CURRENT INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000200070001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 15, 2016
• Document Release Date: April 15, 2004
• Sequence Number: 1
• Publication Date: January 8, 1954
• Content Type: REPORT

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A
COPY NO. 2.j
OCI NO. 2225
8 January 1954
CURRENT
INTELLIGENCE
WEEKLY
CLASS. CHANCED TO. T 3
NEXT REVIEW DATE:
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NO CHANCE IW -- 1
DECLASS A,?
I-IEU
E'vIFWFc I
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
E
25X1
25X1
STATE review(s)-completed.
lot
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly has been prepared pri-
marily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of
all current situations. Comments and conclusions rep-
resent the immediate appraisal of the Office of Current
Intelligence.
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SUMMARY OF CONTENTS
THE SOVIET WORLD . . . . . . . . . . . . . . . . . . . Page 4
END OF JANUARY WILL BE CRITICAL PERIOD FOR KOREAN
ARMISTICE . . . . . . . . . . . . . . . . . . . . . . . Page 5
The Korean armistice faces a period of severe strain
with the approach of the scheduled date for the release
of the prisoners of war on 22 January and the expiration
on 27 January of President Rhee's agreement not to ob-
struct the truce.
PROSPECTS OF EGYPTIAN NEUTRALISM . . . . . . . . . . . Page 7
Egypt's recall for consultation of its envoys to
Moscow, Washington, London, New Delhi and Karachi suggests
an attempt by the Nagib regime to reassess its strategy
toward the West.
IRAN APPROACHES CRITICAL PERIOD . . . . . . . . . . . . Page 8
The next few months will probably determine whether
or not the present Iranian government can continue in
office.
MOTIVATIONS AND CONSEQUENCES OF SOVIET GOLD EXPORTS . . Page 10
Soviet gold exports, which in the past three months
have increased to about five times the rate of recent
years, have. coincided with marked changes in the internal
economic program of the Uaak.
COAL-STEEL ASSEMBLY FACES BASIC DIFFICULTIES AT JANUARY
MEETING . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Growing producer opposition to the European Coal-
Steel Community's long-term program poses a serious
challenge to the sigh Authority's leadership at the
special session of the community assembly called for
14 January in Strasbourg.
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PROBLEMS FACING THE UNITED STATES AT THE TENTH INTER-
AMERICAN CONFERENCE . . . . . . . . . . . . . . . . .
The Tenth Inter-American Conference which is to
convene in Caracas on 1 March promises to be the most
difficult of any meeting to date. It will probably be
,the scene of a series of challenges to United States
economic policy.
rage 13
POOR RICE CROP AFFECTS JAPAN'S FOREIGN RELATIONS AND
DEFENSE . . . . . . . . . . . . . . , . . . . . . page 15
Japan's poorest rice crop since 1934 not only
imposes a heavy economic burden on the government, but
will seriously reduce its ability to meet other demands
important to defense and foreign relations.
COMMUNIST CHINA SETTLES FOR MODERATE CONSTRUCTION
PROGRAM . . . . . . . . . . . . . . . . . . . . . . . rage 19
The general goals of China's five-year national
construction plan now appear to be modest, and less than
Peiping had hoped for.
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Malenkov's answers to the questions of an American
foreign correspondent and a New Year's Eve speech by the
chairman of the Presidium of the Supreme Soviet hailing the
now familiar "new course" in the Soviet Union set the tone
for the gayest celebration in Moscow in many years.
As concrete expressions of their new program, the Soviet
leaders started a 10-day series of New Year's tree parties in
the Kremlin for school-age children, staged an elaborate
masquerade ball in the Kremlin for Soviet youth, and, for the
general population, threw open railroad stations for New Year's
Eve celebrations at considerably lower prices than those charged
at hotels. In addition there was a marked increase in the supply
of most foods in Moscow state stores during the holidays, in-
cluding imported foods such as pineapples, oranges, lemons,
bananas, fish, and canned meat.
