ECONOMIC RELATIONS OF COMMUNIST CHINA WITH THE USSR SINCE 1950

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• Publication Date: May 1, 1959
• Content Type: REPORT

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ECONOMIC INTELLIGENCE REPORT
N? 75
ECONOMIC RELATIONS OF COMMUNIST CHINA
WITH THE USSR SINCE 1950
CIA/RR 59-16
May 1959
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
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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.
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ECONOMIC INTELLIGENCE REPORT
ECONOMIC RELATIONS OF COMMUNIST CHINA WITH THE USSR
SINCE 1950
CIA/RR 59-16
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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le#
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CONTENTS
Page
Summary and Conclusions 1
I. Foreign Trade of Communist China 3
II. Financing Sino-Soviet Commodity Trade, 1950-58 8
III. Soviet Economic Aid to Communist China 9
A. Industrial Projects 9
B. Soviet Technical Assistance to Communist China
IV. Consequences of Sino-Soviet Economic Relations 18
Appendixes
Appendix A. Statistical Tables
Appendix B. Methodology: Dollar Value of the Foreign Trade
of Communist China, 1950-58
19
25
Tables
1. Dollar Value of the Foreign Trade of Communist China,
1950-58 5
2. Percentage Distribution of the Foreign Trade of Communist
China, by Dollar Value, 1950-58 6
3. Value of Imports, Exports, and Trade Balances of Communist
'China with the USSR as Reported by communist China)
1950-58 8
4. Estimated Utilization and Repayments of Soviet Loans to
Communist China, 1950-58 10
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5.
Soviet Economic Assistance to Industrialization
in Communist China, by Date of Agreement,
Page
1950-59
13
6.
Estimated Number of Major Projects in Communist
China Receiving Soviet Assistance) Under
Construction or Completed, 1950-57
14
7.
Exports from Communist China to the USSR as
Reported by the USSR) 1950-57
20
8.
Imports by Communist China from the USSR as
Reported by the USSR, 1950-57
22
9.
Value of Imports) Exports, and Trade Balances
of Communist China with the USSR as Reported
by the USSR) 1950-58
26
Charts
Following Page
Figure 1.
Communist China: Percentage Distribution
of Foreign Trade, by Dollar Value, 1950,
1955, and 1958
Figure 2. Commodity Composition of
Communist China and the
1956, and 1957
Figure
Figure
Trade Between
USSR, 1950,
. .
3. Communist China: Balance
the USSR, 1950-58
of Trade with
4. USSR: Loans to Communist China:
Utilization, Repayments, and Relation-
ship to the Balance of Trade, 1950-58
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ECONOMIC RELATIONS OF COMNUBIST CHINA WITH THE USSR
SINCE 1950*
Summary and Conclusions
Communist China achieved remarkable progress during 1950-57 in its
program of rapid industrialization and militarization, primarily be-
cause of the economic, military) technical) and industrial support
received from the USSR. During the First Five Year Plan (1953-57)) Com-
munist China depended on the USSR for the bulk of its imports of indus-
trial equipment. The projects constructed with Soviet assistance during
1953-56 in the coal, electric power) iron, steel, copper) aluminum, and
the lathe-machine manufacturing industries accounted for 30 to 90 per-
cent of newly added productive capabilities of these industries in China.
Although East Germany replaced Communist China as the largest single
trading partner of the USSR in 1957) Communist China and the USSR nor-
mally are the principal trading partners of each other. The value of
Sino-Soviet trade increased from $320 million** in 1950 to a maximum of
$1,705 million in 1955 (but this included $330 million estimated to be
the value of military materials and joint-stock company assets turned
over to China in 1955). In 1957, Sino-Soviet trade was at a level of
about $1)290 million. Provisional information for 1958) however, indi-
cates that trade increased by 18 percent above that in 1957 to a level
of about $1,515 million. During 1950-57, China accumulated a trade
deficit of $781 million with the USSR. China had a small export surplus
of $30 million in 1956, a more substantial surplus in 1957 amounting to
$196 million, and a surplus in 1958 of about $300 million. During the
next several years, as China continues to repay Soviet loans and credits,
China probably will continue to have substantial export surpluses in its
trade with the USSR.
Since 1950 the USSR has extended loans to Communist China amounting
to about $1,325 million. Loans for economic development amounted to
$430 million, special loans covering the return to Chinese ownership of
the four Sino-Soviet joint stock companies accounted for an amount esti-
mated at $75 million) and the remainder represented military loans of
$820 million. China is estimated to have repaid $482 million of the
total of Soviet credits received by the end of 1957. An additional sum
* The estimates and conclusions in this report represent the best judg-
ment of this Office as of 15 April 1959.
** Dollar values in this report are in terms of US dollars.
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amounting to about $190 million was scheduled to be repaid in 1958.
Repayment obligations have placed a heavy burden on Chinese resources.
The greater portion of China's debt amortization to date probably has
represented repaYment of Soviet military loans.
Sino-Soviet relations have been greatly strengthened as a result of
the willingness of the USSR to supply equipment and technical services
valued at about $3.3 billion.for the construction of major industrial
enterprises in Communist China. Of the 211 major installations which
the USSR agreed to furnish under arrangements announced before 1959,
67 have been fully or partially completed. The remainder of these proj-
ects -- which, are the core of China's industrialization program -- are
scheduled to be completed during the Second Five Year Plan (1958-62).
A new agreement was announced in February 1959 calling for Soviet de-
liveries through 1967 of 78 additional projects, for which the equipment
and technical assistance is valued at about $1.3 billion. Economic credits
of $430 million have been fully drawn on to cover a part of the cost of
the equipment and services for Soviet projects. The remainder of the
cost is being paid for by China from its earnings in current trade with
the USSR.
