COMMUNIST CHINA THROUGH 1961

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP98-00979R000400490001-4
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 36
• Document Creation Date: December 23, 2016
• Document Release Date: May 10, 2013
• Sequence Number: 1
• Publication Date: March 19, 1957
• Content Type: NIE

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R 1712-r-
94- S ET 63
NIE 13-57
19 March 1957
N? 270
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 13-57
(Supersedes NIE 13-56)
COMMUNIST CHINA THROUGH 1961
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
INTELLIGENCE ADVISORY COMMITTEE
on 19 March 1957. Concurring were the Special Assistant, In-
telligence, Department of State; the Assistant Chief of Staff,
Intelligence, Department of the Army; the Director of Naval
Intelligence; the Director of Intelligence, USAF; and the
Deputy Director for Intelligence, The Joint Staff. The Atomic
Energy Commission Representative to the IAC, and the Assist-
ant Director, Federal Bureau of Investigation, abstained,
the subject being outside of their jurisdiction.
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1. This estimate was disseminated by the Central Intelligence Agency. This copy.
is for the information and use of the recipient indicated on the front cover and of per-
sons under his jurisdiction on a need to know basis. Additional essential dissemination
may be authorized by the following officials within their respective departments:
a. Special Assistant to the Secretary for Intelligence, for the Department of
State
b. Assistant Chief of Staff, Intelligence, for the Department of the Army
c. Director of Naval Intelligence, for the Department of the Navy
d. Director of Intelligence, USAF, for the Department of the Air Force
e. Deputy Director for Intelligence, Joint Staff, for the Joint Staff
f. Director of Intelligence, AEC, for the Atomic Energy Commission
g. Assistant Director, FBI, for the Federal Bureau of Investigation
h. Assistant Director for Central Reference, CIA, for any other Department or
Agency
2. This copy may be retained, or destroyed by burning in accordance with appli-
cable security regulations, or returned to the Central Intelligence Agency by arrange-
ment with the Office of Central Reference, CIA.
3. When an estimate is disseminated overseas, the overseas recipients may retain
it for a period not in excess of one year. At the end of this period, the estimate should
either be destroyed, returned to the forwarding agency, or permission should be
requested of the forwarding agency to retain it in accordance with IAC-D-69/2, 22
June 1953.
4. The title of this estimate, when used separately from the text, should be classified:
FOR OFFICIAL USE ONLY
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
DISTRIBUTION:
White House
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Atomic Energy Commission
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TABLE OF CONTENTS
Page
CONCLUSIONS . . . . . . . . . . . . . . . . . . 1
DISCUSSION . . . . . . . . . . . . . . . . . . . 2
I. DEVELOPMENTS WITHIN CHINA . . . . . . . . 2
The Political Situation . . . .. . .. . . . . . . 2
Popular Reaction to the Regime . . . . . ... . . . 3
The Economy of Communist China . . . . . . . . . 4
Planning for the Second Five Year Period . . . . . 6
Major Economic Problems ... . . . . . . . . 6
Prospects . . . . . . . . . . . . . . . . . 8
The Military Establishment . . . . . . . . . . . 8
II. COMMUNIST CHINA WITHIN THE COMMUNIST
WORLD . . . . . . . . . ... . . . . . . 8
III. COMMUNIST CHINA'S RELATIONS WITH THE
NON-COMMUNIST WORLD . . . . . . . . . 9
The Asian Impression of Communist China . . . . . . 11.
IV. PROBABLE CHINESE COMMUNIST EXTERNAL
COURSES OF ACTION . . . . . . . . . . . 12
The US . . . . . . . . . . . . . . . . . 12
Taiwan . . . . . . . . . . . . . . . . 12
Korea . . . . . . . . . . . . . . . . . . 13
Japan . . . . . . . . . . . . . . . . . . 13
Vietnam, Laos, and Cambodia . . . . . . . . . 13
Pakistan, Thailand, and the Philippines . . . . . . 13
Indonesia . . . . . . . . . . . . . . . . 13
Malaya and Singapore . . . . . . . . . . . . 13
India . . . . . . . . . . . . . . . . 14
Burma . . . . . . . . . . . . . . . . . . 14
Hong Kong and Macao . . . . . . . . . . . 14
APPENDIX A
THE ECONOMY OF COMMUNIST CHINA . . . . . . . . 15
Industry . . . . . . . . . . . . . . . . . 15
Engineering Industries . . . . . . . . . . . . 15
Metallurgy . . . . . . . . . . . . . . . . 15
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TABLE OF CONTENTS (Cont.)
Page
Electric Power and Coal . . . . . . . . .. . . . 15
Petroleum . . . . . . . . . .. ... . . . . 15
Other Industry . . . . . . . . . . . . 18
Agriculture . . . . . . . . . . . . . . . . 18
Transportation . . . . . . . . . . . . . . . 18
Railroads . . . . . . . . . . . . I . . . . 20
Shipping . . . . . . . . . . . . . . . . . 20
Foreign Trade . . . . . . . . . . . . . . . . . 22
Science and Technology . . . . . . . . . . . . . 23
Population . . . . . . . . . . . . . . . . . . 23
APPENDIX B
THE CHINESE COMMUNIST MILITARY ESTABLISHMENT. 25
Ground. Forces . . . . . . . . . . . . . . . . 25
Internal Security Forces . . . . . . . . . . . . . 26
Air Forces . . . . . . . . . . . . . . . . 26
Naval Forces . . . . . . . . . . . . . . . 27
Nuclear Energy Program . . . ... . . . . . . . . 28
APPENDIX C
DIPLOMATIC STATUS OF COMMUNIST CHINA . . . . . 29,
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COMMUNIST CHINA THROUGH 1961
THE PROBLEM
To examine the present situation in Communist China and its international re-
lations, and to estimate probable developments during the next five years.
CONCLUSIONS
1. The Chinese Communist Party will al-
most certainly continue to exercise ef-
fective control over mainland China dur-
ing the period of this estimate and will
press forward with its program of creat-
ing a powerful industrialized Communist
state. Through a combination of incen-
tives and repression the regime will prob-
ably be able to prevent popular discon-
tent from becoming a significant factor
in retarding the momentum of its pro-
gram. (Para. 19)
2. The Chinese Communists will probably
continue to make substantial progress in
industrial development but agricultural
production will probably increase at only
50 percent of the planned rate of increase
and thus will tend to restrict, the rate of
overall economic growth. (Para. 37)
3. Communist China has placed great
emphasis upon maintaining and develop-
ing its armed forces as a basic aspect of
national power. With Soviet assistance,
its military capabilities have become far
greater than those of any other Asian
power and will probably continue to in-
crease during the next five years. (Paras.
38-39)
4. The position of the Chinese Commu-
nists in the Communist world has been
greatly enhanced as a result of develop-
ments since the death of Stalin and par-
ticularly because of the prominent role
they have played in Bloc affairs in the
past year. Peiping will probably further
increase its influence within the Commu-
nist Bloc and will have an important
voice in matters, affecting the Bloc as a
whole. Communist China will continue
to rely on the Bloc for the bulk of its
military and economic imports. Although
it is probable that some conflicts of in-
terest and disagreements will develop be-
tween Moscow and Peiping, it is highly
unlikely that either will permit such con-
flicts to impair Sino-Soviet solidarity.
(Paras. 40, 43)
5. Communist China's influence has in-
creased markedly in the non-Communist
world, and its presence is especially felt
in Asia. The Chinese Communists have
been able to create the impression in
much of non-Communist Asia that Com-
munist China is a dynamic, permanent,
and perhaps not unfriendly world power,
which it is unwise to offend by too close
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alignment with the West. At the same
time, however, there is apprehension con-
cerning Communist China's real inten-
tions and a recognition, though seldom
voiced publicly, of the importance of the
US in restraining Communist China from
overt aggression. (Paras. 44, 54, 57-58)
6. The replacement of Western influence
by Communist influence in Asia will con-
tinue to be a major Chinese Communist
objective. In its approach to this ob-
jective and other international problems,
Peiping will probably try to avoid courses
of action which it believes would pro-
voke US military intervention. It will
remain hostile to the US, and will not
offer major concessions on basic issues.
Nevertheless, it will probably endeavor
to appear conciliatory and flexible on in-
ternational issues. At the same time,
it will continue its subversive efforts, and
will take advantage of opportunities for
Communist expansion, possibly includ-
ing the extension of support to armed
revolts against non-Communist govern-
ments. Peiping will remain determined
to obtain control of Taiwan, but will al-
most certainly not attempt to seize Tai-
wan by force so long as the US is commit-
ted to its defense. (Paras. 59-60, 62, 64)
DISCUSSION
1. DEVELOPMENTS WITHIN COMMUNIST
CHINA
7. During the past seven years the Chinese
Communists have brought mainland China
under effective control and have established
a strong central government, aligned with
the USSR and hostile to the West. By delib-
erate use of terror and by persuasion and
social pressure, they have drastically changed
many basic features of Chinese society. They
have made considerable progress toward de-
veloping an industrial base and in increasing
output in other sectors of their economy. The
Chinese Communist armed forces are being
modernized, with Soviet support, and their
military capability on the Asian mainland
and in adjacent waters has been greatly in-
creased.
The Political Situation
8. The Chinese Communist Party is in com-
plete control of the government. Most im-
portant government posts at both national
and local levels are held by members of the
party, and the party structure parallels that
of the government down to the, smallest polit-
ical division. Orders from Peiping are trans-
mitted through both governmental and party
channels. The party cadres have the impor-
tant functions of supervising the operation of
provincial and local governments and of pro-
viding leadership for the implementation of
major projects such as the socialization of
agriculture. Non-party members occupy a
few cabinet and subcabinet positions but are
there either as window dressing or in order
that their skills can be exploited.
9. Party membership has more than doubled
since 1952, and now probably exceeds 11 mil-
lion. The majority of party members con-
tinue to be' drawn from the peasant class
(about 69 percent), but the proportion of
urban workers has now increased to about
14 percent. About 10 percent of the members
are women.
10. The top leadership of the Chinese Com-
munist Party has continued to demonstrate
a remarkable degree of continuity, unity, and
stability. The Eighth Party Congress, which
met in September 1956, confirmed the domi-
nant position held by Mao Tse-tung and his
closest lieutenants, Liu Shao-chi, Chou En-lai,
Chu Teh, and Ch'en Yun. These four men
serve as vice chairmen of the Central Com-
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mittee and as members of the newly formed
six-man Standing Committee of the Politboro,
the most powerful organ of the party. Mao
himself remains chairman of the Central Com-
mittee and of the Politboro and its Standing
Committee. His personal prestige and power
have not been diminished by the Soviet attack
on the "cult of personality."
11. At the same time, the party has brought
some new blood into the higher party echelons.
One hundred three new members and alter-
nates have been added to the. Central Com-
mittee from among provincial and municipal
party committees, central government and
party agencies, and the high-ranking officers
of the armed services. By giving added rep-
resentation to provincial party organizations
and key.elements of the civil government and
the military, the party has strengthened its
control over these segments of government
and administration. The most notable in-
dividual promotion was the appointment of
Teng Hsiao-p'ing, Secretary-General of the
Central Committee and apparently the lowest
ranking member of the old 13-man Politboro,
to the Standing Committee.
12.- During the next five years, the leadership
of the party will probably be able to maintain
unity. and cohesion. In the event of Mao's
death or disability, jockeying for power might
develop which could reduce the effectiveness
of the leadership. Mao would probably be
succeeded as chief-of-state by the aged vice
chairman, Chu Teh. However, effective power
would probably initially reside in a collective
body made up of the senior party members.