In contrast, Soviet propaganda continued to regard the
forthcoming Berlin conference pessimistically. Pravda recently
alleged that the Western preliminary meeting in Paris "would
lead to a collapse of negotiations."
At the same time there were additional indications of
the means by which the USSR hopes to obtain a propaganda
advantage from the conference. In an interview with Churchill
and Eden on 23 December, Soviet ambassador Malik expressed
interest in the security guarantees to the USSR which have been
discussed in the press, indicating that European security is
a subject likely to be exploited in Berlin. Malik also de-
veloped the line, similar to that of Soviet propaganda, that
Britain and the Soviet Union, as European powers, are disposed
to mutual understanding, whereas non-European powers could
not understand European problems.
A Pravda comment of 31 December alleged that the West is
evading s g ificant questions regarding the German problem
and cited as an example the question of easing Germany's
economic and financial burdens, suggesting that this will be
one of the points that the Soviet delegates will raise at
the conference. Reports that the Soviet ambassador to Austria
will attend the Berlin meeting indicate that the USSR will
be prepared to defend its position on Austria.
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END OF JANUARY WILL BE CRITICAL
PERIOD FOR KOREAN ARMISTICE
The Korean armistice faces a period of severe strain with
the approach of the scheduled date for the release of the
prisoners of war on 22 January and the expiration on 27 January
of President Rhee's agreement not to obstruct the truce. Inci-
dents involving American forces could be caused by Communist
insistence that the prisoners must undergo a full 90 days of
explanations and that their fate be discussed in a political
conference prior to their release, by the Indian government's
indecision on whether to hold the prisoners, and by Rhee's
growing antagonism toward the Indians.
General Thimayya, chairman of the Neutral Nations Repatria-
tion Commission, has stated repeatedly that the Indian custodial
forces cannot legally hold the prisoners after 22 January. New
Delhi apparently backs Thimayya, as indicated by Krishna Menon's
late December statement to Ambassador Allen that a phased with-
drawal of the POW's from the demilitarized zone could begin on
23 January. Prime Minister Nehru, however, is reportedly under
strong pressure from Peiping and from certain advisers in the
Indian Foreign Ministry who favor the Communist viewpoint, and
this could induce him to delay the release pending discussions
at the UN General Assembly.
Despite Chou En-lai's recent statement to the Indian ambas-
sador at Peiping that the Communists would never agree to the
release on 22 January, there is no evidence that they would risk
a renewal of the war by attempting by force to block the release
of the 22,000 anti-Communist prisoners. If the release takes
place on schedule, the Communists may limit their action to a
world-wide propaganda blast at the United States and possibly
at India, stressing the "illegality" of the move.
Since the anti-Communists recognize their dependence on the
UN Command and South Korea for their initial support and reset-
tlement, their transfer from Indian custody should be accomplished
without major difficulty. There is a strong possibility, however,
of disorders among the prisoners.
If the Indian government decides not to release the POW's,
the Communist governments could be expected to exploit the de-
cision. There would probably be a violent reaction among the
prisoners, who are fully informed on the release timetable.
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General Thimayya is aware of this danger, and states that he has
informed New Delhi that failure to release the prisoners will
force the Indian troops to give up all control over them and
stand humiliated, or far worse, to kill hundreds in an attempt
to hold them back.
President Rhee's conviction that India is pro-Communist,
newly reinforced by the unfavorable NNRC majority report and
Indian screening of the POW's, and his emotionalism over the
detention of Korean nationals by a foreign power, would impel
him to take strong action to effect their release. His action
in releasing the Korean prisoners last June demonstrates that
he would encourage a breakout and stand by to harbor any escapees
He has threatened publicly to use force against the Indians if
the prisoners are not released automatically on 23 January.