Soviet technical assistance has been extended to all levels and to
all branches of the Chinese CoMmunist economy, although the precise num-
ber of Soviet advisers, specialists, and technicians in China is not
known. In 1950, China required a greater number of Soviet technicians
because of its low level of industrial competence. Moreover, the en-
trance of China into the Korean War necessitated temporary reliance on
a large number of Soviet military specialists and advisers. The subse-
quent development of technically trained Chinese has since permitted a
sharp reduction in the number of Soviet specialists and technicians.
China was the first major Asian nation to fall under Communist domi-
nation and to apply Communist totalitarian methods to the promotion of
economic development. If China can accomplish a sharp rise in per capita
income and show substantial economic progress, the impact of this success
will be felt throughout Asia. Thus Sino-Soviet economic relations will
play an influential role in determining the future of the Communist sys-
tem in all Asia as well as in China.
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I. Foreign Trade of Communist China.
Since the assumption of Communist control over the mainland in Octo-
ber 1959, China has consistently relied on imports of capital equipment,
military goods, ferrous metals, and petroleum in order to carry out its
plans for rapid industrialization and military modernization. The
foreign trade turnover during the years 1950-57 averaged about 10 per-
cent of the gross national product (GNP) of Communist China, and imports
varied between 5 and 7 percent of the GNP.
The Soviet Bloc now accounts for about two-thirds of the total trade
of Communist China, and the USSR has become the principal trading part-
ner of China in contrast to pre-Communist days, when the volume of
Soviet trade with China was small. Between 1917 and 1936 the trade of
the USSR with China reached a peak in 1928, when it amounted to 5.4 per-
cent of total Chinese foreign trade) whereas in some prewar years it was
below 1 percent. 2/
In 1950 the USSR accounted for more than 26 percent ($320 million)
of the total trade of Communist China of $1,215 million. The peak year
for Sino-Soviet trade was 1955, when the total trade of China was valued
at $3,065 million, of which the USSR accounted for $1,705 million, or
56 percent. Included in this trade, however, were the special acquisi-
tions by China (transfer of the Soviet shares in four joint-stock com-
panies and the receipt of military materials at Port Arthur when the
Russians withdrew) which were financed by Soviet credits. In 1956 the
share of the USSR in the total trade of China dropped to 47 percent, or
$1,460 million, thereby reflecting the absence of special Soviet loans.
Nevertheless, excluding special loans and credits in 1955 which probably
amounted to $330 million, Sino-Soviet trade on current account in 1956
actually increased over 1955. In 1957, Sino-Soviet trade declined by
about 12 percent, amounting to $1,290 million. This decline may be at-
tributed primarily to a 24-percent reduction in Chinese imports of mili-
tary goods, machinery and equipment, and ferrous metals. The rather
drastic curtailment of imports from the USSR in 1957 reflected certain
adjustments undertaken in the Chinese economy which resulted in reduced
capital investment and greater dependence on its own resources. An ar-
rangement was made with the USSR which enabled China to expand its ex-
ports of industrial goods, ores and concentrates, and consumer goods to
compensate for a temporary reduction of the usual exports of agricul-
tural raw materials and foodstuffs. The "leap forward" drive of the
Chinese apparently influenced Sino-Soviet trade in 1958, which, accord-
ing to preliminary information, amounted to about $1,515 million, or an
increase of 18 percent above that in 1957.
?
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The estimated dollar value and percentage distribution of the for-
eign trade of Communist China during 1950-58 are indicated in Tables 1*
and 2.** (For a chart showing the geographic distribution of the for-
eign trade of Communist China by dollar value in 1950, 1955, and 1958)
see Figure 1.***)
The composition of trade between Communist China and the USSR re-
flects the complementary natures of the two economies. Thus Soviet ex-
ports consist largely of machinery and equipment for China's industria-
lization program) and China's exports to the USSR are primarily food-
stuffs and raw materials. Soviet exports of capital goods, however,
provide a priority contribution to China's industrialization program,
whereas many of China's exports to the USSR have no direct bearing on
Soviet industrial production. The Chinese have indicated, for example,
that certain exports have been accepted by the USSR primarily as a mat-
ter of accommodation to China.
Chinese exports of such commodities as tin, rubber, and tungsten,
on the other hand, are extremely valuable to the USSR, inasmuch as these
items are not available in sufficient volume from Soviet resources to
satisfy internal requirements. By obtaining such commodities from China,
the USSR fulfills a critical need and at the same time conserves its own
foreign exchange holdings. Moreover, about 50 percent of Soviet exports
to China during 1950-55 are believed to have consisted of military items
which have not contributed to the development of the Chinese economy.
Military goods inherently have a high obsolescence factor; nevertheless,
China is required to reciprocate with substantial exports of useful and
valuable foodstuffs) minerals) and consumer goods to repay the USSR for
these military goods.
Chinese imports of industrial equipment and complete installations
from the USSR have made a major contribution to the economic development
of China. During the First Five Year Plan (1953-57), China imported
about 40 percent of its capital equipment requirements, of which more
than one-half came from the USSR. .3/ Among the other major imports from
the USSR during this period, Communist China received more than 6.5 mil-
lion tons of petroleum and petroleum products; more than 2 million tons
of steel (including castings, prefabricated steel, and other such prod-
ucts); about 3,000 metal-cutting lathes; more than 2 million tons of fer-
rous Metals; approximately 10,000 agricultural machines; about $25 million
* Table 1 follows on p. 5.
