ECONOMIC PLANNING AND DEVELOPMENT IN COMMUNIST CHINA 1952-60

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A000600110001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 153
• Document Creation Date: December 23, 2016
• Document Release Date: July 3, 2013
• Sequence Number: 1
• Publication Date: June 20, 1956
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
SECRET
ECONOMIC INTELLIGENCE REPORT
ECONOMIC PLANNING AND DEVELOPMENT
IN COMMUNIST CHINA
1952-60
CIA/RR 73
20 June 1956
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
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.
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
ECONOMIC INTELLIGENCE REPORT
ECONOMIC PLANNING AND DEVELOPMENT IN COMMUNIST CHINA
1952-60 .
CIA/RR 73
(ORR Project 15.849)
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
FOREWORD
This report attempts to assess the impact of the Communist system
of economic planning, regimentation, and rapid industrialization upon
the backward, predominantly agricultural economy of China; to estimate
the effect of that impact upon Communist China's economic development
and capabilities through 1960; and to examine the foreign economic
relations of Communist China with Western countries, the USSR, and
other members of the Sino-Soviet Bloc.
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
CONTENTS
Page
Summary and Conclusions 1
I.
II.
Introduction
A. 1949 Through 1952
B. January 1953 Through Jule 1955
C. July 1955 Through 1957 and 1960
Economic Planning and Administration
A. Five Year Plan (1953-57)
B. Extension of Economic Controls
9
9
9
10
11
11
11
1. Organizational Structure
11
2. Economic Control Organizations and Methods ?
?
?
12
3. Progress Toward Socialization
16
C. National Budget and Fiscal and Accounting System,
1950-55
23
1. Budget Revenues and Expenditures, 1950-55 . .
23
2. Capital Construction Program
32
III.
Population and Labor Force
49
A. Population Trends
49
B. Labor Force
51
1. Employment in Modern Industry
53
2. Employment in Industry
55
3. Working Conditions
57
C. Education and Technical Training
58
IV.
Trends in the Economy
61
A. Significance of Chinese Communist Statistical
Reports 61
B. Gross National Product 62
-v -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
C.
1. By Sector of Origin
2. By End Use
3. Size of Gross National Product in 1952
Consumption and Investment
Page
62
64
64
66
1.
Consumption
66
2.
Investment
67
D.
Agriculture
68
1.
Food Production
68
2.
1955 Food Situation
72
3.
Principal Commercial Crops
72
E.
Industry
74
1.
Engineering Industries
79
2.
Armaments Industry
82
3.
Electric Power
85
4.
Coal
86
5.
Ferrous Metals
87
6.
Nonferrous Metals
89
7.
Petroleum
89
8.
Chemicals
92
9.
Cement
92
10.
Light Industry
94'
F.
Transport and Telecommunications
96
1. Transport 96
108
109
2. Telecommunications
V. Foreign Trade and Economic Relations
Appendix A. Methodology
Appendixes
115
- vi -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Tables
1. Socialization of Agriculture in Communist China,
1951-55
2. Socialization of Credit in Communist China, 1950
and 1953-55
3. Socialization of Selected Industries in Communist China
During the Five Year Plan (1953-57)
4. Budget Revenues and Expenditures in Communist China,
1950-55
5. Disposition of Surplus Funds Under the 1955 Budget
of Communist China
Page
18
21
22
24
27
6. Economic Construction Expenditures in Communist China
During the Five Year Plan (1953-57) 33
7. Comparison of Investment in Communist China During the
Five Year Plan (1953-57) with Gross National Product
of 1952
8. Investment and Value Added for Selected Industries
in Communist China During the Five Year Plan
(1953-57) ,
9. Increases in the Industrial Capacity of Selected
Industries of Communist China During the Five Year
Plan (1953-57)
35
36
39
10. Estimated Cost of Industrial Capital Construction
in Communist China During the Five Year Plan
(1953-57) ? 41
11. Cost of Nonindustrial Capital Construction in Communist
China During the Five Year Plan (1953-57) 14.14.
12. Population of Selected Cities in Communist China,
1953 49
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Page
13. Population of Communist China, 1953-60 51
14. Estimated Number of Workers in Communist China, by
Category of Employment, 1952 and 1954 52
15. Number of Workers and Clerical Staff in Communist China,
1952 and 1954 53
16. Estimated Number of Persons Employed in Industry
in Communist China, 1952 and 1954 54
17. Increases in Labor Productivity in Communist China ? ? 56
18. Indexes of Gross National Product of Communist China,
by Sector of Origin, 1949-57 and 1960 63
19. Indexes of Gross National Product of Communist China,
by End Use, 1949-57 65
20. Estimated Per Capita Index of Available Consumer Goods
in Communist China, 1949-57 67
21. Allocation of Sown Area of Communist China, by Crop,
1952 68
22. Estimated Yields of Food Crops in Communist China,
1952, 1954, and 1957 70
23. Population, Food Production, and Per Capita Availability
of Food in communist China, 1931-37 Average and
1949-60 71
24. Officially Announced Production of Commercial Crops in
Communist China, 1952, 1954, and 1957 (Plan) 73
25. Comparison of US Estimates and Communist Claims
of Production of Raw Cotton, Cotton Yarn, and Cotton
Cloth in Communist China, 1949-54 75
26. Index of Value Added by Industry in Communist China,
1949-60 76
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Page
27. Index of Gross Value of Production in Communist China,
1949-57 77
28. Output of Major Engineering Industry Products in Com-
munist China, 1952 and 1957 80
29. Estimated Output of Armaments and Munitions in Communist
China, 1949-60 83
30 Estimated Capacity and Production of Electric Power in
Communist China, 1952-60 85
31. Estimated Capacity and Production of Coal in. Communist
China, 1952-60 86
32. Estimated Production of Ferrous Metals in Communist
China, 1952-60 88
33. Estimated Production of Selected Nonferrous Metals and
Minerals in Communist China, 1952-60 90
34. Estimated Production of Petroleum Products in Communist
China, 1952-60 91
35. Estimated Production of Selected Chemical and Rubber
Products in Communist China, 1952-60 93
36. Estimated Capacity and Production of Cement in Communist
China, 1952-60 94
37. Estimated Production of Commodities in Light Industry
in Communist China, 1949-60 95
38. Imports and Exports of Communist China, 1954 109
39. Indexes of Production of Industrial Commodities in Com-
munist China, 1949-57 and 1960 0 118
40. Output and Income for the Agricultural Sector of
Communist China, 1952 121
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Page
41. Income Originating in the Nonagricultural Sector
of Communist China, 1952 124
42. Income Originating in the Nonagricultural Sector
(Excluding Consumer Services and Rent) of Communist
China, 1952 125
43. Valuation of Industrial Production in Communist China,
1952 128
44. Estimated Gross National Product in Communist China,
by End Use, 1952 131
Illustrations
Following Page
Figure 1. Communist China: Structure of Government,
December 1955 (Chart) 12
Figure 2. Communist China: Functions of the Economic
Ministries (Chart) 12
Figure 3. Communist China: Budget Revenues and
Expenditures, 1950-55 (Chart) 24
Figure 4. Communist China: Capital Construction Expendi-
tures in the First Five Year Plan (1953-57)
(Chart) 34
Figure 5. Communist China: Growth and Projected Output
of the Economy, by Sector, 1950-60 (Chart) . . 64
Figure 6. Communist China: Gross National Product, by
Sector of Origin, 1952 and 1957 (Chart) . . . 64
Figure 7. Communist China: Foreign Trade, 1950-54
(Chart) 110
-x -
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Communist China: Administrative Divisions (Map)
Inside
Communist China: Railroads and Selected Roads (Map) . ? ? ? IB1c Cover
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
CIA/RR 73 S-E-C-R-E-T
(ORB Project 15.849) .
ECONOMIC PLANNING AND DEVELOPMENT IN COMMUNIST CHINA*
1952-60
Summary and Conclusions
The announcement in July 1955 of the first Five Year Plan
(1953-57) for Communist China followed a period of reconstruction and
economic experimentation and a series of basic policy decisions. 1L?C?e
These decisions, 'which indicated the trend of the planned development
program, included the socialization of large-scale consumer goods
industries and and the monopolizatAonopf trade in grain, cotton, and
agricultural mport products. `13y postponing increased output of con-
sumer goods, gulating the profits of agriculture; and following a teellt:
general policy of forced economizing, the Communists were able to
expand heavy industry despite the additional decision to modernize ksSsc-..
the armed forces with its resultant heavy drain on resources that
could alternatively be used for investment. Governmental actions of
this nature are dictated by the Communist Party through the State
Council and by agencies, such as the State Planning Commission, which
are formally controlled by the State Council.
The acceleration of the pace of socialization of agriculture,
industry, and trade in late 1955 under direct order of Mao Tze-tung
showed sharp advancement of the goal of complete socialization as
set forth in the Five Year Plan. Over 60 percent of all peasant
households were organized into cooperatives by late 1955 as com-
pared with only 11 percent at the end of 1954. By the end of 1954,
75 percent of industry was under state, cooperative, or joint state-
private enterprises, and practically all of foreign and wholesale
trade and 58 percent of retail sales were in the hands of state, and
cooperative trading companies.
The most recent information on the budget of Communist China
indicates further increases in revenues and expenditures in 1955 and
a growing reliance on the taxes and profits of state enterprises as
* The estimates and conclusions contained in this report represent
the best judgment of ORB as of 1 January 1956.
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
a source of revenue.
S-E-C-R-E-T
1 The increased defense expendi-
tures in combination with economic construction expenditures com-
prise 75 percent of the budget for 1955.
The Chinese Communists plan to build up productive capacity on a
wide front from 1953 to 1960. The capital construction program
emphasizes industrial buildup especially. It also includes invest-
ment in the fields of transport, communications, agriculture, water
conservancy, education, propaganda facilities, and health. The
total amount of planned capital investment in the Five Year Plan is
equivalent to $18.1 billion at the official exchange rate. The
relative emphasis assigned by the Chinese Communists to development
of the various sectors is shown by the allocations, which are
58.2 percent to industry; 19.2 percent to transport and posts and
telecommunications; and 7.6 percent to agriculture, forestry, and
water conservancy. Within the industrial portion of the current
plan, 88.6 percent ($9.3 billion) of investment is to be in
producer goods industries and 11.4 percent ($1.2 billion) in con-
sumer goods industries.
The population of Communist China totaled 582.6 million in
mid-1953, according to the official results of China's first com-
plete census. This is approximately 20 percent higher than the
officially reported total of 487 million in 1950. The sharp
increase is due chiefly to improved statistical coverage rather than
to natural increases. The predominantly rural character of the
Chinese population is indicated by the classification of 505.3
million people, or 83.7 percent of the population, as rural inhabit-
ants. There is increasing evidence of overpopulation in present-
day China. The appearance of articles on birth control in Party-
controlled publications indicates that the ground is being prepared
for a policy shift on population control.
The estimated labor force in Communist China is about 300 million
of the 1954 population of 594 million, with over 75 percent of the
labor force in farm employment. The dominance of agriculture in the
- 2 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Chinese economy is brought out even more clearly by the fact that in
1954, less than 23 million of the nonfarm labor force of 56 million
were in industry, trade, transport, and government.
Indexes of industrial production show large annual increases
averaging nearly 33 percent from 1949 to 1952. Estimated 1952 out-
put was about 10 percent over pre-Communist peak levels of output.
Increases in industrial production in 1953 and 1954, the first 2
years of the Five Year Plan, dropped to an average of about 20 per-
cent. Estimated increases of output from 1955 to 1957 are smaller,
averaging about 10 percent a year and reaching a total in 1957 that
is 87 percent higher than in 1952. Output originating in modern
industry alone in1957 is expected to double that of 1952. This
estimated increase reflects a level of gross value of production
that is 75 percent over that of 1952 as compared with the Five Year
Plan goal of nearly 100 percent. The rate of industrial growth is
expected to decline further from 1957 to 1960 to about 8 percent a
year. The decline in rate of increase is due in part to the greater
reliance on increases in capacity and also to the much slower
increases in output of agricultural raw materials, limiting the
expansion of light industry. The output of industry, however, still
is relatively very small in the Chinese Communist economy as com-
pared with that in more industrialized economies.
The success of Chinese Communist objectives for developing heavy
industry at the expense of light industry is shown in the industrial
indexes for producer goods and for consumer goods. After 1957 the
projected value-added index for consumer goods shows an average
annual increase of about 9 percent as against an average annual
increase of about 17 percent for producer goods.
The current Five Year Plan places increasing emphasis on the
development of heavy industry in order to industrialize the country
and modernize the military establishment. With the exception of
electric power, steel, machine tools, and chemicals, in which
relatively large new capacities are to be brought into production
after 1957, planned rates of growth of the principal industries from
1955 on decline sharply. The trends in the modern industrial sector
are illustrated in the figures for production of major industries
for 1953 and projected for 1957 and 1960 as follows:
- 3 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Product
First Year
(1953)
of Five Year
Plan
Last Year
(1957)
of Five Year
Plan
1960
Electric power (billion
kilowatt hours)
9
16
23
Coal (million metric tons)
69
113
133
Pig iron (million metric tons)
2.23
4.20
5.90
Crude steel (million metric
tons)
1.76
3.80
5
Finished steel (million metric
tons)
1.49
3.04
4.23
Crude oil (thousand metric
tons)
628
1,400
2,400
Machine tools (units)
11,200
12,720
30,000
Tungsten (thousand metric
tons)
17
24
N.A.
Copper (thousand metric tons)
11
14
15
Lead (thousand metric tons)
12
23
24
Zinc (thousand metric tons)
7
14
19
Antimony (thousand metric tons)
11
15
17
Tin (thousand metric tons)
lo
17
22
Ammonium sulfate (thousand
metric tons)
225
500
730
Cotton fabric (million linear
meters)
4,365
5,583
6,463
The estimated average increase in gross national product* (GNP)
from 1950 to 1952 is about 12 percent. The increase in GNP for 1953
is about 6 percent over 1952 and is higher if Communist figures are
accepted. Setbacks in agricultural output in 1954 reduced the increase
in GNP in 1954 to 4.5 percent over 1953, but agricultural outpuu in
1955 was expected to increase by 6 percent over 1954. The projected
trend from 1954 to 1957 gives annual average increases in GNP of
about 7.5 percent, with total production reaching a level 36 percent
higher than in 1952. The GNP is expected to increase from 1957 to
1960 at an annual rate of about 4.5 percent.
* See footnote ****, p. 34, below.
- 4 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
The general trend embodied in the indexes of major sectors of GNP
shows a steady increase in the proportion of national output origi-
nating in the industrial sector. Modern industry is expected to rise
by one-half in its contribution to GNP in the period of the Five Year
Plan, and the modern industry sector, including transport and state
construction, should increase from 17 to 25 percent of GNP. This
trend through 1957 still leaves the modern sector a relatively small
share of total output in comparison with Japan or Western industrial
powers. Moreover, because the index was computed in 1952 Chinese
Communist prices, it reflects the high prices of producer goods
relative to agricultural prices.
In terms of 1952 prices, consumption is expected to decline from
about 73 percent of GNP in 1952 to about 65 percent in 1957 and invest-
ment to rise from about 15 percent to about 21 percent. Government
purchases of goods and services including military expenditures are
expected to rise from about 12 percent to about 14 percent.
The index for construction in fixed prices, derived from an index
of available investment goods including construction materials, shows
the following percentages of the total estimated volume of construction
in the Five Year Plan completed in 1953-54 and projected for 1955-57:
1953, 15 percent; 1954, 18 percent; 1955, 20 percent; 1956, 22 percent;
and 1957, 25 percent. The burden of the Five Year Plan on the economy
is therefore expected to rise steadily from 1952 to 1957, and invest-
ment should increase as a proportion of total output.
The GNP of Communist China in 1952 now is estimated to be about
69 billion yuan in the new currency. The increase over the previous
estimate of 60 billion yuan is due in general to the acceptance of
Communist claims of output of agricultural products in 1952. The
usual procedure for converting Communist China's GNP into other
currencies is to apply the official exchange rate, which for nearly
all of 1952 was about 20,000 old yuan (2 yuan, new currency) to
1 US dollar. This is equal to $34 billion. If the GNP for Com-
munist China in 1952 is directly valued in US 1952 prices, however,
its value is about $65 billion. On the other hand, when both US
and Chinese GNP's are valued in 1952 yuan prices, the value of the
Chinese output as a percentage of US output is equivalent to $25
billion.
-5-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
The Communists' estimate of total grain production in 1954-55 of
169.5 million metric tons* probably is overstated by about 11 million
tons. This difference, however, probably is attributable to a
number of factors, including the collection of peasant grain reserves
carried over from previous years.
The Communist plans for agriculture include ambitious increases
of production of commercial crops as well as grain. The limitations
of total cultivated acreage, plus the possibility of expanding it by
about 1-1/2 percent per year, necessitate close scrutiny of planned
conversions of land from grain to commercial crops.
In the field of transport the Five Year Plan includes the laying
of about 10,000 kilometers (km) of track, including over 4,000 km of
new lines (later revised upward to more than 5,000 km), and increases
in double tracking, spur lines, and sidings. By the end of the Five
Year Plan, 7,100 km of new highways will be open to traffic. Invest-
ment for transport in the Five Year Plan is more than 8.2 billion
yuan ($3.4 billion), or nearly 20 percent of the total basic con-
struction plan.
The new official figures on Communist China's foreign trade
indicate a much higher level of trade than had been previously
estimated. Total trade is valued at $3.47 billion in 1954 and is
approximately in balance if military deliveries under loan arrange-
ments are excluded. The bulk of Communist China's trade continues
to be with the Soviet Bloc, the Free World portion being about
20 percent. The USSR, as Communist China's most important trading
partner since February 1950, has agreed to provide extensive assistance
for 156 of the 694 principal projects currently scheduled for con-
struction or renovation during the Five Year Plan.
In 1954 the North Korean government placed a value equivalent to
about $125 million on Chinese Communist goods delivered in 1954, the
first year of the 10-year economic agreement, under which Communist
China promised to send the equivalent of $338 million in goods and
materials during 1954-57. Detailed reports of actual materials
delivered in 1954, however, are estimated to be only half that value,
or about $60 million to $70 million. In 1954, Communist China
exported to North Vietnam a minimum of 30,000 tons of goods, which
Tonnages throughout this report are given in metric tons.
- 6 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
consisted of ordnance supplies, petroleum, communications equipment,
trucks, cloth, and rice. In July 1955, Communist China announced that
North Vietnam was to be granted $338 million (the same amount promised
to North Korea) in material aid for the rehabilitation of the North
Vietnam economy.
- 7 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
I. Introduction.
The period of Communist control of China -- since the seizure of
the mainland in 1949 -- and of the imposition of the Communist
pattern on the economic institutions of the country may be divided
into three phases, as follows:
A. 1949 Through 1952.
The Chinese Communist leaders during 1949-52 concentrated
upon reconstruction and rehabilitation of the industrial plants left
by the Nationalists and Japanese, demolished the influence and seized
the reserve assets of the Nationalist capitalists, and expropriated
Western-owned enterprises. Industrial production was restored
generally to the levels previously attained under the Japanese in
Manchuria and under the Nationalists in China proper, and the assets
of Chinese and Western industrialists seized in China proper were
used as means for further expansion. During this period, also, the
institutional framework was established for central planning and
statistical compilation, financial and budgetary controls, centralized
procurement and allocation of resources, and socialization of agri-
culture and private industry.
B. January 1953 Through June 1955.
Although annual production goals and plan fulfillments had
been announced during the previous period, goals and announcements
for 1953 became parts of the new Five Year Plan for economic develop-
ment. This plan depended heavily upon a Soviet technical assistance
agreement, reached only in May 1953 and announced in the following
August. After the truce in Korea, in June 1953, which entailed the
diminution of Soviet military aid and the reallocation of domestic
resources, further detailed elaboration of the plan depended
principally upon (1) surveys to establish geological resources,
engineering requirements, economic feasibility, and practical sites
for the location and construction of industrial projects and mines;
(2) basic planning to develop cost and resource calculations,
engineering designs, and determination of the extent to which the
USSR and the European Satellites could provide industrial equipment
for the projects; and (3) further extension and development of the
economic controls and institutional framework of socialization and
centralized economic planning and administration.
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
C. July 1955 Through 1957 and 1960.
The Chinese Communist government outlined the Five Year Plan
at the Annual National People's Congress in July 1955. The delay
between the inauguration of annual production goals under the Five
Year Plan and the enactment into law of the complete plan provided
time for the development of specific industrial projects, for working
out detailed technical assistance arrangements with the USSR and the
European Satellites, and for the Chinese to prove their ability to
execute annual segments of the plan. After 2-1/2 years of the plan,
major portions of the capital investment plan, in addition to pro-
duction goals for the more complicated machine and producer goods
industries, still remained to be accomplished.
The following sections briefly examine the resources,
capabilities, and weaknesses of the Chinese Communists in relation
to the goals of the Five Year Plan.
- 10" -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
II. Economic Planning and Administration.
A. Five Year Plan (1953-57).
The Chinese Communist government announced in July 1955 its
complete Five Year Plan which had been inaugurated in 1953. The prin-
cipal aim of the plan is to form a base for further industrialization
of the econom nd modernization of the armed forces. With the aid
ke.-0,2W
of the USSR, 156 rojects are to be undertaken, projects which are to
make possible e doubling of industrial output within the 5-year
period. The collectivization of agriculture and the nationalization
of private industry are to be carried out in accordance with the
Soviet model. In fact, since the announcement of the aims of the
plan, official pronouncements have indicated that the pace of
collectivization and industrialization has been increased. 1/*
B. Extension of Economic Controls.
1. Organizational Structure.
The recent changes in the organizational structure of the
Chinese People's Republic represent the continuing trend toward
greater centralization of control over the economic, political, and
social life of Communist China. This trend is illustrated by the it) )00Gn
formal structure of the Chinese Communist government adopted in c Pt' 60
September 1954, as shown by the chart in Figure 1.** This new Av4
structure indicates that there has been little change in the real locus of of power, which resides in the key organs of the Chinese Com
munist Party -- the Central Committee, the Politburo, and the
, 14, ,44,
Secretariat. de~t/toK vvi f
4d/a4Ytt.1/04,4ti ivt.4.4,9
Under the constitution the National People's Congress
and its Standing Committee are superior to the State Council, but
in practice and on the basis of the,membership.of both organizations
the State Council appears to be theore important of the two)>The kwir.,
State Council, which is described in the-constitution-as?"the Govern-J744?0:.
ment of the People's Republic of China," has increased its functions
to include responsibility for the armed forces by subordinating to
the Council the newly created Ministry of Defense. 2/ In the eco-
nomic field the State Council is charged by the constitution with
** Following p. 12.
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
,
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
responsibility for national economic planning, the state budget, con-
trol of foreign and domestic trade, and the coordination and leader-
ship of the various ministries and commissions on the national level
and of the local people's councils at every subordinate level
throughout the country. 1/
It appears probable that coordination functions which
formerly were handled by committees under the former Government
Administrative Council now are performed by the eight staff offices
of the State Council which were established "to assist the Premier
in controlling the work of the various departments under the State
Council." V These staff offices are directed by men who are, in
general, prominent Party leaders and who frequently hold concurrent
posts as ministers or commission chairmen.
2. Economic Control Organizations and Methods.
The Chinese Communist economy is formally controlled by
a number of economic ministries, commissions, and agencies under the
State Council. The various economic ministries, commissions, and
agencies may be divided into three general groups: (a) those which
control the extractive or productive industries, (b) those which
control economic services, and (c) those which perform over-all
control and planning functions. Figure 2* shows the subordination
and functions of the economic ministries.
There are approximately 11 agencies in the Chinese
Communist government administrative structure whose duties include
over-all economic planning or control. functions. On the commission
level there are two agencies, the National Planning Commission and
the National Construction Commission. There are also six ministries
which are mainly concerned with over-all economic control and
planning functions rather than with operations -- these are the
Ministries of Finance, the Procurement of Agricultural Products,
Local Industry, Third Machine Building, Supervision, and Labor.
Four of the specialized agencies are in this category: the National
Statistical Bureau, the People's Bank of China (which is also a
service organ), the Central Handicrafts Administrative Bureau, and
the Central Industry and Commerce Administrative Bureau.
* Following p. 12.
