EIC REPORT ON 'COMMUNIST CHINA'S IMPORTS AND EXPORTS, 1956: TRADE AND TRANSPORT INVOLVED' (EIC-R1-56)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00400R000200070004-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 121
• Document Creation Date: December 19, 2016
• Document Release Date: August 11, 2006
• Sequence Number: 4
• Publication Date: December 3, 1957
• Content Type: REPORT

Approved For Release 2007/01/20: C~P-Ifif'00400R000200070004
IAC-D-42/ 13
3 December 1957
EIC Report on "Communist China's Imports and Exports, 1956:
Trade and Transport Involved"
(EIC-RI-S6)
The attached report by the Economic Intelligence Committee
(EIC) will be placed on the agenda of an early IAC meeting for
approve
CCP
25X1
25X6
SECRET
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
1ONOMIG INTELLIGENCE REPORT,
fiS JNJS-T C7fTNA "S DoPORT.I.; AND FOLD 195
TRADE AND TRANSPORT INVOLVED
agroved by EIC Working Group
5 November 1957
Approved by Economic Intelligence O ttOP
?l Ncwember 1957
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
so
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-E-C-R-E-T
Table of Contents
Pa a
I. Summary of Major Developments During 1956 and
Prospects for 1957 ? . Sal
A. Level of Trade o ? a a . . ? . . . O . . ? a a . ? S-i
Be Volume of Trade and Transport Services . . . . . . S-3
C. Impact of the Closure of the Suez Canal . . . . . S-5
ZI. International Trade and Balance of Payments . . . . . . 1
A. Total Trade and Balance of Payments . . . . . . . . 1
1. Level and Direction of Trade., 1955 and 1956 1
2* Balance of Trade . . ? ? a . . . ? . . ? . . : 3
R3.?.,,~Balancey~off Payments ? ? ? ? ? o ? ? a ? ? ? ? ? 4
Be Trade with the Bloc ? ? a ? a ? ? e ? ? a ? ? ? ? ? 7
1 e Trade with the USSR 7
2. Trade with the European Satellites . . . . 7
3. Trade with the Far Eastern Satellites . . . . . 8
C. Trad/e,w,ith Non-Bloc Countries . . . . . . . . . . . 9
le General . a . ? ? e ? ? ? ? ? ? ? ? ? s ? ? ? ? 9
2. IWorts . . . . . . . . . . . . . . . : . . . . 9
as Recorded Imports . ? . ? a o . . . . . . ? 9
be Use of the CBINCCM Exceptions Procedure . . 16
c. Unrecorded Forts . . ? . ? ? . . . . . . 19
3. Exports . . . . . . . . . . . . . . . . . . . . 23
a. Recorded Exports . 23
be trecorded Exports . ? ? . ? ? o ? ? ? ? ? 29
Pages to be numbered consecutively in final printing.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
III. Volume of Trade and Transport Services . . . . . . a . ? 30
A. Total Trade . ? . ? . ? e ? . ? a . ? ? ? ? . e . ? 30
B. Total Transport Services . . . . o ? ? o o a O o a . 32
1. Shipping Services . . . . . . . . . . . a . . . 32
2. Interior Transport Services . . . . a . . . . . 37
a. External and Internal Arrangements for
Movement of Foreign Trade . . . . . . . . . 38
b. Changes in Facilities for Movement of
Foreign Trade . a . . . . . . . . . . e . . 40
C. Overland Trade and Interior Transport Services . . . 45
1. Total Overland Trade . . . . . . . . . . . . . . 45
2. Trade with the Free World . . . . . . . . . . . 45
3. Trade with the Bloc . . . . . . . . . . . . . 45
a. USSR . . . ? a ? ? ? ? o o e e e . ? ? . ? . 45
b. European Satellites e o . a o ? . . 50
c. Far Eastern Satellites . . 50
4. Significance of Overland Foreign Trade Traffic . 52
D. Seaborne Trade and Shipping Services . . . . . . . . 54
1. Trade with the Free World . . . . . . . . . . . 54
a. Imports . . . . . . . . . . . . . . o o . . 54
b. Exports . . . . . . . o ? a a o ? . . o . . 55
a s USSR . . e e . . e . . o a a a a 59
b. European Satellites ? o ? e ? ? e e e o . e 60
c. North Vietnams. . . . . . ? . ? . . . ? . o 0 61
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
111. Voles of Trade and Transport Services (contde)
R. Seaborne Trade and Shipping Services (contd.
Shipping Service .. o .000 00000.000 61
ao Review of Non-Bloc Shipping a . a a a . e o 61
b. Review of Bloc Shipping o o . . . a . . . . 66
c. Utilization of Capacity of Shipping Engaged
rilaCommunist China ? s Seaborne Trade a . . . 72
d. Port Activity . e . . . . . o o . o . . . a 75
Relationship of Chinese Foreign Trade to the National
1,aOZltuy . o a o . A a ,. o . a a ? a a * o a 0 ? n ? a
A. Foreign Trade in Relation to Gross National Product 64
B. Contribution of Imports to Economic Construction
and Military D e v e l o p m e n t a 0 0 a o. 0 o 0.. a a 55
Internal Resources Allocated to Exports a a . ? a a ti's
Economic Growth and Future Trends in Foreign
.fade of C ist China . . . . a a a . . a m 58
V. lWact of the Closure of the Suez Canal. on the Trade
and Transport of Conaunist China and Prospect for 3.957
A. Impact of, the Closure of the Suez Canal a a a e a a
. Shipping o 0 0 . . . .
a o Rerouting of Vessels a m. a a o a a a a e a 9d
b a Tightening Ship Charter Market a o. o 0 e a 92
t :o Bunkering Difficulties .. a a. a. a m. a 9 A
d. Increased Shipping Costs a a.. a. a a a a 94,
E'fect of Suez Cana
China on the Seaborne
Trade of Ccomminisab China a . a . a a a a . . .
Diversion from Ocean Shipping to Rail Transport 105
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
V. iaet of the Closure of the Suez Canal on the Trade
and Transport of Communist China and Prospect for 1957
(contd.)
BO Prospects for 1957 . o
0
0.
0.
0
0
0
0
0.
0
0
0
0
0
108
1. Trade o 0 0 0 . .
.
. .
? .
.
.
0
0
0 0
0
Q
.
0
0
l% '~
JtLl
20 Transport o 9 . .
0
. .
9 ?
0
.
0
0
0 .
.
0
.
?
0
'771. Yuan Value of Foreign Trade
Trade . . . . . . o 0 . . 0 ? ? a a A?~1
II 0 ~yS .D la~e Value of Foreign . . . . 0 O O 0 0 . 0 . 0 A-V
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-E-C-R-E-T
CAST CHINA'S TS AND EORTS9 1956:
TRADE AND TRANSPORT INV OLVED*
1956 and Pro
A. Level of Trade.
-The foreign trade of China** in 1956 was announced as 10.9 billion
yuan (approximately US $4.4 billion), compared with 11 billion Yuan in
1955, marking the first year in which China's trade has declined. The
decline was an the inport side and reflects a sharp reduction of receipts
under Soviet loans. (See Figure 1.::)
A further decline in trade is planned for 1957, with total trade
expected to be 9,955 million Yuan (slightly more than $4 billion), or
8.4 percent less than in 1956. For the first time, exports will decline.
This further decline in trade reflects the economic maladjustments resulting
from the overambitious economic activity of 1956 and the effects of typhoons
and floods on the agricultural production of China. Despite this decline
the foreign trade goal of the First Five Year Plan (1953.57) is expected
to be overfulfilled. by 6.4 percent by the end of 1957-
* Appendix A (seep. A-1) presents the revised estimates of value and
direction of China's foreign trade for the years covered b the previous
studies published in this series (EIC-R1 through EIC-Rl-S5), as well as a
discussion of the problems involved in the conversion of yuan values to
dollar equivalents.
4* Unless otherwise specified, the terms China and Chinese. are used here-
after in this report to mean Cotm:anist China d Communist Chinese.
ee All dollar values in this report are in terms of US do s or equivalents.
Following p. S-1.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Figure 1
To be inserted late
Foreign Trade of Cowmunist China*
1950-56
Data for inclusion in figure follow:
Million us $
ap-
RLJ-
1952
12L4
j=
1956
Total trade
1, 300
2, 650
3,100
3,300
3,450
4,485
4,k1-5
imports
665
1,565
1,795
1,884
1,795
2,465
2,150
Exports
635
1,085
1,305
1,420
1,655
2,020
2,265
Trade with:
Bloc
435
1,680
2,420
2,490
2,780
3,675
3,325
Non-Bloc
865
970
680
810
670
810
1,090
fTTo be in the form of a bar chart with one bar for "Total Trade"
divided into Bloc and non-Bloc, and separate bars showing total
imports and exports
* Data ice"1950-55 do not necessarily agree with that previously published
since they reflect revisions based on later data.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
? ? S-F-C-R-B-T
Trade with the Free World in 1956 rose by more than one-third and
accounted for almost cane-fourth of China's total trade., dared with less
than. one-fifth in 1955. Unrecorded inports fell slightly from $76 million
in 1955 to $66 million in 1956, largely as a result of the increased use
of the CENCC4 exceptions procedures. The amounts licensed under these
procedures in 1956 were approximately $82 million, conpared with a total
of about $15 million for the preceding i years. By mid-l957 the UK, followe<
by most other CINCC( countries, had abolished the China differential,,
applying COCt trade control rules to the entire Sinoo-Soviet Bloc, thereby
-largely nullifying the inportance of the exceptions procedures.
Trade with the USSR declined about 15 percent, and trade with
the Far Eastern Satellites fell slightly -?- together offsetting an
est1mated 13-percent increase in trade with the European Satellites. A
further shift in the direction of trade toward the Free World Is expacted
in 19574
In 1956, China achieved for the first time an export surplus,,
which amounted to about $115 million and which consisted of a $9C-million
surplus with the Free World and a $25-millionn surplus with the Bloc.
The balance-of-payments position of China appears to have deteri-
oriated in 1956 and 1957, reflecting in large part the sharp reduction
of receipts under Soviet loans, the Increasing ecitments for the
repayment of previous Soviet loans., and the further extension of China's
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
own aid program. Despite the development of an export surplus in 1956 and
1951, it appears that China has been hard-pressed to most its foreign
exchange commitments and has had to reduce its holdings of foreigp exchange
and gold as well as to obtain short-term credits from the USSR.
B. Volume of Trade and Trans ort Services.
Railroads continued to carry approximately 95 percent of China's
overland foreign trade. The opening of the Trans-Mongolian Railroad on
1 January 1956,, in offering the shortest route between the Ruropean USSR
and, central and south Cbina,, diverted a considerable volume of traffic
from that portion of the Trans-Siberian Railroad line connecting with the
Chinese system at Otpor. Nearly two-fifths of the 1956 Sino-Soviet rail
freight moved on the Trans-Mongolian Railroad, more than two-fifths moved
through Otpor, and approximately one-fifth moved through Grodekovoo The
substantial restoration of railroads and roads in North Vietnam facilitated
s-3
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
the movement and distribution of an increasing amount of aid from China.
An important although relatively sme.U amount (approximately 3 percent) of
overland trade was transported by river between China and the USSR.
Following p. S- -
S?k
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
co fact of the closure of the Suez Canal.
The closure of the Suez canal in late 1956 had a slight depressive
effect on China's foreign trade, although it is difficult to isolate and
measure this effect because of its coincidence with other factors affecting
trade. Increased shipping costs as a result of the diversion of trade
either by sea around the Cape of Good Hope or by land over the Trans-
Siberian Railroad may well have encouraged China to defer some nonessential
imports and exports. A scarcity of shipping following the closure of the
Suez canal restricted trade in certain bulky items such as exports of iron
ore and coal, and imports of fertilizer frcm Western *rope.
S-5
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
11. International Trade and Balance of Payments.
A. Total Trade and Balance of Amts.
1. Level and Direction of Trade, 1955 and 1256.
The total foreign trade of China was slightly smaller in 1956
than in 1955 -- 10.9 billion yuan (approximately $4.4 billion) in 1956,,
compared with 11 billion Yuan in 1955?* The decline was only on the import
side and reflects a sharp reduction of receipts under Soviet loans. In
oommereial trade, both imports and exports continued to increase.
The most significant shift which occurred in the geographic
distribution of the trade of Mina in 1956 (as shown in Table 1**) was in
trade with the Free World. Rising by more than one-third in 1956, it
accounted for almost one-fourth of the total trade of the country, compared
with less than one-fifth in 1955? The largest gain was recorded in trade
with Asian-African countries, which increased 39 percent, trade with other
Free World countries increasing 29 percent. Trade with the Sino-Soviet
Bloc, including aid financed imports and exports, declined. It is
* The rate at which Yuan are converted to US dollars for 1956 trade is
2.46 yuan to 1 US $, based on the Yuan-sterling-dollar cross rate. Other
currencies are converted to US dollar equivalents at official exchange rates
except the Hong gong dollar, as noted in footnote b, Table 4 (p. 13, below).
The dollar equivalents of Yuan values cannot be arrived at directly, because
information on commodity prices and exchange rates involved in China's foreign
trade is limited. A discussion of the problems involved in the conversion
of yuan values to dollar equivalents is contained in Appendix A. It should
be noted that yuan-dollar equivalents wherever utilized are only approxima-
tions and that these figures should be used with caution. Rite procedure for
converting yuan values to dollar equivalents -- involving the use of yuan-
sterling-dollar cross rates -- may well overstate the dollar value of China's
trade with Soviet Bloc countries.
Table 1 follows on p. 2.
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
estimated that trade with the European Satellites increased about 13 pert gent,,
that trade with the Par Eastern Satellites declined slightly, and that trade
with the USSR declined about 15 percent.
Geographic Distribution of the Foreign Trade of Communist Chinas; by Value
1955 and 1956
1.955 (Revised)
.__m__~. 126
Million
Percent
Of Total
Million
4
Percent
of Total
USSR
2,800
62.5
2,370
5307
European Satellites
675
15.0
760
17.2
Par Eastern Satellites
200
4.5
195
4.4
Total Trade with the Bloc
x,675
8200
3rd
Trade with the Free World
810
18.0
2,
Total foreign trade 100.0 ~ "41 100.0
Recent Chinese announcements are consistent with the estimate
of trade turnover in 1955* as published in EIC-Rl.35 but indicate a
different geographic distribution of this trade. It is now estimated that
in 1955 Soviet Bloc countries accounted for 82 percent of total trade turnover
(rather than 8005 percent) and that the USSR accounted for 62.5 percent
(rather than 55.3 percent). The value of trade turnover with the Free World
is estimated as 18 percent of the total (rather than 19-5 percent) and that
* On the other hand, these Chinese announcements indicate slightly different
values of trade for 1950-54+ frays those in BIC-Rl publications (see Appendix A).
