BACKGROUND MATERIAL FOR PREMIER ZHAO'S VISIT TO THE UNITED STATES, 10-12 JANUARY 1984

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R001000030001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: December 22, 2016
• Document Release Date: August 17, 2011
• Sequence Number: 1
• Publication Date: January 1, 1984
• Content Type: REPORT

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Directorate of
Intelligence
3
10-12 January 1984
Background Material for
Premier Zhao's Visit
to-the United States,
Seer-et.
-AM g4_iOOoS
January 1984
Copy
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Background Material for Premier Zhao's
Trip to the United States
10 - 12 January 1984
Chinese Expectations for the Visit
Zhao Ziyang. -- A Political Portrait
China: Leadership Politics
China's Economy: An Overview
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SECRET
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
30 December 1983
Chinese Expectations for the Zhao Visit
Summary
The Chinese leadership wants a successful Zhao visit to
highlight recent gains in Sino-US relations, bolster China's
prestige, and enhance Beijing's position in the Sino-US-USSR
strategic triangle. Zhao probably also hopes to facilitate-
broader?Sino-US economic ties--especially greater access to
American technology--both to underscore China's continued
commitment to its open door policy and to demonstrate the'
benefits of that policy. Zhao is likely to stress publicly
China's adherence to an "independent foreign policy" and
privately restate--in non-polemical terms--Chinese concerns over
the Taiwan Relations Act and US arms sales to Taiwan. But we
expect him to place greater emphasis in private on common
strategic and economic interests in the hope of laying the
foundations for a smoother relationship with the Reagan
administration, which Beijing probably expects to win another
four-year term.
Importance of Symbolism
Beijing may attach more importance to the symbolism than the
substance of the Zhao visit. It will be the first by a senior
Chinese leader since Deng Xiaoping came to Washington in 1979 and
the first ever by a Chinese premier. Beijing probably regards
the timing of the visit as also important in underscoring how
much the relationship has improved since last spring.
This memorandum was prepared by the China Division of the
Office of East Asian Analysis as background for the visit of PRC
Premier Zhao Ziyang to the United States. Questions and comments
on the memorandum are welcome and may be directed to the Chief,
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EA M01/000
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Zhao almost certainly hopes to develop a better personal
relationship with the President both to counteract Taiwanese
influence and erase any residual strain left over from their
first brief meeting at Cancun in 1981. Zhao is likely,
therefore, to stress common interests--especially in countering
Soviet expansionism and promoting stability in East Asia. In
doing so he presumably will raise or be prepared to discuss
recent North Korean overtures for talks. He probably hopes the
US in turn will acknowledge in public the importance of China's
contribution to stability in Northeast Asia.
Zhao will raise Taiwan as every Chinese leader has with
senior US officials visiting China over the past year. Recently
the Chinese have taken the line that continued US support for
Taiwan, especially arms sales, encourages Taiwan-to ignore
Beijing's overtures for talks and thus undercuts China's policy
of pursuing peaceful reunification. The Chinese may believe
that, with, a US President coming to China in an election year,
they have greater leverage. on this question now than later. If
so, they may probe US willingness to play a more active role in
helping to bring about a Beijing-Taipei dialogue.
At a minimum, Chinese-leaders seem determined to drive home
the message that mishandling this issue endangers Sino-US
relations. Their strong reaction to both the Pell resolution and
the amendment to-the Asian Development Bank funding bill was
intended in part to emphasize their concern that the Taiwan issue
be handled in a way that does not:
-- Publicly embarrass Beijing and force it to respond
forcefully.
-- Cast doubt on the administration's commitment to a one
China policy.
A.senior Chinese official, who will accompany Zhao, underscored
this theme in a recent conversation with a US Embassy officer in
Beijing.
Stabilizing Ties
Underlying their concern over Taiwan is, we believe, a
genuine fear that Sino-US relations could deteriorate again,.
jeopardizing their strategic and economic interests. Although
Beijing no longer is interested in pushing publicly for -a "united
front" against the USSR, we believe the Chinese still want a
limited, more tacit security relationship with Washington that
creates uncertainty in the Kremlin about the degree of support
the US might lend China in response to an overt Soviet military
threat. The Chinese interest in access to US dual technology,
some US weaponry sales, and good political relations in general
indicates the value they still attach to the US as a strategic
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Although the Chinese are unhappy with some of our economic
policies (e.g. textiles), they remain very interested in
promoting broader economic ties to facilitate their economic
modernization drive. From all accounts, they especially prize
American technology and continue to encourage foreign, and
counterweight to Soviet military power. Indeed the Chinese have
repeatedly insisted neither ?25X1
their perception of the Soviet threat, nor their balance-of-power
approach to containing the Soviets has changed. 25X1
particularly American, investment in China. Zhao in particular
is closely identified with the open door policy--and hence has a
vested interest in demonstrating the benefits of this strategy.