-12 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
COMMUNIST CHINA
STRUCTURE OF GOVERNMENT
(December 1955)
NATIONAL PEOPLE'S CONGRESS
Standing Committee?National People's Congress
Chairman?Liu Shao-chi
State Council:
Supreme People's Procuratorate
Supreme People's Court
Premier?Chou En-lai
Vice Premiers (10)
Ministers (31)
Commission Heads (5)
Secretary General
Local and Special
Staff Offices
(8)
People's Procuratorates
Regional Governments
People's Republic of China
Chairman? Mao Tse-tung
Vice Chairman? Chu-teh
National Defense Council
Administrative Organs
Provincial, Municipal and
Autonomous People's Councils
25276 6.56
Supreme State Conference
(to be convened when necessary)
Ministries:
Internal Affairs
Foreign Affairs
National Defense
Public Security
Justice
Supervision
Finance
Food
Commerce
Foreign Trade
Heavy Industry
First Machine Building
Second Machine Building
Third Machine Bur!ding
Coal Industry
Electric Power Industry
Petroleum Industry
Geology
Building
Textile Industry
Light Industry
Local Industry
Railroads
Communications
Posts and Telecommunications
Agriculture
Forestry
Water Conservancy
Labor
Purchase of Agricultural Supplies
Culture
Higher Education
Education
Public Health
Commissions:
State Planning
National Construction
Physical Culture and Sports
Overseas Chinese Affairs
Nationalities Affairs
Special Agencies:
State Statistical Bureau
People's Bank of China
State Bureau of Measures and Standards
Central Handicrafts Administrative Bureau
Civil Aviation Bureau
Central Meteorological Bureau
Central Industry and Commerce Administrative Bureau
New China News Agency
Broadcasting and Motion Picture Administrative Bureau
Committee for Reform of the Chinese Written Language
Foreign Cultural Relations Liaison Bureau
State Council Religious Affairs Bureau
State Council Law Codification Bureau
State Council Personnel Bureau
State Archive Bureau
Central Confidential Communications Bureau
State Council Office of Councillors
State Council. Expert Work Bureau
State Council Government Organs Affairs Bureau
Premier's Staff Otfice
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
COMMUNIST CHINA 50X1
FUNCTIONS OF THE ECONOMIC MINISTRIES
Ministry of
Finance
Ministry of
Commerce
Ministry of
Foreign Trade
Ministry of
Geology
Ministry of
Building
Civil Aviation
Bureau
Ministry of
Railroads
Ministry of
Posts and Tele-
communications
Ministry of
Communications
Ministry of
Water
Conservancy
Ministry of
Food
Ministry of
Procurement of
Agricultural
Products
Taxation
Domestic Trade
Export?Import
Geological
Construction
Civil Air Operations
Railroad
Postal Service
Highways
Flood Control
General
Collection and
National
Budget,
Auditing and
Fiscal
Controls and
Planning
State
Treasury
(Currency
Including
Supervision
of State Trading
Companies
Administration
Customs
Administration
Shipping
Registration
of Private
and Foreign
Export?Import
Firms
Survey
City Planning
Operations
Construction
and
Maintenance
Telephone
Service
Telegraph
Service
Radio
Service
Ports,
Harbors and
Waterways
Inland,
Coastal, and
Ocean
Shipping
Irrigation
Projects
Supervision of
distributing
and stock-
piling of
grain
Purchasing of
grain,
? ? cotton,
vegetable
Oil seeds for
domestic
supply and
rationing
purposes
Issue and
State
Granaries)
Administration
of Banking
System and
Financial
and Monetary
Control Plans
Ministry of
Heavy Industry
Iron and Steel
Construction r
Materials
Nonferrous
Metals
Chemicals
25277 6-56
First
Ministry of
Machine Building
Machine Tools
Shipbuilding
Locomotives
and Rolling
Stock
Automobiles
(Electric?al
MininIto m iTt
Machinery
General
Industrial
Machinery
Zig-Ng-rent
(Teals and
snipment
Second
Ministry of
Machine Building
Arms and
Munitions
Third
Ministry of
Machine Building
Local Public-private,
Private, and
Cooperative
Machine and
Electrical
Industries
Ministry of
Coal Industry
Coal
Ministry of
Electric Power
Industry
Electric Power
Ministry of
Petroleum
Industry
Petroleum
Figure 2
Ministry of
Textile Industry
Textiles
Textile
Machinery
and Equipment
Ministry of
Light Industry
Tobacco
ci1149 Foods:
Salt,
Sugar,
Canned Goods,
_rljyllcidd Fats .../
Medical
RRLE-n-efi
Pharmaceuticals -
Paper Goods
Rubber Goods
Leather Goods
Paints
Weighing and
Measurement
Equipment
Ministry of
Local Industry
Other Local Public-
private, and
Cooperative
Industries
Ministry of
Agriculture
Agriculture
Fisheries and
Marine
Products
Ministry of
Forestry
Reforestation
Timber-Cutting
Lumber Mills
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
a. National Planning Commission.
The National Planning Commission is the key economic
control body. It is 1:e.sDonsible for the internal consistency of the
national economic plans as well as for coordinating subordinate 0(
economic organizations and allocating the resources of caaital, raw
?ffigt-F=1ana skilled_labor. The fact that Vice-Premier Li Fu-cE7un
is the chairman of this organization emphasizes its preeminent posi-
tion.
b. National Construction Commission.
Little is known about the National Construction Com-
mission, which is comparatively new. It probably was created to plan
construction activities on a national basis and to remedy the lack
of coordination and standardization which existed among the various
industrial ministries, construction enterprises, and the Ministry of
Building.
c. Ministry of Finance.
The Ministry of Finance is one of the major control
organs of the Chinese Communist government. It is responsible for
tax collection and administration 2/ (including taxes-in-kind); for
the preparation, execution, and audit of the national budget ?/;
for the inspection and supervision of financial policies, budgets,
accounts, and audits of enterprises and agencies of the central
government 7/; and for the management of the national treasury
(including the currency issue and public granaries). .f./ The Office
of Food Control, of the Ministry of Finance, which had the respon-
sibility for the operation and control of the public granaries, 2/
now will coordinate with and perhaps supervise the recently created
Ministry of the Procurement of Agricultural Products 10/ under the
central government's forced procurement program.
d. People's Bank.
The People's Bank is the operating arm of the Ministry
of Finance. It acts as the national treasury, bank of issue, and
clearinghouse and exercises monetary and currency control. It op-
erates as the tax collecting agency, conducts the construction bond
-13-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
?
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
drives and other national borrowing activities, and serves as the
principal government and public depository and dispenser of credit.
e. Ministry of the Procurement of Agricultural Products.
Following 1-1/2 years of experience in the implemen-
tation of the state's 'balanced supply and marketing program," the
State Council apparently concluded that a reorganization of the
control mechanism for the procurement of agricultural products was
needed. The Ministry of the Procurement of Agricultural Products
accordingly was established in June 1955. Its functions and
responsibilities have not been publicly announced, but apparently it
is intended to centralize all procurement efforts with respect to
grain and commercial crops. The Ministry of Food still appears to
have responsibility for the supply and marketing of foodstuffs and
operates the ration coupon program.
f. Ministry of Local Industry.
It is believed that the Ministry of Local Industry
was created to provide central coordination for the enterprises
directly under the control of the local governments and prepare the
way for the further socialization of private industries under the
state's nationalization program. 11/
g. Third Ministry of Machine Building.
The Third Ministry of Machine Building was established
in April 1955 purportedly "to direct the machine and electrical engi-
neering industries of local state enterprises, joint state-private,
cooperative, and private enterprises." 12/ Its functions are believed
to be related to further socialized control of industries in the
machine and electrical engineering fields.
Two other organizations apparently also exist for
the control, direction, and extension of socialization of local
industries and trade:
h. Central Handicrafts Industry Administrative Bureau.
i. Central Industry and Commerce Administrative Bureau.
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
j. National Statistical Bureau.
The National Statistical Bureau, because of its func-
tions of auditing and aggregating national production statistics in
all fields and of providing basic data for national planning, is one
of the key support agencies for economic planning and control.
k. Ministry of Labor.
The Ministry of Labor apparently does not play a
very important role in the Chinese Communist economic control
mechanism other than to provide over-all statistical and planning
data. It has declined in importance with the eclipse of its
Minister, Li Li-san.
Finally, there are two ministries which, although not
primarily economic, play an important role in the economic control
system.
1. Ministry of Public Security.
The Ministry of Public Security is important in the
economic field because it controls a considerable resource of man-
power through the "reform through labor" (forced labor) program. 12/
Under this program, labor is supplied for water conservancy work,
highway construction and maintenance, and construction programs of
varied nature in hardship areas. In addition, this ministry has the
power to prevent mass migration of the peasants to the cities.
m. Ministry of Supervision.
The Ministry of Supervision presumably controls the
people's supervisory offices which are attached to government
organizations and enterprises at all levels. It was reported in
1954 that there were almost 4,000 supervisory organs alleged to be
"supervising all activities of production and finance, concentrating
on the supervision of economic construction." This ministry is
responsible for cutting down waste and costs in connection with the
implementation of state procurement and allocation of resources for
the 5-year capital construction program.
-15 -
S-E-C-R-E-T
I Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
3. Progress Toward Socialization.
Speeches made by various Chinese Communist officials
leave no doubt as to their ultimate objective of a socialist economy.
They consider state control the only way to industrialize, and, in.
order to provide support for the industrialization program, measures
to socialize industry and to collectivize agriculture have priority
as the means of controlling output. By the end of 1954 these
measures had reduced the private sector to 25 percent in industry,
12 percent in wholesale trade, and 42 percent in retail trade. The
record is less impressive in handicrafts and agriculture, but even
here 5 percent of handicraftsmen and 11 percent of farm households
had been organized in producer cooperatives, an intermediate form
of socialist organization preceding complete collectivization.
The initial slackening of the socialization pace
in 1955 varied in degrees from sector to sector. An actual rise in
private retail trade was first predicated, from 42 percent of sales
in 1954 to 48 percent in 1955, but large-scale conversion of private
trading enterprises to joint state-private firms in December 1955
apparently reversed the announced policy. A stepping-up of the
process of socializing private industrial enterprises by means of
converting whole industries in the large cities to joint state-
private status also began in December 1955. The conversion of
private industry and trade into the intermediate form of state
capitalism termed "joint state-private enterprise" (in which the
state initially invests the requisite new capital funds in the form
of raw materials or merchandise inventory as a share of total capi-
tal) is more gradual than outright nationalization which character-
ized earlier years. The preharvest policy of temporary abatement in
the fate of agricultural socialization -- that is, of recruitment of
peasants as members of producer cooperatives -- was terminated
abruptly in October 1955 when an all-out drive for agricultural
cooperativization was launched following publication of a speech by
Mao Tse-tung. 12/ He called for a 100-percent increase in agri-
cultural cooperatives (from 650,000 to 1.3 million) rather than the
previously agreed on target of 1 million cooperatives by October 1956.
The December 1955 results of this effort indicated that Mao's goal
already had been exceeded.
-16-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
On a somewhat longer range basis -- that is, by the end
of the Five Year Plan -- the Chinese Communists expected to reduce
the contribution of private industry to 12 percent of total indus-
trial output and the contribution of private retail trade to 21 per-
cent of sales and to organize into producer cooperatives 5 million
handicraftsmen (about 50 percent of the total).
a. Agriculture.
State-owned farms in Communist China account for an
I insignificant part of the total farm area. The number of totally
socialized mechanized state farms is expected to rise from 94 in
1954 to 117 in 1955 and to 141 in 19571 while nonmechanized state
farms will then number 2,897 according to plan. The establishment
of large-scale state farms is said to be delayed pending the planned
production of farm machinery.
The government embarked on an intensive campaign in
1952 to form mutual aid teams, and by 1954 these teams embraced
56 percent of peasant households. Great headway in organizing
producer cooperatives was made during 1954, but it occurred in a
year of declining agricultural production. Although floods prob-
ably were the chief cause of the decline, the decision to slow down
the organizational work of forced socialization is a partial
acknowledgement of the effects on production of peasant resistance
to the "hard line" policy pursued by the government during that year.
Nevertheless, the number of producer cooperatives reached 500,000 by
the end of 1954. Despite the emphasis on consolidation and volun-
tarism, the latest statistics on agricultural producer cooperatives
show continued organizational increases to a total of 670,000,
embracing 15 percent of peasant households by the spring of 1955 and
to over 1.24 million, containing 63 percent of peasant households,
by the end of 1955. These data are summarized in Table 1.* The
effect of such a rapid rate of growth of peasant cooperatives on
production will not be evident until the next harvest, but past
experience in other Communist countries suggests that it may be
seriously adverse.
* Table 1 follows on p. 18.
- 17 r-
S-E-C-R-E-T?
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 1
Socialization of Agriculture in Communist China
1951-55
Year
1951 2/
1952 2/
1953 2/
1954 12/
1955
(spring) 12/
1955
(December) ftl/
Number
of
Cooperatives
400
3,600
14,000
500,000
670,000 2/
1,240,000
Households
Organized
(Percent)
Less
Less
Less
than
than
than
11
15
63
1
1
1
Number
of Mutual Aid
Teams
(Million)
4.3
8.3
10.0
N.A.
N.A.
N.A.
Households
Organized
(Percent)
20
14.0
43 (including
cooperatives)
56
N.A.
N.A.
a.
b.
c.
lt/
11/
Based on 26 households per cooperative as in 1954. 2f./
b. Trade.
The official policy with respect to socialization of
trade in Communist China as announced in the Five Year Plan indicated
a desire on the part of the central government to increase rural-
urban trade and therefore to delay further socialization in order to
utilize the talents of private merchants. Private retail trade was
to be the main beneficiary of this policy, as wholesaling and foreign
trade had been largely taken over by the state. This new line was
changed again in November 1955, however, as a result of the direct
intercession of Mao Tze-tung, and the emphasis again was on conversion
of private trading firms into joint state-private firms as an inter-
mediate step to complete socialization.
-18-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
In 1954-55) before the abrupt change of policy pre-
scribed by Mao, supply and marketing cooperatives and state trading
organizations were directed to concentrate on wholesale trade and
to curtail competition with private retailing. Private merchants
were encouraged to make wholesale purchases from supply and marketing
cooperatives, and, in order to strengthen the effects of this policy,
cadres were directed to encourage private traders to organize mutual
aid groups, or cooperatives, to pool capital for such purchases.
The state trading companies apparently have con-
sistently underquoted prices of private traders in a multitude of
fields. The major blow to private trade, however, came in the form
of bans on private trading in major agricultural products and in the
policy of "planned purchase and supply," which gave the state the
exclusive right to buy certain commodities and.enabled it to control
supplies to the market. This policy was applied to grain in November
1953 and to cotton, cotton cloth, and oil-bearing seed crops in
September 1954. The state then assigned some of its purchasing
authority to supply and marketing cooperatives, which, in addition
to buying the products mentioned above, monopolized purchases of tea,
tobacco, peanuts, and jute. Private sales of these commodities were
made for the most part on a commission or fixed-price basis.
The 32,000 supply and marketing cooperatives with a
membership of 160 million have continually cut into private trade.
They were in a position to underprice private trade because of the
lower wholesale prices, cheaper credit, and tax exemption accorded to
them by the state. The inroads made on private trade were manifested
in its declining share of total wholesale and retail sales, from
81 percent in 1950 to 42 percent in 1953. State trading departments
and cooperatives, as indicated in the Five Year Plan, were expected
to control 55 percent of retail trade by 1957, as compared with
34 percent in 1952. The policy inaugurated in November 1955, whereby
the state contributes capital funds in the form of merchandise inven-
tories to private trading firms thus converting them into joint
state-private firms, is a drastic intermediate step toward complete
socialization and places nearly all trade under direct state control.
-19-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
c. Credit.
The People's Bank of China has controlled almost all
credit in urban areas since the beginning of Chinese Communist rule.
A more difficult socialization task has been the elimination of
private credit in the rural economy. Several organs have been used
to achieve this goal, the key ones being the rural credit coopera-
tives. Their number has grown from 542 in 1950 to 130,000 in
April 1955, which means that 59 percent of rural villages now are
served by credit cooperatives. Other villages are served by credit
departments of the supply and marketing cooperatives or by credit
mutual aid teams. These forms are used to prepare the way for
credit cooperatives.
The plans for 1955 are to forego further expansion
of credit cooperatives in favor of improved management and firmer
alignment with the state financial policy. The 1957 goal for credit
cooperatives had been achieved by the first half of 1955. The
expansion of socialized credit organs is shown in Table 2.*
The socialization of industry is a clear goal of the
Chinese Communists although there has been variation in government
relations with private enterprise. The initial approach to private
enterprise prevailed through 1951 and may be described as a period
of adjustment with recognition of state leadership as the basis of
adjustment. Private enterprises had to submit operational plans
for government approval, distribute earnings according to a set
pattern, and submit reports on the value of their assets.
Having substantially restored production and gained
knowledge of private industrial practice, the Chinese Communists
embarked on a direct and violent attack on private enterprise during
the first half of 1952. The campaign succeeded in breaking the power
of private industry and commerce. Subsequent production declines and
unemployment brought about a shift in government policy. The means
used to revive private enterprise, such as state loans and orders,
made private enterprises almost completely dependent on the state.
The simplest device was for the state to place an order with a pri-
vate enterprise and then arrange for state distribution of the output.
* Table 2 follows on p. 21.
-20-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 2
Socialization of Credit in Communist China
1950 and 1953-55
1950
1953 LI/
1954
(June) 12/
1955 ,
(April) SI
Number of credit cooperatives
542 1/
9,400
42,190
130,000 21
Membership (million)
6.0
20.4
170
Cooperative deposits (new
currency, million yuan)
74
73
488
Number of credit departments
of supply and marketing
cooperatives
2,000
3,232
Number of credit mutual aid
teams
4,790
42,084
a.
12/
c.
21/
e.
22/
Moreover, the state, by control of raw materials and their allocation,
could make a private enterprise simply an agent carrying out a pro-
cessing contract. It was announced officially that 86.4 percent of the
gross output of private industry in 8 leading cities fell within such
control. 2/11
Joint enterprises are another form of state capitalism,
and their encouragement dominated policy in 1955. This form evolves
when private enterprises are forced to the verge of bankruptcy because
of state capital levies, price controls, or stoppage of credit and are
obliged to accept state funds, usually in the form of raw materials,
as a share of total capital. These enterprises are subject to direct
supervision and financial control by the government and, regardless of
the percentage owned, the state directs their policies. The share of
-21 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
joint enterprises in total industrial output doubled between 1953 and
1954 and was expected to contribute 15.4 percent of total industrial
production in 1955. The joint form facilitates eventual takeover by
the state and at the same time retains some incentives for priVate
entrepreneurs to contribute their experience.
In late 1955 a hastening of the process of sociali-
zation of private industry in the intermediate form of joint state-
private ownership was indicated in a policy change instituted by
Mao Tse-tung. The only industries in which as much as 5 percent was
planned to be left in private hands by 1957 were the food processing
and machine building industries. Table 3 shows the planned pro-
portions of ownership of selected industries in 1957. In view of
this policy inaugurated in late 1955, however, it is estimated that
these proportions will be effective in 1956.
Table 3
Socialization of Selected Industries in Communist China
During the Five Year Plan (1953-57)
Percent of Total Output
Industry 2/
State bJ
Cooperative
Joint
Private
Steel
Pig iron
Steel products
Cotton yarn
90.9
97.3
85.4
51.4
0
0.3
0
0
9.1
2.0
14.1
48.6
Less than 1
0.4
0.5
0
Electric power
90.84
0.01
9.14
0.01
Coal
.81.6 '
0.1
4.2
4.1
Petroleum
100
0
0
0
Machine building
77.7
0
15.9
6.4
Cement
68.0
0
32.0
0.
Food processing
64.7
6.9
17.2
11.2 2/
Paper
61.6
0.1
37.3
1.0
a./
b. Includes both central and local government-Owned enterprises.
c. Of which 7 percent is for handicrafts.
- 22 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
The handicraft industry is the only sector of the
Chinese Communist economy in which socialized organization still plays
only a minor role. Although the Communist timetable under the Five
Year Plan called for organizing all 10 million handicraftsmen into
cooperatives by 1960, EY Mao Tze-tung stated in late 1955 that the
socialization problem of the handicrafts would be solved in the spring
of 1956. Handicraft output was valued at 15.3 billion yuan in 1953,
and the 300,000 organized handicraftsmen contributed less than 4 per-
cent of the total. Membership in the various types of handicraft
organizations is expected to rise from 1.16 million in 1954 to 1.7
million in 1955. The Five Year Plan membership goal of 2.1 million
persons applies only to handicraft cooperatives, which account for
roughly half of the organized handicraftsmen.
C. National Budget and Fiscal and Accounting System, 1950-55.
1. Budget Revenues and Expenditures, 1950-55.
Planned revenues and expenditures in the 1955 budget
represent new highs for the Chinese Communists (see Figure 3*).
Planned current receipts of $11.85 billion** are 7 percent higher than
in 1954. Inclusion of the surplus carried over from 1954 raises the
total revenue of $13.178 billion. In terms of yuan, the total budget
amounts to roughly 31 percent of the Chinese Communist GNP. Despite
a rise in expenditures of 20.7 percent to $12.56 billion, 1955 is to
be the fifth successive year in which the achievement of a budget
surplus is claimed. This surplus, however, includes revenue from
the surplus brought forward which is drawn upon to cover the actual
deficit of $710 million. The proportions of revenue derived from
each category are presented in Table 4,*** with budget data for
1950-55.****
* Following p. 24.
** The yuan converted at the official Chinese Communist rate --
1 US dollar = 2.367 yuan. The official rate of the Communist Bank
of China probably overstates the value of capital investment in
yuan as much as 50 percent in terms of US prices and understates the
value of services and of food crops. However, the official rate of
exchange is used throughout this report (except where otherwise noted)
in order that consistent proportions may be maintained in the dis-
cussion of value relationships between budget categories.
*** Table 4 follows on p. 24.
**** Continued on p. 27.
-23-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 4
Budget Revenues and Expenditures in Communist China
1950-55
Expenditures
1950
1951
1952
1953
1954
1955 (Plan)
Million
Yuan
Percent
of Total
Million
Yuan
Percent
of Total
Million
Yuan
Percent,
of Total
Million
Yuan
Percent
of Total
Million
Yuan
Percent
of Total
Million Percent
Yuan of Total
Economic construction
of which:
1,735.37
25.5
3,511.15
29.5
7,626.34
45
8,644.53
40
12,358.22
50
14,188.76
48
Capital construction2/*
(2,459.40)
(20.7)
(4,549.80)
(27.3)
(7,552.79)
(35.1)
(8,685.71)
(35)
(9,591.64)
(32.2)
Social, cultural,
and educational
755.01
11
1,343.76
11
2,279.68
13.5
3,360.69
15.5
3,460.51
14
3,850.69
12.9
Defense
2,827.39
41.5
5,060.81
42.5
4,371.34
26
5,679.22
26.5
5,813.53
24
7,193.15
24
Administrative
1,313.27
19
1,744.86
15
1,727.38
10
2,118.69
10
2,162.07
9
2,241.56
7.5
Other
177.02
3
241.61
2
782.28
6
1,684.65
8
838.11
3
1,245.73
4.2
General reserve
1,017.23
3.4
Total
6,808.06
11,902.19,
16,787.02
21,487.78
24 632.44
29 736.72
Revenue
Taxes
4,897.81
75
8,112.17
62.5
9,768.45
55.5
11,967.12
55
13,218.08
50
13,780.57
49
Profits of state enterprises
869.65
13
3,053.73
23.5
5,727.97
32.5
7,669.05
35
9,961.50
38
11,115.81
40
Credits, loans, and insurance
327.91
5
567.95
4.5
193.16
1
491.83
2.5
2,345.37
9
Other
423.75
7
1,233.17
9.5
1,870.10
11
1,634.36
7.5
711.87
3
3,153.40
11
Total
6,519.12
12,967.02
17,559.68
21,762.36
26 236.83
28,049.78
Deficit
- 288.94
-1,686.94
Surplus
(carried over from previous year) 4,509.0 12/ 3,142.74
(cumulative)
Total revenue 30,745.83 31 192.52
* Footnotes for Table 4 follow on p. 25.
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
COMMUNIST CHINA
BUDGET REVENUES AND EXPENDITURES
1950-55
( Billions of Current Yuan)
REVENUES
12.967
9.26
17.560
112
32.51
" 23.5X
Other Revenues 6.519 4,7'1%59
Credits, loans and Insurance . ? ? ? fife4t.