** Table 2 follows on p. 6.
*** Following p. U.
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COMMUNIST CHINA
PERCENTAGE DISTRIBUTION OF FOREIGN TRADE
BY DOLLAR VALUE, 1950, 1955, and 1958*
USSR
Other Bloc
Free World
1950
.27701 4-59
1955
? Figure 1 50X1
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1958*
(Preliminary)
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Table 1
Dollar Value of the Foreign Trade of Communist China ill
1950-58
Million US $
1958
1950
1951
1952
1953
1954
1955
1956
1957
(Preliminary)
Bloc trade
USSR
320
750
965
1,170
1,275
1,705
1,460
1,290
1,515
European
Satellites
20
205
320
345
375
430
465
485
550
Far Eastern
Satellites
5
20
30
50
90
125
320
125
95
Subtotal 121
222
2/2
1,315
1,565
1,740
2,265
2,045,
1,895
2,160
Free World trade1.11
22a
58o
122
800
1,090
1,140
1,300
Total
1,215
1,890
1,895
2,315
_g2.,
2,365
3,065
3,135
3,035
3,460
a. Based primarily on trade information released by Communist China, which apparently has
adopted a dual conversion ratio for foreign trade. The dollar value of trade with the USSR and
other Bloc countries is derived by applying the conversion ratio of 1 yuan to 1 ruble, which is
equivalent as a cross rate to a conversion ratio of 4 yuan to US $1. The dollar value of trade
with the Free World is derived from the conversion ratio of 2.46 yuan to US $1.
b. Subtotals may not agree with the sum of their rounded components. Figures are rounded to
the nearest 5 million.
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Table 2
Percentage Distribution of the Foreign Trade of Communist China
by Dollar Value 9../
1950-58
Percent
Sino-Soviet Bloc
trade
1950
1951
1952
1953
1954,
1955-
1956
1957
1958
- (Preliminary)
USSR
26.3
39.7,
50.9
50.5
53.9
55.6
46.6
42.5
43.8
European
Satellites
1.7
10.8
16.9
14.9
15.9
14.0
14.8
15.9
15.9
Far Eastern
Satellites
0.4
1.1
1.6
2.2
3.8
4.1
.3.8
4.1
2.7
Subtotal 12/
28.8
51.1
69.4
67.6
73.6
73.9
65.2
62.4
62.4
Free World trade
71.2
48.7
22_,J.
12.14
26.4
26.1
111:11
37.6
ILL
Total trade
100.0.
100.0
100.0-
100.0
100.0
100.0
100.0
100.0
- 100.0
a. Because of the dual conversion rate system used by China, these figures differ from those
announced'bythe Chinese on distributioh-of the yuan value of trade.
b. Subtotals may not agree with .the sum of their rounded components. .
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worth of scientific apparatus; and large amounts of other equipment
needed for the industrialization program of China.* V
The major Chinese exports to the USSR continue to be agricultural
products, but there has been a significant shift in the relative im-
portance of agricultural raw materials and foodstuffs. Shipments of
agricultural raw materials -- principally tobacco) soybeans, peanuts)
tung oil, and oilseeds -- declined from about 36 percent of total ex-
ports to the USSR in 1950 to about 18 percent of total exports to the
USSR in 1957, even though the value of this category of exports almost
doubled between 1950 and 1957. Foodstuffs (principally wheat, rice,
tea, spices, meat and dairy products, fish, vegetables, fruits, and
edible vegetable oils), on the other hand, increased from about 12 per-
cent of total exports to the USSR in 1950 to 17 percent in 1957, repre-
senting a fivefold value increase.
The other principal Chinese exports to the USSR are nonferrous metals
and alloys, textiles, and textile raw materials: Certain Chinese exports
to the USSR are showing a growing importance in recent years. For ex-
ample, natural rubber (which is a reexport) and building materials ac-
count for more than $50 million of Chinese exports in 1957.
In the future the pattern for Communist China's trade with the USSR
probably will be guided by the desire for increased reliance on internal
resources. This attitude may be reflected in a gradual decrease in the
percentage of complete installations as a portion of total imports of
equipment and machinery from the USSR after the completion of the Second
Five Year Plan (1958-62). It is also expected, however, that Sino-Soviet
trade will continue to grow in absolute terms during this period and
that the USSR will continue to be the principal trading partner of Com-
munist China. The Chinese have indicated the intention of increasing
the import of materials required for industrial and agricultural produc-
tion such as petroleum and petroleum products. There may be a slight
increase in the import of other items such as chemicals, pharmaceuticals,
and certain types of consumer goods.
Trade between Communist China and the USSR which, in the past, has
expanded relative to the growth of China's GNP should continue to in-
crease. China's exports likewise should follow a similar pattern and
grow at a rate of about 8 percent annually. In order for China to pay
for its current imports and, in addition, to repay the USSR military and
economic developmental credits previously extended, the Chinese will be
required to maintain large export surpluses with the USSR, particularly
* The imports and exports exchanged between Communist China and the USSR
during 1950-57 are shown in Appendix A, Tables 7 and 8, pp. 20 and 22, re-
spectively, below. Significant changes in the composition of this trade
are illustrated in Figure 2, following p. 8.
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through 1962. Although agricultural products will continue to be the
major Chinese exports to the USSR, it is probable that exports of min-
erals, metals, and light industrial products (particularly textiles)
will be increased.
Financing Sino-Soviet Commodity Trade, 1950-58.
During 1950-57 the value of total trade between China and the USSR
amounted to $8.9 billion. China exported goods valued at $4.1 billion
to the USSR and in turn received goods from the USSR valued at $4.8 bil-
lion. This balance-of-trade position resulted in a cumulative trade
deficit for China of $781 million for 1950-57 (see Table 3). Prelimi-
nary information for 1958 indicates that China may have an export sur-
plus of $299 million in trade with the USSR.
Except for 1950, 1956, 1957, and 1958 the imports of Communist China
from the USSR have exceeded its exports to the USSR. Part of the aggre-
gate trade deficit accumulated during 1950-57 was financed by industrial
credits, and part apparently was financed by military credits.