While Rhee would be reluctant to risk a conflict with
American forces stationed between South Korean troops and Pan-
munjom, he might well gamble that the UN Command would choose
not to uphold the armistice rather than shoot down South Koreans.
The fact that such action would violate the armistice would not
deter him since he considers himself released from its obliga-
tions as of 27 January.
Another possibility is that Rhee would use nonrelease of
the prisoners as justification for carrying out his threat of
independent military action against the Communists. His recent
public statements, however, have emphasized the "right" richer
than the "intention" to attack northward. It is also prorble
that he is now less convinced of his ability to involve tie
United States in renewed fighting, which is undoubtedly tie
major determinant of his decision.
Nevertheless, the emotional impact of the prisoner i~-sue,
combined with the continuing build-up of the North Korean forces,
the increasing Chinese influence in the north, and the planned
withdrawal of two American divisions could spur him into an
irrational "now or never" decision, If he decides on this
course, an all-out attack would be less likely than a ser::es
of small-scale actions designed to provoke the Communists to
retaliate.
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Egypt's recall for consultation of its envoys to Moscow,
Washington, London, New Delhi, and Karachi suggests an attempt
by the Nagib regime to reassess its strategy toward the West.
The regime's frustration over its inability to obtain
British evacuation of the Suez base and American economic aid
has led it to promote the idea that Egypt might adopt a neutral
position in the East-West struggle.
This attitude may be expected to express itself in reduced
cooperation and increased anti-Western propaganda rather than
in closer relations with the Orbit. Egypt apparently considers
that the threat of neutralism and closer relations with the
Soviet Union is a potent lever on the United States and Great
Britain.
Recent evidence indicates Egypt's inability to fulfill its
threat of closer ties with the Orbit. Despite Cairo's efforts
to enlarge commercial relations -- an economic mission is now
touring the Satellite states and the USSR -- there is no indica-
tion that significant success will be achieved. Official rela-
tions have been desultory and the Orbit has not responded in the
past to Egyptian requests for arms. There is also little likeli-
hood that the Soviet Union will grant Egypt any important eco-
nomic aid, or that a closer political alignment will materialize,
except for occasional opportunistic collaboration in the United
Nations.
In line with a policy of reduced cooperation with the West,
however, Egypt may recognize the Communist regimes in Albania
and China, The Egyptian press has hinted lately at the possi-
bility of recognition, a subject reportedly to be discussed at
the Arab League Council meeting scheduled for early January.
Egypt intends to push
for an Arab states' declaration of neutrality at the meeting, but
the other Arab governments are not likely to associate themselves
with such a declaration. Egypt may be expected, however, to con-
tinue its propaganda efforts to promote neutralism among them.
Since Egypt is the recognized Arab leader, its position
accordingly limits the freedom of action of pro-Western Arab
leaders in the area. Cairo's adoption of neutralism would make
it difficult for the United States to obtain support for regional
defense plans in the other Arab states.
Any policy of neutralism adopted by the Nagib regime will
probably be limited to noncooperation with the West and in-
creased public stress on Egypt's independence of action.
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8 Jan 34
IRAN APPROACHES CRITICAL PERIOD
The next few months will probably determine whether or
not the present Iranian government can continue in office. A
government victory in the elections, expected before the end
of January, will provide the semblance of popular support Zahedi
needs in order to start oil negotiations with the British. His
position may still be endangered, however, by opportunism in
the new Majlis, by independent maneuvers of the shah, and by
the expiration of American aid next April.
Prime Minister Zahedi has yet to win the confidence of a
large part of the population, and feels the need of a properly
elected parliament to share his responsibilities. The shah and
Zahedi have drawn up a joint list of the candidates they will
covertly support. In addition, they reportedly will soon re-
place provincial officials by army officers, a move which would
strengthen the government's control over the voting.
The elections for each chamber are scheduled for completion
within a 24-hour period, and this haste reduces chances for the
formation of a united opposition. Although government backing
will not assure a candidate's election, most of the government-
supported candidates probably will be successful. For the first
time in several years, there may be a full Majlis and Senate.