Profits of State Owned Enterprises 132
*.Y.ort
Agricultural Taxes f229%I. 39%
746?fr' 43.0%
Industrial a
CommercialT
xes 46%
26.237
Other
Taxes "
3%
21.762
7.5%
35
-
38%
28.050
3.5%
40%
/440 rij
We. "di
42%
34%
35.5%
1950 1951 1952 1953 1954 1955
(Budget
25099 12.55 (First Revision 6.561
Other Expendit
Administra
EXPENDITURES
11.902
/77/4
42.5%
6.808 ?
res , 3 x
6" ? M ?
Defense 41.5%
Social, Cultural
and Educational
Economic Construction 25,5%
29.5%
16.787
5%
.7,1(rgi
'///z7
26%
45%
21.488
8%
1
24.632
3%
/4.
24%
29.737
40%
50s
ECONOMIC CONSTRUCTION
EXPENDITURES
14.274
12.316
11%
Other
14.5%
20%
Commerce and
Foreign Trade
7
8.595
14%
15%
Communications
and Transport
14%
24%
9%
Agriculture. Forestry, Water
Conservancy, and Meteorolgy
11%
4.1
14%
12%
40%
36.5%
Heavy
Heavy !
Industry
46%
_ -
10%
light
Light
1950 1951 1952 1953 1954 1955 1953 1954 1955
(Budget) (Budget
Figure 3
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 4
Budget Revenues and Expenditures in Communist China
1950-55
(Continued)
Revenue by Sectors
Taxes, profits and depreciation
reserves of state enterprises
Taxes and bond payments by
cooperatives
Taxes and bond payments by
peasants
Taxes and bond Payments by
private enterprises
Taxes and bond payments by joint
enterprises
Other
Total
1950 1951 1952 1953 1954 1955 (Plan)
Million
Yuan
Percent
of Total
Million
Yuan
Percent
of Total
Million
Yuan
Percent
of Total
Million
Yuan
Percent
of Total
Million
Yuan
Percent
of Total
Million
Yuan
Percent
of Total
2,221.72
34
6,399.22
49
10,181.10
58
13,623.24
62.5
16,344.79
65
18,618.60
69
189.64
1
539.71
2.5
914.44
4
1,282.65
5
1,931.61
30
2,356.11
18
2,809.55
16
2,933.57
13.5
3,565.09
14
3,162.58
12
2,146.09
33
3,716.35
29
3,720.90
21
3,703.95
17
3,342.11
13
2,877.22
11
184.37
1
267.68
1.2
415.88
1.5
532.42
2
219.69
3
495.75
4
474.12
3
694.39
3.3
476.01
2
354.95
1
6,519.12
12,967.02
17,559.68
21,762.36
25,053.33
26,889.95
a. Capital construction is composed of expenditures for fixed assets under the economic construction; administrative; and social, cultural, and educational categories of the budget.
b. A total of 1,604.39 billion additional yuan was added to the cumulative surplus by the end of 1954. The 1955 budget speech states that roughly half of the surplus had been
previously allocated and therefore only a portion was available for 1955 expenditures. It is not clear how the surplus was accumulated for it exceeds the unspent revenue of the
years 1950 through 1953.
- 25 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
S-E-C-R-E7T
a. Revenues.
(1) Surplus.
The surplus of the Chinese Communist budget was
stated to be $2.583 billion at the end of 1954. It is not clear how
this surplus was accumulated because the unexpended balance on budgets
of previous years totals only $1.448 billion. Certain statements in
the 1955 budget report clarify the nature of the surplus category and
indicate for the most part that it is fictitious because all but
$1.327 billion of the surplus is already allocated. The available
surplus is even lower if a 1955 appropriation of $713 million to state
enterprises for repayment of overdue loans from the state bank is con-
sidered an existing obligation.
Clarification of the relationship of the state
bank loan program to government surplus accounts was necessary because
of overlapping plans for the same funds. In both 1953 and 1954,
budget officials apparently drew on the surplus funds forcing the
state bank to contract its loans of working capital to state enter-
prises and cooperatives. The state bank now has free use of the
funds repaid to it. The breakdown of the surplus category is
presented in Table 5.*
(2) Revenue Increases and Secret Military Credit.
Revenues in the Chinese Communist budget of 1955
are expected to increase at roughly the same rate as agricultural and
industrial output. Over 60 percent of the increased revenue will be
in the form of profits fram state enterprises. The increases in prof-
its are.to result from increased productivity and expansion of com-
modity circulation. The remaining two categories of revenue --
taxei and credits, loans and insurance -- also will increase but to
a lesser degree.
In accounting for the rise in the credits,
loans, insurance, and the category other, announcement is made for
the first time of military loans from the USSR. The only specific
reference to military credit is in connection with a $40-million
increase in credits and loans in 1955. There is reason to believe,
however, that military credit of from $400 million to $500 million
* Table 5 follows on p. 27.
-26-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 5
Disposition of Surplus Funds Under the 1955 Budget
of Communist China
Million US $
Total surplus funds
Allocation
2,582.72
Repayment of central government overdraft 912.05
Transfer to special accounts in state bank 213.09
Replenishment of local budget revolving
funds 129.88
Carried into 1955 budget 1,327.70
Allocation of 1955 carryover
Repayment of state enterprises loans
from state bank 712.70
Unallocated 615.00
Total 1,327.70
Increase in local budget revolving funds 35.96
was given in 1954 and will continue at the same level in 1955. This
range is derived from a statement that a Soviet loan is mainly respon-
sible for a $600-million excess in revenues from the credits, loans,
and insurance category achieved over the budgeted 1954 figure. Over-
subscription to a domestic bond drive accounts for $100 million of the
unexpected revenue. If this were in fact the only other cause of
overfulfillment -- and only the two are cited in the budget speech --
the military credit may have been as much as $500 million.
-27-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
There is evidence, however, that other components
of the budget category may have increased unexpectedly during 1955.
These possibilities include an increase in industrial credit based
on the Soviet loan of $130 million (520 million rubles -- terms not
announced) agreed to in October 1954 and on the inclusion as a credit
of Soviet shares in several jointly owned companies turned over to
the Chinese Communists during 1954. The October 1954 agreement
specifies that Communist China is to repay the USSR with exports over
a period of years for the capital shares thus surrendered. Allowances
for these items would support a military loan estimate closer to
$400 million.
This interpretation of the budget statement is
substantiated by foreign trade statistics announced by the Chinese
Communist government on 29 July 1955. The reported value of imports
is approximately $600 million more than previously estimated and
could encompass at least $400 million worth of undisclosed Soviet
military deliveries under the announced 1954 loan.
A lower estimate of the loan might be derived
from the expenditure side of the budget. Defense expenditures for
1954 exceeded the plan by $230 million. If the unplanned expenditure
was due chiefly to the allocation to the Ministry of Defense of an
unexpected Soviet loan, the loan could be estimated at roughly that
amount.
(3) Revenue by Sectors.
Revenue also is broken down into contributions by
sectors. Taxes, profits, and depreciation reserves of state enter-
prises are a greater source of revenue than the bond and tax payments
of all the other sectors combined. These sector contributions were
mentioned in the budget speech only as a percentage of total revenue
excluding foreign loans. In order to arrive at the dollar value of
revenue by sectors, as presented in Table 4,* estimated foreign loans
of $500 million in 1954 and $475 million in 1955 were deducted from
total revenue.
* P. 24, above.
-28-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
b. Expenditures.
(1) Increases.
The large increase in expenditures in 1955 is
attributed by the Chinese Communists to a carryover of unused
appropriations for basic construction in 1954, increased payment of
interest and principal on domestic bonds and Soviet loans, and
allocations for economic development. The more important causes are
the appropriation of approximately $700 million to state-operated
enterprises to provide for repayment of overdue loans from the state
bank and the increase of $600 million in defense expenditures neces-
sitated by the withdrawal of Soviet armed forces from Port Arthur --
that is, "necessitated" by the allocation to the Ministry of Defense
of Soviet equipment turned over at the time of the withdrawal and
the subsequent maintenance of operations and equipment at Port
Arthur.
Although the defense share of the budget did
not increase in the 1955 plan, the substantial absolute increase in
military expenditures may be partially responsible for the declining
share of expenditures for economic construction. Within the economic
construction category there are significant shifts in expenditures
from agriculture and light industry to foreign trade, heavy industry,
and transport. From the small allocation of economic construction
funds to agriculture it is apparent that the Chinese Communists are
still relying largely on organizational changes, minor investment
measures, and favorable weather to realize their goals of increases
in production of 7 percent per year. The investment plans also show
scant consideration for production incentives in the form of consumer
goods inasmuch as investment in light industry is cut almost in half
and will represent only 10.8 percent of industrial investment as com-
pared with 22 percent in 1954.
(2) Capital Construction.
Capital construction is a new budget category,
defined by the Chinese Communists as "construction increasing the
fixed assets of the state." 27/ It cuts across the usual expendi-
ture categories of economic construction; social, cultural, and
educational; and administration, and gives a more accurate figure of
fixed investment in Communist China than could be derived from
previous budgets. Fixed assets are to increase by $4.05 billion in
-29-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
1955, which is approximately $0.5 billion more than was spent in
1954. The only breakdown of the capital construction figure that
is given pertains to industrial investment in 1954. In that year,
48 percent of the funds allocated for capital construction were spent
by industrial departments.
(3) Budget Trends.
(a) Nationalized Assets.
In order to view the 1955 budget of Commu-
nist China in a wider perspective, a comparison with budget trends
since 1950 is useful. Socialization probably is the best single ex-
planation for over-all and specific budget trends. The primary reason
why revenue has risen from roughly $2 billion in 1950 to $12 billion
in 1955 is that receipts include the value of confiscated enemy
assets, profits, and reserves of former private enterprises, and
capital levies on the public in the form of forced bond purchases
and penalties for alleged tax violations and profiteering.
(b) Categories of Expenditure and Revenue.
Socialization of the economy also affects the
types of expenditures in the Chinese Communist budget. Allocations to
heavy industry account for 40 percent of economic construction expend-
itures under the 1954 budget in contrast to the 5 percent allocated
to light industry. Total budget allocations for fixed investment
(capital construction) constitute about one-third of budget expend-
itures and about 10 percent of GNP. The apparent rate of savings is
thus very high considering the low level of per capita income in
Communist China. The actual rate of savings in Communist China is
even higher when private investment and working capital are taken
into consideration.
Another aspect of the socialization pro-
gram which has tremendous repercussions on the budget of Communist
China is the government monopoly over, purchases of major agricul-
tural products. The prices at which agricultural products are sold
by state stores or supply and marketing cooperatives are estimated
to involve substantial markups over the official procurement price.
The trading profits resulting from this price differential constitute
almost 25 percent of the profits of state enterprises. This category
of revenue has risen from 13 to almost 40 percent of the budget. A
-30-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
similar price differential also prevails on the tax assessment values
at which grain taxes in kind are taken into the budget. The tax
value of grain is less than half the fixed retail price. The con-
sequences of these differentials are that the tax burden on the
peasant is heavier than the budget indicates) whereas the payment
of wages in kind to administrative and military personnel, at a rate
roughly midway between procurement values and official retail prices,
understates these expenditures in relation to others. The true grain
tax burden on the peasant has been estimated at 21 percent of budget
receipts rather than the official proportion of 13.5 percent. 28/
The subsidization of expenditures through the use of wages in kind
affects about 30 percent of both defense and administrative expend-
itures. If this portion of the two categories were raised by 25
percent to represent the extent of underevaluation of grain, total
expenditures would be $600 million more than reported in 1954.
Defense and economic construction expenditures
have more or less reversed their proportions in the budget over the
5-year period. At the beginning, 41 percent was allocated to defense
and 25.5 percent to economic construction. In 1955, 24 percent was
allocated to defense and 48 percent to economic construction. The
correlation of the two expenditure groups is close: for example,
in 1952 the allocation to defense fell 16 percent, and the allocation
to economic construction increased by 16 percent.
The Chinese Communists have succeeded in
restraining the growth of administrative expenditures and thus freed
a greater portion of revenue for other more productive use. The share
of administrative expenditures in the state budget has declined
steadily, from 19 percent in 1950 to a planned 7.5 percent for 1955.
Recent budgets have tried to build up the
General Reserve Fund to give leeway for seasonal fluctuations of
receipts and expenditures and for shifting the expenditure alloca-
tions during the fiscal year. Planned budgets since 1953 have
included an appropriation to the General Reserve Fund, but no budget
speech has indicated that reserves were increased according to plan.
(c) Budget Fulfillment.
Information on budget fulfillment since
1950 shows a consistent underestimation of revenues and overestimation
of expenditures. Profits of state enterprises seem to be the most
-31-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
unpredictable revenue category for the Chinese Communist planners.
The Soviet loan in 1954, however, caused the greatest single case of
overfulfillment.
Failure to carry out basic construction
(investment) plans reflects a serious shortcoming in Chinese Com-
munist planning. In contrast to this underfulfillment, there has
been consistent overspending on economic construction. A partial
explanation for the contrasting results is that certain economic con-
struction expenditures, such as training and operating expenditures
and assignment of working capital and fixed assets, are not dependent
on availability of scarce skills, materials, and equipment and so can
be more readily carried out.
2. Capital Construction Program.
a. Introduction.
The Five Year Plan of Communist China predicates a
total expenditure for "economic construction and cultural and
educational development" during 1953-57 of 76.64 billion yuan (equiv-
alent at the official exchange rate to $32.8 billion). This planned
expenditure includes allocations for capital construction, geological
prospecting, engineering survey and design, stockpiling of equipment
and materials, trial manufacture of new products, working capital of
government enterprises and economic ministries, and operating expenses
and training of personnel under the education ministries.
Capital construction as defined by the Chinese Com-
munists includes construction, repair, and conversion of buildings
and other structures for the purpose of expanding production; purchase
of productive machinery and equipment and their installation; survey,
design, and planning in the preparation for construction; L91 and
expenses for training production cadres after completion of con-
struction. ]2/ The sum allocated for capital construction constitutes
55.8 percent of the total planned outlay, or 42.74 billion yuan
(equivalent at the official exchange rate to $18.1 billion). The
allocations of the total planned expenditure and of the capital con-
struction funds included are shown in Table 6.*
* Table 6 follows on p. 33.
-32-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 6
Economic Construction Expenditures in Communist China
During the Five Year Plan (1953-57)
Sector
Total
Total Planned Investment
Planned Expenditures in Capital Construction
by Category by Category Capital Construction
as a Percent
Billion Percent Billion Percent of Total
Yuan of Total Yuan of Total Planned Expenditures
Industry
Agriculture, water conser-
vancy, and forestry
31.32
6.10
40.9
8.o
24.85 2/
3.26
58.2
7.6
79.3
53.4
Transport, posts
and telecommunications
8.99
11.7
8.21
19.2
91.3
Commerce, banking, and
commodity stockpiling
2.16
2.8
1.28
3.0
59.2
Culture, education,
and health
14.27
18.6
3.08
7.2
21.6
Municipal public utilities
2.12
2.8
1.60
3.7
75.5
Working capital for various
economic enterprises
6.90
9.0
o
o
o
Major repairs for various
economic enterprises
3.60
4.7
o
o
o
Other economic expenditures
1.18 12/
1.5
0.46 12/
1.1
o
Total
76.64
100.0
42.74
100.0
55.8
a. This sum excludes 1.77 billion yuan to be spent by nonindustrial ministries for industrial enter-
prises.
b. It is not known whether these two items are parallel.
- 33 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
b. Capital Construction Investment.
The distribution of investment funds under the Five
Year Plan of Communist China demonstrates the pattern of development
which the Chinese Communists are attempting to put into effect. The
pattern is one of emphasis on the building up of sectors which his-
torically have been weak in the Chinese economy. This pattern is
illustrated in Table 7* and Figure 4.** Agriculture, which was the
sector responsible for 44 percent of the estimated GNP in 1952, is
receiving only 2 percent of the investment funds. Modern industry,
which in 1952 contributed 12 percent to the estimated GNP, is
receiving 62 percent. Within modern industry the emphasis on
development of heavy industry shows up strikingly. The contribution
of heavy industry to GNP in 1952 was about 50 percent higher than
that of light industry, yet investment in heavy industry is to be
eight times as great as in light industry. The transport and tele-
communications sector contributed 2 percent to GNP in 1952, yet it
is to receive 19 percent of capital construction investment under
the Five Year Plan. As would be expected, investment in transport
and telecommunications is in approximately the same proportion to
investment in heavy industry as was the 1952 GNP contribution of
transport and telecommunications to the 1952 GNP contribution of
heavy industry. The two sectors are moving together.
Within the modern industry sector the pattern of
emphasis upon historically weak phases is carried out. This pattern
is illustrated in Table 8,-xxx which compares estimated value added*xxx
by various industries with the shares of those industries in the
capital construction investment under the Five Year Plan. Value
added by heavy industry in 1952 is estimated to have been approxi-
mately 60 percent of value added by modern industry, and value
added by light industry is estimated to have been approximately
40 percent. Investment in heavy industry under the Five Year Plan
Table 7 follows on p. 35.
Following p. 34.
xxx Table 8 follows on p. 36.
*xxx Value added is the sum of the values created in the process
of producing the output of an economy. Gross national product is
the sum of the sales to the final consumer of the economy: that is,
the gross value of the output of the economy less purchases of
materials, fuels, and power used in the production process. The
totals of these measures are equal.
-34-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
?
COMMUNIST CHINA 50X1
CAPITAL CONSTRUCTION EXPENDITURES
IN THE FIRST FIVE-YEAR PLAN
1953-57
(Figures are in billions of Yuan)
Municipal
Public Utilities
Culture, Education
and Health
Commerce, Banking, and
Commodity Stockpiling
Agriculture,
Water Conservancy
and Forestry
Transport, Posts,
and Telecommunications
0.46 1.1% Other
24.85
58.2%
IndustrY*
Ministries of
Machine Building
Local Industry
1.90
7.1%
Industrial Enterprises of Nonindustrial
Ministries of the Central Government
Ministry of Construc-
0.69 2.6%tion and Engineering
0.20 0.8% Ministry of Geology
0.69 2.6% Ministry of
Light Industry
Ministry of Textile Industry
Ministries of
Fuel Industries
6.79
25.5%
Total Expenditures
42.74 billions of Yuan
(18.06 billions of US dollars)
* Excludes industrial capital construction investment by nonindustrial ministries.
**Includes industrial capital construction investment by nonindustrial ministries.
25283 6-56
Figure 4
Ministry of
Heavy Industry
Industrial Expenditures**
26.62 billions of Yuan
(1L25 billions of US dollars)
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 7
Comparison of Investment in Communist China
During the Five Year Plan (1953-57) .
with Gross National Product of 1952
Sector
Percent
of Gross
National Product
(Factor Prices)
1952
Allocation .
of Capital Construction
Investment 2/
1953-57
(Percent)
Agriculture
44
2
Modern industry
12
62
Heavy industry
7
55
Light industry
5
7
Transport
and telecommunications 2 19
a. Based on Five Year Plan announcement.
is to amount to 89 percent, and investment in light industry is to
amount to only 11 percent of total industrial capital construction
investment. The textile industry, with the second highest value
added in 1952, is to receive only 5 percent of total investment in
industrial capital construction.
Within heavy industry the engineering industry of
Communist China shows the biggest contrast between 1952 value added
and investment under the Five Year Plan. The showing for steel on the
other hand seems low in relation to value added. This probably is
because of the high price of steel products in Communist China, which
results in a lower capital output ratio than in the engineering
industries. Within heavy industry the emphasis is upon engineering,
power, and steel. Petroleum products and miscellaneous heavy indus-
tries (chemicals, construction materials, and nonferrous metals) are
of less interest, though the proportion of investment they are
receiving is greater than their share of value added by heavy industry.
-35-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 8
Investment and Value Added for Selected Industries in Communist China
During the Five Year Plan (1953-57)
Sector
Sector Contribution
to Value Added
by Modern Industry
1952
.(Percent)
Allocation
of Industrial
Capital Construction
Investment
(Percent)
Contribution
of Each Industry
to Value Added
by Heavy Industry
1952
(Percent)
Allocation
of Capital Construction
Investment
in Heavy Industry
(Percent)
Contribution
of Each Industry
to Value Added
by Light Industry
(Percent)
Allocation
of Capital Construction
Investment
in Light Industry
(Percent)
Heavy Industry
Engineering .
Power
6o
9
lo
8982
26 2/
14 b/
100
14
16
100
29
16
Coal
11
4 T/
18
5
Petroleum products
3
7 17/
5
8
Ferrous metals
and metallurgical coke
Miscellaneous heavy industries
17
3
17
8 '2/ ?
121
28
7
19
9
Industrial lumber
3
3 a/ c/
4
3
Other
4
10
8
11
Light Industry
4o
11 Li/
100
100
Textiles
Other
14
26
5 d/
6 -e-/
36
64
55
a. Based on Five Year Plan announcement.
b. Estimate.
c. This figure may not include the whole industrial lumber investment.
d. This figure includes investment by the Ministry of Textile Industry and textile investment under local industry.
e. This figure includes investment by the Ministry of Light Industry and includes part of the 1.77 billion yuan invested in industrial enterprises by nonindustrial
ministries, as well as some investment under local industry.
- 36 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E7T
c. Industrial Capital Construction. 21/
The Chinese Communist program of industrialization
envisages a 98.3-percent increase in the gross value of total
industrial output by the end of the Five Year Plan, requiring an
average yearly increase of 14.7 percent. Production by modern
industry (exclusive of handicrafts) is to increase by 104.1 percent
during the period, or 15.3 percent per year. Within the present
plan period, emphasis is to be upon the development of heavy
industry, which is to receive 88.8 percent of industrial invest-
ment funds, whereas light industry is to receive only 11.2 percent.
In terms of the number of investment projects the
major effort is to be expended on 694 projects which the Chinese
Communists call "above-norm" construction projects.* Among these
are 156 projects for which the USSR is furnishing technical and
material aid, of which 145 are to be started, and, of these, 45 to
be completed, during the 5-year period. The remaining 11 are to be
designed within the 5-year period. It is contemplated that 455 of
the 694 projects will be completed within the current Five Year
Plan. In addition to the above-norm projects, there are 2,300
relatively small, "below-norm" construction projects which the
Chinese Communists expect to complete by 1957.
The following are among the large projects:
(1) Forty-eight major construction and reconstruc-
tion projects are to be completed between 1953 and 1960 in the An-
shan iron and steel complex, including 3 iron mines, 8 ore-selecting
and sintering plants, 6 automatic iron blast furnances, 3 steel-
making plants, 16 steel-rolling mills, 10 batteries of coke ovens,
and 2 heat-resistant material shops.
* For each industry a norm has been established for building and
expansion projects, according to an arbitrary classification of the
size of the expenditure involved or the new capacity to be added.
The relatively large projects, classified as "above-norm," generally
are considered to be of key importance in the over-all plan of
economic development and, therefore, require higher level super-
vision and control than the smaller "below-norm" projects.
-37-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S7E-C-R-E-T
(2) Two other major iron and steel combines are to be
started: the No. 315 Plant at Wu-han - Ta-yeh 12/ in central China,
and another plant at Pao-t'ou in Inner Mongolia. The No. 315 Plant is
to be an entirely new development apart from the existing Ta-yeh Steel
Mill. Although the latter is already expanding its facilities, it is
believed that large-scale new construction work at the two new plants
is not yet under way and may not get into full swing until 1956 or
1957.
(3) Fifteen thermal power plants of 50,000-kilowatt
(kw) capacity are included among the many power projects to be built
in the 5-year period. The Feng-man hydroelectric station in the
Northeast is to have a total capacity of 567,000 kw 2.3./ after the
installation of new generating units and Completion of renovation.
(4) Thirty-one projects in the coal mining industry
are to be completed during the 5-year period, each of which is to
add a capacity in excess of 1 million tons of coal a year.
(5) Many projects in the engineering industries are to
be completed or started in the 5-year period. These include the No. 1
Automobile Plant, to be completed at Ch'ang-ch'un within the current
plan period; the No. 2 Automobile Plant, with a planned capacity
double that of the No. 1 Plant; and a tractor plant with a capacity
of 15,000 units per year. In addition, power_generating equipment
Is planned with an output of 800,000 kw of new capacity within the
5-year period, including units of 12,000-, 25,000-, and possibly of
50,000-kw capacity. .3.V
(6) Cotton textile mills with 1.65 million spindles
and 47,100 looms are to be built in the 5-year period. The mills
will range in size from 30,000 to 100,000 spindles.
The additions to capacity planned for the prinO.pal
industries by 1957 over 1952 and the total increases to be realized
when all the planned projects have been completed are shown in
Table 9* and indicate that the major part of the capital construction
work remains to be carried out in the last 2 years of the plan period.