13. The Chinese Communist Party will be en-
gaged in a continuing drive to maintain and
tighten party discipline. It will probably con-
tinue its efforts to improve party control in
the army and in economic enterprises, in order
to prevent the emergence of a caste of non-
political specialists. There will also be an
effort to adjust relations between local and
central organs within both party and govern-
ment, in order to encourage local initiative
while enforcing central control and also to
prevent the development of local satrapies.
Although administrative efficiency will prob-
ably improve, the regime will continue to be
hampered by a shortage of trained party ca-
dres and administrators.
Popular Reaction to the Regime
14. We believe that the regime is faced with
considerable dissatisfaction, engendered in
part by rigid controls, enforced social changes,
and imposed austerity, and in some areas
such as Tibet, with open defiance. On the
other hand, the regime has the positive sup-
port of some groups, in part as a result of
its promises of a new industrialized and pros-
perous China and its claims of growing pres-
tige and influence in the world. The bulk
of the people, however, probably respond to
the regime in a resigned manner because of
their conviction that it can effectively exercise
its power over them and that little is to be
gained by opposing it.
15. The regime, concerned by the adverse ef-
fects of the continuing lack of general positive
support, sought, in the spring of 1956, to relax
domestic tension engendered largely by the
radical social changes embodied in the col-
lectivization drive of 1955. The regime sought
to counteract the rigidities of its policies and
to create a more positive response to its pro-
grams, and promised some amelioration of
the harsh conditions of life to almost every
social group in Communist China. In partic-
ular, the regime has adopted some measures
designed to improve conditions for the intel-
lectuals and to increase incentives for peas-
ants and urban workers. This recognition of
what the Chinese Communists subsequently
termed the "human factor" in production and
social reorganization apparently stemmed
from a desire to consolidate the considerable
social change which had occurred.
16. These tactics have not involved any sig-
nificant increase in personal freedoms. De-
spite an announced emphasis on. material in-
centives for peasants and workers, these in-
centives will be limited since the regime's
long term program will inevitably require
the retention of austerity and harsh economic
policies. Moreover, the incentives granted to
private entrepreneurs participating in joint
state-private enterprises are admittedly tem-
porary. The toleration and even encourage-
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ment of intellectual diversity, in certain fields,
designed to elicit the maximum efforts of Com-
munist China's limited numbers of intellec-
tuals and trained technicians, will not be car-
ried to the point where attacks on basic pol-
icies and doctrines of the regime will be per-
mitted.
17. Even if the regime is unsuccessful in elicit-
ing greater positive support, it will probably
be able to maintain firm control throughout
China and to implement sweeping social
changes. It has large and well-disciplined
police, militia, and security organizations,
supplemented by a network of informers and
local "residents' committees" which provide
surveillance over individual family groups.
Party control is further reinforced by a system
of mass organizations, organized along social
and occupational lines, which mobilize various
groups in the population behind Communist
programs and serve as channels for propa-
ganda and indoctrination. The rapid expan-
sion of agricultural cooperatives and collec-
tives during 1955 and 1956 has probably
strengthened Communist control over the
peasantry and reduced the likelihood of large
scale peasant revolts. Behind this control
mechanism stands the large Chinese Commu-
nist military force.
18. The Chinese Communists have admitted
the existence of unrest among some minority
nationalities on the borders of China proper,
requiring military suppression and a policy
of gradualism in imposing Communist institu-
tions. The most serious recent armed clashes
appear to have been with the Tibetans. Al-.
though the Chinese Communists were able
to establish a military regime in Tibet in 1951,
it was not until May 1956 that they took the
first step toward establishing Tibet as an
"autonomous region" of Communist China.
The regime, in recognition of strong Tibetan
resistance to change, has indicated that social
changes will be imposed gradually.
19. Barring involvement in a major war, dur-
ing the period of this estimate the regime's
control over the population will probably be-
come increasingly effective as socialized enter-
prises become more firmly established. The
regime will probably continue to have diffi-
culties in imposing its policies in minority
areas, such as Tibet, where changes will have
to be instituted slowly and carefully. How-
ever, the imposition of Communist control in
these areas will probably be facilitated as
communications and party organization im-
prove, and as the policy of moving Han Chi-
nese into these areas is implemented. There
appears to be, during the period of the esti
mate, little likelihood that the existence of
the regime or its control over the mainland
will be threatened by popular dissidence, or
by the almost inevitable local eruptions of
discontent. The regime will probably be able
to elicit a somewhat more positive support
from certain privileged groups, such as skilled
workers, technicians, and scientists.
The Economy of Communist China' 2
20. The transformation of agrarian China
into a "modern socialist industrial" state is
an avowed major objective of the Peiping re-
gime. During the initial four years of the
First Five-Year Plan (1953-1957), the regime
has achieved considerable progress in its pro-
gram of industrialization. Gross national
product has probably been expanding at an
average annual rate, of seven to eight percent,
a growth rate comparable to that of Japan in
recent years and well above that of other
Asian countries. This growth was achieved
under considerable strain, involving enforced
austerity and adjustments to shortages in
transport, power, and other sectors. Indus-
See Appendix A for additional discussion of the
current economic situation.
2 The analysis in this section is based on estimates
which are largely dependent on Chinese Com-
munist statistics. Although these statistics often
cannot be confirmed by independent sources,
careful examination and comparison with in-
dependent data that are available strongly sug-
gest that these figures constitute the basic eco-
nomic data available to the regime and that
in most instances there appears to have been
no motive to inflate these data. Where in-
accuracies exist, they appear, for the most part,
to be the result of ambiguous definitions of the
data, deficiencies and inexperience in data col-
lection, provisional reporting, pressure to re-
port fulfillment of plans, and incomplete and
selective reporting of the data to support cer-
tain policy points of view.
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trial expansion appears to have exceeded the
original goals of the First Five Year Plan,
while the growth of agriculture has been con-
siderably less than the planned rate. The
rate of investment has approached 20 percent
of GNP and industrial output has increased
at an estimated average annual rate of nearly
17 percent. The output of steel ingots is esti-
mated to have increased from approximately
1.35 million tons in 1952 to about 4.5 million
tons in 1956 and the limited electric power
production has doubled. Agricultural output
has increased at an estimated average annual
rate of nearly three percent.
21.. This relatively rapid rate of economic
progress was facilitated by the comparatively
inexpensive rehabilitation of the modest in-
dustrial base, built largely by the Japanese
and concentrated in Manchuria and, to a less-
er extent, in North China and Shanghai. Po-
litical unification of mainland China, for the
first time in decades, provided generally peace-
ful domestic conditions which enabled the
regime to integrate the previously fragmented
economy and to organize resources -and pro-
duction on a national basis. In addition,
the regime has received from other Bloc coun-
tries, over the four-year period 1953-1956,
capital goods, raw materials, and military
equipment in the amount, of over six billion
dollars. Of this, some 1.5 billion dollars was
covered by Soviet economic and military cred-
its and the balance financed by exports. The
Bloc has apparently fulfilled Chinese Com-
munist essential import requirements, espe-
cially for machinery, though with occasional
delay in delivery, and has provided consider-
able technical assistance.
22. One of the most important factors con-
tributing to the regime's economic program
has been -its. success in establishing effective
controls over the economy without causing
a major slump in production. These per-
vasive controls effectively restricted consump-
tion as output increased, resulting in the for-
mation of capital which was concentrated in
expanding heavy industry, and in the ac-
cumulation of commodities to exchange for
vital imports. The agricultural sector, which
contributed nearly two-thirds of GNP in 1950,
presented the critical problem because of the
difficulty of establishing control over the out-
put of nearly 450 million peasants farming
millions of tiny farms. The problem of estab-
lishing control over industry was less difficult
because the regime was able to assume owner-
ship of a major portion of heavy industry di-
rectly from the National government, though
it was faced with the problems of organizing
production.
23. In the early stages of establishing control
over the country, the regime permitted a large
segment of private enterprise to continue and,
for the most part, exercised indirect methods
of control through fiscal, banking, and trade
channels. It ruthlessly enforced compliance
with its regulations and eliminated the major
potential sources of resistance. The regime
concurrently applied education, propaganda,
and social pressures in an effort to induce the
people to accept the end of private enterprise
and began on a small-scale to impose socialist
control through a series of transitional stages.
However, by forced acceleration of socializa-
tion in the winter 1955-1956, the regime
virtually eliminated private capitalism and
gained direct control over practically all in-
dustry and commerce.
24. To ease the transition to socialism in the
agricultural sector, the Chinese Communists
at first adopted a step-by-step approach which
was to move from a simple pooling of labor
and tools, through agricultural producers co-
operatives, to full scale collectives. The Chi-
nese peasant, by incentives, including the
promise of higher income, and by noncom-
pliance penalties, was induced to accept con-
stantly increasing state control. Concurrent-
ly, the regime moved more rapidly to gain
control over the marketing of the .main agri-
cultural products, and established price con-
trols, rationing, and controls on agricultural
loans. During the early part of the present
Five Year Plan (1953-1957), progress toward
collectivization was slow, irregular, and rather
uncertain. By October 1954 less than two per-
cent of the peasant households were in coop-
eratives and an insignificant percent in col-
lectives.
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25. Following a speech by Mao in July 1955,
the rate of collectivization was abruptly ac-
celerated. Mao called for more rapid socializa-
tion through energetic leadership, and cas-
tigated. those who had urged a slower pace.
By November. 1956, the Chinese Communists
claimed that 96 percent of the total peasant
households in China were in some kind of
agricultural producer cooperative, and of those
83 percent were completely. collectivized. We
believe that almost all peasants have now been
assigned to collectives, but that many of these
collectives have not yet been consolidated.
26. It is too early to judge the ultimate effects
of these organizational changes. While the
regime has claimed that in most instances
production has increased in agriculture and
industry and that trade has expanded, it has
admitted that the "mistakes and defects were
not few" in the socialization program. Among
the major shortcomings admitted were: (a)
waste and faulty planning, (b) neglect of live-
stock and rural handicraft industries, and (c)
defective organization due to "rapid advances
of the movement." In addition to the prob-
lems inherent in such a large undertaking,
many mistakes resulted from inexperience and
lack of training on the part of the cadres
responsible for the drive. Nevertheless, in its
approach to socialization and particularly the
collectivization of agriculture, the regime has
to date avoided most of the disastrous conse-
quences experienced by the Soviet Union.
27. Planning for the Second Five Year Period.
We estimate that many of the First Five Year
Plan targets for 1957 were achieved by the
end of 1956, but at the cost of depleted mate-
rial stockpiles and an untenably low level of
working capital. As a result, the year 1957
will be a period of adjustment and consolida-
tion before the more ambitious Second Five-
Year Plan (1958-1962) is begun. The regime
has evinced growing concern over the inter-
related problems of consumption and incentive
and the total amount of capital available for
investment. It has recognized the dangers:
(a) that a shortage of consumer goods will
cause difficulty in maintaining price stability,
(b) that prices paid to the farmers for many
of their products are too low to encourage
peasants to increase production, and (c) that
an insufficiency of light industry products will
decrease worker's incentives and lower pro-
ductivity as well as reduce the state's profits
and its resources for investment in heavy in-
dustry. Although the regime has recently an-
nounced its intentions to maintain industrial
investment in 1957 at about the 1956 levels,
it has admitted that cuts in nonindustrial in-
vestment will be necessary. A program of
austerity in other government spending has
also been introduced.
