RECENT DEVELOPMENTS AND PROBABLE TRENDS IN COMMUNIST CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81-01043R002000150005-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 159
• Document Creation Date: December 27, 2016
• Document Release Date: June 5, 2013
• Sequence Number: 5
• Publication Date: February 10, 1958
• Content Type: REPORT

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50X1-HUM
Intelligence Report
50X1-HUM
50X1-HUM
RECENT DEVELOPMENTS AND PROBABLE TRENDS
IN COMMUNIST CHINA
DEPARTMENT OF STATE
50X1-HUM
Office of Intelligence Research
and Analysis
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This report was prepared as the IRA
contribution to VIE 13-58, "Communist
China," and is distributed for back-
ground use.
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This report is based on information available through February 101 1958
TABLE OF CONTENTS
Abstract
I. Recent Developments
Page
iii
1
A. Political and Social 2
1. Mao's "Contradictions" Formula 2
2. The "Rightist" Issue 4
3. Party and Government 10
4. Dissidence and Resistance 16
5. Education and Trained Personnel 22
6. Socialization 26
-- B. Economic Developments 29
1. General 29
2. Finance 31
3. Agriculture 37
4. Industry 41
5. Foreign Trade and the Balance of Payments 43
6. Labor 46
7. Demography 50
8. Transport 52
C. Military and Palle Security 56
1. Developments in Military Policy and Organization 56
2. Internal Security 61
D. Sino-Soviet Relations 64
1. General 2 64
2. Peiping's Position Clarified 65
3. New Light on "Contradictions" 67
4. Popular Attitudes Toward USSR 68
5. Official Visits 70
6. Sino-Soret Reiations Viewed. Through 40th
Anniversary Celebration 71
E. Policy Toward Non-Communist Countries 75
1. General 75
2. Po)icy Toward the US 77
3. Relations with Other NonCommunist Countries 80
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TABLE OF CONTENTS - continued
Page
Future Trends 87
A. Political and Social 87
1. The Party 87
2. Popular Response 91
3. Trained Personnel 94
B. Economic Prospects 96
1. The First Five-Year Plan 96
2. The Second Five-Year Plan 108
3. Communist China in 1962 121
C. Military 123
D. Sino-Soviet Relations 126
1. Objectives 126
2. Probable Developments 127
E. Policy Toward Non-Communist Countries 132
1. Objectives 132
2. Peiping's Tactics 134
3. Probable Achievements 137
III. Conclusions 144
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Abstract*
1957 was a year of considerable experimentation and adjustment in
Communist China, as the regime faced problems arising from collectivization,
socialization, and ideological regimentation, the forced pace of industrial-
ization) and the aftermath of de-Stalinization and the Polish and Hungarian
developments of 1956. Through Mao's "100 flowers" and "contradictions"
formulas the regime attempted to institute a more flexible approach to
problems of popular dissatisfaction, intellectual regidity, and party weak-
nesses, but reverted to more conventional authoritarianism wL5n the
relaxation elicited excessive criticism of basic aspects of the regime's
program. Consequently the latter part of 1957 was devoted to a weeding out
of "rightists" from the government, party, and other sectors and to a
heightened program of ideological indoctrination of the populace, although
the CCP continued its "rectification" effort to eliminate failings in the
party and government.
In an attempt to streamline the gargantuan administrative and
economic apparatus, Peiping at the end of the year began to transfer
hundreds of thousands of cadres to lower echelons and to productive enter-
prises. In agriculture the regime, faced with considerable peasant
opposition to the collective farms into which 97 percent of mainland China's
peasants had been organized, attempted to find more effective methu63 of
operating the collectives and of controlling the collectivized peaants and
their product. In its economic program, adjustments were made to case
inflationary pressures, relieve industrial shortages, and to improve state
collections of agricultural products. Industrial and agricultural output
in 1957, the last year of the first Five-Year plan, was about 133 percent
and 15-20 percent, respectively, above 1952.
In the field of international relations, the regime moved to recoup
some of the losses it had suffered as a member of the bloc in 1956 as a
result of the revelations concerning Stalin and the repression of the
Hungarian rebellion. While retaining its initiative in making ideological
formulations and maintaining its stature within the bloc, Peiping emphasized
particularly its acceptance of Moscow as the leader of the bloc. Partici-
pating as the second-ranking bloc member after Moscow at the celebration of
the 40th anniversary of the Bolshevik revolution, Peiping attempted to
identify itself with Soviet gains during the year, and particularly with
the Soviet launchings of two earth satellites. A notable feature of
Communist China's rtlations with the non-Communist world was its sensitivity
regarding the "two Chinas" concept, which it adamantly rejected as a US
plot.
The Chinese Communist regime appears to be facing the second
Five-Year plan beginning in 1958 with considerable confidence in the
economic field, although the maintenance of economic expansion will be more
difficult and costly than in the first plan. However, through stringent
economies and harsh limitations on consumption increases, the regime will
* The conclusions of this paper are presented in somewhat more detailed
form on page 144.
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probably be able to maintain a rapid rate of economic growth, with national
Income rising about six to sever percent annually. During this period the
population problem will become increasingly significant with the population
expected to rise from 64o million to 720 million.
The regime will be faced with continuing and probably increasing
dissidence among many sectors of the population, particularly peasants,
intellectuals, and national minorities. Although the decrease in public
support may hamper some of the programs, the regime's control apparatus
will almost certainly be able to prevent any internal threat to its
existence.
The present character of the Sino-Soviet alliance will probably be
maintained, with Peiping and Moscow bound by ties of mutual dependence and
a common view of world history and of the East-West struggle. Barring
Imforeseen shifts in bloc strategy or a major war, Peiping will probably
continue its present tactics toward non-Communist Asia and attempt to
exploit whatever non-Communist weaknesses may develop. Although these
tactics may result in some increase in Peiping's influence and prestige,
changes in its international position will be determined to a greater degree
than in the past on the course of the conflict between the Communist and
non-Communist worlds.
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I. RECENT DEYELOPMENTS
By early 1957, the air of acilfitience and certainty which seemed to
characterize the Eighth Congress of the Chinese Communist Party (CCP) in
September 1956 no longer prevailed.. This change can be partly explained
by the fact that the Congress, the first in eleven years, could look
back with justifiable satisfaction on the COP'S achievements after the
Congress, it was necessary to face the future, with its uncertainties
and. problems. More important, however, were certain &nestle and inter-
national developments which created additional problems or underlined
old ones. Foremost among these developments were the domestic reper-
cussions of de-Stalinization and of the Hungarian and Polish affairs; a
disappointing 1956 harvest and growing difficulties with a newly
collectivized peasantry; increasing disillusionment, discontent and
apathy; and the claimed 'basic completion of the socialist revolution,"
which necessitated reconciling policy with ideology.
Accompanying this increase in problems was a more realistic
recognition of the problems by the Chinese Communists. Thus in early
1957 they were engaged in reappraising the situation in order to adapt
their policies to meet the problems.
Although specific developments prompted the CCP to undertake this
reassessment, they were all manifestations of the fundamental problem
inherent? in Chinese Communism: how to mobilize the country's human
resources and utilize its material resources in support of the regime and
its programs) particIllArly its economic policy of forced industrialization.
UnWilling to make any basic change in this economic policy, the Chinese
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Communists sought the solution by attempting to improve their utilization
of material resources and their method of mobilizing the people. Domestic
developments in Communist China largely reflected this attempt.
During 1957, the Chinese Communists were largely successful in
restoring the momentum of their economic program, but their attempts to
devise new solutions to their political problems encountered unexpected
obstaeles. Thus at the beginning of 1958, their economic activities were
characterized by a renewed air of confidence; in the political field, Van
regime having reverted:to previous methods, the atmosphere was more one
of firmness of purpose than of satisfaction and assurance.
A. Political and Social
1. Maols "Contradictions" Formula. Available evidence strongly
suggests that Mao Tse-tung himself, perhaps ignoring the apprehensions of
some party leaders, devised the new formula for eliciting more positive
support from the Chinese people. Mao presented the theoretical basis
and the broad outlines of this formula in a speech to a Supreme State
Conference audience of some 1,800 persons on February 27. The formula
had two main Components.
The first component was the thesis that contradictions
me WM
i?e?y
problems and conflicts of interest -- continue to exist in a socialist
society, partly owing to dialectic reasons and partly because of
inexperience. These contradictions occur between-the-leaders-al:lathe
people and within and between various groups, such as the workers,
peasants, bourgeoisie, intellectuals and. minorities.
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The second component of Mao's formula was a suggested method of
handling these contradictions. He explained that there are two types of
contradictions: antagonistic ones between the "people" and the "enemy,"
and non-antagonistic ones "within the ranks of-the people." Using the
concept of the "people's democratic dictatorship," Mao stated that
dictatorial methods should be applied only to the antagonistic contra-
dictions, while "democratic methods" should be used in handling contra-
dictions "among the people." Most of Communist China's problems were
of this second category) Mao explained, and they should be resolved by
'democratic methods, methods of discussion, of criticism, of persuasion
and education, not coercive, high-handed methods."
Mao's approach was a bold one with ambitious objectives. It
avparently arose from his belief that it would be both feasible and
desirable to rely less on repression and controls and more on voluntary
popular support. The lessons of Poland and Hungary undoubtedly
Influenced. his thinking) but domestic considerations were also important.
The technique of repression, tight controls: and sudden spurts of
"campaign" energy, previously effective in suppressing organized opposi-
1?
tion and in establishing the institutional framework of a communist
society, would be less productive in channeling the country's energies
into the protracted. effort of economic development. By arguing that
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problems wereinevitable, even under communist, he apparently hoped to
make the problems a common cause, thus .reducing the blate laid on the
?,
regime. And he intended to reinvigorate the' CCP by rationalizingthe
problems, by creating abetter relationship between the party and the
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people, by correcting the errors and fteknesses of party members, and
by fostering a stronger sense of discipline and unity.
2. The "Rightist" Issue. The full impact of Mho's speech was not
immediate. In mid-April, however, it became apparent that the regime had
decided to use the speech as a basis for a major campaign, and at the
end of April the CCP launched a party rectification campaign, to be
"guide ideologically" by Mho's thesis on contradictions.1
This rectification campaign was described by the CCP directive
as primarily an internal party matter with the objective of improving
the party's "working style." However, the rectification technique
emphasized the value of criticism as a means of identifying and solving
contradictions, and in early May the CCP held a series of forums in
which non,-Communists -- primarily intellectuals -- were encouraged to
voice their frank views. These foruMs led the rectification movement
into the tangential and unplanned "anti-rightist" phase which
. _
constituted a fundamental change in the movement, and, it appears, in
,
Chinese.Communistthinking.
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All evidence suggests that Mao's speech -- as delivered, not as
eventually published -- was, for a Communist statement, remarkably
" . ' ? ? ?? ? .
liberalistic in both specific content and general tenor. In particular,
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it stressed the necessity of further encouraging and expanding the
process of "blooming and contending" which Mao had advanced in 1956 for
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the morej+mited. purpose of ptidOlating scientific and intellectual .
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L. A a-scussion of rectificationnTs given in the
and *Goverhment " -page l0'. .
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activity. Reports that Mao specifically guaranteed that there would be
no retaliation against those who voiced their views are partially
slibstantiated and appear logical in view of the surprising frankness with
which criticism were soon expressed.
a. Criticisms expressed. Long frustrated. by enforced silences and
apparently hoping that they could in fact influence the CCP, the
intellectuals voiced criticisms which, in total effect, challenged the
CCP's monopoly of leadership and some of its important policies. The
following criticisms, all published in the mainland press, indicate the
vehemence and range of subjects:
Relations between the CCP and the people have deteriorated
because the party believes that it should control "every-
thing under heaven." The demarcation between the govern-
ment and the CCP should be clearer. The National Peoplels
Congress has no opportunity to discuss matters intelligently.
A "political planning council," with large nom-CCP member-
ship and with broad authority, should. be established. CCP
members adopt an arrogant attitude toward non-party persons.
Minor political parties are slighted. CCP committees in
educational institutions should be abolished. The CCP is
not qualified to "lead science." Newspapers should print
news; intellectuals should. be permitted to establish their
own publications. A. high-level body should be formed to
2..view the injustices which occurred in previous mass
campaigns. Former businessmen no longer need extensive
ideological remolding. The tempo of socialization should
be slowed down. China should not bear the full cost of
the Korean war, should obtain more lenient loan terms from
the Soviet Union, and should receive compensation for the
-eqpiPment which the Soviet Union removed from Manchuria in
1545-46.
b. Number of "rightists." It is not clear how many people voiced
such criticisms. The Chinese Communists claimed that of the intellectuals
and former busineasmen, only a small minority was involved. However, 54
"rightists! were'deprived'of their?positionir---anties---toftbe'aitional
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People's Congress in January 1958, and an Incomplete count shows that
about 500 persons have been attacked in the press. Whatever the
number of persons who actively criticized the reginerthe criticisms
represented the opinions of a still larger group of persons. CCP
spokesmen stated that the large majority of the intellectuals and
"bourgeoisie" have not yet accepted the "socialist road" and are "unwilling
to accept the leadership of the party and the proletariat." The Chinese
Communists have attempted to minimize the extent of opposition sentiment
among the students, workers, and peasants, but official press reports
suggest that a sizable wave of criticism of the regime swept through
the schools, and that dissatisfaction, not necessarily related to the
"rightist" issue, was widespread among the peasantry. Moreover, the
vehemence of the regime's counterattack -- a move which necessitated a
major chance in both the procedure and the tenor of the rectification
campaign -- strongly suggests that the CCP was shocked by the prevalence
of these views and concerned by the probability that the views would
find a large receptive audience.
The persons charged as "rightists" ranged from some of the
country's most pronlrent non-Communists -- several government ministers,
university presidents, newspaper editors -- to obscure individuals.
Almost all areas of intellectual activity were affected; the CCP secretary
general, for example, listed "industrialists and businessmen, democratic
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parties, educational circles, journalistic and publication circles,
cultural,and art circles, scientific and technological circles, health
circles, many personnel of state agencies, college students, and so
forth." In addition, "rightists" were found in the government, the
army, the party itself, the Communist Youth League, in legal fields,
and among the national minorities. Of the various groups, the minor
"democratic parties," especially the China Democratic League, were
charged with harboring the largest number of "rightists" in responsible
positions.
c. "Rightists" accused of organizing. How much organization
or liaison there was among these "rightists" is not clear. Two of the
leading "rightists" -- Chang Po-chun and Lo Lung-chi, government
ministers and deputy chairman of the China Democratic League -- were
accused of having formed a "conspiracy" with widespread contacts. It
wassaid?that the "rightists" had a "platform, organization, and plan."
The Minister of Public Security stated that counterrevolutionaries,
"influenced by the frantic rightists," established organizations,
carried out armed revolt, and engaged in propaganda activities. It is
probable that the COP deliberately exaggerated the degree of organiza-
tion, and it seems doubtful that most of the "rightists" were
organizationally united. However, there was undoubtedly some liaison
withili-certain groups., Some of the 'persons accused as "rightists"
may been seeking.an?opportunity,to exercise an ameliorating
influence onisome of the harsher Communist policies for some years.
After Maolsjspeech,promiaing'a,more ?liberal' phase in Communist policies,
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these_ persons probably moved into action along the lines suggested by
the Communist charges, attempting to "light fires" in non-Communist
intellectual circles throughout mainland China. However, their objectives
were probably not as ambitious as the regime charged, since it is
improbable that they expected to usurp leadership of the country.
d. Countattacragainst"ritists." The regime launched
its counterattack -- the "anti-rightist struggle" -- in early June.
Its technique was to make charges against the "rightists" in general,
leaving to various other groups, such as the minor parties and
professional bodies, the task of identifying the Iniividual culprits
and specifying the charges. A. revised yersion of Mao's February speech
was released) now incliiling criteria by which proper and-improper
criticism should be judged. The principal criteria were acceptance
of CCP leadership and support of socialism) and the broad accusations
leveled against the "rightists" were that they were challenging the
right of the CCP to lead the country and. were attempting to restore
the "bourgeois economic and political system."
Many of the prominent "rightists" publicly recanted; most
initial confessions were rejected as superficial and unsatisfactory,
and the "anti-rightist struggle" continued with heightened intensity
and broadened. 'scope. The regime laid the groundwork for severe'
punishment by using such phrases -as "criminal activity," "the enemy,"
and "the same category as counterrevolutionaries." Of long-term
significance was the modification of Mao's discussion of contradictions,
to.emphaiize that there will be recurrent struggles 'between the enemy
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and. people" for some years, even though those who resolutely oppose
socialism are small in number.
..Some "rightists" were expelled from their positions in government
(including three ministers) and other organizations, in the CCP and the
minor parties, and in the people's congresses at both national and
lower levels,, but none has been arrested as of mid-January 1958. It
is possible that a few will eventually be charged with counterrevolutionary
activity, but apparently the CCP hopes to avoid a reversion to widespread
use of terror and physical punishment'.
e. ,I.deological indoctrination stepped up. Perturbed by the
signs of a more widespread dislike of communism than previously estimated,
and hoping to derive some more positive benefit from the "anti-rightist!'
campaign, the CCP broadened its original plans and launched a nationwide
rectification movement. Of even broader scope, although somewhat '
different in form, .was the massive "socialist education" campaign
conducted among workers and. peasants with the stated purpose of heighten-
ing their belief in the superiority of socialism and inculcating a
proper understanding of the relation between individual interests and
those of the state. For students, courses for ideological indoctrination
have been heavily emphasized. Meanwhile, toward the end of the year the
COP returned to its 'original program of party rectification, and thus all
significant grtupe in the country were engaged in varying degrees in
ideological indoctrination,
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3. Party and Government.' The rectification campaign produced most
of the significant developments concerning the party and government during
1957.
Rectification is a unique CCP device of inducing, or if necessary
enforcing, party "purity;" its major objectives are to create conformity,
tighten discipline, correct failings, and reinvigorate the party. The
CCP directive emphasized that harsh techniques were to be avoided; the
process was to be one of persuasion and education. A central feature was
"criticism and self-criticism" as a method of identifying and correcting
"contradictions", or errors in party work.
It is natural that in the context of the rectification campaign,
the more significant party and governmental developments during this period
would highlight problems and wealmesses. However, there was little reason
to believe that the party faced a critical internal crisis. The basic
elements of its strength remained: a determined leadership,, a large
membership organized to act as an instrument of control and policy imple-
mentation, and an intention and ability to enforce a high degree of
discipline and conformity.
a. Policy disagreements. At the beginning of 1957 it was
apparent that some doctrinaire elements in the CCP were 'questioningthe
fibloomirw and contending" policy which ha() had advanced in 1956. His
strong reaffirmation of this policy in 'his February speech was undoubtedly
intehded to silence these doubts, but there are indications that.Maols
licontradictions" formula was in turn opposed by many party members,
probably including some in the Politburo. Mao seems to have originated
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-the new approach, rather than merely using his authority to settle a
debate, and it is not known how many party leaders genuinely favored
Mao's formulations. It is possible that Liu Shao-chi and P'eng Chen
argued against the policy; "rightists" were accused of making such_allega-
ticns, and Liu took little publicized part in the initial phase of the
movement. However, the subsequent modification of Mao's original policy,
marked by the counterattack against the regime's critics, presumably
provided considerable justification, to those who had questioned the policy,
and it is doubtful that either those who supported hao or those who dis-
agreed with him have fallen into disfavor. Nevertheless, the debate may
have at least temporarily sharpened divergent viewpoints within the party,
and Mao's prestige as the infallible leader may have suffered slightly.
This probable disagreement among the leaders was reflected at lower
party levels. Some members were labelled "rightist" for expressing views
comparable to those of the non-party critics, while others, fewer in
number, were called "leftist" for questioning the fundamental concepts of
the "contradictions" 'doctrine and the rectification movement.
b. e?nsion In September 1957, the CCP
claimed a membership of 12.7 million. Of these, 8.2 million had joined
-the party after it achieved control of the country in 1949, of which
about two million were recruited since June 1956. During the rectifi-
cation campaign, the CCP stated that many of the now moMbcra came from
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a non-proletarian background, were-insufficiently grounded in communist
theory,?ladke4,revolutionary,experience and fervor, and had been "steeled
through labor."
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c. Other party weaknesses. Explicit in the rectification
campaign and in many party statements was a concern that party members .
did not have the proper close contact with the people. Thus one of the
main objectives of the campaign was to 'combat the admitted growth of'
bureaucratism, which was stated to have led to the use of undesirable
methoda of administrative control or oppression in dealing with the people.
The campaign was also intended to overcome sectarian tendencies (described
as adopting a narrow, compartmentalized approach to questions) and sub-
jectivism (a catch-all deviation arising from a failure to understand the
reality of any situation). In addition, party members with an intellectual
background were told to overcome vestiges of bourgeois thought and tenden-
cies towards liberalism and individualism. Occasionally alluded to during
the rectification campaign, and even more evident in early 1957, were the
doubts and confusion which were aroused by the Polish and Hungarian affairs
and not fully allayed by the party's official explanations.
d. Possible party purge. Although the policy of reeducating
errant members was constantly stressed, and although the CCP will want to
avoid a Stalin-type purge, at the beginning of 1958 there was increasing
evidence that a significant number of party members might be expelled.
A number of' provincial party officials, including the governor of Chekiang
and a number of deputies to the National People's Congress, were dismissed
from the party for "rightist" activities; more party members, including
officials of the judicial organs and the party's newspapers, have been
attacked as "rightists." In a review of the rectification campaign at a
Central Committee meeting in September 1957, the party's secretary general
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" v?
- 13 -
stated, in reference to members who opposed the party on certain policy
?
problems and adopted a "vacillating political stand," that-Prightists"
within the party "must be treated with severity," (apparently meaning'.
expulsion). So far no persons of Central Committee' level have been charged
. with rightism, although one member was dropped for dereliction of duty.
The rectification campaign itself, as distinct from-the "anti- -
rightist struggle," had led a few if any expulsions, but' it is possible
- that the leaders will use this opportunity for weeding ba-members of
dubious reliability or ability.
The delay in convening the second session of 4he*8th Party Congress,
?
previously scheduled for December, may be due to an ini4ation to utilize
the Congress to summarize and terminate the "purge".aepeCt'of the rectifi-
cation campaign.
e. Shift of cadres. An important change in the cadre assignments
occurred during the period, again largely as a result of the rectification
campaign. By the beginning of 1958, about a million cadres, perhaps half
???.,r
of whom were party members, had been transferred to lower'llevels; partic-
f' '1d1
ularly to rural areas; large numbers were assigne o agrI1:11 tairal cooper-
atives. This major program seemed to have a number of ob3ectives: retrench-
ment of non-productive personnel in party, government andinduetrial organs;
(4.
reduction of bureaucratic tendencies in these organs; strengthening of the
party network in the crucial agricultural field; inculcat Temembere with
? - ? ?
an appreciation of manual labor; and punishment of erraht MeMbers. The
numerous exhortations to these cadres suggeted that manydisliked"the
,
pp
shift, but the program still continues with the prospect that Many. more
v.,
?
cadres would soon be affected.
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er:04,017,,T. 'rec,"'"';iht.S1." 7 7 ;47; -`"17.7..`"%nt?tt",;., 1,??? .P ? 4443, 4 '4 4
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- iii
f. Parochialism. The problem of antagonism between cadres Of
? lf, .
local origin and those sent in from other parts of the country -- a problem
Seldom mentioned in the past -- received considerable attentiOn?.-torWards
the end of 1957. The problem was more acute in certain areas, notably
Kwangtung, where it was described as a serious obstacle to the party's
programs. Reports indicated that resentment was directed particularly
Al-.
against the policy of assigning non=local cadres
r
Still the CCP .indicated no intention of changing
to the higher cadre jobs.
its assignment policies;
? ,
instead, it called on cadres to demonstrate a more cooperative spirit and
to emphasize their common devotion to communism.
g. Rural cadres. The problem of ensuring efficiency of action
and Orthodoxy of thought among rural cadres is not a new one. Chinese
Communist statements during 1957 reflected the CCP's continuing concern,
which was probably heightened by its more realistic appreciation of the
difficulties of obtaining peasant support and of running the collectives
smoothly. Some cadres were said to have identified themselves more closely
?
with the peasants' interests than with the state's demands on the question
?!'T f
of grain Collection. In more general terms, they were criticized for
hiving "bourgeois" tendencies and for having failed to realize that the
class struggle, particularly on the political and ideological level,
-still continues in the countryside. To correct these weaknesses, the
-
Tarty stated that the "socialist education.!' movement was directed at the
cadres as well as the peasants. The large-scale transfer of cadres to
'I ?
the rural areas undoubtedly had as one objective the expansion of the
rural cadre system and, 'increasing the number of cadres of urban origin,
?
. "C?
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- 15
the counteracting of. undesirable tendencies among the rural cadres.
,
h. Decentralization. , .Peiping's state apparatus has been character-
- ,,.
. -
ized,...by a high degree of centralization in planning and.decAsi9n7Aaking
and by a related trend toward the growth of a large, tpp-hea..7,0!ureaucracy.
As a result, local initiative has often been)pardly,z.ed,.and local ,officials
have been smothered under an avalanche of directives from central .and
provincial governments.
Chinese Communist leaders have shown increasing awareness of the ,.
need for streamlining their swollen bureaucracy and promoting a greater
measure of local initiative. The problem of readjusting central-local
relationships was one of the major topics discussed during the 8th Party
Congress held in September 1956. In November 1957, after almost a year
of preparation, the central government issued a series of new regulations
providing for a gradual, limited and still experimental decentralization
of some industrial, commercial, and fiscal controls.1. This decentral-
ization process may facilitate the concomitant efforts,by._the regime to
streamline its bureaucratic apparatus and retrench excessive administrative
.? - ; ?
personnel.
?
- ?
:.4
:
f
1. Although this move was similar in spirit,to.the Soviet_eccncmip
reorganization Measures, it 'differs 'consiSerably in sc4e and detail.
The Soviet measurs-a-ra,v?haye influenced tlise_CCP1s thinking",,butt)ie.
'CCP did-not .dow the SOvie-z--pivtXe:rrii:"2' *"-
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naftEr
-,16
,
? . , ?