The basic construction program as a whole reached 32 percent of com-
pletion by the end of the first 2 years. The Chinese Communists
announced in September 1955 that by the end of the first 3 years of
* Table 9 follows on p. 39.
- 38 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 9
Increases in the Industrial Capacity of Selected Industries
During the Five Year Plan (1953-57)
of Communist China
Industry
Unit
Capacity
1952
Planned
Total Increasq
in Capacity fi
Percentage Increase
from Projects
Started 1953 to 1957
Planned
Total Capacity
after all Projects
are Completed
Steel
Coal
Million metric tons
Million metric tons
1.8 12/
79.0
6.1
93.0
339
118
7.9J
172.0
Cement
Million metric tons
4.83 /
3.6
75
8.43
Power
Million kilowatts
2.05
4.06
198
6.11
Cotton spinning
Million spindles
5.66 e
1.89
33
7.55
Sugar
Thousand metric tons
300.0 f
560.0
187
860.0
Trucks
Units
0.0
90,000.0
0.0
90,000.0
Tractors
Units
15,000.0
0.0
15,000.0 g/
Chemical
fertilizer
Thousand metric tons
325.0 12/
910.0
280.0
1,235.0
a. The total increase will result from all projects started in the first Five Year Plan period.
b. Production figures are for 1954, when most industries were operating at nearly full capacity. The
reported increase in 1953 and 1954 has been subtracted.
c. Although a capacity increase of 6.1 million tons is to be attained when all projects started during the
present plan period are completed, the Five Year Plan indicates that a total steel capacity of 10 million
tons is contemplated by 1962.
d. It is assumed that production was 59 percent of installed capacity in 1952 and 84 percent of installed
capacity in 1954.
f. It is assumed that production was 80 percent of capacity in 1952.
g. In 1959.
h. It is assumed that production was 65 percent of capacity in 1952.
- 39 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
-2,1A-RDP79R01141A000600110001-1
S-E-C-R-E-T
the Five Year Plan, 52 percent of the volume of capital construction
would have been completed, lY leaving 48 percent to be completed in
the last 2 years of the plan period.
Table 10* shows the sum specifically allocated by the
Peiping regime to selected industrial ministries for capital con-
struction under the Five Year Plan, with estimates of the sums to be
devoted to capital construction in individual industries under those
ministries. Among the industrial capital construction investments
the planned investment of the Ministries of Machine Building,
6.93 billion yuan, is the largest. Under the Ministries of Fuel
Industries, electric power is to receive the largest share of invest-
ment funds -- 3 billion yuan. In addition, the estimated local
investment in electric power is 140 million yuan. The capital con-
struction investment in the petroleum industry is the residual sum
of 1.53 billion yuan.
It is estimated that, under the Ministry of Heavy
Industry, steel will receive the largest share of capital con-
struction funds -- 3.4 billion yuan. The residual sum of 1.79
billion yuan under this Ministry covers, for the most part,
investment in the construction materials, nonferrous metals, and
chemical industries.
Capital construction under the Ministry of the
Textile Industry is devoted principally to production of cotton
textiles, with minor investment in plants for production of woolen
textiles, silk, hemp, synthetic fibers, and for printing and dyeing.
Capital construction for production of textile machinery also falls
under the Ministry of the Textile Industry. Investment by the
central government in productive capacity to produce cotton textiles
is estimated to be 703 million yuan. Investment by the central 2
government in other textile industry projects is estimated to be
225 million yuan, which is a residual sum.
Under the Ministry of Light Industry, investment
is in the food-processing, sugar, rubber products, pharmaceutical,
and paper industries.
* Table 10 follows on p. 41.
-4o-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 10
Estimated Cost of Industrial Capital Construction
in Communist China
During the Five Year Plan (1953-57)
Expenditure
as a Percent
of Total
Ministry or Industry
?
Expenditure W*
(Billion Yuan)
Expenditure
for Industrial
Capital Construction 12/
Ministries of Machine Building
6.930
26
Ministries of Fuel Industries
6.790
25
Power
3.000
11
Coal
0.900
3
Petroleum
1.530
6
Nonproductive construction
1.360
5
Ministry of Heavy Industry
6.490
24
Steel
3.400
13
Nonproductive construction
1.300
5
Other (including nonferrous
metals, chemicals, and
construction materials
industries)
1.790
7
Ministry of the Textile
Industry
1.160 21
Cotton textiles
0.703
2.6
Other textile industries
0.225
0.7
!Nonproductive construction
0.232
1.0
Ministry of Light Industry
Ministry of Geology
0.690
0.200
3
1
Ministry of Construction
and Engineering
0.690
3
Footnotes for Table 10
follow on p. 42.
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 10
Estimated Cost of Industrial Capital Construction
in Communist China
During the Five Year Plan (1953-57)
(Continued)
Expenditure
as a Percent
of Total
Expenditure
Ministry or Industry
Expenditure 2/
(Billion Yuan)
for Industrial
Capital Construction
Industrial Enterprises
of Nonindustrial Ministries
of Central Government
1.770 12/
7
Lumber industry
0.790 12/
3
Other
0.980
4
Ministry of Local Industry
1.900 12/
7
Power
o.14o
0.5
Coal
0.100
o.4
Heavy industries
0.150
0.5
Textiles
0.285
1.0
Food industries
0.645
2.4
Other
0.580
2.2
Total
26.62 12/
100
a.
b.
co
Unless otherwise noted, expenditures are estimPtes.
Totals may not add because of rounding.
Five Year Plan figure.
- 42 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
It is believed that the capital construction invest-
ment funds allocated to the Ministry of Construction and Engineering,
amounting to 690 million yuan, are to be expended upon construction
machinery and equipment and upon construction of storage facilities
for storing building supplies.
Within the total of 26.62 billion yuan to be spent
on industrial capital construction, 1.77 billion is to be spent by
nonindustrial ministries upon industrial enterprises. Among such
expenditures by nonindustrial ministries is an investment of 790
million yuan by the Ministry of Forestry for capital construction in
the lumber industry. The other industrial investments by non-
industrial ministries are in processing enterprises of the Ministries
of Commerce and Food, shipyards of the Ministry of Communications,
locomotive and railroad car construction and maintenance shops of
the Ministry of Railroads, film studios of the Ministry of Culture,
and others.
d. Nonindustrial Capital Construction.
Of the total amount of 42.74 billion yuan allocated
for capital construction under the Chinese Communist Five Year Plan,
26.62 billion yuan are allocated for industrial construction and
17.89 billion yuan (including the 1.77 billion yuan to be spent on
industrial construction by nonindustrial ministries) are allocated
for investment by the various service ministries and the Ministries
of Agriculture, Water Conservancy, and Forestry.
The allocations of capital investment in transport,
telecommunications, municipal utilities, state commerce, education
and health, and the agricultural sector, ?as specified in the Five
Year Plan, are shown in Table 11.*
Total allocation under the Ministry of Railroads is
5.67 billion yuan. Basic construction in the railroad system is to
consist of building new lines, improving existing facilities, and
increasing the locomotive and rolling stock. In the field of rail-
road construction investment, 21.5 percent, or 1.2 billion yuan, is
to be spent on increasing the locomotive and car park.
* Table 11 follows on p. 44.
-43-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 11
Cost of Nonindustrial Capital Construction
in Communist China
During the Five Year Plan (1953-57)
Expenditure ./-*
Ministry or Industry (Billion Yuan)
Expenditure
as a Percent
of Total
Expenditure
for Nonindustrial
Capital Construction 12/
Ministry of Railroads
5.670
32
Building of new railroads
2.365
13
Improvement of existing
railroads
1.854
10
Increasing locomotive
and car park
1.219
7
Planning
0.232
1
Ministry of Communications
1.339
7
Highway construction
0.900
5
Other
0.439
2
Civil Aviation Bureau
0.101
0.6
Ministry of Posts
and Telecommunications
0.361
2
Local communications
0.739
11-
Agriculture, forestry,
and water conservancy
3.260
18
Ministry of Agriculture
1.035
6
Ministry of Water Conservancy
1.400
8
Weather Bureau
0.036
0.2
Ministry of Forestry
0.789
4
Footnotes for Table 11 follow on p. 45.
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 11
Cost of Nonindustrial Capital Construction
in Communist China
During the Five Year Plan (1953-57)
(Continued)
Ministry or Industry
Expenditure :_a/
(Billion Yuan)
Expenditure
as a Percent
of Total
Expenditure
for Nonindustrial /
Capital Construction IV
Culture, education,
and health
3.080
17
Commerce, banking,
and commodity stockpiling
1.280
7
Construction of municipal
utilities
1.600
9
Other expenses
o.46o
3
Total 2/
17.890
loo
a. Data are from the Five Year Plan except those for the Ministry of
Communications, which are estimated.
b. Totals may not add because of rounding.
c. Total includes the sum of 1.77 billion yuan to be spent on
industrial enterprises by nonindustrial ministries. See Table 10,
p. 41, above.
Expenditure of 1.339 billion yuan by the Ministry
of Communications is for the development of highways and water trans-
port. It is estimated that 900 million yuan are to be spent for the
construction of highways. In addition to the expenditure for high-
way construction, the allocation of the Ministry of Communications
includes a residual of 439 million yuan, a small part of which prob-
ably will be used for other phases of highway transport, for example,
-45-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
highway maintenance equipment, and the balance for water transport,
mainly for the purpose of increasing shipping tonnage and developing
shipyards.
The Ministry of Posts and Telecommunications was
allocated 361 million yuan for capital construction. This is a
small amount considering the magnitude of this ministry's duties,
and it is believed, therefore, that it is augmented by investment
funds at the local level (listed under investment for local com-
munications) to be spent by local government organs. The Chinese
Communists have allocated 739 million yuan to investment for local
communications. It is believed that this sum is to be spent by
local government organs for developing local road transport, water
transport, and posts and telecommunications.
Capital construction in water conservancy absorbs
the preponderant share of funds for the budget item agriculture,
forestry, and water conservancy. The Ministry of Water Conservancy
on 26 July 1955 announced that 2.490 billion plan were to be spent
on capital construction in water conservancy during the Five Year
Plan period. 1// It is believed that the bulk of the 1.035 billion
yuan allocated to the Ministry of Agriculture is to be spent for
water conservancy projects and that most of the 200 million yuan
invested by other ministries in agriculture, water conservancy, and
forestry also will be spent on water conservancy.
Projects under the Ministry of Water Conservancy
include flood control, irrigation, and the development of water
resources for hydroelectric power. At present, state investment in
water conservancy takes the form primarily of the repair and building
of dikes and the building of huge reservoirs. 111/
Investment for capital construction in agriculture
other than that which goes to water conservancy goes into hand
manufacture of tools; supply of tools; improvement of cooperative
organizations; equipment for the preparation and distribution of
organic fertilizers, tools, and seeds; land reclamation; state
farms; farm tool and tractor stations; animal husbandry stations; the
dewelopment and distribution of improved seeds and drugs and insec-
ticides; marine products enterprises; cadre training; and the
Instruction of farmers in improved cultivation practices.
- 14-6 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
The basic construction investment of 789 million yuan
allocated to the Ministry of Forestry apparently will be invested in
the lumber industry, probably going into facilities for timber con-
servation and afforestation.
Capital construction under the item culture,
education, and health amounts to 3.08 billion yuan. The expansion
of educational facilities will be for the accommodation of planned
incredses in enrollment, which amount to 127 percent of 1952 enroll-
ment. The plan is to establish 60 new schools of higher education
so that by 1957 there will be 208 schools of higher education. In
addition, existing schools are to be expanded.
Facilities for the publishing of books, magazines,
and newspapers are to be rehabilitated or built. The system of
state-operated bookstores is to be expanded. It is planned that
within the period of the Five Year Plan, radio transmission capacity
is to be increased by 2,174 kw. The motion picture industry is to
be developed. Construction of a new developing and printing plant
with an annual capacity of 45 million meters is to be started in
1956. The building of a raw film plant with a production capacity
of 65 million meters a year and of a new film studio is to be
started in 1957. The number of state-operated theaters is to be
increased. Culture halls, libraries, and museums are to be built.
The number of hospital beds under the central government is to be
increased by 77 percent to a total of 244,000 within the period of
the Five Year Plan. The number of epidemic-prevention centers,
health stations, and district health offices under the central
government is to be increased by 65 percent to a total of 17,000 by
1957.
Capital construction investment under commerce,
banking, and commodity stockpiling amounts to 1.28 billion yuan.
It is believed that the expenditure for commerce will be for
storage and distribution facilities. The expenditure for banking
doubtless will be for branch banking facilities. It is believed that
the expenditure for stockpiling will be for equipment needed in con-
struction.
The item construction of municipal utilities probably
covers items which contribute to city improvement and expansion,
such as power plants, city roads, bridges, drainage, water supply,
and sewage systems.
-47-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
III. Population and Labor Force.
A. Population Trends.
The population of Communist China totaled 582.6 million people
at mid-year 1953, according to the official results of China's first
complete census. This total is approximately 20 percent higher than
the officially reported total of 487 million in 1950. Tile sharp
change cannot be attributed to natural increase of the population.
Instead, it must be explained in terms of statistical inaccuracies,
deriving from what seem to have been consistent underestimates of
the population made before 1953.
The predominantly rural character of the Chinese population
is indicated by the classification of 505.3 million people, or 83.7
percent of the total population, as rural inhabitants. The urban
population included 77.3 million people, or 13.3 percent of the total,
according to the census announcement. Although not defined by the
Chinese, it is believed that the urban population refers to cities with
a population of 10,000 or more. Table 12 presents population estimates
for selected Chinese cities as of June 1953.
Table 12
Population of Selected Cities in Communist China a/
1953
City
Population
City
Population
Shanghai
6.2
Sian
0.8
Peiping
2.8
Ch'ang-ch'un
0.8
Tientsin
2.7
Ch'eng-tu
0.8
Mukden
2.3
Tsinan
0.7
Canton
1.6
T'ang-shan
0.7
Chungking
1.6
T'ai-yuan
0.7
Wu-han
1.4
Fu-shun
0.7
Harbin
1.2
Hangchow
0.7
Port Arthur
Dairen
1.2
An-shan
0.6
Nanking
1.2
Ch'ang-sha
0.5
Tsingtao
1.0
Pen-ch'i
0.5
Kunming
0.5
Wu-shih
0.5
a. 39/
S-E-C -R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
The total
by administrative
S-E-C -R -E-T
population of the Chinese mainland
units as follows:
was
distributed
Peiping Municipality
2,768,149
Kirin Province
11,290,073
Tientsin Municipality
2,693,831
Heilungkiang
Shanghai Municipality
6,204,417
Province
11,897,309
Hopei Province
35,984,644
Jehol Province
5,160,822
Shansi Province
14,314,485
Shensi Province
15,881,281
Inner Mongolia
Kansu Province
12,928,102
Autonomous Region
6,100,104
Tsinghai Province
1,676,534
Liaoning Province
18,545,147
Sinkiang Province
4,873,608
Shantung Province
48,876,548
Kiangsi Province
16,772,865
Kiangsu Province
41,252,192
Kwangtung Province
34,770,059
Anhwei Province
30,343,637
Kwangsi Province
19,560,822
Chekiang Province
22,865,747
Szechwan Province
62,303,999
Fukien Province
13,142,721
Kweichow Province
15,037,310
Honan Province
44,214,594
Yunnan Province
17,472,737
Hupeh Province
27,789,693
Sikang Province
3,381,064
Hunan Province
33,226,954
Tibet and Changtu
Area
1,273,969
Total
582,603,417
No detailed information on the age and sex composition of the
census population has been issued by the Chinese Communists. They have,
however, announced that men outnumber women, with 107.5 males for every
100 females. This is in contrast with the US, where there are only
98.9 males per 1.00 females. They have also indicated a high concen-
tration in the younger age groups, reporting that children less than 5
years of age accounted for 1.5.6 percent of the census population. By way
of comparison, the US had only 10.8 percent of its population in that
age group in 1950, and Japan had only 13.5 percent for the same year. 40/
The birth rate in China is believed to be between 40 and 45
per 1,000 persons, and no significant decline is expected through 1960.
The trend of the death rate, on the other hand, is far more difficult
to predict, but, judging from China's past history, it seems likely
that the annual average death rate has probably fluctuated between
30 and 50 per 1,000 for the past several generations. It is probable
that the death rate has fallen since the Communists came to power,
although not so much as they have claimed. Food shortages remain a
very serious problem in Communist China, however, and there is no
-50 -
S-E-C -R -E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C -R -E-T
assurance that the Communist regime can reach, or maintain, a low
mortality rate before 1960. Table 13 presents the census population
of Communist China projected to 1960.
Table 13
Population of Communist China a/
1953-60
Million
1953 1954 1955 1956 1957 1958 1959 1960
582.6 591.3 600.2 609.2 618.3 627.6 637.0 646.6
a. Projected at a rate of 1.5 percent.
There is increasing evidence of overpopulation in present-
day China. Overpopulation has direct significance for China's eco-
nomic plans, and there are indications within China that the planners
are just now beginning to recognize the seriousness of this threat.
Indeed, doubts have been quietly expressed about the ability of China's
resources to support such an enormous population. The appearance of
articles on birth control in Party-controlled publications, plus the
lack of any specific refutations from official sources, indicates
that the ground is being prepared for a policy shift on population
control.
B. Labor Force.
The key direct figure on the labor force in Communist China
is contained in the recently published Five Year Plan which stated
that workers and clerical staff totaled 21,020,000 persons in 1952.
By 1954 it is estimated that this total had increased to 23,020,000
persons. This employment total is exclusive of the numerically most
important segment of the Chinese labor force -- agricultural workers
as well as of self-employed, handicraft, service, and miscellaneous
workers.
- 51 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Scattered data on these remaining sectors have been fitted
into the framework of an estimated 1952 labor force of 300 million
persons and a 1954 force of 309 million persons and are presented
in Table 14. The implied labor force participation rate of 52.5
percent (in terms of the 1952 population*) is derived from the age
and sex distribution of the population, present labor force policy
in Communist China, and comparative data from other Far East countries.
Table 14
Estimated Number of Workers in Communist China
by Category of Employment
1952 and 1954
Thousand
Category
1952
1954
Workers and clerical staff
21,020
23,020
Handicraft
10,000
10,000
Trade (excluding peddlers)
5,300
5,500
Military
2,500
2,500
Public security
1,500
1,500
Other a/
_
16,680
15,980
Subtotal
57,000
58,500
Unemployed
3,000
3,500
Agricultural
240,000
247,000
Total
300,000
309,000
a. The residual includes the following occupa-
tions: domestic service, personal service, self-
employed, pedicab drivers, junkmen (their employees
are included under workers and clerical staff), and
professional workers.
* 1952 population is used because better labor force data are avail-
able for that year.
- 52 -
S-E-C -R -E -T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
1. Employment in Modern Industry.
The modern industry labor force is equated with the 21,020,000
persons classified as workers and clerical staff in 1952 as noted in the
Five Year Plan. Approximately half of the workers were then in pri-
vate employment. The detailed breakdown of this figure given in the
plan is presented in Table 15. The 1954 breakdown is based partially
on announced figures and partially on estimates derived from Five
Year Plan employment targets and output data.
Table 15
Number of Workers and Clerical Staff
in Communist China
1952 and 1954
Thousand
Sector
1952
1954
Industry
Trade
Finance
Transport, post and tele-
communications
Agriculture, water conservancy,
forestry, and weather bureau
Construction
Government organs and people's
organizations
Culture, education, and health
Municipal public utilities
Private handicraft and transport
Total
5,406
3,454
305
716
239
1,021
1,523
2,282
41
6,035
21,020
6,400 a/
3,800 a/
377 a/
1,000 b/
250 b/
2,000 a/
1,400 b/
2,500 b/
60 b/
5,243 c/
23,020
a. 41/
b. Estimated.
c. Residual.
-53-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C -R-E-T
There is a limited amount of data which may be used to
subdivide the 1952 figure of 5.4 million industrial workers. In the
absence of official figures on employment in light industry, a tenta-
tive estimate was made and is presented with announced data in Table 16.
The estimate of employment in light industry is based on the estimated
value added by such industries, less profits, divided by an estimated
average wage. 42/ The 1954 breakdown is estimated on the basis of
changes of output adjusted for productivity increases.
Table 16
Estimated Number of Persons Employed
in Industry in Communist China
1952 and 1954
Thousand
Industry
1952 1954
Heavy industry (chemicals, iron and steel,
nonferrous metals, construction materials) 590 2/ 750
Light industry (including handicraft workshops) 3,030 3,605
Textiles 720 b/ 750
Coal mining 46o 7 600
Engineering industries 230 ay 300
Weapons and armaments 210 200
Electric power 110 T/ 125
Petroleum. 50 i/ 70
Total 5,406 6,400.
a. Employment in 1953 was 700,000. 43/ This figure has been adjusted
in light of the announced productivity and production increases in
1953 over 1952.
b. 44/
c. 75-/
d. 76/
e. -4-7/
f . -47/
g. Residual.
-54-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
2. Employment in Industry.
a. Urban Employment Opportunities.
The industrialization program of the Chinese Communists
has improved urban employment opportunities, although underemployment
and unemployment have by no means been eliminated. The expansionary
elements in regard to job opportunities include growth of industry,
commerce, construction, flood relief, and irrigation projects. On
the other hand, relocation of industry away from coastal areas, social-
ization, economy programs, campaigns to increase labor productivity,
the Party line on such occupations as ricksha- and cart-pullers and
domestic servants, and the elimination of foreign businesses have
caused unemployment. The depressive effects of these factors are
particularly evident in the large cities; they are not, however, of
such magnitude as to offset entirely the improvement in employment
opportunities that is a result of the expansionary elements in the
economy.
The only announced labor force goal for the Five Year
Plan period is the increase of the workers and clerical staff by
4.22 million persons. If the only labor force increase with which
the Chinese Communists have to deal is a growth of 2 percent per year
in the 1952 nonfarm labor force, 5.8 million additional jobs will be
needed. Future prospects then would hinge on the feasibility of the
Five Year Plan goal and the absorption of the balance of 1.6 million
persons in private or socialized trade, handicrafts, and services.
The Five Year Plan goal of employment had already been half met by
the end of 1954 and, unless the labor productivity and labor economy
programs are extraordinarily effective, it is believed that additional
jobs required under the plan will be created.
Even though the number of jobs in the Chinese Communist
economy may grow through liberal use of the abundant labor supply,
underemployment and peasants' attempts to move out of rural areas
constitute grave and continuing problems for the Chinese Communists.
In addition, the problem of actual unemployment reached serious pro-
portions in 1955. Floods in late 1954 left peasants without adequate
supplies for the winter, and thousands of them swarmed into urban
areas to live with relatives or to earn enough to avoid starvation.
Also in 1955, light industry and textile mills were forced to curtail
operations on account of shortages of raw materials arising from the
1954 floods. The reported good harvest in the fall of 1955 should
assist the regime in dealing with both these sources of unemployment.
- 55 -
S-EC-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
.01A-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S -E-C -R -E -T
b. Labor Productivity.
The Chinese Communists have put increasing stress on
raising output per worker and on cutting down on excess staff as a
means of reducing production costs, raising output, and providing
capital. The Five Year Plan stated that productivity has "experienced
a great and continuing increase under the Communist regime and that
during the Five Year Plan period, 2/3 of the increased production
value of State-operated industry will be due to increased labor pro-
ductivity." 49/
Some of the productivity goals of the Five Year Plan
and the National Statistical Bureau's yearly figures on labor pro-
ductivity are presented in Table 17.
Table 17
Increases in Labor Productivity in Communist China a/
Sector
Five Year Plan Goal
(Percentage Increase,
1957 over 1952)
b NSB (Percent-
ageP Increase,
1952 over 1951)
NSB (Percent-
age Increase,
1953 over 1952)
NSB (Percent-
age Increase,
1954 over 1953)
State-operated
industry
64
13
15 c/
Ministry of Heavy
Industry
67.9
Steel .
37
16
Nonferrous metals
7
16
Chemicals
42
26
Fuel Ministries
63.6
Electric power
12
12
Coal
24
16
Petroleum
35
17
Machine Ministries
65.2
29
21
Ministry of Textiles
10.4
32
10
Ministry of Light
Industry
75.5
Paper
23
Rubber
18
13
a. All Increases apply to "large-scale" state and joint state-private enterprises.
b. National Statistical Bureau.
C. Applies to state and joint state-private.
-56-
S-E-C -R -E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S -E-C -R-E-T
c. Forced Labor.