Triangular. Politics
At a minimum, Beijing does not want to lose ground in
the triangle as the US presidential election campaign heats up.
Judging.by recent commentary in the Chinese media, Chinese
leaders remain concerned that the administration might be tempted
to try to enhance its reelection prospects by reaching an accord
on INF with Moscow that would damage Chinese interests.
Because of current US-Soviet strains, on the other hand, the
Chinese may see an opportunity to improve relations with both the
US and USSR. If so, they may decide after the Zhao trip to adopt
a more flexible position on, for example, confidence building
measures during the next round of Sino-Soviet talks in March,
hoping to move Sino-Soviet relations forward and increase their
leverage with the US at the same time.
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Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
30 December 1983
Zhao Ziyanq--A Political Portrait
Summary
Zhao Ziyang, at 64, is the youngest of six members on the
Politburo Standing Committee, China's most powerful policymaking
council, and formally ranks fourth in the Chinese Communist Partu
hierarchy, after Hu Yaohang, Ye Jianying and Deng Xiaopinq.
Together with party General Secretary Hu Yaobang, Zhao will
preside over a transfer of power from the waning generation of
old revolutionaries to a group of leaders who matured under the
Communist system. Zhao has demonstrated both political skill and
administrative expertise in his rapid ascent to national
prominence, and he can be expected to play a leading role in the
decade ahead.
Sources of Influence
Zhao is in a key position to affect both the broad contours
of policy and the details of implementation that give substance
to general policy directives:
-- Within the Chinese system, Zhao commands instant respect
as a member of the party's top echelon. He Darticipates
in the highest policy deliberations within the Politburo
Standing Committee and is an ex officio member of the
party's Secretariat, which handles day-to-day party
business. His views carry political weight exceeded only
by that of a handful of party elders--notably Deng
Xiaopinq, Chen Yun and Peng Zhen.
This memorandum was prepared by the China Division of the
Office of East Asian Analysis as background for the visit of PRC
Premier Zhao Ziyang to the United States. Questions and comments
on the memorandum are welcome and may be directed to the Chief,
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As Premier of the State Council, Zhao stands at the apex
of the governmental apparatus. Below the critical policy
threshold of the Politburo, he is the final administrative
authority and has broad latitude in devising the specific
details of policy implementation. The organizational
resources at his disposal are formidable.
By most accounts, Zhao appears to enjoy the confidence of
senior leaders normally suspicious of possible rivals and
jealous of their prerogatives. They presumably find much
to admire in Zhao's makeup: a quick study who is not
intimidated by details; a model of sobriety, discretion,
and tact; and party experience that includes the requisite
degree of toughness--even ruthlessness--as a former land
reform and party purge administrator in provincial
assignments.
Zhao and the Leadership
Zhao appears to have the knack of pleasing his superiors and
the corresponding gift of arousing few animosities among his
peers. Unlike Hu Yaobang, he has placed relatively few
supporters in positions of influence. For having spent a
lifetime in the party, he has created no readily identifiable
enemies while winning support of the powerful. His rapid climb
to become China's youngest provincial first secretary in 1965
presumably had the approval of Mao Zedong and Deng Xiaoping, who
was then party general secretary. His early rehabilitation
following the Cultural Revolution bears the imprimatur of Zhou
Enlai as well.
Although there may be no close personal ties between Zhao
and Deng--such as exist, for example, between Deng.and General
Secretary Hu Yaobang--there is certainly mutual respect. Deng,
China's single most powerful leader, was probably instrumental in
transferring Zhao to Sichuan Province in 1975 and in providing
him the freedom for economic experiments there that eventually
became the national model. Zhao's rapid rise is inconceivable
without Deng's sponsorship. -Deng and Zhao have shown through
their statements and actions that they agree on reforming China's
party, government, and economy.
It is possible that Zhao's relative distance from Deng made
him all the more acceptable to other, more conservative, members
of the Politburo Standing Committee. Zhao appears to enjoy good
relations with State President Li Xiannian, who has spent his
career within China's economic bureaucracy, and with veteran
economic policymaker Chen Yun--whom we believe is second only to
Deng in prestige within the party. When opinions differ, Zhao
seems to have no problem deferring to the views of elder party
leaders.