4. Dissidence and Resistance. The Chinese Communist regime has been
confronted with an increasing volume of popn1A+. dissidenCe and discontent
among several sectors of the population, including the peasantry, students
and intellectuals, and certain ethnic minority groups. This rising level
-r
of popular unrest appears to reflect a disillusionment arising from unful-
filled promises, as well as the stresses and strains involved in the regime/s
accelerated program of collectivization and industri.ilization. Continued
efforts by the regime to impose stringent political'and-social controls
and to modify deeply ingrained social customs have also been contributing
factors.
Popular unrest on the China mainland has not been translated into
well-organized and active resistance capable of threatening the stability
of the regime. Active resistance activities have been localized, sporadic,
and confined to small groups lacking effective leadership and organization.
For the most part, popular dissidence has been expressed in passive
resistance, apathetic resignation, or refusal to accept the doctrines
disseminated by the regime. Nevertheless, dissidence constitutes an
important obstacle to the successful implementation of the regime's
political, economic, and social programs.
a. 'Counterrevolutionary" moves. From the middle of 1955 to
the fall of 1957, the regime carried out another nationwide drive against
counterrevoluO.onaries" comparable in scope and intensity to an earlier
? .
?
drive launched in 1951. ,During this movement, overaP0,600"counter,-
_
?.
revolutionarieSn' were reportedly disaoyered within the party, government,
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- 17
mass organizations, and state enterprises. About 5,000 of these were
? .; ?
uncovered within the CCP itself and 3,000 in the Communist'YouthIeague.
According to official reports, some of these had "reached the innermost
organs and had usurped impoitant functions of the party and the. state."
In addition, more than 3,000 "reactionary cliques" were broken up, and
"various sblemes within the government smashed."
The part of the counterrevolutionary campaign aimed at the general
population resulted in many arrests and reportedly in the surrender of
some 370,000 "counterrevolutionaries" and criminals. Most of the specific
cases of "counterrevolutionary" activity reported in the Communist press
during 1957 have involved small-scale and localized instances of alleged
sabotage, espionage, or assassination of CoMmunist officials. There have
been no reports of large-scale armed uprisings comparable to the Tibetan
revolt of 1956.
While continuing their usual efforts to suppress counterrevolu-
tionaries, the Chinese Communists attempted to devise more subtle
methods of detecting and minimizing popular dissidence -- the "contradictins" and "rectification!' movements mentioned above. However, the
intensity and volume of the criticism revealed a residue of popular
resentment and discontent which apparently alarmed the CCP leaders and
prompted them to revert to more stringent control measures.
b. Disaffection of intellectuals. One significant fact emerging
from-the "rectification" Campaign: and drive against "rightists" is the
.A .
extent of residual intellectual antagonisft to the regime. Communist
-
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-18-
?
leaders have been forced to admit that the majority of intellectuals
remain_ncorrupted :by bourgeois" ideas and that tt will take another
ten years or more to reform then} thoroughly. Current trends toward a
reimposi- tion of party controls over cultural life will probably intensify
existing discontent among the intellectuals.
The Chinese student grow, :traditionally volatile and politically'
??
articulate, has also shown signs of increasing disaffection and unrest.
During l96 and .early 1954 student riots .and demonstrations against
the regime were reported at several schools and universities wi,th some
. . .
Youth League members participating. Such activity may have been inspired
?
in ,part by the ;impact of the Hungarian revolt on Chinese students; probably
to. an even greater extent it reflected growing student. dissatisfaction
with stringent Ceramist controls over the schools, restricted opportunities
for higher education,, and lack of, adequate job opportunities.
, . ?
c. . Peasant discontent. During 1957 the regime encountered con-
. Eno ???????,-val
siderable dissidence and discontent from the peasants, comprising 85 per-
cent of therp9pulation. Resentment against the collectives flared up
at the.-.beginning of 1957, and there were numerous spontaneous and un-
? , -,
. *4.
authorizqd. peasan:b wi.thdrawals,1 leading to the disintegration of some
_. _ .
collectives, ilpst....,wei-er restored by administrative action, but reports
. ... t..,. - ' - ? , '-`, ?'-? r '.1.? ;':.
? of. "civil disturbances" and counterrevolutionary activity by "rich
peasants" and ex-landlords suggest the use of force in a number of
areas. ,T4e, Communist, leaders claim that only a small proportion of the
peasants are actively hostile to the collectives, but admit that many
?.#
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are "waveringu and not convinced of the collectives' advantages, while
-.!..-,- :.? -,-?:?.t..,,- ,' . f, .*: ,. 4 ?
the large majority have specific grievances such as food shortages, mal-
functioning of the collectives, and blunders in the farm development
- : -;.,.,--..,.t.- ,. ,r1.:? ... ., - : ..:!0-. ? .. a- .. - .._
program. In In addition, there was a decline in the effectiveness of rural
-ii.i-J17r
-.., - .,-;;-. ,.- ? -.? _ ?
- ?
cadres, whose morale has dropped sharply and who in many cases tended to
,.-t-; - -.- !-? .-- .., . , ,
1., . ?,.'.
sympathize with, rather than oppose, the ucapc.talistion views of the
, ;
peasants.
d. Tibetan resistance. The Chinese Communists, like previous
, . .
rulers of China, have dridotritered-sfaciardikficaiies in dealing with
'
? . !. ,
the various ethnic minority groups who now compose about six percent
I ?
of the population. The Communists have tried-to placate these groups
..,
., , . ,:, . . ' ? '3 - ? . ,
by promising them a measure of cultural and political autarmr and by
, . ?
' ,r?-. , , , ? - .
occasionally delaying social and economic changes in minority areas. .
At the same time, however, the Communists have continued their efforts. ... ,
, -
to integrate minority areas into a centralized pattern of administrative
c, ? ( 0 ...
controls.
: - , ?
To date, the Communists have encountered the greatest raeasure" of
, . ? - -
active resistance in Tibet and in the libetan areas of Szechllin. The
.9
I
well-entrenched Buddhist church in Met, Commanding broad popular sup-
? , ? F. . ' ? ? ,
- ,
port, has been a serious 8:13:Stacie to Communist efforts to carry out
1.' ?lifft.?
social 'and political change. The Tibetans have- apparently resented CCP
-
efforts to interfere with traditiOnal religious custams and -to indoc-
.
," ? :1',
trinate Tibetan youth. Following' the-- -"of irmed UipriSings in
eastern Tibet in 1956, the ComMunibts we're fai'ced to revise their time-
- rka
table for Tibet and announced that projected 6-(561:6l and beonomib reforms
47:1
11 ?
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-20-
-.
? 1 ?
mould be postponed for six years. As a consequence, many Chinese cadres
were withdrawn and the size and functions of the Preparatory. Committee
- - . ?
for the Autonomous Region were reduced. However, Chinese troops remained
? :
in Tibet, and Peiping did not abandon its objective in integrating Tibet
? , , r, , ?
more completely into the pattern established for the rest of the country.
7 ? : . 17 .
Towards this end, recruitment for the CCP and the Communist Youth League
continued and other Tibetan cadres were being trained.
,? ?
e. Difficulties in other iirLnoir areas. During the latter part
of 1957 there were increasing indications that the Communists were en-
countering difficulties in other minority areas. During November and
December, party and government conferences were called in several of
the "autonomous" areas inhabited by minority peoples, including the
Chuang areas of Kwangsi, the Miao and rung areas of Kweichow, and
the Ili region of Sinkiang. The dominant theme at these conferences was
the growing danger of "local nationalism" among ethnic minority groups,
?-?.
,wbich was reportedIy being expressed in resistance to Communist social
reforms and in agitation for 'lyre real independence. This stress on
-
the dangers of "local, nationalism" marked a shift from the earlier CCP
? ?? ? "' ? , ? ?
"line," which stressed _the need to guard against "greater Han chauvinism."
,
. This earlier emphasis may.in.fact have encouraged the minority peoples to
_
. _,--., ? .
demand more autonomy than the ,CCP ? 9CP would. tolerate.
. , ?
, , ?
Sinkiang, inhabited largely by Uighurs or Turki peoples, appears
, ;?,.:-E:?.1. ? ..i : -? ....? ,...., _rlf.....-..-1-.,0 .: .: ? . . _ .,
, to be an area of particular concern. At a party conference called in
,
Decepber 1957, the local CCP leader, Saifuddin, revealed that local
? "r? "? 572?.1 ? ?
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- 21-
minority groups had been agitating for the withdrawal of Han Chinese
cadres and had been resisting Communist efforts to promote the study
of Chinese. In Inner Mongolia; he-C ommmnist press%reported that
,
"rightist" elements-among-minority group's were tziini to promote a
"secessionist" movement.
DeS.pite indications of mounting discontent among ethnic minority
groups, Peiping has not abandoned 1t'6 policy of granting nominal
"autonomy" to minority groups while at the same time tightening its
administrative conti-ols over them. The regime announced plans to es-
tablish two new larger "autonomous regions" having an administrative
status equiValent to provinces. One of these, the Kwangsi Chuang
Autonomous Region, will include more than six million Chuang peoples,
the largest single ethnic group on the Chinese mainland. The other,
the Ninghsia- Hui Autonomous Region, established in the northeasteim
part of Kansu. province, will have a population of about 1.6 million;
one third of which will consist of Hui -. a loosely defined group Who
. -
are largely Muslim in religion, although Chinese in speech. In both
4:1
of these new "autonotous areas" the ethnic minorities will be outnumbered
by Han Chinese, thus facilitating a further tightening of Minese control.
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S. ?Education.and Trained Personnel. .During 1957, Communist China
continued to emphasize the role of education and technical training in
realizing the long-run objective of developing an industrialized economy.
Although the reduce d,rate of industrial growth,resplted in a slight
decrease in the total 1957 national budget when compared mith the previous
year, the portion allocated for education expenditures increased in both
absolute and percentage terms from approximately 8.8 percent in 1956, to
10.2 percent. 1957.
PeipirWs,rgeneral review of its programs was reflected in its,
reassessment of educational capabilities. This resulted in a sharp
reduct4on,in new,admissions, particularly in universities and colleges,
although total enrollment continued to grow. Moreover, evidence ..of
stuctiunrest and the political unreliability of leading intellectuals
reveled during the rectification campaign caused the initiation of
measures designed to reestablish student discipline and cloctrin4.orthodoxy
as, well as reinforce the dominanance of CCP influence in educational circles.
a. School ,enrollment 1957-1958. The Chinese Communists state
that about 65 million children were attending primary schools in 1957-58,
representing about 80 percent of the total number of primary school-age
children and an approximate 5 percent increase over those enrolled the
previous year. Available data suggest that total enrollment in middle
schools in 1957-58 was about 5,100,000, a drop of several hundred thousand
from the 1956-57 school year. With respect to secondary vocational training,
total enrollment in 1957-58 was about the same number (530,000) as in the
previous year; however, unlike 1956-57, more attended the secondary normal
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-23'-
schools than the -technical sahoas.. Present univers-ity and college
enrollment is said to be 443,000 as compared to- the 1956-57 enrollment of
.1.100;00-0. Though this represents an'inCrease Of 12.4 percent, 'the number
of 'newly enrolled students dropped substantially from 18000o in 1956
to 107,000 in 1957.
_ b. Educational problems. Peiping stated iri early 1957 that fewer
primary and middle school graduates would be permitted to advance to
higher schools, and called for those students unable toa.dvance to turn
to manual labor, particularly in rural areas, owing to the limited rise in
urban employment in 1957. The government recognized that in some specialized
fields at the university level, incorrect pedagogical methods, aggravated
by poorly qualified teachere and inadequate equipment, resulted in poorly
qualified graduates, Consequently, courses of training were increased
,
from four to five years. 'Furthermore, the regime announced that limited
financial and material resources made it impossible to provide adequate
school building facilities for the increased number of students who
wanted to 'enter middle school's and higher educational institutions. In
addition to these admissions of inadeqUacy, Peiping also found it
necessary to reemphasize'that university and college graduates would have
to agree to work assignments made'by the State. ?
c. Strengthened control over students. The emergence of these
educatiOnal'problems coinCided:witb' additional problems arising from the
- rectification campaign'. -Some'of-'the'articiiite critics of the regime
twavdd to be-university professors,'and schoold mere one center of the
resulting controversy. A number of student demonstrations were reported.
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Wall posters and unauthorized publications. on,:univprsity and ,college
canpuses criticized such policies as.work assignment and.excessive study.,
loads. These developments evoked sbarp.disciplinary measures by the state..
Leaders and some school officialsAmplicated in a middle school,riot in ?
quhan were executed. In July, Peipinbpublished regulations requiring all
university and college students to prepare anew complete biographies as a
means of evaluating their political reliability. Further political control
measures stipulated that if a graduate adamantly refused tbe work aseign-
ment given, the State would not provide alternative employment and be
would be placed under security surveillance. Students suspected of "anti
-
socialist" leanings would be allowed to graduate, but would be placed on
probation far,qne.to three. years and would receive no salary other than a
living allowance. Although the number of graduates affected,by these
administrative measures will probably be limited, they do serve as sharp
reminders to the rest that the regime intends to exercise strict control.
One of the principal criticisms made by the "rightists" was directed
at the CCP committees attached to higher educational institutions. It
called for the abolition of these committees on the grounds that the CCP
members on these committees were inc45etept and that they subordinated
intellectual inquiry to political requirements. T.1e regime reacted:by
strengthening its controls in the schools. Recent,wholesale transfers of
?
government officials to local administratiye,posts,throughout,,the,country ,
included the assignment of large numbers of,political,officials to executive
positions in many colleges and universities. In addition, Peiping decreed
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'ihJ.ate 1951 thit'c8Urd"On. "sOcalist-ed;'CAidnif .'for university and
colle&'faculties and students would be stressed as an integral part of
. _ .
the curriculuM"this aCadeinic year. These'deVelopments have increased the
regliele. preoecuPation with the class backgrouhd of the students. Peiping
asserts that by now two-thirds of the middle school students are of
workepeii.ant background, but that aehigher levels the proportion is much
c . ' ?
, . , ?
lowei. 'Associating'class background with political reliability, the regime
?'r
?
haa'lleci.dea that4i,u'dents with woi..icer.-peasant backgrounds be favored for
__adds s ools ?
d. rBsiC7iogram unchanged ii Despite these political developments
,
in Chinese ComMunisi education, there has been no fundamental change in
? ? ? r ?
?
P'eitilfigil6)ibkram.tO Create a larger reservoir of technicillY'trained
indiv?duaI 0f the 107,000 newly. enrolled university and college students
? e , ' ?
academic year', almost 3 percent will Major in engineering
couijeeialieEi.holi.6 35 percent are scheduled for normal school .ttendance.,
'-knotWeil5-Peicent a istributed evenly between medicine and science,
, .
'whileAhe 15 Perdeht remainingwill stud y agriculture, economics, lawl,
t
-an'clthe.fine arts. 'these Eigu'r:e6 ?
refleCt''cdritinVing heavy emphasis on
'teschni. Cal 'arid teacher
Undei.tbe.proVisions of the Five-year Plan, from 1953 to 1957,
. ?
10,100students wereto be sent abroad, with49400 Of these going to the
? . .
Soviet Union and the remaining 700 to East European satellites and other
countries._ In *additlon, 6,200'W-or1ers, technicians, and factory adminis-
?
trators- 'Were s'obteduled to receive 'training in the USSR during this period.
? ?
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These quotas have probably been largely fulfilled, .but many of the spidents
have admittedly been inadequately prepared for their courses. Recent
decisions have included a greater emphasis on the sending of graduate
students because undergraduates have shown themselves unable to benefit
fully from :their study abroad.
Commmnist China continued its campaign during 1957 to lure pro-
fessionally trained overseas Chinese through attractive job offers and
the appeals of dependents and relatives. Very few of this caliber have
actually returned, although the recent efforts_of Chinese Communist
diplomatic-representatives to contact the two Chinese-American Nobel prize
winners is an example of their persistence in this directionA, .
6. Socialization. While primarily concerned with rationalizing and
consolidating the newly socialist organization, the regime continued its
drive to complete the socialization of the economy during 1957. At the
end of 1956, 96 percent of peasant households ihad been organized, with
88 percent in collectives and 8 percent.. in "lower level" cooperatives. By
the end of 1957, individual peasant housebold had .been reduced to 3 percent,",
and most of these with the exception of Tibet and,othertexempted areas had
been placed under the "guidance" of the nearest collective. Virtually all
"lower level" cooperatives had beep.reised to full collectives.. Although a
considerable number of collectiyes,reportedly:were "dilsolved" in early
1957, this apparently r.epresented spontaneous action by..angry peasants
and was tolerated only_4ntil rural cadre,forces.pould,be,strengthened.
.
The principle of "voluntariness" was mainteine,d in th.eory, .but in practice it
? ; - .)?
became virtually impossible for the peasant to escape collective- control.
rilri?,
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a. AdjUstient to problems. During 1957 the regime showed condern
over the inefficient operation of the collectives, the rise in peasant
discontent, and the decline in the morale of rural cadres. The trend
of 1955-56 toward ever larger collectives was reversed. The ideal Size
was placed at about 100 households, half the 1956 size, preferably to
contain only one natural village, in order to simplify management and to
reduce hostility within the collective between antagonistic groups. Cadres
were directed to participate in manual labor in a concerted effort to
reduce administrative overhead. In their analysis of peasant discontent,
the regime noted that 15 percent of the households had been discriminated
against in collective operation -- those with many dependents and those
with high or special skills -- and were strongly opposed to collectives.
These were largely the better farmers and the community leaders. Although
the regime claimed that 70 percent of the households were "basically
staunch supporters" of the collective system, even these had 'grievance's
and were "wavering," with an additional 60 to 80 percent of peasant
households complaining of foodshortages.
In mid-1957 the regime launehed a campaign of "socialist education"
employing standard technidites of indoctrination and intimidation to oppose
"capitalist" tendencies in the collectives. Succeeding the landlords and
rich peasants; the upper-middle peasants are now to be "struggled" against,
although the regime, worried over the further narrowing of its base of
support, is counselling caution, non-violence, and an attempt to establish
"unity" with this group. At the same time, a program to send hundreds of
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28.
thousands of urban cadres to the countryside was inaugurated, in large
? ?
part to provide the collectives with more able and resolute leadership..
The morale of the rural cadres was said to be sliding and in some instances
they sided with the peasants against the government.
? ,?
-b. Urban socialization. The regime apparently encountered lesser
problems in its urban socialization program. The "blooming and contending"
period revealed dissatisfaction among the former bourgeoisie, but the
economic power of this class does not approach that of the peasantry an
its dissidence was not a major problem. The chief flaw in the urban
.socialist system that became apparent during. the year was the prevalence of
small "underground" enterprises that had either been bypassed in the 1955-.56
socialization drive or had sprung up subsequently to supply goods and
services that the socialist enterprises could not adequately supply.
During the fall, of 1957,the,regime_began.cautiolasly to move against some of
these enterprises recognizing that many of them performed essential
services with relative efficiency even if they .violated the principles, of
socialism. Consequently the regime issued regulations attempting to
contrOl-some of these enterprises, while moving against others by. a com.-
bination og ideological indoctrination,.administyative controls, and
?
business-measures.
. ,
? it
p
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27
?
a. Adjubtmeni to problems. airing 1957 the regime showed concern
ovr the inefficient operation of the collectives, the rise in peasant
?
discontent and the decline in the morale of rural cadres. The trend
of 1955-56 toward ever larger collectives was reversed. The ideal size
was placed at about 100 boueholds, half the 1956 size, preferably to
contain only one natural villdge, in order to simplify management and to
reduce hostility within the collective between antagonistic groups. Cadres
? .
were directed to participate in manual labor in a concerted effort to
reduce administrative overhead. Id their analysis of peasant discontent,
the regime noted that 15 percent of the households had been discriminated
against in collective operation -- those with many dependents and those
with high or special skills -- and were strongly opposed to collectives.
These were largely the better farmers and the community leaders. Although
,
the regime claimed that 70 percent of the households were "basically
staunch supporters" of the collective system, even these had grievances
'and were "wavering," with an additional 60 to 80 percent of peasant
households complaining of food shortages.
In mid-1957 the regirile launched a campaign of "socialist education"
employing standard techniques of indoctrination and intimidation to oppose
"capitalist" tendencies in the collectives. Succeeding 'the landlords and
rich peasants, the upper-middle peasants are now to be "struggled" against,
although the regime) worried over the further narrowing of its base of
support, is counselling caution, non-violence, and an attempt to establish
"unity" with this group. At the same time, a program to send hundreds of
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- 28 -
thousands, of urban padres to the countryside was inaugurp,ted, in large
part to provide the collectives with more able and resolute leadership.
The morale of the rural cadres was said to be sliding and in some instances
they sided with the peasants against the government.
b. Urban socialization. The regime apparently encountered lesser
probleffis in its urban socialization program. The "blooming and contending"
period revealed dissatisfaction among the former bourgeoisiel, but the ,
economic power of this class does not approach that of the peasantry and ,
its dissidence was not a major problem. The chief flaw in the urban ,..
socialist system that became apparent during the year was the prevalence of
small "underground" enterprises that had either hren bypassed in the 1955-56
socialization drive or had sprung up subsequently to supply goods and
services that the socialist enterprises could not adequately supply.
During the fall of 1957 the regime began cautiously to move against some of
these enterprises, recognizing that many of them performed essential
services ,with relative efficiency even if they violated the principles of.,
socialism. Consequently the regime issued regulations attempting to
control some of these enterpriees, while moving against others hy a com-
bination of ideologipal indoctrination, administrative controls, and
.?
business measures., r-
0
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-.29-
B. Economic Developments
1. General. Economic policy in 1957 was aimed at restoring stability
and balance to the economy after the over-exertions of 1956, while attempt-
,
ing to maintain much of the momentum of the 1956'program. The regime had
made substantial achievements in 1956, increasing industrial output by 31
percent and state capital construction by 62 percent, collectivizing agri-
culture, and mobilizing the peasants on a grand scale for land improve-
ments and the introduction of new, more intensive cropping practices. But
by- the end of the year an unbalanced budget and liberal credit policies
had developed strong inflationary pressures, and unbalanced production
with attendant goods shortages was affecting industrial output and con-
struction and tying up resources in inventories. The urban population,
up 7.6 percent was growing restive over shortages of housing and other
facilities, foodstuffs, and other commodities. Rural resentmeht had
flared up and hardened against the regimels program, as the peasants
chafed under the new collective institutions, became embittered over
apparent inequities and inefficiencies of their operation, and became
sceptical and disillusioned as many of the technical innovations turned
out to be failures.
A policy of "readjustment" in 1957 was therefore indicated, and
-
the year opened on a note of uncertainty as the regime sought to determine
the extent of necessary concessions and compromises. The budget called
7.:
fora 2.3 percent increase in revenues and a 5.7 percent cut in expendi-
,
tures, including a 20 percent reduction in capital construction, in order
, ?
? ,
to-achieve a fiscal surplus. At the same time, the rise in the annual
'
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-.30 v
wage bill as a result of the wage increases and expansion in the labor force
" , ? .. ?
_ ? ......____
during 1956 was limited:by rescinding some of the wage increases and s pro-
?i, ? - ': ? ? . . ..
. ... .............
viding for a small reduction in the labor force by the end of the year.
.. . :-- :
? ,.,.--, ?',?,,-:
. .
,
The extension of credit to the newly formed collectives and cooperatives
was cut back Sharply, and efforts were made to promote urban and rural
,c? -n-?:- ? ; " .?" ?. 7
savings deposits. Commodities in short supply, such as grain, textiles,
and coal, were conserved by more stringent rationing and distribution
. .,
controls. By mid-year these measures had eased inflationary strain and
, -
reduced severe shortages.
, ? -
By the end of the year the regime appeared more confident. Reve-
- , , ?
nues had exceeded the budget estimates by 4.45 percent 2 providing a
. , .
substantial increase in the fiscal surplus, while economies in other
t.
sectors had permitted the restoration of nearly half the cut in capital
r-
construction. Industrial shortages had been relieved, with a build-up
?
:,? ? ?
in stocks and a substantial expansion in the production of basic materi-
als, -and a considerable amount of new industrial capacity had been
brought into operation during the year. The harvest, despite serious
floods and droughts, had improved over the previous year, and with more
..t.**1 I' -
stringent controls, state purchases and stocks of grain, cotton, and
other commodities rose significantly over the previous year.
,
ITith the economy in a stronger position, the regime is preparing
-
for a resumption of rapid expansion in 1958 on the scale of the 1956
, 7
efforts. The peasants have been mobilized in the winter of 1957-58 for
,:?-- T15. - ? ?
an agricultural development effort similar to that of 1955-56,. and are
, -
again to be driven to expand irrigated crops, multiple cropping, and the
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-31-
:
? planting of rice, corn, and potatoesj with the target of increasing farm
'output by 6 percent. Industrial output, Which increased only 6.9 percent
in 1957 as a result of raw material shortages and market dislocations, is
scheduled to rise by 14.6 percent in 1958, while capital'construction is
to rise by 17.8 percent, exceeding the high level set in 1956.
In contrast to the rosy optimism of the expansion effort of 1956,
-however, the regime in 1958 promises only "hard work and thrift" and
tightening controls. The 1958 economic plan credits the proposed expan-
sion to the new acceptance of socialism, following the intimidation and
-indoctrination of the rectification and "anti-rightist campaigns," and to
administrative streamlining, which has removed wavering elements from
positions of influence and has placed dedicated Communists in command of
the shaky collectives and local governments. A ruthless retrenchment is
under way among the favored groups of the bureaucracy, the students, and
urban labor, with a new insistence on doctrinal loyalty and on the silent
acceptance of sacrifice. It remains to be seen What'respOnse the economy
will make to this increased reliance on the whip.
2. Finance. At the beginning of 1957 the regime was particularly
concerned over bringing under control the inflationary pressures loosed
in 1956. Fitcal operations in *1956 (see Appendix, Table 1) had resulted
in a deficit on current account of 1.83 billion (US$ ./ while
Toans to collectives anegthheWly socialized enterprises incie-ated by
, , ?
3 billion (US$ 1.2 fp'illaabfi-i);:(twite the planned' iiiirdabe. This 'credit
- . ? ,
expansion 'and a .?-fse %ft. 2-:7-13Iiiiort '0% 1.1 on?n the Urban
.?
wage bill contributed to an indrease of Y 6.3 billiori-(US$
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-.32-
in total purchasing power, which rose to Y 46.5 billion (US$ 18.9 billion).