As a means of channeling surplus labor into produc-
tive work and of reforming recalcitrants, forced labor is taking on
increased significance in Communist China. The Communists have
announced that "over 83 percent of the prisoners in penal institu-
tions of the country are engaged in agricultural or industrial pro-
duction." 50/ Defining forced labor in terms of convict labor, how-
ever, restricts the meaning to rather narrow limits relative to the
total number of involuntary workers in China. In addition to the
forced laborers in prison camps, the Chinese Communists force the
unemployed, the flood-stricken peasants, and peasants idle in the
nonharvest or planting period to work in dike repair, irrigation,
and highway construction projects.
The postponement, however, of many of the planned
conservancy projects to the second and third Five Year Plans indi-
cates the limitations which shortages of technical personnel and
food resources impose on labor-intensive construction projects.
3. Working Conditions.
Controls on Chinese labor, especially industrial workers,
have become increasingly severe over the past 5 years. A new set
of regulations was promulgated in July 1954, and, although developed
mainly for state-operated enterprises, it was clearly intended to
serve as an outline for all enterprises. 51/ Among the more signif-
icant provisions, control over the movement of workers is sought by
requiring each job applicant to furnish certification of his past
record, including approved release from his last employment.
At the present time a worker's pay rate in Communist
China is determined by three basic factors; (a) type of industry,
with highest rates of pay for mining and heavy industry and grada-
tions downward to consumer industries at the bottom of the pay scale;
(b) productive capacity of individual plants, with the larger and
more efficient plants having a higher wage level; and (c) skill of
the individual worker, usually classified by an eight-grade system. 52/
Incentive methods of payment including piecework pay rates, bonuses,
and awards are being instituted wherever possible in preference to
time rates.
-57-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S -E -C -R -E -T
The Chinese Communists until 1955 used a system of com-
puting wages in terms of units of purchasing power. Thus a worker's
wages were computed in a given number of units, the value of the unit
being based on the price of a market basket of commodities. 53/
There are indications that the wage unit was rigged so as not to
reflect the actual increase in commodity prices, with the result
that increases in wages lagged behind price increases for consumer
goods. 54/ If this proves to have been the case, then real wages
of urban workers may have declined in the 1953-55 period.
As regards money wages, it has been announced that the
average monthly wage of workers (presumably industrial workers) was
from 500,000 to 600,000 old yuan in 1953 -- that is, 50 to 60 yuan
in the new currency. 55/ Available information from scattered plants
and industries tends to support this range. 56/
C. Education and Technical Training.
When the Communist regime launched its industrialization pro-
gram in China, it was immediately apparent that one of the most seri-
ous obstacles would be the shortage of skilled workers and technicians.
The rather modest industrial developments in China before the Communist
takeover relied heavily on foreign technicians and managers, with
little industrial management experience accruing/to the Chinese. The
immediate problem of coping with the shortage of technical personnel
left the Communists with several courses of action. They could get
maximum use from the small number of available technicians and special-
ists by distributing them according to the priorities of the indus-
trialization program; second, they could organize training programs,
both in the schools and on-the-job, to turn out technicians as rapidly
as possible; and, finally, they could rely heavily on foreign techni-
cians, using the interned Japanese and White Russian specialists as
well as accepting aid from their Soviet allies.
In their haste to advance economic construction, the author-
ities followed all three courses, giving each a high priority.
Japanese technicians and specialists, trapped in China after World
War II, helped in the reorganization of production in Northeast
China. 57/ Soviet advisers in China have been reported in practically
all phases of economic construction, such as superintending projects,
advising Chinese managers, or traihing Chinese workers in the required'
techniques. 58/ In addition to these technical and managerial advisers,
Soviet experts in China include academic personnel assigned to Chinese
colleges.
-58-
S -E -C -R -E -T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S -E-C -R -E-T
The Chinese also concentrated on expanding their own techni-
cal force rapidly. The city of Shanghai sent out over 63,000 skilled
workers, technicians, engineers, and management personnel to con-
struction sites throughout China during 1950-54. The factories in
Shanghai and An-shan also trained additional skilled workers, who
were sent to basic construction sites, usually in the Northeast or
Northwest. 59/
The official Chinese Communist estimate of personnel require-
ments for national economic construction was announced in late 1951. 60/
The Chinese estimated that, over the period of the first Five Year
Plan, their economic construction would require an additional 150,000
senior technical and administrative personnel and 500,000 intermediate
and junior technical personnel. In addition, the Chinese Communists
listed a need for 1.61 million teachers. They also listed a need
for 200,000 additional health workers of advanced and intermediate
level.
The pressure to train specialists for economic, cultural,
and health work has resulted in a rapid expansion of the enrollment
in institutions of higher learning. According to Communist claims,
a total of 117,000 students were enrolled in colleges and universi-
ties in the school year 1949/50. In the 1954/55 year, the enrollment
had more than doubled the 1949/50 figure, increasing to a total of
258,000 students. Although there has been an unusually rapid expan-
sion in the enrollment of China's universities and colleges, the 1954
graduating class of 40,300, including 15,000 engineers, was considered
by the Ministry of Personnel to be "far from enough to satisfy the
growing needs of the country." 61/
In terms of total enrollments, the senior middle schools of
Communist China have grown at a slower rate than have either colleges
or primary schools. This has resulted in an inadequate reservoir of
students prepared for college work. One of the most obvious reasons
for this condition has been the shift from emphasis on general educa-
tion to that on specialization, especially in technical subjects. A
more fundamental reason is that, in spite of unprecedented expansion
of school facilities, educational opportunities are still severely
limited in China.
-59-
S -E-C -R -E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S -E --C -R -E -T
The most striking evidence of failure in education can be
found in the fact that, by the Communists' own estimate, over 80 per-
cent of the Chinese population is illiterate. 62/ And although the
Communists claim to have expanded primary schools to an enrollment
of 51.5 million students in 1954, this includes, by their own ad-
mission, only 62 percent of the total eligible school-age children,
leaving some 30 million children completely outside the educational
system. 63/
In summary, it is clear (1) that the imperative need to
obtain trained workers and technicians quickly has resulted in an
excessive emphasis on numbers of graduates, students, and trainees;
(2) that this emphasis has not been able to surmount the serious
obstacle of the high rate of illiteracy; (3) that higher education,
although meeting the decreed requirements of numbers of students pro-
cessed and indoctrinated, is falling seriously short of quality stand-
ards; and (4) that the resort to on-the-job training of workers and
administrators, while filling the positions with the specified num-
bers of trainees, must result in the imposition of heavy responsibili-
ties on the supervisors and administrators and in costly mistakes in
the execution of orders and plans by the inadequately trained novices.
-6o -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
IV. Trends in the Economy.
A. Significance of Chinese Communist Statistical Reports.
The trends in nonagricultural production presented in this
report are based on research to determine the resources, the pro-
ductive facilities available to exploit the resources, and the
approximate magnitude of year-by-year production, which in most
cases substantiate Chinese Communist claims of the output of im-
portant commodities. Reliance upon Communist statistics to esti-
mate the absolute magnitude of production is necessary in some
cases because of the lack of precise data available from non-
Communist sources. The use of Communist announcements offers some
advantages in that advance notices of production goals and planned
increases of capacity allow time in which to seek data from other
sources which might indicate the feasibility of the planned per-
formance. The use of Chinese Communist announcements is not with-
out its drawbacks, however, for such announcements, in some cases,
diverge from estimates previously derived exclusively from non-
Communist information.
Chinese Communist statistical series probably are much
better than any that existed previously for China. Statistical
reports are a part of the apparatus of economic controls, and
there is much evidence of Chinese Communist efforts to develop and
enforce accounting procedures and periodic reporting by all enter-
prises of any importance. As the state rapidly extends its control
directly and indirectly over the economy, the coverage of the
statistics available to the Communist government -- if not to the
outside world -- is increasing.
The reliability of Communist statistics, aside from the
question of outright deception, must depend on Communist cadres
that were initially untrained to meet the demands placed upon
them. In addition, the development of systematic data for a rela-
tively underdeveloped economy such as China's is enormously dif-
ficult. Agricultural production; handicraft output; and the whole
miscellany of distributive services, including native transporta-
tion, coolie stevedoring, and other middleman functions, depend
on the relatively isolated activity of individuals and family units
where systematic records of economic activity are lacking.
-61-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
The extension of centralized control, furthermore, and its
concomitant expansion of economic reporting may account for a portion
of the claimed production increases since 1949. Economic reports
probably have incorporated statements of production from the areas
of previously uncounted and unrecorded activities of unorganized
farmers, traders, and other private operators as these groups have
come either under direct Communist administrative control or under
the tax system. The probable resultant overstatement of production
increases is difficult to differentiate from actual increases in
production. In general, recent Communist statistical reports repre-
sent increasingly important data on the Chinese economy
Moreover, as these statistical reports become available,
the opportunities are increasing for cross-checking Communist state-
ments from the points of view of both internal consistency and
aggregative analysis.
B. Gross National Product.
1. By Sector of Origin.
From 1950 to 1960, GNP, in factor prices, is expected to
grow at an average annual rate of almost 8 percent compared with an
expected rate of about 6 percent for the USSR and 3 percent for the
US. This growth rate, as indicated by the indexes in Table 18,* is
not distributed evenly over the period or among the major sectors
contributing to the product of the economy.
The average increase in GNP from 1950 to 1952 was about
15 percent. The increase in output for 1953 was 9 percent over 1952.
Reduced agricultural output in 1954 restricted the increase in GNP in
1954 to 4.5 percent over 1953. The projected trend from 1954 to 1957
indicates an average annual increase of about 6 percent, with GNP
reaching a level in 1957 36 percent higher than in 1952. From 1957
to 1960, GNP is expected to increase at about 4.5 percent a year.
The Chinese Communist emphasis on the industrial develop-
ment of the economy is demonstrated by the different rates of growth
expected for the various sectors. Those sectors directly related to
industrialization will more than double output from 1952 to 1960. On
* Table 18 follows on p. 63.
- 62 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
50X1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 18
Indexes of Gross National Product of Communist China
by Sector of Origin
1949-57 and 1960
1952
= 100
Sector
1949
1950
1951
1952
1953
1954
1955
1956
1957
1960
Agriculture,
forestry,
fisheries,
and farm
handicraft
80
86
92
100
101
100
105
101
110
117
Industry
43
55
74
100
124
142
151
168
187
232
Transport
and com-
munications
53
77
100
131
160
183
206
229
339
Construction
23
48
86
100
134
159
176
193
207
262
Trade and dis-
tribution
services
60
69
82
100
112
120
125
134
144
163
Miscellaneous
consumer ser-
vices and
house rent a/
65
73
85
100
109
115
120
127
135
151
Government
65
88
100
108
115
124
133
142
174
Gross national
product (at
factor prices)
68
75
86
100
109
114
121
128
136
155
a. Urban services moved with the trade index and rural services with the
index for agriculture, forestry, and fisheries.
the other hand, the consumer-oriented sectors are expected to experience
only modest increases for the period.
Figure 5* shows the effect of the different rates of growth
upon the composition of GNP by sector of origin. During the period of
the first Five Year Plan, modern industry will rise by one-half in its
* Following p. 64.
-63-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
contribution to GNP, and the modern sector including transport and
state construction will rise from 17 percent to 25 percent of GNP.
This trend through 1957 still leaves the modern sector a relatively
small share of total output in spite of the industrialization
program.
It must be remembered that the changes projected are in
terms of Chinese prices for 1952 -- a year in which industrial
goods were in short supply and highly priced in relation to agri-
cultural products. As the output of producer goods rises and as
demand for agricultural products increases, with agricultural out-
put remaining relatively constant, prices of producer goods are
likely to fall in relation to prices of agricultural products.
Such a trend in prices would mean that industrial output would not
command as large a portion of 1957 output in current prices as is
indicated in Figure 6.*
2. By End Use.
Table 19** presents trends expected for GNP in terms of
estimated final sales to consumers, government, and for invest-
ment. Based on the estimated allocations of GNP in 1952, an in-
dex of GNP at market prices is derived as a second method of com-
puting an index for GNP. The two indexes do not vary significantly
in view of the difficulties of obtaining trends in over-all output.
The different rates of growth noted in the preceding
section are reflected in the anticipated growth of consumption,
investment, and government purchases. As a result, by 1957 (in
terms of 1952 prices) consumption will decline from about 73 per-
cent of GNP in 1952 to about 65 percent, and investment will rise
from about 15 percent to about 21 percent. Government purchases
are expected to increase from about 12 percent to 14 percent.
3. Size of Gross National Product in 1952.
The total GNP of Communist China in 1952 was about 69
billion yuan in the new currency. This represents an increase of
9 billion yuan over previous estimates and results almost entirely
from the higher estimate of agricultural output. If the official
exchange rate is used to convert Communist China's GNP into dollars
* Following p. 64.
** Table 19 follows on p. 65.
-64-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
100
80
60
40
20
COMMUNIST CHINA
GROWTH AND PROJECTED OUTPUT OF THE ECONOMY,
BY SECTOR
1950-60
(1952 constant factor prices)
?Gross National Product
(at factor prices)
1950 51
25284 6-56
52
53
54
55 56
Figure 5
57
58
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
59
50X1
Agriculture, Forestry, Fisheries,
and Farm Handicrafts
?Industry
?Trade and Distribution Services
'Miscellaneous Consumer Services
and House Rent
"Government
?Construction
"Transport and Telecommunications
60
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
COMMUNIST CHINA
GROSS NATIONAL PRODUCT, BY SECTOR OF ORIGIN
1952
64.74 billions of Yuan
Miscellaneous Consumer Services
and House Rent
Government (including Health
and Education)
State Construction
Trade, Native Transport and
Other Business Services
1952 and 1957
(1952 constant factor prices)
Agriculture, Forestry,
and Fisheries
Modern Transport and
Communications
Industry
(including Peasant
Handicrafts)
1957
87.78 billions of Yuan
Miscellaneous Consumer Services
and House Rent
Government (including Health
and Education)
State Construction
Trade, Native Transport and
Other Business Services
Modern Transport and
Communications
Agriculture, Forestry,
and Fisheries
Industry
(including Peasant
Handicrafts)
25285 6-56 Figure 6
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 19
Indexes of Gross National Product of Communist China
by End Use 2/
1949-57
1952
= 100
Category
1949
1950
1951
1952
1953
1954
1955
1956
1957
Sales to consumers
Sales to invest-
ment
Government pur-
chases
Gross national
product, by
end use (market
prices)
Gross national
product by sec-
tor origin
(factor prices)
76
42
83
58
61
77
75
90 100
80 - 100
83 100
88 100
86 100
103
127
115
108
109
105
144
121
113
114
108
153
133
118
121
114
167
143
125
128
119
189
153
133
136
a. 1952 prices are used.
the total is $34 billion. At best, this conversion rate is an average
exchange rate for goods entering into foreign trade, and of course it
does not reflect the relative prices of US and Chinese goods and ser-
vices which do not enter foreign trade. Even if the exchange rate
were considered the best average conversion rate for total output, it
would be inappropriate for direct comparisons of various sectors of
the economy.
For these reasons, a conversion rate based on a cross-
valuation of the Chinese Communist GNP in terms of Chinese prices
and US prices for the year 1952 was constructed. Many problems arise
in making such an international comparison of output. The first is
the adequacy of the GNP concept for measuring the output of an under-
developed country such as Communist China. The second qualification
springs from discussion of the welfare significance of the GNP con-
cept. The well-being of the Chinese and US populations should not
be compared on the basis of GNP alone. Food distribution services in
-65-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
the US, which increase the market value of foodstuffs, are not re-
quired by the Chinese, and US residents are not necessarily better
off because their foodstuffs have a greater market value. On the
other hand, US output may be understated because GNP does not fully
reflect higher quality of goods, greater diversification of pro-
duction, freedom of consumer choice, and other benefits to the US
economy.
To convert Chinese output to US dollars, each sector
of the Chinese economy was valued in US dollars, and the output of
goods and services in the US in 1952 was valued at Chinese prices.
The difficulties of such comparisons are great even when comparing
corresponding sectors of GNP. Despite these differences caused by
opposing methods of allocation of resources, varying scales of
production, and differing levels of technology, the comparisons
thus obtained are considered more valid than the general use of the
exchange rate as the basis for valuing Chinese output in dollars.
The differences between the sector ratios for the US
and for the Chinese bill of goods are moderate except in the case
of industry. In the case of the industrial sector the US dollar
is worth about 2-1/4 times as many yuan for the US bill of goods
as for the Chinese bill of goods. Largely because of this dis-
crepancy, the total GNP is valued at $65 billion in terns of the
average conversion rate for the Chinese bill of goods and at $25
billion in terms of the average conversion rate for the US bill of
goods in yuan. This range is extreme, and no particular conversion
rate can be regarded as more meaningful or appropriate than the
others.
C. Consumption and Investment.
1. Consumption.
Recent Chinese announcements indicate that the population
is increasing by at least 1.5 percent a year, and the increase may
have been even greater in recent years. Table 20* presents an index
of estimated per capita availability of consumer goods without con-
sideration of subtractions due to exports or of stocks carried over
from one year to the next.
* Table 20 follows on p. 67.
-66-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 20
Estimated Per Capita Index of Available Consumer Goods
in Communist China
1949-57
1952
= 100
Commodity
1949
1950
1951
1952
1953
1954
1955
1956
1957
Food
87
91
94
100
98
94
98
98
98
Clothing
(yarn)
52
69
75
100
111
126
108
136
140
Fuel
65
80
90
100
105
117
125
132
139
Miscellaneous
58
66
78
100
115
127
130
138
111.11.
Total for all
consumer
goods
79
85
90
100
101
102
103
108
111
The index of per capita availability of food increases
from 1949 to 1952, then stabilizes slightly below the 1952 level
for the Five Year Plan period. The index demonstrates the extent
to which national resources are being diverted to the industrializa-
tion program and poses the problem of the maintenance of the same
food level in the face of a rising population and increases in in-
come. Increases in production of fuel and textiles and miscellaneous
consumer goods, on the other hand, permit greater expenditures for
consumer goods other than food. If planned trends up to 1957 are
realized, Communist China's ability to export textiles and other
consumer goods will be increased.
2. Investment.
The index for investment increases at about 34 percent
a year from 1949 to 1952. From 1952 to 1957 the average annual
rate of increase is about 13.5 percent. The large increases
achieved from 1949 to 1952 and, in part, 1953 probably represent
largely the reconstruction and repair of war-damaged plants and
equipment. The period 1953 through 1957 indicates the first steps
of the Chinese Communists toward the industrialization of the
economy. The extremely large increase of 1957 over 1956 reflects
the final phase of the first Five Year Plan.
- 67 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
D. Agriculture,
1. Food Production.
A review of the basic factors influencing agricultural pro-
duction in Communist China indicates that China, with a population
nearly four times as large as that of the US, has a cultivated acreage
less than half that of the US. The total land under cultivation in
China in 1952 is estimated to be roughly 100 million hectares, of
which almost 31 million hectares are double cropped. The allocation
of the total cropped area of 131 million hectares to individual crops
is shown in Table 21.
Table 21
Allocation of Sown Area of Communist China, by Crop
1952
Crop
Percent
Food crop
Rice
20
Wheat
18
Soybeans
8
Sweet potatoes
6
Other grains
36
Total
88
Commercial crop
Cotton
4
Jute, tobacco, sugar
cane, and sugar beets
0.3
Oil-bearing crops
4
Total
8
Miscellaneous
-4
- 68 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
The Five Year Plan of Communist China states that total
production of grain crops in 1952 (including soybeans and sweet
potatoes converted to a grain basis) amounted to 163.9 million tons,
which is accepted as approximately correct. The 1957 goal for pro-
duction of grain crops is 192.8 million tons, or 17.6 percent over
1952, which is considered to be far too high. On the basis of pre-
war yields and of the improvements which might be effected by
measures now being instituted by the Chinese Communists, it is be-
lieved that the most that could be achieved in the increase of
grain crops during the 5-year period is about 11 percent, or a
total production in 1957 of 180 million tons. On the basis of the
Five Year Plan and the relative emphasis given to increasing pro-
duction of crops of relatively high yield per acre, it is estimated
that the given crop production of 1952 may be increased proportionately
for the individual crops as shown in Table 22.*
US specialists have estimated that a program of agri-
cultural improvement in China for a period of gO to 25 years could
accomplish an increase of food production on the land presently
cultivated of approximately 40 percent of present production and
that an additional 6 to 8 percent could be added by the cultivation
of new land. Thus, assuming that the Communist system of regimenta-
tion could accomplish the necessary instruction of peasants in the
measures which would yield short-term increases and which require
relatively small investment, it is possible that within 5 years or
so an increase of 10 million to 15 million tons of food production
could be realized on the land presently cultivated. Table 23**
shows the relationship between the estimated production of the main
food crops and population growth for 'the years 1949 through 1954
and projected through 1960, as compared with the 1931-37 average.
The table reveals that in the best year of agricultural production
under the Communists -- 1952 -- the per capita availability of food
was equal to only 87 percent of that in 1931-37. In order to
attain the prewar level by 1957, an increase in food production of
38 million tons of food, or 23.5 percent over 1952, would have to
be realized. This may be compared with the Communist plan to in-
crease the gross value of agricultural output by 23.3 percent over
1952, including an increase over 1952 of 17.6 percent or 31 million
tons of food. .
* Table 22 follows on p. 70.
** Table 23 follows on p. 71.
-69-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 22
Estimated Yields of Food Crops in Communist China
1952,
1954, and 1957
Index
Index
Index
Crop
Unit
1952
1952 =
100
1954
1952 = loo
1957
1952 = loo
Rice
Acreage
Million hectares
25.3
100
24.8
98
28.0
111
Yield
Kilograms per hectare
2,530
100
2,415
95
2,625
104
Production
Million metric tons
64.o
loo
60.0
94
73.5
115
Wheat
Acreage
Million hectares
21.8
100
21.8
100
21.8
100
Yield
Kilograms per hectare
1,080
100
1,080
100
1,125
104
Production
Million metric tons
23.5
100
23.5
100
24.5
104
Soybeans
Acreage
Million hectares
8.2
100
8.2
100
9.8
120
Yield
Kilograms per hectare
1,152
100
1,152
100
1,125
98
Production
Million metric tons
9.5
loo
9.5
100
11.0
116
Sweet potatoes 2/
Acreage
Million hectares
7.5
loo
8.2
109
9.6
128
Yield
Kilograms per hectare
1,879
100
1,912
102
1,875
100
Production.
Million metric tons
14.0
100
15.7
112
18.0
129
Other grains
Acreage
Million hectares
42.9
100
41.4
96
47.1
110
Yield
Kilograms per hectare
1,190
100
1,190
100
1,125
95
Production
Million metric tons
51.0
100
49.3
97
53.0
104
Total
Acreage
Million hectares
105.7
100
104.4
99
116.3
110
Yield
Kilograms per hectare
1,533
loo
1,513
99
1,548
101
Production
Million metric tons
162.0
100
158.0
98
180.0
111
a. Potatoes are converted into grain equivalent by multiplying by 0.25.
- 70 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 23
Population, Food Production, and Per Capita Availability
of Food in Communist China
1931-37 Average and 1949-60
Food Production Index of Food
Population Population (Million Metric Food Production Availability
Year (Million) (Index) Tons) (Index) Per Capita
1931-37
average 465.0 100 150 100
1949 550.3 118.5 135 90
1950 558.3 120.0 143 95
1951 566.3 121.9 150 100
1952 574.4 123.6 162 108
1953 582.6 125.0 160 107
1954 591.3 127.2 158 105
1955 600.2 129.2 167 111
1956 609.2 131.0 173 115
1957 618.3 133.0 180 120
1958 627.6 135.0 182 121
1959 637.0 137.0 186 124
1960 646.6 139.1 191 127
100
76
79
82
87
86
83
87
88
90
90
91
91
For the realization of an increase of food production suf-
ficient ta keep pace with the increase in population the Chinese Com-
munists rely mainly on the extension of relatively minor measures of
improvement. It therefore seems unlikely that the goals for increased
food production will be reached. The best that could be achieved in
the way of increased production of grain crops during the Five Year
Plan, it is believed, would be a 9- to 11-percent increase over 1952.
Furthermore, it is believed that improvements more long term in nature
(such as irrigation, flood control, and the opening up of new land)
and the extension of minor improvement measures together might realize
a further increase in production of grain crops of possibly another
6 percent by 1960. This would still leave the per capita availability
of food, on the basis of projected increases in population, at a level
approximately 10 percent below the 1931-37 average.