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
L),"E-O-R-E-T
of the European and Far Eastern satellites as
19-5-percent (rather than
25.2 percent).
2- Balance of Trade.
China achieved a substantial export surplus in 1956, exports
being 5 percent larger than imports. It was the first year in which China
did not show a surplus of
imports over exports. Imports were valued at
5,297 million yin (about $2#150 million), and exports at
5,5 68 mil],ion yuaa
Cabout $2,P265 million)- The export
surplus with the Free World, (based on
indications of unrecorded and recorded trade) is estimated at approximately
million, and the export
surplus with Bloc countries, therof'oreq amounts
to $25 million, as shown in Table 2.
'.fable 2
Estimated Trade Balanees of Co MMIst China
1956
_ .~...~.~.........~.,.,. _
Million
USSfi
.mports
c.i.f.
Exports
If -o.b? Belanc0
European Satellites
49
150
.Far ?astern Satell
400
,
70
?
ites
31b
4
fit
3
0
?
Total Bl
1h5 + 135
oc
1,
610
6-
Free World
_
jj~
j
-??
5910
--.~
Grand total w
S'}I0?B-F,T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
The development of the export surplus in 1956 followed the sharp
decline in imports under Soviet loans and to some extent reflected the
pressures for exports to meet China's increasing international comaitments0
The large )ort surplus with the Free World which arises primarily from
trade with non.Ccn mist Asia reflects a concerted effort to increase
earnings of foreign exchange. The export surplus with Bloc countries
reflects largely aids-financed shipments to the Far Eastern Satellites. A
small import surplus with the European. Satellites is believed to have
resulted from Chinese payments for freight charges on deports. Thus the
remaining $70 million represents an import surplus in trade with the USSR.$
arising in large part from utilization of $e8 million of Soviet credits and
from export restrictions placed on a few ccumodities in the latter part of
19560
3. Balance of Payaentsa
The balance of payments of China
differs considerably from that of
pre4CceID mist China0 To cover import requiremtenta, China. has planed more
reliance on commodity trade and less reliance on capital flows such as
overseas remittances, foreign investments in Chinas and income from
investments abroad.
The value of capital goods imported under loan agreements (all
with the Bloc) was less than 4 percent of the value of total Chinese imports
from 1950 through 19560 it is probable that the high rate of military imports
was made possible through Soviet loans and/or grants. Ou the other hand.,
S-E-C?RoE-T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
China has extended loans and grants to both Bloc and non-Bloc countries,
so that in 1956, exports under such aid programs amounted to $164 million,
or $116 million more than receipts from foreign loans.
The Chinese have claimed an excess of international receipts
over payments during the period 1950 through 1954. In 1955 and 1956,
despite favorable developments in commodity trade, China's balance-of-
Payments position appears to have deteriorated. An estimate of Mina's
balance of payments, based on selected items only, indicated a slight
deficit in 1955 totaling $46 million* and a larger deficit in 1956 totaling
$173 million, as shown in Table 3.**
The Chinese recently released information on foreign credit
receipts and the servicing of foreign indebtedness and on the extension
of foreign aid. This information indicates increasing demands on China's
holdings of foreign exchange. The data involved are shown in Part II, C, of
Appendix A. Other Chinese receipts are believed to have declined. For
example, remittances from overseas Chinese have been smaller as a result
of growing dissatisfaction with the Chines regime and of weakening family
ties. Foreign expenditure in China fell when Soviet troops withdrew from
Port Arthur and Manchuria. Chinese expenditures abroad for diplomatic
missions and education have increased.
* It is believed that receipts from foreigners in China less corresponding
expenditures by Chinese abroad might offset this $46-million deficit. The
balance of payments, however, would still have deteriorated from the favorable
balances reported for previous years.
** Table 3 follows on p. 6.
-5-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Table 3
Estimated Balance of Peyznts of Cc=mist China
195556
walloa "L
Payments
Iiorts (c.i.f.)
b
D
-2j,465
-2j,150
e
t repayment
7
- 196
242
o eiga- aid grants and loans
.. 160
- 164
Total payments
Z21821
-
Receipts
Exports (f.o.b.)
22020
2,,265
Overseas remittances
i
80
70
Fore
gc credit receipts
675
48
Total receipts
?ate
Deficit, Including errors and omissions
46 ?
173
a. For Wiles this items includes known Chinese payments for which is
value estimates are not available, such as the cost of Chinese students
studying in other Bloc countries, the cost of technical services received
frown the Bloc, the maintenance of diplomatic missions abroad, and the like,
and Chinese receipts for similar expenditures by other countries in Chinao
In addition, this item includes changes in holdings of foreign change.
As a result of these developmeents, China4a holdings of foreign
c ; and gold are believed to have decreased. Sterling balances in
honde1 were reduced sharply in 1956 and early 195?. Although it is possible
that sci of these balances were transferred to hidden accounts in Western
I Ra"ope jp it is probable that a large portion was transferred to Bloc countries
In. pays nt of obligations.
-6-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3.
 Approved For Release 2007/01/Y0-1ID82-00400R000200070004-3
B. Trade with the Bloc.
l.. Trade with the USSR
The value of Sino-Soviet trade during 1956 is estimated at
$2,370 million,, a decline of 15 percent from the peak trade of $2?800 million
+L 1955,e This decline is attributable to the sharp reduction in 1956 of
' inese imports financed by Soviet credits. Excluding such iaports,, there
was an increase of almost 10 percent in 1956 trade over that of 1955
It is estimated that China had an import surplus of $70 million
in Its trade with the USSR, with imports of $1,,220 million and exports of
$1,150 million. Official budget data indicate that repayment of the foreign
debts of China meted to $242 million in 1956 (believed to have been paid to
the USSR) and that loan receipts were reported as only $Z8 million (probably
Soviet loans). Although other Sino-Soviet transactions are unknown, it is
believed that China had to draw upon foreign exchange boldinge
2
"fiewith .
According to Chinese announcements,, the Rstropean Satellites
counted for 17.2 percent of the total foreign trade of China in 1956? which
Indicates a trade turnover of $760 million. This value is $85 million more
than in 1955, an increase of 13 percent.
The
Sovietmannouiiced ruble values of this trade indicate lower dollar
values than the figures presented here,, which are based on Cinse data
0-vressed in y u=- See Appendix A, Part II!, for discussion of the conversion
problem involved.
Data released by the European Satellites, however, suggest a total of
*')40 million,, approximately one-fourth lower than the Chinese announcements only
ir.~dicate. There are indications that the Chinese data overvalue, whereas the
D"Wean Satellite iata undervalue,, Sino - European Satellite trade expressed
in dollar equivalents,. See Appendix A, Part I11.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Little information is available on the balances between imports
and exports in Sino-Satellite trade. Chinese trade with each of the Satellite
nations is planned to balance each year, and there is no indication that
serious imbalances have developed in either direction. Accordingly it is
estimated that imports and exports during 1956 were .in approximate balance
at about $360 million (f.o.b.) in each direction but. that China would have
incurred, freight costs on imports of about $40 mfhion.*
East Germany and Czechcslovakia were the principal European
Satellite trading. partners of Ccaam' niet China in 1956j, followed by Poland,
drys Bulgaria., Rumania and Albania. East Germany and Czechoslovakia
together probably accounted for one-half of total Sino - European Satellite
3. Trade with the Far Eastern Satellites.
It is estimated that the trade turnover of China with the Par
Eastern Satellites in 1956 amounted to $195 million, of which Chinese aid
deliveries to North Korea and North Vietnam accounted for about two-thirds.
The estimated value of trade turnover with North Eorea was $65 million, about
$55 million of which consisted of aid-financed exports. The estimated value of
trade turnover with North Vietnam increased to $95 million, about $75 million
of which consisted of aid-financed extorts.
* As C n jt-china bas no merchant fleet in this trade, freight charges on
Imports carried in non-Bloc ships (and quite possibly on Bloc ships as well)
would be paid in Western currencies. Gina, probably recording imports an a
c.i.f* basis and exports f.o.b., presumably recorded trade with the European
Satellites as $360 million of exports and $400 million of Imports
-8-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-B-C-B-T-T
The estimated value of trade with the l6ongolien Republic was $35 million,
which probably included deliveries worth about $5 million under a 0.m.] ].ion
program of Mine" aid to longplia,, announced in 1956.
C. !yea with Nan-Bloc Countries.
1. General..
The trade of China with the Free World in 1956 is estimated to
have amounted to imports totaling approximately $470 million (c.i.f. Chinese
Ports) and exports totaling $555 million (f.o.b.)
The estimate of total trade amounting to -1.02 billion repreaente
94 percent of the $149-billion figure for Chinese trade with Free World are"
calculated from announcements made by the Chinere. The &Pference between the
two figures falls well within the range of error to be e*eoted in arriving at
such a figure, given the problemo involved In arriving at appropriate valuations
Of Free World trade and in converting yuan values to dollar equivalents.
2. o7Ct8.
a. Recorded torts.
The value of recorded Chinese imports from am-Bloc countries
in 1956 rose sharply to $405 million, compared with $321 million in 1955, W3
minion in 19548 and $279 million. In 1953- Changes in Chinese Iworte from
-9-
B-N-C-R>FwT
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Mina's various trading partners are shown in Table 4. The increase of
$84 million in total imports during 1956 reflects in large part the greatly
intensified use of the CHXNCOM exceptions procedure, particularly in the
latter half of the year.
"The value of recorded Chinese Imports moves directly from
Western Europe to Chinese ports increased by nearly 50 percent, almost all
of the increase occurring in the second half of the year. As in 19559
this increase was partly offset by a decline in imports from Hong Kong.
Japan
Ceylon,, West Germany, and tb.
m- imports from each of which were less than half those from Japan ._R.
were close contenders for second place. The only major trading partners
from whom imports were reduced during 1956 were Hong Kong, Pakistan, India,
Burma, Brazil, and Finland.
?I"ablefollows on p.
11, O
For LUneunnian of "g
procedure, see p. 16, below.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Table 4
Recorded Forts of Co==nist China from Free World Countries, by Value
195-56 a/e
Thousand US
1954
Country Total
1955 1956
Total First Half
Europe, Western Hemisphere,
and South Africa
Total
Argentina
1,495
981
916
-
916
Austria
445
2,694
4,256
2,265
6, 541
Belgium-Luxembourg
426
5,435
8,059
11,491
19,550
Brazil
2#938
4,672
3
683
686
Cuba
418
6
6
Denmark
185
56
549
1,684
28233
Finland
3,390
14,606
3,270
5,289
8,559
France
8,379
6,438
8,634
9,141
17,775
West Germany
20,554
28,488
11,003
-?
20,479
31,482
Greece
132
62
194
Italy
5, 285
5,841
3,926
6,703
10,629
Mexico
N.A.
45
1,023
486
1,509
Netherlands
1,565
2,791
715
4,681
5,396
Norway
28
35
115
1,077
1.,192
Portugal
N.A.
7
267
274
Sweden
6 32
1,546
889
3,361
48250
Switzerland (c.i.f.)
4,085
10,568
3,072
7,555
10,627
Union of South Africa
N.A.
1,043
788
337
1,914
UK
18,170
22,756
11,216
17,047
28,263
Yugoslavia
N.A.
3,691
38691
6cr/
3
0/
0
0
0
Canada
47
-
1,057
0
2,473
2,473
Plus 10-percent
adjustment for c.i.f.
(except Switzerland)/ 69354
9,891
5,551
98124
14,675
Subtotal JU984 119,368 64,t10
107, 2L6
- 172,046
Footnotes for Table 4 follow on p. 130
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Table 4
Recorded Imports of Ca mmist China from Free World Countries, by V&.ue
1954.56 a/
"'Continued)
1954
1955
Total
Country
Total
Second
Total
Near East, Asia,
and Oceania
__
Australia
3,421
5,794
4,260
5,364
9,624
Burme e
22
.13, 960
.9..844
1,047
105.891
Ceylon
48,429
22,814
14,157
19,609
33,766
jkypt
11,389
23,081
16,846
8,544
25,390
Bong Kong
67,154
31,143
9,0008
13, 515
2-2, 523
D dia J
5,798
20,591
6,057
5,351
11,408
: donesia
1,014
6,221
5.,064
7.073
12,137
Japan
19,109
28o552
-02,410
449929
671339
N ,aya
6, 561
4,031
774
6,837
7,611
New Zealand
50
. 266
114
298
412
Pakistan
26,189
34.9525
5,880
10, 840
.6, 720
Sudan
N.A.
812
2
2,493
2,495
Syria
N.A.
165
insigo
;1,549
1* 549
Plus 5-percent adjust-
ment for coiofio
9,457
9,598
4,721
6,1372
119093
Subtotal 12 ~ 201, 553
Da 1
~U3A 82L
X 2 2 2 4 2 1
16 26
241
404
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Table 4
Recorded Xs orts of Communist China from Free World Countries, by Value
1954-562 (Continued)
a. These data are based on the official trade statistics of the Free World
countries involved. Those data for 1955 which differ from the comparable
SIC-pi?S5 figures reflect more up-to-date information.
b. Figures for imports from countries of Western Europe, the Western Hemisphere,
and the Union of South Africa are based on the assumption of a 2-month voyage --
that is, they represent recorded exports of those countries to China during the
12 months ending 31 October in each year. With the exception of the import
figures for Hong Kong and Japan, which represent exports for the periods
indicated in the table, the figures for the countries of the Near East, Asia,
and Oceania are based on the assumption of a 1-month voyage and represent
recorded exports of those countries during the 12 months ending 30 November.