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Zhao also seems to have a stable working relationship with
party General Secretary Hu. Their areas of responsibility are
fairly well defined along party-government lines, with Hu the
party chief having the acknowledged upper hand. Zhao projects
the image of a team,player and detail man who faithfully
implements the party line, apparently modeling his behavior after
that of Zhou Enlai, Mao's long-time lieutenant. Hu eventually
may view as threatening Zhao's mastery of the details of economic
adminstration and government organization. For now, however,
there is no indication that this is the case.
Policy Preferences
As with all but the most outspoken Chinese leaders, it is
difficult to distinguish Zhao's own views from official
positions. It has been Zhao's place as the government's
principal spokesman to announce major political and economic
initiatives. In the eyes'of most Chinese, however, he is clearly
identified with bureaucratic and economic reforms. Most
observers, in fact, are impressed by Zhao's apparently deep
commitment to economic reform. Almost certainly part of Zhao's
early appeal as a candidate for the premiership was his
unequivocal willingness to support the reform initiatives of Denq
and his allies.
In particular, Zhao has strongly supported measures to
decentralize some economic decisionmaking responsibilities,
restructure and rejuvenate China's bureaucracy, and establish
"special economic zones" to attract western capital and tech-
nology. Although they have achieved only limited success, these
measures remain at the center of Beijing's program. In the case
of economic decisionmaking, party policy continues to vacillate
between relaxation and restoration of central controls.
In foreign policy Zhao has an important administrative role
and, by virtue of his position on the Politburo Standing
Committee, oarticipates in policy deliberations. On most issues,
he accurately reflects the party consensus established under
Deng's leadership. While his public statements are often bland,
in numerous private conversations Zhao has shown himself to be a
strong proponent of China's opening to the West and the United
States and convinced, that China will ultimately derive economic
advantages from improved political ties to Western nations.
Zhao's career also demonstrates that he is in tune with the
senior party leadership on the question of party primacy, an
underlying element in the current campaign against "spiritual
pollution." Zhao and others of the so-called reform group within
the party seek change, but only within a system that does not
allow opposition to--or even implied reservations about--the
party's leading position or the proclaimed superiority of
social ism.
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The Decade Ahead
Zhao appears to have capably filled the office of premier,
which makes heavy demands on its occupant. The premier must span
the chasm between politics and administration, striking a
workable balance between the need for bureaucratic routine and
shifting political requirements. Zhao has demonstrated political
flexibility and administrative firmness that have impressed
Chinese and Western observers alike.
The problems complicating Beijing's*ambitious policy agenda
for the 1980s will, in our view, dampen the prospects for most
economic and political initiatives. Such successes as are
achieved should redound to Zhao's political advantage, improving
his already favorable image.
Zhao's deportment in office and smooth relations with senior
leaders lead us to conclude that his political durability
surpasses that of any generational peer, including Hu Yaobanq.
Several Chinese observers have suggested that, should Hu falter
as party leader, Zhao would be a logical replacement. We have no
clear indication, however, of the extent of Zhao's ambitions. If
he does not challenge for primacy within the party and is content
to operate as China's businesslike manager of government, his
importance will probably grow as political generations change.
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Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
30. December 1983
China: Leadership Politics
Summary
Zhao Ziyang will be visiting the US at a time when China's
domestic political situation is complex and uncertain. No majgr
personnel changes have been made at the top--Deng Xiaoping is
more than ever China's paramount leader, and others in the
Politburo Standing Committee, including Zhao, have maintained
their positions. Nevertheless, subtle changes in the power and
prestige of several senior leaders seem to have had an effect on
the content and. direction of China's domestic policies.
A Transitional Year
For Beijing, 1983 was a year of amibitious initiatives. The
reform group--led by Deng, General Secretary Hu Yaobang and
Zhao--had brought off a successful 12th Party Congress, and
seemed determined to deal simultaneously with a host of tough
political problems--bureaucratic reorganization, ideological
confusion, party rectification, official corruption, and a rise
in street crime--while trying to maintain momentum in economic
reform. Their record has been mixed at best, in part because of
the growing influence of more conservative party elders--Deng's
generational peers--who have questioned reforms with greater
effect since mid-year.
We believe that the elevation of Li Xiannian to State
Presidency and of Peng Zhen to Chairmanship of the National
People's Congress (NPC) Standing Committee at the June NPC
This memorandum was prepared by the China Division of the
Office of East Asian Analysis as background for the visit of PRC
Premier Zhao Ziyang to the United States. Questions and comments
on the _memorandum are welcome and may be directed to the Chief,
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session is symptomatic of the reassertiveness of party
traditionalists, and helps explain the more conservative tone of
Beijing's recent domestic policy pronouncements. Li and Peng'
draw their support from the dwindling but still influential old
guard of the party, which is ideologically orthodox, suspicious
of younger leaders, wary of reforms that diminish party controls
over society, and unwilling to retire gracefully from power.