28. Although such considerations will prob-
ably lead to some modifications in the invest-
ment program of the recently announced
Second Five Year Plan, the regime will prob-
ably still try in the second five year period to
achieve a rate of economic progress about
equal to that achieved in the first five year
period. The announced targets of the Second
Five Year Plan call for about an 80 percent
increase in industrial production above the
level expected for 1957 and an increase in
agricultural production about one-third over
the expected 1957 output. (See Tables A II
page 17 and A III page 19.) 3 If these goals
were met GNP would increase by about 45
percent.
29. A major weakness of the proposed Second
Five Year Plan is its assumption that agri-
cultural output can be increased at a rate of
six percent annually. We estimate that even
with considerable effort the growth in farm
output will be only on the order of three per-
cent, and, therefore, will probably involve not
only the curtailing of planned increases in
personal consumption 4 but also some reduc-
tion in planned investment.
30. Major Economic Problems. In view of
the difficulties of increasing the amount of
land under cultivation, the regime's success
in increasing agricultural production will de-
In key sectors, by 1962 the Chinese Communists
plan to increase production above the probable
1957 levels by the following percentages: cot-
ton yarn 52 percent, basic food crops 40 percent,
cotton 38 percent, coal 71 percent, steel 107 per-
cent, electric power 131 percent, crude oil 245
percent, and chemical fertilizers 435 percent.
4 See paragraph 27, Appendix A, for a discussion
of population growth.
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SECRET 7
pend largely on its ability to raise yields. The
quality of the soil and the supply of water are
adequate to support a substantial increase in
output per acre, provided a heavy investment
is made in fertilizers and irrigation. However,
we believe the total investment in agriculture
included in the Second Five Year Plan (1958-
1962) is inadequate for achieving the agri-
cultural goals. State investment is largely
limited to some large scale flood control and
irrigation projects. The bulk of the invest-
ment, which will be for local projects, is to be
provided by the collectives from their own
production, over and above their contribution
to the national budget.
31. Whether the collectives will fulfill their
goals will depend in part on the peasants'
reaction to collectivization. During the first
year of full scale collectivization (1956), peas-
ant reaction was not unduly adverse, probably
because of the prospects for a good crop year.
We believe a continuation of this attitude will
depend largely on whether the regime is able
and willing to permit some increase in the
real earnings of the peasants. The prospect
for a rising peasant income will rest on the
regime's decisions regarding total national
expenditure and investments, and on the
weather. We believe that the regime, recog-
nizing this problem of peasant incentive, will
probably make some concessions to the peas-
ants, and cadres have already been instructed
to limit the investment, welfare, and reserve
fund allocations from the income of the col-
lectives in order to maximize direct payments
to the peasants. This situation will tend to
limit the additional resources for investment
which the regime can hope to mobilize
through its collectivization program, and in
addition will render the program vulnerable
in the event farm output fails to increase.
32. Even with adequate progress in capital
formation, the regime will still have the con-
tinuing problems of planning and of proper
allocation of investment. , As the industrial
sector becomes integrated, orderly progress
will depend on timely, realistic, and accurate
planning which avoids mistakes such as those
which in 1956 resulted in shortages of cement
and steel, shortfalls in petroleum production,
low quality of output in many industries, and
shortages of commodities for export. The
planners must also act to end the serious
congestions and delays which have occurred
on various sections of the railroads.5
33. The shortage of trained personnel will con-
tinue to be another problem of major propor-
tions. The increase in investment, the pro-
jected completion of new plants, and the pro-
gressive integration of industry, are certain
to accelerate the requirements for trained
personnel in industry. In particular, the
Communists admit that the development of
necessary skills is the critical factor in the
establishment and expansion of such indus-
tries as chemical, telecommunications equip-
ment, and precision machinery. During the
Second Five Year Plan period the educational
system will find it difficult to provide both
for its own expansion and for the needs for
trained personnel in industry and agricul-
ture. Moreover, the shortage. of scientific
manpower will continue and scientific re-
search and development will remain limited.
34. There will also be the problem of satisfy-
ing the increasing requirements for essential
imports of machinery and other commodities.
Further increases in production in almost all
industries will depend upon installations of
new productive capacity, much of which
is to be furnished by the Soviet Bloc, but
some of which will come from the West. Dur-
ing the period of this estimate, the Chi-
nese Communist ability to import will be ad-
versely affected if, as it now appears, the
Soviet Union extends no further credits.. It
will also be adversely affected by the need to
repay outstanding Soviet credits and by the
extension of grants and credits to Asian Com-
munist and non-Communist countries. Ex-
ports will therefore have to be increased even
more than imports, which will be difficult in
view of present problems in squeezing out ag-
ricultural' goods for export. Moreover, devel-
opments within the Soviet Union and the
European Satellites may have an important
adverse impact on the volume of imports from
the Bloc and the timing.of their arrival. De-
See paragraphs 16-25, Appendix A, for a dis-
cussion of transportation.
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lay or curtailment of scheduled installations
as a result. of stresses within the Bloc could
have a seriously depressing effect upon the
Chinese Communist rate of industrial growth.
However, if Western trade controls were re-
laxed the regime's dependence on the Bloc
would be reduced and its import problems
eased .6
35. There will also be the continuing drain
on resources to maintain the large military
establishment, which is scheduled to account
for 13 percent of the budget during the Sec-
ond Five Year Plan, as against 18 percent in
the First Five Year Plan. In absolute terms,
the plan provides that military expenditures
will remain approximately at 1956 levels. Not
only does military spending reduce the funds
available for other purposes, but it also com-
petes for commodities in short supply such
as steel and trucks, and takes a large share
of the earnings from exports to finance mili-
tary imports.
36. Prospects. We believe that many of the
targets of the Second Five Year Plan, as it
now stands, are unrealistic and cannot be
achieved. It is likely that the regime, which
appears to recognize this situation, will re-
duce some of the goals. However, despite the
existence of the difficult problems discussed
above, the Chinese Communists have demon-
strated an ability to cope with similar prob-
lems in the past, have achieved considerable
momentum, have further strengthened their
control mechanism, and will probably con-
tinue to make progress.
37. Barring a series of natural disasters or
the outbreak of war in the Far East, we be-
lieve that the gross national product will in-
crease at an annual rate of six to seven per-
cent during the period 1956-1962, as compared
with an annual rate of increase of approxi-
mately seven to eight percent during the
period 1952-1957. This increase will result in
a total increase in GNP of 35-40 percent dur-
ing the period 1958-1962 as compared with the
45 percent envisaged in the proposal for
the Second Five Year Plan announced in Sep-
tember 1956. Agricultural output will prob-
ably increase at an average annual rate of
about three percent rather than the planned
rate of six percent. Since the regime will
have to compensate for the shortfall in agri-
culture, the Chinese people, especially the
peasants, will be placed under heavy strain.
However, it is not likely that the regime dur-
ing the five year period will push the invest-
ment program to the extent that no increase
in per capita consumption is possible, al-
though they may do so for short periods to
make up for temporary setbacks.
The Military Establishment'
38. The Chinese Communist regime has
placed great emphasis upon maintaining and
,developing its armed forces as a basic aspect
of national power. With Soviet assistance, it
has become by far the strongest Asian mili-
tary power. The ground forces of the People's
Liberation Army total 2,500,000, many of
whom are battle tested and most of whom are
fairly well trained. The air arm, including
naval aviation, is estimated to have 395 jet
light bombers and 1,475 jet fighters. The
naval forces include four destroyers and 13
submarines, with additional units under con-
struction, and an estimated 315 aircraft. Of
the latter, 160 are jet light bombers and 30
are jet fighters.
39. The armed forces probably will not in-
crease their personnel strength in the next
few years, but the power of these forces will
grow as the ground force and the air arm
are more completely equipped with improved
weapons, and as the navy completes or ac-
quires additional submarines and large patrol
vessels. Communist China will remain de-
pendent on the USSR for most major items
of military equipment and a large part of
its POL supplies during the period of this
estimate.
II. COMMUNIST CHINA WITHIN THE
COMMUNIST WORLD
40. The position of the Chinese Communists
in the Communist world has been greatly en-
hanced as a result of developments since the
6 Trade controls are discussed in paragraphs 23
and 24 of Appendix A.
7 See Appendix B for a more complete discussion
of the Chinese Communist military establish-
ment.
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SECRET
death of Stalin and particularly because of
the prominent role they have played in Bloc
affairs in the past year. Communist China's
initial reaction to Soviet criticism of Stalin
was one of aloofness and noninvolvement,
with Peiping taking care to point out Stalin's
"strong points" as well as his "weaknesses."
However, as a result of the Polish and Hun-
garian crises, Peiping has become increasing-
ly involved in Eastern European affairs. It
has asserted the necessity for each Commu-
nist country to develop with due regard to
its own political and social backgrounds, has
pointed out that no one Communist country
is entitled to adopt an attitude of superiority
over other Communist countries, and prob-
ably has favored a more flexible approach in
Soviet relations with the Satellites. Commu-
nist China has so far not joined in Soviet
criticism of the Polish press and there is
some evidence of Sino-Soviet differences on
Poland. On the other hand, it supported the
Soviet use of force in Hungary and has in-
sisted that the first duty of all Communist
countries is loyalty to international proleta-
rian solidarity under the leadership of the
Soviet Union.
41. The tone of authority in the Chinese Com-
munist statements and the need apparently
felt by the Kremlin for Chinese support on
Eastern European issues have made a deep
impression on the Communist world, and have
further weakened the concept that Moscow is
the only, authoritative interpreter of Commu-
nist ideological guidance. The actions of the
Chinese Communists would appear to suggest
an awareness of the need for some concessions
to nationalism in the interests of Bloc soli-
darity.
42. The Chinese Communists, in many cases,
are the channel through which Asian Commu-
nist parties receive guidance, although most
of these parties probably look to the Soviet
Union for leadership. The Chinese Commu-
nists exercise substantial influence in North
Vietnam and North Korea. Communist China
has extended a credit of $320 million to each
of these countries, continues to maintain large
forces in North Korea, and is the principal
supplier of military assistance for North Viet-
nam. Communist China is developing in-
fluence in Outer Mongolia, which until recent-
ly was an exclusive preserve of the USSR. In
1956, the Chinese Communists extended a
$40 million credit over a four year period to
assist the Mongolians in the construction of
light industrial facilities, and supplied a large
number of technicians.
43. During the period of this estimate, Peiping
will probably further increase its influence
within the Communist Bloc and have an im-
portant voice in matters affecting the Bloc
as a whole. However, Communist China will
continue to rely on the USSR and the Com-
munist Bloc as the chief source of the im-
ports, aid, and technical assistance essential
to its military and economic programs. In
addition, Peiping will almost certainly con-
tinue to rely on Soviet military guarantees
as its chief insurance against what it regards
as the danger of US attack. Although it is
probable that some conflicts of interest and
disagreements will develop between Moscow
and Peiping, it is highly unlikely that either
will permit 'such conflicts to impair Sino-Soviet
solidarity.
III. COMMUNIST CHINA'S RELATIONS WITH
THE NON-COMMUNIST WORLD
44. Communist China's influence has in-
creased markedly in the non-Communist
world, and its presence is especially felt in
Asia. It has formal diplomatic. ties with less
than one-third of the countries of the world,
but these include India, Burma, Indonesia,
Ceylon, and Pakistan. There is a growing
pressure for normalization of relations with
Communist China, especially in Japan, in
Western Europe, and in the British Common-
wealth. US influence has been the major
factor in preventing a much greater number
from recognizing Communist China and
agreeing to its admission to the UN. 8
45. Communist China has broadened' its con-
tacts, even with those countries with which it
does not have diplomatic relations. It has
expanded trade with many countries in the
non-Communist world and has regularly par-
ticipated in trade fairs. There has been a
See Appendix C: Countries recognizing Com-
munist China.