Table 3
Value of Imports, Exports, and Trade Balances of Communist China
with the USSR as Reported by Communist China 2/
1950-58
Million US $
Year
Exports
Imports
Total
Trade
Trade Balance
1950
183
137
320
46
1951
308
442
750
-134
1952
413
552
965
-139
1953
474
696
1,170
-222
1954
575
700
1,275
-125
1955
636
1,069
1,705
-433
1956
745
715
1,46o
30
1957
743
547
1,290
196
1958
(Preliminary)
907
608
1,515
299
Total
$4,984
$5,466
$1o,450
-482
a. Derived from trade information released by Communist China.
For comparison with Sino-Soviet trade figures reported by the USSR,
see Appendix B, Table 9, p. 26, below.
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BETWEEN COMMUNIST CHINA AND THE USSR, 1950,1956 and 1957
CHINESE EXPORTS
cul-TURE--sa
Agricultural
Row Materials
41
dais?
CFMA
Ncinferrout?andt:AIloyMetala
1950
CHINESE IMPORTS
Metals and Ores
Equipment and Machine.
Petroleum and Petroleum
Products
Miscellaneous"
Kint:m(73;d for **. .
......
1950
IcuLTURE,.
r-Gcl st>.
i
7011 Agricultural
6. wiff Row Materiels
21%
scettoneous
1956
oft
%cut-TORE...as*
Figure 2 50X1
1957
1956
1957
'Miscellaneous Chinese exports Includes such categories as industrial goods, industrial raw materials, chemicals and rubber, and cultural and consumer goods.
?Miscellaneous Chinese imports includes such categories as chemicals, building materials, pharmaceuticals, and cultural.and consumer goods.
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During 1951-55, when Communist China incurred an import surplus each
year in its trade with the USSR, the amounts were uniform with the ex-
ceptions of 1953 and 1955. In these years the large import surplus
probably represented large amounts of military goods delivered to China
by the USSR. These deliveries may have resulted from orders placed by
China for Soviet military equipment during the Korean War. In 1955,
when Soviet forces withdrew from Port Arthur, Manchuria, the USSR turned
over military goods to China under a loan estimated at $255 million. In
addition to the military material included in 1955 imports from the USSR
were $75 million representing Soviet shares in the four Sino-Soviet joint
stock companies retroceded to China in 1955.
In 1956, Communist China reversed its balance-of-trade position with
the USSR, resulting in a trade surplus of about $30 million, and an even
larger surplus amounting to $196 million was achieved in 1957. Provi-
sional information for 1958 indicates that Communist China has accumu-
lated a surplus of about $300 million in its trade with the USSR. An
export surplus in Chinese trade with the USSR should continue, reflect-
ing repayment of Soviet loans and credits.
Information regarding nontrade items is not sufficiently comprehen-
sive to permit an estimate to be made of the over-all balance of pay-
ments between the USSR and Communist China. It is apparent, however,
that the deficit in commodity trade was the most important element in
the Sino-Soviet balance of payments and that the annual trade deficits
undoubtedly were compensated by drawing on Soviet military and indus-
trial credits. During 1950-57 the USSR has extended military and eco-
nomic credits amounting to about $1,325 million. Thus drawings on
Soviet credits were more than adequate to compensate for the cumula-
tive trade deficit of $781 million. The Soviet loans to Communist
China during 1950-58, including utilization and repayment by China, are
summarized in Table 4.* The balance of trade of Communist China with
the USSR for 1950-58 is shown in Figure 3.** The utilization and repay-
ment by Communist China of Soviet loans and the relationship to balance
of trade are shown in Figure 4.**
III. Soviet Economic Aid to Communist China.
A. Industrial Projects.
The keystone of Sino-Soviet economic relations during the First
Five Year Plan has been the 211 major projects being built with Soviet
aid and technical assistance. These projects have strengthened Sino-
Soviet relations and have become the core of the industrialization
* Table 4 follows on p. 10.
** Following p. 10.
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Table 4
Estimated Utilization and Repayments of Soviet Loans
to Communist China
1950-58
Million US $
Year
Loans 21
Utilization
Repayments
by China
Industrial
Military
and Other
1950-52
544
166
378
0
1953
. 110
67
43
0
1954
221
78
143
35
1955
414
84
33O/
130
1956
29
29
0
150
1957
6
6
0
167
1958
0
0
0
190 c/
Total di
1,325
430
895
672
a. Soviet loans to China during 1950-57 amounted to 5,
lion yuan and were converted at an exchange ratio of 4
US $1.
b. Including $75 million estimated to be the value of
of joint-stock companies returned to China by the USSR.
c. Amount planned for repayment in 1958.
d. Totals may not agree with the sum of their rounded
294 mil-
yuan tb
assets
components
program of Communist China. The need for machinery and equipment for
these projects insures that the USSR will continue to be the leading
trade partner of China during the Second Five Year Plan (1958-62). The
USSR has announced that the total cost of industrial equipment and
technical services to be furnished China for these 211 industrial proj-
ects is $2,025 million, financed in part by Soviet loans of $430 mil-
lion. 2/ Consequently, it appears that only about 20 percent of the
total foreign exchange costs of these projects is covered by Soviet
credits.
Soviet participation in the industrialization program of Com-
munist China began in 1950 after the signing of the Sib-Soviet Treaty
of Friendship, Alliance, and Mutual Assistance. Under this pact the
USSR agreed to supply China with equipment and other materials for the
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MILLION US DOLLARS
50X1
Figure
COMMUNIST CHINA
BALANCE OF TRADE WITH THE USSR
1950-58*
..,
000
900
BOO
700
600
500
400
300
CHINA
IMPORTS
/
IMPORT
SURPLUS
EXPORT
SURPLUS
ar
'CHINA
EXPORTS
200
100
0
,
1950
27700 4-59
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1951
1952
1953
1954
1955
1956
1957
1958*
(Preliminary)
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MILLION US DOLLARS
Figure 4, 50X1
USSR: LOANS TO COMMUNIST CHINA
UTILIZATION, REPAYMENTS, AND RELATIONSHIP TO THE BALANCE OF TRADE
1950-58
500
400
300
200
100
1=1 Loans
Import Surplus
Export Surplus
Military Utilization
Industrial Utilization
Repayments by China
ii-
..