- 2
The regime reduced state commodity stocks by Y 2 billion (US$ .8 billion)
to withdraw currency from circulation, but even so the note issue expanded
by g 1.7 billion (US .7 billion)
The 1957, budget provided for an increase of only 2.3 percent in ,
revenues, in view of the unfavorable economic outlook. Although the bud-
get was ostensibly balanced, providing for a 3.9 percent reduction in ex-
penditures, its deflationary impact was even greater. An allocation of
? . ? _
g .6 billion (US$ .2 billion) was made to state bank reserves, which in
effect represented a fiscal surplus and indicated a real: reduction in ex-
penditures of 5.7 percent, while state capital construction was cut by
20 percent and increased working capital allocations allowed for a build-
up of industrial and commercial stocks. The budget for economic, military,
and administrative expenditures was cut by 14, 10, and 8 percent respec-
tively,.although the expanding education program forced .a rise of 5 percent
in scheduled social expenditures and expanding foreign aid and loan service
obligations resulted in a 25 percent increase in miscellaneous expenditures.
Planned purchasing power was placed at g 47.3 billion (US$ 19.2
billion), a rise of 1.8 percent over 1956. The urban wage bill waS
estimated to rise by Ic 1.2 billion (US$ .5 billion) to g 14.1 billion
, ?
(US 5,.7 billion) as the wage and employment increases of 1956 became
'effective over an entire year. In addition, peasant cash sales were ex-
.
_
. .
pected to. rise by g 3 billion (17,9 1.2 billion) from increased marketings
r - ,
61 . , ..., i
and fraR incentive? price increases. However, the expansion of credit to
..
collectives and other newly socialized enterprises was to be reduced to
. _
? . 4
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negligible levels, while a drive was to be organized to promote private
savings. The rise in personal purchasing power would thus be limited to
Y-1.8 billion (U% .7 billion) and would-be partly offset by a reduction
of Ic 1 billion (US$ .4 billion) in market purdhases by enterprises and
government organs. The projected commodity supply, however, met only 98
percent of the estimated purchasing power, and the regime admitted that a
balance would be achieved either by exbeeding supply. or savings plans or
by price increases.
The official urban retail' price index rose by ,2 percentin,the
first quarter and by percent in the second quarter, but by mid-year '
it appeared that inflationary pressures had eased and the most severe -
shortages of goods eliminated. The regime found that it had been able
to make effective budget economies, and towards the end of the year felt
its fiscal position was strong enough to make supplemental appropriations
of Y 1.34 billion (UVI'ii .5 billion), largely to restore postponed capital
construction projects. By the end of 1957 the fiscal accounts showed
revenues in excess of plan, rising 6.8 percent over 1256,1evels? and re-
sulting-in a fiscal surplus (including reserve funds) 0f.,7; 1.8 billion
(US$ .7 billion). Expenditures, excluding reserves, were 5.3 percent
below those of 1956, or only slightly above budgeted levels. As compared
with 1956, edonomic, defense, and administrative expenditures were
- 'reduced by 6.6- 10, and 12:7 percent-respectively,' while social and,mis-
cellariebUb 'expenditu'res rose by 3 and 16 perbent respectively.
The market Supply: of commodities and 0S'Ocial purchasing.power"'?
balanced 'atrlc?47-hill3.on (*:19',1 billion),' slightly under planned levels.
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Urban personal cash incomeappears-,to have,-been at planried levels, whilq:.
rural personal cash income exceeded the target as a result of expanded
crop purchases. However, a contraction of rural. credit and an expansion,
of urban and rural savings held back the rise in "social purchasing
power."
For 1958 the regime estimates the market supply of commodities at
*.50- billion (US$ 20.3 billion) and "social purchasing power" at.; 49.4
billion (US$ 20.1 billion). Urban wages are to rise by Y. .55 billion
(uS.2211. million), resulting in an increase of .5 billion (US$ ,203
million) in the purchasing power ,of the urban population. A loosening,
of rural credit and increased crop, purchases is scheduled, to expand rural
purchasing power by 1r 2.2 billion. (US$ .9 billion) 3 while enforced economy
measures are to reduce institutional-purchasing power by- Y .3 billion
(US$ .1 billion). Despite the-rise in the market supply?of commodities,
the supply of the two main staples, grain and cotton cloth; remains
restricted. Total grain' sales will be reduced by limiting the, supply to
rural ,areas in ,order ,to build up stocks, while the per capita supply of
cotton cloth is;_to.be held at 1957 -levels, with most .of?the increase in
produption,, allocated to exports and to the rebuilding occommercial.
stocks.
? ?
In 1958 the=.regime expects aj, rise of 7.7 percent in curmnt fiscal
revenues resulting fro.the exp,ansion, of industry an. trade,. while. further
economies in military: and.i..aciAinistrative expenditures am projected (9.2
and,13.9 percent. respectively). social expenditures are to ,be held to a
2.9-percent increase _over 197, levels, allowing a 17!-.3 percent .increase in
. - -
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- 35 -
?.
.... ..!. i' ? -.
. r
economic expenditures. Reserve funds were placed at Y1.9 billion, (US$.8
; :::,,, :.. ? . - ? ? ,. = .
billion), the highest level in recent years, to provide a balanced
budget.
Outsidd of the budget, state stocks were increased by 15 billion
(US$2.0 billion) in 1957, owing in large part to the heavy crop pur-
chases at the end of the year, necessitating increased credit to state
industry and commerce of g4 billion (US$1.6 billion) over plan. Support
frori the fiscal surplus was about gl billion (US$.4 billion) over plan,
while agricultural credit was reduced 1.6 billion (US$.2 billion) below
the target, and urban and rural savings deposits exceeded expectations.
Nevertheless, this left a deficit of about g2 billion (US$.8 billion),
which the regime has been able to immobilize temporarily by paying the
collectives by check for their surplus crops and controlling the disburse-
ment of these credit balances.
The regime is faced in 1958 with the problem of managing these
credit balances while carrying out its plan to increase industrial and
commercial loans by g2 billion (US$ .8 billion) and agricultural loans by
g.4 billion (US.2 billion). An allocation of Y.8 billion (US.3 billion)
to bank reserve funds is carried in the budget, and past fiscal experience
suggests that this item will in practice be considerably larger. Private
savings may rise sharply, approaching la. billion (US$.4 billion), in
view of the regime t s f orced---savi-nt,b plan for the--32-404)704Q--voricers_suad_
staff to be sent to rural areas. In addition, the regime has raised
the limitations on the proportion of collective income which may be
allocated to reserve funds, and expects these reserve funds to total
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r?.36
(US$ )...2 Although a large part of these
rese-fve funds. is. to be...utqlz.ed :to, finance the agricultural investment ;
program of the collectives, the regime probably also expects that some ,of
the funds will be left to absorb -a portion of the. outstandingcredit
balances.: Thus,-_the ;regime d.n 198 plans to increase sharply the savings
mobil4.z.ed: outside. Ig the budget,. arid particularly to test title effective?,
n.ess.,of the coLlectiv,e organization in mobilizing resources for the ,
? .
regime's program.
=7_
:
?
. ? ,
? **
???-
???
??''t
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? ? :
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- 37 -
.
3. Agriculture. In 1956 the regime inaugurad a'veriabibitious
, , ? :i..., ' 4?
program of agricultural development, aimed primarily at.raising the pro-
.t
ductivity of existing acreage and predicated on the Mobilizing of
. 1 , ' 1. ? a :
'
under-employed peasant labor to carry out land improvements and to introduce
. . ,
more intensive cropping practices. the program was rigorously carried out,
and_in the winter of 1955-56 irrigation facilitiee were provided or
improved on one-tenth of the cultivated land. While cultivated land
increased by 1.5 percent, the expansion of multiple cropping raised the
crop area by 5.4 percent to 159 million hectare. The high-yield crops of
rice, corn, and potatOes were promoted, with rice acreage rising by 15
percent and potato acreage by 10 percent. As a result of these develop-
ments, the regime claimed that food output, despite serious floois,
,
typhoons, and drought, rose 4.4 percent over the bumper 1955 crops.
However, this "crash!' program with limited technical direction
resulted in many blunders. A large portion of the new irrigation facili-
ties was poorly designed or constructed, resulting in inadequate irrigation.
For example, 40 percent Of the wells lire inadequate, and the usefulness of
the remainder was limited by failure to prepare the land and by lack of
equipment for lifting and distributing the water. In many localities the
?
new cropiiing patterns were unsuccestfui; Owing to shortages of water,
fertilizer, or labor, while in Others the new crops or new seed strains
proved Ill adapted to t1le. soils or cliola7t,-m=c0.0 -
potatoes than he inadequh,tetorage-?acilities and limited market demand
could absorb. In other areathe shi'ft'f;;Oni kaoli6n'g to corn resulted in
fuel'and'iodder shol4e.ges, to the iedu6ed supply of the by-prOdgct
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- 38
kaoliang.stalks. An illlated program to mass-produce 5,000,000 iwroyed
plog.s for the peasants was halted in mid-year with an unsold inventory of
, _
850,000, as the featured .2-wheel, double share plow proved too unwieldy
for small plots and in hilly areas, too large to be operated in heavy
soils or by the light and weak Chinese draft animals, and too difficult to
maintain in repair. Moreover, the pre-emption of peasant labor adversely
affected livestock production and other subsidiary output normally con-
ducted-in the off-season.
As a result of these mistakes and the reaction to them, the program
was temporarily slowed. Much less development work was accomplished in
?
the winter ofj956-57, the regime having called earlier for a limit to the
. ? ? ? ?.
proportion o. collective income allocated for investmen.p and for the pro-
vision of adequate, free time for livestock and other subsidiary production.
? h.
The regime apparently permitted. some local determination of crop plans,
w#h,1ocal cadres instructed to review the program in the light of
,
experie19e and..0 accept the advice of older_experienced peasants. In
consevence,, cultivated acreage remained constant, while a reduction in
. ?
?
theaultiple cropping index reduced crop acreage by g percent, with some
'I ?a
cutbacks In rice, corn, and potato acreage. Flood and drought affected
crops in 1957, although possibly to a.lesser extent.than,in 1956, and the
regime, claimed that improved yields increased food crops 1.5 percent over
. .
the 1956 level
??
? The reliability.. of the regime's crop estimates is open to some
-
question. Inr1956, with-near-complete collectivization, the regime
attempted. to base its crop estimates on complete.epumeration, compiling
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-39-
? , )
returns from all collectives. However; reporting was late and, as later
'marketing experience showed; was seriously biased upward.' ...Sharp downward'
revisions in the estimate's were made in:early:195/, but the 'final,estimates'
may still overstate the crop. The state' grain levy (tax and purchase) was ?
reduced by nearly' 1,000,000 tons husked grain, with concessions to eight
calamity-hit provinces only partially offset by increased levies elsewhere.
In these eight provindes the state, through reduced levies and increatied
sales; provided: an increase Of 5,000,000 'tone Over the previous year,
allegedly matching the decline in production. The regime claimed that in
the-remaining provinces the net grain supply rose by 15 Million tons husked
grain, involving a per capita increase of 42'kilograms'or nearly 20 percent
in food supplies. However, the regime admits that 668o percent of the '
. _
peasants complain of food shortageal which it attributes to deterioration
in cipalitY and forced shifts to unka:miliar and. unpalatable foods as a
--
result of changing crop patterns, t6 'the over-high expectations of the
peaaants of their income from collectives, to the concealment bf grain
,
supplies by some peasants, and to the influence of small but articulate
groups whose income has tended to be reduced (large labor-short families
unable to earn adequate' work points, and peasants with high or special
skills not adequately rewarded under the work point system). 'These factors
?
are relevant and may *justify a 1956 crop estimate at or' slightly abOve the
- -
1955 level, but do not seen to support fully the AnalLerbb 6ati6at*as.-
- ? ,7rF, ?
' In 195/ the regithe attempted to
? ?
rove it crop-reporting, turning
?? sf)
again to earlier experiments in sai1e'surveya which, lniethek'had: also '
. ?
tended to show an upward- bias, had been more reliable- thari the 1956 Methods.
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- 1I,o.
The initial food crop estimate) 1.5 percent over 1956) probaply reflects
'both an exaggeration in the 1956 estimate and .a more realistic 1957 estimate.
With possibly:less severe natural calamities and the correction of many of
the mistakes of 19561 it is not unlikely that production in 1957 was
?
::* ?
appreciably higher than in 1956.. This view is in part supported by the
increase in state purchases and the decrease in. sales and the consequent
rebuilding of stocks) although this change also reflects a .firmer policy
than in 1956 when the regime was attempting to appease the peasants and
absorb ,purchasing power.
The regime is proposing to mobilize again a large-scale development,
effort in the winter of 1957-58. The limitations on the investment
allocations from colleetive income have been lifted, and. the rural cadres
are .being reinforced by students and. urban cadres) who maybe more.
enthusiastic and doctrinaire than those who have been through the program
of 1955-56 and faced the wrath of the peasants. The regime has called for
caution and increased technical leadership in formulating the program) but
the emphasis is on mobilizing an effort similar to that of the winter of
1955-56.
It is claimed by the regime that 100)0001000 peasants) nearly the
? ,
?
whole of rural ,male labor force) have been mobilized for developmental
projects, that in the four months since October 1957 irrigated land has
?
increased-by 7.8 milliqn hectares) irrigation facilities have been improved
on 3.7 milliop he9tare?), drainage canals have been pug to protect 5 million
I , ? ..., , - ?' -,..... ? '.z;:,?-?,.
hectares: and measures to check erosion have been carried out over an area
: , . ,- . - - . - ' .A: -,;' ."I . . ? : - .
of 4519109, square kilometers., As in 1956) multiple cropping and the planting
,, , . _ :-? f - .; . .
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of rice,' corn, and potatoas"are to be?expande4 with the hope that ????::
experience* and: betterfpreparation and. organization will reduce blailtrs?
and. enable an expansion of 6.1 percent in farm output. -
4. Industry. During l956 gross industrial output had eiiandad by a
(U3;)23.9 billion).
phenomenal 31 percent to li:58.7 billion (See Appendix, .Tablaf.12)'r Of' the
Y1.4 billion (US$5.7 increase,' ge..7 billion (US$1.1.biltiOn) came
from---the machine-building industry, *Y5.8 billion (US$2.4 billion) from
other capital goods- industries, and.:13.5.billion (US$1.4 billion) from
consumers goods industries. Among the major factor'S contributing to: the
increase were: 1) the organization of mass-production methods in the
machine-building industry, 2) the completion-of substantial new capacity
in the: iron and steel industry., 3) the increase in-the output of building
materials as a result of accelerated. capital-construction, and 4) the ?
recovery of the textile industry as a result of amol&-supplies of raw
cotton from the 1955 harvest.
However, by the end:of .1956 serious imbalances In-Industrial output
were evident. The growth -of the -fuel and, power industries was 'inadequate
to support. this rate of expansion, and steel- shortages developed despite
the iis,p in output, owing to. the even greater increase- in machine-production
and capital construction. -In the steel Industry-itself ore and pig iron
capacity began to limit output. The specialization and standarai7ation:
redpired. for mass ,prod.uptiore-had...been._pverd9pei;-for.,OommunistEChins,'s
limited market, resulting in surpluses of,sgmeiprodu0srAndafshortages in
others. Thus, the steel Shortage wa6 in selective shapes and qpnlities,
while other items were in surplus, enablina exports of 210,000 tons (40% of
-
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steel imports) and.. a 5 percent increase in .stocks p4.1728,000 tons during
.1
the -year. In the machine ?industry there was stirplus,eapacity and. pro-
duction of farm and textile machinery, borers and. lathes, and small
diesels. The abortive farm machinery program condumed 280.;i000 tons of
steel,. as p.gainst 70,000. in 1955.?
With ithentories and production..unbalanced, it was necessary to
readjust industrial. output in 1957 and. slow .the rate of expansion. ' A
growth of 14-..5 percent Was planned, involving a 4.4- percent decline in
machine building, aa 1.1 percent increase in other- capital goods, -and a
't
1.1 -percent increase in consumers goods. The decline in machine building-
reflected both material shortages and. the cutback of surplus production.
billion
The small increase -in consumers -goods output reflected a y.1,14 )
decline in the cotton textile industry as a result of, the poor 1956:: -
cotton harvest; small increases in? other textile industries, the food.
industry, and other consumer goods industries barely,off set this decline.
-
Industrial 'output exceeded the plan, rising-by 7 percent. Pro-
duction of' consumers goods-and capital 'goods other- than machineryorose
by .2 percent and. 12 percent, respectively, both :slightly over planned
?..
- levels. However, machinery output did. not ?decline. as planned., but rose'
10 percent, reflecting both-the opening of new plants and an increased
eff-Ott .to .work out production schedules. During the year industrial ?
inv-entoriei? rose, raducing- the more deveie shortages while a' better
balance was achieved in ?output.
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- 43 -
? -
During 1956 and 1957 a substantial amount of industrial, capacity
was brought into operation. .(See Appendixi.Table 3.) During the 1st -
FiveTYear.Plan work began on 825 major industrial projects, of which 449
were completed. and placed in operation. Of the latter, one-fifth were
completed in 1956 and two-fifths in 1957.
During 1958 a slightly greater number of major industrial projects
than in 1957 are to be completed, and industrial output is to rise by
14.6 percent.'MachinerY output is to increase by one-fifth and other capi-
tal groods production by one-sixth, reflecting the expanded plant capacity.
The output of consumers goods is to rise by one-!tenth, resulting primarily
from the expanded supply of agricultural raw materials.
5. .Foreign Trade Ara the Balance of Payments. In the face of
disappointing harvests in 1957, Peiping for the first year since it came
to power -was forced to cut its exports, and placed its 1957 export plan
at Y5,200 million :(US$2,114 million) or 6.6 percent less than in 1956.
(See Appendix, Table 6.) This reduction reflected sharp.cuts in scheduled
exports of vegetable oils, grain, and pork-commodities in short supply on
thea domestic market. An increase in Peiping's foreign-aid program and
service on foreign debt and a decrease in. Soviet loans, totalling in all a
reduction of Y200 million (US$81 million) in foreign exchange, contributed
to an .even greater decline in scheAuled imports which were placed at
Y41755 raillion1'(US$1)933 million) or 10.2 percent below 1956 levels. In
1956 Peiping.Admited.itjiad not.4q.et its export commitments, presumably
to the USSR,: and in -early 1957 an agreement with the -USSR was announced,
providing:forpostponing-Of.pertaint-eport commitments u/iktil 1958.
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Although the Chinese' Corn unit 'recently stated that total trade in
1957 slightly exceeded their 15fan, they gave na indiCation about the
relative amounts accounted for by -exports aid imports. An earlier
announcement regarding trade through October indicated that imports were
running about three percent above the 1957 plan and exports lagging about
three percent below plan. This lag in exports behind imports would reduce
the trade balance by. Y320 million (US$130 million), but since exports are
usually heavy at the end of th.c year, it is possible that the 'trade balance
will be no less than planned. ' Partial trade returns from non-bloc countries
suggest that Communist China's trade with the free world continues to
account for about one-quarter of its total trade, with imports about 10
percent above the 1956 level and exports registering a slight decline. The
increase in imports resulted primarily from greater direct purchases from
Western Europe and increased imports Of Indonesian rubijer 'and. Egyptian cotton.
?
An increase in trade by 8.6 percent is planned for-1958, which would
bring the total back to the 1956 level. On the beisis of improved crops
and -collections in 1957, Peiping shadld 'be able to expand its exports
substantially. Although there was no increase in the amount budgeted-for
foreign aid, the absence of foreign' loans, coupled with an increase of 16
percent in the servicing of. the foreign debt, will severely .1 imi t an
expansion of imports. In additicihi Peiping may have to settle its postponed
Soviet export commitmentS: At the -end of 1195' an' agreement was announced
on the "readjustment of mutliai settlement of non'-trade.payments" which
- .
could reflect some easing of Peipind's obligations to the USSR, but
probably merely represents a northal year.;ehd settlement of accounts.
? dkoikE4r
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The foreign trade difficulties of l957 have apparently not been
regarded by the Chinese Communists as a temporary phenomenon, and have led
to important alterations in the planning for the second Five-Year Plan.
Reports of planning developments during the year indicated that the regime
was not planning to increase exports of basic foodstuffs, but was directing
its attention to possibilities for increasing export production of ores and
minerals, manufactures, and other products and for reducing the import
requirements of its industrial program.
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- 46 -
6. Labor. During 1957 the regime was attempting to restore an
orderly and coherent labor policy after the sharp increase in employment
and wages in 1956. At the beginning of 1956, when the regime was opti-
mistic over its resources, it decided to raise wages to improve morale and
productivity. Since 1952 money wages had risen only 14.7 percent and real
wages only 6.9 percent, and labor was getting restive. More important, the
wage structure had remained relatively static since the days when wild
inflation levelled all incomes to subsistence levels, and did not provide
adequate incentives to skilled workers and technicians, or sufficient
prestige and authority to such groups as teachers and low-level government
officials. Accordingly, it was decided to extend a Nage increase averag-
ing 14 percent which". would be applied selectively among various groups,
some effective April 1 and others July 1. During the year the regime
failed to calculate non-agricultural labor requirements accurately or to
control hiring sufficiently, and annual average wage employment under the
state plan rose by 2.3 million -- nearly three times the planned increase
-- to 21.2 million, and reached 22.4 million at the end of the year. Total
wage earners at the end of the year, including those not under the state
plan, were estimated at 24.2 million.
In 1957, to ease the inflationary impact, it was planned to reduce
employment by 140,000 by the end of the year, although average employment
over the year would still exceed that of 1956 by 4.7 percent. Keasures
were taken to rescind or limit some wage increases. Rural officials,
originally favored, were to have their incomes brought back in line with
peasant incomes. Advancement of apprentices was suspended, and other
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-11.7-
promotions were to be carefully scrutinized and justified. Despite such
actions, average mages were expected to rise by 4.2 percent in 1957
(to 153 or US522 monthly) as the modified 1956 increases became effective
over an entire year. The total wage bill would thus rise 9.4 percent to '
114.1 billion M5.7 billion),
The regime reported average employment in 1957 at 23,973,000 and
the mage bill-at Y15.25 billion (US)6.2 billion). However, the state plan
now apparently includes all wage earners, and these figures appear to be
consistent with the planned figures. In the plan for 1958, total wage
earners will number 24,392,000, and the mage bill will increase to g15.8
billion (US,6.4 billion). Of the increase in the mage bill, 1300 million
(US3122 million) represents the wages for the 419,000 additional workers
while 1250 million (US102 million) covers wage increases from promotions
or minor' adjustments in the mage structure. The figures for total wage
earners include those to be sent to rural areas, since these persons will
apparently be carried on the rolls of their original organizations for at
least the first two years.
The limited rise in employment during 1957 and planned for 1958,
numbering about 300,000 over the two year period, has intensified the
problem of maintaining student and worker morale. In the expansion of
the educational system during the First Five-Year Plan, a subsidized
education was provided for all students who Mere able to advance at all
grade levels. By the 1956-57 academic year, however, the educational
system had filled out to the desired pyramidical structure. Tlhereas
formerly the educational system had furnished limited numbers of college
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and vocational vocational school graduates to the labor force -which were largely
offset by the numbers drawn out of the labor force to fill college and
middle schbol enrollment quotas, in June 1957 the educational system
released 55,000 college graduates, 90,000 senior middle school graduates,
800,000 junior middle school graduates, several hundred thousand vocational
school graduates, and 4,000,000 primary school craduates. These numbers
will increase in June 1958, and it appears that in the two years the
educational system, excluding primary school graduates, will have released
to the labor force eight to nine times the increase in urban workers and
staff. The students are thus faced with the dual realization that edu-
cational advancement will be extremely competitive and limited and that
employment prospects on completion of their education are very restricted.
At the same time the regime faces a problem in organizing the urban
labor force to absorb the numbers turned out by the educational system.
The rapid expansion in the urban labor force in the past eight years has
resulted in the promotion of large numbers of poorly educated and trained
personnel to administrative, technical, and managerial posts. This group
is regarded as incompetent by the young graduates, and in turn regards
the latter as a threat to its position and status. In early 1957 the
regime appeared ready to denand higher standards of performance and
gradually to weed out incompetents. However, as the extent of "rightist"*
sentiment in the country became known, the regime slipported the status quo,
since the existing leadership cadres owed.ltheir-ppsition to the regime and
could be counted on to be loyal to it.
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-14.9-
The current campaign to send some 3,000,000 workers and staff to
rural areas and "lower levels" appears in part to be an attempt to
ameliorate this problem. The campaign is aimed primarily at young school
graduates and will temporarily remove them from competition for adminis-
trative posts. The regime expresses the hope that the differences between
the old cadres and the young intellectuals will disappear after the latter
have been "steeled through manual labor," but the program appears to be
a stopgap rather than a permanent solution. It seems likely that the
problem will remain as a major source of friction and an obstacle to the
smooth and efficient organization of the urban labor force.
The effect of the wage increases of 1956 has been increasingly
dissipated in 1957, and this trend will probably continue in 1958. During
1956 the urban population rose by 7.6 percent, resulting in severe short-
ages of housing and other urban facilities and services. The urban retail
price-index rose 2.3 percent in the 12 months ending March 31, 1957, and
this index probably understates the real rise in prices. Foodgrain prices,
which are heavily weighted in the index, remained stable while subsidiary
foods and household goods prices rose sharply, with vegetable prices
rising 27.7 percent. By mid-1957 the regime had reduced severe shorilages
and price fluctuations, but at the cost of increasingly stringent ration-
ing.- The wage earner thus-has had his real wages undercut by rising prices
and facing crowded urban conditions and limited market availabilities of
basic staples, probably does not consider himself materially better off.
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-50-
7. Demography. In 1957, with a more realistic approach to its
problems
_Peiping evinced increasing concern over its demographic problems
and growing determination to undertake corrective action. While a tenta-
tive decision to encourage birth control appears to have been made as
early as 1953, it has been difficult for the Communists, who traditionally
have opp66ed neo-Malthusianism for ideological reasons, to provide un-
equivocal authoritative leadership to such a program. At the beginning of
1957 additional detailed population estimates were released, and the short-
term and-long-range implications they had in the regime's economic program
and the people's standard of living were discussed in less equivocal terms.