All trade statistics were converted at the official exchange rates except Hong
Yong figures, which were converted at an average rate of 1 BK $i to US $0.1715
for 1955, US $0.1702 for the first half of 1956, and US $0.1625 for the second
half of 1956.
co Representing US shipments to China under exceptions procedures. These
shipments consisted of an automobile and other goods for the diplomatic mission
of a friendly country in 1954 and printed matter in 1955-
d. Most countries record imports in their official trade statistics on a c.i.fo
basis (cost, insurance, and freight) and their exports on an f.o.b,, basis (free
on board, meaning the cost of the. exports involved excluding insurance and
freight). In utilizing the recorded exports of China's Free World trading
partners -- reported on an f.o.b. basis - to arrive at China's "recorded"
imports on a c.i.f. basis, an allowance must be made for the insurance and
freight charges, primarily the latter, involved in moving the goods to China.
The adjustments indicated are average figures based on shipping coats and the
general nature of the coemodities shippedo
e. Trade through Burmese ports other than Rangoon is only partially reflected
in these data.
f. Including imports into Tibet except for the second half of 1956.
x.130
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
The changing commodity composition of Mina's imports fraa the
free World fron 1950 to 19% is ahcn+nl I T,e changes in 1956 reflected
both &a estic ecanmic developments and modifications in the operation of CMW%1
controls. The red deed level of cotton marts was the result of it redaced
demud following China's abundsat cotton crop in 1955. The decline In i is
of drugs vas a cant -Ovation of a 3-year tread and reflected increasing domestic
25X1 fiction. Greater use of the exceptions procedure undero'
permitted a
- 14-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
sharp increase in imports of metals and machinery and other items. The increase
in rubber imports represented increased shipments from Ceylon under the rice-
rubber agreement with that country, as Ceylon made up a shortfall on the 1955
contract in addition to fulfilling the 1956 contract. were was an increase
in imports of chemicals, consisting largely of fertilizer and industrial
chemicals, as was the case in 1955.
Imports from Western Europe, Japan, and Hong Song continued,
as in the past, to consist chiefly of manufactured goods and chemical fertilizers.
The only significant exceptions consisted of imports of wool tops from the UK
and beet sugar from France. Of imports from Japan, machinery (especially textile
merry) and instruments accounted for 29 percent; chemical fertilizers,
21 percent; textile fabrics, 15 percent; and cement, 9 percent. Imports from
Hang Song shoved a similar pattern: chemical fertilizers.. 27 percent; machinery,
-15-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Lnstr nts and equipment,, 1.4 percent; iron and steel, 12 percent; and other
Annitfact d goods of various ids, 15 percent.
e from the other Free World countries of Asia and the
ar East consisted almost entirely of agricultural products Ceylon remained
e 1?riu ry source of rubber. Pakistan and F;glrpt shipped cotton. Burma
pies some rubber and cotton and was the major source of im rted rice.
'"1ir+a continued to obtain large quantities of wool from Australia and of
+'ot9.ut oil and sugar from Indonesia.
., Use the ("HIMC{ .~cce t3_t~np P1'oendure.
A i t of cRI1 I' countries duri 1956 relaxed the app ,?
on of trade controls against Mina in antics tion of a removal of the
lira differential and increasingly lice sed their embargoed commodities for
to China under CHIHCLffit exceptions propedures. The US, however, can-
;l ied to maintain its carnal -:-:.c embargo an trade with Mina. These governments
ad been under considerable d gestic pressure, both political and commercial,
revise, if noo+- a polish, the China differential . In the course of 1955 a
rh m r Ar countries ;participating in CHIffCCClt began increasingly to reflect
dissatisfaction over the differential of controls toward ChlnX-~~
I
* CBINCCK, or the China Committee, is a working camatittee which coordinates
Controls on strategic trade with China. It is the counterpart of COCOtt, or the
Coordinating Ca zm ittee, which is the working committee for trade controls as
a ed to the FAzropean Soviet Bloc. The two committees are subordinate to the
Consultative Group (CG), in which the following countries participate (at the
ministerial level) : Bel.giuma, Canada, Denmark, France, Greece, Geraen;y, Ita1 r,
'apan.. IAIbourg, the Netherlands,, 8orway, Portugal, Turkey, the UK, and the US.
Tli US naintalm a complete embargo an trade with China.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
By resorting to exceptions procedures, trade with China by many
CH MO= countries In items on the control list began to Increase. These pro-
cedures permit a participating country to license for export to Chirma certain
embargoed commodities under very special circumstances and when it believes
that the commodity would not contribute to the military strength of China and
would be used for civilian purposes. Depending on the particular procedure
emoyed, the other participating countries were to be notified either before
or after export licenses were granted for the goods in question.
in Iuy 1956 the UK announced that "more use will be made of
the exceptions procedure to permit reasonable exports in appropriate cases
to China. of goods which are not on the Soviet 1oc~ lists. " Thereafter,
greatly intensified use vas made of the exceptions procedures. Cases pre-
sented to CEMCOM for licensing in the second half of 1956 were 2.4 times
greater in value in the second half of 1956 than in the first half of the
year, with the result that the value of these cases reached million in
1956, compared with a total of about $15 million for the 4-year period 1952-55.
It is apparent from the trade returns, however, that only about one--half of
the licensed shipments were received in (mina in 1956, with the remainder
presumably to arrive in 1957. The UK, West Germany, France, and Japan
were the principal countries utilizing the exceptions procures, as shown
in Table 7.*
:9 Ta-M ' fcUaws on p. 18.
-17-
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
3-R?-C-R-S-T
Table 7
Value of Exceptions on Notice to CRINCOM, by Country
1952-56
Thousand Us
December
1956
December 1952
country
1952-53
1954
X955
First Ralf
second RUF
Total
December 1956
UK a
333
424
882
6,639
20,559
27,198
28,837
West Germexr
1,210
1,146
1,235
3,294
12,870
16,164
19,755
Japan
0
454
5,450
4,041
6,155
10,196
16,100
France
20
0
1,743
5,853
9,371
15,224
16,987
I ay
0
453
5
2,858
5,932
8,790
9,248
Belgium
Others
24
26
444
159
746
97
1.,457
2,554407
3:6
5,883
1,613
3,080
24,203
57,774
81,977
96,8'
a. UK figures include overseas territories.
Two categories -- iron and steel products and motor vehicles
and parts -- accounted for more than one-half of the value of the goods
concerned. Iron and steel products increased from abut $5 million in 1955
to more than $25 million in 1956. Motor vehicles and equipment, which in
1955 amounted to only $13,000, totaled $15 Brillicai in 1956. Tinplate submis-
lions rose sharply to almost $6 mi111cm.. and submissions on excavators and
cranes, which were nonexistent in 1955, amounted to more than $5 million.
Other commodities which figured prominently were fishing vessels, bearings,
metalworking machinery, and power equipment.
Although various CRINC04 countries continued to make use
of the exceptions procedures in 1957, thqrbecame increasingly dissatisfied
with the China trade control sysi,t.a. After protracted negotiations in
-18-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
CRINCM, the UK on 30 MW 1957 unilaterally announced that it would adopt
the same lists for China as for the Soviet Bloc, thus practically eliminating
the differential. In June, most of the other participating countries took
similar action,
c. Unrecorded Dmporte.
The estimated value of unrecorded imports into China declined
fran 275,000 tons, valued at $76 million, in 1955 to almost 190,000 tons,
valued at $65 million, in 1956, largely as a result of declining trans-
shipnents from Western Europe. These transshipments were, however, still
the main source of unrecorded trade by value,
The min source of unrecorded imports by volume was Southeast Asia, the
tonnage involved rising
-19-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
(1) Transshipments of Western Commodities Through Soviet
Bloc Countries.
China was able to reduce its use of the circuitous traas-
shipment route through the European Soviet Bloc in obtaining C I C0k-controlled
goods during 1956 as a result of greater use by Free World countries of the
exceptions procedure. The volume of traneshipnents through Gdynia, Bold,
in 1956 is, as a result, estimated to have declined two-thirds, compared
with 195
The value of unrecorded imports from Gdynia in 1956 is
estimated at $40 million, compared with $60 million in 1955. Nonferrous
metals and iron and steel accounted for almost all of these imports, both
by value and by volum
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-E-C-R-E-T
(2) Unrecorded Imports Through Song Kong
There continues to bi
I 25X1
smuggling from Hong Kong by sms11 craft and overland to Chins, but the value
of this trade in 1956 is estimated at $2 million. Py tonnage, PCB appears
to be the chief strategic commodity involved in this movement. Hong Kong
aut uwlties seized more than 800 tons of POL products in 1956, almost
one-third more than in 1955. Two unusually large ship eats of diesel oil
and lubricating oil accounted for the increase. 25X1
I I
10,000 tons of kerosine, with a combined value of $1.5 million.
(3) Unrecorded Imports from Mew.
There are no published official trade statistics on
Macao 'a exports to China in 1956. Such exports were largely reexports of part
of the goods imported from Haag Kong. Imports from Song Kong amounted to
$10 million in value and 66,000 tons in volume. It is estimated that, as
a maximum, strategic commodities comprised one-fourth.. by value, of these
imports, of which a portion was transshipped to Qaina. PM shipments,
especially kerosine and diesel oi1, were important in terms of volume.
l6a ca+o t s imports of PO L from Hong Kong rose to almost $500,000 in 1956, of
which about $300,000 war is believed to have been
transshipped to China. Other strategic commodities transshipped included
copper tubes, ball bearings, auto parts, surveying instruments, and radio
tubes. The total 'value of strategic commodities transshipped is estimated
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
smuggled cargoes included up to 4:500 tons of diesel oil and
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
at $700t In addition, official
125X1
infortastion from Macao indicated that exports of nonstrategic goods to Chine
amounted to 4,500 tons valued at $1.3 million.
(4) Unrecorded Imports from Ja.
The existence of a large smuggling ring in Japan which
dealt in diverting refined petroleum products to as was uncovered in 1956.
Petroleum products arriving in Hong Kong were transshipped to Japan, offloaded,
and t1uen reexported, allegedly on consignment to Timor. The POL is believed,
however, to have been unloaded by Japanese vessels in North . Records
(5) Unrecorded Darts frog Southeast Asia.
Turing 1956k::~tons of rice were shipped from 25X1
Bn-rasm. to Ceylon on Chinese account in partial fulfillment of the rice rubber
agreement between C2d and Ceylon. It is believed that the Chinese recorded
the rice movement as an import from Burma an well as an export to Ceylon.
Approved For Release 2007k- "DP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
3. Exports.
a. Recorded Exports.
The exports of China to Free World countries rose
almost as sharply in 1956 as in 1955. Their value, adjusted to an f.o.b. basis
from the trade statistics of the trading-partner countries of the Free World, was
$544 million in 1956 compared with $423 million in 1955, $298 million in 1954, and
$323 million in 1953. The rise in exports occurred in the first half of the year,
and the higher level was maintained during the second half, as shown in Tables 10
and 11-*
D.stribution of Recorded Exports of Cc=lnist China
to Free World Areas
1954-56
Million US
Western Europe,
Asia, Near
Western Hemisphere,
East and
Year
and South Africa
Hong Kong J
O
ceania Total
Furst half
40
23
17
51 131
Second half
48
44
22
53 167
First half
61
48
38
59 206
Second half
60
59
39
59 217
1256
First half
81
62
37
91 271
Second half
73
58
42
100 273
* Fable 11 follows on p. 24.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Recorded bcports of Comounist China
to Free World Countries, by Value
1954-56 a,/*
Traousand US
Country
Rurope,. Western
Hemisphere, and
South Africa. V
1955 1956
Total Total First Half Second Half Total
Austria
878
1,009
1,175
1,339
,.4
Belgium-Luxembourg
2,058
2,123
2,228
4,000
6228
Canada
1,541
4,290
3,776
2,115
5:,891
Colombia
311
31.
&A.
N. A.
H.A.
Denmark
30
195
1,158
298
1,456
Finland
2,953
3,583
952
1,823
2,775
France
8,972
12,002
8:390
7,466
15,856
West Germany
37,688
45,917
28,482
25,461
53,943
Italy
2,182
4,873
4,974
6,793
11,767
Mexico
354
288
400
230
630
Netherlands
6,306
8,524
6,4822.
5,103
1.1,585
Norway
2,439
2,554
1,006
954
1,960
Sweden
1,159
2,473
1,063
1,621
2,684
Switzerland
10,599
19,066
10,626
7,506
18,132
Union of
Africa
N.A.
1,023
445
417
862
UK
25,664
33,669
19,829
19='01
38,930
Us
170
227
6o
128
188
Yugoslavia
R.A.
6
3,466
1,637
5,103
BMus 15-pence;
8djuaauent for c.i.f.
(except for the US
and Canada) a/
-15,239
-20,600
-13,601
-12,562
26,163
Subtotal
88,065
121,253
8D,911
73,430
154,341
Footnotes for Table 11 follow on p. 26.
_24-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
S-E-C-R-E-T
Table 13.
Recorded Exports of Cc1 mist China
to Free World Countries, by Value
1954-56 a/
(Continued)
C
1954
1955
1956
ountry
Total
Total
F
S
-
irst Eat
econd Half
Tota
Near East, Asia,, and
Oceania
Aden
N.A.
667
284
297
81
Australia
B
3,878
4,710
1,996
2
313
5
4
339
urma
C
306
4,522
9,748
,
4
791
,
14
539
eylon /
E
t
32,260
16,871
7,751
,
18
941
,
26
692
gyp
F
h
818
1,818
5, 758
,
4
527:
,
10
279
renc
West Africa
Ghana (Gold Coast)
1,156
N.A.
1,520
80
720
,
500
,
1, ~
India
4,922
8,960
12,015
8
000
01
20
Indonesia
4, 228
10;949
18,229
,
14
811
5
,
040
33
Japaa
40,770
80,781
39,470
,
44,178
,
8
648
Macao
5,542
5,080
3,100
3
000
3,
6
100
Malaya
29,108
38,570
20,788
,
24,960
,
748
45
Morocco
New Zealand
12,493
628
16,973
830
11,447
9,7 0
,
20,831
Pakistan
Ph
1,375
394
295
8,150
8
44
ilippines
945
400
30
30
,
60
Sudan
N.A.
70
8
29
Syria
N.A.
153
129
9
307
Taiwan
Thailand
3,411
1i924
891
651
1,54336
2
N.A.
N.A.
4
10
14
Vietnam J
8,381
9,165
1,463
2,680
4,143
Minus 5-percent
adjustment for c.i.f.