1950'
1951' 1952' 1953
.. A
1954
_
1955" 1956
*For the years 1950-52 no information is available on the annual utilization of loans. A simple average is presented above.
"The figure for 1955 includes 75 million dollars estimated to be the value of the joint-stock companies returned
27699 4-59 to Communist China by the USSR.
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1957 1958
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restoration and building of 50 industrial enterprises. A separate
agreement provided for a Soviet loan of $300 million to China. In 1953
the USSR agreed to assist in the expansion and construction of an un-
stated number of electric power stations. IV In the same year an agree-
ment was signed providing for economic and technical assistance in the
construction and renovation of 91 additional enterprises. 13./
Announcement was made in October 1954 of protocols by which the
USSR granted an additional credit of $130 million for economic develop-
ment and assistance for the construction of 15 more industrial enter-
prises in Communist China. The protocols also provided for the sale of
additional equipment for the enterprises valued at $100 million. 2V The
agreement signed in 1956 provided for 55 additional industrial enter-
prises to be constructed with Soviet assistance during the final years
of the First Five Year Plan and the early years of the Second Five Year
Plan. Equipment for these new projects was valued at $625 million. 12V
On 8 August 1958, Communist China and the USSR signed an agree-
ment providing for Soviet technical aid to China for the building and
expansion of "another" 47 major industrial enterprises. LI According
to the Chinese Communists, these 47 projects are included in the first
group of industrial enterprises which the USSR will help China to build
during the Second Five Year Plan. It is possible that the 47 plants re-
ferred to in the agreement of August 1958 are part of the 211 major
projects already covered by the existing Sino-Soviet agreements. A
change in the scheduled construction of plants in China may be attrib-
uted in part to the "leap forward" acceleration of the industrialization
program.
In February 1959 an agreement was announced which calls for 78
additional projects valued at $1.25 billion to be constructed during the
next 9 years. No new loans are involved in this agreement. Although it
Is possible that some of these projects were included in previous ar-
rangements, it is apparent that installations not covered in previous
arrangements are involved in this most recent agreement.
Because of the ambiguity of the announcements regarding Sino-
Soviet economic agreements, it is not possible to determine precisely
the number of Soviet-assisted projects promised to China. Any estimate
of the number of projects may be misleading) moreover) for projects vary
considerably in size, value, and scope. A single project may consist of
a small reprocessing plant, or it may consist of a large steel plant as
well as a number of associated steel processing installations.
A more meaningful measure of the scope of Soviet assistance for
the industrialization of Communist China is the value of complete plants)
equipment) and technical assistance that have been promised or have been
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delivered. Before the most recent agreement in February 1959, the USSR
had agreed to provide complete plants and technical assistance valued at
about $2 billion for constructing projects in China. The agreement of
February 1959 called for additional equipment and technical assistance
amounting to about $1.3 billion. Thus since 1950 the USSR has commit-
ted itself to approximately $3.3 billion in industrial assistance in
the form of complete installations, of which it is estimated that at
least $1 billion have already been fulfilled. The remaining commit-
ment of somewhat more than $2 billion are to be implemented during the
1959-67 period, a large portion of which is to be allocated during the
Second Five Year Plan ending in 1962. Additional equipment, not in-
cluded in the assistance agreements, has been and will continue to be
delivered to China within the terms of annually negotiated trade pacts.
It is clear, therefore) that the Soviet role in the industrialization
plans of China will be substantial under existing agreements for many
years. Moreover) additional agreements may be negotiated before China's
Second Five Year Plan has been completed, in particular if the leap
forward program results in large increases in the export capabilities
of Communist China.
The major portion of the cost of Soviet projects is financed by
current exports of Communist China, and industrial loans extended by
the USSR for use in financing these projects total only $430 million.
The 1950 loan of $300 million was drawn on by China over a period of
5 years beginning in January 1950. Repayment of this loan began in 1954
and is being made in 10 annual installments of $30 million, plus inter-
est at the rate of 1 percent per year. 12/ The Soviet loan in 1954 of
$130 million was fully utilized by the end of 1957 and alleviated the
burden of servicing the loan of 1950 and other loans during the first
3 years of repayment, 1954-56.
A summary of Soviet economic assistance to industrialization in
Communist China during 1950-59 is shown in Table 5.*
Soviet assistance for these projects is comprehensive, including
selection of factory sites, collection of data for planning purposes,
supply of the equipment, supervision of construction at the site, in
stallation of machinery) and guidance in the stage of trial produc-
tion. 12/ Major emphasis of the Soviet aid program in Communist China
has been on the reconstruction, expansion) and construction of iron and
steel plants) heavy machinery factories, and electric power installa-
tions (see Table 6**).
* Table 5 follows on p. 13.
** Table 6 follows on p. 14.
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Table 5
Soviet Economic Assistance to Industrialization in Communist China
by Date of Agreement
1950-59
Date of
Agreement
Economic Credits
(Million US $)
Number
of
Projects
Value of Complete Sets
of Equipment 2,/
Million US $ Million Rubles
February 1950
300
50
N.A.
N.A.
September 1953
0
91.12/
1,300 2/
5,200 2/
October 1954
130
.15
100
400
April 1956
0
55
625
2,500
August 1958
0
47
N.A.
N.A.