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steady increase in the exchange of official and
unofficial delegations and Chinese Commu-
nists have frequently cultivated specific tar-
gets such as professional, intellectual, and re-
ligious groups and offered them free tours to
mainland China.
46. In order to promote trade ties with under-
developed countries, Communist China has in
several cases selected items for trade because
of their political impact. For example, despite
a shortage of steel in Communist China, 37,000
tons were exported to Egypt in the first half
of 1956. Other examples have been the rice-
for-rubber deal with Ceylon, the Sino-Burma
trade ageement, and the suggestions to Japan
that large amounts of coal and iron ore would
be available in exchange for machinery and
steel.
47. The Chinese Communists have also used
economic assistance to gain influence. The
Sino-Cambodia aid agreement, which was
signed in June 1956, provides for a grant-
in-aid of about $22.4 million during 1956 and
1957 in the form of technical assistance, con-
struction materials, and merchandise. Both
countries have stressed the "unconditional na-
ture" of this aid. Under an agreement signed
in October 1956, Nepal is to receive grants
totaling approximately $12.6 million over a
three year period. The Lao government has
not yet acted on Chinese Communist offers of
assistance.
48. The Chinese Communists have demon-
strated interest in developing the Asian
African Bloc as an instrument to weaken
Western economic and political influence in
underdeveloped areas. At the 1955 Bandung
Conference Chou En-lai took a leading part
and actively supported the "Bandung spirit
of peaceful coexistence." This has since be-
come one of the main slogans of Chinese Com-
munist foreign policy, designed to convince
non-Communist Asian nations of the peaceful
intentions of Communist China and to facili-
tate an increase in Communist influence in
these areas.
49. Emphasis on the "Bandung spirit of peace=
ful coexistence", however, has not caused the
Chinese Communists to cease their efforts to
gain the allegiance of Overseas Chinese com-
munities, or to abandon subversive activities
in Southeast Asia. Moreover, the buildup of
Chinese Communist military capabilities and
occasional border incursions constitute a con-
tinuing pressure on neighboring countries.
50. Peiping is attempting to increase its in-
fluence, and eliminate that of Nationalist
China, in the Overseas Chinese communities,
especially those of Southeast Asia. It is at-
tempting to obtain control of local Chinese
schools, newspapers, organizations, and lead-
ers, and is conducting a large scale propa-
ganda campaign to revive interest in Chinese
culture. In mainland China, preferential
treatment has been promised to Overseas Chi-
nese students and to relatives of Overseas
Chinese. Although these efforts have resulted
in some increase in Communist China's influ-
ence among Overseas Chinese, the bulk of the
latter still appear to be intent on improving
their positions in their resident countries, and
seek to avoid involvement in the struggle for
their allegiance.
51. The Chinese Communists are giving covert
support to indigenous Communist groups in
Asia. This policy has been followed even in
the neutralist countries despite its adverse
effects on Chinese Communist relations with
the governments concerned. In Burma, the
government is concerned over the assistance
given by the Chinese Communist Embassy
to the local Communists. Many Indonesians,
particularly in the army and the Moslem par-
ties, are disturbed by the ties between the
Indonesian Communist Party and Peiping.
The Indian government is concerned by the
probability that the Chinese Communists are
giving assistance to the Communists in Nepal
and the possibility that the Naga tribes have
received arms from Communist China.
52. The Chinese Communists have continued
to increase their military capabilities in the
Taiwan Strait area, although Chinese Com-
munist propaganda speaks almost exclusively
of the intention to "liberate" Taiwan by
"peaceful" means. Peiping has adopted a
"moderate" attitude toward the Nationalists,
offering potential defectors positions in the
Peiping regime corresponding to those of ex-
Nationalist collaborators in Communist China.
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Peiping propaganda directed toward Taiwan
attempts to create the impression that the
US is an unreliable ally for the National gov-
ernment and that the latter will inevitably
collapse. Despite Peiping's seemingly concili-
atory attitude toward Taiwan, the Chinese
Communists continue to reject categorically
any suggestions for a compromise solution
to the Taiwan problem involving "two
Chinas"; they equally reject suggestions for
a meaningful renunciation of force in the
Taiwan area.
53. The attitude of Communist China toward
the US continues to be one of hostility and
mistrust and its policy is directed toward de-
stroying the US position in the Far East.
Peiping portrays -the US as the chief threat
to peace in Asia and the world and the source
of most of the problems facing the countries
of Asia. Nevertheless, the Chinese Commu-
nists have made some gestures to create the
impression that current Communist "peace"
tactics apply also to relations with the US.
These gestures, however, appear to be directed
not at improving relations with the US, but
at undermining US policies and creating a
belief, particularly in Asia, that a shift in the
US attitude toward the Chinese Communists
is imminent.
The Asian Impression of Communist
China
54. The Chinese Communists have been able
to create the impression in much of non-
Communist Asia that Communist China is a
dynamic, permanent, and perhaps not un-
friendly world power, which will exert a major
influence on the course of events in Asia.
Many Asians are impressed by the effective
control which the Chinese Communists exer-
cise over the tremendous area and population
of mainland China, by the sweeping socializa-
tion of the country, by the steady and sub-
stantial increases in military capability and
industrial capacity, and by the growing abil-
ity of Communist China to trade with and to
extend economic assistance to other countries.
55. These achievements are of particular sig-
nificance to the people and leaders in many
countries of non-Communist Asia because
they too are seeking to make profound social
and economic as well as political changes,
and the Chinese Communist pattern appears
in certain respects to offer a solution to many
of their problems, which they are tempted to
adopt. Many of the people and leaders in
these countries are inclined to pay more at-
tention to the apparent material progress in
Communist China than to the methods by
which it was attained.
56. Many Asians, in part because of their con-
tinuing distrust of Western intentions, have
been impressed by Communist China's anti-
colonialist propaganda and do not believe
that the Chinese Communists intend to ex-
tend their control throughout Asia. Their
receptivity to this propaganda is encouraged
by the tendency in Asia to equate capitalism
and private enterprise with colonialism.
There is also a tendency among many Asians
to accept the Communist charges that the
US program of developing military pacts and
bases is a colonialist policy which threatens
the independence of Asian countries. and in-
creases the danger of war.
57. Although Communist China has been able
to exploit Asian distrust of Western intentions,
there is also an undercurrent of apprehension
regarding Communist China's real intentions.
This apprehension has been caused by Com-
munist China's role in international Commu-
nism, particularly its connections with the
support of indigenous Communist movements
in individual Asian countries, and by mistrust
in many Asian countries of historical Chinese
expansionism. Peiping's efforts to exploit the
Overseas Chinese communities in most South-
east Asian countries have also created fears
of its intentions, as have Communist China's
activities in border areas, and its support of
recent Soviet repression in Hungary.
58. Asians realize that Communist China is
now the strongest Asian military power, and
that they are dependent upon the US for
defense against a possible Communist attack.
Because of their dislike of such dependence
and their concern as to the effectiveness of
US action in their defense, many prominent
Asians, especially in South and Southeast
countries, have come to believe that they
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should show discretion in some form of neu-
tralism or at least a willingness to be friendly
and to reciprocate Chinese Communist over-
tures, and finally, that if a trend toward Com-
munist success should develop, they should not
be the last to attempt some form of political
accommodation. Many Asian leaders seem to
have confidence that, even though they in-
crease their political and economic contacts
with Communist China, they will be able to
resist attempts to encroach upon their politi-
cal independence. These factors exist to some
extent even in many of the countries aligned
with the US. At the same time, even in non-
aligned neutralist countries there is a wide-
spread, though seldom publicly voiced, recog-
nition of the importance of the US in restrain-
ing Communist China from overt aggression.
IV. PROBABLE CHINESE COMMUNIST
EXTERNAL COURSES OF ACTION
59. The Chinese Communists, in their ap-
proach to international problems, will prob-
ably endeavor to appear conciliatory and flex-
ible, but joint Sino-Soviet policy will in fact
permit no major concessions to the West on
basic issues such as Taiwan or the status of
North Korea and North Vietnam. Commu-
nist China will continue to encourage the
neutralist, anticolonialist, and nationalist
sentiments in Asia and will continue its efforts
to discredit US actions and motives and to
seek a reduction in Western influence and
military power in Asia. It will encourage
wherever possible the formation of govern-
ments in which the Communist influence
could be expanded. Communist China will
almost certainly increase its official and un-
official contacts with the governments and
people in non-Communist Asia, and will prob-
ably continue to increase trade with non-Com-
munist countries, especially with Japan and
other Asian countries. ? Peiping will also prob-
ably offer economic assistance to selected non-
Communist countries and will propagandize
the "nonpolitical" nature of such assistance.
Peiping will continue its attempts to acquire
influence over, and the support and allegiance
of, the Chinese residing in non-Communist
Asia. Peiping will continue to seek admission
to the UN.
60. Despite a "soft" . policy toward its Asian
neighbors, Communist China will continue its
subversive efforts, will probably apply pres-
sure on a selective basis to remind the Asians
of its power, and will take advantage of oppor-
tunities for Communist expansion, possibly
including the extension of support to armed
revolts against non-Communist governments.
During the period of this estimate, Peiping
will probably try to avoid courses of action
which it believes would provoke US military
intervention. However, the possibility cannot
be excluded that the Chinese Communists will
step up military action against the offshore
islands, or will attempt to seize one of- the
smaller islands, to test US intentions and to
increase external pressure on the US to bring
about a Nationalist evacuation of these
islands. If the Chinese Communists became
convinced that the US would not assist in
the defense of these islands with its own
forces, they probably would attempt to seize
them. Should the Communist regimes in
North Vietnam or North Korea be subject to
external attack the Chinese Communists
would almost certainly give material support
to the Communist regimes in these countries
and would if necessary commit "volunteer"
units to avoid a defeat. However, the Chinese
Communists would probably seek to limit the
area of conflict and to obtain a cease fire.
61. The US. Communist China recognizes
that the US is the chief obstacle to its ambi-
tions in Asia. Its efforts will almost certain-
ly continue to be centered on neutralizing
sources of US support, isolating the US from
its allies, and, ultimately, destroying the US
position in Asia. However, in its. "peace"
strategy, Peiping may make conciliatory ges-
tures relating to peripheral questions in an
effort to create the impression of reasonable-
ness. Peiping will almost certainly continue
to press for a meeting with the US at the
foreign ministers' level, and will exploit oppor-
tunities for other contacts that may present
themselves.
62. Taiwan. Peiping remains determined to
obtain control of Taiwan. However, the Pei-
ping regime apparently recognizes that its
military forces will not be able to seize Tai-
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wan against US military opposition. In con-
sequence, Peiping is attempting to reduce
morale on Taiwan, in the hope that National-
ist leaders may ultimately be induced to nego-
tiate with Peiping over Taiwan's assimilation
into Communist China. A major objective in
any conference with the US would be to in-
duce the removal of US military protection
from Taiwan. The Chinese Communists will
continue to improve their military capabili-
ties in the area opposite Taiwan and the off-
shore islands, but they will almost certainly
not attempt to seize Taiwan by force so long
as the US is committed to its defense. (See
paragraph 60.)
63. Korea. The Chinese Communists, in com-
mon with the USSR, hope to secure a with-
drawal of UN forces from Korea and even-
tually to eliminate the ROK. As a means of
putting pressure on the US to withdraw its
troops, there may be additional withdrawals
of Chinese Communist forces, but they will
almost certainly maintain adequate forces in
Manchuria to permit immediate reinterven-
tion. The Communists will almost certainly
refuse any settlement in Korea which en-
dangers Communist control of North Korea.