(except for the
Philippines) /
-7,464
-10,202
-6,717
-7,432
-14,149
Subtotal,
142
194
127
141
%S
, U5
X
, 89
1=6 Kong
66,700
107,300
62,300
58,000
,
120,300
Total
22
42
2
-25-
S-E-C-R-E-T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Recorded Exports of Communist China
to Free World Countries, by Value
1954-56 !LJ
(Continued)
a. These data are based on the official trade statistics of the Free World countries
involved. Those data for 1955 which differ from the comparable EIC-Rl-85 figures reflect
more up-to-date information. Most countries report their imports by country of origin,
so that a portion of their imports recorded as from "China" were actually purchased from
intervening owners. Data are complete except for the following countries in the second
half of 1956: Belgium-Luxembourg,. French West Africa, India, Pakistan, the Philippines,
and New Zealand: In these cases, estimates based on less than complete data have been
entered in the table.
b. Figures for exports from countries of Western Europe, Western Hemisphere, and the
Union of South Africa are based on the assumption of a 2-month voyage -- that is, they
represent recorded imports of those countries from, "China" for the 12 months ending
28 February in the following year. Figures for Hong Kong, Japan, Macaw, Philippines,
Taiwan, and Vietnam are recorded imports for the periods indicated in the table. Figures
for the remaining countries are based on the assumption of a 1-month voyage and represent
recorded imports for the 12 months ending 31 January.
c. Most countries record exports in their official trade statistics on an f.o.b. basis
(free on board, meaning the cost of the exports involved exclu insurance and freight),
and their imports an a c.i.f. basis (cost, insurance, and frei. In utilizing the
recorded imports of the Free World trading partners of China -- reported on a c.i.f.
basis -- to arrive at China's "recorded" exports on an f.o.bo basis, a deduction must be
made for the insurance and freight charges, primarily the latter, involved in moving the
goods to the importing country. The adjustments indicated are average figures based on
shipping costs and the general nature of the commodities shipped.
d. Sugar imports from Taiwan. amounting to $1.223 million were deduced from first-half
1954 imports from China as reported in Ceylon's trade statistics.
e. The data for 1954 are for "Indochina" and include trade with Vietnams, Laos, and
Cambodia. January-May 1955 data are imports by North and South Vietnam. Beginning in
June 1955, the figure represents imports by South Vietnam alone.
:f. A deduction had been made from Hong Kong's recorded imports from China to eliminate
duplication resulting from the fact that many countries (all listed countries except the
'C, Belgium,.. Canada, Denmark, the Netherlands, Egypt, Australia, India, Nov Zealand, and
the Philippines) record imports from Hong Kong of Chinese origin as imports from "China."
Goods exported by China to Hong Kong and reexported by Hong Kong to these countries are
recorded as imports fraan "China" both by Hong Kong and by the country of destination. The
amount of this deduction for 1955 and 1956 follows..
26-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Recorded Exports of Camiinist China
to~Free World Countries, by Value
1954-56
(Continued)
(~botr~+ote continued)
Million US $
1955
1956
Total
First Half
Second half
Total
total imports from
Bong
i
ni
CoM
n
iat Ch
Jess: Estimated reexports
recorded in import data of
other countries as imports
from China
154.2
87.8
85.1
172.9
Taiwan
2.0
009
0.6
105
Japan
12.8
6.4
7.0
13.4
Malaya
12.9
6.6
8.3
14.9
Indonesia
2.4
2.1
2.7
4.8
Vietnam
3.2
1.5
1.8
3.3
Other
D-6
8.0
~Ll
1
Total deduction
Hong Kong's retained imports
from China plus reexports
not recorded in import data
of other countries as imports
46.9
25.5
27.1
52.6
from China
1 .
6 U.
22-MO
1
Hong Kong figures were converted at an average rate of exchange of 1 8K $ to us $0.1715
for 19559 US $0.1702 for the first half of 1956, and US $0.1625 for the second half of
1956.
Although China again increased its exports to nearly all of
its induetrislired Free World trading partners in 1956 as in 1955, the most
striking development in 1956 was the increase in exports to the underdeveloped
countries of Asia and the Near East. This increase accounted for 60 percent
27
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
of the total increase in the value or exports to Free World countries.
3xports to underdeveloped areas, nevertheless, represented only 35 percent
of Chinese total exports to the Free World, and exports to a number of
nearby Asian countries remained negligible. China's only new trading
partner of consequence was Yugoslavia.
Hong gang continued to be is iortant as a customer and
broker for China's sport trade in 1956. Goode valued at $173 m i t l i an,
nearly one-third of China's exports to the Free World, moved to or through
Hong Kong, and of this amount an eatimsted $120 million worth (22 percent
of Chinese exports to the Free World) was consumed in Song Kong. The, 2-year
trend of increasing exports to Hong Kong was interrupted, however., during
the second half of 1956.. when such worts failed to rise above those of
the first half. This change probably reflected an increase in direct
trade between China and, other Asian countries. In 1956, China's exports
to Fong bong (including goods reexported by Song gong) exceeded its imports
by *150 million, yielding significant sterling earnings.
Sorts to all Free World countries consisted, about
45 percent by value, of foodstuffs (including rice, other cereals, vegetable
oil, eggs, fruit, vegetables, pulses, and tea); 30 Percent were oilseeds and
other agricultural raw materials (textile fibers,, oils, hides and skins,
tune oil, and miscellaneous crude materials).,* and 25 percent were other
goods (Minly ores, minerals, and products of light Industry). The grwing
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
ability of Chin= to produce and market., light manufactured goods was
demonstrated by increased exports of such items as sewing machines,
flashlight batteries, sms11 radios, and sheet glass.
More than 40 percent by value of China?s exports to Hong
]long were basic foodstuffs, chiefly for cation in Hong Hong; 26 percent
were Chinese specialty foods and products, primarily for reexport to Irope;
and 30 percent were miscellaneous manufactures for local consumption and
for reexport to Southeast Asia. Textiles accounted for a substantial
portion of the maaufaature -- $32 million, compared with less than $2 million
in each of the 2 previous years -- despite a near cessation of exports of
cotton yarn in the second half of 1956.
Japan was China's second best Free World customer,,
1 orting primarily foodstuffs and industrial raw ma'teria'ls.
b. Ilbrecorded Exports.
In addition to recorded export tons of Burmese
rice, valued at $8.7 million, were purchased by the Chinese for shipment
directly from Bursa to Ceylon in partial fu3,fi]lasent of the rice-rubber
agreement between China and Ceylon..
As in EIC-Bl-S5, no allowance has been m e in this report
for e34ports of opium and other narcotics. It is estimated, that earnings
from such exports were not significant in the period under review.
See p. 22, above.
- 29 -
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01,120 :.CIA-RDP82-0040OR000200070004-3
~' xb4?:; ttv ~>1rt~xe 'r nn +detf.u.18 On the total volum Of
r.; I Ytee - 9,,4, but t.f"V hi; ? aT1Y1CEux),?ae t .t more. ban (9n =.;h% 1 f"
t? ? fir., r ~.?~;; tr
a a n,, ,,.z +?v t?h.t/ tb , 10t rviffh h ,rle of S.'h'{,f,9sase fi de Wil the
25X1 r r M.", fr- )rx.:l Q, .?re i_.qs
thht t.hr. tra.l, vas K.i ghex.. ar the vck1u! 1 rat v i -< 3 Q5 5
of i titnomgp jrr.r .f"$; ffo-d Pot mnv ; by 19e?'t In 195
s s e +~ t:nr rtn . b:y t t a ice. 1.c n 1955, vbi. h#, r r
y 44; n 10,91i a i tMt t n?-h .1 f would be tr"rx-4,
#,e tolsu r?ryit rat. 8 7 ml.l.t
trade of Chi rR, , P.r= stbout, 17,4 i 1 L i ors t,nK j.
r:,c- the yr 1 ni n ?~h ~n~e ions but 94,14-4
p^U y by a shift In 1956 from the
; ram itiea like, pc c tr, the export of law- comwditl 1
of S I . n c r - 1 0 1 : L e t t -& (A LA55 was estIm ..t at 5,2 mI11ton tone is
i f" t i rarr xa i ;tes tMt 'tht tx? .e In 1955 s larger 1. my
k M11,141-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-004008000200070004-3
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-004008000200070004-3
S-E-C-R-EST
In 1955, estimated overland imports were slightly greater by volume
than seaborne imports, but in 1956 seaborne imports probably increased more
rapidly than overland imports, largely as a result of a sharp increase in
imports of cement and fertilizer. In the absence of more precise data,
th eseefore, the volume of seaborne imports in 1956 has been set as appro~ci mate y
equal to overland imports, and consequently the volume of seaborne and of
overland exports was also apporozimmtely equal.
R. Total Transport services.
1. Shipping Service.
The year 1956 again witnessed an increase in the volume of merchenl5x1
shipping engaged in trade with C'h3 na 1
32
Approved For Release 2007/01/20: CIA-RDP82-004008000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Next 4 Page(s) In Document Denied
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-E-C-R-E-T
a. External and Internal_Arrangemants for Mvement, of
Foreign Trade.
All international rail shipments in the Sino-Soviet Bloc
are governed by the multilateral "Agreement on International Railroad
Freight Traffic" (S)GS) of 1954s which is intended to facilitate and
stimulate Sino-Soviet Sloe foreign trade and overland transport relations.
Shipments between Sino-Soviet Bloc countries .ch must transit-a third
country are subject to the rates and regulations contained in the Uniform
Transit Tariff (7iT) which supplements this agreement. Freight rates for
rail shipments between neighboring SJGS countries are determined by the
individual tariff agreements in effect between those countries. When
freight must transit thrid countries by railroad, however, transport charges
for such transit axe determined by rates contained in the UTP. The rates
contained in the t?Pf are, as a rule, lower than the rates which formerly
applied to transit traffic in the Sl[3S countries.
A reduction of transit freight rates brought about con-
currently with the inclusion of Commud st China, Mongolia, and North Korea
in the SIGs and the U7T in 1954 provided significant reductions in the cost
in interational overland trade to these countries. Ne UTT rates issued in
38 -
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S E-C-RE-T
January 1956 lowered transport costs even further, although the changes
were not get. Of the charges which Chine must pay on imports, re-
ductions ranged from 11 to 33 percent of mfr of the important cOi dities
which in the past few years have maned by rail. There were, however, no
changes whatever on many other items. Sizable reductions in the U7T
freight charges were also made on a number of commodities originated
by China and destined for the European, Satellites, but rates on rubber,
silk, wool, tea, and the principal grains were not reduced.
On =UW items, rates in the 1956 UTT were still listed
at the equivalent of from $110 to $160 per ton (payable in rubles) on
movements to China from East Germany and Czechoslovakia. The new rate
on fertilizer, although now only about $45 per ton for the samre through
movement, was more than twice the sea tariff, and apparently discounts
were not custo?sriJay permitted for large bulk shipments. tilT rates do
not decrease with Increases in distance of shipments. In this respect
the UTT differs from Soviet internal toriffs, which provide special rates
over regular long?heul routes and which, on a kilometer basis, generally
taper downward as the distance increases. Thus the UTT must be working
out to the benefit of the country which provides long-haul service and
to the detriment of those countries with returns on short hauls, where loading,
-39-
SEE-RE-T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
overhead, and transfer costs cannot be absorbed by returns on many
kilometers of movement. Because of the long haul through the USSR for
trade between China and the European Satellites, these countries must
find that the tariff favors the USSR.
b. C_hangea in Facilities for Movement of Foreign Trade.
(1) Wis.
Qa) MR.
The appreciable increase in the capability or
China to move foreign trade between the USSR and China which accompanied
the opening of the Trans-Mongolian Railroad constituted the major develop-
moat affecting Sino.Soviet transport connections in 1956. Although basically
completed before the and of 1955, the line was not opened for through
international traffic until January 1956. The Chinese reported that on the
Chining Erblien section or the line the volume of traffic increased sub-
stantially each month during 1956. Improvements continued to be made in
facilities on the line in 1956, and there are indications that the cost
or transport was substantially reduced, even though the condition of the
newly constructed roadbed has required that freight cars be lightly loaded.
During 1956, Chum continued to improve the lower capacity rail lines
-40
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
ap thing Chi ing in order to handle the increasedd amount of traffic
flowing to and from the north. This work will no doubt be continued in
1957, if needed, as Chinese railroad investment plans cell for increased
en ht-sis on rehabilitation and expansion of existing facilities rather than
on new line construction.
The ding point on the Trans Mongolian
line is located at Chining, more than 200 miles inside China. This
location permits the use of Soviet rolling stock in Chinese territory as
far as Chiming. The Peiping-Paotou tine, which reportedly will be one of
the first limes in Chins to be electrified during the Chinese Second Five
Year Plan, joins the transloading point at Chining with the Chinese rail
system. There is little information available about the facilities in use
at Chiming. It is probable, bwwever, that the capacity to trannicad at
Chiming is nearly equal to the capacity of the Chinese rail lines serving
lining and that it will be increased in the future as the capacity Of
the connecting Lima is increased to take advantage of the shortest rail
link between the USSR and south and central China.
(b) 1?~c&th Vittnem.
By early 1956 the transport system of North
Vietnam, disorganised and, severely da=Mpa during the civil war, bad been
substantially restored and in saw re cts immroved./
41 -
SR-CR-EJP
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S E.C'd-R-E-T
t stribution of increasing material aid from China. Capability of the
Aanoi a ng?hsiang line would be substantially increased if the line
- *,converte t from the present meter gauge to Chinese standard gauge
The use of Chinese equipment would then be possible as far south as
?Lnoi and would tend to offset any present limitation imposed by the
m Viet Minh locomotive and rolling stock park and, by transloading
pyablems. No information is available to indicate that actual conversion
of the line to standard gauge has been initiated.
Reopening of the railroad from Hanoi to Kunming
Yunnan will further enhance transport capability between North Vietnam
rail. China. Reconstruction of the portion of the line between Hanoi and
Lao Kay in North Vietnam was completed in 1956, and that portion of the
line was opened to traffic before the end of the year. On the Chinese
side of the border
The probability
that the. connection with the North Vietnam system will be mide in 19584
current reports indicate that the entire line will be meter gauge. Once
the line is open to through traffic, it probably will be of more importance
to China than to North Vietnam. Restoration of the section between
.Lao Kay and Kunming will faacilitate the exploitation of Southwest China's
mineral resources, which can then be transshipped through the port of
W.phong for water export or shipment to consuming centers in China instead
of being hauled long distances overland!