February 1959
0
78 4/
1,250
5,000
Total
430
289
3,275 2/
13,100
a. Including technical assistance related to these projects.
b. Agreement signed to deliver equipment for a total of 141 projects.
c. This sum includes the value of equipment and technical assistance
for all of the 141 projects.
d. It has been assumed that the February 1959 agreement is an expansion
of the August 1958 announcement and therefore includes the 47 projects
under that agreement.
e. Converted at the official rate of 4 rubles to US $1.
The Chinese Communists originally planned to start construction of
145 projects under the First Five Year Plan (1953-57)) but no more than
131 were begun by the end of 1957. The Chinese have reported a total
of 67 projects in full or partial operation at the end of 1957, of which
61 can be verified (see Table 6*). Thus about 70 percent of the 211 ma-
jor projects are scheduled to be completed during the Second Five,Year
Plan (1958-62). The Chinese Communists report that in the first 10 months
* Table 6 follows on p. 14.
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of 1958 the USSR delivered complete sets of equipment for 20 big metal-
lurgical, machine building, power, and coal enterprises. By the end of
1958 the Chinese expected about 30 major Soviet-assisted enterprises to
begin full operation. 12/
Table 6
Estimated Number of Major Projects in Communist China
Receiving Soviet Assistance, Under Construction or Completed
1950-57
Number of Projects
Industry Under Construction
Number of Projects
Verified Probable Completed
Iron and steel 19 2 16
Machine 26 11 13
Electric power 22 6 10
Coal 11 10 8
Aircraft 1 1
Chemical 8 2 4
Nonferrous 3 3
Paper 1 1
Petroleum 2
Textile 3
Shipbuilding .3
Communications 1
Total 100
31
3
2
The form adopted by the USSR for aid in the construction of proj-
ects during 1958-62 will differ from that of the First Five Year Plan.
According to Peiping, the Chinese will survey and design most of the
projects and the USSR will supply the principal equipment. As before,
however, technicians from the USSR will continue to assist China in all
phases of construction.
One of the most important of the key projects being constructed
with Soviet assistance is the An-than Iron and Steel Complex in Northeast
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China.* The Chinese state that two-thirds of the capital construction
at An-shan has been designed with Soviet help. Under the original
plan the An-shan complex was scheduled to be producing annually 2.5 mil-
lion tons of pig iron, 3.2 million tons of steel, and about 2.5 million
tons of steel products by 1960. According to the Chinese, these goals
were almost achieved by the end of 1957. I.//
The USSR has designed and is assisting in the construction of
two other iron and steel complexes, one at Wu-han (Hupeh Province) and
the other at Pao-t'ou (Inner Mongolia). The Wu-han complex is reported
by the Chinese Communists as more than 40 percent completed. Blast fur-
nace No. 1 at Wu-han, completed in September 1958 about 9 months ahead
of schedule., is claimed by the Chinese to be "one of the biggest in the
world, with a daily capacity of 2,000 to 2,500 tons of pig iron, sur-
passing the daily capacity 5,500 tong of the largest blast furnace in
Great Britain." 1?/ Both of these major projects are planned for com-
pletion by 1962. 2W
Nearly 60 percent of the production of iron and steel in Com-
munist China in 1957 was produced in plants built with the assistance of
the USSR. 22/ Moreover, Soviet assistance for this industry should fa-
cilitate resolution of a number of problems, such as undue concentration
of production at An-shan, inadequate development of ore-mining facili-
ties, and.the inability to supply an increasing variety of steels re-
quired by the advancing technological level of Chinese industry. These
problems are being met to a degree by construction of the integrated
plants at Pao-t'ou and Wu-han and through the establishment of small and
medium-size plants located throughout the country near ore deposits and
local centers of consumption.
Communist China has imported a large volume of Soviet equipment
for the exploration and development of petroleum resources. This equip-
ment played an important role in the expansion of petroleum production
In China from 436,000 tons in 1952 to about 1.5 million tons in 1957. ELli
The completion of the new refinery at Lan-chou, in particular, will rep-
resent a significant addition to refinery capacity and also will provide
China with its first modern refinery capable of producing fuels for air-
craft engines. Although China has increased its capability to provide
certain accessory material and equipment from domestic production, it
must continue to import most essential types of petroleum equipment.
The USSR designed and constructed the chemical industrial center
at Kirin in Northeast China. The center, including a chemical fertilizer
factory, a calcium carbide factory, and a dyestuffs factory, was opened
* Actually, components of the An-shan Iron and Steel Complex) such as
individual blast furnaces, are reported by the Chinese Communists as
separate projects receiving Soviet assistance.
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in October 1957. 2/ China plans to increase investment in the chemical
Industry during the Second Five Year Plan and to support in particular
its agricultural program by expanding its production capabilities for
fertilizers. Soviet assistance is expected to be utilized in expanding
the capacity of the installations at Kirin and in other localities as
well.
The USSR also is making a substantial contribution to the power
Industry in Communist China. Powerplants built with Soviet aid were
reported to account for about 680,00 kilowatts (kw) out of the power-
plant capacity in 1957 of approximately 4.4 million kw. 32/ In addition,
It is estimated that the USSR has delivered power-generating equipment of
about 700,000 kw capacity which is utilized in other plants throughout
China. During 1958 the USSR was expected to deliver to China equipment
with a power-generating capacity of 400,000 kw, a large portion of which
was to be placed in operation by the end of the year. .2)2/ It is esti-
mated that China had an electric power output in 1957 of 19 billion kilo-
watt-hours (kwh) -- higher than that of India (10.9 billion kwh) but low
compared with those of Japan (78 billion kwh) and the USSR (210 billion
kwh). E2/
As a result of Soviet assistance and equipment, Communist China
now has a 6.5- to 10-megawatt thermal research reactor and a 25-million
electron-volt cyclotron. These facilities are the largest in the Bloc
outside the USSR.