64. Japan. Communist China in conjunction
with the Soviet Union will continue to seek to
neutralize Japan and prevent its re-emergence
as a major military and political power in
Asia. It will attempt to weaken Japan's links
with the US by exploiting US-Japanese policy
differences. The Chinese Communists will
seek to increase the tolerance for Communism
among the Socialists and other groups. They
will probably also offer trade inducements,
seeking both to increase Sino-Japanese trade
and- to induce Japan to break the CHINCOM
embargoes. Communist China will also seek
to increase significantly cultural and other
semiofficial contacts with Japan, anticipating
the establishment of formal diplomatic rela-
tions. These policies will contribute to the
weakening of Japan's willingness to support
US policy toward Communist China.
65. Vietnam, Laos, and Cambodia. Peiping
will continue to support the Vietnamese Com-
munists in their efforts to extend Communist
control to South Vietnam and will probably
act in concert with Hanoi to expand Com-
munist influence in Cambodia and Laos.
Through pressure, subversion, and overt prop-
aganda the two Communist regimes will at-
tempt to discredit and undermine the author-
ity of the Diem government. The Chinese
Communists probably will not encourage
North Vietnam to initiate open hostilities
against Diem, but might encourage Hanoi to
initiate guerrilla activities. In the event a
weak government came to power in South
Vietnam, Peiping might adopt a conciliatory
approach in order to encourage a neutralist
development. Toward Cambodia and Laos,
the Chinese Communists will continue their
gestures of friendship and goodwill and will
probably not engage in overt hostile propa-
ganda, at least so long as the authorities in
these two governments reciprocate. Commu-
nist` China will probably expand its relations
with both.countries and formal diplomatic re-
lations are likely to be established.
66. Pakistan, Thailand, and the Philippines.
Although Chinese Communist efforts have
thus far concentrated on the uncommitted
nations, the coming years are likely to see
greater emphasis on the states allied with
the West, including Pakistan, Thailand, and
the Philippines as the Asian members of
SEATO. Peiping will seek to exploit growing
sentiment for trade with the mainland, will
encourage "informal" contacts as an entering
wedge, and will attempt to exacerbate politi-
cal disputes within these countries over na-
tional policies concerning relations with the
West.
67. Indonesia. The Chinese Communists
probably estimate that the capabilities of the
Indonesian Communist Party, the strongest
indigenous Communist Party in non-Commu-
nist Asia, will continue to be maximized if
they themselves maintain a friendly attitude
toward the Indonesian government. The Chi-
nese Communists will continue to give covert
support to the Indonesian Communists.
68. Malaya and Singapore. Peiping will prob-
ably continue to encourage Malayan Commu-
nists to work for popular front governments,
to extend control over Chinese youth and the
labor movement, and, at the same time to
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maintain in being their guerrilla organization.
Following the achievement of independence
in Malaya (expected in August 1957) and self-
government in Singapore, Peiping will seek
to obtain recognition by these governments
and will try to promote greater Chinese politi-
cal influence in relation to the Malay popula-
tion.
69. India. Although Communist China will
seek eventually to supplant Indian influence
in Asia, it will probably continue, at least for
the next few years, to strengthen friendly re-
lations with India and to encourage India's
efforts to bolster a neutralist sentiment
throughout Asia and the Middle East. But
this general approach will probably not cause
the Chinese Communists to cease their efforts
to increase their influence in the Indo-Tibetan
border area.
70. Burma. Peiping will continue its efforts
to woo the Burmese government while at the
same time encouraging the Communist ele-
ments in the country. Communist China will
probably be willing to agree to a settlement
of the boundary dispute on terms that appear
conciliatory but is unlikely to cease its sub-
14
versive activities among the ethnic minorities
in the border region.
71. Hong Kong and Macao. Communist
China is committed to *the ultimate incorpora-
tion of Hong Kong and Macao in its terri-
tory although this has not been stated as ex-
plicitly as in the case of Taiwan. However,
for the period of this estimate the Chinese
Communists will probably not attempt to seize
these colonies by force. Non-Communist
Hong Kong and Macao have a certain utility
to Peiping as points of contact with the West;
furthermore, Peiping probably believes that
an attack on Hong Kong at least would in-
volve hostilities with the UK and possibly
with the US as well. Nevertheless, during the
period of this estimate, Communist China will
attempt to exploit frictions which arise over
Hong Kong and Macao. Peiping will almost
certainly continue unabated its campaign
through outright subversion and "peaceful
penetration" to increase its political and eco-
nomic influence in Hong Kong and Macao,
to reduce the effectiveness of these areas as
Western listening posts, and to undermine
the resolve of the UK and Portugal to main-
tain their positions.
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APPENDIX A
THE ECONOMY OF COMMUNIST CHINA
Industry
1. The. regime during the First Five Year
Plan has concentrated its investment on heavy
industry, especially machine building, metal-
lurgy, power, and armaments. As a result,
industrial production (excluding individual
handicraft) has expanded at an average an-
nual rate of about 17 percent while the output
of heavy industry has attained a rate of in-
crease of about 20 percent. (See Table A I.)
Although the regime has announced a policy
of decentralizing industry, investment in in-
dustry in the First Five Year Plan has not
altered the basic concentration of production
in the established industrial areas of Man-
. churia, North China, and Shanghai.
2. Engineering Industries. Communist China
is seeking to develop engineering industries
which will ultimately be capable of producing
its. own requirements of machinery, equip-
ment, and armaments. The engineering in-
dustries have become self-sufficient in the pro-
duction of textile machinery, and are increas-
ing the volume of the production of some types
of machine tools (after Soviet Bloc proto-
types), agricultural equipment, and transpor-
tation equipment. (See Table A II.) . In Sep-
tember 1956 the Communists announced the
assembly (probably at Mukden North Airfield)
The analysis in this appendix is based on esti-
mates which are largely dependent on Chinese
Communist statistics. Although Chinese Com-
munist statistics often cannot be confirmed by
independent sources, careful examination and
comparison with independent data that are
available strongly suggest that these figures con-
stitute the basic economic data available to the
regime and that in most instances there ap-
pears to have been no motive to inflate these
data. Where inaccuracies exist, they appear,
for the most part, to be the result of ambiguous
definitions of the data, deficiencies and in-
experience in data collection, provisional re-
porting, pressure to report fulfillment of plans,
and incomplete and selective reporting of the
data to support certain policy points of view.
of a jet aircraft, but they almost certainly used
Soviet components. We believe their ability to
produce aircraft and their components will
probably increase markedly during the period
of this estimate. The Chinese Communists
still must depend largely on imports for chem-
ical and refining equipment and for electron-
ics machinery, although the completion of the
telecommunications production center near
Peiping in late 1958 will enable them to pro-
duce a sizable quantity of electronics com-
ponents and some of the more complicated
electronics and telecommunications equip-
ment. Although the armaments industry is
advancing along with general industrial de-
velopment, production capacity has not been
established for most heavy military end-items.
3.. Metallurgy. The Chinese Communists are
making rapid progress in expanding their
steel production and are estimated to have
raised steel ingot output from 1.35 million tons
in 1952 to 4.5 million tons in 1956. However,
in 1956 they still had to import 15-20 percent
of their total supply of steel products. Steel
production continues to be hampered by low
quality coking coal and iron ore, and by a
deficiency of the alloying elements, chromium
and nickel. While there has been some prog-
ress in the production of other metals, there
is a continuing deficiency in the production
of copper and aluminum.
4. Electric Power and Coal. Although elec-
tric power production has been increasing at
an average rate of 20 percent annually since
1952, it has not quite kept pace with industrial
demand. Coal production, despite announced
shortages, generally has been adequate to
meet essential domestic demand and even to
allow for limited exports.
5. Petroleum. The production of petroleum
and petroleum products in 1956 equalled about
one-third ' of domestic consumption, -and siz-
able imports of crude oil and refined products
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SECRET 16
ESTIMATED CHINESE COMMUNIST ECONOMIC GROWTH'
(Billion Yuan)
Indicated
Annual
Average
Rate of
Increase
During
1952
1953
1954
1955
1956
1957
1953-57
(Prelim- (Project-
GNP (at 1955 factor prices)
67.5
73.8
79.2
84.1
inary)
91.5
ed)
97.0
Annual Increase (in percent)
-
9.3
7.3
8.2
8.8
6.0
7.5
Agricultural Production
32.4
32.2
32.0
34.8
35.8
36.9
Annual Increase (in percent)
-
-0.6
-0.6
8.8
2.9
3.1
2.6
Industrial Production (excluding individual
handicraft)
8.2
10.3
12.4
13.4
15.8
17.6
Annual Increase (in percent)
-
25.6
20.4
8.1
17.9
11.4
16.5
Light Industry Production
3.9
4.5
5.4
5.4
8.1
6.7
Annual Increase (in percent)
-
15.0
20.0
-
13.0
9.8
11.5
Heavy Industry Production
4.3
5.8
7.0
8.0
9.7
10.9
Annual Increase (in percent)
-
34.9
20.7
14.3
21.3
12.4
20.5
The values given are for estimated income originating in 1955 prices. The figures differ from gross value
figures given in Communist reports in that the figures in the table exclude indirect taxes and the costs of
raw materials and fuel to avoid double counting, The indices also differ because they are based on phys-
ical production estimates for specific commodities including the production estimates given in Tables A II
and A III.
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INDUSTRIAL OUTPUT - COMMUNIST CHINA
(Estimated for 1952-1957 and Chinese Communist goals for 1962)
NOTE: The figures in this table should be used with caution (see footnote on page 1 of this Appendix). The
estimates are subject to varying margins of error, some of which might be considerable. The estimated pro-
duction of industrial products projected for 1957 depends upon construction or improvement of capacity, the
assimilation of advanced techniques by the Chinese Communists, and continued importation of capital goods
from the West and the Bloc at approximately present levels. The figures for 1952 are the mid-points in the
ranges given by the Chinese Communists in their Second Five Year Plan. We believe the investment plan
needed to attain these goals is not feasible. The Chinese Communists apparently recognize this situation and
there are indications that they are presently revising their program which will probably result in a down-
ward revision of a number of the goals.
Per-
centage
in-
crease
Per-
centage
in-
crease
1962
1956
1957 1957
(Chinese
Commu-
1962
(Pre-
(Pro- over
nist
over
Unit
1952
1955
lim.)
jected)
1952
goals)
1957
Electric. Power
Billion KWH
7.26
12.278
15.30
18.0
148
41.5
131
Coal
Million MT
64
94
105
117
83
200
71
Crude Oil
1,000 MT
430
966
1,200
1,600
272
5,500
244
Gasoline
1,000 MT
130
.240 "
220
310
138
1,200
287
Pig Iron
1,000 MT
1,870
3,630
4,630
5,375
187
9,500
77
Steel Ingots
1,000 MT
1,350
2,853
4,516
5,400
300
11,200
107
Coke
1,000 MT
2,860
5,200
5,900
6,685
134
10,000
50
Iron Ore
1,000 MT
4,058
10,583
12,745
14,918
.268
23,400
57
Tungsten (concentrate 68%
1,000 MT
15.8
20.5
22.1
23.7
50
na
-
WO3)
Manganese. Ore (+35% Mn)
1,000 MT
100
Copper (refined)
1,000 MT
8.0
12.9
13.2
13.6
70
na
Tin
1,000 MT
9.8
16.0
16.0
16.0
63
na
Lead
1,000 MT
7.0
22.5
22.8
23.1
230
na
Zinc
1,000 MT
3.5
7.9
8.3
11.0
214
na
-
Aluminum
1,000 MT
0
10
12
20
-
110
450
Chemical Fertilizers
1,000 MT
194
371
472
578
204
3,100
436
Cement
1,000 MT.