42
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
BEE-R E-T
'~ Romeo
The capabilities of some of the roads connecting
Chinae, with neighboring countries were improved during 1956.
E::::] In November 1956 it was estimated that road connections
bet -Awn Hanoi and China were capable of carrying 60 percent more traffic
than in 1955. The importance of road connections to foreign commerce
between China and North Vietnam, however, has not been so critical since
the restoration of the Hanoi Ping hsiang railroad in February 1955 and
viii be of even less importance after the opening of the entire Hanoi
Kunming railroad.
:Oaring 1956 the Burma Road remained the principal
Interior connection between China and Burma for the transport of foreign
In spites of these overland connections, most
Sino-Burmese trade moved by sea.
- 43
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-9-CREP
(3) Inland 4laterw rs.
The use and capability of the Sungari River, the
only significant waterway connection available for the foreign tare of '7i $
remained unchanged during 1956.
r.
Siggniftcat developments in air transport in
1956 included, in addition to international flights to Burma and North
Vietnam, the establishment of a jet aircraft service (flown by Aeroflot,
the Soviet carrier) from Prague to Peiping via Moscow. Further ex*raion
of civil air services between China and adjacent areas is also a0ntiei,pst ,1,G,
Negotiations have been going on between India and China; Ceylon and C bc4ia
are seeking rights for their air carriers to fly to Canton; and there hs
been rumors of a Japanese Tol yo-Peiping Ioscow route.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
SEC-RET
C. Overland Trade and Interior Transport Services.
1.. Total Overland Trade
The tots overland trade of China in 1956 is estimated at
8.7 million tons. Exports continued to account for the larger share,
aggregating 5.75 million tons, compared with 2.95 million tons of imports.
Virtually all, Chinese overland trade in both directions was with the Bloc.
,. USSR.
The major portion of Sino-Soviet trade moves overland by
rail. The USSR reported that rail transport, apparently during 195055,
accounted for 81 to 85 percent of the volume of Sino-Soviet trade, river
transport accounting for 0.1 to 3.5 percent and truck transport for
2 to 3 percent.* This pattern of transport was altered somewhat in 1956,
as the share of truck traffic decreased and the share of river shipping and
rail traffic increased. The estimated tonnage of rail freight moving
between China and the USSR was about 6.1 million tons in 1956, comprising
nearly 88 percent of the total tonnage of Sino-Soviet trade during the year.
'IT,,--T-hp, moved by sea. See p. 58, below.
- 45
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
River traffic is estimated to have reached 275,000 tons, accounting for
almost 4 percent of the total in 1956. Truck traffic in 1956 is estimated
at 140,000 tons, about 2 percent of the total.
The USSR has reported that approximately one-fifth of its
1956 rail traffic with Chinas was transported via Grodekovo, two-fifths
via. Nuasbki, and two-fifths via Otpor. the actual, freight
shipped an the Trans-Mongolian Railroad suggest, however, that its share
of Sino-Soviet rail freight was less than Otpor's share. Therefore, it is
estimated that about 37 percent of the freight moved through Naushki and
43 percent through Otpor.
1) rts.
The volume of overland imports from the USSR in 1956 is
estimated at about 2.7 million two., of which more than 2 million tons
have been identified in official Chinese announcemen
Official announcements report that China
imported 5 million tons of petroleum during 1953-56
Chinese announcements
indicate that imports of steel during 1953-56 amounted to 2 million tons.
- 46
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-E Co-R?ETT
T figure probably Includes castings, prefabricated steel, and other steel
products not included in estimates of steel imports carried in previous
,NCO-Rl reports. It is believed that the annual fluctuation In volume of
steel ids has been small and that the volume in 1956 weal about
200,000 tons. It is estimated that imports of military equipment and
supplies amounted to about 15,000 tons, The 635,000 tons of imports not
Ldentified probably included vehicles, machinery, instruments, and chemicals
may also have included paper and wood products.
47
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Imports on the Cberny Irtysh and Ili Rivers in Sinkiang
during 1956 are estimated at only 20,000 tons. Imports along the Sungari
River are estimated at 150,000 tons, including petroleum and petroleum
products from Sakhalin and iron and steel. These imports accounted for
three-fourths of the total international traffic on the Sungari River
during 1956.
It is estimated that 1 million tons were imported over
the Trans-Mongolian Railroad during 1956, including large quantities of
petroleum products. Other Soviet products reported as moving into China
over the Trans4bngolian Railroad were industrial equi m nt, machinery,
electrical equipment, and chemical products. Imports from the USSR moving
on the line through Grodekovo are estimated at 150,000 tons in 1956,
including petroleum products from Sakhalin and the Hack Sea area as veil
as rolled ferrous metals, tubing,,and other manufactures of the Maritime
Territory.
The total volume of imports moved by truck from the
USSR into China is estimated at 100,000 tons in 1956. The balance of
overland shipments, or 930,000 tons, would therefore have been moved by
rail through Otpor.
48
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
vn , cxs' oweri. exports to $ USSR in 1956 is
at about 3.9 million tons, including a wide variety of egrim
ttt? ural au ani. i t ro ucts, ci emicals, coal, ce rrat, pig iron.. mined
, ant teitiles.,
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
1,rt an sa; lL.tes
of overt imports f."roa -ale 9u,
tellites in 1956 is cal urlatr at $1:10 million. It Is t a.ievcx
1955, .ixaports crrnatste poly of high-value e_o +~ kf'C3? ~: sax?f
ebleles, it 14nery, electrical equigtsent, and phWl :eUtiCW, U , a, t 111i
.r value of $1,500 per ton. 1t is es ii tem froi t "=se Zip ri
he e, that the ids + xwunted. to about, 115,000 IDs, at.i 4,;r ? ) eti.
by rail.
e"i ted seaborue ship nta a I aids '.' .tx exports in .195b is eetiri ate at :L "W:.
stern teeter,,
e s t i m a t e d all
~ $5 millions
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Bo
n i9a6
-ts to Worth Korea, including aid shipments,
F at $60 million, an of which moved
the total in ports of Chins from North Vietnam
, valued at $10
= r; Ir ion, overland shipments probably accounted, P 25X1
out $8 million. Cement probably was the lest item moved overland
iL terms of tom, and other imports consisted of smell amounts of high-
- flue commodities such as spices, tea, coffee, bides, and, bamboo.
'otal a arts to North Vietnam, including shipments
"i ed. by Chinese aid programs, rose in 19 25X1
air at $85 m3 3 l ion
Xt is believed that iron and steel accounted
'o a la; a portion o-e these export 25X1
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
(3) Outer Mongol .
(a) Im is
The volume of overland imports from Outer I1ongolia
in 1956 is estimated at 50,000 tons
F- I
(b) EUMtj.
The volume of exports to Outer )Mongolia during the
first 9 months of 1956 was reported by its gavernu nt as 48,ooo tons,
indicating exports for the year of about 65,000 tons.
Significance of Overland Foreign Trade Traffic.
The total volume of the foreign trade of China with bloc
countries which moved overland in 1956 amounted to about 8.5 million tons.
Ourtng 1956 the Trans-Siberian Railroad and three of its
connecting lines with Mina -- the Thrskiy-M&nchouIj-Mrbin,, the
- 52
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
SEmC-R Ems'
Voroshilov-Suitenho 4arbin, and the Trans-Uongolian -? were the only
Sino-Saviet rail connections utilized in Chinese foreign trade with the
USSR, the European Satellites, and Mongolia. The importance of these lines
is indicated by the fact that in 1956 they carried about 6.5 million tons,
or nearly 38 percent of the total estimated tonnage of Chinese international
traffic moving by all routes, including ocean shipping. The Trans-Siberian
Railroad and its connecting lines, moreover, carried apprflatimately 75 perm
cent of the total tonnage of Chinese foreign trade moving over interior
c cting routes. The foreign trade traffic of China, represents also an
important part of the total traffic carried by these lines.
In 1956, international rail traffic constituted only a small
part of total tonnage originating on all Chinese rail lines. it was not
of sufficient magnitude in itself to place an undue burden on the Chinese
rail system, nor is it estimated to have added significantly to the
congested traffic situation which developed on portions of the system in
1956.
53
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Next 12 Page(s) In Document Denied
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
*1141p; Ot
r3 r- thin in i.rr nport4=.d entire-l.
with the tcep.1; tan of a v or i
S.I : ad rt i.1..y Ir t.p rfw s, i both q tit:, aC3d$ q,Ja ..i:ty ~ t.be
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
merchant fleet of China remains old, slow, and inadequate even for Chinese
coastal requirements. There is reason to suspect, however, that of th4 28
Polish ships on the Baltic-China run in 1956, about one-half are effectively
controlled., if not owned, by the Chinese through the Chinese-Polish ShLp_,
brokers Corporation (CHIPOLBROK).
In any case,, the Chinese must depend on increasing
numbers of non Bloc ships to carry their seaborne trade. Of the more than
1,000 non-Bloc ships chartered by the Bloc in 1956, several hundred were for
China trade. Although chartered shipping carries the bulk of the carip in
this trade, liner services are of more importance than the volume of cargo
carried might suggest. These ships provide a regularity of shipment which
enables the Chinese to engage space to move smaller lots of import and
export cargoes promptly without having to await charter arrangements. For
the most part, non-Bloc merchant ships during 1956 transported only the, so-
called noncontrolled ccamyodities in the China trade. This service, which in
itself is of great importance to the Chinese, also releases Bloc ships to
transport embargoed items to China. Bloc vessels continually deliver stra-
tegic goods from Gdynia and rubber from Ceylon and Indonesia.
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Ikon Bloc coastal services are far more important
than movements of Chinese vessels in the Chekiang-Fukien coastal area
opposite Taiwan. Until the rail line to Amoy was completed in December 1956,
this area had been notably lacking in rail facilities, and local Chinese
ports and installations would have been difficult to supply adequately
except for the availability of non-Bloc shipping along this coast. Some of
the British-flag ships, which are owned by Hong Kong-registered firma, prob-
unist s athizers. 25X1
Therefore, without the benefit of non-Bloc shipping,
Sino-Soviet Bloc transportation and distribution facilities, already heavily
committed, would face increasing difficultiess
b. Review of Bloc Shipping.
e ollowing p. 66.
ee Table 19 follows on p.67.
-66-
Approved For Release 2007/01/20: CIA-RDP82-004008000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Q
Next 1 Page(s) In Document Denied
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-E-C-R-E-T
(3) Routes Employed.
(a) General.
Subsequent to the seizure of the Soviet tanker
TUAPSE by Chinese Nationalist naval forces in June 19514., Bloc ships avoided
the Malacca Straits, South China Sea, and the Formosa Strait en route to
Communist China and the Soviet Far East. An alternative route through the
Sunda Strait, Java Sea, Macassar Strait, Celebes Sea, and northward east of
the Philippines was substituted for the less secure route adjacent to Taiwan.
In February 1956, however, for unknown reasons Soviet ships returned to the
South China Sea route via the Malacca Straits but continued to avoid the
Formosa Strait, proceeding northward via Babuyan Channel off the northern
tip of Luzon. In March 1957, Soviet ships .everted to
the use of the Sunda Strait, the Java Sea, the Macassar Strait, and the
Celebes Sea route.
- 68 -
S-E-C-R-E-T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
(b) Tanker Voyages from the Black Sea.
25X1 cleared the Suez Canal)
hays
I before the closing of the
Canal. Thereafter, no Soviet tankers departed for the Far Fast via the
Cape of Good Hope during the remainder of 1956.
_69-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
The Communist Far East continued to benefit from
logistic support provided by the Soviet tanker construction program in 1.956.
By the end of the year a total of 36 Leningrad/Kazbek-class `8,229 GRT)
tankers were in operation, a majority of which were in the Far East trade
exclusively or lutexmittently.
- 70 -
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
All POL shipments from the Black Sea to the
Communist Far East, of necessity, moved in Bloc tankers,, inasmuch as noo-
Bloc tankers have not been made available for trade in that part of the
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
In addition to the movement of petroleum in Bloc
ships., a considerable portion of total POL exports from the Black Sea was
carried in chartered non-Bloc tankers to Free World ports as well as in the
intr.-Bloc petroleum trade (to Albania and Poland). The availability of
Free World tanker tonnage to supplement the Bloc maritime capability in the
petroleum trade with other (European) areas enables the Bloc to allocate a
considerable portion of its own tanker fleet to support the Communist Far
co Utilization of Capacity of Shipping Eared in Communist
China "a Seaborne Trade.
The pattern of utilization of cargo-carrying capacity of
shipping arriving in China remained generally similar to that of previous
years. Utilization continued to be low on non Bloc liner services from West
European ports, although the booking of greater volumes of cargo on liners
serving China increased their utilization ratio over 1955. The cargo-
carrying capacity of non-Bloc tramp service from Western Europe continued to
be well utilized.
- 72
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
? S E-C-R-E-T
The utilization of cargo-carrying capacity of vessels plying
between China and Japan increased in both directions. I
Utilization of available cargo capacity continued
to be low for shipping between Hoag Kong and China in 1956. The utilization
of capacity of vessels plying between Bloc ports and China continued to show
a great disparity.
I
The utilization of vessels plying between China and ports in
North Vietnam, Africa, and Free Asian countries was roughly the same in each
direction
?' e -
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/4jL0 d If P82-0040OR000200070004-3
d. Port Activity.
Shanghai, the Tientsin - Tea Bar - Tangku-Hsingksng complex,
CantonWhawpoa, Tsingtao, and Dairen (in that order) continued to serve as
the main ports of entry for shipping. Of the total foreign merchant fleet
arrivals in China, three-quarters were effected at Shanghai and ports north-
ward. Shanghai, with 33 percent of the total, received the bulk of the
traffic as in previous years. The ports of Chinwangtao and Swatow continued
as important ports of entry, and Tulin (Hainan Island) retained its signifi-
cance as a port for the export of iron ore.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
During 1956, there were two daavelopments of significance on
the Chinese coast. The first was the reported development of the Chinese
port of Teamkong (Chankiang), located at Fort Bayard in the former French-
leased territory of Kwangfhowan, as a year-round, deepvater port. Tsemkong
was opened on a limited basis in May 1956, several months ahead of schedule,
and is reported to be capable of handling 1.6 million tons of cargo annually.