Subsequently an increased effort to encourage birth control was organized,
which not only sought to provide and explain contraceptive devices but to
indoctrinate certain selected groups for increased acceptance of birth
control. Restrictions on abortion and sterilization were liberalized,
while youth orgnizations were directed to indoctrinate and exert social
pressure on youth to postpone marriage, with the implied threat of an
eventual increase in the legal minimum marriage age if this was not
effective. These programs were still cautious and experimental, and as
yet have evidenced no notable success, but they suggest that the regime
is facing up to the problem and may take more aggressive measures. At the
same time, the regime is still hampered by the dilemma of reconciling a
birth control program with the traditional Communist rejection of neo
NalthuSianism, and during the year sharp warnings were made not to utilize
the population problem to advocate either alteration or postponement of
any of the regime's programs.
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-51-
The-regime was also faced with the more immediate problem of con-
trolling urban growth and migration. The urban population has reported-1Y
increased from 58 million in 1949 to 39 million in 1956, rising by 7.6
percent during 1956. Despite an attempted cutback in urban employment in
1957, there was extensive rural migration to the cities during the winter
of 1956-57 and again in the autumn of 1957, owing to the food shortages
in the rural areas. Since employment opportunities were limited, the
migration in these periods consisted largely of dependants. In Tientsin,
of 2051000 rural migrants during this .period, half were women, while three-
quarters of_the.males were either, aged and infirm or children. With urban
unemployment rising, public security bureaus reported increasing concern
1 -
over the rise in begging and petty crime.
The regime has long had control over migrations, requiring regis-
tration and permits for all population movements. However, rural officials
were reluctant to limit emigration, which would relieve pressures in the
countryside. In early 1957 controls were tightened; centrpliling hiring
and thus limiting employment ofgers as a cause of migration. However,
dependents were able to justify visits to friends and relatives, and
migration remained large. The regime subsequently instituted paid vacations
for urban workers with families in %rural villages, apparently to justify
refusal 4:4 travelapermits to dependents. -.1.'he public security bureaus also
scrutinized the,urban.;dependent population closely,d pressures were
exerted-on those with alternative homes in the countryside and on those
not in the immediate family to return to rural:villages. In December the
regimei,alarmed over .continuing migration, issued a:directive to tighten
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-52-
controls; Special offices are to be established to enforce the program
in the five provinces covering the North China plain and the Huai and
lower Yangtze rivers, where the problem is serious awing to dense populations,
unceratain crops, good transportation, and many large cities. Inspection
of permits mas tightened at rail stations and other transfer points; begging
and unlicensed peddling were prohibited, penalties were imposed on urban
organizations failing to hire through the labor department, urban ration
permits were more tightly controlled, and unemployed peasants in urban
areas were being rounded up and employed in public works until they could
be escorted in groups back to their original collectives or assigned to
new collectives.
8. Transport. Transportation facilities have been a limiting factor
in Peiping's industrial program. During 1956, with the expansion in
industrial output, construction, and urban needs, freight carried by modern
means of transport increased by 25 percent, leading to severe traffic
congestion on the railways in North and Central China and parts of Manchuria
as well as in the Yangtze River ports. (See Appendix, Tables 4 et 5.) With
the pace of economic expansion reduced in 1957, freight tonnage increased
by only 9 percent. At the same time, there was a sharp increase in the
investments allocated to expand facilities on the strained portions of
the transport system. Thus the regime was able to meet its 1957 require-
ments satisfactorily, but the system is operating with little reserve
capacity.
Investments in new rail lines were reduced in order to increase
investments for -improving. the capacity of the eccisting network. Construction
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-53-
of the line to Foochow, chiefly of military significance, was postponed
for a year, and only 36 kms. of track were laid on the Sinkiang line.
.While 1,7)4.7 kms. of new track were laid in 1956, only 535 kms. were laid
in 1957, including the restoration of the Kunming-North Vietnam line,
continued construction of the high-priority Paotou-Lanchou line, and a
number of industrial lines in the Wuhan and Paptou areas in preparation
for the erection of large steel mills at these sites. At the same time,
double-tracking was to be increased by over 600 lans. as compared with
210 kms. in 1956, and 1/4. railway yards were to be expanded. Because of
limited production capacity, only 160 locomotives and 6,800 cars were to
be added to rolling stock, holding the planned increase in rail transport
to four percent. However, by hauling heavier trains and reducing turn-
round time for cars, rail freight transport rose by 10 percent in 1957
over 1956.
Water transport freight tonnage rose by 2)4 percent in 1956 and
8 percent in 1957 over the proceeding years, keeping pace with the
expansion of total transport tonnage. The rise in Yangtze river traffic
accounted for most of the increase, and there was a much smaller expansion
of coastal and other river traffic. The regime is looking toward a sharp
expansion of Yangtze River traffic and Yellow Sea coastal shipping to
relieve strain on important north-south and east-west sections of the
rail system. During 1957, 108 vessels aggregating 110,000 tons wei-e?
added to the coastal and river fleets, and there was considerable invest-
ment in port facilities, particularly in congested Yangtze ports.
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Truck transport increased sharply in 1956, but .remained at the 1956
level during 1957 as imports of motor vehicles and petroleum were cut back.
The regime appears to be curtailing its plans to develop motor vehicle
transport as a means of opening up isolated rural areas, in order to con-
serve scarce foreign exchange. Instead, native transport -- junks and
carts -- is to handle such needs. Truck transport, however, will continue
to be important in servicing the sparsely inhabited peripheral areas such
as Tibet, Sinkiang, and Inner Mongolia.
In 1958 traffic requirements will again rise sharply, reflecting
particularly the sharp rise in coal and steel production and in the capital
construction program. Railway investment plans are 19.4 percent over the
1957 outlays, although this increase largely reflects a resumption of new
line construction. New track to be laid is placed at 1,290 kms., more
than double that of 1957, while double-tracking is scheduled at 157 kms.,
one-quarter of the 1957 target. Additions to rolling stock will be in-
creased as a result of expanded production facilities, and include 200
locomotives, 600 passenger cars, and 9,000 freight cars.
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TABLE 6. ESTE ATED BALANCE OF PATENTS OF COMUNIST CHINA
1956 - 1958
(million US8)
1956
1957
1958
Payments
Imports (c.i.f.)
2,150
2,030
2,100
Debt repayment
242
267
310
Foreign aid expenditures
164
185
185
Total payments
2,556
23482
2,595
Receipts
Exports (f.o.b.)
2,265
2,115
2,370
Remittances from overseas
70
60
55
Foreign loans
48
9
Total receipts
2,383
23184
2,425
Deficit, in9ludihg errors and
/173
/298
,1170
omissions
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-.56-
C. Military and Public Security
1. Developments in Military Policy and Organization. Chinese Communist
military policies during 1957 have continued along lines established in
previous years, with major emphasis on 1) the modernization of the armed
forces and the establishment of a regular reserve; 2) the maintenance of
party controls over the armed forces; and 3) the continuing development of
a defense industry. The CCP has claimed continuing redudtions in military
expenditures and in the size of its armed forces. Efforts to promote
greater economy in the military establishment have reflected the need to
achieve a balance between the regime's short-term military program and
its ambitious long-term plans for industrial expansion, including military
support industries. Economy measures, however, have not been permitted to
reduce the military effectiveness of the regime. In fact, through modern-
ization, more efficient recruiting and better training, this effectiveness
probably increased during 1957.
While the regime continued its previous efforts to modernize its
armed forces, it claimed continuing reductions in military costs during
the year... Annual expenditures for military defense, as stated in the
1957 national budget, totalled 5.52 billion plan (DS02.3billion at the
official exchange rate), representing 18.85 percent of the total budget.
This would indicate a reduction in budgeted military expenditures of about
10 percent from 1956 and 16 percent from the peak year of 1955. This
leveling off reflects the receipt in 1955 of unusually large quantities
of Soviet military equipment, possible modest reductions in personnel, and
economies in overhead expenses.
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-57-
Thus during 1957, efforts were made to reduce military costs in
the field of logistics. Early in the year the Rear Services Department
announced that operating expense's would be cut by one-third; subsequent
directives issued by the People's Liberation Army (PLA) stressed the need
for greater economy in the use of food, fuel, and other materiel. In
Janu6.--i7 1958; the director of the Rear Services Department claimed that
over 70 million yuan had been saved during 1957 through economy measures.
a. Recruiting policies. In an effort to create a more effective
military establishment, the regime has continued its previous policy of
rapidly replacing aging and less educated PLA personnel with younger
recruits conscripted under the Military Service Law of 1955. During the
winter of 1956-57, the regime carried out a third draft, concentrating
chiefly on the 18-year-old age group. Former liberal deferment policies
were tightened up, and certain types of exemption for government personnel
were removed. Official figures on the total number conscripted have not
beeri=released. On the basis of very fragmentary data, it has been roughly
estimated at 400,000 to 500,000. A fourth draft call, begun in December
19571_ is scheduled for completion in February 1958.
- During 1957 the regime made continuing improvements in the general
quality of new recruits inducted into the PLA, reflected in higher stand-
ards-pf education, Physical fitness, and political reliability. Greater
efforts have been made to induct youths having some middleschool education.
According to official claims, over 60 percent of the new recruits have had
some,education beyond the level of primary school, and a like percentage
reportedly belongs to the CCP or the -Chinese Communist Youth League.
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MD 58
The government also continued its policy of demobilizing precon-
scription veterans of the PLA. Original targets for the 1957 demobilization
announced in November 1956 totalled 800,000. In July 1957 the regime
announced that 620,000 had been demobilized. CCP leaders have claimed that
the number of veterans damobilired in 1957 exceeded the number of new re-
cruits inducted, resulting in a new reduction in the overall strength of
the PLA.
Communist statements on demobilization suggest that more than 90
percent of the enlisted personnel on active duty prior to 1955 have now
been replaced, leaving only a small core of experienced personnel. Such
a rapid rate of turnover in personnel would inevitably result in some
reduction in efficiency. However, this has probably been more than counter-
balanced by the replacement of illiterate older veterans by younger and
better educated recruits and by improvements in training.
Peiping has been gradually formalizing and regularizing procedures
for demobilization. New regulations issued by the Ministry of Defense in
January 1958 provided that all men discharged from, the PLA in the future
should be given indoctrination, prior to demobilization, in such matters
as agricultural policy, relations with civilians, and participation in
militia work. Upon demobilization they are expected to register for
reserve service with their local governments.
b. Military reserve system. As part of its modernization program,
the goirernment has been in the process of creating a permanent military
4.
reserve. The original blueprint for this reserve system set forth in
1955 called for the establishment of two reserves -- a first reserve
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-59-
consisting of officers and men who have completed tours of active duty,
and a second reserve consisting of men and women between the ages of 18
and 40 who have not had military experience. Registration for the reserve
was carried out on a localized and limited basis during 1955, but the
reserve system as a whole appears to be still in the formative stages.
Training for reservists has been limited to short-term military
drills for selected age groups. In August, 1957 the PLA announced that
reserve training would henceforth be combined with militia training. In
some areas, at least, the reserve appears to be very closely related to
the existing militia organization. To date, however, the militia has
remained a separate organization, having local defense and public security
functions.
c. Party control of army. Chinese Communist leaders have continued
to emphasize strongly the need for maintaining strict party control of the
armed-forces. This was one of the major themes stressed at the August 1
Army Day celebrations. Subsequent comments by CCP leaders concerning
Marshal Zhukov firmly endorsed the existing system of party committees
and dual leadership by military and political officers in the PLA:
Since 1956, military men have assumed an increasingly prominent
role in the highest levels of CCP leadership. Seven of the ten marshals
of the-PIA are now members of the Politburo and about one-third of the
new Central Committee members elected in 1956 are military men. However,
there-has been no indication that the military group in the party bier-
_
archy_constitutes a separate "vested-interest" group competing with the
civilian leaders of the party. All of the military men who have risen
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-60-
to high rank in the CCP are veteran CoMmunistsmto have long been
associted with Hao Tse-tung and-whd? are well indoctrinated in Communist
doctrine.,'
During 1957 there were a few changes in the assignments of high-
level military leaders. Most of these, however, appear to be routine
personnel shifts lacking political sianificance. Two of the marshals of
the PLA, Lo Jung-huan and Liu Po-ch'eng, were relieved of some of their
operational responsibilities, presumably because both have now been
4.
elevated to Politburo status and have acquired more important policy-
making functions. Lo was replaced as head. of the Political Department of
the PLA by 'Ilan Cheng, now a member of the party Secretariat. Liu was
replaced as director of the PLA Training Department by Hsiao K'ol another
veteran general.
Among the rank and file personnel of the PLA, the percentage of
CCP members and members of the Youth League has continued to be high. An
estimated 75 to 80 percent of the officers and men of the PLA belong
either to the CCP or to the Youth League. This would suggest that the
PLA remains one of the most politically reliable groups on the mainland.
Despite a reduction in preferential treatment during 1957, morale apparently
remains high.
-The regime's 1957 rectification program was extended to the PLA,
?????????
where-it was aimed primarily at improving relations between officers and
men and at promoting better relations between the PLA and the civilian
populace. Official reports on the results of this movement indicated
that a small number of "rightists" had been discovered in the PLA, but that
the great majority of army personnel were politically reliable.
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- 61
Other efforts continued to be made during 1957 to improve relations
between the PLA and the people. During February and March, military units
carried on "love the people" drives, marked by "fraternization" meetings
between military personnel, government officials, and local:inhabitants.
Military officers took part in manual labor, and army units continued to
participate in various economic activities such as land reclamation, rail-
road construction, and harvesting of crops.
_ The continued dependence of Communist China on the USSR in the
military field was underlined by the sending of a high-level military
delegation to Moscow in November 1957. The agenda and results of these
high-level military talks have not been revealed.
2. Internal Security. The Chinese Communist regime has continued to
maintain a very large and effective security and police organization. The
chief elements in this security network are the Public Security Forces,
which are an integral part of the regular military establishment, and the
People's Armed Police, which operate under the Ministry of Public Security.
The operations of the security and police forces are reinforced by a large
militia, which has local defense and security functions, and by a system
of local residents' committees, which are linked up with the lower levels
of the police and security organization. The regime's controls over the
population are further reinforced by a network of mass organizations, which
provide a means of controlling and manipulating various social and occu-
pational groups.
Since 1949, the regime has carried out a series of nationwide...
drives against counterrevolutionaries which appear to have destroyed most
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-62-
of the effective centers of organized resistance to the regime. The most
recent of these drives, begun in 1955 and completed in 1957, resulted in
the exposure of almost 500,000 persons, most of whom were labelled "counter-
revolutionaries." In early 1957, the regime took the position that counter-
revolutionary activity had been virtually eliminated. Following the "anti-
rightist" phase of the rectification campaign, however, there was renewed
emphasis on the continuing need for periodic drives against counterrevolu-
tionaries for an indefinite Period.
_ During the latter half of 1957, the regime issued several new
regulations which further formalized and systematized its internal security
system and provided additional evidence of renewed emphasis on police state
methods.
In June, the central government issued a series of comprehensive
regulations defining the "people's police" as a "state security force
having the character of an armed force." Its chief functions will include
the maintenance of public order, the arrest of counterrevolutionaries, the
guarding of prisons and important government buildings, and the direction
of local-security committees.
In August, a series of new regulations concerning "labor custocly"
was promulgated. These permitted administrative instead of judicial pro-
cedures-to deal with troublemake'rs: and, people not engaged in regular
occupations. The regulations provide that such people can be assigned
work by local government agencies. The "labor custody" system differs from
the existing system of "labor reform" in that it applies to people who have
not been convicted of crimes and provides compensation in the form of wages.
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- 63 -
In September another method for controlling petty;criminals and
troublemakers was officially proposed. This involves the drawing up of
communal pacts by villages and rural cooperatives which place restraints
on such people. It was further suggested that habitual troublemakers in
the cities would be assigned to agricultural cooperatives and forced to
work under surveillance.
In October 1957 the government issued new security regulations
covering minor breaches of public order not sufficiently serious enough
to be dealt with under ordinary criminal law. The prescribed penalties
range from fines to short periods of detention. At the same tithe new
regulations were adopted concerning disciplinary actions against government
officials guilty of maladministration and other illegal actions.
In January 1958, the central government issued a new series of
regulations regarding the maintenance of population registers, which further
standardized a system of household registration plre0y in existence for
some time. Under these new regulations, population registers are estab-
lished for each household and placed under the control of local security
agencies. The registration system will enable the public security agencies
to maintain strict surveillance over the population and to establish tighter
controls over freedom of movement. One of the stated reasons given for the
promulgation of these regulations at this time is the need to restrict the
migration of peasants to urban areas, as well as the migration of popu-
lation to areas designated as "national border defense areas."
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- 61. -
D. -Sino-Soviet Relations
1. General. Developments in the relationship of Communist China to
the USSR and the bloc during 1957 affirmed existing trends. Peiping
attempted at every opportunity to underscore its support of Moscow as the
leader of the bloc and to emphasize its overriding concern that the strength
and uhity of the bloc vis-a-vis the West should not again be jeopardized.
At the same time Peiping manifested an independence of thought and an
increased initiative in ideological formulations which enhanced its influence
through the bloc. These developments underscored the acceptance of Peiping
within the bloc as the senior Communist power next to Moscow. Communist
China's increased stature attained during the period of de-Stalinization
and the Polish and Hungarian crises in 1956 was clearly not a temporary
gain during a phase of Soviet adversity, but persisted even at the post-
sputnik celebration of the 40th anniversary of the Bolshevik Revolution,
the high point of Soviet post-Stalin prestige. Welcoming Peiping's
underlying support throughout the year, the USSR demonstrated considerable
_
tolerance for Communist China's ideological views and enhanced position.
MOSCOW publicized Maols theoretical formulation on "contradictions," and
incorporated formulations that were identifiable as of Chinese Communist
origin in the main address at the 40th anniversary Celebration.
Beneath the surface of developments reflecting these trends was the
continuing critical dependence of Peiping upon the USSR as a source of
supply "Of essential equipment, economic and technical assistance, and
military aid, including the military guarantees inherent in the Sino -Soviet
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65 -
alliance. Peiping's -economic relations with the USSR and other bloc states
continued to be close, although officially Communist China remained an
observer rather than a member of the Council for Economic Mutual Assistance
(CEMA). There were, however, indications that Peiping was attempting to
scale down some of its import requirements as a result of foreign exchange
shortages, aggravated by increasing commitments for repayment and service
on Soviet loans obtained in the period 1950-1955.
Peiping's dependence on the USSR was further underscored during the
year by the highly publicized achievements of the USSR in the fields of
science and weapons development. Communist China has been engaged since
the Korean war in a crash program to "modernize" its armed forces, but as
Peiping uses the term, modernization refers largely to conventional armaments.
In this program Peiping has made great progress with Soviet assistance and
is hoping gradually to achieve a greater degree of self-sufficiency; but if
Peiping is planning ultimately to modernize beyond this level by equipping
its forces with nuclear weapons and long-range missiles; it undoubtedly
recognizes that it will be altogether dependent upon the USSR for a much
longer period.
2. Peiping's Position Clarified. 1956 closed with the announcement from
Peiping that Chou En-lai would interrupt his South Asian tour for a visit
to Moscow, Warsaw, and Budapest. Prior to this visit, Peiping on December 28
released its definitive "Marxist" explanation of de-Stalinization and the
situation in Poland and 'Hungary, to clarify its position on, these develop-
ments-. This statement placed Peiping on record as supporting Soviet actions
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-66-
in Hungary but maintained Communist China's latitude in criticizing past
"errors" in Soviet policy, whether these had previously been admitted by
Moscow ox not(for example, Peiping cited Stalin's sometime tendency
toward "great nation chauvinism" -- an "error" that had not previously
been mentioned by Moscow sources). However, Peiping laid down what it
regarded as the essential elements of Marxism that could not be challenged
even in "comradely" criticism: i.e., the Leninist organization of the party,
the necessity for revolutionary struggle and for the establishment of the
"dictatorship of the proletariat," planned socialization and economic
development, and opposition to "imperialist aggression." It made clear
that it would not countenance criticism of the USSR or the Soviet system
such as that made by Tito or actions such as those taken by Nagy that
brought these principles into question, that threatened the solidarity of
the bloc, or that seemed to lose sight of the common enmity of the bloc to
the Nest, to which Peiping demanded that all family squabbles be subordinated.
The December 28 statement included an elaboration of a point Peiping had
previously raised in regard to Stalin's "errors" -- that these constituted
reflections of "non-antagonistic" contradictions such as inevitably arise
even under socialism, and must not be confused with the "basic" or
antagonislic" contradiction between socialism and Western capitalism-
imperialism.
After the December 28 statement, Chouls visit to Moscow, Warsaw,
and Budapest was something of an anti-climax. Chou stressed on every
occasion, the necessity for solidarity among Communist states. He did not
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-67-
further publicly elaborate on Peiping's criticism of Moscow's past actions,
in line with what appeared to be the primary purpose of his trip -- to help
reestablish the bloc's common front against the West. Instead, Chou
stressed Peiping's acceptance of Soviet leadership in the bloc. Ever the
diplomat, however, Chou En-lai subtly tailored his formulations to local
prejudice-S, consenting to the omission of any reference to Soviet leader-
ship in a communique issued jointly with Gomulka (Chou later explained that
"if no unanimity can be reached for the time being, it would also be normal
to reserve-the differences while upholding our solidarity").
3. New Light on "Contradictions." After Chou's trip the emphasis in
Peiping's policies shifted to the situation within China. In his "secret"
speech of February 27, 19573 Mao Tse-tung restated the thesis of "antago-
nistic" and "non-antagonistic" contradictions in terms of current Chinese
Communist domestic problems, which he sought to alleviate through a period
of "blooming and contending." Although Mao's speech was intended to meet
an internal crisis in Communist China, it was cited in various partial
versions by "revisionist" and anti-Soviet elements in Poland and elsewhere
as offering a new "liberalized!' Marxism, notwithstanding the fact that the
December T28 statement had already laid dawn the limitations on free criticism.
In_the initial Febrrary 27 version of the speech, Mao reportedly
restated--the Chinese 'Communist position in regard to Eastern European
developments, elaborating- on the criticism of past Soviet policy contained
in the December. 28 statement. However,' in the editing of the speech for
its official public release on June 18, most of the discussion of Eastern
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- 68 -
Europe was deleted, presumably to underscore the domestic preoccupation of
the speech and to avoid its misuse by anti-Soviet elements. At the same
time, Mao inserted his "six criteria" for permissible criticism, probably
because-the original version bad occasioned "excessive" criticism within
China and misinterpretation of Mao's position elsewhere.
he revisions in Mao's text, while motivated primarily by consider-
ations of domestic policy, reflected also Peiping's desire that ideological
matters should not undermine the Sino-Soviet alliance and bloc solidarity.
Moscow for its part made a similar effort, deleting from the published
version of a television interview by Kbrushchev a Temark that the "contra-
dictions" thesis did not apply in the USSR. Mao's "contradictions" thesis
was first published in the USSR in the form of an April 13 People's Daily
editorial reflecting the original unedited text) and the Soviet press
carried the final revised version of June 18. Mao's theory was presented
to the Soviet and Eastern European audience as a definite contribution to
Marxism-Leninist theory of general interest, although developed for the
particular circumstances of China and not necessarily of general applicability.
4. Popular Attitudes Toward USSR. Aside from the ideological implica-
tions of Mao Tse-tung's "secret" speech, domestic political events in
Communist China apparently had no direct impact on relations between the
USSR and Communist China. However, the criticism of the regime that was
permitted to be published during the "blooming and contending" period
revealed significant hostile attitudes toward the USSR among some sectors of
the Chinese intelligentsia. It was clear from Mao's speech and from
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-69--
discussions published in Chinese Communist magazines and newspapers that
Chinese intellectuals and students accepted the official Communist version
of the Soviet intervention in Hungary only with reservations. More
significantly, serious questions and even an unfavorable comparison with the
US seem to have arisen in connection with Soviet economic policies toward
Communist China., At the height of the "blooming and'contending" phase,
Lung Yun, former warlord of Yunnan province and a vice-chairman of the
Chinese Communist National Defense Council, stated that it was unreasonable
for Communist China to bear the entire expense of the Korean war. Unlike
the US which had cancelled some wartime loan repayments, the USSR was'
requiring repayment for loans, and that it was doing this despite the
uncompensated Soviet removals from Manchuria after the war. Lung Yun's
views were described as "absurd!' by Peiping, and in early 1958 he was
expelled from his positions in the NPC and the National Defense Council.
However, his criticisms probably struck a responsive chord among many
people, probably including some CCP members.
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S. Official Visits. As in previous years, Peiping engaged .in an
extensive exchange of delegations with the USSR and other countries of
the Communist bloc. In addition to the usual exchanges of "unofficial"
visitors and the customary trade and cultural delegations, an unusual
-Tmnber of bloc states were represented repeatedly in Peiping by high-
level but largely ceremonial governmental, parliamentary, or military
-delegations, including an unprecedented number of heads of state.
Prominent bloc visitors to Communist China during the year included Soviet
President Voroshilov (April and May), Czech premier Siroky (March),
President Cyrankiewicz (April) and Defense Minister Spychalski (September
and October) from Poland, Hungarian premier Kadar (September and October),
and Yugoslav Vice President Vukmanovic (September). Of the Asian
Communist leaders, both Ho Chi Minh and Kim Il -sung passed through
Communist China several times.
Peiping reciprocated these and other bloc delegations to Communist
China with Chou En-lails trip in January to Moscow, Warsaw, and Budapest
(and his talks in Moscow with other bloc officials, particularly the
East Germans), Mao's attendance at the November celebration of the
ammiversary of the Bolshevik Revolution, and Pleng Chents parliamentary
delegation to Eastern Europe. However, despite a publicly announced
invitation, Mao did not reciprocate Polish President Cyrankiewiczt
visit, possibly because he did not want to detract from the prominence
accorded the USSR in the November anniversary celebration by visiting
Warsaw, a capital that by no means saw eye to eye with Mao in regard to
the defefence to be paid to Soviet leadership within the bloc.