-71-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
2. 1955 Food Situation.
in Communist China during
the spring and summer of 1955 indicated a serious food shortage fol-
lowed by grain rationing in the urban areas. The state council
issued grain rationing orders along with other orders designed to
extract larger grain deliveries from the peasants and to move the
available food thus obtained to the cities, industrial centers, and
towns. The rationing system became operative in cities and towns,
and in industrial and mining areas before the end of November.
In Vice Premier Chen Yun's speech of 21 July 1955 he
stated that the production of grain in 1954-55 totaled 169.5 mil-
lion tons. It is estimated, however, that the total production
of grain in 1954-55 was about 158 million tons. The difference of
11 million tons may be attributed in part to the possibility that
the Communists, in expanding their production base, included for-
merly unreported areas and grain reserves carried over from pre-
vious years. A general padding of statistics for political purposes
is also a possibility. A subsequent decree by the Chinese Com-
munists announcing a lowering of grain procurement quotas for the
next 3 years .?..Y would seem to indicate, however, that the 1954
production was less than the officially announced 169 million tons.
On the basis of the 1954-55 grain production of 158
million tons, the supply available for food would have totaled 110
million tons, or an annual per capita availability of 186 kilograms.
This would have provided, statistically, a daily caloric intake of
1,781 calories per capita, that is, some 10 percent below the pre-
war average daily caloric intake of around 1,967 calories. In
comparison with other countries of Asia the 1955 per capita caloric
intake of Communist China was lower than that of other Eastern
countries with the exception of North Vietnam and India.
3. Principal Commercial Crops.
Under the land utilization pattern in China the largest
proportion of cultivated land is devoted to the principal food crops,
with relatively small shares divided among the commercial crops --
cotton, tobacco, sugar beets and cane, vegetable oil seeds, hemp,
silk, and animal husbandry. Thus a relatively small conversion of
land from grain to commercial crop production, or increases in culti-
vation of commercial crops on new land, results in relatively large
percentage increases in acreage and production of commercial crops.
-72-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Within the limits of the total cultivated acreage of about
134 million hectares (including double-cropped areas) in 1955 and the
possibility of expanding cultivated acreage by about 1.5 percent per
year, it is believed possible that substantial increases can be achieved
in both cultivated acreage and yields of commercial crops without
compromising the projected increase of food crops. The Five Year
Plan for increased production of commercial crops, however, does not
appear to be completely related to possible acreage increases within
the total prescribed acreage limits which have been postulated.
The announcements of the Five Year Plan goals for production of com-
mercial crops are shown in Table 24.
Table 24
Officially Announced Production of Commercial Crops
in Communist China
1952, 1954, and 1957 (Plan)
Million Metric Tons
Crop
1952
1954
1957
Plan
Planned Increase
1957 over 1952
(Percent)
Cotton
1.30
1.24
1.635
25.4
Jute and hemp
0.305
0.323
0.365
19.7
Cured tobacco
0.22
0.24
0.39
76.6
Sugar cane
7.10
8.73
13.15
85.1
Sugar beets
0.470
0.50
2.135
364.4
Besides increasing the acreage sown to grain, cotton,
jute and, hemp, tobacco, and sugar cane and sugar beets, an increase
of 2.1 million hectares in acreage sown to oil seeds is planned,
this latter constituting nearly 10 percent of the planned increase
of cultivated acreage during the 5-year period, which is believed un-
likely of accomplishment. The production of cotton in Communist
China is estimated by US specialists on the basis of acreage, yields,
the relationship of raw cotton to cotton yarn production and of
available yarn to cloth production, the number of operable spindles
and looms in cotton mills, and the production of yarn per spindle
and cotton cloth per loom. Such a procedure results in production
-73-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
figures which are considerably below those announced by the Chinese
Communists. A comparison of the two sets of data is shown in
Table 25.* It is clear from the comparison in Table 25 that the
Communists' claims were excessive for the amounts of raw cotton
available to produce the stated amounts of yarn. It is apparent,
however, that the Communists recognized this disproportion by 1955
when the various claimed production figures for 1954 reflected
adjustments to more appropriate mutual proportions although raw
cotton production is still somewhat excessive for the amount of
yarn indicated.
E. Industry.
The Chinese economy for the period 1949-60 may be charac-
terized by two major features: first, the period of recovery from
the war years, 1949-52, and, second, the inauguration of a program
to develop the industrial base of the economy, 1953-60. It would
appear that the Chinese Communist recovery programs were, in general,
successful, and by 1952 the output of major industrial commodities
met or exceeded the peak pre-Communist levels of output. Similarly,
the Chinese Communists appear to have achieved some success toward
their goal of developing heavy industry.
Chinese Communist statistical reports substantiate three
major trends in the economy. First, the reports demonstrate large
increases in industrial output and in the growth of the share of
total output originating in industry. Second, they indicate the
more rapid growth of heavy industry relative to consumer goods.
Finally, these reports show the growing proportion of industrial
output originating in the areas of the economy which are dominated
by the state.
From 1949 to 1952 large increases in industrial output were
achieved, reflecting the integration of the economy under one govern-
ment. The indexes presented in Tables 26 and 27** show that in the
first 2 years of their industrialization program the Chinese Com-
munists made substantial progress in developing industrial output,
achieving increases of about 24 and 14.5 percent for 1953 and 1954,
respectively, when measured by value-added indexes and 21 and 14
percent when measured by gross value of production indexes.xxx
Table 25 follows on p. 75.
Tables 26 and 27 follow on pp. 76 and 77, respectively.
*** Continued on p. 78.
-74-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 25
Comparison of US Estimates and Communist Claims of Production of Raw Cotton, Cotton Yarn,
and Cotton Cloth in Communist China
1949-54
Thousand Metric Tons
Year
Raw Cotton
Cotton Yarn
_ Cotton Cloth
TMililon 40-Yard Bolts)
US
Estimate
Chinese Communist
Claim
US
Estimate
Chinese Communist
Claim
US
Estimate
Chinese Communist
Claim
1949 a/
11.11.14,0
321
32
1949/50
492.4
322.4
72.5
1950
705.9
430
50
1950/51
672.8
437.9
96.6
1951
1,043.4
478
64
1951/52
734.4
520.5
112.1
1952
1,292.0
656
112
1952/53
829.6
621.2
131.0
1953
1,176.6
741
127
1953/54
843.5
644.o
135.6
1954
1,243.2
835
153
a. The Chinese Communist claims are for the calendar years 1949-54; US estimates are for
crop years, 1 July to 30 June, for the years 1949-54.
- 75 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 26
Index of Valtie Added by Industry in Communist China
1949-60
1952 = 100
Industry (excluding
peasant handicraft)
Industry (excluding
individual handicraft)
Heavy industry
Light industry
Modern industry
(excluding all handi-
crafts but including
military end items)
Modern industry
(excluding all handi-
crafts and military
end items)
Estimated Actual
Projected
1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960
43 55 74 100 124 142 151 168 187 199 214 232
41 53 73 100 125 144 155 173 194 207 223 244
31 49 71 100 132 158 177 199 227 248 271 303
48 59 75 100 115 130 138 142 156 164 173 183
53 72 100 126 146 159 178 200 215 232 256
37 53 73 100 126 149 161 181 205 220 238 262
-76-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 27
Index of Gross Value of Production in Communist China
1949-57
1952
= 100
1949
1950
1951
1952
1953
1954
1955
1956
1957
Industrial Output
Chinese Communist figures 2/
39
78
100
131
154
162
198
CIA estimate
43
54
74
100
121
138
143
158
175
Heavy Industry
Chinese Communist figures
29
100
138
163
184
227
CIA estimate
30
50
71
100
134
155
171
190
214
Light Industry
Chinese Communist figures
45
100
128
148
148
180
CIA estimate
48
56
76
100
116
129
129
143
157
a. Figured from other indexes on the basis of 40 percent for heavy industry in 1952.
Chinese Communist' figures fpr industrial output exclude individual handicraft production.
- 77 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Increases in output for 1955 to 1957 are expected to be smaller,
averaging about 10 percent a year for industry excluding farm handi-
craft. The rate of industrial growth is expected to decline still
further from 1957 to 1960 to about 8 percent a year. The decline is
due in part to the greater necessity for increases in industrial
capacity as the basis for increases in production and to the much
slower increases in output of agricultural raw materials.
A comparison of the indexes for heavy industry with those for
light industry indicates the greater emphasis placed upon heavy indus-
trial development by the Chinese Communists. Value-added indexes indi-
cate that the output of heavy industry may triple over the period
1952-60, whereas the output of light industry will be less than double.
The two sets of indexes presented in Tables 26 and 27 are
not strictly comparable. The value-added inaexes, constructed net
of intraindustry sales, measure only the final contribution of in-
dustry to the economy. The gross value indexes, on the other hand,
include some, if not all, intraindustry transactions. To facilitate
a comparison of the production estimates employed to project the
value-added indexes with Chinese announcements, indexes based on CIA
production estimates and available 1952 prices have been calculated.
The discrepancy between Chinese Communist claims and the CIA
estimate of the gross.value of industrial output may be explained in
part by differences in the product mix and prices used for the con-
struction of the two indexes. For the period 1952-57 the differences
between the Chinese and the CIA figures stem largely from the greater
growth claimed by the Chinese in the light industries than is credited
by CIA.
Expanding economic reporting, differences in classification,
and the weighting system employed by the Chinese Communists probably
have resulted in an inflation of the announced index. The expansion
of state control over food processing and distribution, with the con-
comitant extension of reporting, and the change in the classification
system used for the handicraft industry are likely to have caused the
index to rise more rapidly than actual output. Whereas it is not pos-
sible to compare the price weights used in the two indexes, it appears
that the Chinese index is more sensitive to changes in the output of
more heavily taxed commodities. It is felt, as a result of the fore-
going, that the CIA index more accurately reflects the growth ex-
perienced by the light industries.
- 78 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
The relatively small difference between the indexes for heavy
industry result largely from different estimates of the output of
machine industries. The Chinese Communists claim these industries
increased output by 65 percent in 1953 and 13 percent in 1954. The
increase from 1954 to 1957 is to be about 8 percent a year. Such
a growth pattern can be explained only by the rapid multiplication
of simpler types of machine tools in 193 and 1954, followed by a
diversion of resources to production of more complex types of
equipment and machinery.
1. Engineering Industries.
Although the Chinese Communists claim that output of
the engineering industries has risen 14 times from 1949 to 1954,
it is admitted that these industries are still largely limited to
the production of parts and to assembly, repair, and manufacture
of small and simple machinery and equipment. The Five Year Plan
calls for many construction projects to diversify as well as to
augment the capacity of the engineering industries to produce more
complete units and more complicated types of machines. The Five
Year Plan admits the Chinese Communists' dependence on the USSR
for 50 to 70 percent of the equipment needed for the 156 Soviet-
aid construction projects, which are the "core" of the Five Year
Plan, and for 40 percent of the equipment for the industrialization
program.
The orientation of the Five Year Plans, present and
future, is toward the indigenous production of a full range of
producer goods for further industrial expansion. Table 28* gives
production figures included in the current plan for major items
of the engineering industries for 1952 and projected for 1957.
The productive capacity of other key items planned for 1957 or
1960 is as follows: metallurgical and mining machinery, 171,000
tons; power generating equipment, 800,000 kw; trucks, 90,000
(capacity in 1960); and tractors, 15,000 (1960 capacity of a
tractor plant to be commissioned in 1959). 67/
The first Five Year Plan also records the state council
intention for the machine industry to begin the trial or actual
production of many more complex machine products, including the
following: (a) 1,000-meter blast furnaces, each with a capacity of
* Table 28 follows on p. 80.
-79-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 28
Output of Major Engineering Industry Products
in Communist China
1952 and 1957
Product
Unit
1952
1957
(Plan)
1957 Compared
with 1952
(Percent)
Steam boilers
(steam-generating
capacity)
Metric tons
per hour
1,222
2,734
224
Steam turbines
Kw
Not available
84,500
Not applicable
Water turbines
Kw
6,664
79,500
1,193
Internal combustion
engines
Units
1,528
10,630
696
Generators
Horsepower
Units
27,600
746
260,200
2,938
942
394
Electric motors
Kw
29,700
227,000
765
Units
91,147
135,515
149
KW
639,000
1,o48,000
164
Transformers
Kilovolt
amperes
1,167,000
2,610,000
224
Metal-cutting machine
Units
13,734
12,720
93
tools .91
Metric tons
16,298
29,292
180
Two-wheel hand plows
Units
5,000
689,000
13,611
Locomotives
Units
20
200
1,000
Passenger cars
Units
6
300
5,000
Freight cars
Units
5,792
8,500
147
Units
84
1,347
1,604
Merchant ships
lbw
Displacement
in metric
tons
21,485
179,111
834
Trucks
Units
None
4,000
Not applicable
Bicycles
Units
80,000
555,000
694
a. According to the Five Year Plan, the number of metal-cutting machine tools
to be produced in 1957 is less than that of 1952 but the aggregate tonnage
will be increased by 80 percent. The technical quality as well as the cutting
capacity of these machine tools to be produced in 1957 is planned to be much
better than those produced in 1952. In addition, the number of different types
of these machine tools to be produced in 1957 is to be increased, the output
of small machine tools is to be cut; and more and more large-scale, compara-
tively modern machine tools are to be produced in 1957.
-8o-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
350,000 tons of pig iron per year; (b) 185-ton open-hearth furnaces;
(c) coke-oven equipment with a production capacity of 300,000 tons
per year; (d) 675-hp diesel engines; (e) hydroelectric generators
with 3,000- to 12,500-kw capacity; (f) thermal electric generators
of 2,500- and 6,000-kw capacity; (g) transformers of 154,000 volts
and 30,000 kilovolt amperes; (h) 4-ton trucks; (i) locomotives of
the most up-to-date design; (j) coastal freight steamers of 7,450
displacement tons; (k) 37-hp tractors; (1) combine grain harvesters;
(m) excavators of 3-cubic-meter capacity; (n) 100-ton overhead
traveling cranes; (o) cement plants with an annual capacity of
300,000 tons of cement; (p) coal-mining equipment for vertical mine
shafts capable of processing 900)000 tons of coal per year;
(q) textile mill equipment capable of printing and dyeing 3 mil-
lion bolts of cloth per year; (r) equipment to process 2,000 tons
of sugar cane daily; (s) microscopes with magnifying power of
1,500; (0 X-ray machines; and (u) 142 types of metal-cutting ma-
chine tools of up-to-date design.
Some of the more important of the Soviet-aid projects
which are reported to have been finished or are scheduled for com-
pletion under the sponsorship of the First Ministry of Machine
Building within the span of the current Five Year Plan include:
the No. 1 Northeast Machine Tool Plant and the No. 2 Machine Plant,
the Mukden Pneumatic Tool Plant, and the Northeast No. 7 Electrical
Machinery Plant, all in Mukden; the Northeast Precision Measuring
and Cutting Tool Plant, the Northeast No. 4 Electrical Machinery
Plant, the Harbin Electric Meter and Apparatus Plant, and the Harbin
Boiler Plant, all in Harbin; the No. 1 Automobile Plant in Chiang-
ch'un with a planned production capacity of 30,000 trucks per year;
the Fu-shun Mining Machinery Plant; the T'ai-yuan Heavy Machinery
Plant; and the Ching-wei Textile Machinery Plant at Peiping. 01
Two other major plants which are to be started within the current
Five Year Plan but which will not be in production until the second
Five Year Plan are the No. 2 Motor Vehicle Plant and the No. 1 Tractor
Plant, with planned annual production capacities of 6o,000 trucks and
15,000 54-hp tractors, respectively. ?.2/
The success of this ambitious Five Year Plan for the ma-
chine industry will depend largely upon the importation of equipment,
the completion of a number of Soviet-aid construction projects, and
the assimilation of advanced industrial techniques. Although notable
increases in the value of output apparently have been achieved by the
machine building industry, the gross value of output was little more
-81-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
than 6 percent of total industrial output in 1954 and will continue
at the same rate. Because the substantial investment allocated to the
engineering industries embodies the drastic reorganization required
to overcome these weaknesses in product mix and in technology, the
value of output is expected to increase only moderately in the last
3 years of the plan. Greater increases may be expected after 1957.
2. Armaments Industry.
Although the Chinese Communist armaments industry is not
yet capable of meeting all the equipment requirements of the Chinese
Communist Armed Forces, it is believed to be proceeding apace with
a program of gradual modernization. The government apparently is still
concentrating on the production of infantry regiment equipment such
as small arms, machineguns, and mortars as well as some light artillery.
Table 29* gives both estimated production and production
capacity for ammunition and indicates that, although estimated pro-
duction decreased radically after 1953 (Korean Armistice), capacity
has increased and will continue to do so through 1960. Estimated
minimum production of ammunition for 1954-60 was calculated on the
basis of roughly one-third of estimated capacity. In anticipation
of or in the event of war, it is believed that actual production
could be quickly expanded to the capacity figure.
Table 29 shows, in general, the estimated production of
artillery, mortars, machineguns, small arms, and armored vehicles
for 1950-60. The estimated increases in production of artillery,
mortars, and machineguns through 1955 are considered necessary in
the light of requirements of the Chinese Communist Armed ,Forces, which
are in process of standardizing weapons and equipment. The increases
are further considered possible because of reported increases in the
number of arsenals,** because of increased labor efficiency brought
about by Soviet training and guidance at production points, and be-
cause of imports of Soviet machines.
Using the estimated production for the years 1953-55 the
requirements*** for all the weapons produced except artillery and
* Table 29 follows on p. 83.
** Five new arsenals were reported under construction in 1952-53. /Si
*** The estimate of requirements is based on order of battle and esti-
mated tables of equipment of the Chinese Communist Armed Forces. 71/
-8n-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 29
Estimated Output of Armaments and Munitions in Communist China
1949-60
Category
Unit
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Ammunition (all types)
Metric Tons
Production
N.A.
41,000
47,000
54,000
54,000
22,000
23,000
24,000
25,000
26,000
28,000
29,000
Capacity
36,000
41,000
47,000
54,000
62,000
65,000
68,000
71,000
75,000
79,000
83,000
87,000
Artillery
Pieces
200
200
1,000
1,200
1,400
1,600
1,600
600
600
600
800
Mortars
Pieces
800
1,000
5,000
5,800
6,700
7,700
3,000
3,000
3,000
3,000
3,000
Machine guns
Pieces
2,000
2,200
10,000
11,600
13,300
15,300
16,000
5,000
5,000
5,000
5,000
Small arms
Pieces
36,000
43,000
207,000
234,000
265,000
265,000
100,000
100,000
100,000
100,000
100,000
Armored vehicles
Units
'0
0
0
0
0
0
0
0
0
0
300
- 83 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
machine guns would be fulfilled from indigenous production. Thus the
production of weapons except artillery and machineguns will be cut
back in 1956 and the production of the latter items cut back in 1957.
There is little doubt that the restoration of plant facili-
ties by the installation of Soviet equipment following 1952, combined
with the advice and training given by Soviet experts, has resulted
in an improvement in the quality of output. 73/
Ammunition production in Communist China has been limited
to the production of ammunition for the following listed weapons, but
the munitions industry is capable of production of other ammunition
items presently imported from the Soviet Bloc.
105-mm
76-mm
75-mm
howitzer
gun
gun
37-mm AA gun
120-mm mortar
81- and 82-mm mortar
70-mm infantry howitzer 60-mm mortar
90-mm rocket launcher
57-mm recoilless rifle
Rifle and submachinegun
ammunition
Land mines
Hand grenades (AT and hand)
The Chinese Communist production of ammunition for these
weapons is estimated to be sufficient to meet peacetime requirements
for the period 1954-60 but not sufficient, even at the estimated 1960
capacity, to meet requirements equal to those for the Korean War in
1952. It is believed, however, that the Chinese arsenals will have
the capacity by 1956-57 to be self-sufficient in the production of
light weapons such as small arms, machineguns, light mortars, light
artillery, and special weapons such as rocket launchers and recoilless
rifles.
It is estimated, however, that even by 1960 the Chinese
Communists will not be able to produce the heavy artillery, anti-
aircraft artillery, tanks, and self-propelled guns required during
time of war. By 1957, Communist China may have the facilities for
producing some heavy artillery and antiaircraft artillery and may
have the beginnings of a tank industry by 1959. Nevertheless, the
production of these items probably will take place at the expense of
a cutback in the production of light weapons because heavy weapons
will be produced in the same arsenals in which light artillery and
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
mortars are now produced. For the production of limited peacetime
requirements it is estimated that Communist China will be self-
sufficient in all categories of conventional weapons by 1960.
3. Electric Power.
During the current Five Year Plan, Chinese Communist
planning envisages an increase in total electricity output capacity
of 4.1 million kw, or 2.05 million kw over the 1952 capacity, and
a planned output in 1957 of 15.9 billion kwh. This is expected to
be accomplished by undertaking 92 power station projects, among
which are included 15 thermal power plants, each with a generating
capacity of 50,000 kw) and by the renovation and expansion of exist-
ing plants, Most significant of which is the renovation of the Feng-
man hydroelectric station to achieve a total power generating capac-
ity of 560,000 kw. 22/ Table 30 shows the estimated production of
electric power for the years 1952-60.
Table 30
Estimated Capacity and Production of Electric Power
in Communist China
1952-60
Year
Capacity Production
(Million kw) (Billion kwh)
1952 2.05 7.1
1953 9.0
1954 2.58 10.8
1955 2.95 12.3
1956 14.0
1957 4.10 15.9
1958 18.3
1959 20.7
1960 6.11 a./ 23.4
a. Refers only to capacity on which construction
has started but will not have been completed at the
end of 1957.
-85-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
IA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Current plans for construction of power plants necessi-
tate continued reliance on imports of power equipment from the USSR,
Czechoslovakia, East Germany, and Hungary. IY In order to fulfill
the planned installed capacity pal for 1957, it will be necessary
to import 61 percent of the necessary generating equipment.
In the past 2 years the Chinese Communist government has
conducted the training of 11,000 skilled workers for the power in-
dustry in 12 technical schools, and 10,000 additional workers are
to be trained during the course of the Five Year Plan.
4. Coal.
Communist China's coal industry appears to be capable of
meeting the needs of domestic consumers, including the armed forces,
through 1960. This capacity is expected to be achieved by under-
taking 179 above-norm coal-mining construction-projects and an un-
known number of below-norm projects. The large projects include the
construction of 31 enterprises, each of which is designed to produce
more than 1 million tons of coal a year. Planned output of coal by
the end of 1957 is expected to be about 50 million tons greater than
that of 1952, then amounting to 113 million tons. 77/ Table 31 shows
the reported and estimated production of coal for the years 1952-60.
Table 31
Estimated Capacity and Production of Coal
in Communist China
1952-60
Thousand Metric Tons
Year
Capacity
Production
1952
79,200
63,500
1953
84,200
69,000
1954
92,200
8o,000
1955
105,200
92,700
1956
119,200
103,000
1957
133,100
113,000
1958
120,000
1959
126,000
1960
157,000
133,000
-86-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
During the first Five Year Plan, the Chinese Communists
plan to install 11 new modern coal-washing plants, with a total
planned capacity of 17 million tons of washed raw coal a year, in
order to improve the quality of coking coal needed by the' metal-
lurgical industry for the production of metallurgical coke. 721
These plants are expected to be in production by 1958, thus greatly
increasing the volume of washed coal available for coking for
metallurgical use.
5. Ferrous Metals.
The capacity for production of pig iron in Communist
China is to be increased by 2.8 million tons and crude steel by
2.53 million tons during the current Five Year Plan. When all
metallurgical projects, either completed or started before the
end of 1957, have been put into operation, total capacity for pro-
duction of pig iron is expected to be increased by 5.75 million
tons and crude steel by 6.1 million tons per year. 79/
The major emphasis in the ferrous metals field will be
placed on the further expansion of the An-shan Iron and Steel Works,
which is scheduled to complete 48 projects of construction and
rehabilitation during 1953 to 1960. The increased productive capacity
of the plant will enable it to produce annually 2.5 million tons
of pig iron, 3.22 million tons of crude steel, and 2.48 million tons
of rolled steel. .1E22/ Construction of the Wu-han and Pao-t'ou iron
and steel centers also will begin during the first Five Year Plan.
In addition, reconstruction and expansion work to be completed
before 1957 will be conducted at the Chungking Steel Plant, Tientsin
Steel Works, Tiang-shan Steel Works, Pen-ch'i Iron and Steel Company,
Ma-an-shan Iron Works, and Lung-yen Iron Works. Lil/ Table 32*
presents the estimated production of ferrous metals for the years
1952-60.