Deng probably shares their views on some issues, such as party
Spiritual Pollution--A Confusing Departure
For reasons that are still unclear, the Chinese leadership
recently undertook a new political campaign that has apparently
baffled many party, members by blurring the focus of China's
entire political program. For years, Deng and his allies have
insisted that Cultural Revolution era leftists who remained-in
positions of authority were the cause of most of China's problems
and should be purged from the party and replaced with younger,
better educated recruits. A Central Committee plenary meeting in
October finalized plans for a three-year "rectification" of the
party that would eliminate politically unreliable and incompetent
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b
Deng's speech to the plenum, however, also set off a
campaign against "rightist" phenomena: the spread of undesirable
Western intellectual and cultural influences in China and of
doubt over the party's ability and right to rule. Deng charged
that some of the party's own propagandists had spread this
"spiritual pollution" by publishing articles on humanism and
"alienation in socialism," and that this attitude of "liberalism"
had to be eliminated. While his remarks were generally
consistent with ideas other party traditionalists have expressed
before, the intensity?and breadth of the campaign that has ensued
Perhaps the most visible result of the campaign against
spiritual pollution has been the confusion it has provoked
throughout China about the direction of domestic policies,
especially reform. Since mid-November, the party has been trying
to define the limits of the spiritual pollution campaign and
prevent it from disrupting agricultural work, foreign trade,
science and technology, and foreign relations. Zhao has not
played a prominent role in the campaign
Progress has been slow, however, in Dart because
authoritative Politburo guidance still has not been issued.
Until the line from Beijing becomes clearer, the negative effects
of the campaign--such as local attacks on reform, confusion over
policies and intellectual distrust of the party--will persist.
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The campaign also has aroused speculation about political
infighting within the Politburo. Some of the spiritual pollution
commentaries have contained implicit criticism of Hu Yaobang, who
has been associated with the "liberal" wing of the party, even
though he is on record criticizing writers for the mistakes now
under attack. There are rumors of high level dissatisfaction
with Hu's judgment and leadership style. Some of the stories
even suggested that Deng has found Hu lacking in the essential
skills of leadership. The cumulative effect of this, plus his
relatively low profile in the campaign, may have damaged Hu's
Since-early 1980, Deng has sought to nail down for Hu
Yaobang a place as his political heir, and, more broadly, to
establish procedures for orderly succession that would avert
political instability. Zhao's appointment to the premiership
also is part of this transition to a younger leadership. In
contrast to Hu, Zhao has not suffered any visible damage from the
recent turn of political events, despite his clear association
image as the party's nominal leader.
Were Deng to die today, his place as first among equals
within the Chinese leadership would probably fall to one of his
generational peers, such as Li Xiannian or Peng Zhen, rather than
to Hu or Zhao. Hu would probably continue to preside over rather
than actually lead the party, in much the same way as. he has
under Deng. Zhao, for his part, would almost certainly remain as
China's Premier, as there seems a general consensus that he has
performed caoably in that role. As the party's old guard are
Deng's age or older, Hu's best strategy would he to maintain his
position and wait for them to fade. In this regard, he still has
substantial advantages over ootential rivals in his own or
younger generations. The entire succession question, however, is
still very much in Deng's hands. Still in good health, and with
his political prestige at its highest ever, Deng seems not to be
with reform policies.
in any hurry to resolve this difficult problem.
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CONFIDENTIAL
Central Intelligence Agency
Washington. D. C.20505
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DIRECTORATE OF INTELLIGENCE
30 December 1983
China's. Economy: An Overview
Summary
In the economic realm, Zhao Ziyanq faces two sets of
issues: those familiar to most world leaders--inflation,
unemployment, and budget deficits--and a second set of more
fundamental economic problems that are the legacy of. 20 years of
Chinese mismanagement. These include chronic energy, and
transportation shortages, and a management system that encouraqes
inefficient, wasteful operations. Over the vast few years,
stabilization policies aimed at curtailing inflation and reducing
unemployment repeatedly have interfered with efforts to solve
these more fundamental problems.
The Chinese economy today clearly is in better shape than it
was just a few years ago. Improvements are particularly evident
in personal consumption and in agriculture. Beijing's "open
door" policies with respect to foreign trade and investment have
also contributed to the overall health of the economy. More
important, there is a.growi derliness and direction in
economic policymaking.