During the First Five Year Plan, Communist China depended on the
USSR for the bulk of its imports of industrial equipment. According to
a Chinese Communist official of the State Planning Commission, the proj-
ects constructed with Soviet assistance during 1953-56 in the coal, elec-
tric power, iron, steel, copper, aluminum, and lathe-machine manufactur-
ing industries accounted for 30 to 90 percent of newly added productive
capabilities of their respective industries. During the Second Five
Year Plan, China intends to produce 70 to 80 percent of its own require-
ments for industrial equipment and thereby to reduce its dependence on
such imports. There are indications that this goal is already being
achieved. In 1957, for example, the FU-la-erh-chi Heavy Machine Build-
ing Plant revised its annual investment plan and canceled orders for
equipment from the Soviet Bloc valued at $8 million in favor of domes-
tically produced lathes and cranes.
B. Soviet Technical Assistance to Communist China.
Soviet technical assistance has become an integral part of all
phases of the industrial development of Communist China with Soviet spe-
cialists employed at all levels of and in all branches of the Chinese
economy. An acute shortage of trained Chinese personnel has fostered
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dependence on large numbers of Soviet technicians during the past sev-
eral years. The Sino-Soviet joint-stock companies formed in 1950 and
1951, for example, were organized and operated primarily by Soviet
managerial and technical personnel. The industrial projects for which
Soviet assistance is being provided have required the services of many
Soviet experts. In addition to providing industrial technicians, the
USSR also has sent economic advisers to assist in the formulation and
administration of the development program of Communist China.
The precise, number of Soviet advisers) specialists) and tech-
nicians in Communist China is not known. In 1950) China required a
greater number of Soviet technicians because of its low level of in-
dustrial competence and because of its entrance into the Korean War.
The subsequent development of technically trained Chinese has permitted
a sharp reduction in the number of Soviet specialists and technicians
in China. The Korean truce and the withdrawal of Soviet forces from
Port Arthur also permitted the withdrawal of large numbers of Soviet
military specialists.
A substantial demand for Soviet technicians probably will con-
tinue during the Second Five Year Plan primarily because these experts
will be required on Soviet projects that are still under construction
or in the planning stage. For example, Soviet petroleum specialists
are still engaged in prospecting in various parts of China, and the
USSR will continue to provide technical assistance in the field of nu-
clear energy. In addition) Soviet technicians and advisers will con-
tinue to serve in other sectors of the Chinese Communist economy.
The USSR, besides providing technical assistance and on-the-
job training in China, has trained about 7,000 Chinese workers, tech-
nicians) and factory administrators in the USSR during the First Five
Year Plan. E?../ Most of these men were trained for operational work in
the factories and other installations being constructed with Soviet
assistance. The An-than Iron and Steel Complex alone sent more than
700 people to the USSR for practical training. 27/
Although less tangible than technical assistance in the form
of expert advice and training) Soviet transfers of scientific and tech-
nical information have been of considerable importance in implementing
the industrialization program of Communist China. Under the Sino-Soviet
Scientific and Technical Cooperation Agreement of October 1954) the USSR
has provided China with blueprints for the construction of 600 kinds of
factories and enterprises, designs for 1,700 sets of machinery and equip-
ment) and substantial information on production processes. 2?./ addition-
al agreements were signed in January 1956 -- one for joint development of
the power resources) navigation, and irrigation of the Heilungkiang (Amur)
River and another for technical cooperation in civil aviation. 22/
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Knowledge and data obtained in this manner from the USSR have been use-
ful.to China even on projects with which the USSR has not been involved.
IV. Consequences of Sino-Soviet Economic Relations.
Communist China appreciates the technical, economic, military, and
Industrial assistance which the USSR has provided, but the Chinese are
not abject in their gratitude. They are aware of the elements of mutual
advantage in their relations with the USSR, the ideological and politi-
cal support which China provides, within and outside of the Soviet Bloc,
and the assistance in establishing a strong industrial base that China
receives in return. They believe that there are gains to both nations
In trade between themselves and the USSR. Thus the Chinese do not re-
gard their position as that of a dependent satellite, in terms either of
Ideology or economics, but believe rather that they possess sufficient
independence to influence the course of intra-Bloc relations. To so-
lidify and to strengthen the position of China within the Bloc, it is
likely that China will strive for even greater independence by utiliz-
ing in its developmental program its own savings and internal resources
whenever possible. At the same time, however, China probably will fos-
ter intra-Bloc unity by such means as long-term trade agreements and
participation in Bloc-wide plans for economic cooperation.
Just as Chinese leaders recognize their position of strength within
the Bloc, so also do they perceive their position of influence on the
Free World. The experience of China, the only major underdeveloped
country in the Communist Bloc, in applying totalitarian methods to the
promotion of economic development under conditions similar to those ex-
isting in many other countries, is being closely observed in all parts
of the world. If China can accomplish a sharp rise in per capita in-
come and show substantial economic progress, the impact of this success
will be felt throughout the world. Leaders in underdeveloped countries)
in particular, ambitious for material progress and impatient to find
short cuts to industrial development, may be sorely tempted to ignore
the consequences of totalitarian control and attempt to follow in the
footsteps of the Chinese Communists. Moreover, the significance of the
role of the USSR in fostering rapid industrialization in China already
has attracted the attention of leaders of many underdeveloped countries.
Because the success of China's industrialization program will have im-
portant consequences on the future growth of the Communist ideology as
well as on the foreign policy interests of both China and the USSR) both
of these nations undoubtedly will seek to maintain and to better the
economic relations that have been developed during the past 9 years.