The raw material resources of Communist China are esti-
mated to be adequate to support an iron and steel industry much
larger than the one planned for 1960. Improvement in the quality
of raw materials and in technology has been responsible for pro-
duction gains and improved quality of pig iron and crude steel.
The quality of finished steel, although somewhat dependent on whether
emphasis is on increased tonnage or quality, apparently is improving.
* Table 32 follows on p. 88.
-87-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 32
Estimated Production of Ferrous Metals in Communist China
1952-60
Thousand Metric Tons
Product
1952
1953
1954
1955
1956
1957
1958
1959
1960
Pig iron
1,870
2,230
3,030
3,450
3,800
4,200
4,550
4,950
5,900
Crude steel
1,350
1,760
2,200
2,600
3,100
3,800
4,200
4,400
5,000
Finished steel
1,110
1,487
1,722
1,927
2,292
3,045
3,139
3,504
4,234
Metallurgical coke
2,860
3,600
4,540
5,200
5,900
6,685
7,000
7,400
8,300
Iron ore
4,058
6,233
8,4o8
10,583
12,758
14,933
17,108
19,283
21,458
Tungsten 2/
15.8
17.4
19
20.5
' 22.1
23.7
Manganese ore
89.4
105.1
129.6
145.2
165.9
186.4
202.9
219.8
251.3
Molybdenum 12/
0.60
0.63
0.67
0.67
0.67
0.67
0.67
0.67
0.67
a. Concentrates, 65 percent W03.
b. Metal content based on a 75 percent concentrate of molybdenite M0S2.
-88-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
6. Nonferrous Metals.
The major emphases on nonferrous metals during the cur-
rent Five Year Plan are the stress on geological surveying for new
ore deposits and the expansion and mechanization of existing mines,
smelters, and refineries. The most important construction project
now under way is at the Ko-chiu Tin Mine (Yunnan Province), which
is the largest tin producer and supplies about 80 percent of total
tin output in Communist China. 2'12/
Assuming that extensive geological surveying is con-
tinued throughout Communist China and that the current influx of
Soviet Bloc material and technical assistance in the field of mining
and prospecting is continued, it is estimated that Communist China
by 1960 will be self-sufficient in the production of fluorspar, salt,
pyrites, and possibly lead and that it will continue to have sub-
stantial export surpluses of tin, antimony, and mercury but will
continue to be dependent on imports of copper and aluminum. With
the possible exceptions of copper, aluminum, and tin, the quality
of most nonferrous metal products is considered to be about standard.
Estimated production of nonferrous metals in Communist China is
shown in Table 33.*
7. Petroleum.
On 6 July 1955, Li Fu-ch'un, Chairman of the National
Planning Commission, in his presentation of the Five Year Plan an-
nounced that "current production of the petroleum industry is very
low, falling far below actual needs." 83/ Estimated production of
crude petroleum and shale oil in 1954 was 790,000 tons, whereas
estimated demand was approximately 1.7 million tons, thus forcing
Communist China to import about 1 million tons from the Soviet Bloc.
The Five Year Plan goal for production of crude petroleum
recently was reported to be set at approximately 2 million tons by
the end of 1957. This goal is believed to be doubtful of achieve-
ment, although not impossible, because it would require doubling the
present estimated refining capacity within the next 2 years, which
indeed seems to be the plan. There are still no indications, how-
ever, that Communist China will be self-sufficient in the production
of refined petroleum at least before 1960. Table 34** shows the esti-
mated and projected production of petroleum products for 1952_60. XXX
* Table 33 follows on p. 90.
** Table 34 follows on p. 91.
*** Continued on p. 92.
-89-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 33
Egtimated Production of Selected Nonferrous Metals and Minerals in Communist China
1952-60
Thousand Metric Tons
Product
1952
1953
1954
1955
1956
1957
1958
1959
1960
Copper a/
Tin 12/
Lead c/
Zinc d/
Antimony d/
Mercury 27
Aluminum 1/
Fluorspar
Pyrites
Salt (including handicraft)
8
9
7
4.4
10
3
0
5
55
4,945
11
10
12.3
6.6
11
5
0
lo
55
5,400
12.6
12
22.2
8.6
12
7
0
15
60
5,900
12.9
13
22.5
10.3
13
9
0
17.5
65
6,400
13.2
15
22.8
11.9
15
11
0
20
70
6,900
13.6
17
23.1
13.6
15
13
3
22.5
70
7,500
13.9
18
23.4
15.3
16
14
5
25
75
8,000
14.2
20
23.8
17
17
15
10
27.5
75
8,500
14.6
22
24
18.7
17
16
30
30
80
9,400
a. Metallic copper from scrap and refined ores.
b. Crude metal averaging about 99 percent tin.
c. Metallic lead from scrap and refined ores.
d. Metallic content of produced ores.
e. Flasks of 76 pounds net, pure mercury.
-90-
-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 34
Estimated Production of Petroleum Products in Communist China 2/
1952-60
Thousand Metric Tons
Product
1952 1953 1954 1955 1956 1957 1958 1959 1960
Crude oil (natural and shale) 436 628 790 984 1,200 1,400 1,700 2,000 2,400
Gasoline 133 176 217 240
Kerosine 43 65 78 101
Diesel fuel oil 22 33 38 48
Lubricating oil 16 26 30 35
Residuals 12/ 289 414 489 635
a.. Estimated production of refined products for 1952-55 includes yield from imported crude oil.
b. Includes residual fuel oil, asphalt, coke, and miscellaneous residual products.
- 91 -
S-E-C -R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
8. Chemicals.
The ever-increasing industrial and agricultural demand
for chemicals in Communist China apparently is planned to be met
primarily by the expanding production of existing plant facilities
and by imports rather than by the construction of completely new
plants. This expansion seem to be centered in the Northeast and
East China, where most of Communist China's chemical fertilizer and
industrial chemical production facilities are located. The Chinese
Communists have announced that by 1960 the capacity for production
of chemical fertilizer is to be increased to 910,000 tons per
year. Li-/ It is estimated that about 600,000 tons of this capacity
will be devoted to the production of ammonium sulfate. L12/
Soviet assistance will also be rendered in expanding
the rubber and pharmaceutical industries. According to the announced
Five Year Plan, 4 rubber plants will be reconstructed and I con-
structed in the Northeast, North China, and East China. In con-
junction with the development of the rubber industry, 1 carbon
black plant will be constructed in the Southwest and 1 in the North-
east. In the pharmaceutical industry, Soviet assistance will be
instrumental in the designing and building of 2 pharmaceutical
plants, 1 in the Northeast and the other in the North of China. 86/
Table 35* shows the estimated production of selected chemical and
rubber products for 1952-60.
The quality of chemical and rubber products has been
the target of much criticism, and special emphasis is now being
placed on improving the quality of these products.
9. Cement.
By the end of 1957, cement production is to be increased
to about 6 million tons per year. Lq/ This goal probably will be
overfulfilled by about 400 thousand tons primarily because of the
capacity increases planned for 1955-57. As a result, the cement
industry will be able to meet the increasing domestic demands for
cement throughout the current Five Year Plan. Production of cement
has been increased rapidly through more efficient operating methods,
but at the same time the general level of quality of the cement pro-
duced has deteriorated. Table 36** shows the reported and estimated
production of cement for 1952-60.
* Table 35 follows on p. 93.
** Table 36 follows on p. 94.
-92-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 35
Estimated Production of Selected Chemical and Rubber Products in Communist China
1952-60
Thousand Metric Tons L/
Commodity
1952
1953
1954
1955
1956
1957
1958
1959
1960
Calcium carbide
8.0
10.0
12.0
15.0
18.0
21.0
24.0
27.0
30.0
Synthetic ammonia (as N)
28.8
40.6
51.9
62.0
72.0
82.2
92.3
102.5
112.5
Refined naphthalene
0.727
0.915
1.155
1.270
1.400
1.540
1.700
1.860
2.020
Chlorine
6.9
N.A.
N.A.
N.A.
N.A.
N.A.
10.0
N.A.
N.A.
Refined benzol
18.85
23.7
28.8
32.8
36.2
40.0
43.8
48.2
53.0
Toluol
4.08
5.14
6.146
7.100
7.80
8.60
9.45
10.40
11.45
Phenol, crude
0.975
1.155
1.455
1.600
1.760
1.940
2.180
2.400
2.640
Caustic soda
79
89.27
116.05
129
142
154
171
190
210
Sulfuric acid
146.0
198.5
231.0
308.0
367.0
420.0
485.0
585.0
615.0
Soda ash
192
222.7
309.6
365.1
420.5
476
540
610
690
Nitric acid
9.4
14.0
22.0
25.1
29.4
33.3
37.3
41.5
45.8
Ammonium nitrate
7.5
22.5
27
32
37
14.14.
59
74
89
Ammonium sulfate
181
225.8
298.1
370
440
504
580
702
734
Motor vehicle tires
(1,000 sets)
418
475
575
65o
680
760
800
900
1,000
Rubber footwear
(million pairs)
61.69
75.88
84.22
90.0
100
108.31
115
120
125
Penicillin (billion units)
45.9
459
1,515
2,100
4,500
8,700
9,000
9,500
10,000
a. Unless otherwise specified.
- 93 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 36
Estimated Capacity and Production of Cement
in Communist China
1952-60
Thousand Metric Tons
Year
Capacity
Production
1952
4,830 2./
2,860
1953
5,100
3,900
1954
5,480
4,600
1955
6,00o
5,300
1956
6,400
5,700
1957
7,190
6,400
1958
6,800
1959
8,430 12/
7,200
1960
7,600
a: Assumes that production was 59 percent
of installed capacity in 1952 and 84 percent
of installed capacity in 1954.
b. Refers to the planned capacity after all
projects started in the Five Year Plan
period are completed -- estimated to be 1959
for the cement industry.
10. Light Industry.
Production estimates for leading commodities in light
industry including textiles are given in Table 37.* The diffi-
culties now being encountered in raising the output of light in-
dustry are shown by the official figures for output in the years
1952 to 1955. The gross value of output of textiles and other
light industry commodities is claimed to have increased by 28
percent in 1953 over 1952, but the increase dropped to 15 per-
cent in 1954 over 1953. The real crisis in inc.reasing production
of light industry, however, is shown by the increase slated for
1955, which is expected to be no higher than output in 1954.
* Table 37 follows on p. 95.
- 94 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 37
Estimated Production of Commodities in Light Industry in Communist China
1949-60
Commodity
Unit 1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Cotton yarn
Thousand metric tons 321
1.30
478
656
741
835
726
835
907
952
1,000
1,050
Cotton cloth 12/
(machine-made)
Million linear meters 1,251
1,927
2,465
3,829
4,365
4,932
4,932
5,257
5,583
5,862
6,155
6,463
Machine-made paper
Thousand metric tons 107
139
239
372
428
556
606
631
655
672
684
693
Cigarettes
Thousand crates 1,625
1,885
2,030
2,650
3,604
3,784
4,44o
2/
4,570
2/
4,700
Vegetable oils
Thousand metric tons
458
724
890
941
960
1,160
1,552
Sugar (machine-made)
Thousand metric tons 107
129
162
249
269
314
418
498
686
Flour (excluding hand-
Thousand metric tons 1,283
1,219
1,886
2,990
3,439
3,738
3,920
4,276
4,670
milled flour)
a. Excludes homespun yarn.
b. Excludes cloth made entirely from homespun yarn.
c. Planned increases which may not in fact be achieved.
1955 output probably will be lower by 180,000 cases.
Cigarette output in particular probably is falling behind the 1954 plan, and
- 9_5 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
-2,1A-RDP79R01141A000600110001-1
S-E-C-R-E-T
This sharp decline in the growth of light industry is due primarily
to the shortage of cotton, tobacco, and other agricultural raw ma-
terials. According to figures given by Chia To-fu, Minister of
Light Industry, in connection with the announcement of the Five Year
Plan, the rate of utilization of equipment in 1954 was less than
one-third for tobacco and match plants, about 50 percent among oil
and fats plants and flour mills, and about 60 percent among leather
plants. In state-owned textile mills the rate of utilization in
1954 was claimed to be 96 percent but was to drop to 76 percent in
1955 because of the poor cotton crop in 1954. In the light.of
this limitation on output of light industry and the official pre-
disposition against increasing imports of raw materials for con-
sumer goods industries, the small amount of investment in light
industry as against heavy industry is understandable.
The greatest emphasis in the food-processing industries
is given to machine-made sugar and -- presumably to secure added
exports -- to meat processing. Of 34 big new food-processing enter-
prises scheduled for the first Five Year Plan, 18 are sugar re-
fineries and 9 are meat-packing plants. Oil-extracting and flour
plants already are said to be operating at half of capacity and
little emphasis is being given to investment in these industries. L/
The slow rate of annual increases projected for 1955 to 1957 is
obvious from the production estimates in Table 37.*
Absolute decreases in output of cotton yarn, gunny bags,
and cigarettes for 1955 compared with 1954 highlight the impact of
the shortage of agricultural raw materials. Chia To-fuTs speech 90/
specifically stated that the large increase in the output of con-
sumer goods in 1953 was due to the bumper harvest of crops in 1952
and that the flood in 1954 would have a serious impact on output of
light industry in 1955. A serious situation was admitted with re-
spect to the quality of output of light industry, 21/ obviously one
of the costs of the production increases given in Table 37.
F. Transport and Telecommunications.
1. Transport.
a. General.
Transport routes in Communist China are concentrated
in the eastern half of the country, converging primarily on such large
* P. 95, above.
-96-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
economic and population centers as Mukden, Peiping, Shanghai, Hankow,
and Canton. The industrial region in the Northeast is particularly
well served by internal transport routes. New route construction
into western areas, presently served largely by primitive means of
transport, is being increasingly emphasized in an attempt to develop
unexploited resources and increase the effectiveness of central
government control.
Since the Communists gained control of the China
mainland in 1949, transport service as a factor of demand has shown
marked increases in performance, paralleling to a great extent the
growth of the industrial sector of the economy. By 1954, total
traffic of tons originated was indicated to be more than double the
1950 performance.
By 1953 railway traffic had equaled the annual rate of
ton-kilometer performance of the previous peak year of 1945 under the
Japanese. Inland water traffic, although increasing at a rate greater
than railroad traffic, had reached a level only somewhat less than
half previous peak performance by 1954. By 1960 this deficiency is
expected to be overcome.
Highway transport remains of little significance in
terms of total transport performance. It is, however, quite sig-
nificant in the long-haul mOvement of goods in the western provinces,
as is indicated by the growing volume of traffic carried annually.
Civil air transport has not yet attained previous levels of perfor-
mance. The probable addition of new air routes to adjacent countries
of Southeast Asia and the prospective acquisition of better perform-
ing Soviet aircraft, however, are expected to facilitate progress
in the future. Despite the disruption of regular coastal services
which followed the Communist acquisition of control over China,
Chinese merchant marine performance has grown considerably, although
as yet the fleet remains well below pre-Communist levels. NeVer-
theless, the basic reorientation of China's foreign trade toward the
Soviet Bloc, accompanied by an increased use of railroads for foreign
trade and the disruption of regular services in the Formosa Straits,
is likely to impede the growth of Chinese coastal shipping.
The growing performance of Communist China's transport
system since the Communists gained control of the government has been
the product of many factors -- a growing demand for the service, in-
creasing investments, and greater operating efficiency. Outstanding
among these have been the. increasing requirements generated by the
-97- ?
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
industrialization program, without which transport performance could
not progress.
b. Rail.
(1) Pattern and Adequacy of Operations.
Railroads in Communist China especially have borne
the burden of increasing economic activity, particularly in industrial
areas. Manchuria, with about 9 percent of China's area, has more than
half of the rail mileage and originates far more traffic per capita
than the remainder of China. The Peiping - Tientsin area and the
regions around Tsingtao, Shanghai, Hankow, and Canton are also im-
portant, but most of China as yet generates little rail traffic.
As is evident, Chinese rail operations consist
largely of the movement of a few bulk commodities from a relatively
small number of places of origin to a few principal destinations.
Coal, the largest single item shipped, comprises about one-third of
total tonnage. Foodstuffs are also a major traffic commodity, fol-
lowed by metals, construction materials, wood, and ores. Iron and
steel products such as plates and rails are becoming of increasing
importance, whereas petroleum, in contrast to the situation in most
other nations, is still a relatively minor item.
It is readily apparent that the Chinese have em-
barked on a major program of construction. It is noteworthy, more-
over, that in view of the large commitments of capital resources
necessary to implement such a program, more than 20 percent of total
railroad investment during the Five Year Plan is to be devoted to
the manufacture of rolling stock and motive power. This apparently
large-size allocation is testimony of the progressively tightening
freight car and locomotive situation in China as well as of an in-
tention to prevent its becoming a brake on economic growth. Based
on
Chinese Communist announcements, it is
estimated that in 1954 the Chinese possessed some 3,420 locomotives,
6,300 passenger cars, and 73,000 freight cars. 92/
(2) Investment.
Since 1949, when the Chinese Communists had only
21,700 kilometers (km) of operable railroad line, they have allocated
?
-98-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
50X1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
a large part of the available investment resources to the expansion
of the rail system and to bolstering existing facilities. Consider-
able progress has been made. By the end of 1955, about 25,500 km
of track will be operable, and plans call for construction of
3,100 km more by the end of 1957.
During the Five Year Plan, 5.67 billion yuan,
or about 70 percent of the new capital investment in transport and
telecommunications, is to be allocated for rail transport. Of
this, 2.4 billion yuan is to be used in new line construction, with
the major part of this effort being concentrated in the western
provinces of China. Extension of the rail system into regions
hitherto inadequately served by modern transport apparently is
designed mainly to exploit undeveloped economic resources and to
a lesser extent to provide more effective political control over
greater areas of population. In addition, it will enlarge the
logistic capability of the railroads and significantly add to the
total length of operable track by 1960. 93/
A prime example of this effort is the construc-
tion of the 2,800-km section of track begun in 1953, which is to
extend westward from Lanchou, via Yumen and Urumchi, to the Chinese
border, where it will connect with a line from Alma-Ata on the
Turkestan-Siberian railroad. In 1956, at the present rate of prog-
ress, the line is expected to reach Yumen and to be in a position to
facilitate the more rapid exploitation of petroleum resources in the
area. 2V The new line connecting Pao-t'ou in Inner Mongolia with
the Trans-Siberian, across Outer Mongolia, was completed in 1955.
A great deal of the construction effort also
has been directed toward strengthening the established rail system.
During the Five Year Plan, 1.85 billion yuan is to be allocated for
improvement of existing lines. According to the 1954 railroad
plan, 22/ 50 percent of the funds invested by the state for rail-
roads were to be used to strengthen existing installations of the
railroads and to add new wagons and locomotives. Line increases on
dxisting installations in 1954 were reported to total 280 km. 96/
In 1955 the size and number of such projects were to be greatly
increased. On three lines alone) an aggregate of 240 km of double-
tracking was to be completed, and another 2,700 km were to be either
surveyed or designed for similar construction.
-99-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
(3) Operating Efficiency.
Since the Communists gained control over the China
mainland in 1949, the railroads have shown progressive gains in per-
formance, consistent with the requirements of a growing economy. By
1953, turnaround time was reduced from 4.7 to 4 days, where it has
apparently leveled off. By 1954 the average tons loaded per loaded
car had reached 31.6, an increase of 3.3 tons over 1950. 21/ The
significance of this achievement is apparent when it is realized that
the increase in the average carload of coal by 1.3 tons in 1954 over
1953 was equivalent to loading, on the average, an additional 6,500
tons in 24 hours. 98/
By 1953, freight traffic more than tripled the
performance of 1949, when traffic was at an estimated low of 48.2
million tons originated on account of economic and political dis-
organization following the civil war. As of 1954, when tons origi-
nated reached an estimated 183 million, however, there were indica-
tions that the railroads were operating under an increasing strain,
which might soon become acute for both the economic and military
sectors of China. 22/
Whereas the magnitude of annual increases in
terms of tonnage has been growing, the proportionate growth during
recent years has become smaller. Tons originated have fallen from
a 20-percent increase in 1953 over 1952 to a planned 13.6-percent
Increase in 1955 over 1954. Progress in reducing turnaround tine
is not likely to continue, but tons loaded per loaded car should con-
tinue to increase somewhat, chiefly because of the increased intro-
duction of.larger capacity freight cars. These trends suggest that
the Chinese apparently have reached a definite turning point in the
development of railroad transport. Further appreciable progress by
the railroads can be accomplished only through a program of addi-
tional capital investment, designed to increase both physical route
capacity and the availability of rolling stock and motive power. 100/
c. Highways
(1) Pattern and Adequacy of Operations.
Motor transport in Communist China is used most
frequently for short-distance, intercity freight movement. Highway
transport performance in 1954 increased almost sevenfold over 1950.
- 100-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
The extent of progress in road transport is indicated by the fact
that its share of total tons originated by all carriers in China
has grown from about 6 percent in 1950 to over 16 percent in 1954,
and performance by 1960 should be at a level 3 times that of 1954.
The road network was expanded from 78,000 km
in 1950 to 140,000 km by the end of 1954, mainly by extending new
motorable roads into areas formerly served only by coolie and animal
transport. 101/ At present the greater part of this road net is
not capable of supporting truck traffic throughout the year.
Motor transport also has greatly facilitated
the .growth of commercial centers in rural areas not served directly
by rail or waterways. New feeder roads which join many scattered
farming communities to the transport network have facilitated the
marketing of commodities previously dependent dn animal and coolie
carriers. Construction of new roads into border areas as well as
in mining and industrial regions is expected to bring the total
highway length in China to 158,000 km by 1960.
Increasing the vehicle park has also been a
prime goal which has met with considerable success. Mainly as a
result of large imports of vehicles from the Soviet Bloc, the
motor truck inventory has grown from 40,000 units in 1950 to some
67,000 units in 1954. 102/ Moreover, the continued import of
vehicles from similar sources, coupled with domestic manufacture
beginning in 1957, is expected to bring the total truck park to
150,000 units by the end of 1960. 103/
(2) Investment.
It is estimated that, during the Five Year Plan,
about 900 million yuan of the allocation to the Ministry of Com-
munications will be used for highway construction. In addition,
a major share of the 730 mi1lion yuan allocated for "local communica-
tions" is to be used in local highway construction. The 1955 plan
provides for the survey and construction of an additional 23 roads,
mainly in industrial and mining areas or into national minority
regions. 104/ These projects will add 4,500 km to China's highway
network during 1955. 105/ Some idea of investment in inventory can
be obtained from the plan to produce domestically 4,000 vehicles
by 1957. 106/
- 101 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
(3) Operating Efficiency.
The efficient utilization of highway transport
is hampered to a large extent by physical restrictions such as low-
capacity bridges, numerous ferries, and inadequate road construction
and maintenance. Lack of adequately trained personnel also has
been a problem. Although the technological innovations necessary
to overcome physical limitations have not been forthcoming to an
appreciable degree, 107/ considerable effort has been directed toward
reducing inefficient hauling. Provincial transport companies were
established under the central control of the government, and a
rigid system of traffic control was introduced to allocate trucking
properly. 108/ Administrative reorganization, coupled with the
introduction of heavier loading vehicles, undoubtedly resulted in
some improvement, but commodity distribution is such that trucks
are still required to operate empty more than half the time.
The need for more technically trained personnel
was realized by the Chinese Communists as early as 1952, 109/ but
the building of adequate training facilities, for the most part, is
still in the planning phase. Technical advice provided in many
cases by the USSR, however, overcomes this deficiency to some extent.
d. Inland Water.
(1) Pattern and Adequacy of Operations.
Inland water operations have steadily improved
since the Communists assumed control of China. Freight movement,
in terms of ton-kilometers, was four times greater in 1954 than in
1950, and tons originated grew at a somewhat greater rate because
of a progressively decreasing average length of haul. 110/ River
traffic has not, however, yet approached prewar levels. Continued
emphasis on this medium of transport and the consequent gains en-
visioned should bring performance close to prewar levels by 1960,
when it is estimated that some 48 million tons of cargo will be
originated. Nevertheless, with the constantly growing role of the
railroads, it is considered that inland water transport will never
again be as important to China in terns of percentage of total
traffic as it was in the 1930's.
- 102 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
In general, inland water transport in China ful-
fills its usual role of carrying bulk cargoes where speed is not of
major importance. The inland waterway system of China is one of
the most extensive in the world, with about 95,000 km of inland water-
way routes now open to navigation, although most are suitable only for
shallow draft vessels. 111/ The essentially local nature of the traf-
fic is demonstrated by the average length of haul of the modern water
transport sector of only 370 km in 1954, despite the great length of
such main routes as the Yangtze River. Inclusion of local junk traf-
fic which on the extensive Yangtze system carries 85 percent of the
traffic would lower the average length of haul considerably.