The election of a progovernment Majlis, however, wits not
solve all of Zahedi's parliamentary problems. After the elec-
tions many deputies are likely to support the government only
when this is personally profitable and expedient. Should some
pro Mossadeq deputies from the previous Majlis, includin? the
extreme nationalists Baghai and Makki, be elected, they would
provide a rallying point for such opportunism.
The first task of Zahedi and the new Majlis will be =.o
pursue oil negotiations with Britain. Zahedi must not give any
indication of submitting to British pressure if he wishe!~, to
carry the country with him. His caution will be increas_-d by
the fact that his government has imprisoned former prime minis-
ter Mossadeq, the father of oil nationalization, who is . ill
popular. Iran is expected to take no stand prior to the open-
ing of direct negotiations with Britain and will wait for defi-
nite British proposals.
The future of the present regime is also endangered by
the possibility of an open break between Zahedi and the shah.
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The latter has always distrusted a strong prime minister, and
his behind-the-scenes intrigues have made difficulties for
previous governments.
Any intrigues by the shah, following his earlier insist-
ence on assuming control of the army and his intervention on
Mossadeq's behalf, would heighten the tension which already
exists, but an immediate open break between the two men is un-
likely as their cooperation is necessary to elect a friendly
Majlis.
Up to the present, the $45,000,000 of emergency American
aid has enabled the government to meet its monthly payrolls
and other current obligations. The expiration of this aid in
March or April poses an immediate problem for Zahedi, as his
government's finances will not be sufficiently improved by then
to meet monthly deficits. Until Iran again receives substantial
income from oil sales, Zahedi has no chance of mastering the
financial problem or of undertaking the economic and social re-
forms he has promised.
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MOTIVATIONS AND CONSEQUENCES OF SOVIET GOLD EXPORTS
Soviet gold exports, which in the past three months have
increased to about five times the rate of recent years, have
coincided with marked changes in the internal economic program
of the USSR. Not only has the government's pledge to improve
Soviet living standards increased internal requirements for
such dependable foreign exchange earners as grain and timber,
but the regime has also committed itself to expand imports of
consumer goods.
Faced with a reduction in foreign exchange receipts, the
Soviet government has shifted the pattern of its exports. In
contrast with the Stalinist view that gold should be hoarded
as a reserve for emergency use only, the new Soviet leaders
apparently regard it as a source of foreign exchange like any
other exportable commodity.
This shift in attitude is apparently based on a cautious
economic calculation. With fixed investment and a priscner
labor force already assigned to gold production, it is
advantageous for the USSR to procure many types of goods
abroad through the proceeds of gold sales instead of maru-
fa,cturing the goods domestically.
The value of the USSR's current gold production is
estimated as high as $500,000,000 per year. With this scale
of output, the USSR could maintain its present rate of gold
exports without dipping into its stockpile.
The new Soviet gold policy probably does not foreshadow
any "dumping" of gold, fears of which have been expressed in
Western financial circles. Soviet planners, despite their
desire to acquire Western currencies, are not likely to reduce
the value of their gold by exporting it in such volume as to
precipitate a sharp fall in its price or create any serious
disturbance in Western markets. The Soviet government's
awareness of its better interests is reflected in its recent
propaganda favoring an increase in official gold prices..
Soviet gold exports offer financially hard-pressed Western
governments an opportunity to replenish their gold reserves
as well as to expand their market outlets. The USSR is thus
placing itself in a more favorable position to break Western
resistance to trade with the bloc.
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COAL-STEEL ASSEMBLY FACES BASIC DIFFICULTIES
AT JANUARY MEETING
Growing producer opposition to the long-term program
of the European Coal-Steel Community (CSC) poses a challenge
to the CSC High Authority's leadership at the special session
of the community's assembly called for 14 January in Strasbourg.