If presently announced plans to expend the port are fully consummated, its
annual cargo-handling capacity will reach 4.6 minion tons. The development
of this additional port in South China was undertaken in order to reduce
dependence on Whampoa, where occasional problems of port congestion exist.
- 76 -
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
(1) Bunkering.
During 1956, non Bloc controls on bunkering of merchant
vessels involved in trade with China were continued by the US, the UK, France,
and Japan. Under these control procedures, bunker supplies for merchant ships
an route to China were denied by the above countries when a vessel was known
to be transporting unauthorized strategic commodities. The UK, France, and
Japan authorized bunkers for non-Bloc vessels transporting controlled goods
to China when such shipment had been licensed for export to China by a
country participating in the COCCM/CHINCCM organization. The US, however,
considered each bunker application on its own merits, according to the circum-
stances prevailing at the time of application. Thus, even though a particular
strategic cargo had been duly licensed under COCQM/CHINCOM exceptions
procedures, the US denied bunkering application of the vessel on which it was
carried.
The major difference between US bunker controls and
those of the other three countries is that only those of the US provide for
a review of bunker applications for ships returning from China. Consequently,
most Bloc vessels avoided bunkering from British, US, or French supplies en
route to China but bunkered without restriction at Singapore on the return
trip.
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
3-B-CRF-T
The system of limited bunkering controls did not
effectively prevent the movement of controlled materials to China during
1956. These controls, however, are believed to have continued to produce
considerable uncertainty and inconvenience for the Bloc.
2 Won-Bloc Deliveries of Merchant Shins to the Sim-
S
i
t B
ov
e
loc .
Ilae Soviet Bloc and, to a much lesser extent, China
have been able to au nt considerably their own international transportatjon
facilities by the acquisition of new and secondhand merchant ships frOae non-
Bloc countries. During 1956, 46 new merchant ships aggregating 132,581 f1RT
(including 2 tankers totaling 6, 566 GRT) and 2 secondhand freighters with a
total GIRT of 12,600 were delivered to the Sim-Soviet Bloc fx?om Western Fthip
yards, as shown in Table 24. 1 and It.* This represents an increase in
tonnage of More than 100 percent compared with 1955 when 26 new ships of
62,000 GRT were delivered to the Bloc.
The foreign trade of China in 1956, however, benefited
only indirectly from these new ship acquisitions. Only 2 small Finnish-
built cargo vessels, totaling 1,600 GET, were delivered to China but were
used only in coastal traffic. The remaining new ships were built in Belgium,
Denmark, Finland, France, West Gesmazy, the Netherlands, and Sweden for Soviet
account, and only one engaWd in China trade. Moreover, only 1 of the 2
secondhand ships, the 5,242-MT SLOWAICE acquired by Poland from Norway, was
assigned to China trade. The other, a British freighter of 7,372 GRT? was
sold to Bulgaria.
:5 Viable fr fol jows on p.
- 7
S-R-C R-S-T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Nona-Bloc kd airs, tc Soviet, Bloc Vessels.
Although v o Chinese merchant vossels are repai rR Ad
n non-Bloc yards, China benefits indirectly by ship repair services
provided to other Bloc countries by the Free World, as shots in Table 24,
I:XY.-* During 1956, 14 Soviet Bloc merchant ships (Soviet, Polish,
Czechoslovak, and Rumanian) were repaired in non-Bloc shipyards, about
half of which were assigned to the China trade. In the majority of caves: ,
these transactions involved extended capital repairs of from 2 months to
more than I year In duration. In numbers, howet',er, repairs on Bloc
ships in non-Bloc shipyards represent only a fr.cticsn of those effected
domestically in the Bloc. In fact, repair of Bloc ships In non-Bloc
shipyards has steadily decreased in the last fem yec.rs. The 1956 figu
represents decreases of about 5C to 75 p rcert in tke number of ships
repaired in 1955 and 1954, respectively. The reduction reflects the grog Lt
use of domestic ship construction and repair facilities for merchant marl " e
rposes, accompanied by a decrease in naval cor_strc;ction.
V. Relationshi of Chinnese Foreign Trade to the National Fccnom .
7oreiga trade has played an essential, ro'.s J u ccntributing to the rec , xt
rapid growth of the economic and military strenf~tb c,f China. Starting with
an. economy largely agrarian in character, China has relied on importo to
obtain much of its military supplies? capita]. goods, and essential raw
materials. The Chinese regime from the beginnir g has sought to maximize
Table 2 foollows on p. 80.
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Next 3 Page(s) In Document Denied
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
exports, which reached a dollar value of $2.3 billion in 1956, more than
three times that of 1950. Thus the trade policy of China has been used
to facilitate the development of the economy with its orientation toward
heavy industry and military modernization..
A. Foreign Trade in Relation to Gross National Product.
A comparison of foreign trade turnover to gross national product
(GNP) provides a rough yet useful guide to the dependence of an economy
upon foreign trade. Between 1950 and 1955, this relationship for China was
about 10 percent, comparable to that of India, which is similarly under-
developed. Imports in relation to OF have varied between 5 and 7 percent
for both countries.
In. spite of these similarities, the composition of Chinese and
Indian imports show striking differences. Chinese imports have included
only about 10 percent of consumer goods, whereas India, in contrast, has
imported about 30 percent. In addition, of their remaining imports, India
has included a greater proportion of raw materials and fuels, and China has
concentrated on capital goods and military supplies. India and China both
obtained their imports with approximately the same relative export effort,
measured as a percentage of GNP. The difference in the composition of
Chinese and Indian imports is associated with the much greater Chinese
industrial and military developments.
- 84 -
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
B. Contribution of Imports to Economic Construction and Military
Development.
Imports during 1953-56 totaled about 20 billion yuan (US $8 billion).
The Chinese have stated that imports were divided as follows: consumer
goods, 10 percent ($0.8 billion); raw materials and fuels, 30 percent
($2.4 billion); and capital goods, 60 percent ($4.8 billion). Although
the Chinese have never mentioned military equipment and supplies in reporting
the commodity composition of their imports, it is believed that the category
of capital goods includes an indeterminate proportion of material for
military use.
The Chinese estimated that during the First Five Year Plan (1953-57)
imports of machinery and equipment for state construction projects would
account for 15.2 percent of total expenditures for state construction, or
about 6.5 billion yuan. With 85 percent of the construction program completed
during 1953-56, these imports are estimated at about 5.5 billion yuan
($2.2 billion) or slightly more than a quarter of total imports. In addition,
Communist China has imported construction materials, particularly steel of
which 2.8 million'tons were imported during 1953-56. The Chinese claim that
imports would supply about one-fifth of their finished steel requirements
during the First Five Year Plan.
A substantial portion of the machinery and equipment imports has been
obtained under contracts for "complete installations" negotiated with the
USSR and other Bloc countries, in which the suppliers undertake to design
-85-
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
and supervise the construction and initial operation of the installations.
In 1953 and 1954 the USSR agreed to construct 156 such industrial instal-
lations with a value of $1.4 billion and in 1956 contracted for 55 additional
installations with a value of $600 million. By 1957, 43 of these Instal-
lations had been completed and 102 were under construction, and it is
believed that most of than are scheduled to be completed by 1960. Similar
installations, although on a much smaller scale, are being provided by. the
European Satellites.
The Chinese have reported in their budgets total military expenditures
during 1953-56 of about 24 billion yuan (US $10 billion) but have not indi-
cated what proportion of these expenditures was for imported material. The
Chinese have reported receipts of Soviet credits of $2.2 billion, of which
$1.26 billion were utilized during 1953-56. Economic credits utilized during
1953-56 include a scheduled $120 million from the 1950 loan and almost all
of the $130 million 1954 loan. The bulk of the credits utilized in 1955 --
$675 million -- were specifically stated to be for military supplies and
installations turned over to the Chinese on the departure of Soviet forces
from Manchuria.
it is uncertain how the remaining $400 million in credits during
1953-56 were utilized., as no formal arrangement covering these credits has
been announced. It may be argued that, because of the secrecy, these were
military credits in spite of the fact that the 1954 credits ($360 million),
-86-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
which included a large portion of these remaining credits, were described
in the budget as supporting economic construction. In addition to military
material financed by loans, the Chinese are believed to finance some military
imports through trade which have been estimated very roughly at about
$150 million annually. These indications, although fragnentary, suggest
that military imports during 1953-56 may have been between $1.2 billion and
$1.6 billion.
Co Internal Resources Allocated to Exports.
Products of agricultural origin constitute about three-fourths of
the value of Chinese exports. Although exports represent only a small pro-
portion of agricultural production, exports of basic foodstuffs compete with
the requirements of an increasing population and a growing industrial economy
which requires industrial crops. Total output has been affected by adverse
weather conditions as well as by changes in. the institutional setting such
as collectivization. As a result of these factors, China has encountered
increasing difficulties in expanding exports of basic foodstuffs and has
stressed greater exports of subsidiary agricultural products such as bristles,
feathers, hides, tong oil, and silk.
Of nonagricultural exports, mineral products -- primarily nonferrous --
form the major share. Nearly all of the current output of tin, tungsten.,
mercury, maguesite, fluorspar, and molybdenum is exported as well as about
half of the zinc mined. Although most of the ferrous mineral output has been
consumed domestically, in 1956 about 7 percent of iron ore production,
- 67 -
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
12 percent of pig iron production, and 5 percent of finished steel production
is estimated to have been exported. Between 1 and 2 percent of the coal. out-
put was exported.
The pressure on Chinese export resources appears to be serious enough
to entail a cutback its the export program for 1957 and possibly for future
years. Although there are indications that China is
making investments to
expand production and exports of nonagricultural commodities such as non-
ferrous metal products, the main possibilities for expanding exports in the
near future are limited to agricultural commodities. The Chinese appear con-
cerned over the dangers inherent in reducing already-low internal consumption
further. As an illustration, the Chinese, after an unsatisfactory crop year
in 1956, apparently were forced to the decision to reduce exports in 1957
rather than to a ytail domestic consumption further.
D. Economic Growth and Future Trends in Foreign Trade of Communist
Recent events have indicated that the foreign trade of China ham
become an increasingly important, factor in shaping its ambitious industrial
and military programs. At the Eighth. Party Congress in September 1956 the
Chinese outlined a preliminary draft of their Second Five Year Plan, which
called for a doubling of industrial output and an increase of 50 percent in
national income an well as doubling the volume of capital construction over
that of the First Five Year Plan. Since thew, the regime has indicated that
it is lowering its goals and readjusting the program and that one of the
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
important factors involved in this re-evaluation of their capabilities Is
an appreciation of their limited import prospects stemming from export
difficulties and other payments problems.
The September 1956 draft of the Second Five Year Plan proposed that,
compared with the First Five Year Plan, imports of machinery and equipment
would decline from 40 to 30 percent of total needs, or from 15 to 11 percent
of total expenditures for construction. Because of the planned doubling of
capital construction, however, the volume of such imports was scheduled to
increase by half. More recently the regime has canceled several major
industrial projects and has called for increased emphasis on small and
medium-sized plants which would require proportionately less imports. Recent
reports that imports of machinery and equipment would supply only 20 to 30 per-
cent of requirements for a smaller capital construction program than originally
planned indicate that the regime is reducing scheduled imports of capital goods,
possibly to less than those of the First Five Year Plan.
Although the precise factors involved In this reassessment of import
prospects are uncertain, it is clear that payments difficulties play a promi-
nent part. During the First Five Year Plan the Chinese had current net
receipts on the nontrade items in the balance of payments which enabled the
financing of an import surplus of 1.9 billion yuan.e In the Second Five Year
Including military imports. Payments on foreign credits and for foreign
aid totaled Y 3.4 billion, receipts of foreign credits totaled ? 3.1 billion,
and not receipts on all other items amounted to about T 2.2 billion, including
particularly overseas Chinese remittances and expenditures of Soviet forces in
China during 1953-55.
89 -
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
S-E-C-R-E-T
Plan, however, the Chinese appear to contemplate a sharp reduction in
receipts from foreign credits, a sharp increase in service charge payments
on existing credits, some decline in remittances from overseas Chinese,, and.
a considerable decline in foreign expenditures in China (largely, as a
result of the withdrawal of Soviet forces in 1955). Although present Chinese
foreign aid conmaitiments total only one-third of those granted during the
First Five Year Plan, new grants or loans may be extended as current programs
expire over the next few years. On the basis of these factors, the Chinese
would be confronted with nontrade expenditures exceeding nontrade receipts by
possibly 3 billion to 3.5 billion yuan during the Second Five Year Plan. This
deficit would have to be balanced largely by an export surplus, since present
foreign exchange reserves are limited.
The Chinese, after an unsatisfactory crop year in 1956, appear to have
lowered their estimates of their export potential. A recent analysis of long-
run export prospects published in the Chinese press considered that exports
of basic foodstuffs and consumer goods, constituting half of current exports,
could not be expanded appreciably and in some cases would be reduced as the
result of rising domestic needs. The increase in total exports would then
depend on expanding the sales of other exports, particularly specialties to
the overseas Chinese populations of Asia, handicrafts to Bloc and Western
markets, minerals to Japan and other areas, and light industrial products to
Southeast Asia. Although exports rose by half between 1953 and 1957, the
regime clearly expects a leveling off it the rate of export increases. It
- 90 -
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-B-C-B H-T
may be noted that., in view of the movements of the nontrade itew in the
balance of payments, exports would have to increase by about one-fourth
.over the level of the First Five Year Plan in order to finance the same
level of imports.
The Chinese may also have reappraised their Import needs. A recent
analysis published in China indicates that the proportion of imports allocated
to essential consumer goods and to raw materials and fuels will be increased
during the Second Five Year Plane presumably reflecting increased urbanization
and industrialization. There is no indication of the trend in military imports.
V Impact of the Closure of the Suez Canal on the Trade and Transport of
C
ommunist China and Prospects for 1957?
A. Impact of the Closure of the Suez Canal.
1. Sh y.
Probably the most significant development in 1956 affecting ship-
ping engaged in Chinese foreign trade was the closure at the end of October
of the Suez Canal -- through which about 20 percent of China?s total foreign
trade moves. The effects of the closure were manifested primarily in early
1957. Bloc shipping services, whose employment in China?s trade even under
normal conditions is limited (reflecting a serious weakness in the over-all
Bloc supply system),, were restricted further during the period of the closure,,
and to a greater extent than non-Bloc shipping services.