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71 -
Some of thea bloc delegation p toured Communist China during the
height of the "blooming, and contending'! and "reptification" period. In a
number of cases, the Chinese Communist press publicized the extent to
which the visiting delegations were.given glimpses into these Chinese
Communist activities. Vorosbilov and members of his delegation were
particularly quoted as engaging in good-natured banter with Chinese
Communist officials about the rectification drive and the danger of
estrangement between the party and the masses. In a different vein,
Hungarian Premier Kadar was quoted at the time of the "anti-rightist"
phase of the rectification movement as underscoring the importance of
suppressing "rightism" in order to avoid a Hungarian-type uprising. In
advertising these unique Chinese Communist programs to the visiting
delegations from other bloc countries, Peiping appears to have displayed
considerable pride of innovation and discovery. (The same note was touched
in November by Mao himself in Moscow, when be desoribed for the benefit
of his Supreme Soviet audience the rectification process as a Chinese
Communist development.of Leninism.)
_ 6. Sino-Soviet Relations Viewed Through 40th Anniversary Celebration.
The various strands of Sino-Soviet and bloc relations, were further
clarified at the 40th anniversary :of ths Bolshevik. Revolution, celebrated
shortly after thspe_ctacplarlaunobing by the USSR of two earth
satellites._ Mao:Tsp-tung, on. his second,knowm.trip outside of China,
participatO:in.,te Pupreme,Soet meeting as the ranking international
Copimunipt.lea,deraftrKhr_uslIcbeve-rAcoording to_ the, German Communist
5
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a
- 72
Ebert, the Chinese Communists were'cOL.drifters with 'the Soviets of the
declaration issued by 'the bloc Communist PartieS'on NO4tember 21. 'Although
no new major formulations came' out of the meetings in goscow, the per-
manence of Peiping's increased stature within the bloc was made evident.
At the same time, the Chinese Communists stressed.that? in Mao's wor6,
"the .socialist camp must have a leader and that leader' is the Soviet 's
Union; the Communist and workers' parties '.%-f all countries must also have
a leader and that leader is the Communist Party of the Soviet Uniori;"
Mao reportedlyitook a siMilarly strong pro-Soviet 'position in'
off-the-record ditcussions with bloc delegations in Moscow. 'One report
stated that Mao's dogmatism on the question of SPiiiet leadership in "the
bloc and on "revisionism" led to strainedrelatiOns between the Yugosilg
and Chinese' Communist delegations.. Another report indicated that Mao....
-had taken a stronger position thah the Soviets in advising Polish premier
Gomulka not to accept -economic aid from the US. Aile these reports '
cannot be confirmed in detail; the position said to have been taken b3i.
Mao is consistent with the Chinese Communist public position on these"'
questions, andmay.account in .part for-Mao!e_failure to'iollowhis visit
. _
to'Moscow with a tour of Eastern Europe.
,A total of. at least five separate Chinese CommUnist delegation
were in Moscow -at the time of the anniveriary,Indluding six politburo
-ct
- members. Virtually every element'Ofthe Chine Communist Government '
and party was represented. It is probable that' Peiping used the otcaSion
-for initiatingnegotiations'with'Ibe USSB:on'a'humber* of issuesl.sdme-iif
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? N
- 73 -
^
which may have been held in abeyance during the period when Peiping was
. --
attempting to help Moscow reestablish its hold over the bloc after the
,
Polish-Hungarian crises of 1956. Two scientific delegations discussed
questions of Soviet scientific and technical assistance to Communist
China. A major military delegation, called to Moscow after lffaofs
arrival, without prior public notice, held discussions with Soviet military
leaders. Economic discussions may have been started on trade and other
questions. Mao and some of the military and foreign office specialists
? ?
who accompanied him may have discussed a revision of the 1950 Sino-
Soviet treaty with their Soviet counterparts, many provisions of which
:?
were outdated by the reestablishment of relations between the USSR and
- Japan. It is possible that the question of Chinese Communist partici-
pation in Soviet disarmament proposals and in possible East-;West nego-
tiations was also discussed.
On January 181 1958 Peiping and Moscow announced the signing of a
five-year scientific agreement providing for cooperation and joint
research on 122 otherwise unspecified scientific and technical projects.
There have been no other announcements or reliable reports of any results
of the negotiations that undoubtedly took place in Moscow. Rumors that
the military negotiations led to Soviet agreement to Supply Communist
China with Modern nuclear weapons and missiles or to station Soviet units
equipped with such weapons on Communist Chinese territory have not been
- substantiated. Peiping has announced that an agreement was signed on
December 301 1957. providing for a "readjustment of mutual settlement of
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- 74 -
? ? ,?,. ..te
, ? ?
-nontrade payments" between Communist China and the USSR) but no sub-
.. :? ?
stantive details were pub:iished. There bas likewise been no information
?- ? ?
'on possible Communist decisions in regard to Chinese Communist partici-
. , , ;? -t. ' '
pation in East-West negotiations; generally the issue has been given
" - - ?
? ...
purely perfunctory lip service by the USSR and avoided altogether by
Peiping. (An appendii to Bulganin's January 8, 1958 letter to
President Eisenhower stated that questions directly concerning Communist
?
? ?
China that might arise subsequent to settlement of the major points
.raised by the USSR could be negotiated only with the participation of
Peiping, but it was not suggested that Communist China should be an
.? . , ?
initial participant in the summit conference.)
?
,
6
; ? ? rf,t1cfri
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E. Policy Toward Non-Communist Countries
1. General. There were no major shifts in Peiping's policies
toward the US and other non-Communist countries during the year. There
? , ' ; ? ? ? E-
?
. .
were: however: some propaganda and diplonatic indiaations that Peiping
?
had concluded that some aspects of US policy are susceptible to change
?? ? ..,
'
and increasing weaknesses are developing in the anti-Communist position
. .
throughout the wnrld: although the US remains committed to oppose
: ? ,
Communist expansion by force in Asia. This possible conclusion has
?-, , ?
not been reflected in major tactical or strategic changes in Chinese
?
Communist policy: but may have led to a reinforcement of previous
policy trends. At the same time: it may have led Peiping to expect
" ? ?
,?
? ? .?
.c
somewhat greater returns from some of its policies and may therefore
?
be related to the hardening of the Chinese Communist attitude toward
?
some of the countries associated with the US: particularly the UK and
1?1??,. . . ?
Japan. However: Peiping's initial preoccupation
!?. t
exploit these weaknesses was the negative one of
? ??. ( .): ?
wider acceptance of the status1.229.. (typified for
of- "two Chinas").
Three major developments
? ? .,????? ' ?
contributed to a possible shift
? ???.` ??:; ?
and. prospects in Aeia:
- ??;? -
?
r ?
in attempting to
attempting to forestall
Peiping by the slogan
may be cited among those that may have
?-",
in Peiping's appraisal of US strength
; , ? '
?
..j?)?r7 e ?!
?
--.sEatET (???
?
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- 76 -
.1 .
, a. The Thjei riots. The1.8461 fiSr?trii-Tip-iiig to
- ' - r ' - r ?
have convinced Peiping that there were anti-American potentialities
even in areas that seemed to be firmly aligned with the US. The riots
?
? ?
were .treated in Peiping propaganda as part of a world-wide struggle
against US "aggression and imperialism." Chiang Kai-shek, who in
recent years had been treated with remarkable leniency in Peiping
propaga4da, was castigated for "subserviently" apologizing to the US
for the .age. Peiping may have believed that the riots indicated
?
not only an anti-American undercurrent in Taiwan but also a serious
. -
weakness,, on the part of Chiang Kai-shek.
? ?
b. The Red Cross Conference. Peiping appeared to be impressed
with .the fact, that an official US delegation participated in the meeting
? - - ?? -
in New Delhi of the International Connittee of the Red Cross, despite
the fact that a Chinese Communist delegation was present (until its
walkout on November 7 in protest against the seating of the GRC delega-
tion). On November 15 Chpu En-lai summoned the chiefs of foreign
diplomatic missions in Peiping to an unprecedented two-hour conferenCel
at,-Which be put forth the thesis that the US actions in New Deihl.
indicated that the., USbad adopted a "two Chinas" policy in recognition
of the impasse its previous China policy had reached.' Chou stated that
the US hoped to ease its own ultimate recognition of Peiping by obtain-
ing additional international recognition for the GRC. Chou termed any
such development entirely unacceptable to the Peiping regime, and.
proclaimed that henceforth Communist China would not participate in Rry
conference to which the CRC had761so,1),een invited.
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'T7
c. The Sputniks. Capitalizing onthe Soviet ICBM announcement
- ? sa
? ,
and. -satellite launchings, Peipingstated...that .the ,wor4.4 ,power
had shifted to the USSR and the Communist bloc.... Mao made,much of this
point at the Moscow 40th anniversary celebration,. stating that the.East
wind now prevailed over the West wind. Although #.e Peiping,reslmewas
probably previously apprised at least in general terms of Soviet
?
, ? 4
'Scientific and weapons developments, the worldwide reception.acoorded )
,
the dramatic Soviet gestures must havelmpressed the.Chingsg Communist
- "
. . '4.
leaders, posSibly more than any advance information they may have
possessed.
2. :Policy Toward the US. Whatever reappraisal may have been
initiated in response to the above developments, Communist Chinats policy
?
toward the US remained static during the year. Peiping thus made no .
mavesifftring the year to ease its relations with the up .nareid it take
..? ? ..
magesttions to exacerbate these relations. TI g Chinese Communists.
t:.on -------
secoaded-Soviet calls for East-West negotiations after the sputnik,
-"
launchings, but at their own principal point of, contact with the GUS,
, ?
the Geneva ambassadorial talks, no progress was made.during,thg year.
?
Instead the ta* 6 were used to present the Chinese Commnist propaganda
- . . ? ,
? ? . ?.,.
??-? ?
position on &.,-iikliety of iirsues. No US,prisoners were relgased,pri,cx,-,.
? -
. .
to the their, sentence, although four were
, Iir
completion of tiielkprison sentences. When the US announced op,Augugt? ?2.-
.... ,,.
,.. . .41..;, ? .:.=.!:;. "'X ?. ? ' s ,- ? ..t. ,.
that it-would permit US Journalists to travel to Communist Chirnal ,.
.
.1 ..,..
Peiping .failea.--to act on visa applications on the ground that the,US.was
, 4--.,? .:?: ff. . -7 7. ?. ? 0 '
4? -,
refusing toilIake'S:recipFocal.agree?gmnt_regarding 9: Communist newsmen.
. I
t ,
,,.... ? ,.., i. ? ,..... . ? t 4. ' A , ? 7)
??? s. ? .t? , ' ": 0
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MS 78
Howevir, ihrie other :jettirnalists and a group of'41-3;ouths 166 bad applied
,
? , ??.,?
for visiia prior to'the relaxation of the US travel ban, were granted entry
without mention 'of rediproaitY, as-irere'four relatives of imprisoned
Ameritans and an American lawyer seeking evidence for the defense in a
sedition trial. Peiiing refused to recognize the passports of the
relatives, the first Americans to travel legally to Communist China since
N
the Korean war, and Visas were as usual issued on seperate pieces of paper
0,
because the "incorrect passports were "not the fault" of the individuals
-
concerned.
The offshore island situation remained militarily quiescent
throughout the year, with only occasional artilliiir exchanges between
Communist and Nationalist batteries. The only significant military
indident between the US and:Communist China during the year occurred on
'
June 12 when sOme aircraft of the earner Hornet cane within range of
Communist antiaircraft fire. Even this incident, however, led tor only
routine propaganda exploitation.
Peiping's propaganda treatment of the US during the year
? ,
,
continued. along standardized lines. The Chinese Communists seconded all
Soviet propaganda campaigns, particularly those relating to alleged US
aggressive intentionS in the Middle East. US defense moves in the Far
East, Particulariy-the announcement in Mar that US Matador units would
,
be stationed on Taiwan and the proclamation in June by the UN command
?
N,
in Korea-: that m61e66. weapons' would be int.r.oditheeinto that country,
f ?
brOht-he customary chArges of US eigessiOn; without further public
follow-up outside of the proi6agan3a field. In regard to US policy toward
SEcatta
0*
????
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-79-
the GRC, Peiping continued, except briefly after the Taipei riots, to
?
charge that the US was an unteliable ally for the GRC and that it was
seeking to displace the present GRC leadership with "liberals" or with
T "
advocates of Taiwanese independence. The Chinese Communists continued
subtly to encourage rumors that negotiations between them and GRC-leaders
,
were in process or about to be initiated, and on several occasions
Chou En-lai and other spokesmen renewed previous offers of a vaguely-
described ?"high position" for Chiang Kai-shek, if he would subordinate
his regime to that of Communist China. Perhaps because of the current
lack of international publicity for the Geneva ambassadorial talks,
Peiping's propaganda failed during the year to press strongly for a
US-Chinese Communist foreign ministers' meeting. Chinese Communist
charges of US subversive activities were generally linked to charges of
GRC subversion and seemed to bear less on US-Chinese Communist relations
v,
than on domestic developments, such as drives against "counter-
revolutionaries," or on relations with other countries, such as Great
Britain, which was repeatedly accused. of permitting Hong Kong to be
used as a base for US and GRC subversive activities and espionage.
? ,
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,
?
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- 80 -
:, ? n". t k '
3. Relations with Other am-Communist Countries. Peiping's inter-
. ,* ? . ^ ,V
national (non-bloc) activities were, as in the past, directed primarily.
?-? ' ;?? T:: ?? ?
at the Far Eastern area. The Chinese Communists, while moderately active
in the Niddle East, did not attempt to match the more dramatic Soviet
. ?,
moves. For e2ample, they played a distinctly secondary role at the Cairo
Asian-African Solidarity Conference, in contrast to the preeminent role
? * ? 7
played by Chou En-lai at Bandung in 1955. In regard to Western Europe
.
Peiping similarly followed the Soviet lead. Peiping expressed its approval
.C I.
of each Soviet move in regard to disarmament, NATO, and other issues, but
initiated no moves of its awn. There were no significant developments
, ?
in Chinese Communist relations with Western European states, other than
a deterioration of relations with the UK because of a series of relatively
., ?
,
minor incidents and protests relating to Hong Kong, and because of
,,?
Peiping's increasing sensitivitk to what it interpreted as British
' ,?
espousal of the "two Chinas" thesis.
Peipines tactics toward the non:-Communist countries were those
?, , -?
developed in the post-Korean period. There were few innovations possibly
? , .7 ? . 4.. I
because of Peiping's domestic preoccupation during the year. At the
end of 1956 and the beginning of 1957, Chou En-lai attempted further to
exploit the favorable personal impression he had created at Bandung in
a tour of seven South and Southeast Asian non-Communist countries:
Cambodia, India, Burma, Pakistan, Afghanistan, .Nepal, and Ceylon. (Chou
also visited North Vietnam). Chou's trip was followed up with the usual
exchange of delegations of all degrees of prominence between Communist
China and non-Communist countries, including such figures as Vice President
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- 81 -
Radhakrishnan of India, Premier Daud of Afghanistan, Anti-,Fascist
. People's Freedom League head and present Premier U Nu, Chiefs Justice
U Myint Thein, and Deputy Premier Kyaw Nein of Burma, Vice president Hatta,
Nationalist Party Chairmanidilopo, Deputy Chief of Staff Subroto, and
Speaker of Parliament Sartono of Indonesia, the Crown Prince of Yemen,
and the by now customary succession of Japanese politicians, newsmen,
military figures, and cther ,7roups.
Despite Peiping's critical foreign exchange situation, the Chinese
Communists made five major offers or grants of economic aid and loans:
a grant of USa5750,000 to Ceylon in September, a loan offer of .
US;d4,200,000 to Burma in December, a loan offer of US20,000,000 to
Indonesia in September, an interest-free loan of USa6,000,000 to Yemen
in January 1958, and, apparently, an indirect offer of some USI/0,000,000
to Laos in February 1957., (A. reported offer of U3:a4,000,000 to Jordan
in June has not been confirmed.) These aid offers were in addition to
those previously granted: US22,400,000 to CaTbodial.USa2,600,000 to
Nepal, and US,700,000 to Egypt during the Suez crisis.
In addition to the aid offers, Peiping negotiated a number of
trade agreements with non-Communist countries during the year. .However,
Peiping generally took a more moderate position than previously in regard
to the potentialities for expansion of trade. Several tradeddellegations
were-told that the tightness of:foreign exchange and the still,very
tentative nature of some of the second five-year plan targets de ,.firm
-
trade offers impossible at this time. In propaganda aimed et,,Jppen and
r
the _UK, the Chinese Communists attempted to rationalize this situation
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- 82 -
by pointing to the partial nature of the relaxation of trade controls
by the UK and Japan and to continuing restrictions on certain categories
of items that Peiping was most anxious to obtain.
As in past years Peiping attempted to extend its influence in
the Asian area also through covert use of local Communist movements and
overseas Chinese. However, the Chinese Communists were not overtly active
in the twomost critical situations in the non-Communist Far East during
the year -- the Lao and Indonesian crises. Offers of economic aid were
made but did not figure importantly in either crisis. Peiping otherwise
confined itself publicly to propaganda support for a coalition government
in Laos and for the West Irian campaign in Indonesia, and sought particu-
larlt-to.identify the US as an obstacle to Lao and Indonesian aspirations.
The Lao and Indonesian crises nevertheless created opportunities for the
exparision of Communist Chinese influence through its connections with
indigenous Communist movements and through its espousal of the "peaceful
coexistence" and "Asian-African solidarity" line. The Indonesian crisis
may have expedited Indonesian ratification of the Indonesian-Chinese
Communist treaty on the status of overseas Chinese, pending since April
1955.-
Despite the prominence of some of the Chinese Communist activities
.7
during the year, no new diplomatic recognition was accorded Peiping.
--
Overtures for the establishment of diplomatic relations with Ghana,
.61
Malaya, and Tunisia were not reciprocated by those countries. Ambassadors
were exchanged for the first time with Ceylon, stemming from the recog-
nition _of Peiping by Ceylon in 1950 and from a September 1956 agreement
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.? ?
-,83
to exchange representatives. Similarly, the Treaty of Friendship signed
:w r
with Yemen on January 12, 1958 -- the first such formal treaty by Peiping
-; r ? t-j-f..!..
outside of the Communist bloc -- reaffirmed a previous (1956) agreement
L.
between. Yemen and Peiping to exchange diplomatic representatives.
In fields other than recognition, Peiping's achievements during
the year were likewise limited. Chou En-lai's reception in the cities
he visited on his Asian tour, although generally favorable, was marred
by _Peiping' s unqualified backing for Soviet intervention in Hungary.
This was dramatized by the sudden interruption of the tour for the trip
to Ebscau, Warsaw, and Budapest, which necessitated a rearrangement of
the second half of his itinerary on very short notice to the host govern-
ments. Chou's trip led to a joint communique in every country but India;
the omission probably reflected the divergent views on Hungary, under-
scored the gap that exists between Communist China and non-Communist
Asia whenever Peiping reveals its overriding adherence to bloc as distinct
from Asian aspirations.
There were some other differences between Peiping and the non-
Communist countries that were not altogether obscured by Peiping's
propaganda and diplomacy. A tour of India by the Tibetan Dalai Lama
.1
coincided with Chou's Asian tour and led to Chinese Communist charges
that the Dalai Lama had been subjected to improper US pressure in India
?. ? '
riot to return to Tibet. Peiping has charged also that India has per-
:, . _ ? -
mitted Kalimpong to become a center of subversive activities aimed at
I -
Tibet, Relations with Pakistan continued to be affected by Pakistan's
; ? ;? , ? :????,;- - ?
pro-West orientation and by Peiping's closer relations with India.
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? .
- ?
Relations with Burma were aggravated bY the unresolved border question,
which despite 'all'Bui-mese efforts seemedno nearer to solution at the
beginning of 1958. Peiping's relations with a number of countries
?
suffered from Communist China's ties with local Communist movements and
overseas Chinese; Chou was questioned sharply on both issues by local
journalists during his tour.
Chinese CoMtunist relations with Japan deteriorated during the
year,'clespite a continuing flow to Communist China of Japanese delegations
representing all political viewpoints and despite the fact that Japan had
followed the UK lead in freeing a large number of commodities previously
embargoed under Chincom regulations for export to Communist China.
Peiping has been particularly adroit in practicing "people's diplomacy"
with 'Japan and has succeeded in promoting trade and other relations
through 'unofficial contracts, frequently involving Japanese politicians
?
of both major parties. The Chinese Communists have generally stressed
a "reasonable" line in such contacts, taking the position that Japan
4
initially need not alter its relations with the US and the GRC in order
to improve relations. however, Premier Kishi's trip to Taiwan in June
and other expressions of friendliness for the GRC, as well as indications
,
of widespread support in Japan for a "two Chinas" formula have led to a
substantial Sharpening of Peiping's comments regarding the Japanese
, -
Government. On the Japanese side, meanwhile, there has been some disil-
lusionment in recent months
enthubiasm of earlier years
pell-rceptibly lessened.
471,4
-
on trade prospects, and the uncritical
: ?
for the "experiment" on the mainland has
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Chinese Communist relations with the UK have similarly deteriorated.
On a number of occasions during the year Peiping complained through
diplomatic and propaganda channels of Britain 's alleged ."unfriendly"
attitude in connection with Hong Kong. Peiping sought to obtain permission
tR establish an official representative in Hong Kong -- a request that the
British reportedly intend to reject as they have done when it was raised
in previous years. Other issues raised repeatedly included Britain's
? alleged excessively lenient treatment of anti-Communists involved in the
1956 Hong Kong riots and alleged improper resettlement of Chinese resi-
dents of an area of Hong Kong that was being redeveloped. In addition,
- Peiping on several occasions leveled charges at the British of permitting
Hong Kong to be used as a base for GRC and US subversive and espionage
activities, as indicated above.
Probably a more basic issue than the minor incidents in connection
with Hong Kong was Peiping's apparently increasing irritation at Britain's
stand with the US on many Far Eastern issues. Repeatedly since mid-1957
Chinese Communist propagandists purported to see indications in various
-.British actions (such as permitting a Chinese opera troupe from Taiwan
to perform in the UK) of an espousal by Britain of a "two Chinas"
formula, and Peiping formally protested on one occasion regarding this
--issue. In a sharply-worded interview in January 1958 with Reuters
correspondent David Chipp, Chou En-lai stated that relations between
- -fCommunist China and the UK should have improved after the 1954 Chou-Eden
talks in Geneva but that instead Britain had "even retreated, toeing the
-7American line in every matter." Chou complained that Britain's position
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- 86 -
wad-not "consistent," that while it had recogniied-ComMunidt China, it
was engaged in "Creating two Chinas," and tiiat this wad the "most unfriendly
attitude of. all." Chou demanded that if Britain (and Japan) could not
'"free themselves from US controlfl'and vote for Peiping's admission to the
UN, then they should abstain from voting, in order to maintain at-least
"the piedent level of our refatiorishiP."
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).
- 87 -
117 FUTURE TRENDS
A. Political and Social
? ?
Peiping's objectives in domestic political and social matters have
undergone no significant change in the last year. These fundamental
objectives are to consolidate control of the country; to mobilize the
country to contribute more effectively to the ambitious economic and
m4itary programs; and to complete the process of transforming the
#is.titutional patterns and the thinking of the people along Communist
lines. Towards these ends the Chinese Communists are attempting to
strengthen the party, governmental, and security apparatuses; to
increase the degree of positive popular support; and to build up a large
. ? ,
corps of professionally capable and politically reliable persons to fill
? ? ?
the pressing needs of industry, agriculture, science, education,
government, and party.
1. The Party. Crucial to the Chinese Communists' future prospects
?,.
is the strength and, vigor of the party itself, which in turn depends on
10,
the effectiveness of its leadership and the effectiveness of the rank-.
and-file members.
, a. Effect of policy disagreements. For years the CCP leader-
ship has demonstrated a-unity and, vigor seldom found in other comminist
parties.. Deyelopments, during 1957 suggest that at ?.east temporarily
- there was, fairly serious. disagreement among the leaders over :Pao's
"contradictions" approach. Whether or not the disagreement followed or
I created any factional pattern is not clear. rliatever the nature r.:7
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. ,
and extent of the disagreement,-the.challenge of the criticism from the
"rightists" and the resultant modification of pOliey...probably did mueh
-4. ? 4 .ts? .
to efface and perhaps resolve the disPute. At the dame time, the partial
failure .6fla:policy apparently originated by haa may halie resulted in
some lessening Of Confidence in hini- among other party *leaders.
However, 'all of the CCP ledei's undoubtedly'tealize 'the impottance
of iaintaining a high degree of unitY and of avoiding any action that
might jeopardize the advantages accruing from haols persorial prestige and
influence : Therefore they Will probably subordinate whatever differences
have occurred or ilay occur to their aolimion devotion to fundamental objec-
tives. This, together with the band-of Past association in both hardship
and success, will probably preclude any'leadeiship cleavages of suffi-
cient iSioportions-td-affect significantly the party's ability to control
,r
the country during Mao's lifetime.
However, ther question arises whether the apparent reemphasis on
orthodox solutions will impose any limitd during the next few years on
the leadership's ability to devise realistic and effectiire.mehods of
coping with the problems it will continue to face, particularly. those
related
- r
related to popular response41;xIt is.probable,Ihat the shift in emphasis
_ .
was more. than a tactical exOdiencrand that,'fot,example,.the,i0ersion
to the theme of continuing and prolonged claes-struggle bath refleited.
and influenced doctrinal-thinking.' THUilsome lessening of
of approach ay"..acaur, with the possible.'effoct.of-reducing.the regiets
ability elicit popular suppott.-On the othet'handecent develop-
ments have probably resulted in a clearer understanding by the leaders
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- 89 _
of the problems and a firmer determination to prevent any problems from
giving rise to uncontrollable situations.
. ,
It appears unlikely that the of professional elites
-
in military, industrial, and administrative fields will constitute a
- ?
_ .-?
-challenge to party leaders during the next five years, even if Mao were
to die. Such groups, with backgrounds different from those of present
.t
party leaders, will not develop for some years. Moreover, the CCP is
undoubtedly aware of this latent problem, and will continue to take all
? ,4 1,)
possible steps to ensure that the emerging elite groups remain responsive
. ,
to party policy and control.
b. Probable situation should Mao die. It is not unlikely that
- ? ? -
Mao, now 64, will die during the-next five years. If this should happen,
party authority would probably pass at first to a collective group corn-
prising, under present circumstances, Liu Shao-chi, Chou En-lai, Teng
-
_Hsiao-p'ing and Chien Yun, with Chu Teh becoming titular head of state.
