu Chemical
Works cost J$2500 per pound. In March 1954 it cost JMP$3500.,
Amyl Acetate: In January 1951 the chemically pure quality was obtainable
ivr-E-Uflia40 thousand per pound. In March 1954 the same quality cost
JMP$80,thousapd.
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EL11_..619: In January 1951 the
-----E-1954 -it Was doubled: J1P$42
technical quality (usually 40%
quality).
50X1-HUM
price per pound was J1P$21 thousand. -
thousand. This price vas for the
cheaper than the chemically pure
Orange Oil, Commo'l: There was almost no cargoon the market in March 1954.
Old cargo, which was sometimes spoiled, cost JMP$70 thousand per pound.
(Exchange rate was then JMP$24 thousand to US$1,the black market rate
from JMP$33 thousand to JMP$4C thousand.)
Orange Oil) Good Quality: In March 1954 it cost J$600 thousand per pound.
Sellers paid. 20% taxe .
Orange.Oil Tee enelesse ? In March 19511. the price was OP$2,800,000, approxi-
mate y US 112. The US current price is $600)
Lemon Oilt Common: In March 1954 the price was 014450 thousaadper pound.?
(It was usually, spoiled.)
Lemon Oilt Good saalLtzt March 1954 JMP$500 thousand.
Lemon Oil, Teruneless: Nara. 1954, JMP$4,800,000.
'p
(The above prices, are listed in the Pharmaceutical and
Chemical Guild Price List published in December 1952. This list was still
in use in March 1954. Since there are no characters'inChinese for the
different oils, they are listed in English.)
Alcohol: In January 1951 96% alcohol was easily obtainable at JMP$7 thousand
per peund.e .Shortages began to develop in that year and at .the end of
1952athe-price had climbed to JMP$28 thousand. In March 1954 the price
dropped to JMP$13 thousand. .
Amyl AlcoholrRectifitd: In March 1954 it was obtainable at JMP$50 thousand
per pound.
rujthi__..oilz_-HdysL: March 1954, JMP$18 thousand per pound.
Injection:Liver
The locally made government-produced
ampoules (1 cc containing one international unit of active Vitamin B
Complex) sold for JMP$10 thousand per 10 ampoules.
Gasoline: In March 1954 one liter cost J1P$18 thousand.
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Iridium Alloys: An alloy containing platinum and iridium made into ballpoints
. ? for pen manufacture sold at JMP$6 million per ounce.- (Each ounce con-
etained approximately 6000 ballpoints. Great quantities of these pens
.are manufactured in government factories. The point is welded onto
the nib of a cheap pen and the nib is split. The pen sells for
approximately US$.50 - they are of very poor quality.)
21. Imported medical supplies smuggled through are very expensive and
their well-known superiority to the local products nettles the local health
authorities. For example, between January and March 1953 many doctors in
Shanghai prescribed Rimifon, a patent medicine made by a well-known
firm for the treatment of certain types of tuberculosis. Results from use
of the drug were so good that its fame spread rapidly and countless Chinese
were getting it sent to them in Shanghai by friends and relatives
In March 1953 the Department of Public Health in Kiangsu Road in
Shanghai issued a pronouncement that Rimifon had been found ineffective
against tuberculosis and that importation was henceforth prohibited.
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Individuals were were forbidden to receive small packages of it from their friends.
At the end of six months, without explanation, it was officially pronounced
efficacious again. This is typical of the current whims of the Department
of Public Health.
22. A supply of stainless steel drums of the type used in the transport
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of chemicals is currently being sold to the, manufacturers of bicycle frames'
(they are cut up and made into steel tubing and are in great demand).
Laame of these drums were probably left-overs from
1946, 1947 and 1948. The price is ne drum of approximately 70-gal-
lon50X1-HUM
capacity sells for JMP$8 million.
23. Another government-operated light industry of some importance is the manu-
facture of radio microphones and loudspeakers. Tubes in the finished
product are usually smuggled in/ Some sewing
machines are also being manufactured. 50X1-HUM
-end-
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