The interruption of shipping between europe and Asia compelled
the use of much longer alternative sea routes for trade between these areas.
Bunkering was difficult as rerouting became widespread and bunker ports
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: ( lA 400R000200070004-3
became conger t :d. Moreover, the maintenance of the flow of commodities
over extended sailing distances greatly increased world shipping require-
ments q As a reauita the tight ship charter market created when Egypt
vvwtional ,zed the Suez Canal in mid-1956 became increasingly restrictive.,
amd obipping costs rose steeply.
Vessels.
a. Reroutin
Tae closure of the Suez Canal interrupted traffic on the
shortest ail-seaaon sea route between Europe and the Far East. Vessels
engaged in nese. trade and nonaally using the Cana had to choose between
she Prmam Canal or the Cape of Good Hope routes. The use of either ant
si ificant increase in sailing time and drastic revisions in delivery
schedules- For the most part,, shipowners found it more advantageous to use
he Cape route
u between Europe and China became one=third or more longer. For example,
the distance between Hamburg and Shanghai is 10,785 nautical miles via the
Suez Cpl; around Africa the distance is about 14,150 nautical miles. The
t:' and distance differentials between Mediterranean or Baltic Sea ports
d China became erect greater.
b 4 iteenin p Charter Market.
The extension of voyage time for vessels carrying a sizable
seg rat of world trade greatly increased the need for both tankers and cargo
vessels, thus aggravating a charter market that had been tightening since
_92-
As a result, voyage
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
the Suez Canal was nationalized on 26 July 1956. Over-all. tonnage
offerings in October, before hostilities in Egypt, were barely able to
cope with traffic d+ ands . Hostilities in Egypt made it even more difficult
to find vessels, especially for the Far East. Some liners serving the area
were rerouted to other trades, and many cargo vessels previously available
for charter on a one-trip basis were withdrawn. The impact on shipping
between. Europe and the Far East in general is best illustrated by the
freight-rate increases of 15 percent in early November and 17.5 percent on
1 February 1957 which were Incurred by traffic between these areas. To
these additional coats must be added increased insurance premiums.
c. Bunkering Difficulties.
Most vessels engaged in regular traffic are built to operate
on particular trade routes, with. consideration for obtaining fresh food,
fuel, and water at certain ports along the way. On the long-established
route to the Far East through the Suez Cana., there are many ports equipped
to provide these necessities. Ports along the Cape of Good Hope route are
not so numerous; neither are they sufficiently large to service efficiently
large numbers of vessels diverted from the Suez Canal. Vessels using the
route, therefore, had to incur certain' dissa,dvantages in addition to those
imposed by increased sailing distances. .
The diversion of China-bound vessels around Africa caused
delays in bunkering of from 2 to 8 days. Regular lines nosily using the
facilities on the west coast of Africa and at Capetown were given preference,
-93-
S-E?-C-R-E-T
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-4-C-R-B- `
ors of other vessels had to arran for agents and wtgotia ; b9.-< er
contracts. BuDker facilities for Bloc vessels engaged in carrying strategic
commodities to China were even more limited, inaeanucb as Western bunk!s.rtng
regulations which ho ly apply to ports east of Suez were inter reted. to
covey ports east of Capeetown.
ict of bunkering difficulties on the Bloc is 111os-
trated by the report in December that Czechoslovakia almost found it neceene.ry
to withdraw its vessels from the China trade because of the difficulty in
obtaining burr facilities on the route around African Moreover? the USSR
was compelled to bunker some of its vessels at sea from a Soviet tanker.
d., Increased Shippin
its a result of the increased voyage. time of 30 days per round
trip between Europe and the Far East, operating costs for a standard carqo
vessel in trade. bet ea these areas increased by about $87, (approximately
$2,900 a day)) , To cover the additional costs of fuel, wages, and, suppl.ias?
ahi,pr wae;rs raised frei,q t rates -- the additional, rate applied to Cue
import traffic routed via the Cape of Good Hope amounted to a minimum
$4.24 per ton. As a result, it is estimated that from .No,rmber 1956 through
April 1957 China incurred an ad itional expense of approximately $3 millionA
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
for imports via the Cape of Good Hope. This expense is in addition to the
general freight-rate increase incurred Immediately after the Suez Canal was
rationalized in July 1956, which amour eed to about $4 per ton. The aggre-
gate of these additional freight charges incurred by Comunist China amounted
to about $6 million.
2. Effect of Suez Canal Closure on the Seaborne Trade of C st
~n
Although same shipowners began diverting their vessels around the
Cape of Good Hope after nationalization of the Suez Canal in July 1956, the
major impact on shipping was not felt until the Canal closed at the and of
October 1956.
5X1
the chief Impact on shipping service pro-
vided for China was felt during the period January-April 1957 7
Thus the closure o e uez
commerce of China. Chinese exports, mainly iron ore, soya beans and food-
stuffs, and fertilizer Imports were affected by the shipping shortage and
increased freight rates which ensued. The closure of the Suez Canal, however,,
coincided with other factors which also had a depressive effect on China trade,
such as shortages of eexportables and of foreign exchange.
95
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
The downward trend in arrivals prevailed among Bloc as wall 25X1
as non Bloc vessels, although the former showed the greatest relative decline.
I This increase continued a trend "evidenced early
in 1956 and maintained throughout the year. This trend is believed to be a
reflection of the increase in non-Bloc liner services between Europe and the
Far East and in tramp shipping from Japan.
- 96 -
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Next 2 Page(s) In Document Denied
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
b. Reasons for Decrease in Merchant Ship Arrivals in Communist
China.
The decline of the seaborne trade of China, reflected in
decreased arrivals, apparently cannot be explained as being entirely the result
of the closure of the Suez Canal. It is quite certain that the worldwide
shipping shortage and the consequent increase in freight rates were important
factors influencing the over-all downward trend in merchant ship arrivals in
China. There have been reports indicating that cargoes to and from China
have been delayed by the dislocation of shipping since the end of November
1956. For example, shipments of iron ore to East Germany and coal deliveries
Table 27 follows on p. 101
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Next 2 Page(s) Document Denied
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
R-E-C-R-E-T
to Pakistan have lagged because of the scarcity of shipping. Moreover, the
unavailability of shipping has hindered China in obtaining desired imports
such as fertilizer from Western Europe.
Other factors, however, probably have also had a depressive
influence on China's seaborne trade. Defects in industrial planning in 1956,
in large part involving overinvestment in some sectors of the economy, led
to the need for "suitable retrenchment" in 1957. During 1957, it was
announced that China's construction program will be 20 percent smaller than
in 1956 -- investment will be limited to about one-third of total government
revenues, compared with about 45 percent in 1956. Internal and external
economy drives have also been undertaken which may have caused cancellation
of some contracts for equipment abroad.
Furthermore, the faulty planning in 1956 led to serious
shortages of some domestically produced commodities. Iron ore and coal,
both major export items, were reported to be in short supply internally in
early 1957 and therefore probably were not available for export in the same
volume as in 1956. Typhoons and floods in the summer and autumn of 1956,
which were apparently more serious than originally thought,, also affected
the availability of some basic products for export. It was subsequently
announced that exports of certain major commodities in 1957 would be
reduced greatly compared with 1956.
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
3. Diversion from Ocean Shipping to Rail Transport.
No specific data are available upon which a quantitative
estimate can be made of the diversion of the foreign trade of China from
ocean routes to overland rail routes as a consequence of the closing of the
Suez Canal. Nevertheless, an estimate can be made of what may have taken
place based upon knowledge of historical movement patterns and the supply
position of China.
Owing to the imperative need of maintaining a constant supply
of petroleum, the overland movement of this commodity for China via the
Trans-Siberian Railroad may have been expected to increase by approximately
25,000 tons per month (equivalent to a daily movement of about 800 to'e, or
slightly more than one half train load) as a result of the suspension of
sea movements. No Black Sea petroleum is believed to have ruched China
either directly by sea or indirectly by ocean voyage around Africa to
Vladivostok and by rail from there to China via the Grodekovo border point
during the time the Canal was closed.
The tankcar park of the USSR may well have been placed under an
extra strain owing to the relatively long car turnaround time required for
the overland movement of petroleum ft China and the Soviet Far East which
probably totaled 60,000 tons per month, or the addition of about ll trains
per day. It is even possible that petroleum deliveries of lower priority
within the USSR may have had to be deferred. No additional strain, however,
was probably placed on the rail system of China, because even with the Canal
- 105 -
S-?- -R-F-T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
in operation there has been a normal rail movement from Vladivostok via
Grodekovo to China of the petroleum received at Vladivostok by sea from
European USSR.
Certain other goods on order by China from the European Satel-
lites undoubtedly were shifted from sea to overland rail movement as soon
as it became clear that the Canal would be blocked for a matter of months.
These goods probably consisted mainly of high-value priority items. Diver-
sion to rail up to the end of 1956 of dry cargoes from the Satellites to
China is estimated to be about 15,000 tons. In 1957, such shipments probably
amounted to less than 5,000 metric tons per month.
Westbound freight from Chin and North Korea for the USSR and
the Satellites, the absence of which might have interfered with Soviet
or Satellite key industrial plans or development., may have been shipped
overland also in limited amounts. Possibly in this category would have been
rubber, jute, nonferrous metals and concentrates, oilseeds, soya beams, and
certain chemicals. Although the Satellites are known to have been short of
iron ore during this period, an estimate that there was the likelihood of an
overland movement of any great amount must be ruled out because of the
excessive transport cost for such movement. A rough estimate of the mwdmum
tonnage which under the most urgent circumstances might have been diverted to
the railroad for westbound movement during 1956 would be in the neighborhood
of 30,000 to 35,000 tons. It would, however, be reasonable to assume that
overland freight costs and the necessity for providing Soviet exchange
-106-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
precluded the shifting of an amount so large to the rails for the account
of the Satellites exclusively. A rough estimate is that diversions to the
railroads during 1957 probably were no more than 5,000 tons per month urtJi
the Canal was reopened, when, after a short lag, they probably ceased. The
impact on the railroads of having to move diverted dry cargo was of less
consequence than the increased petroleum movement, because the volume was
lower and the need came after the season of peak demand on closed cars had
passed.
One principal factor in restraining the demand for overland
transportation on the part of China and the european Satellites was the
great excess of land freight rates over ocew shipping rates. Following
the closing of the Suez Canal, it appears reasonable that except in the most
urgent cases the Chinese and European Satellites would have accepted the
delays to shipments occasioned by the routing of ships via the Capp of Good
Hope rather than pay the added transportation costs resulting from a rail
movement including the release of ruble exchange for the transit through
the tESR
-107-
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-004008000200070004-3
B. Prospects for 19R.
At ft e National Peoples Co ?ea$ in July 19 7 the Chi ded
anmunced that the 1957 trade pa.an provided for total, foreigm tradit aiund
at 99 955 million ]roan (slightly more than $4 billion)., or 8.4 percen loan
than in 1956 o This total would consist of Imports valued at 4,9755 millio
yuamm and exports valued at 5,200 million yuan, 10.2 percent and 6.6 .rc: t,
respectively, below 1956 levelaj.
Approved For Release 2007/01/20: CIA-RDP82-004008000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Planned exports are $150 million less than in 1956. The major
reduction is reported to be in grain exports, which are expected to decline
by 540,000 tons, or 41 percent less than in 1956. Exports of edible vege-
table oils are to be reduced from the 1956 level by 100,000 tons, pork by
85,000 tons, and cotton yarn by 12,200 bales. These cuts would be partly
compensated for by planned increases in exports of minerals and industrial
and handicraft products. The planned reduction in imports of $220 million
apparently reflects China's currently weak export and foreign exchange
position. There are indications that imports of machinery will be particu-
larly affected, reflecting concentration on less pretentiouu olent
construction for which the Chinese can themselves supply most of the materials.
This reduction in machinery will, however, be partly offset by increased
imports of consumer goods to alleviate domestic shortages.
Despite the planned reduction in 1957 trade, the Chinese have
reported that the aggregate volume of foreign trade in the First Five Year
Plan will exceed the origin.]. target by 6.4 percent and that the plan will
be overfulfilled by 8 percent for imports and 4.8 percent for exports.
Our present estimate of China's 1957 balance of payments indi-
cates a probable deficit of about $203 millions, compared with the estimated
deficits of $46 million in 1955 and $173 million in 1956.* The increase in
eSee tion 12, A, 3, P. 4
- 109 -
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
these estimated deficits in 1956 and 1957 compared with 1955 probably
reflects in large part receipts of goods under barter agreements with the
USSR not paid for by exports during the periods in question. The failure
to meet these export commitments was tantamount to an extension of sbort-
term Soviet credits. In addition, the deficits probably reflect some
drawing down of foreign exchange holdings. (See Table 28.)
Table 28
Estimated Balance of Payments of Communist China
1957
Million Us $
Payments
imports (c.i.f.)
-1,930
Debt repayment
- 250
Foreign aid grants and loans
- 207
Total
-2817
Receipts
Exports (f.o.b.)
2,9115
Overseas remittances
60
Foreign credit receipts
9
Total
2,1$4
Deficit, including errors and omissions
203
S-E-C-B-E-T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
A slight further shift in the direction of China's trade toward
the Free World is expected in 1957?
Considering that the total trade in 1957 is scheduled.
to decline, the maintenance of the non Bloc trade at the 1956 level would
result in an increase in its share to at least 27 percent.
The Chinese have announced that 1957 trade with the USSR would
be 1 times that of 1950 and would account for half of total trade, indicates
a decline in the Soviet trade of as much as 15 percent. Assuming no change
in the Satellite share of trade, this suggests that the Bloc share of trade
will be about 71 percent of the total, a level consistent with the indications
of the non Bloc share mentioned above.
2. Transport.
The opening of the Suez Canal removed an impediment to shipping
engaged in China's foreign trade. Shipping services to China recovered
during the second 1 months of 1957
S-E-CB-E-T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved,For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
The effect of the increase in shipping service during the
period May-August 1957 was to compensate for the reduction in shipping
service sustained during the first 4 months of the year, so that the average
It now appears that shipping service provided Chi= during
1957 will not be substantially greater than that provided during 1956.