- :
However, as recent developments in the Soviet Union again demonstrated,
?
a genuine collective leadership cannot last long in a Communist totali-
tarian state. It is thus likely that both policy disagreements and
power rivalries would become more pronounced and that Chou, Liu or Teng
- - ' ? " . _
perhaps in that order of probabilitywo-uld-nrarzeuver the-,top.
? , 2 ?
Furthermore, with Mao's death, the CCP would be deprived of his marked
abilities and his great prestige both domestically and in the Communist
bloc. All All of these factors mould significantly reduce the CCP's capa-
,?-? ' ' ? ? ;
loility to formulate and implement effective policies, although the
- ? ... - - . -
'problems would probably not become so acute as to jeopardize the party's
f 7:1-'1..tr,r n ( ) '1 , -
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-- 90--
- ?
eiiiience 'or its PhYsical control' of-the' tothtiy.
. ?
c. Problem of party consolidation: c- The' party's ability' to 'weld
'? the hiige rank-and-file' meMberehip', into 'a fore vigOrOus and effective
group is questionable. The developments a 1957.:*Jsuggest that the'iDarty
leaders' face more problems with respect to this' group than had been pre-
viously'discernible. The launching of the rectification campaign -
,
indicates that the leaders recognize thege problems, but the success of
their efforts to -save them is still problematical. The current.campaign
'Will-undoubtedly tighten discipline, put a 'brake on some undesirable
tendencies, and probably weed out some of the less capable'dnd reliable
member.' ?Comparable but perhaps legs intensive-drives will probably be
?
carried out: periodically. However, ,one fundamental problem ?is that -of
instilling more vigor and a heightened sense of dedication ?in party...
members; and: some aspects of the party's tactics -- the mas-sive ,shift.of
cadres of lower levels, the implied threat of .expulsion, the e4o-ture to
criticism,. the demand for austerity ? may aggravate rather than 'solve
the problem.. Future progress of the regime's programs will be gradual
rather than' dramatic, and the exhilaration of' rapid achievement'will be
lacking. Furthermore, many "members 'are caught in the middle between the
party--and the Often discontented public, and blame is ,directed at ',them ?
from both sides :-
. ;
, -During the next five -idea's there is 'little 'likelihood that" thee
? , ;
cadre 'prOblemg will become so ii-itense that -a serious paity crisis will
; ? , ? :
aris-e. , It likely;nhowever, 'that' this situation -will. adversely affect
,
nthe:ieg?me's efforts In' suchmatters as-the agrarian program and popular
sup-ort to some degree.
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7.-w, ?
?
2. Popular Response. The Chinese Communists are committed to an
economic program which at besCwill provide during the next five years
only slight material benefits to the people; they are also committed to
a political and social program which creates more antipathy than goodwill.
'-Peiping is unlikely to make any fundamental changes in these programs,
arid both factors will continue to
ability to elicit a more positive
Impose severe limitations on the regime's
response from the Chinese people.
The Chinese Communists recognize their problem, and have solved
one aspect of it by creating a strong security system which is capable
of preventing a popular uprising of sufficient dimensions to threaten
the existence of the regime. A considerable number of cases of sporadic
but isolated and small-scale active resistance will probably continue to
occur during the next five years, particularly in rural and ethnic
minority areas. The regime will probably be able quickly to quell these
minor revolts, and suOh repercussicits-ds they might have are likely to be
6.?
of a local rather than national nature. While it is highly unlikely that
discontent will seriously threaten Chinese Communist control of the coun-
try_during the next five years, disaffection will continue to hamper some
of the regime's programs.
a. Probable attitude of peasantry, A key group is the peasantry,
-7.74-777.
on which thefrrekime's economic program largely rests. During 1957 there
, -
I.,-
was more evidence of discontent among the peasantry than was discernible
during the,process of establishing cooperatives in 1956. Poor crop years
r
could seriously aggravate the situation; even in good years, it is
Lerr,'"
????
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- 92 -
unlikely that the regime will permit the peasants to retain appreciably
?
more of their production than at present. Nor is it likely that the
Chinese Communists will make institutional changes in the collective
system which mould placate the peasantry. On the other hand, the collec -
tives will be managed more efficiently; the peasants will probably become
. ,
1
more accustomed or resigned to the system; the increase in the number of
'
? ? : : .
cadres in collectives may strengthen the system; constant Chinese
Communist propaganda may have some affect. On balance, it is perhaps
only possible to estimate that the peasantry's response to the regime
will not become appreciably more favorable during the next five years,
and in certain contingencies could deteriorate. This attitude will
.probably be a handicap to the efforts to increase agricultural produc-
tion,..although it is impossible to estimate its effect in quantitative
terms.
Intellectuals disillusioned. The events of 1957 further
- 1,; ?, ; ? ?
disillusioned many, if not most of the non-Communist intellectuals and
-
former .businessmen, and it is unlikely that this disillusionment will
disappear. Their talents will not be entirely lost to the regime during
the next five years, but the lack of a more positive support from this
:
group will limit the regime's ability to fill the gap between the
. ...;,.....- ? %: , ..., :--
regime's need for trained peinfihel and the EliMer of pidTbssionally
,1- ' . ? , , -. .: .. ,
. :;????
capable young persons trained and indoctrinated under the Chinese
..,
Communists. Even within this latter group, the party will continue to
7 . - . ? )
face_some problems of morale and enthusiasm.
Among workers, a group vital to the regime's economic plans, the
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- 93 -
problems may be less acute than in other sectdrs. However, the regime's
4
a
current emphasis on psychological rather than material incentives will
probably continue with minor modifications over the next few year-S,' and
there is little likelihood of a marked improvement in worker morale.
c. Anti-Chinese feeliu in,minority areas. The regime will
probably continue to face acute problems in minoritY-inhabited areas.
There were indications in the fall of 1957 that the regime was shifting
its policy away from the cautious, conciliatory line followed since 1956
to a new emphasis on imposing Communist control and programs. The shift
in policy probably reflects a combination of factors, including a con-
cern that conciliation might permit anti-Chinese and anti-Communist feel-
ings to become more vocal and better organized, and perhaps renewed
confidence in its ability to handle dissidence that might flare into
minor rebellion. During the next year or so, Peiping will probably under
the guise of combatting "narrow nationalism" attempt to rout out or
suppress dissidence in,minority areas. There are some indications that
the new, harsher line will be applied also to Tibet, but Peiping will
almost cert-ainly be forced to proceed more cautiously in that area than
in the minority areas that have been longer under Communist rule and that
are more accessible to the application of Communist force. It seems
probable-that no matter how Peiping balances force and persuasion in its
minority policies, the historical anti-Chinese feeling among !minorities
will continue to manifest itself in periodic minor disturbandes and, ir
Tibet, possibly in renexed widsly.ecattered outbr,elaks that mi6t:necessi-
tate protracted,and fairly large-scale Chinese CohmtigiSt ot;era!tions.
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3. Trained Personnel. During the period 1958-62, Communist China
plans to graduate about 500,000 students from its higher educational
institutions -- a reasonable estimate in view of the current enrollment
of 443)000. Together with the approximately 370,000 that have been
previously graduatedlihfi.:will Provide Criii4ce of some 870,600 persons --
disregarding attrition -- who have completed their university-level
education under the Chinese Communists. Currently, about one-third of
the students are enrolled in teacher-training courses -- an indication
of the regime's planned expansion of primary and middle school education?
Another one-third are enrolled in engineering courses, and seven to eight
percent in each of the fields of science, agriculture and forestry, and
medicine. It is probable that proportions approximating these will be
maintained over the next five years.
?
Despite these impressive figures, the regime will experience
difficulty in meeting the industrial and scientific needs for persons
with advanced training and experience. In 155-56, 4,800 students were
receiving post-graduate training) largely in technical fields. Some
10,000 students have been sent abroad since 1949, the large majority to
the Soviet Union, and an unknown percentage of these have received
advanced training. These programs will probably be accelerated, parti-
cularly in the scientific field) in view of the regime's ambitious
.;?: ?
objective of approaching the most advanced levels attained in the world
in many important fields of science.
By 1962, the regime plans to double the enrollment in primary and
?
middle schools, hoping to approach the goal of universal primary
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- 95 -
education in 1967. -Whether or not this target is reached, it appears that
the previous problem of an insufficiency in the number of persons qualified
to enter the higher institutions no longer exists. This expansion is lead-
ing to a broadening of the base of the educational pyramid and is creating
the problem that the expectations of many primary and middle school graduates
cannot be met -- a prospect hardly brightened by the claim that these
students will comprise the "first generation of cultured workers."
Despite the planned increase in the number of graduates, the
regime's need for trained personnel will not be fully met by 1962. There
will be a particular inadequacy in highly trained and experienced personnel
in the more advanced scientific and technical fields. The problem is
aggravated by the regime's apparent feeling that many pre-Communist in-
tellectuals cannot be expected to give loyal and enthusiastic support and
therefore should not be given positions of responsibility.
Qualitatively, the regime also faces problems which will make it
difficult to achieve its stated objective of building up a large group
that is both "red and expert." Earlier pedagogical methods have been
declared unsatisfactory and are under revision. There is a shortage of
qualified teachers. Events in 1957 will further reduce the vigor of
academic activity. Political indoctrination courses have been increased,
cutting into the regular curriculum; also, it appears that such courses
have been resented by at least a portion of the students. Dislike of the
system of assigning graduates with little regard to their preferences has
been countered by an expressed determination to enforce rather than
modify the system.
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- 96 -
B. Economic Prospects
1. The First Five-Year Plan. In assessing Communist China's economic
prospects, it is useful to review the character of its development in the
eight years since the regime gained political control of the China mainland.
The initial three years were described by the regime as a "rehabilitation
period," characterized by a stabilization of the economy, an extension and
consolidation of the regime's political controls, and the expansion of
production with relatively little fixed capital investment. The economy,
which had been depressed and fragmented by over a decade of war and civil
war, responded favorably, and by 1952 the regime had sufficiently expanded
its fiscal revenues and improved its statistical apparatus to undertake
planned economic development. During 1949-52 the regime claimed increases
in the gross output of industry and handicrafts from g14 billion (US$5.7
billion) to 1134.3 billion (US$13.9 billion) (in constant 1952 prices) and
in gross agricultural output from Y32.6 billion (US$13.3 billion) to
y48.4 billion (US$19.7 billion). This expansion is almost certainly
greatly overstated, and reflects improved statistical coverage as well as
real increases in output. The actual rise in total output is estimated at
about 20-25 percent, a very rapid rate of expansion but well under half of
what is indicated by the regime's data.
-The first Five-Year\ an (1953-57) could be termed a "reconstruction
period.," yiring which the regime directed much of its investment towaras
-
restoring the previously existing productive plant and derived most of
the inease in output from such investment and from more intensive
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- 97 -
utilization of existing plant. A considerable investment in new facilities
was made during 1953-57, however, much of which would be brought into pro-
duction during the second Five-Year Plan (1958-62). Because of the
opliOrtunities to increase output with relatively little investment, total
production continued to rise rapidly, and the regime claims that national
income during 1953-57 increased about 50 percent in constant 1952 prices,
as follows:
National Income-a-
Sector origin (In Y billions)
% of
Increase
1952
1957 b
Agriculture Y36.2
Y.44
25%
Industry 9.2
22
40%
Other c 15.7
35
35%
Total national
income 61.1
93
100%
a. The national income is calculated by Soviet
concepts, excluding certain services not connected
with material production.
b. National income estimates have been reported for
1952 and 1956, and the 1957 data are projecticns
based on the expansion of gross output in industry
and agriculture in 1957.
c. Including construction, trade, transport, and
handicrafts.
This claimed increase in national income should be somewhat
discounted. Not only is agricultural expansion. ectifderabl.y.ovtrgtated.,
but growth in national income has also been exaggerated, loving to the
undue importance the 1952 price structure has given industry, the fastest
growing sector. Compared with 1936 prices, agricultural and industrial
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-98-
prices in 1952 had advanced two and five times respectively, while the
price of imported goods in terms of the over-valued yuan exchange rate
had risen only by half. Nevertheless, the real increase in national
income is probably 70-80 percent of what is claimed, indicating a rapid
growth of 35-40 percent over the five-year period.
a. Industry. The growth in industrial output was sharply
oriented towards heavy industry, and the expansion of gross output by
industrial sectors during the first Five-Year Plan was as follows:
(In billion yuan)
Percent
Increase
1952 1957
Machinery
Y 1.4
* 6.3
350%
Other capital goods
9.3
26.4
1814
Consumer goods
16.3
30.1
85%
All industry
27.0
62.8
133%
This rapid growth was due largely to the reconstruction of existing
plant,- particularly the stripped Manchurian industry, and to an increase
in its utilization. In 1956 the regime estimated that new industrial
plant completed after 1952 would contribute 15 percent of gross industrial
output in1957 and 50 percent in 1962. These estimates would indicate
that the plant existing in 1952 had nearly doubled its output by 1957
and had contributed nearly three-quarters of the increase in industrial
output; by 1957 it, was approaching maximum utilization, since an
increase of only 5 percent in its output was projected for 1962.
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- 99 -
Fixed investment in industry during 1953-57 was reported at ;27.8
billion (US$11.3 billion), or nearly three-fifths of total state capital
construction. Although this figure should be discounted because of the
high prices of machinery and equipment which accounted for 38 percent
of total state capital construction costs -- it still represents an
impressive development effort. This investment was concentrated in heavy
industry; the fuel and power industry absorbed about one-quarter and the
iron and steel and machine industries each about one-eighth of industrial
capital construction expenditures.
I. Fuel and power. In the fuel and power industry, coal
output rose from 63.5 million tons in 1952 to 122.4 million tons in 1957,
with about two-thirds of the increase resulting from the reconstruction
and expansion of existing mines. Existing mines absorbed one-third of the
capital construction expenditures in the coal industry, and their investment
cost per additicnal annual ton of coal production was about hslf that of
the new mines. Despite the rapid rise in output, the increase in demand
was even greater, and. by 1957 coal was distributed under stringent ration
procedures, affecting household consumption in particular.
Electric power output rose from 7.3 billion kwh in 1952 to 19 billion
kwh in 1957, with a doubling in generating plant from 2,000,000 kw to
4,000,000 kw. A part of the increase in plant represented the restoration
of Manchurian power facilities removed by the USSR in 1945. Five turbine-
generators aggregating 350,000 kw were re-installed in the Tafengman Dam,
and the large thermo-planta at Fushun and Fuhsin were rebuilt. Power
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-100-
output per kw of capacity rose 30 percent, reflecting in part the
development of power networks and in part the regulation of demand in
order to reduce peak loads.
Although the petroleum industry contributes only a small part of
the energy resources, it is important to the regime's hopes for industrial
expansion, and a large investment has been made in exploration and
development of resources. Crude oil production rose from 436,000 tons in
1952 to 1,445,000 tons in 1957, of which about two-thirds were obtained
from natural oil deposits and the remainder from oil shale and coal
distillation. Despite the regime's efforts, production has legged behind
the target, and apparently hopes are fading for the discovery of many
large and easily exploitable oil deposits. In its long-range plans the
regime-is now calling for the substitution of other energy sources for
petroleum wherever possible and, despite its high cost, for building new
facilities for extracting oil from shale and coal.
ii. Iron and steel. Iron and steel production was sharply
expanded during the first Five-Year Plan, with pig iron output rising from
1.9 million tons to 5.9 million tons and crude steel from 1.35 million tons
to 5.24 million tons. Most of this increase has been obtained from recon-
structing previously existing facilities and through raising the output
per unit of capacity by various technical measures. At the Anshan plant,
which produces about half the iron and steel, eight of the former nine
blast furnaces had been restored by 1957, together with both of its steel
plants. Production rose far above previous levels as a result of careful
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-101-
selection and preparation of materials and other measures designed to
maximize the physical output per unit of capacity.
iii. Machinery and equipment. In Manchuria and the port
cities a considerable engineering industry had been built prior to 1949,
designed to provide repair and maintenance services to existing industries.
It is largely.this plant, re-equipped and reorganized and provided with a
guaranteed home market, which has enabled the industry to increase its
output 4.5 times during the first Five-Year Plan. Mass production of
certain simpler products within the capabilities of the equipment and
technology of various factories enabled a rapid.rise in output, but by
1957 market limitations for these items were restricting output. However,
there has been considerable investment in new plant, most of which will
come into production during the second Five-Year Plan. Once in production
these new facilities will enable increased domestic production of the
heavier and more complex types of equipment.
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-102-
b. Agriculture. Agricultural growth claimed during the period is
largely the result of more intensive production on existing farms. Culti-
vated land rose 4 percent to 112,000,000 hectares, while crop area rose
11 percent to 156,000,000 hectares, owing to increased multi-cropping.
Food output rose 20 percent to 185,000,000 tons grain-equivalent, with the
food crop area rising 7.3 percent to 120.5 million hectares and per-hectare
yields rising 12 percent. Shifts to more intensive crops, i.e., rice and
sweet potatoes, account for about one-third of the increase in yields.
Other crop developments include a 9 percent increase in major oil crop area
(soybeans, peanuts, and rapeseed) to 16.8 million hectares and a 3 percent
increase in yields; a 4 percent increase in the cotton area to 5.8 million
hectares and a 21 percent increase in yields; and a 61 percent increase in
miscellaneous crop area to 12.9 million hectares. The claimed increase in
agricultural productivity was even greater than these figures indicate, for
1952 was a bumper crop year while 1957 was a mediocre or ordinary crop year.
There was also a 10 percent increase in labor animals to 84,000,000 head,
of more than one-third in hogs to 125,000,000 head, and of three-fifths in
sheep and goats to 97,000,000 head.
The main factor to which this agricultural expansion is credited
has been the mobilization of idle and underemployed rural labor for increased
cultivation work and land improvements. Irrigated land reportedly rose by
one-fifth to 37,000,000 hectares, and extensive flood control and soil
conservation measures were undertaken. In addition, chemical fertilizer
supplies were raised from 333,000 tons to a peak of 2,000,000 tons in 1956,
providing a small but important addition to soil fertility. Rural coal
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- 103 -
supplies were more than tripled to a peak of over 25,000,000 tons in 1956,
permitting greater use of straw and other by-products as feed and ferti-
lizer. Improved seeds were developed and by 1957 were sown on 40 percent
of the grain acreage, 80 percent of the cotton acreage, and 30 percent of
the oilseed acreage. There has also been an increase in the supply of farm
? tools, and some progress was made in controllina crop pests. Among offset-
ting factors, there has been a sharp decline in draught-animal power per
crop-hectare, resulting from a decline in the quality of the animals and
from the fact that the increase in numbers has been largely in the nomad
grassland areas. Another unfavorable factor was collectivization which has
upset the production and market organization in the farm areas and has
adversely affected the production of certain subsidiary products which were
marginal peasant enterprises.
Although information is inadequate to assess accurately the consist-
ency of the claimed increase in productivity in relation to the production
measures taken, it seems likely that the regime has overstated the rise in
farm output. It has admitted that its agricultural statistics, although
improving, are still imperfect. Chinese officials, in discussions with
Indian agricultural missions, have indicated that the data prior to 1952
were clearly incomplete and that, while data since 1952 is generally compa-
rable, the possibility of a small bias from improved statistical coverage
could not be ruled out. At the same time, marketing data indicate that the
production-estimates assume that the peasants have been retaining and con-
suming much larger quantities of grain, cotton, and oilseeds, an assumption
which seems at variance with the facts. It is of interest to note that
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Dr. J. L. Buck's study of Chinese agriculture in 1929-33, which challenged
the official data of that day, describes an agricultural plant very similar
to that indicated by the 1957 data, with a comparable rural population,
cultivated area, irrigated area, multiple crop index, and livestock popu-
lation. This may suggest that much of the expansion of the past eight years
largely represents a recovery to prewar levels.
c. Foreign trade. Foreign trade has been an important factor in
Communist China's first Five-Year Plan, and has supplied the military equip-
ment, capital goods, and essential raw materials required by the program.
To obtain the necessary imports, the foreign trade policy was to expand
exports as rapidly as possible in order to finance a greater volume of
imports, and to limit imports to essential commodities not produced in suf-
ficient quantity in the Chinese economy. During 1953-57, balance of payments
pressures have been growing, reflecting the cessation of Soviet loans, a rise
in foreign debt service, continuing high foreign-aid commitments (chiefly to
North Korea and North Vietnam), and declining receipts from foreign expendi-
tures in China and from overseas Chinese remittances. As a result, although
exports approximately doubled between 1952 and 1957, imports rose by only
a third.
The composition of Communist China's imports and exports during the
first Five-Year Plan is estimated approximately as follows:
(In Y billions)
Imports
Exports
Consumer goods
Y 2.5
Agricultural products
Y. 17
Rau materials, fuels
7.5
Other
6
Capital goods
10-11
Military supplies
4-5
Total imports
25
Total exports
23
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-105-
Over three-quarters of Communist China's trade has been with the Soviet
bloc during the first Five-Year Plan. The Soviet bloc has supplied all of
the military supplies, most of the capital goods, as well as certain raw
materials and fuels under Western trade controls, e.g. petroleum. Most of
the imports from non-Communist countries have consisted of consumer goods
and raw materials, although some capital goods have been received, including
uncontrolled items and those shipped in evasion of trade controls. The
Soviet bloc has absorbed a rapid increase of Chinese exports, although by
the end of the period Communist China appeared to be directing its attention
to export markets in non-Communist countries, presumably intending to uti-
lize its export surpluses with the latter areas to settle import deficits
with the Soviet bloc.
d. Population, manpower, and consumption. During the first Five-
Year Plan the regime estimated from its 1953 census, its population regis-
tration figures, and its collection of vital statistics in selected areas,
that its average annual population growth was 2.2 percent during 1553-57,
and placed the mainland population at 575,000,000 at the end of 1952 and
640,000,000 at the end of 1957. Urban growth was about twice as rapid as
total growth, and the urban population rose from 72,000,000 to 92,000,000
during the period. However, because of the small relative size of the
urban population, it absorbed less than one-third of the total population
increase.
The population engaged in farming increased by 10 percent from
482,000,000 to 530,000,000 while the non-farming population increased by
18 percent from 93,000,000 to 110,000,000. Employment in government and
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-106-
state-controlled enterprises (excluding the armed forces) rose from 10,000,000
to 24,000,000. Part of this increase reflected the nationalization of private
enterprise, and the net increase in staff and workers, i.e. wage-earners,
is estimated at 5,000,000 - 6,000,000. The remaining non-farm labor force
included the armed forces, personnel in service occupations and handicraft
cooperatives, and a few unassimilated peddlers and tradesmen.
Despite the rapid growth in population, the regime claims that the
even more rapid growth in production has permitted the needs of the develop-
ment program to be met and has provided substantial increases in living stan-
dards, as indicated by the following data in constant 1952 prices of per
capita consumption taken from its national income estimates:
Per cent
1952
1956
Increase
Peasants
Y 72
Y 81
Workers
151
180
19 %
Total, including others
84
100
19 %
and social consumption
However, it is believed that the regime has aver-estimated the growth
in its agricultural output and thus exaggerated farm retentions, which
constitute about three-fifths of peasant consumption. Further, while peasant
cash income and consumption of textiles and other manufactures have in-
creased, the peasant preference is to spend the increased income for food
which has been prohibited by the regime's controls over the distribution of
the crops. Moreover, the measurement of consumption in 1952 prices, when
farm prices were low and industrial prices high, has tended to exaggerate the
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- 107 -
rate of growth of consumption. Thus, it is believed that real peasant
consumption has increased very little and that the peasants, in -view of the
controls over their consumption and the additional work required of them,
consider themselves worse off in 157 than in 152.
Real urban per capita consumption has undoubtedly risen during
1953-57, probably close to the officially claimed rate of 4 percent annually.
However, urban consumers have had to accept increasingly stringent rationing
of basic commodities such as foodstuffs, textiles, and coal, as well as
overcrowded housing and urban utilities. The rise in total per capita con-
sumption includes "social" consumption, such as military, health, and
education expenditures, which has increased more rapidly than personal con-
sumption.
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-108 -
2. The Second Five-Year Plan. At the 8th Party Congress in
September 1956, an initial working outline of its second Five-Year
Plan was presented by the regime. Compared with the 1957 goals of
the first Five-Year Plan, this plan projected by 1962 a doubling of
industrial output and an increase of 35 percent in agricultural out-
put which were to contribute to a 50 percent increase in the national
income. It was calculated that the expenditures would increase at a
somewhat more rapid pace than national income, and that 'state fiscal
expenditures during 1958-62 would rise by three-quarters over that
planned for 1953-57. Tath the expansion in fiscal resources, state
capital construction was to be doubled, with the shares allocated to
industry and agriculture rising slightly to 60 and 10 percent respective-
ly. Fiscal expenditures during 1958-62 were indicated to be as follows:
Economic and social expenditures
-Military and administrative
expenditures
Debt service, foreign aid, other
expenditures
? Total fiscal expenditures
Of which:
State capital construction
Industrial
Agricultural
Other
Plan Plan
1953-57 1958-62
(In Y billions)
Y 72 Y 132-154
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41 44
15 44- 22
128 220
45 90
26 54
3 9
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-109-
Capital accumulation was to represent a slightly higher proportion of
national income than in the first Five-Year Plan, but still was to permit
a rise in consumption comparable to that during 1953-57.
During 1957, as the regime attempted to work out the details of
the plan, important modifications were made in the program, reflecting
a recognition of the limited resources available. While the regime has
not sumMarized the effects of these changes, it appears to be attempting
to maintain the projected expansion in total output through a more
effective utilization of available resources and by stretching out its
timetable for constructing a modern capital goods industry.
a. Agriculture. In September 1956 the 1962 farm targets called
for a 35 percent increase in agricultural output over that planned for
1957 including an increase in groin production to 250,000,000 tons, in
cotton production to 2,400,000 tons, and in the hog pop-nation to
250,000,000 head. During 1957 it was recognized that these goals were
too ambitious, and the grain target was lowered to 240,000,000 tons,
the cotton target to 2,150,000 tons, and the hog target to 220,000,000
head. At the same time, the proposed agricultural development effort
was increased, notably by raising the chemical fertilizer production
target from 3,000,000 - 3,200,000 tons to 5,000,000 - 7,000,000 tons.