2,861
4,502
6,400
7,700
169
13,500
-
Machine Tools
1,000 Units
13.7
13.7
27
29
112
62.5
116
Locomotives (new & rebuilt)
Units
20
98
184
200
-
na
-
Freight cars (new & rebuilt)
Units
5,792
18,800-19,900 ?
6,400
6,500
12
na
Trucks
1,000 Units
0
0
1
4
-
45
-
Tractors
1,000 Units
0
0
0
0.15
-
20.5
-
Motor Vehicle Tires
1,000 Units
417
593
675
760
82
na
-
Naval Vessels
1,000 SDT
2
10
14
19
850
43
126
Merchant Vessels
1,000 GRT
9
8
10
11
22
16
45
Inland Vessels
Self-propelled
1,000 HP
8
9
16
23
188
58
152
Non self-propelled
1,000 DWT
14
26
33
40
186
76
90
Turbines (steam & hydraulic)
1,000 KW
6.7
90
164
189
-
1,450
667
Electric Motors
1,000 KW
639
524
1,048
1,153
80
na
-
Electric Generators
1,000 KW
30
108
281
331
-
. na
-
Cotton Yarn
1,000 MT
656
720
929
1,016
55
1,540
52
Paper (machine-made)
1,000 MT
372'
589
707
800
115
1,550
94
? Includes imported crude through 1955.
b This is the estimated production for three years 1953-1955.
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continue to be necessary. The quality and
variety of petroleum products have been im-
proved and a relatively complete line is now
produced. The major exceptions are aircraft
fuels and high grade lubricants, which in 1955
constituted about one-fourth of the total im-
ports of POL. Deficiencies in refined prod-
ucts will be partially corrected when the
Lanchou refinery comes into production, prob-
ably in 1958, and when the Yumen refinery
begins production of the high quality lubri-
cants which it has been testing. Plans were
announced in September 1956 to increase an-
nual crude oil production (natural and syn-
thetic) from the 1956 level of about 1.2 million
tons to about five or six million tons by 1962.
Much of this increase depends on higher pro-
duction in the Yumen fields, and exploitation
of newly discovered, but incompletely proven,
fields in the Tsaidam and Dzungaria Basins.
Even with substantial attainment of the 1962
targets, it is probable that Communist China
by 1962 will still have to import substantial
quantities of aviation fuels and high grade
lubricants.
6. Other Industry. The chemical industry has
not been developed significantly, and over two-
thirds of the very modest state investment
in this field has probably been for fertilizer.
Chemical fertilizer output probably will be in-
creased significantly in the next few years
though large imports will still be required.
The cement industry, despite remarkable ad-
vances since 1949, was not able to meet the
high domestic demand in 1956 in part because
of exports to the USSR. The Chinese Com-.
munists have announced plans to double the
1956 output by 1962.
7. The growth of light industry has been and
will continue to be limited by a low investment
priority and by shortages of agricultural raw
materials. However, the Chinese Communists
probably over-fulfilled their 1956 goals in the
cotton textile industry, which accounts for
about one-third of the total value of light in-
dustry. Chinese light industry is generally
plagued with the problem of poor quality.
This results from the absence of effective qual-
ity controls and from the pressure to stretch
raw materials and to increase output per
worker.
Agriculture
8. Agricultural production has expanded at
an annual average rate of nearly three percent
during the period 1952-1956. (See Table
A III.) Output per unit of land has been in-
creased, primarily through greater use of fer-
tilizers and increased irrigation. Some addi-
tional land has also been brought under culti-
vation.
9. The expansion of major crops does not ap-
pear to have been hindered by the wholesale
collectivization of agriculture in 1955-1956,
although the output of other farm prod-
ucts has apparently been adversely affected.
Farmers have traditionally produced such
items as tung oil, tea, silk, hogs, and other
commodities as a supplementary activity. But
the winter construction programs and other
duties assigned by the newly organized col-
lectives reduced the time available for, and
the incentive to engage in, such activity.
Transportation
10. Communist China's transportation sys-
tem relies heavily on railroads, which present-
ly carry the bulk of total inland traffic ' and
the major share of trade with the USSR. 2
There is an extensive inland waterway sys-
tem operating primarily in Central China.
There is important coastal traffic from Shang-
hai north, a substantial share of which is car-
ried by the Chinese merchant marine. The
road system is generally poor, although in-
creasing emphasis is being placed on road
improvement and on the construction of stra-
tegic roads. Communist China is entirely
dependent on foreign vessels for ocean ship-
ping, which in 1955 carried over 50 percent of
' The Chinese Communists have announced that
the railroads originated 193.4 million tons of
freight in 1955, or about 10 percent less than the
plan goal. We believe that the actual tonnage
originated may have been less than the an-
nounced figure. *
*The Deputy Director for Intelligence, The
Joint Staff, does not agree with the above
footnote which could be read to imply that the
difference between the actual tonnage ini-
tiated and the Chinese Communist announced
figure may be slight. He believes that there
is insufficient evidence to judge the degree of
error involved.
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ESTIMATED AGRICULTURAL OUTPUT,
COMMUNIST CHINA, 1952-1957, 1962
Percent
Percent
Average
Average
Annual
Annual
Increase
Increase
1952-
1957-
Unit
1952
1953
1954
1955
1956
1957
1957
1962
1962
Food Grains
Million MT
163
166
164
180
183
187
2.7
217
3.0
Rice
Million MT
68
70
66
74
78
80
3.3
95
3.5
Wheat
Million MT
18
18
23
23
22
23
5.1
26
2.5
Other Grains
Million MT
52
51
49
55
54
53
0.4
60
2.5
Tubers (grain equiv.)"
Million MT
16
17
17
19
20
20
4.5
24
3.7
Soybeans
Million MT
9.5
10
9
9
9
11
3.0
12
1.7
Meat
1,000 MT
5,513
5,665
5,819
5,523
5,525
5,820
1.1
6,870
3.4
Fish
1,000 MT
1,633
1,900
2,295
2,520
2,650
2,810
11.5
4,830
11.5
Sugar (raw value)
1,000 MT
630
640
10
840
950
1,060
10.7
2,000
13.5
Edible Vegetable Oils
1,000 MT
1,133
1,070
1,263
1,364
1,434
1,625
7.5
2,700
10.7
Peanuts
1,000 MT
2,316
2,127
2,767
2,926
3,372
3,473
8.5
4,026
3.0
'Estimates of physical production in the agricultural sector are subject to serious limitations in statistical
reporting and coverage. Agricultural output data seem to show a substantial upward bias believed to
reflect in part increased statistical coverage as local reporting is improved and in part the unreliable
sampling procedures on which the crop reporting is based. The tonnages involved are very large and
changes in total production are small in relation to the level of production. The estimated trends in
physical production for the basic food crops are based primarily on increases in cultivated land, land
under irrigation, and capabilities of fertilizer. Production trends are considered somewhat more reliable
than the level of production in any one year.
"Equated to grain at a 4:1 ratio.
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its total foreign trade. (See Table A V.) The
civil air fleet plays a very limited role. The
telecommunications net is poorly developed.
11. Railroads. The railroad network (see map
at the end of the estimate) is largely con-
centrated in the east and northeast where it
connects important industrial and population
centers. Traffic consists largely of the move-
ment of a few bulk commodities from a rel-
atively small number of places of origin to
a few principal destinations. Transport of
coal, the most important single item shipped,
makes up more than one-third of the total
rail traffic, while agricultural products and
construction materials each make up about
one-fifth.
12. The railroads received some 13 percent of
total state. investment during the period 1953-
1957. About one-half of this was allocated
to the construction of additional lines, about
3,000 miles of which have been completed,
principally in western areas. The opening of
the Trans-Mongolian link with the Trans-
Siberian railroad in January 1956, the con-
struction of the line westward from Lanchou,
via Yumen and Urumchi to connect with the
Soviet system near Aktogay, and the comple-
tion of the projected line into the Tsaidam
(oil) basin, all will have an important impact
on the opening of new areas in the west and
will facilitate trade with the USSR. Work is
also underway on sections of track which will
provide an additional north-south .trunk line
parallel to, and west of, the Peiping-Hankow-
Canton line. This line will pass through Pao-
tou, Lanchou, Chengtu, Chungking, and Kun-
ming, and will ultimately provide a Chinese
inner belt line linking North Vietnam and the
Soviet Union. Other new lines such as the
Litang-Fort Bayard line and the recently com-
pleted Yingtan-Amoy line have greatly in-
creased Chinese Communist military logistic
capabilities in these strategic areas.
13. The other half of the total investment in
railroads was devoted to improving the physi-
cal plant and equipment of existing rail lines.
The program included the construction and
restoration of double tracking, the develop-
ment of yard facilities, the installation of
communications equipment, a sizable in-
crease in the rolling stock inventory of higher
capacity freight cars, and the adoption of a
new central system of administration.
14. Despite the increased capacities and in-
tensive utilization of facilities and equipment,
there have been indications since 1954 that
the development of rail facilities has not kept
pace with the increase in the volume of traffic.
In 1956 as a result of the sharp increase in
demand arising out of the rapid acceleration
in industrial development, the inadequacy of
line capacities became a major transport prob-
lem. In particular, during the past year there
have been increased references to the general
lack of adequate transportation and to con-
gestion, particularly on key sections of such
rail lines as the Peiping-Hankow, the Lunghai,
and the Shihmen-Taiyuan railways, and at
important border transloading points.
15. We believe that the railroads, though over-
strained, have met most of the requirements
of the economy. However, railroad capacity
will be an increasingly critical factor as the
economy shifts from a decentralized agricul-
tural economy to an increasingly industrial-
ized economy. To deal with this problem the
regime will have to increase its investment in
rail transportation, particularly in expanding
the capacities of existing lines.
16. Shipping. The small merchant marine,
estimated at 112 ships of over 1,000 gross
registered tons (GRT) (287,300 dead weight
tonnage (DWT)), is restricted to coastal runs
from Shanghai north except for a small ex-
port trade to North Vietnam. It, however,
shares control with Poland over the services
provided by Polish vessels on the China run.
17. There was an increase of almost 20 per-
cent in the gross registered tonnage of the
ships arriving in Communist China in 1955.3
(See Table A IV.) Communist China con-
tinued to be heavily dependent on non-Bloc
shipping, much of it chartered, which ac-
counted for 81 percent of the tonnage of all
1955 arrivals. Moreover, non-Bloc shipyards
render important shipbuilding and repair
fl Incomplete data indicate an even greater in-
crease in tonnage arriving in 1956, with non-
Bloc shipping increasing by about 26 percent.
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SHIP ARRIVALS IN COMMUNIST CHINA
Percentage
1956
Percentage
Non-Bloc Ship
1954
1955 Change in
(preliminary) Change in
Arrivals in
Thousand
Thousand GRT.'
Thousand
GRT.
Chinese Ports
No.
GRT.
No.
GRT. over 1954
No.
GRT.
over 1955
Flag
British
518
2,056
524
2,276
10%
532
2,630
16%
Japanese
97
504
196
748
48%
278
1,159
55%
Norwegian
80
323
54
234
-27%
81
316
26%
Danish
35
181
34
174
-4%
32
185
6%
Swedish
32
181
26
156
-14%
41
233
33%
Italian
23
151
16
94
-38%
9
60
-36%
French
14
105
10
74
-30%
16
96
30%
Dutch
17
120
56
329
174%
57
304
-8%
Finnish
18
89
19
95
7%
20
99
4%
Panamanian
4
28
-
-
-
-
-
-
German
4
20
8
64
220%
35
270
311%
Pakistanian
2
14
6
41
193%
3
21
-45%
Indian
2
12
3
20
67%
1,
7
-65%
Moroccan
1
7
Turkish
4
17
-
2
7
-59%
Egyptian
2
15
-
5
28
87%
South African
-
2
14
-
6
45
220%
Burmese
6
-
1
6
-
Lebanese
2
-
1
7
250%
4,359
15%
1,120
5,473
26%
Bloc Ship
1954
1955
Percentage
Arrivals in
Thousand
Thousand
Rise in
Chinese Ports
No.