Since the opening of the Suez Canal, petroleum shipments by sea
have not completely resumed their pre-Suez patterm,~
land movements of other diverted goods have probably long since returned to
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
There are, however, other forces conducive to the maintenance
of adequate shipping service for China's foreign trade in 1957 and the
immediate future. Since the reopening of the Suez Canal, there has been
a, decline in the world charter markets for both dry cargo vessels and tankers,
so that China, as well as other Bloc countries, should have no difficulty
in chartering Free World vessels at relatively reasonable rates for trade
movements during the year. Moreover, as the result of the elimination of
the so-called China differential by all countries in the COCOM/CHINCOM
organization except the US, in May and June 1957, controls on the use of
Free World vessels in the China trade are being relaxed by a number of the
leading maritime powers. Similarly, efforts are being made to reduce if not
eliminate bunkering controls. The relaxation of these controls would place
China charters on an equal footing with Free World charters and would elimi-
nate an irritant and inconvenience to China. Furthermore, the elimination
of bunker controls would in effect increase'the payload carrying capacity
of Bloc vessels engaged in China trade which previously had to'sacrifice
badly needed cargo space for the carriage of bunker supplies required for
the long voyage to China.
These circumstances, which would increase the availability of
shipping to the Bloc with its attendant lower transportation costs, may
result in'some increase in the portion of Chinese - Soviet Bloc traffic
moving by sea. The decline in infra-Bloc trade and the relative increase
i:h trade with the Free World projected for 1957 would have the effect of
- 11.7
S-E-C-R-E-T
Approved For Release 2007/01/20 CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
also increasing the relative share of seaborne trade, because the bulk
of Free World trade with China moves by sea, and a large proportion of
Bloc trade normally moves overland. Thus, some increase in the relative
share of China9s seaborne trade is expected, barring unforeseen develop-
nents which would disrupt shipping in the China trade.
China may now also increase the size of its oceangoing fleet
through purchase of merchant vessels up to 151 knots in speed from major
Free World shipping and shipbuilding nations except the US. The purchase
of even secondhand vessels will require considerable outlays of foreign
exchange or other exports, and Free World shipbuilding yards are already
I.eavily committed with orders to build new vessels well into the future.
It is improbable, therefore, that China will be able to avail itself of
this opportunity during 1957. There is no need for China to do so as long
es shipping requirements are provided by other Bloc countries and the Free
World. There is some evidence, however, that the Chinese may have plans
for the employment of their own merchant ships in trade with Southeast Asia
-within the next few years.
- 118 -
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
S-E C-R-E-T
APPENDIX A
STATISTICS FOR THE FOREIGN TRADE OF CO` lUNIST CHINA
lO
I. Introduction.
More information on the foreign trade of China was released during
1956-57 than in any previous comparable period by the governments of China,
the European Satellites, and the USSR. Many of the releases are obscure
and difficult to interpret. Most figures of trade activity are given an
index numbers and percentage changes from earlier periods., and there are
apparent irreconcilable conflicts among some figures. An increasing number
of absolute figures, however, have been announced. On the basis of this new
information a number of estimates in EIC-RI-S5 have been revised, the revisions
being referred to in footnotes throughout this report. This information raises
questions regarding the validity of the method for conversion of Yuan values
into dollar equivalents at the cross rate with the Yuan-sterling rates re-
ported by the Chinese as has been done in EIC-RI-S5 and in this report.
As estimates of the yuan value of the foreign trade of China for 1950.56
are considered relatively reliable, they are presented in this report as
a point of reference for the less reliable dollar estimates.
II. Yuan Value of Foreign Trade.
A. Total Trade and Balance of Trade.
In September 1956 the Chinese published an index of the value of
dotal foreign trade for 1950-55. The value of trade during these years
has been computed from this index and an official figure for trade in 1954
. S-E-C-R_E.-T
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
(8,9487 minion iruan). The value of exports and imports and the resulting
balance of trade have been calculated from a recent announcement of import-
port ratios for 1950-55. These data, together with the announced value
of exports and reports for 1956 and the 1957 plan, are presented in Table 31.
Table 31.
Estimated Yuan Value of the Foreaign Trade,
Imports, Exports, and Trade Balances of Communist China
1950-57
Lion Yuan
Year
Total Tradks
ITTO-rts
Trade Balances
1950
1
51
4x,160
2,122
2
038
84
9
19
65,949
3,510
,,
2,1439
1, on
:1953
8, 112
3o764
2,726
1,038
1954
846
~~.~62~
3,ta88
1
1955
7
14,413
4,074
339
1956
1120214
1
6s063
4, 961
1,1,E
(gin)
9,955
4*755
a,200
445
o Direction. of Trade,
The direction of trade has also been estimated from Chinese official
data, In 1956 a table was published showing the percontage of the trade ff
China with the three main areas of the Bloc and with the F ,e World t 'om ? .95
through 19538* In 15'57.,4 comparable official data for the distribution
These Percentages mom released in conjunction with indexes of MAX , and.
total trade which differ from the recently announced index of total trade.
F example, total trade for 1953 was reported at 181 percent of 1950,
o d with the recent figure of 195 percent indicated in the innd , The
differences may reflect use of different units of account or incomplete
courage. It is believed,, hoarever, that these ntages, despite weir
Inconsistencies, indicate reasonably well the direction of Chimse trail
In these years.
.E...T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
S.?E-C-RI.E.T
of trade in 1956 were published. Only miscellaneous announcements reporting
the Bloc and Soviet shares of the trade of China have been released for the
intervening years 1951 and 1955. The Bloc share was reported for those 2 years
as 80.55 percent and 82 percent, substantially larger than in 1952, 1953,
or 1956, The Soviet share, however, was announced as 55 percent and 55.3 per-
cent for 1954 and 1955, approximately the same share as in 1952 and 1953
and again in 1956. These figures would indicate that the share of the
Satellites (European and Far Eastern) in the foreign trade of China Increased
considerably over their share in 1952 and 1953 and that their share decreased
in 1956.
No other Information, however., supports this indication. It appears.,
on the contrary, that the substantial increase in Bloc participation in the
trade of China in 1954 and 1955 was a result mill's of expansion of trade
with the USSR than of expansion of trade with the Satellites. In both these
years the USSR extended loans -p- amounting to about $360 million in 1954 and
$675 million in 1955. Such loans have been observed in earlier years, but in
1953 they totaled only slightly more than $175 million. That the Soviet share
of Chinese trade should be higher than the announced percentages is also
suggested by a recently published Chinese index of Sino-Soviet trade for 1955
and 1956 (with 1950 as the base year) which indicates that the Soviet share of
trade in 1955 was approximately 62,5 percent. The Soviet share for 1954 mgy,
therefore, be estimated at 59 percent. With credits reduced to less than
$50 million in 1956, the Bloc and Soviet shares of Chinese trade would be ex.
pected more closely to approximate the 1953 level. This expectation in con-
firmed by the Chinese trade announcement for 1956.
A.3
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
S-E-C.R.-B-T
trade with the European Satellites suggest
that their share of China's trade declined from 19 percent in 1953 to about
16.55 percent in 19511 and 15 percent in 1955. On the basis of these figures
the share of the Far Eastern Satellites is calculated an rising from
2.52 percent in 1953 to 5 percent in 1954 and declining to 4.5 percent in 1955.
The percentage distribution of the foreign trade of China, shown
in Table 32, was used as the basis for estimating the distribution of the
Yuan value of trade, as shown in Table 33.41
Table 32
Percentage Distribution of the Foreign Trade of Comnmuiist China
1950-56
1
1951
1952
195
1955
3956
66.52
36.72
21.92
211.51
19.145
p
18
211.7
33.48
63.28
808
7 ,5.49
80.55
82
5.3
USSR
30.89
48.72
57.34 .
56.39
59
62.5
53.7
European Satellites
1.99
713.24
19.02
16.58
16.55
15
17.2
Far Eastern Satellites 0.6
1.32
1.72
2.52
5
4.5
4.4
* Table ' 33 follows on p. A-5.
A..4
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01-t,I.'82-00400R000200070004-3
Table 33
Estimated Yuan Value of the Direction of the Foreign Trade of Conte China
1950-56
Milli
Y
on
uan
1950
7`
X9
52
9
_
-.
Total trade
,.a
I9
Non-Bloc trade
29767
2.1184
1,423
1,988
1,651
1,984
2,68!
Bloc trade
1,393
3 76
5
612!}
686
8
..
,181
USSR
1,285
2,898
3,721
4,574
5,007
6, 886
5, 834
European Satellites
83
788
1,234
1,345
1,!405
106.58
1, 86;
Far Eastern Satellites
25
79
112
204
424
1+96
478
C. Capital Movements
The budget report of Vice-Premier Li Heien-.nien to the 1957 National
Peoples Con ress provides considerable information of the value of Soviet
loans to China. Li reported that the -USSR has extended to China loans amounting
to 5, 291 million yuan, of which 2,171 million were used Before 1953 and
3,120 million are being wed in the period of the First Five year plan. The
budget report also provides the basis for Calculating the annual utilisation
of the Soviet loans extended daring the Five Year Plwn0
Other capital movements have been revealed in budget reports. Foreigi
aid expenditures have been reported for the years 1955..57,
Service on debts
(both domestic and foreign) has been reported for the years 1954. 5;7. An infor=
nation is available on dmestic debt service, foreign debt service has been
calculated as residuals, These data are ahown in Table 34.*
oil on po.
Amy
S-E-C_R-E.?T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
tbble 34
Sel.ated Capital Muvei, ants in the Balance of Pater; of Ca muniiet (iirui
.95o-56
Period
eipte of
?ore Croats
Foreign ! bt
serwice
PDVO n
1950--52
`,1714
Negligible
t A.,
438
1legligihles
A.
19514
88t
I,35
/
1955
1 9657
18o
1956
117
595
1=:
to Nnreported at jM ar-
in. u8 Don" value of FTqign Trade.
In previous ETG-Rl, reports, yuan values of trade have been sonvz rte 1 into
dollar equivalents by using the yuan.sterling amdmwe rate reported by ChirA9
Although Free World trade data warrant the use of this rate in convetim tte
an value of Free World trade to dollars, there has never been ade aAte
evidence for using the same exchange rate in trade with the Bloc couratxi"no
Data in recent Soviet and Satellite releases about their trade with C'" hi.
indicate that this esethod for -ruan-dollar conversions should be re :ud d.
Mesa data indicate lower dollar valuers for Chinese trade with ".1oc
'countries than are carried in previous EI1C-RI reports. The USSR has announced
the ruble value of its trade with China as 1,656 million rubles (at the
official rate of ezxhange equivalent to $414 mf1I'on) in 19506 4.140 mi1: ;.tor
rubles ($1,035 million) in 19531 4,500 million rubles ($1,325 million) in
19.51.1 and 5,500 million rubles ($1#375 million) in 19.560
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3.
The reports of the European Satellites of their trade with China indicate
a value of total Sina.European Satellite trade in 1956 of approximately
$540 million. These dollar figures may be compared in Table 35;* with the
estimated value obtained by converting Chinese figures aacpressud in yuan value
to dollar equivalents by using the yuen-sterling-dollar cross rate? A com-
parison of the figures reveal that for 1950 the conversion ratio for Sino-
Soviet trade is about the amen as the official cross rate, but that those for
succeeding years indicate a higher conversion ratio.
There are several, possible explanations for the discrepancies in the data.
These ezplaaations highlight the difficulties and limitations of attemptL,3g to
reconcile these differences and to express Chinese trade data denc*ni.nated In
yuan into meaningful equivalents.
Part of the diapariy between dollar estimates based on Chinese data
and those based on Soviet and European Satellite data might be explained by
Bloc methods of pricing cam odities in antra-Bloc trade. According to
Chinese statementa, trade with the Soviet Bloc is conducted at constant
ruble prices, based on 1950 world prices. Thus the value of the trade as
reported by Chines should be the same as the value reported by the USSR if it
also reported trade in constant (1950) prices. If, however, the USSR
reported trade in constant (1950) prices and China reported it in current
prices, the value of the trade as reported by China would increase more
rapidly between 1950 and 1956 than the value as reported by the USSR, for
world prices rose during these years.
A-7
S-E-C..R.E-T
Approved For Release 2007/01/20: CIA-RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-E-C.?R-E-T
Such price risen are, however, insufficient to account fully for the dis-
parities. The discrepancy in Sino-European Satellite trade,, as reported by
the Chinese on the one, hand and the European satellites on the other, can be
accounted for to even a smaller degree by this price factor. The evidence
indicates that unit prices in this trade were not as constant as in the
Sino-Soviet trade.
Furthermore, in computing trade data, the USSR may have excluded some
items of trade that China may have included, since the reported value of the
USSR of its trade with China appears especially low as cornpared with intelli-
gence estimates as well as with Chinese reports, The items most likely
excluded are military goods shipped to China. This difference in statistical
procedures could account for the disparity in 1953 but not for that in 1956,
when military deliveries were small.
Another possible explanation is that,the Chinese figures present foreign
trade as valued in domestic rather than in international prices. It is
known that several Dios, countries record foreign trade valued in dameatic
prices as well as in international prices for purposes 'of planning and
accounting,
In Bloc countriej the foreign trade price of~a commodity usually differs
from its domestic price. The ratio of domestic prices to world prices varies
from one cammadity to another. Thus a conversion ratio from Yuan to dollars
for trade within the Bloc would vary from country to country depending upon
the commodity composition of the trade. Information presently available does
not permit the calculation of.meaningful conversion ratioi based on domestic
prices for Chinese trade with Bloc countries,
A.8
Approved For Release 2007S&ELI.RGtA$RDP82-00400R000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
S-E-C-R-E-T
'.Emus there is no available explanation for the discrepancies in trade
data, and a reconciliation would probably encoaegeaa all of these factors and
possibly others. The paucity of information about the methods of China of
recording and reporting foreign trade, including data on exchange rates,
precludes a completely satisfactory expl$nation or exact estimate of the
dollar value of this trade. It is believed, however, that conversion of Yuan
values to dollar equivalents by using the sterling cross rate gives a uaeAzi
approximation of the value of trade.
I
A - 10
3-E-C?R-E-T
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
 Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3
Approved For Release 2007/01/20: CIA-RDP82-0040OR000200070004-3