In early 1958 long-range provincial targets were being raised sharply
under the slogan, "advance by leaps and bounds." However, as in 1956,
such targets appear to serve as a propaganda background supporting an
agricultural program which calls for widespread changes in cropping
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-110-
practices) and as yet do not appear to have altered the national targets.
During the second Five-Year Plan, the emphasis will continue to
be on increasing the productivity of existing farmland rather than ex-
panding cultivated acreage. The regime claims it has surveyed and found
suitablr, for reclamation some 35,000,000 hectares in Manchuria, and in
northwest and south China, but admits that the costs of drainage, irriga-
tion, and other development preclude bringing more than 7,000,000 hectares
into production during 1958762. About half of this will be reclaimed by
state farms producing soybeans in Manchuria (1.3 million hectares), cotton
in the northwest ( .7 million hectares) and tropical crops in south China
(1.2 million hectares). The balance is to be reclaimed by peasant re-
settlement programs and by bringing into production unused lands in the
vicinity of the various collectives. Much of these new lands will be of
marginal productivity, but the regime estimates that the program will
increase production by the equivalent of 10,000,000 tons of grain.
Despite the new lands, per capita farm land will decline further
from .19 hectare in 1952 to .17 hectare in 1962. To increase the land's
productivity, the regime proposes to mobilize additional rural labor,
expand irrigation, and improve fertilization in order to increase yields
and to introduce more intensive cropping systems. During the second
, Five-Year Plan the irrigated area is to be expanded by 17,000,000 hectares
.and irrigation facilities improved on 7,090,000 hectares now under irriga-
tion. The regime hopes also to increase the chemical fertilizer supply
t6 7,000,000 tons, which it estimates will increase grain output by ,
15,000,000 tons and cotton production by 300,000 tons.
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-111-
, ?
Despite the cutback -in taxtetiand'the increase'in-developmefit
effort, the farm prOgram 'stiil alibearetO'be over-optimistic. The program
has assumed that the Mei.ging of une-lconomiCally sMall farms Into large
collective units would mobilize- a'substantial amotnt of farm labor for
land Improvements and additional field work. This assumption is
warranted by pre-World lar II studies iihiCh show that Chinese peasants
were idle one-sixtA'Of the year and engaged in marginal Off-farm tasks
one-fifth of the year; those on the larger farms'accomplished half
again as much work per man as the average on all farms. However, in
the first two years of collective operation these labor saVings have
been dissipated by high administrative aVerhead and the inefficient use
of labor. The regime ascribes this failUre to inexperience in 1956 and
timidity in 1957; and its 1958 plan call for mobiliiing substantial
additional labor. However, the consolidation of the collectives seems
likely to be a long-term process during which the labor potential will
not be realized, owing to large administrative overhead, inefficient
management, and reduced peasant work incentives.
lath experimental and extension facilities to develop and test
new techniques necessarily limited, the program for rapid changes in
cultivation practices is bound to result in costly errors, as in 1956.
The regime admits this but justifies the program on the grounds that net
production is to be increased. It has urged its rural cadres not to
think--like one who has hit his thumb with a hammer--of the finger which
has been hurt but of the nine which have not been hurt. The individual
peasant, however, cannot afford to take gambles with his crop, and it is
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- 112 - ?
likely that .
locai .resist.ane :
:c r;rOiam,w1(.13:111crea.de:'
-
At the same time, the regime iSlikelybe'dipointea Ln its
expectations of increases in farM p dudtivity. Cultati?n preitices
V. . ? - .
are already highly intensive, and the peasants well aware-of the 'advantages
Of irrigation and maintenance of soil fertility. IncreaseCi local efforts
alone are likely to result in only marginal increases in outpUt? and
major expansion will depend on introducing new faCtoi.er., such as chemical
fertilizer or machinery. Vhile such new factors are included in the
program, they do not constitute the major part of the planned expansion.
The cutback in the major targets has probably involved a reduction
in the goal for expanding agricultural output froth 35 percent to between
25 and 30 percent. In view of the di&iculties facing the regimels
program, however, it seems probable 'that theincrease will not exceed
I ,
20 percent.
. ?-??? ". ? 2
.?
C+4.
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- 113 -
b. Industry. Under the second Five-Year Plan working outline,
gross industrial and handicraft output in constant 1952 prices was to rise
to Y. 130.6 billion (U53.1 billion) by 1962, or double that scheduled for
1957 under the first Five-Year Plan. Actually, at the time the -1962 target
- was announced, the regime was confident it would overfulfill the 1957
target by 10 percent, so that the actual increase projected for 1962 was
80 percent over the 1957 level. The ratio of capital goods to consumer
goods was to be raised to 50:50 in 1962, as compared with the ratio of
38:62 targeted for 1957 under the first Five-Year Plan and the ratio
actually achieved in 1957 of about 45:55. While the epansion of capital
goods output would still be more rapid, the disparity in the rates of
growth between the two sectors would be reduced in the second Five-Year
Plan, with consumers goods output rising by over half and contributing
two-fifths of the total increase in output.
During 1957 numerous changes were made in the second Five-Year Plan
industrial program. Part of these adjustments resulted from changing views
of requirements and natural,resources. Of more importance, however, are
the indications that the regime found its resources inadequate to carry
ailt the program it had outlined. As the various ministries worked out the
details of the program, it became clear that the plan to increase the
concentration of investment in modern industrial plant --dear to the
_heart of every Communist regime -- left a wide gap between the targets and
their means of achievement. A number of factors appear to have been
involved in this reassessment. One surprise apparently resulting from the
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calculations was the sharply rising investment cost per additional unit
of production projected for the second Five-Year Plan, reflecting the
necessity to rely on new investment for increased output rather than plant
reconstruction and intensified use of industrial assets. In addition,,the
long lead time between investment and the realization of 'production involved
in the construction of large modern industrial plants apparently had not
been adequately recognized, and it was found that part of the projected
increase in output would not actually be realized during the second Five-
Year Plan. Further, the agricultural targets were found to be unrealistic,
with the prospect that the expansion of consumers goods oUtput would be
limited by shortages of agricultural raw materials. Again, foreign exchange
resources were found to be inadequate to support the foreign exchange re-
quirements presented by the program (see Section c, Foreign Trade, below).
To bring the plan into balance, the regime has increased the
proportion of investment allocated to small industrial,plants, which it
is calculated will reduce the investment and import requirements per unit
of-capacity as veil as the lead time between investMent and realization
of production. At the same time it is hoped that by scattering these
plants in medium-sized cities, whiCh have not as yet felt the main impact
of-urban expansion, the existing labor force and urban supporting
facilities can be utilized, and nnon-productiven social overhead invest-
meht in housing and urban utilities may be slashed sharply. The.existing,
industrial plant is being re-examined for opportunities. to intensify
further its utilization or' to ihcrease its productivity chiefly thrqugh-
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- 115 -
extensions or complimentary investments. This review has led to abolishing
the separate management of arsenals, the surplus capacity of which is now
to be utilized to produce machinery and equipment for the civilian economy.
Development of coastal industry which has been relatively neglected for
strategic reasons is to be emphasized where it can show large potential_
returns on investments. In addition) productive investment is to be
economized through the acceptance of lower standards of construction and
serviceability and the elimination of less essential facilities.
The lag in agriculture is forcing increased industrial support of
the farm program. The 1962 target for chemical fertilizer production,
placed at 3.0-3.2 million tons in September 1956, has been subsequently
raised to 5-7 million tons) with the stipulation that most of tbs equip-
ment is to be produced in Communist China. In addition, it is proposed
to develop the production of agricultural machinery designed primarily
to increase total farm output rather than mere labor productivity. At
the same time, the tractor program appears to have been cut back in view
of its high import requirements for equipment and petroleum. As yet,
this program of industrial assistance to agriculture appears to be in
the formative stage, with many of the details remaining to be worked out.
In 1957, following the shortages of coal, power, and basic materials
in 1956, it was decided to raise initial targets in the second Five-Year
Plan for these materials to provide a margin of safety. The 1962 target
for coal production was raised from 190,000,000-210,000,000 tons to
230,000,000 tons, apparently with the,expectation,that most of the increase
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-116-
would come from developing small local mines with relatively little in-
vestment and relying priMarily on manpower. Coal deposits are widespread
in Communist China, and many outcrops are mined on a small scale for local
use. The 1962 target for electric power output was increased from 40-43
billion KITH to 44 billion KWIL and later to 50 billion KWH. The initial
target involved the addition of about 3,800,000 KU to the 4,000,000 KU
plant existing in 1957, and the later revisions suggest that a further
1 million KW of capacity is now included in the plan. The additional
capacity will apparently be obtained from increased domestic output of
power generating equipment and be partly financed by investment economies
on the plants originally planned. On the other hand, petroleum targets
were cut back by an unstated amount from the 5,000,000-6,000,000 ton level
in recognition of the inadequate resources.
-The 1962 iron and steel targets were raised to 12,000,000 tons of
ingot steel, the upper range of the former target of10,500,000-12,000,000
tons. The steel centers at Wuhan and Pacitoul each with a projected annual
output of 1.5 million tons steel, are to be completed, although the in-
vestment allocation has been lowered by reducing standards and eliminating
auxiliary projects.. Some 18 small iron and steel plants are to be built
with an-annual aggregate capabity of 1.8 million tons, with the expectation
that they can be completed more quickly'and at an investment cost per ton
of capacity of less than two-thirds ichat of the larger mills. At the
same time, existing steel plants will be expanded, increasing their output
P
about 2,000,000 tons over theil. 1957 output of 5,2.00;000 tons. Cement
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- 117 -
production targets for 1962 have, however, been lowered to 12,500,000 tons,
the lover range of the former target of 12,500,000-14,500,000 tons, pre-
sumably reflecting a reduction in building construction following the cut
in "non-productive" investment.
Investment in machinery plants has apparently been cut back sig-
nificantly, reflecting in part a cut-back in certain programs, such as
tractor stations, and in part a postponement in the timetable for developing
domestic production of heavy and complex equipment, which is now imported.
However, the Chinese Communists hope that, with the investment program
now emphasizing less complex facilities, mass production of simpler products
can be further organized and enable more intensive use of existing facilities.
As a result of all these adjustments in the industrial program, it
seems likely that production of capital goods at about the levels projected
in September 1956 is now a reasonable prospect, and is based on investment
requirements approximating available resources. On the other hand, con-
sumers goods output is likely to be reduced as a result of lowered agri-
cultural targets, and will probably be reflected in lowered consumption
targets. In early 1958 industrial goals were being raised rapidly, par-
ticularly at the local levels, but this appears to reflect an attempt to
activate local planning rather than a realistic raising of industrial sights.
c. Fore!_ trade. Although no foreign trade targets were mentioned
in September 1956, it as indicated in 1957 that the limited volume of
imports available during the second Five-Year Plan would necessitate
changes in the program, particularly a reduction in the proportion of
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- 118 -
investment in large modern plant in which import requirements formed a
greater share of total costs. This change may reflect in part a more
pessimistic view of the balance of payments problems. However, it seems
likely that import requirements were not fully known until the various
ministries had worked out the details of allocating the doubled capital
construction funds; as these calculations were completed in 1957 it became
apparent that the import needs presented were beyond Communist Chinats
capacity to meet.
The balance of payments pressures developed at the end of the
first Five-Year Plan suggest that there will be no great increase in
imports during the second Five-Year Plan. During 1953-57 net receipts
from non-trade items financed a "g" 2 billion (US$.8 billion) import
balance, but for 1958-62 it is estimated that an export surplus of
1; 3 billion (U1.3 billion) will be used to finance net expenditures
from non-trade items, as shown in the following table:
1953-57 1958-62
tlnThillion77-ran
Trade balance
-2.0 +3.0
Foreign credits
+3.1
0.0
Foreign expenditures in China and
- Overseas Chinese remittances
+2.9
+1.0-1.5
Foreign debt service
-2.0
-3.0
Foreign aid
-2.0
-1.0-1.5
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Exports reached a peak in 1956 and fell off slightly in 1957.
According to the regime, exports during 1958-62 will increase much more
slowly than during 1953-57. The export of foodstuffs, constituting about
half of current exports, is to be held constant or reduced slightly; further
expansion of exports mill depend on increased exports of minerals, in-
dustrial products, handicrafts, and subsidiary agricultural products.
Despite the planned reduction in export expansion, it is estimated that
total expotts during 1958-62 may exceed those during 1953-57 by about
40 percent, reaching a level of1.Y.? 32 billion (US$13 billion). This level
of' exports would permit an increase of 16 percent in imports to
Y- 29 billion (US$11.8 billion).
With the development of the economy, the regime has indicated that
import requirements for raw materials, fuels, and essential consumer goods
-wiL1 rise during the second Five-Year Plan. At the same time, it seems
likely that military imports may decline somewhat as the military forces
begin to shift from a rapid build-up to a maintenance and replacement phase.
It seems probable therefore that capital goods imports can be increased
to some degree. However, with capital construction expenditures being
doubled it is clear that imports must form a much smaller proportion of
total investment costs than in the first Five-Year Plan. In September 1956
it was stated that the machinery industry would supply 60 percent of the
machinery aria equipment requirements during the first Five-Year Plan and
70 percent in the second Five-Year Plan, while in 1957 the latter per-
centage was raised to 70-80 percent, suggesting either that other import
needs had proved greater than expected or that the estimate of total im-
port availabilities had been revised downward.
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-120-
d. Population, manpower, and consumption. During the second Five-
Year Plan, total population is expected to increase at a rate similar to
that during the first Five-Year Plan, and rise from 640,000,000 at the end
of 1957 to 720,000,000 at the end of 1962. Although a birth control program
is to be promoted during 1958-62, the regime estimates that in view of de-
clining mortality its effect will be to prevent an increase in the rate of
growth rather than to decrease the rate. During the first Five-Year Plan
there was an estimated migration of 8,000,000 from rural to urban areas,
constituting about 40 percent of the urban growth. In the second Five-Year
Plan it is hoped to reduce such migration sharply through population controls.
However, the urban population in 1962 will probably reach 105,000,000-
110,000,000.
Although,the population growth is expected to exceed 15,000,000
annually, this growth will be concentrated in the group below working age,
since the population structure is changing from that of a stationary to a
growing population. Nevertheless, it is estimated that the annual growth in
the labor force will be about 5,000,000, of which 4,000,000 will be located
in the rural and 1,000,000 in the urban areas. The 1962 goal announced in
September 1956 provided for an increase in workers and staff in government
and state-controlled enterprises from 24,000,000 in 1957 to 30,000,000-
31,000,060 in 1962, although this goal may have been increased somewhat as
a result of the subsequent adjustments in the plan emphasizing labor-intensive
rather than capital-intensive projects. Other non-farm employment is expected
to increase but little; thus about three-quarters of the 25,000,000 increase
in the labor force will have to be absorbed in agriculture.
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The 1962 goals announced in September 1956 provided for increases of
25-30 percent in average wages and in total peasant income, which apparently
would alloW_for per capita consumption increases at slightly greater rates
claimed
than/in 1953-57. However, agricultural targets have since been lowered, and
are still believed to be unrealistically high. Thus it is estimated that at
best peasant per capita output will rise by only eight to nine percent, a
large part of which will be extracted by the regime for its own purposes.
With the agricultural and consumer goods industry targets reduced, the margin
for increa-s-ing consumption will be limited on a per capita basis to something
like 1.5 percent annually. While wage-earners will probably be favored over
peasants as in the past, rising peasant discontent or successful subversion
of the regime's controls in the rural areas could alter the regime's
allocation.
3. Communist China in 1962. In 1962 Communist China will have been
through a difficult period. More than 80 percent of its population will still
be engaged in agriculture, which will have consolidated to a certain extent
the collective revolution and will be in the throes of a technical revolution
involving great changes in its cultivation practices. Peasant discontent
will have been high throughout the period, reflecting rural resistance to
change, little improvement in living standards, and the increased hazards to
farm output from promoting new and untested cultivation practices. However,
the regime will probably have improved its control over the collectives and
devised means to enforce compliance with its directives.
Industrial expansion will have been rapid, and by 1962 capital goods
production will have more than doubled over 1957, providing a basis for a
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-122-
very high rate. of investment and development. The expansion of consumer
goods output, dependent on agricultural development, will be far less rapid,
and will provide for little increase in living standards. Urban morale is
likely to be low, with a minimal rise in living standards and diminishing
prospects for advancement as the growth in urban employment slows down and
positions are frozen in a stable bureaucracy. Student groups will probably
be disillusioned over their prospects and restive. The problem of the "old"
and "new" cadres will probably remain. In a period of social strains the
regime will probably continue to maintain the politically reliable but un-
trained old cadres in their present leadership positions, while the colleges
and high schools will provide several million new cadres to the labor force
who will have little respect for the abilities of their superiors.
By 1962, then, the regime will have greatly enlarged its industrial
base at the cost of reduced political support and by resorting to harsher
controls. Although this development is not likely to threaten the regime,
it may tend to reduce the flexibility and effectiveness of its policies.
However, the regimels long-run prospects maybe increasingly overshadowed by
its population problem. It has only recently faced this question with some
realism and is promising that despite a rural-based population and limited
agricultural land resources, its policies of technical reforms in agriculture
and of birth control will increase agricultural output at a faster rate than
thejlopulation growth and will in several decades reduce population growth to
manageable_proportions. By 1962 these claims will have had a partial test.
If the prospects are unfavorable, they may have a corrosive effect on the
unity and-self confidence of the Party.
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? ????1^?:.
h. 123 -
C. Militart-
Chinese Communist military Policies over the next five years will
continue to be shaped and influenced by the regime's aspirations for
national strength and great power status. The regime will continue its
present efforts to create a modern military establishment and will probably
seek, with considerable success, to achieve greater self-sufficiency in
the production of conventional weapons. However, it will continue to be
dependent on the USSR for many military items, particularly for more
complex equipment.
Equally important is the fact that the Chinese Communists will
undoubtedly continue to view the broader aspects of the Sino-Soviet alli-
ance as the major deterrent against external attack, particularly by the
US, and as an essential element in Peiping's ability to project its power
position into world affairs. This view was almost certainly underlined
during the past year by demonstrations of Soviet weapons and scientific
achievements, and by Peiping's clearer recognition of the role that
nuclear weapons and missiles are likely to play in any future major mar.
Nevertheless, Peiping will continue to emphasize a large and effective
standing army. On the one hand, it cannot, duplicate the Soviet military
pattern; while on the other hand, it probably believes that such an armed
force will continue to be a decisive factor in any limited hostilities
and that it will continue-to constitute an important psychological
instrument against the non-Communist Asian states.
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- 124 -
Levels of military expenditure projected under the second Five-
year Plan do not portend any sizable increase over present levels of
military spending, and Peiping apparently intends to allocate most of the
increase in domestic resources to its ambitious industrialization program.
However, current levels of expenditure are sufficient to promote further
strengthening of its military forces, and continued emphasis on the
expansion of heavy industry will contribute to the improvement of military
potentials.
Chinese Communist aspirations for a great power status may eventu-
ally: impel the regime to develop some token evidence of nuclear capabili-
ties.. Peiping is developing a program of nuclear research, using Soviet
equipment and technical assistance. However, in view of critical shortages
of technical personnel and the competing demands of its industrialization
program, Peiping is unlikely to carry out a program involving the large-
scale production of nuclear weapons. Over the next five years Communist
China's indigenous nuclear capabilities will probably be largely confined
to non-military uses of atomic energy, from which the regime can reap
propaganda advantages.
Peiping's efforts to modernize its armed forces may eventually
produce a new generation of "technical" officers whose interests and out-
look are more purely military, and who ere less closely bound to the CCP.
Such a development might tend to weaken party control over the armed
forces. This, however, is unlikely-to become a serious problem during
the next five .years. CCP leaders appear to be aware of this danger and
will seek to maintain a tight .party control over the PLA. The percentage
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- 125 -
of party and Youth League members in the armed forces will probably continue
to be high, and the PLA will probably continue to be a well-indoctrinated
group loyal to the regime.
If present trends continue, the general quality and effectiveness
of the PLA may gradually improve. The addition of better-educated younger
4
recruits to the PLA will facilitate training in modern weapons.
The regime will continue its present efforts to develop a permanent
military reserve. The development of such a reserve on a nationwide basis,
coupled with the emergence of revised military concepts in bloc strategic
thinking, may permit the regime to effect some reductions in the size of
its regular armed forces.
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-126-
D. Sino-Soviet Relations
1. Objectives. During the next five years Peiping will almost cer-
tainly continue to believe that the military guarantees of the Sino-Soviet
alliance constitute the principal deterrent against attack by the US.
Peiping will continue to rely on the USSR and the bloc as its principal
source of imports, aid, and technical assistance. Furthermore; Peiping
will continue to share Moscow's ideology and view of history. Peiping's
first objective in its relationship with the USSR will therefore be to
maintain and strengthen the Sino-Soviet alliance and the bloc as a mili-
tary, diplomatic, and economic force in order that the bloc might fulfill
what Peiping believes to be its historic destiny and in order to maximize
bloc assistance for Peiping's domestic program.
On certain issues Peiping's objectives may differ somewhat from
those of the USSR despite the identity of long-range interests and Objec-
tives. Peiping's interests are more immediately involved than those of
Moscow in certain Asian questions, particularly the status of Taiwan; on
these issues Peiping may therefore take a more adamant stand than the
USSR. Similarly, Peiping may make demands for its domestic economic
program that Moscow could meet only at some expense to its own economy;
In these cases differences could arise in spite of probable Sino-Soviet
agreement on maximizing the economic strength of the bloc as a whole.
Again, Moscow is more deeply involved in East European affairs and might
in some cal-es believe that its authority must be imposed at whatever
cost, while Peiping from its more detached viewpoint might feet that
greater flexibility would strengthen the bloc vis-a-vis the non-Communist
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- 127 ?
world. In this connection Peiping will almost certainly wish to maintain
its status of independence within the bloc, while Moscow probably does
not view Chinese Communist independence as an end in itself but only as
a contributing factor to the effectiveness of Sino-Soviet cooperation.
However, in all such conflicts of objectives, both Peiping and tioscow
will probably subordinate occasional differences to the wider interests
of commonly held objectives and ideology.
2. Probable Developments. Peiping will probably continue to play a
role in the bloc second only to that of the USSR, and its recently in-
creased interest and influence in general bloc policies will probably be
maintained. Chinese Communist foreign and domestic policies and state-
ments will, as they did in 1956-57, have considerable impact in other
Communist regimes and movements. However, it is unlikely that Peiping
will in the near future issue another ideological pronouncement that
will arouse as much varied interest as the "contradictions" thesis. In
fact, Peiping may attempt to minimize the international implications of
its domestic activities in order not to appear to be undercutting Soviet
leadership.
The variations of objectives underlying the basic identity of
Sino-Soviet interests will create occasional differences and disputes,
such as arise in any alliance. Peiping and Moscow will make every
effort, however, to prevent such problems from materially reducing the
effectiveness of Sino-Soviet collaboration. The degree to which the
efforts to subordinate disputes will succeed will depend in part upon
the personal relationship of the Chinese Communist and Soviet leaderships
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- 128 -
to each other. So long as Mao remains active, his seniority and tremen-
dous prestige will continue to permit Peiping to exercise considerable
flexibility in accepting Soviet leadership without seeming to impair its
independence; if Mao were replaced by lesser leaders, the problem of
building prestige and gaining face might make Peiping a somewhat more
difficult ally for the USSR. At the same time, however, lesser leaders
in Peiping might be more dependent upon Soviet support in any domestic
struggle and might therefore be more prepared to compromise 'on some
issues with the USSR. Leadership developments in ,the USSR will similarly
influence Sino-Soviet relations. If a delicate balance of political
power should arise in the Kremlin, Peiping might exert some influence to
tip the scale, despite the apparent Chinese Communist reluctance to be-
come involved in 3oviet internal politics. Furthermore, any leadership
instability in the USSR that Peiping might interpret as a sign of Soviet
weakness or indecision would make Peiping less prepared to follow the
Soviet lead and more adamant in insisting on its own views and objectives.
Among the problems in the Sino-Soviet relationship that are
probably uppermost in immediate importance is that of economic relations.
Peipingis receipts under Soviet loans have ceased and commitments to
service loans obtained previously are now creating foreign exchange dif-
ficulties. It may attempt to obtain from the USSR an additional loan
or at a minimum a postponement of service and repayment obligations for
past loans. It is also conceivable that as Peiping's import require-
ments increase and its ability to increase certain exports, such as food-
stuffs, remains restricted, the USSR may be reluctant to supply in full
Peiping's needs or accept in payment the exports Peiping has to offer.
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- 129 -
Anotber-pressing problem likely to arise during the next five years
is that of redefining the Sino-Soviet military relationship in the nuclear
and missile age. Peiping will continue to be heavily dependent upon the
USSR for military aid in conventional weapons and may in the next few
years wish to acquire some capability in the missile and nuclear fields.
The USSR would probably be reluctant to provide more than token quantities
of modern weapons for Communist China, and would in any case seek to
maintain more control over sach weapons than it has retained over con-
ventional arms. This might introduce an element of Soviet control in the
Chinese military establishment that Peiping has so far avoided.
Another problem in Sino-Soviet relations may involve the relation-
ship of Moscow and Peiping to the Asian bloc countries: Outer Mongolia)
North Korea, and North Vietnam. Peiping's influence in each of these
areas is substantial, although Soviet control remains predominant in
Outer Mongolia and in North Korea. Outer Mongolia) North Vietnam, and
North Kora are areas of traditional Chinese encroachment in which
Peiping may have ambitions that conflict with Soviet interests. Peiping
and Moscow appear to be cooperating in providing guidance and assistance
to these countries, but this cooperation could, during the period of
this estimate, assume increasingly competitive aspects, particularly if
problems such as pan-Mongol feelings in Inner and. Outer Mongolia compli-
_
Aultethe iasue.-
A Similar possibility that cooperation may be affected by cave-
s_
tition exists in the field of Sino-Soviet activities in non-Communist
Asia an&Africal including relations with the_indigenous _Communist
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- 130 --
movements. Although Peiping has made gestures such as the registration
of "volunteers" for Egypt during the Suez crisis in 1956 and the grant-
ing of a loan to-Yemen in January 1958, the Chinese Communists have not
attempted so far to match Soviet moves in the Middle East; in any events
it has consistently declared its strong support of Soviet policies in
the area. In the Far East and South Asia) Communist China, as an Asian
state, has often been more effective than the USSR. In all of these
cases; Peiping and Moscow appear to have exploited openings for increas-
ing Communist influence through aid, trade, and other tactics, without
necessarily intending to abridge the influence of the other. However,
with the continuing development of Sino-Soviet activities in the Asian-
African area, it is possible that conflicts may arise over spheres of
influence or over the specific tactics to be followed.