GRT.
No.
GRT.
GRT.
USSR
113
535
132
653
22%
Poland
41
253
55
355
40%
Czechoslovakia
4
22
8
46
110%
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services to the Bloc merchant marine engaged
in the China trade. Without the benefit of
Free World shipping and shipping services,
Sino-Soviet transportation and distribution
facilities, already heavily committed, would
face increasing difficulties.
18. About one-half of the total GRT of non-
Bloc arrivals were ships trading between
Hong Kong or Japan and the China mainland.
Ships beginning their voyages from non-Bloc
ports in Europe accounted for another one-
third of non-Bloc arrivals. Most of the re-
mainder of non-Bloc arrivals originated in
Eastern European or South Asian ports. Voy-
ages of Soviet Bloc shipping engaged in trade
with China originated largely from Bloc ports,
especially Poland and the Soviet Far East.
In 1955 there was a sharp increase in the
number of Bloc tankers from Europe which
unloaded POL in the Soviet Far East before
proceeding in ballast to Communist China to
pick up return cargoes. As a result, 59 per-
cent of Bloc ships arriving in Communist
China came from the Soviet Far East, but
only 39 percent of Bloc ships leaving Commu-
nist China went to that area. .
19. A number of ships under non-Bloc flags
were engaged intermittently in domestic
coastal trade for the Chinese Communists in
1955 and contributed a valuable service not
reflected in arrival figures. Bloc ships gener-
ally do not engage in coastal shipping.
Foreign Trade
20. Programs to industrialize the economy
and to increase the military capabilities con-
tinue to be highly dependent on imports of
machinery and of military equipment. To
meet these requirements, the regime has pro-
gressively increased its exports of agricultural
products (which account for four-fifths of
total exports) and of industrial raw materials
including minerals. By 1955, Communist
China's total foreign trade was estimated to
be about $4.5 billion, 30 percent above 1954
and about 250 percent above 1950. (See Table
A V.) About 80 percent of Communist China's
trade was with the Bloc, with imports of about
$2 billion and exports of about $1.5 billion.
The import surplus was probably covered in
large part by loans from the USSR covering
both economic and military equipment. Com-
munist China exported about $450 million to
the non-Communist countries and imported
about $420 million from those countries.
Communist China's ability to export will be
hampered by increasing domestic demands
for agricultural products, the poor quality of
processed goods, and a fall-off in the pro-
duction of subsidiary farm products.
TABLE A V
THE FOREIGN TRADE OF COMMUNIST CHINA
IN 1955
Imports
Volume of Trade
(Thousands of Metric Tons)
Value
of Trade
(Million
US $)
Seaborne Overland
Total
Non-Bloc
1,552 negligible
1,552
420
Bloc
452 2,240
2,692
2,065
Total
2,004 2,240
Exports
4,244
2,485
Volume of Trade
(Thousands of Metric Tons)
Value
of Trade
(Million
us $)
Seaborne Overland
Total
Non-Bloc
2,675 133
2,808
455
Bloc
1,910 4,165
6,075
1,545
Total
4,585 4,298
8,883
2,000
21. About two-thirds of the value of imports
from the Soviet Bloc in 1955 consisted of
machinery, equipment, and essential supplies
such as POL, nonferrous metals, fertilizers,
and other chemicals, and the bulk of the re-
mainder was probably military equipment in-
cluding the transfer of Soviet military equip-
ment and facilities in China. Imports from
non-Communist countries were textile raw
materials (29 percent), drugs and chemicals
(26 percent), metals and machinery (18 per-
cent), rubber (7 percent), and miscellaneous
items (20 percent), mainly foodstuffs, coconut
oil, and paper.
22. Preliminary data indicate that Commu-
nist China's trade in 1956 was about $4.3 bil-
lion. Compared to 1955, trade with the Soviet
Bloc appeared to have declined by roughly
10 percent. However, if the value of Soviet
military goods and installations located in
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Communist China, transferred to that country
in 1955, is excluded from the 1955 figures,
trade in 1956 with the Bloc probably increased
slightly.
23. Preliminary reports indicate that trade
with non-Bloc countries in 1956 was consid-
erably above the corresponding 1955 level.
Imports under the CHINCOM "exceptions pro-
cedures" increased sharply during 1956. The
amounts licensed for shipment were approxi-
mately $70 million, as compared with a total
of about $15 million for the four year period
1952-1955. If goods licensed in 1956 were
delivered, they would represent about 16 per-
cent of total. imports from non-Bloc countries.
Two categories, iron and steel products and
motor vehicles and equipment, accounted for
over half of the exceptions shipments. Other
significant categories were tinplate, excava-
tors and cranes, metal-working machinery,
and power equipment. The principal export-
ers were the UK, West Germany, France, Italy,
and Japan.
24. The maintenance of effective multilateral
trade controls would continue to hamper Chi-
nese Communist economic and military devel-
opment by complicating import problems, in-
creasing costs, and reducing flexibility. Fur-
thermore, present unilateral US financial con-
trols will continue to deny to the Chinese Com-
munists remittances as well as a significant
former export market. Although increased
trade with the Free World would almost cer-
tainly. develop if CHINCOM controls were re-
laxed to the level presently maintained with
the European Bloc, such increases would prob-
ably not constitute a substantial reorienta-
tion of Chinese Communist trade. We believe
that such a relaxation of controls could in-
crease Communist China's annual import ca-
pabilities and would increase its flexibility in
planning, procurement, and shipment. How-
ever, Communist China's basic foreign and do-
mestic policies would probably not be signifi-
cantly changed in either case.
25. The Suez closure is having an adverse ef-
fect on Communist China's seaborne foreign
trade. Cargo shipments have been curtailed,
although alternative,, costly rail facilities are
being used for the most important items. Of
total trade, over 40 percent by volume is nor-
mally carried through the Suez canal. If the
canal should remain closed for a prolonged
period, the Chinese Communists would suffer
from delays, dislocation, and increased costs
for many of their imports. Moreover, they
would be faced with a difficult problem in
storing agricultural products, the export of
which would almost certainly be delayed. Po-
tentially the most serious impact upon the
Chinese Communists would develop if non-
Bloc vessels (which in 1955 provided 81 per-
cent of tonnage arrivals in Communist China)
were diverted to other trade.
Science and Technology
26. Communist China is severely handicapped
in the economic sphere by its extremely limit-
ed research and development capability, by a
severe shortage of scientific and technical
manpower, and by the poor quality of train-
ing. It plans, during the next 12 years, to
increase the number of experienced technical
and professional personnel from the current
100,000 to about one million, particularly in
such fields as engineering, agriculture, medi-
cine, and education. These plans provide dur-
ing 1958-1962 for the graduation of about
40,000 annually in engineering and physical
science, or numerically slightly more than
those graduated in this field in the US in
1955. However, a large proportion of these
graduates must be retained as teaching per-
sonnel. We estimate that shortages of skilled
personnel available to industry will become
particularly acute during the Second Five
Year Plan.
Population.
27. The population of Communist China was
recorded at 583 million in the 1953 census and
the regime officially estimated it at 603 mil-
lion in 1955, showing an indicated rate of
increase of 1.75 percent per annum. Commu-
nist spokesmen have recently claimed a 2.2
percent natural rate of increase during 1955-
1956. At that rate the population in 1962
would total over 700 million. Such a rate of
growth would impose a considerable burden
on the economy. Within the past year the
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Communists have shown increasing concern
about their population problem. A directive
promoting birth control has been issued and
articles have appeared recommending later
marriage. It appears probable that the re-
gime will step up its campaign to control the
growth of population; however, the outcome
of any such campaign is uncertain. The Com-
munist planners have stated that six to seven
million jobs in industry will be created during
the Second Five Year Plan. It follows that,
if the ranks of the unemployed are not to be
increased, the majority of the entrants into
the labor force. over the next five years will
have to be absorbed by the agricultural sector,
which is characterized by slowly rising out-
put, or in other nonindustrial pursuits where
productivity is low. In any event, the rising
population is likely to operate as a brake on
any projected rise in per.capita consumption.
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APPENDIX B
THE CHINESE COMMUNIST MILITARY ESTABLISHMENT
Ground Forces
1. Total Chinese Communist ground forces
are estimated at 2,500,000 men, of whom 1,-
800,000 are organized in 36 armies and sup-
porting units. This primary combat force in-
cludes 114 infantry divisions, 3 armored divi-
sions, 1 and possibly as many as 3 para-
chute divisions, 3 cavalry divisions, and
22 artillery divisions. Most armies have
about 50,000 men and most infantry divi-
sions have about 15,000 men. (TOE strengths
are about 60,000 and 19,000 respectively.)
Infantry division organization includes an
artillery regiment with 24 field pieces and
12 heavy mortars, an AA battalion of 12
light AA guns, and a tank regiment of 800
men and 36 medium tanks. At present only
15 to 20 percent of the infantry divisions
are believed to have tank regiments. An anti-
tank battalion with 12 x 45/57mm AT guns
has been reported as organic to 9 infantry
divisions. An armored division includes about
6,000 men, 80 medium tanks, 10 heavy tanks,
and 8 self-propelled guns. Parachute divi-
sions are estimated at 7,000 men. The break-
down of the 22 artillery divisions and their
TOE equipment is as follows: 12 field artillery
divisions, each armed with 108 pieces of cali-
bers up to 152mm, 2 rocket launcher divi-
sions armed with 72 x 132mm multiple rocket
launchers each, 3 antitank divisions each
armed with 72 antitank guns, and 5 anti-
aircraft divisions armed with 108 light and
medium guns each. Most ground force units
are estimated to have about 85 percent
of TOE.
2. About 25 percent of the total strength of
the ground forces is stationed in Manchuria
and North Korea. Another 25 percent is in
the triangle bounded by Shanghai, Hankow,
Canton, and the southeast coast, and about
14 percent is retained in North China in the
provinces of Shantung, Hopei and Shansi.
Part of the remainder of the force is in posi-
tions of coastal defense in the areas north of
Shanghai and southwest of Canton, and the
balance is disposed in central, western, and
northwestern China as a general reserve and
border security force.
3. Morale in the ground forces is good, be-
cause of preferential treatment afforded mem-
bers of the armed services and because the
Chinese Communist soldiers are developing
a sense of pride in their army and their
country. A fixed annual training cycle is
developing which begins with basic training
for recruits in the spring and appears to
progress to regimental and divisional size
maneuvers by the following winter.. A service
school system for officers and noncommis-
sioned officers is also operative, and higher
level staff colleges have been established. To
supplement indigenous training, numbers of
both junior and senior officers are sent to
appropriate level military schools in the Soviet
Union.
4. The Chinese Communist ground forces are
making efforts to create a better balanced
force through an increase in the proportion
of support units to infantry units, and are
considering a shift in tactical doctrine to
meet problems posed by, nuclear warfare.
A number of atomic warfare exercises have
been held which have emphasized the employ-
ment of individual protective measures similar
to those of the Soviet Army and which prob-
ably foreshadow some change in Chinese Com-
munist ground combat tactical doctrines in-
volving the abandonment of concentration
and mass attack in favor of greater mobility
and dispersion.