The High Authority is itself divided on tactics to be pursued
at this meeting with the 78 delegates from the national parlia-
ments of France, Italy, West Germany, and the Benelux countries.
High Authority president Monnet, who is convinced of the
necessity of extraordinary efforts by publicity and discussion
to win the full support of all interested governments and
economic groups, plans to lay before the assembly detailed
measures for directing investments and negotiating with Britain
on institutions for promoting trade liberalization. He may
also present even more controversial plans for eliminating car-
tels and making prices more competitive.
He feels that the High Authority can no longer defer pre-
senting such plans despite the risk of a showdown with the pro-
ducers. Its plans have been awaited for over a year and many
influential delegates, including assembly president Paul-Henri
Spaak of Belgium, have shown their impatience. These plans, in
fact, are considered indispensable to enable the community in
the long run to meet the growing competition of nonmember
countries in world markets.
The producers, on the other hand, have been repeatedly led
by their short-term interests to act counter to CSC principles
and policies. With the rapid return of a buyers' market in
1953, they insisted increasingly on greater rather than less
protection of their marketing position. Many firms offered price
concessions to customers in strong bargaining positions while
insisting on list prices with those less well situated, The High
Authority's announcement that it will investigate these discrim-
inatory practices, which it can penalize with stiff fines_ has
provoked a bitter reaction among the producers.
In West Germany, where large coal and steel sales organiza-
tions survived the Allied decartelization program, industry has
recently declared that it cannot meet competition without re-
sorting to the traditional vertical combines, encompassing all
steps from raw material production to finished product distribu-
tion. There are also indications that the traditionally
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restrictionist French steel combines are maintaining gentlemen's
agreements for protection against competition.
The long-standing French-German rivalry for steel markets
intensifies the drive toward cartelization, The competitive
position of the French steel industry is favored by new inte-
grated steel mills built largely with Marshall Plan funds and
also by a High Authority decision ending the Ruhr steelmakers'
absorption of part of the freight costs to south German steel
fabricators.
The intense French-German rivalry will also embitter the
forthcoming discussions on the High Authority's master plan
for the community's long-term investments. The French can be
expected to balk at the High Authority's reported present plan
to concentrate initial investments in the basic Ruhr coal
industry.
Though the High Authority has been granted extensive legal
means to regulate the producers, the only practical means of
enforcement it has is the power to withhold subsidy payments
or to refuse to guarantee investment loans to the companies.
Otherwise it must depend on the national governments. The
producers still wield great political and economic power within
the member countries. Thus, they can exert indirect pressure
on the CSC through its Council of Ministers and at times have
even dominated its Consultative Committee, in which labor and the
consumers have with them equal representation. The national
governments, moreover, can determine the success or failure of
the CSC since they retain full control over the unpooled parts
of their economies, such as fiscal, wage, and social security
policies.
In the face of these varied obstacles, one faction of the
High Authority, led by Monnet, wants a bold policy and was re-
sponsible for the official warning to the steel export cartel in
November to dissolve or be outlawed. Another group, including
the influential Dutch member Dirk Spierenburg, opposes prompt
action against this cartel, urging instead the legally safer
test of strength of an attack on the restrictive coal and steel
sales agencies for trade within the community. It also seeks to
mollify steel producers by allowing them to deviate by five
percent from their published prices,
The CSC's basic dilemma seems to be that it must choose be-
tween risking conclusive defeat in an immediate showdown or
gradual failure through a solidification of the old restrictive
practices within the new community.
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PROBLEMS FACING THE UNITED STATES AT THE TENTH INTER-AMERICAN
CONFERENCE
The Tenth Inter-American Conference which is to convene
in Caracas, Venezuela on 1 March promises in several respects
to be the most difficult American meeting to date. At present,
the most serious of the impending problems appear to be a series
of challenges to United States economic policy and possible dis-
agreement over the Washington-sponsored item on Communist in-
tervention in the hemisphere.