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APPENDIX A
STATISTICAL TABLES
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Table 7
Exports from Communist China to the USSR
as Reported by the USSR 2.1*
1950-57
Exports
1950
12/
1951
2/
1952
12/
1953
12/
Million
US $
Percent
Million
US $
Percent
Million
US $
Percent
Million
US $
Percent
Raw materials of agricultural
origin
67
36
86
26
125
30
122
26
Foodstuffs
22
12
23
7
57
14
89
19
Raw materials of animal origin
10
5
17
5
32
8
13
3
Nonferrous and alloy metals
20
11
46
14
73
18
101
21
Textile raw materials
17
9
30
9
39
9
58
12
Textiles
N.A.
N.A.
4
1
15
4
17
3
Miscellaneous 1/
52
27
126
38
73
17
75
16
Total
188
100
laa
100
414
100
100
* Footnotes for Table 7 follow on p. 21.
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Table 7
Exports from Communist China to the USSR
as Reported by the USSR 2../
1950-57
(Continued)
Exports
1954 2/ 1955 1956 . 1957
Million Million Million Million
US $ Percent US $ Percent US $ Percent US $ Percent
Raw materials of agricultural
origin 116 20 130 20 139 18 129 18
Foodstuffs 149 26 179 28 201 26 128 17
Raw materials of animal origin 25 4 22 3 26 3 21 3
Nonferrous and alloy metals 107 19 118 18 126 16 142 19
Textile raw materials 56 10 60 9 59 8 49 7
Textiles 37 6 59 9 96 13 136 18
Miscellaneous sy, 88 15 76 13 117- 16 133 18
Total
2a 644 100 764 100 loo
50X1
b. jg/
d. Miscellaneous includes industrial goods, industrial raw materials, chemicals and rubber, and cul-
tural and consumer goods.
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Table 8
Imports by Communist China from the USSR
as Reported by the USSR 2/*
1950-57
Imports
1950
2/
1951
2/
1952
12/
1953
/2/
Million
us $
Percent
Million
us $
Percent
Million
us $
Percent
Million
US $
Percent
Equipment and machines
Complete installations
Ferrous metals
Nonferrous metals
Petroleum
and petroleum products
Paper
Miscellaneous 2/
Unaccounted for f/
Total
41
(1)
20
3
11
4
23 1/
286
181
11
(0.3)
5
1
3
1
6
73
100
108
(32)
50
17
? 39
11
51 ?
200
23
(7)
lo
4
8
2
11
42
100
157
(41)
66
16
33
17
192/
246 .
28
(7)
12
3
6
3
4
44
100
161
(49)
68
14 1/
45
9
10
391
698
23
(7)
10
2
6
1
2
56
100
* Footnotes for Table 8 follow on p. 23.
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Table 8
Imports by Communist China from the USSR
as Reported by the USSR Eli
1950-57
(Continued)
1954 2./ 1,955 1956 1957
Million Million Million Million ?
Imports US $ Percent US $ Percent US $ Percent US $ Percent
Equipment and machines 199 26 230 31 305 42 272 50
Complete installations (93) (12) (142) (19) (217) (30) (209) (38)
Ferrous metals 88 12 76 10 61 8 33 6
Nonferrous metals 22 3 13 2 18 2 8 1
Petroleum
and petroleum productS 45 6 79 1/ 11 86 12 90 17
Paper 6 1 7 1 6 1 3 1
Miscellaneous 2/ 25 3 16 2 15 2 15 3
Unaccounted for Li 374 49 327 43 242 33 123 22
Total
759 loo 748 loo laa ioo 2121 loo
d.je
c.
o.
e. Including such categories as chemicals, building materials, pharmaceuticals, and cultural and
consumer goods.
f. Representing the value of goods not listed and believed to be primarily of 50X1
military and strategic origin.
50X1
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APPENDIX B
METHODOLOGY: DOLLAR VAUJE OF THE FOREIGN TRADE
OF COMMUNIST CHINA, 1950-58
The estimated dollar value of the foreign trade of Communist China
for the years 1950-58 (see Table 1*) is significantly different from
that derived by the previous method whereby the yuan values of trade
(as reported by China) were converted into dollars on the basis of the
dollar crossrate to the yuan-sterling exchange rate officially reported
by China.
Since 1957, new Soviet figures for trade with Communist China (see
Table 9**) as well as some additional statistics on trade with the Euro-
pean Satellites have been released. The new information suggests that
China is using a dual exchange rate system which results in a lower
value of the yuan in trade with the Bloc than in trade with the West.
This procedure may possibly be attributed to such factors as the rela-
tionship between internal and external prices and the commodity mix of
trade with particular areas.
For the years 1951 through 1958 the new Soviet figures, when com-
pared with appropriate data , reveal an approxi-
50X1
mately constant ratio of about 4 yuan, as valued in Sino-Soviet trade,
to the dollar equivalent of the ruble values. Thus the yuan appears
to be valued at par with the ruble in Sino-Soviet trade.
Variations from equality between the ruble and the yuan (there are
substantial variances only for the years 1950 and 1955) appear to rep-
resent differences in Chinese Communist and Soviet reporting techniques.
It appears, for example, that in 1950 the USSR included military equip-
ment which China excluded and that in 1955 the Chinese included but the
USSR excluded the transfer of joint-stock company assets and military
equipment and bases within China from Soviet to Chinese ownership.
* P. 5, above.
** Table 9 follows on p. 26.
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Table 9
Value of Imports, Exports) and Trade Balances of Communist China
with the USSR as Reported by the USSR 2/
1950=58 ,
Million US $
Year
Total Trade 2:_l
Exports
Imports
Trade Balance
1950
576
188
388
-200
1951 2/
808
332
476
-144
1952
968
414
554
-14o
1953
1,172
475
698
-223
1954 2/
1,338
578
759
-181
1955 2/
1,392
644
748
-1o4
1956
1,497
764
733
31
1957 Li/
1,282
738
544
194
1958 2/
1,517
908
609
299
(pro-
visional)
Total
10,550
5,O'1
5,509
-468
b. Total trade figures
C. 39/
e? El
are derived from unrounded data.
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