The Sixth Five-Year Plan (1981-85), which was not finally
approved until late 1982, provides a reasonably well-defined
policy framework. During the Cultural Revolution (1966-76) the
state planning apparatus was dismantled. Now, the olanninq
agencies have been reestablished and strengthened, and they have
produced a plan that Beijing regards as its most complete,
practicall and realizable five-year plan since the early 1950s.
This memorandum was prepared by the China Division of the
Office of East Asian Analysis as background for the visit of PRC
Premier Zhao Ziyang to the United States. Questions and comments
on the memorandum are welcome and may be directed to the Chief,
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CONFIDENTIAL
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CONFIDENTIAL
However, the Chinese economy is still very much in a
recovery phase--recovering from 20-years of mismanagement. And
the government repeatedly has set aside measures designed to
speed up recovery when it felt that it had to deal with more
immediate threats to economic ability--inflation, unemployment,
and budget deficits.
Good Growth, But...
In general, the period since 1978 has been one of relatively
high growth rates accompanied by continuing signs of imbalance.
In 1982 economic growth was moderate-to-good with GNP and
industrial production each rising by over 7 percent. In other
areas:
-- Energy production rose by 5.7 percent, easing severe
energy shortages:
-- Agricultural output, benefiting from favorable weather and
a continuation of liberal Policies, grew by 11 percent.
-- Foreign exchange reserves rose to US $ 11.3 billion as
Chinese exports increased and imports continued to fall
because, of diminished needs for foreign grain and
industrial materials and equipment`.
-- Personal income growth slowed, but consumer demand still
outstripped commodity supplies.
-- In the absence of high-quality, stylish goods, consumers
continued to deposit large sums of money in savings
accounts; and inventories of rejected merchandise
continued to pile up.
-- The inflation rate was at least 5 to 10 percent.
-- Urban unemployment probably rose, to about 10 percent.
Systemic problems persisted in 1982, despite the favorable
overall picture:
There was no improvement in the wasteful use of
resources. More energy and raw materials were used per
unit of output.
Quality remained a serious problem, especially for
consumer goods.
Continuing high industrial costs resulted in state revenue
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t I.
Ironically, management reforms aimed at reducing waste made
it more difficult for China to complete urgently needed energy
and transportation projects. Beijing's decision to allow
enterprises to retain part of their profits, for example, led to
heavy investment by enterprises in projects that the central
government regarded as low priority. This stretched supplies of
scarce building materials and made it impossible to guarantee
cement, steel, glass, and other building materials to high
1983 saw a continuation of these problems. Investment
spending.was reportedly up by over 10 percent, despite the
leadership's efforts to hold it at the-1982 level. In response,
the central government has ordered a review of the construction
program; lower priority projects are to be halted or dropped.
And new, tougher regulations pertaining to project review and
Too-rapid growth in industry continues to thwart efforts to
get managers to improve quality and cut costs. As a result,
state revenue shortfalls--a result of enterprise losses--have
reached unanticipated levels. The situation is so serious that
Zhao has warned provincial leaders that failure to reduce the
deficits could cost them their jobs.
Management Reforms: Mixed Results
Some of these difficulties are attributable to, or have been
aggravated by, management reforms. The basic thrust of reforms
has been to decentralize decisionmaking in an attempt to boost
production and efficiency. Reforms in agriculture have shown the
most success. Essentially, they entail a reduction of the
government's role in production and marketing decisions. Now,
the bulk of these decisions apparently are made by farm
households. In industry, the reforms allow enterprises to retain
a portion of their profits. But because of mayor irrationalities
in China's price system, the,changes have not produced the
desired effects. For example, at current prices, managers and
local officials find it more profitable to build a factory to
produce cigarettes than to invest in a new mine or plant
producing industrial raw materials--where, despite scarcities,
Currently, Beijing has adopted a more cautious approach to
economic reform. Further, minor changes are being made in the
hope of improving efficiency. But because there are so many day-
to-day problems that demand attention, and because economic
reform is complex--and politically risky--the leadership has
postponed further major changes until,.they say, sometime after
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Data on China's Economy
1980
1981
1982
GNP
5.2
3.0
7.4
Industry
8.8
4.1
7.7
Agriculture
3.9
5.7
11.0
Investment
6.6
-10.5
26.6
Retail Sales
18.9
9.8
9.4
Exports
40.2
13.9
9.3
Imports
33.6
-6.4
-7.4
Output i
n Million Tons
1980
1981
1982
Grain
320
325
353
Oil
106
101
102
Coal
620
622
666
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