Thus far, 28 agenda items have been approved by the Council
of the Organization of American States (OAS), but many countries
including Brazil, which is frequently the bellwether of Latin
American opinion, have announced that the six items listed in
the economic section will occupy most of their attention. These
items include such questions as commercial relations, develop-
ment programs, and technical assistance, and all are so phrased
as to permit discussion of a wide variety of proposals. The
basic Latin American complaint, which Dr. Milton Eisenhower's
recent report described as an emotionally charged belief, is
that the United States tends to exploit the economies of the
other American republics for its own ends.
Latin American resentment of this supposed policy was re-
flected at the Ninth Inter-American Conference in 1948, the
Inter-American Foreign Ministers Conference in 1951, and again
at the 1953 session of the Inter-American ECOSOC. Skillful
American diplomacy in the first two cases, and determined sup-
port from Venezuela and its neighbors in the third, prevented
economic problems from becoming acutely embarrassing to the
United States. There are now indications that frank discussion
of the issues cannot be further postponed and that a showdown
on them will be forced at the conference in March.
Many of the Latin American demands and complaints reflect
the belief that Washington can and should control the prices of
United States imports and exports, and the nature and conditions
of its private investment abroad. This idea has been strength-
ened during the past year by the threat of increased American
tariffs and other import restrictions. As a countermeasure most
Latin American governments have in recent years made concerted
efforts to channel trade toward markets considered less capri-
cious than the United States. More recently. some have attempted
to expanu commercial relations with the Orbit.
On the basis of these attitudes and the recommendations of
the Milton Eisenhower rAnort for more economic assistance to
Latin America and stabilized trade relations, a majority of the
more important countries can be expected to press for basic
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commitments from the United States on tariffs, stable price and
purchasing arrangements for raw materials, development loans,
and other such matters affecting the stability and growth of
their economies.
The chief political problem appears at this time to be the
United States-sponsored item "Communist Intervention in the
American Republics," which is generally understood to refer to
a discussion of possible controls on international travel and
propaganda. Several governments lack enthusiasm for a broad
discussion of Communism, and some tend to share Uruguay's view
that the question is inadmissible without a concurrent discus-
sion of "positive" moves to strengthen democracy and protect
the "rights of man
Guatemala, because of the strong Communist influence in
its government, can be expected to react vigorously against the
proposal. Its probable argument, that the item is actually de-
signed to create a pretext for intervention in the interral af-
fairs of Latin American states, will sound a note to which most
of the OAS countries are very sensitive.
Uruguay's suggestions to include the "positive" aspects of
combatting Communism were defeated in the OAS Council, bit re-
cent statements by its ambassador to the OAS indicate that at-
tempts may be made to reintroduce them with reference to the con-
troversial items on political asylum, human rights, and coloni-
alism. Such attempts are likely to include attacks on the
rightist dictatorships, such as Peru, the Dominican Reput~Iic,
Cuba, and Nicaragua, which are among the staunchest supporters
in Latin America of United States policies.
The broad terms in which the agenda items are drafted hin-
der the development of well-defined blocs on specific proposals
prior to the conference, but may allow the United States to be
confronted with certain "surprise" problems. One such pos-
sibility lies in the Colombian foreign minister's recent sug-
gestion of an inter-American army. The idea has not yet gained
the official support of other governments, but Argentine presi-
dent Peron has stated privately that he will support any motion
in its favor and that he hopes for a NATO-type arrangement,
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POOR RICE CROP AFFECTS JAPAN'S FOREIGN RELATIONS
AND DEFENSE
Japan's poorest rice crop since 1934 not only imposes a
heavy economic burden on the government, but will seriously
reduce its ability to meet other demands important to defense
and foreign relations. The yield for the year ending in March
1954 is expected to be about 17 percent, or 1,700,000 tons, be-
low that of the preceding rice year. Since rice makes up nearly
75 percent of Japan's staple food consumption, the harvest loss
caused by floods and bad weather will have serious effects.