5. The Military Service Law of 1955 requires
a three year term of service in the ground
force, and provides for a reserve made up, in
part, of conscripts who have completed their
three years' service. This will add an esti-
mated 800,000 men annually to the trained
reserve, and will in any year after 1958 result
in a reserve of up to 2,400,000 men who have
undergone active military service within the
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three previous years. The quality of person-
nel available for service in both the active
and reserve components has been improved
by the institution of reserve training in high
schools and universities. Other preservice
training is carried on in the National Defense
Athletic Club and the New Democratic Youth
League, which have extensive military sports
training programs for civilians.
6. The bulk of the heavy equipment for the.
Chinese Communist ground force, especially
armored vehicles, artillery, and complex elec-
tronic equipment, is being supplied by the
USSR. The Chinese Communists produce
most of their present requirements for small
arms, mortars, recoilless rifles, rocket launch-
ers, and ammunition for these weapons. The
general increase in Chinese Communist in-
dustrial production during 1956 has consid-
erably increased the Chinese Communist ca-
pacity to produce greater quantities of muni-
tions, but the ground force will continue to
depend upon the Soviet Union for most of its
heavy equipment during the period of this
estimate.
Internal Security Forces
7. The Ministry of Public Security and the
Ministry of Defense share the responsibility
for internal security. The Ministry of Public
Security controls the People's Armed Police, a
national police force of approximately 500,000
which supports local civil governments
throughout China. The Public Security
Forces, which are still an integral part of
the army and under the control of the Minis-
try of Defense, are responsible for dealing
with internal or border security problems that
exceed the capabilities of the police. The
Public Security Forces have an over-all
strength of about 200,000 organized into a
minimum of 20 divisions and 13 independent
regiments. These units are smaller and more
lightly armed than comparable line units, but
they nevertheless contain the service and fire
support elements necessary for independent
operations in the field.
Air Forces
8. Communist China's air arm is heavily de-
pendent upon the USSR for planes, equip-
ment, supplies, and training. The Chinese
Communist Air Force (CCAF) and the Chi-
nese Communist Naval Air Force (CCNAF)
together are estimated to have 87,000 per-
sonnel and 2,600 aircraft of all types in oper-
ational units, including 1,870 jets. They con-
stitute a reasonably well developed air arm
with modern aircraft, and concepts of em-
ployment are improving. The personnel are
young and vigorous, with excellent esprit
de corps. The forces are organized into bomb-
er, fighter, attack, and transport units, and
operate from a large complex of air bases
which permits launching attacks from many
points on Communist China's periphery.
They also have a fairly well developed recon-
naissance capability.
9. The major strength of the Chinese Com-
munist bomber force is estimated to consist of
395 light ?jet bombers (BEAGLES). and 220
piston light bombers (BATS). The BATS are
being replaced by BEAGLES in a conversion
program supported by the USSR. The BEA-
GLES, with 4,400-pound bomb loads, have a
maximum speed of 450 knots and an unre-
fueled combat radius/range of 745/1,400 nau-
tical miles when operating at an altitude of
35,000 feet. Operational effectiveness of the
bomber force is reduced by factors such as
electronic equipment of limited capability,
which under other than visual or ideal radar
conditions affects bombing accuracy, and the
lack of combat experience.
10. The Chinese Communists are estimated
to have in operational units 1,475 jet fighters,
and about 180 piston fighters. Most of the
fighter strength is deployed near, industrial
and population centers, with the Shanghai
area most heavily defended. Replacement of
piston fighters by jet fighters is progressing
steadily, and piston fighters should be phased
out completely by the end of 1957. Air inter-
ception capability is hampered by a shortage
of adequate GCI radars, a serious shortage of
airborne intercept equipment, by inadequate
pilot experience in night and all-weather fly-
ing, and by only fair but improving standards
in the ground control of interception proce-
dures. However, the CCAF-CCNAF would
pose a substantial threat to bombers attack-
ing under conditions of good visibility. The
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SECRET
ability of the CCAF to support ground opera-
tions is being enhanced through operational
training.
11. The bulk of the Chinese Communist air
defense is concentrated in certain areas con-
taining major military and industrial targets.
They have a radar system which covers the
entire coast and major industrial and popu-
lation centers. This provides fair to good
capability to detect penetration of coastal
and major target areas, except by aircraft at
very high altitudes. Although a central con-
trol exists, the defense system is in essence
an "island" system because of, the long dis-
tances and the relatively poor communications
facilities.
12. The Soviet-supported modernization and
training programs are progressively improv-
ing Chinese Communist air power. By mid-
1959 piston light bombers will probably be
completely replaced. The piston medium
bomber force will probably rise to 60 aircraft
by 1960, at which time we believe that piston
medium bombers will begin to be phased out
as jet medium bombers phase in. We esti-
mate that by 1962 the total fighter strength
will increase by about 22 percent and the
proportion of all-weather fighters from less
than two percent to about 30 percent. As the
all-weather jet fighter program expands and
communications improve, the air-defense sys-
tem will improve significantly.
Naval Forces
13. The Chinese Communist Navy has an esti-
mated strength of 4 destroyers, 13 subma-
rines, 229 patrol vessels (including 118 motor
torpedo boats), 25 minesweepers, 64 amphibi-
ous vessels (including 10 utility landing
craft), and 250-300 small patrol craft and
armed motor junks. Most of the destroyers
and submarines have been obtained from the
USSR since 1953. Most of the larger naval
vessels operate from Hangchow Bay north-
ward, the greatest concentrations of naval
strength being based at. Shanghai and Tsing-
tao. Only small patrol vessels and harbor
craft are operational in the area opposite Tai-
wan. The Naval Air Force has about 30 jet
and 40 piston fighters and about 160 jet and
60 piston light bombers concentrated in sev-
eral areas of East and Northeast China. This
small, recently organized force has shown
steady growth and improvement.
14 The navy, though small and principally a
coastal defense force, is the most effective in-
digenous Asian navy. It can inflict losses on
an enemy in Chinese Communist waters with
submarine attacks, air attacks, mine warfare,
and destroyer and torpedo-boat attacks. The
greatest offensive potential probably lies in
short range amphibious operations (includ-
ing the employment of joint sea-air-ground
forces) utilizing not only conventional am-
phibious types, but also merchant shipping,
junks, and other small craft. The navy's
capabilities are limited by lack of major com-
batant units plus the age and motley origins
of their vessels. These conditions will prevail
until overcome by the indigenous Soviet-
assisted building program now in progress.
15. The Chinese Communists have demon-
strated a reasonable degree of proficiency in
amphibious assaults against coastal islands.
As a result of periodic exercises, they probably
are continuing to improve their techniques.
Through the maximum employment of avail-
able conventional amphibious vessels and un-
der favorable conditions they have the capaci-
ty against the Offshore Islands for the follow-
ing lift variations: (a) 40,000 to 70,000 lightly
armed troops, (b) 20,000 to 25,000 troops
supported by an armored division and an
artillery division with reduced motor trans-
port, or (c) two divisions each of armor and
artillery, also with reduced motor transport.
Eighty-nine available merchant vessels (ex-
cluding 23 otherwise committed) with a ca-
pacity of 260,000 DWT together with coastal
craft plus motor and sailing junks provide
an additional short-haul lift for 200,000 troops.
Against Taiwan, however, it is estimated that
various factors would limit their initial assault
force to approximately 75,000 to 100,000
troops. Completion of the Amoy rail line, and
the near future completion of the Foochow
branch greatly enhance the logistic support
capability in the Taiwan Strait area. Against
the Nationalists alone the Chinese Commu-
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nists have the capability to seize and main-
tain control of the air and sea in the Taiwan
Strait and can organize, launch, and support
a large scale amphibious assault against
Taiwan.
16. The USSR is providing most of the mate-
riel support for the navy, particularly ma-
chinery, electronic gear, ordnance, and fuel.
Under the supervision and direction of Soviet
ship building experts, the Chinese Commu-
nists have recently expanded their naval con-
struction program to include submarine, large
patrol vessels, minesweepers, and motor tor-
pedo boats. However, in spite of Chinese
Communist industrial growth, the navy will
continue to depend in large measure on the
USSR for support through the period of this
estimate.
Nuclear Energy Program
17. Communist China does not have a suffi-
cient number of qualified nuclear scientists
to support a significant atomic energy pro-
gram. Through the Soviet atomic aid pro-
gram and the Joint Nuclear Research Insti-
tute, Communist China is receiving help in
the training of her scientists in basic nuclear
physics and the application of atomic energy
techniques to medical, agricultural, and in-
dustrial research. Even with this aid it is not
likely that Communist China will be able, dur-
ing the period of this estimate, to support an
independent atomic energy program. How-
ever, if the USSR were to provide the necessary
equipment and technicians, the Chinese Com-
munists could in a short time achieve the ca-
pability to use nuclear weapons.
SECRET
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APPENDIX C
DIPLOMATIC STATUS OF COMMUNIST CHINA
UN members which recognize
Afghanistan
Albania
Bulgaria
Burma
Ceylon
Czechoslovakia
Denmark
Egypt
Finland
Hungary
India
Indonesia
Israel
Nepal
Netherlands
Norway
Pakistan
Poland
Rumania
Sweden
Syria
United Kingdom
USSR
Yugoslavia
Yemen
Non-UN members which recognize Communist China:
Switzerland
East Germany
North Korea
North Vietnam
Outer Mongolia
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 Ck
l Int
1'Inp Hu
1~0
Lok.
t.1k01
HAINAN
Y.?Bnf
Tsin81Y E L L U
SEA
SEn
^6^'m of
COMMUNIST CHINA
RAILROADS-FEB. 1957
r -- Existing before end of 1949
Completed since 1949
Under construction
? ? ? ? ? ? . Projected (approximate alignment)
0 100 200 400 600 Mlles
0 100 260 460 660 Kllon,.t.r,
Boundar4, end coo., .,. not n....,.rry
that. r.4opnl:.d by the U. S. Gowmm.ne.
s r Declassified and Approved For Release 2013/05/10: CIA-RDP98-00979R000400490001-4
FOR OFFICIAL USE ONLY
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COMMUNIST CHINA
AIR FORCES BY MILITARY DISTRICT U
I JANUARY 1957
(Estimated actual strength)
SECRET
r' t
S.
\. r..
- ti : BHUTAN (-..J
AIRCRAFT ROLE
NORTHEAST
NORTH
EAST
CENTRAL-SOUTH
SOUTHWEST NORTHWEST
TOTAL
FIGHTER
Jet (Day)
575
'
60
530
245
-
--
1410
)
~ppA/W)
(15)
-
60
120
-
-
80
ATTACK
~p Ftr)
40
LT BOMBER
Jet
Prop
RECON
Jet (Ftr)
5
-
20
-
25
BURMA
)
(Lt Bm
5
5
4%
LAOS
r
Prop
_
10
-
-
-
10
TRANSPORT
Prop (Light)
15
35
90
t THAILAND
1
MEDIUM BOMBER
Prop
UTILITY/LN
Prop (Mac)
25
-
10
-
10
-
45
TOTAL AIRCRAFT
856
195
1010
435
10
90
2596
I,els,dcd is Jet (Day) F:phter rotols.
O Jet Fighters
O Jet Light Bombers
r..
AR
i! NORTH AREA
go Jet Fighters
4~~70 Jet Light Bombers
Of
SEA N
)APA
EAST
AREA
1302et Light'
245 Jet Fighters
o Jet Light Bombers
(1..C?tiO, to KONO
MP~AO
SOUTH NINA
`Hr NA
EAST
t` pHlLlp4YN
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