There has been much speculation concerning possible Sino-Soviet
competition and disagreement in the ideological field. It is probable
that during the next five years Peiping will maintain and possibly in-
crease its ideological stature within the world Communist movement. How-
ever, Peiping's pragmatism and flexibility that have in the past created
differences between its approach and that of Moscow to ideological
matters will also enable Peiping to adjust its formulations (as was done
in Mao's";,..:eoret" speech) to minimize the disruptive effect on Sino-
Soviet relations.
?
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- 1-31'
The above and other sirallarproblems ppy,within the, next ,fiveryears
_
redupe sopl9what.the,effective;:less of_PinonSoviet cooperatioi in specific
2 I ) ?
fielp.,stii,?yevers neither Peipipg nor Moscow is likely to.permit thse
prob4Rs.72t9 assuilie proportions th.p...t,would seriously reduce...the strength
of the Sino-Soviet alliance or detract from its posture of solidarity
JVJO
against the West.
,
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E. 'Polity Taid Non4Cordiunist beiiiin:eiiiisr411-'c: ei 'ri
ort ' 5 !; ? ,4
particularly its-industrializatioplanl-dOes' not precludet&-AYndmic''view'
of its for'eigoiiCyobjecii;ieS:
continue tolleve that the blot'l.'wit11;-68Mitinisfbriil'aL:et's itS iciest
important component after the USSR, cannot remain static libtT'must Move
ahead of the West in all respects, including international influence, in
order to fulfill the destiny outlined for it by Marxism-Leninism. Thus
even during its period of domestic preoccupation, the Chinese Communists,
as dogmatic Communists, will be constantly and intensely conscious of their
long-range world objectives, including the ultimate communization of all of
Asia. The question of feasibility, rather than any weakening of desire or
intent to achieve these objectives, will be the restraining element in
Communist China foreign policy. It is this restraint which makes it
unlikely that Peiping will resort to the use of military force as a
principal-foreign policy tactic, barring a major shift in Soviet policy or
.a softening of free world opposition.
The US represents for Peiping the chief obstacle to the achievement
of its short-term and long-range objectives. The effort to reduce US
influence in Asia/ to weaken US determination to resist Communism in Asia,
and to undermine US bilateral and multilateral security arrangements will
therefore continue to be 'a dominant feature in PeipingPs policies during
the next five years.
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1,
-133?
A concomitant short-t:enn. Chinese Communist objective is to increase
its own influence, particularly in Asia and to a lesser extent in Africa,
both by exploiting all possible opportunities with countries which have
accepted it as a member of the Asian-African community Aand by seeking
wider acceptance. Toward this end, the Chinese Communists will probably
strive for the more limited objective of pro.Communist neutralism rather
than demenaing more positive aliGnment with the bloc. Since the Chinese
Communists undoubtedly reco3nize that Japan constitutes a power rival in
Asia, they will make a stron3 effort to weaken Japan alignment with the
West. They will also concentrate on relations with India, since an
unfavorable policy shift by this leading Asian neutralist country could
have serious repercussions for Peiping throughout the area.
During the next five years it is probable that Peiping will also
become more impatient to play the major role in international affairs
outside of Asia to which it believes it is entitled. Accordingly, it may
attempt to become more active on matters of broad international import,
even if it does not secure entry into the UN.
Elimination of the GRC will continue to be an important corollary
to the objectives listed above. It is probable that the passage of time,
even during the next five years, will accentuate rather than reduce
Peiping's intention of removing this challenge to its international position,
although the Chinese Communists will...grobably not resort to military
.action against Taiwan so long as the US demonstrates a determination and
ability to prevent a military seizure of the island.
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?.
???
- 134 -
. ?
2. Peiping's Tactics. There appears to be relatively little likelihood
at preseht of a major shift in Chinese Communist tactics toward the
.S2
non-Communist world. During the next five years, Peiping will probably
continue toemphasize non-military tactics, utilizing themes such as
"peaceful coexistence" and "Asian solidarity't that are designed to extend
Chinese Communist influence at the expense of the West. Peiping will
co41nli to attempt to project an image of itself as a dynamic Asian country
;
rapidly solving its social and economic problems, but this effort will
probably be hampered by the continuing necessity of relying on strict con-
trols rather than popular support.
Peiping may attempt to negotiate with the West, particularly the US,
over such issues as the status of Taiwan, Korea, or Indochina, but there
is little prospect of a settlement of these issues and any concessions will
be marginal, leaving unchanged the basic Chinese Communist hostility towai'd
the West.
A-reversion to Peiping's earlier tactic of military action and
encouragement of insurrectionary activity by other Communist movements is
unlikely tc tuke place unless Peiping comes to believe that Western and
particu3av:Iy. US determination to resist Communism has been materially reduced,
. -
unless a major shift in bloc strategy should call for military or insur-
rectionary activity in the Far East, possibly for diversionary purposes, or
unless Peiping came to believe that its vital interests or the existence of
? ?
a neighboring Communist regime could be preserved only through such activity.
Despite the probable emphasis on "peaceful" activities, Peiping will
attempt to exploit any opportunity for political or economic penetration
. .? ? .
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- 135 -
of Asian andAfrican nations. Thdi3 1.1:141.11 almost certainly not sever
? a:!' ? ;-,1;:s ? - ?
its relations with CO tmmiliist movements in vatriOus'AsianCoUnt'ries.
? ?? , ,
Through'its ConiaectIons-with'those movements and with the overseas Chinese'
.L:'" - n-Cemaunities in several countries, Peiping will continue to supplementits
"peacefUr'aetivities'with aUb'versive a6tivities.
' T1e'obitaele:6-which face COmmuniat China have ibeit-td adopt a
,
foreign pOlicir-whih dontain's, considerable element'ofieibility,
cOmbinirig a "patiea," mOderate'afixich to soMe'prOlidis with great
i; ' s
4. ?,,
inticinsigencd'on otherrJ issues. Thus, when prevented gaining general
diplomatid i-.6dognition-Or-ebnission to the Ulcit hastejoyed'considerable
ingenAty to delielOP altei:riat'e'delrices, -sudh ati; ni)eoPie?'s diploMacYni
-'whenjungble'td'extend outright Communist 'influence, it has advocated
neutralism. At the.:da6te time, lt lies not compromised On the 'baS'id'issues'
iniralving the status'oTaiwan or the remaining 'US piisoners.' Peiping will
probablyContinUe td demOnstrate'Some flexibility during the'ext five
years, with its chief concern to prevent a situation from becoming frozen --
hence, the present and probably continuing sensitivity on the "two Chinas"
issue.
However, impatience with undramatic progress in certain fields or
indications that the status 3E2 is gaining wider acceptance despite
Peiping's proteatations may lead to less rather than more moderation in
Peiping's policies, and may on some questions create a quite inflexible
stand. Peiping may attempt to realize somewhat greater returns from some
of its activities, particularly since it probably estimates that US strength
and prestige will decline during the next five years while bloc strength
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? - . g S'? .11
and prestige will rise. Peiping may expect that countries judged.
susceptible to its blandishments should adopt a lees neutral or less
..4 ? e
pro-American stand than heretofore, and it may in some cases resort to threats
-
and bluster to attain this end. Without abandoning its "peaceful" line,
Peiping may for example attempt to force the UK and Japan to abandon what
.1
it interprets as support for a "two Chinas" situation. This tactic could
lead to recurring crises over such questions as the status of Hong Kong or
to difficulties in regard to Japanese fishing rights and. trade. Similarly,
if Peiping _believed that it was making little Progress in arresting the
trend toward development of a status2122 in the Taiwan Strait, it might re-
. !
vert to a policy of periodic military action in the Straitl.including attacks
on the smeller, less defended offshore islands, in an attempt to increase
pressure on the GRC, the US, and the latter's allies, in order to keep the
Taiwan issue alive and in a state of crisis just short, of major military
action.
A) ?
!: ? ? "..8 In, E3
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- 137 -
3. Probable Achievements. Through its various activities Peiping
will probably be able, during the next five years, to increase its
influence slightly in the non-Communist world through official and un-
official contacts, propaganda, and astute but necessarily limited appli-
cations of trade and economic aid. It is possible that several countries
s? s
which do-not recognize Peiping now may do so within the next five years,
but most will refrain from recognizing Communist China while the latter
? s
is neither admitted to the UN nor recognized by the US. Peiping's
principal sphere of action will be among the countries of Asia, although
its activities in Africa and the Middle East will probably increase in
4
prominence in the course of the five-year period.
. -
In a period of less than a decade, the Chinese Communist regime
has made substantial progress in extending its influence and making its
impact felt in Asia and the world. It has gained recognition from 17
non-Communist countries, fought the UN in Korea, participated in truce
negotiations in Korea and in the Geneva conference on Korea and Indochina,
gained acclaim at the Bandung Conference, and generally exerted its
influence in much of Asia and Africa. However, much of this impact is
attributable to factors which have already had their major effect on
Communist China's status; such as the sudden emergence of a Communist
China, itseconomic achievements, anti-colonialis.tsentiment in Asia, and
the thee of Asian solidarity. These factors are still relevant, but
the increments to Communist China's international position resulting
-
from these factors will not be as great as in the past. It is thus highly
doubtful that Peiping will be able by its own efforts during the next five
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-138 -
;;tazr
years to approach its past record. Instead ;-:future improvements in its
position will be increasingly dependent on overall Communist bloc achieve-
-
ments.
One of the problems facing Peiping in the next few years will be
that of transforming "coexistence" into meaningful gains for Communism.
,
'rrom the Communist viewpoint the danger is thatprolonged coexistence
may lead to widespread acceptance of the status gm (or, as Peiping puts
it, of "two ChinaS") or even to stabilization of trouble spots, reducing
the potential for Communist exploitation. It is doubtful that such gains
?
as Peiping can make through its own efforts during the next five years
will solve this problem; the final outcome of which will be determined
primarily by developments-in the broader aspects of the East-West struggle.
?
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Table 1. EXPENDITURES AND REVENUES - COMMUNIST CHINA
(In billions of yuan)
1952
1953
1954
1955
Ekpenditures:
Economic construction
Social construction
Defense
II
MoN, Administration
E.I P
r4
cn 1 Other
Total
Revenues:
Taxes
Receipts from enterprises
Loans
Other
' Total
7.63
2.28
4.37
1.73
.78
8.65
3.36
5.68
2.12
1.68
12.36
3.46
5.81
2.16
.84
13.76
3.19
6.50
2.15
75 3.
1679
.
9.77
5.73
.19
-2452
1756
21.4 9
11.97
7.67
.49
1.63
24.63
13.22
9.96
2.35
29.35
12.74
11.20
2.36
90
' 21.76
-2;::
2ri.20 1
1956
15.91
4.60
6.12
2.66
1.28
30.57
14.09
13.43
.72
.50 al/ 22
28.74 I i 3dr.7d I. 3.20b; t
1957
1958a
,34.86
4.74
5.51
2.32
3.12
17.55
4.90
5.00
2.00
3.62
N
r--4
ci)
30.55
33.20b
15.43
16.50
'
14.22
15.72
.67
.63
a. Budget figures.
b. Totals include .13 billion unallocated supplementary appropriations.
11,
(1110?01...i.
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Table 2. Industrial ;Production, Communist China, First and Second
Five-Year Plans
Product Unit 1952
1957
1962 Targets
Sept/1956
Later
Revisions
(1957)
Early
1958
Coal million: 63.5
122.4
190-210
230
?Jmt
Elec. billion 7.26
power
i kwh
19.03
40-43
44
5o
Steel ingot 000 nit 1,349
5,235
10,500-12,000
12,000
Cement 000 nit 2,861
6,683
12,500-14,000
12,500
Chem. fert. 000 nit 194
750
3,000- 3,200
5,000-
7,000
Crude oil 000 nit 436
1,445
5,000- 6,000
a
Cotton yarn 000 - ? 3,618
bales
4,620
8,000- 9,000
Metal cutting 000 units 13.7
machines
29.0
60-65
a
Paper 000 nit 372
890
1,500- 1,600
Machine-made
Sugar all 000 nit 451
850
2,400- 2,500
3,000
Ed. Veg. all 000 nit 891
1,450
3,100- 3,200
3,100
Oil
Salt all million 4.9
nit
8.26
10.0-11.0
14.0
Nlne & 000 nit
spirits
730
870
1,200
Timber million 10.0
cu mts
26.58
31.0-34.0
Aluminum 000 nit 0
10 (est)
100-120
a. The regime has indicated that these targets have been reduced.
b. Will probably be revised downward to about 7,500,000 bales as cotton
crop targets have been lowered from 2.4 to 2.1 million tons.
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Table 3. Communist China, Claimed Increase in'Industrial
Capaeity,.Selected Industries
1953-1957 and planned 1958
Industry Unit of measure
1953-57 a ,
FYP
Coal Million m.t. " 53.85
Electric Million kw 2.05
power
Pig iron Thousand m.t. 2,800
Steel ingot n 11'. 2153b
Rolled steel' n ti 1,830
Cement 11 11 21'360
Crude oil n II 1,520'
._._
11 It
Sugar 428
Cotton .
spindleage 000 units installed 1,650
1953-5'713
Actual
- 1958 f
52.0 '
- ?211..4 -
2.0
0.9
2,800
1,880
2,200
1,380
762
2,400
833
c
436 d
345
1,300 e
500 g
a. -Published first Five-Year Plan; includes all plants. ,
b. FBIS 1/7/58; may include major plants only.
c. Probably not achieved.
d. NCNA 1/3/58; includes all mills.
e. Also given as 2.4 million spindles -- NCNA 12/31/57
f. FBIS 2/13/58; includes all plants.
g. Estimated on basis of given capacity increase of 387,000 bales of
yarn.
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Table 4. FREIGHT. HANDLING ? EC VARIOUS_ ?MANS OF TRANSPORT
-
IN casmu.sz. CHINA,. 1956
Node Of Tran-spo?r-t.?
? Tonnage--
(percent of total) ? ?
Ton-am
? ?.? , (percent of total)
Railways
33.0
78.70
- - River shipping
14.60
12.10
Larger shipping
4.70.
8.50
Native junks
9.90:
3.60
Coastal shipping
1.50.
5.70.,
Motor vehicles
19.7
2.30
Carts and pack animals
40.2.1
1.20
Total
100.0
100.0
yaNial
-
Source: Rechuay Transport, Moscow 10/57
,
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Table S. 'VOLUME OF FREIGHT TRkliPORTa-, C.01,';:UNIST CHINA 1952-1957
(In thousands of metric tons)
Mode of 1952 1955 1956 1957 1957 Percentage
Transport ,,(Original (Estimatpd over Plan
Five-Year actual')
? Plan)
.1
Railroads - 132,100 202,200 246,050 _245,506 276,060 10.0
Shipping 15,172 37,331 46,270 40,325 50,000 3.5
Coastal 5,765 10,303 10,850 11,461
'Inland 9,407 27.,028 35,420 36,864
Highway 20,718 58,776 79,130 67,493. 80,000 18.5
Air 2.0
4.7 *.5 es
' 5.6 n a n a
Total 167,992 298,312 371,455 361,324 , 403,2003. -11.6
_ . .
a. Excluding native transport (e.g. junks, carts) phich carry about half of
. -both], freight burdens on the China mainland.
1
b: Given as 140 percent over 1952.
;
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- 144 -
III. dUMMARY-AND CONCLUSIONS
Present Situation.
-
1. The basic objectives of the Chinese Communist regime continue to
be: a) to establish and maintain control over all territory which the
Chinese Communists regard as having been under traditional Chinese control;
b) to transform an underdeveloped country into a dynamic, industrialized
state; c) to establish the social attitudes and institutional pattern of a
communist society; d) to achieve a position of political, economic, and
,
military dominance in Asia and the status of an acknowledged world power;
and e) to promote the objectives of the international Communist movement.
2. The Chinese Communist Party, numbering about 12,750,000, continues
. .
to lie-alT effective-apparatus for controlling-the-country. -,Bbwever, certain
internal party problems arising' from possible policy disagreements and
queitions of reliability and efficiency among the rank-and-file members
have hampered the implementation of some of the party's programs, and the
leaders are currently engaged in a major effort to reinvigorate the party
and government bureaucracy.
3. Popular dissidence has increased over the last few years,
particularly among the peasants, the students, the non-Communist intel-
lectuals, and the ethnic minorities. An effective public security apparatus,
reinforced by a large and loyal military establishment, prevents dissidbnce---
from threatening the existence of the regime. The regime's attempt in 1957
to devise a new method of eliciting a greater positive response from the
people largely failed, forcing it to revert to orthodox control and indoc-
trination measures.
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4. The regime yir-Oially cqmpleted the socialization of..agriculturel
commerce, and industry during 1956apd 1957. It has claimed that 97
? ,
percent of the peasants have been organized, nearly all in agricultural
collectives. Private business has been's-17110st completely eliminated.
Despite the initial success and relative ease of this tremendous trans-
,
formation of Chinese society, it has been followed by a rise of popular
dissatisfaction, particularly among the peasants.
. -
5. During the first Five-Year Plan the Chinese Communist economy
exbanded rapidly, with an estimated average annual growth in its national
income of seven to eight percent. Industrial output rose 133 percent with
a three-fold increase, in capital goods and a rise of four-fifths in con-
.,
sumer goods. The increased industrial output was obtained largely from
?
the reconstruction and more intensive utilization of existing plant, .
although a considerable investment was made in new plant which is to come
? -
into production In 1958-627 Farm output rose siepificantIy, although
the increase was probably 15-20 percent rather than the 26 percent claimed
by the resi.m. Wi1e developaent and technical improvements played a role
In agricultural expansion, a large part probably reflected a recovery to
pre-Wprld Wer II conditions.
6. The population rose rapidly from 575,000,000 at the end of 1952
, -:c.W. riccirwr -;:1,,,c,;-.? : --.; ... : ... ? ? . r r -,.. r, , .,
to 640,000,000 at the end of 1957, as ,.social stability and rudimentary
.- 'a ,-.:au ./..;:-.. ',.' ? ...... ::::$ r .' . - '-'1' r'i if : .. . ..1;:- fri
public health measures reduced mortality while fertility remained, high,
_ 1.7 1-3 -un:.: -..:- -:::.. _ ? , -7::=:-.. -.:,: ,.71, %,-. ,:o.rnrf P:IT;:. .,
The urban population rose from 72,000,000 to 92,0199.1000,.absorbing
_ ,-..',...',1- .1.'lz- -I,- ']-:...i.s.,.:4 '-?;,-- - --i-r.: ?
8,000,000 migrants from rural areas. State-controlled employment of staff
_
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- 146 -
, and workers rose from 10,000,000 to /1-1000,000'involving the nationali-
zation of 8,000,000-9,000A00' in private enterprise and a net increase
of 5,000,000-6,000,000 wage-earners'. By the end Of 1957 nearly 97 percent
of the 530,000,000 farm population were in collectives and most Of those
producing handicrafts were in cooperatives. By 1957 the exPanded edu-
cational system provided formal training for about 80 percent of the
children at the primary level, 12 percent at thelunior high level, three
percent at the senior high and vocational level, and one percent at the
college level.
7. The regime successfully captured a large share of production
increases for the support of its programs, and during 1953-57 both fiscal
expenditures and total net investment approximately doubled.. Per capita
consumption rose very little, if any, in rural areas, but possibly as much
as four percent annually in urban areas. In the rural areas, crop controls
and collectivization have led the peasants to regard themselves as much
worse off, while -even in urban areas stringent rationing, crowded conditions,
-and job dissatisfactions have let the people restive.
8. The Chinese Communist leaders continue to view their close
alliance with the Soviet Union as the keystone of their foreign policy.
--Peipingss active participation in bloc matters during the last two years
_ has increased its prestige and influence within the bloc; at the same time
;
the Chinese-Communists have strOngly reemphasized their support of the
:11
Jr
principle of Soviet leadership of the bloc.
.' :,..1.- r.10
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- 147 -
9. The .Peiping regime is.-recognized by 18. non-Communist countries, 14
,having extended recognition during. the first year of the regime's existence.
45 non-Communist states continue to. recognize the GRC. Despite the disparity
in these figures, Communist China has achieved considerable: success, parti-
cularly in Asia, in portraying itself as .a dynamic country whose ,impact on
World affairs will probably increase, although many .countries view this
Prospect with concern.
Future Trends,
10. There are at present no identifiable trends.within Communist China
which would indicate that the regime's physical control of the country will
be effectively challenged during the next five years: However, in view of
the regime's program, any increase in material or psych6logicalincentives ?
granted to the people will necessarily be minimal. Thus some decrease in
public support appears likely, which will tend to hamper the achievement of
the regime's domestic objectives.
U. The Communist Party will probably remain an effective apparatus
-for controlling the country, but some decrease iniits ability to formulate
and implement policies may occur as a result of morale problems among the'
-?
rank and file and possible disagreements among the leaders. If Mao dies,
authority may pass temporarily to a collective group; but with.the loss or
-Mao as a unifying factor, rivalry for power and policy disputes would proba-
bly grow with' considerablerapidity until power was seized by one man. These
developments, coupled with :the loss of Mao's abilities and his domestic and
-_-_international prestige, would appreciably weaken the party.
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12-;-. ? conomile*.:expan6icin"will ''bobtlY: nthe Sicond
Five-Year Plan,-.for increasea-out.put.'caiVnb''foilierl'be`I'SfitairieirPiritig.i'iVI.''"'
reconstruction an'CI eiisif?? ?tliz?biI of i?r
will depend On new inVestinent and,i'erChni-c61 inhv?h'InSeitMhbei i%6
a working, outlind of the 1955,-62 plan';was issued ; progbtingecatiital con:-
. struction at 'threequarterst;ovet 'that.a.chieVed-in l9-7'J id a rcse in
industrial and agricultural output of 80 percent and 32 p6.rdontVre'sp'eatively.
As the various ministries filled in the details of the plan in-1957 and
early..1958,?it became clear .that the outline was over-ambitious and would
. .
have-to lbe re-shaped to available resources. Despite increased investment
J
in agriculture, farm: targets ?havp been -lowered, necessitating. reductions in
;.%1 -
consumer goods industry goals., _Stringent investment economies-and a?,zreater,,
emphasis on small plants requiring less investment and imports per unit of
capacity have,. however, maintained industrial targets for capital-'goods,
and apparently the regime hopes to maintain,kts.-,investment goals while cut-
ting its consumption targets.'
- .l3. During 1958-62, then, . the regime will probably maintain a rapid
economic growth, ,with, national income rising about six to seven percent -
s
?.
annually or somphat less than in 1953-57.. The revised industrial goals
4
appear feasible, although: the cut-back farm targets still seem. to be over-
optimistic. The ec9nomic.growth, therefoTel willpr ob ably be ,associated
with harsher controls over the population) intthe absence of significant
material incentives, and, as in 19S3-S7, is to be uneven, depending :
s, ?
on the fortunes of th.crop,weather..;,14p!p9pula#9n problem is likely to
become more significant. The population is expected to grow from 640 million
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- 119 -
to 720 million, with three-quarters of the increase to be held in rural areas
through control of population movements. By 1962 the degree of success the
regime will achieve in slowing population growth through birth control and
in increasing farm output through technological change is likely to influence
its ponfidence and unity and be an important factor in shaping its future
prospects.
14. The regime's overall military po-Wntial will probably be increased
r L4 ..aornization program, improved training, and a further development
of the military-reserve system. Party control over the armed forces will
continue to be strong. The regime may develop greater self-sufficiency in
the production of conventional military weapons, but will continue to be
dependent on the USSR for much of its heavy military egaipment and for nuclear
or missile capabilities.
15. The mutual dependence of Communist,China and the Soviet Union is so
crucial to both countries that Peiping and Moscow will continue to,subordi-
nate any differences that may arise between them to the overriding consider-
ation of maintaining the doctrinal, political, economic, and military bonds
which constitute their alliance. Commu4.st China will probably continue to
exeroise the influence in bloc-wide mattets.which it has recently achieved.
While-it will continue to defer to the Soviet Union on crucial questions of
bloc policy, it will also continue to play a major role on questions of
Communist policy in itsia.
16. Barring any significant shift in Communist bloc strategy, it is
unlikely ttlat Communist China will make-any major change in its foreign
poliCk objectives or tactics. Its basic hostility to the US will remain,
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-150-
_
and Peiping will attempt .to exploit what it apparently believes are elements
? ??????
of weakness in US policy in Asia. Toward this end, it may intensify its
, .
efforts to convince other nations that it desires a rapprochement with the
US, but marginal concessions that it might offer would exclude resolution
of such basic issues as the status of Taiwan, Korea, and Vietnam. On the
other hand, the? Peiping regime probably will not use military force to
resolve these issues so long as it remains convinced that the US would react
?, ?:
effectively. However, Peiping is determined to keep the Taiwan situation
4i
from becoming frozen, and might step up military activity in the offshore
island area to maintain fluidity and pressure.
17. The Asian area will continue to be the major target of Communist
? ? ?
China's foreign policy activities, and its present tactics of stressing
"peaceful coexistence" and "Asian solidarity" will probably be maintained.
Communist China will probably become increasingly impatient to achieve a
position where it can participate more actively in matters of broad inter-
,-
national import. Frustrated because its policies have not been more success-
ful in certain areas, there may be a trend toward a harder attitude toward
?
such countries as Japan and Britain, although Peiping will maintain a flexi-
-
bility of approach in order to exploit all opportunities.
18. Peiping may achieve some successes in increasing its influence and
? . ? ?
prestige, particularly in Asia and Africa. However, to a far larger extent
than in the past, any change in Peiping's international position and its
-
impact on the international situation will be determined by course of
the broad conflict between the Communist and non-Communist worlds. Communist
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- 151 -
China will be a rtajor protagonist in this conflict and its action will thus
influence the outcome, but Peiping's role in Asian and international affairs.
will be increasingly dependent on factors which are not subject to Peiping's
direct manipulation.
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State - FD, Wash.., D. C.
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