The government recognizes that it has no alternative but
to make up most of the food deficit, largely by increased im-
ports. Present plans call for total food imports of over
6,000,000 tons for the year ending next July, as compared to
4,800,000 tons in 1952-53. Such a program would provide a daily
per capita food intake of 2,007 calories, 81 calories below
1952-53, and would require about 60 percent of Japan's estimated
1954 merchandise exports to pay for food imports alone.
In addition, agricultural relief and rehabilitation have
been given a top priority. Japan has already adopted a special
"flood relief" budget which adds about 5 percent to the swollen
$2.68 billion regular budget. This supplement diverts funds from
regular projects, such as an increase in food production, and
absorbs revenues which might have been used for defense, repay-
ment of American aid, and reparations.
The present draft of the 1954-55 budget reflects this sit-
uation. Including anticipated unexpended funds from this fiscal
year, the potential defense expenditures will amount to about
$440,000,000 in fiscal 1954. This contrasts with the $517,000,000
which it is estimated will actually be spent this year. Previous
Diet slashes of proposed defense expenditures make $440,000,000
the likely maximum. Japan's draft budget, despite American re-
quests for a settlement, also omits provision for the repayment
of American aid furnished during the occupation. In addition,
Japan may now want to cut its reparations payments to Southeast
Asian claimants. While Japan might have wanted to reduce these
payments in any case, the poor rice crop increases the pressure.
The added food and agricultural programs may result in a
healthy paring of certain budget items. If past patterns hold,
however, defense and other important expenditures are likely to
suffer at least as much as less important but politically more
palatable appropriations.,
15
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COMMUNIST CHINA SETTLES FOR MODERATE
CONSTRUCTION PROGRAM
+~ri1' SAL
The
general goals of China's five-year national construction
plan
now
appear to be modest, and less than Peiping had hoped
for.
The
construction program was hampered from its start, a
year
ago,
by poor planning and a shortage of technicians and
some
construction materials. Consequently there were several
cutbacks in the plan's first-year goals. The five-year goals,
which were probably not set firmly until the conclusion of the
Soviet aid talks last summer, appear to reflect a Chinese inability
to obtain as much aid as originally envisaged.
Absolute production figures and details on plants are lack-
ing for most of the national construction program, although the
Soviet ten-year aid program for China through 1959 is known to
include the objectives of a fourfold rise in the steel ingot
output and 60 percent more coal.
Most industrial construction is in the Northeast Area
(Manchuria), where China's heavy industries are to be further
concentrated. This is particularly true of the 141 projects
which are to receive Soviet aid, some 50 of which have been
identified as under way. The Manchurian complex, which has
favorably impressed non-Communist diplomats on conducted tours
of the area, includes construction or reconstruction of several
iron and steel plants at Anshan, many power plants, vehicle and
machinery factories, and some synthetic oil refineries.
The electrification program is one aspect of the plan which
is fairly clear. The Chinese apparently hope, with Soviet aid,
to expand capacity of the electric power industry from 2,400,000
kilowatts to about 3,700,000 between 1952 and 1957. This repre-
sents a very gradual approach to industrialization.
None of this expansion is in new hydroelectric plants, but
the huge Tafengman hydroelectric station in central Manchuria
is being restored and the even larger Supong (Suiho) plant on
the Yalu River is receiving priority under the Soviet program to
reconstruct Korea. Two 85,000-kilowatt turbogenerators were
installed at Tafengman in 1953 and more will reportedly be
delivered by the USSR.
An additional 275,000 kilowatts of power were to be added-to
Manchurian thermal plants in. 1953 and-1954,F I 25X1
Considering a capacity o
a dozen large and sma ermal plants under construction else-
where in China, it appears that the five-year electrification
program will be about half completed by the end of 1954.
19
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