The composition of waterway traffic is shifting
from agricultural cargoes, which are becoming relatively less im-
portant though still significant, to industrial traffic, which has
been increasing. Between 1951 and 1953, for example, agricultural
cargoes accounted for over half of the freight movement on the
Yangtze River, but decreased from 4o to 30 percent of the total
inland waterway traffic in Communist China. 112/
Little change in the composition of the river
fleet has occurred since the Chinese Communists came to power. The
self-propelled fleet remains small, both actually and relatively,
and is estimated to total about 750. vessels, 113/ ranging from
4,000 gross register tons (GRT) passenger-cargo vessels to smaller
tugs and steam launches. The nonpowered fleet still consists mainly
of a great number of small junks, which, in the aggregate, have a
freight capacity of over 3 million tons and account for about 85
percent of the total inland water transport. 114/ On the Yangtze
River, especially, tug-barge units are replacing to some extent the
traditional junk on longer haul routes.
(2) Investment.
The Communist regime has developed an impressive
program for the rehabilitation and improvement of its inland water-
ways. Of the 1.339 billion yuan allocated to the Ministry of Com-
munications for capital investment during the Five Year Plan it is
estimated that about 440 million yuan is for water transport, but
the allocation to inland water transport cannot be determined specifi-
cally. Appropriations for waterway construction in 1954 were 74 per-
cent higher than in the previous year and reportedly will increase
by 35 percent in 1955. 115/
-.103 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Before 1954, relatively little investment in
vessels was devoted to new vessel construction, most of the invest-
ment going for the purchase of second-hand craft, salvage work, and
rehabilitation of the existing fleet. Since 1954, however, more
emphasis has been placed on new construction.
The Yangtze River apparently is receiving par-
ticular attention. Appropriations for construction projects on
this river in 1953 were four times the 1952 amount, 116/ and planned
investment during 1955 is scheduled to increase about 70 percent
over the 1954 level. 117/
Significantly, the Chinese Communist government,
in an effort to reduce its-own burden, has decided that local
authorities must finance inland water transport improvements. The
directive to this effect issued in November 1953 by Chou En-lai 118/
does not seem to have brought the desired results, however, for
local officials apparently still are relying on the central ad-
ministration for required funds.
(3) Operating Efficiency.
Chinese Communist statements claim sharp rises
in the operating efficiency of the river fleet. Voyage time has
been greatly reduced, in some instances from one-third to one-half,
by operating vessels on scheduled runs. The efficiency of tugs has
been improved by the substitution of the pushing method for the tra-
ditional means of towing of barges, with a resultant increase in
speed and decrease in fuel consumption. 119/ Barge transport
efficiency has been further improved by routing the barges through
the entire voyage, instead of transshipping cargo several times.
Labor productivity also appears to be improving,
although shortages of trained personnel persist. Efforts are being
made to reduce administrative duplication and organize traffic
operations more efficiently. Remarkable improvement is claimed in
some areas in cargo-handling efficiency 120/ through the use of
mechanical equipment in place of manual operations. 121/
In addition to increasing the efficiency of water
transport, the Chinese have directed some effort to making the cost of
river transport more attractive to shippers. Substantial reductions.
-104 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
in freight rates during the first 3 years of Communist control ap-
parently indicate an intention to reestablish the prewar competitive
status of inland water transport. 122/
e. Coastal Shipping.
(1) Pattern and Adequacy of Operations.
Despite the irregularities and disruptions in
Communist China's coastal trade, traffic carried in Chinese vessels
during 1954 123/ represented an eightfold increase over 1950. .124/
The growth of merchant shipping since 1949, however, has been ham-
pered by the extensive loss of merchant shipping tonnage to the
Nationalists and the radical shift in international trade routes
from sea to rail through the northeast, which accompanied the re-
orientation of China's foreign trade toward the Soviet Bloc.
Additions to the coastal fleet, coupled with
continuing efforts to increase its utilization, are expected to
raise performance by 1960 to roughly 50 percent above the 1954
level.
Operations of Communist China's ocean fleet are
confined to serving the domestic coastal trade. Chinese Nationalist
interdiction of coastal shipping activity has diminished and is at
present effective only in the Taiwan Strait area. In the Yellow
Sea and the Gulf of Chihli (Po Hai) the Chinese Communists are able
to operate unobstructed trunk and feeder passenger and freight routes
servicing all coastal ports north of Wenchow. The largest segment
of the coastal fleet is concentrated in this area, and a smaller
segment of the coastal fleet operates from Canton in South China to
Swatow and ports in the Liuchow Peninsula-Hainan Island area.
The domestic operations of the powered merchant
fleet are considerably augmented by a large number of small ocean-
going junks and, to a limited extent, by chartered foreign shipping.
The Chinese Communists are completely dependent upon foreign registered
vessels, both Bloc and non-Bloc, for longer international waterborne
trade.
Apparently the available Chinese Communist fleet,
augmented by specialized foreign registered vessels, is able to handle
present tonnage requirements. BetVreen 1950 and 1954, with salvage
- 105 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
efforts, foreign purchase, and new construction the Chinese Communist
merchant fleet increased from about 79 vessels of 175,000 GRT to about
111 units of 278,000 GRT. 125/ The coastal fleet had grown by mid-
1955 to some 120 vessels of 295,000 GRT. A fleet of 350,000 to 400,000
GRT by 1960 is believed to be within Chinese capabilities, but this
would still be less than half the size of the merchant tonnage possessed
by the Nationalist Chinese in 1949.
Communist China has few good harbors. Dairen,
Tientsin - Taku - Hsin-k'ang, Tsingtao, Shanghai, Swatow, and Canton
Whampoa, which combined can discharge some 115,000 tons daily,
possess 66 percent of the total cargo-handling capacity of Chinese
ports. Yin-k'ou, Ch'in-huang-tao, Yen-t'ai, Yin-hsien, Wenchow,
Foochow, Amoy, Fort Bayard (Chan-chiang), Hai-Mou, and Yu-lin, all
of relatively minor size, are important as terminals of domestic
coastal trade. Amoy and Foochow, opposite Taiwan, are currently of
singular importance a6 possible staging areas for an offshore island
offensive against the Nationalist Chinese.
(2) Investment.
Investment in China's merchant marine -service
apparently has been devoted in large part to modernizing the exist-
ing fleet and to improving port facilities. In 1954 the government
allocated nearly 10 million yuan to increase port mechanization 126/
in a significant attempt to replace less efficient cargo-handling
procedures.
(3) Operating Efficiency.
A comparison of the growth indexes for the mer-
chant marine inventory and its performance show that great strides
have been made in increasing the utilization of the coastal fleet.
Efforts have been directed toward a more efficient use of labor by
the mechanization of cargo handling at ocean terminals and bSr closer
supervision of traffic operations. 127/ The consistent fulfillment
of performance plans, in some cases by substantial margins, indicates
progress in this direction inasmuch as targets apparently are inte-
grated with plans for increasing efficiency.
- 106 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
f. Air.
(1) Pattern and Adequacy of Operations.
Air transport in Communist China as yet plays a
very limited role in freight movement, but it is important in the
movement of officials and high-value, low-tonnage cargo. Despite
the acquisition in 1955 of the latest transport types (I1-12's and
I1-14's) from the USSR, air transport operations are limited.
During 1954 the unduplicated basic civil air
network of Communist China comprised approximately 15,700 route kilo-
meters flown by two airlines -- CPAC* and the Sino-Soviet enterprise,
SKOGA.** 128/ With the withdrawal of the USSR from SKOGA at the
end of 1954, the Chinese undertook to fly the entire network. Flights
radiate from Peiping via Hankow or Sian to Chungking, Kunming,
Nan-ning, Canton, and Shanghai. There are routes to the USSR via
Sinkiang Province and Mongolia to Irkutsk and Alma-Ata.
The inventory of the Chinese civil air fleet,
composed of various types of craft acquired from diverse sources, is
still well below pre-Communist levels. By the withdrawal of the USSR
from joint ownership in SKOGA, the Chinese obtained the 15 Li-2 air-
craft provided by the USSR as its share in the company. The civilian
fleet -- consisting of these aircraft, the existing CPAC fleet, air-
craft abandoned by the Nationalists, and additionally acquired Li-2's
totaled about 50 2-engine transports in mid-1955, a considerable re-
duction over the 92 aircraft, some of which were 4-engine types, avail-
able in 1948. The regularization of civil air operations throughout
the Bloc has led to the Chinese acquisition of new Soviet aircraft,
probably the better performing I1-14.
(2) Investment.
During the Five Year Plan, 101 million yuan are to be
invested in civil aviation. The end use of this allocation cannot be
determined, but some money will be spent for additions to equipment.
Equipment received from the USSR following its withdrawal from SKOGA
reportedly is being paid for on a long-term basis. The requirement for
new aircraft which will accompany expected route expansion will doubt-
less be met by the same source and on similar terms.
* Chinese People's Aviation Corporation.
** Soviet-Chinese Joint Stock Company for Aviation.
- 107 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
(3) Operating Efficiency.
Operating efficiency of civil air transport in
Communist China is believed to have suffered by the conflict in
ideologies between the US-trained managerial group that defected
from the Nationalists and the Soviet-influenced Peiping organization.
2. Telecommunications.
Telecommunications facilities in Communist China are con-
centrated in the most industrialized and densely populated eastern
part of the country, with Peiping as the hub. Industry and govern-
ment consume about 80 percent of the basic telephone and telegraph
service.
Postal volume has been increasing about 12 percent a
year and probably will continue this rate of increase. Although
25 percent of the country reportedly lacked postal service in 1954,
at the anticipated rate of expansion it is estimated that all of
Communist China will have postal service by 1960.
Expansion of communications is being approached with
energy and determination, but there are still many deficiencies
which must be overcome before an adequate plant is established.
Although during the Five Year Plan 361 million yuan are allocated
to the Ministry of Posts and Telecommunications, this sum does not
appear, adequate to provide for the announced expansion program.
Communist China still has to import over 80 percent of her needed
equipment, and there is a deficiency of managerial and technical
personnel. Although some sectors of the communications system will
have shown a large growth by 1960, communications facilities in
Communist China still will require improvement in order to serve the
economy adequately.
- 108 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
V. Foreign Trade and Economic Relations.
The foreign trade of Communist China has been constantly increas-
ing with the countries in the Sino-Soviet Bloc. In 1950, 25 percent
of the total Chinese trade was with the Bloc, and by 1954 the figure
had risen to 80 percent. The Chinese Communists announced that to-
tal exports and imports in 1954 amounted in value to 8.47 billion yuan
and in volume to over g million tons. 129/ Based on this reported
amount of foreign trade, Table 38 and Figure 7* have been prepared
from announcements by the Chinese.**
Table 38
Imports and Exports of Communist China a/
1954
Million US $
?
Area
Imports
Exports
Total Trade
Sino-Soviet Bloc
USSR ..
1,205
625
1,830'
European Satellites
370
320
690
Far East
4o
200
240
Total
1,615
1,145
2,760
Non-Bloc countries
360
330
690
Grand total
1,975
1,475
3,450
a. 130/
* Following p. 110.
** In the absence of US-Communist China trade and currency remittances
carried on directly in yuan and US dollars, there is no genuine rate of
foreign exchange between the two currencies for trade purposes. The rate
of exchange used to convert the yuan value of Communist China's foreign
trade into US dollars is the average between the buying and selling rates
for sterling remittances in Canton. The sterling rate is consistent
with the remittance rate for other Free World currencies in Canton. Use
of this sterling cross-rate permits conversion of yuan into dollars
through a currency which actually is exchanged directly into Chinese yuan.
- 109 -
S-E-C -R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S -E -C -R -E-T
The import surplus of $500 million shown in Table 38 arose primarily
because trade with the USSR showed an imbalance against Communist
China. It is probable that during 1954 Communist China imported mili-
tary equipment from the USSR which was financed by a loan of as much
as $500 million. 131/ Trade with the European Satellites resulted in
a Chinese import surplus of about $50 million, reflecting the settle-
ment of previous balances in China's favor. Exports to Far Eastern
members of the Bloc consisted of trade items (25 percent) and mili-
tary and economic aid (75 percent) furnished by Communist China to
North Korea and the Viet Minh. 132/
Chinese Communist exports continue to reflect the predominance of
agriculture and the extractive industries in China's economy. Indus-
trial production such as pig iron, cement, and light manufactures
provides a small surplus for export, but most industrial output is
returned to the domestic economy. The Chinese announced that in 1954
the export of light industrial products amounted to about $60 million. 133/
The Chinese Communist claims that 88.5 percent of total imports
in 1954 consisted of products for industrial and agricultural produc-
tion 134/ reflect the avowed policy of restricting consumer goods
imporTT-In order to maximize the rate of industrialization. This
claim, however, omits reference to military goods, which probably are
concealed in the industrial products category.
The Chinese Communists reported that during the first 8 months of
1955, total foreign trade increased nearly 13 percent over the compar-
able period in 1954. The increase with non-Bloc nations was reported
to be 23 percent, whereas the increase with Sino-Soviet Bloc nations
was slightly more. than 10 percent. 135/
The estimate of Communist China's foreign trade through 1960 de-
pends on the export potential. If the recent growth rate (1952-54)
in total trade of 8 percent per year were maintained, the value of
trade in 1957 would total $4,400 million and in 1960, $5,400 million.
The Chinese Communists have announced, however, that trade in 1957
will increase 67 percent over the 1952 (yuan) value of trade. 136/
Considering the possibilities of increasing production and marketing
of exportable surpluses in conjunction with the Five Year Plan trade
goal, a reasonable average rate of growth is believed to be 4 percent,
which is more in line with the 1954 increase in trade. The value of
trade in 1960, at this rate of growth, would total $4,300 million.
- 110 -
-E-C -R -E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
COMMUNIST CHINA
FOREIGN TRADE
1950-54
TOTAL TRADE
AND
IMPORTS AND EXPORTS
(Millions of US dollars)
1150
1950
78
2075
1951
1492.
295
2985
1952
3315
1657.5 1657.5
492.5 148
1953
3465
1954
Total Trade
Exports
Imports
DIRECTION OF FOREIGN TRADE
(Percent of total)
23
6.5
39
28
53
=1'
25
56
20
53
27
25287 6-56
1950 1951 1952 1953
Figure 7
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
1954
50X1
USSR
Satellites
Free World
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C -R -E-T
Communist China carries on approximately 80 percent of its trade
with the Soviet Bloc, 53 percent with the USSR alone, and depends
almost entirely on the Bloc for its essential imports of industrial
and military products. As Communist China's planned annual require-
ments of industrial equipment amount to only about 0.5 percent of the
Soviet GNP or 1.5 percent of Soviet production of industrial equip-
ment, it is probable that the USSR could supply most of these goods
without difficulty. In any event, the phasing of these requirements
over a period of years allows the USSR to make provision for the
requirements in its plans. Recent trends suggest that Soviet food
imports from China are more likely to grow rather than diminish.
The USSR granted Communist China loans of $60 million per year
for 5 years beginning in 1950, to be repaid in 10 annual installments
beginning in 1954. Since 1953, several assistance agreements with
the USSR have been concluded by Communist China to increase the aid
begun in 1950 and to assure the continued flow of capital goods. In
addition to the Soviet technical assistance agreements, the USSR in
1954 agreed to extend loans to China totaling $130 million. 137/ The
Soviet unwillingness to extend larger credits undoubtedly influences
the scope of the Chinese Communist Five Year Plan, although this is
fundamentally determined by the Chinese Communists' own capabilities.
Nevertheless, if the USSR does not extend sufficient credit to satisfy
China, then China may be tempted to seek Free World credit. In
general, however, China now appears to be satisfied with present
Bloc assistance and, in turn, has even undertaken to extend aid to
North Korea and the Viet Minh.
Some shift away from trade with the Bloc may be expected if trade
controls are relaxed. If Free World and Bloc prices of industrial
equipment are compared, however, it appears that Communist China's
terms of trade with the Free World during 1950-54 in general would
have been but slightly more advantageous than trade with the Bloc.
The elimination of trade controls, therefore, would not result in an
important diversion of Chinese trade from the Soviet Bloc to the
Free World because of price differentials.
Communist China's total trade with the Free World has declined
steadily from $965 million in 1951 to $690 million in 1954. On a
physical volume basis, however, trade dropped sharply in 1951 and
then began to increase. As the total trade of Communist China in-
creases, it is likely that trade with the Free World also will main-
tain an upward trend. In 1954, Communist China's major non-Bloc
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
trading partners, in terms of total value of trade turnover, were the
UK (including Hong Kong), Japan, Ceylon, West Germany, and Pakistan.
The goods provided by these countries were such items as basic chemi-
cals, fertilizers, pharmaceuticals, raw textiles, rubber, coconut oil,
paper products, textile machinery, and some manufactured goods. Al-
though the prospects for increasing trade seem to be favorable, the
stories of tremendous trade opportunities between Communist China and
the Free World, and especially with Japan, are perhaps misleading.
The Japanese have estimated that this trade probably could be increased
from the 1954 high of $60 million to a total value of only $140 mil-
lion by 1957. The Japanese demands would conflict to only a limited
extent with Communist China's domestic and Bloc requirements, but
the continuation of Japanese controls on many capital goods exports
to Communist China will tend to hamper the growth of this trade. If
trade controls are relaxed, there is a possibility that Sino-Japanese
trade relations would show the biggest gains because Japan is a ready
market for Chinese exports (rice, soybeans, coal, iron ore, and salt)
and Communist China is interested in obtaining Japanese machinery,
metal products, and fertilizers. The major limiting factor over
such a trade development would be Communist China's ability to increase
production while maintaining the present volume of exports to the
Bloc in order to satisfy its trade and aid obligations with its Bloc
partners.
The reduction of US controls from complete embargo to CCCOM levels
would enable Communist China (1) to obtain a net increase in its total
export volume by exporting to the US commodities that it cannot export
elsewhere and (2) to obtain better prices for other export products
owing to the resultant increase in world market demand. Within 2
years, Communist China possibly could increase its net export earn-
ings by $60 million if it had free access to the US market.
The European Satellites have contributed less than the USSR to
the development of Chinese Communist industry, but their help has
nevertheless been substantial. Exports of industrial items to
Communist China seem to have had a high priority in the European
Satellites, particularly in Czechoslovakia, East Germany, Hungary, and
Poland, where entire plants have been built for export to Communist
China. Cranes, excavators, trucks, power generating equipment, diesel
engines, telecommunications equipment, machine tools, ballbearings,
and farm and mining machinery are on the list for delivery to Communist'
China. These goods and equipment are being shipped to Communist China
- 112 -
S-E-C -R -E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E -C -R-E-T
in fulfillment of barter trade protocols, which are signed each year
by Communist China with each of the European Satellites. As a result
of this continuing increase in European Satellite technical aid, it
is clear that Communist China has been able to fill an important gap
in its industrialization program caused by the continued shortage of
its own technical manpower.
On 23 November 1953, Communist China and North Korea signed a
10-year economic and cultural cooperation agreement. In 1954, North
Korea placed a value of 3 trillion "old" yuan (about $125 million)
on Chinese Communist goods delivered in 1954 under this agreement,
whereas the value of Soviet material and technical aid to North Korea
was $105 million. Chinese Communist
goods consist of about 45 percent industrial materials (coal, steel,
construction materials, and transport equipment) and 55 percent con-
sumer goods '(food, clothing, and newsprint). 138/ The estimated value
of the Chinese Communist aid, however, is estimated to be about $60 mil-
lion to $70 million.
In 1954, Communist China sent at least 1,825 engineers and tech-
nicians to North Korea to work in various industrial establishments.
It is estimated that about 65,000 civilian laborers also were sent
to North Korea. In addition, large numbers of Chinese Communist
troops were used on land reclamation projects and to rehabilitate
the North Korean railroad system. 139/
North Korean exports to Communist China are limited to minerals,
marine products, and electricity, the latter being by far the most
important. During 1946 to 1950, Manchuria was supplied with approxi-
mately 0.9 billion kwh of electricity per year, or one-half of the
total electric power generated by the Suiho Power Station (1950
capacity, 400,000 kw). 140/ Assuming that Communist China is still
receiving approximately one-half of Suiho's electric power output,
it is possible that in 1956, when Suiho probably will have been
restored to its 1944 capacity of 600,000 kw, Communist China will
receive as much as 1.35 billion kwh from North Korea.
Although the total value of Communist China's aid to North Korea
in 1954 exceeded that of the USSR, its impact on the North Korean
economy probably is not so great. It appears that most of the Soviet
aid is designed for the reconstruction of basic industries, whereas
the bulk of Communist China's aid is in the form of consumer goods,
construction materials, and transport facilities.
- 113 -
S-E-C -R -E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
s-E-c -R -E-T
Most of the foreign trade of the Democratic Republic of Vietnam
to date has been with Communist China. The total volume of all Chinese
Communist exports known to have been received by the Viet Minh dur-
ing 1954 is estimated at a minimum of 30,000 tons. Communist China
has supplied and is supplying the Viet Minh with considerable material
and technical aid. In December 1954, Communist China promised to
send the Viet Minh 10,000 tons of rice as well as 5 million meters of
cloth, 141/ most of which probably have been delivered. In late Decem-
ber 1957The Chinese Communists and the Viet Minh also reached agree-
ment on Chinese assistance in the restoration of transport and communi-
cations lines, postal and communications services, and water conservancy
projects. 142/ Under the agreement the Chinese Communists were also
to supply the necessary experts and technicians.
In the past the most important and significant aid rendered to
the Viet Minh by the Chinese Communists has been military aid. In
early 1954 there were indications of increased military aid, estimated
to be as high as 3,000 to 4,000 tons per month in volume. 143/
Chinese Communist and Viet Minh
violations of the Indochina truce agreement soon after the agreements
were signed. Between 21 July and 20 August 1954 alone, it is estimated
that some 3,000 tons of military supplies were shipped to North
Vietnam from China. 144/ There is evidence that this level of ship-
ments of all goods was maintained during 1955.
In July 1955, on the occasion of Ho Chi Minh's visit to Peiping,
it was announced that Communist China was making a gift of 800 million
Chinese yuan (new currency -- equivalent at the official exchange
rate to about $338 million) for the reconstruction of railroads, river
docks, highways, and bridges and for the restoration and construction
of textile mills, tanneries, papermills, and factories for suoh things
as medical equipment, electrical equipment, and agricultural imple-
ments. 145/ It also was stated that both countries would "cooperate
fully with each other on the technical personnel" sent to the Viet
Minh and that the Viet Minh also would "dispatch workers as appren-
tices to certain enterprises in China." The figure mentioned prob-
ably covers past aid -- at least the aid under the December 1954
agreements -- as well as present and future aid. The 800-million-
yuan figure, like the similar 1953-57 Chinese Communist grant to
North Korea for postwar reconstruction, is indicative of the high
political value placed by Communist China on the rehabilitation and
orientation of its Far Eastern partners, a project which involves
the allocation of materials and manpower that could be used in
China's own development program.
- 114 -
S-E-C -R -E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
APPENDIX A
METHODOLOGY
The estimates of production and of production trends made in this
report consist first of estimates of physical output of commodities
or services. Second, with the use of price data, industrial indexes
by value are calculated, grouping related commodities into larger
aggregates. Finally, major sectors of the GNP are combined in terms
of estimated value added for the subsectors.
I. Production Estimates.
Production trends for the commodities and services listed in the
Chinese Communist Five Year Plan for both the official Communist
figures and the CIA estimates are given in the text and tables of the
report.*
A. Agriculture.
The Five Year Plan presents claimed production for 1952 and
the 1957 targets for food and technical crops. Miscellaneous crops
are estimated by cultivated area rather than output. Communist
claims for total food output are made for 1949-54. Absolute figures
for food crops (rice, wheat, and soybeans) and for technical crops
(cotton, tobacco, sugar cane, sugar beets, peanuts, sesame, and
rapeseed) can be derived from the National Statistical Bureau
reports for 1953 and 1954.
Previous CIA estimates of agricultural production were extra-
polated trends from the pre-Communist years. The estimates of the
output of food crops, particularly, made on this basis are far below
the Communist claims. It is felt that the pre-Communist estimates
understated output because of limited statistical coverage. When
adjustments are made in the light of the probable understatement
of prewar output, the Communist figures for total output of food
crops in 1952 are considered reasonable. The trend in the Communist
series from 1949 to 1952, however, almost certainly involves
* CIA estimates are made when official Chinese statistics are not
considered valid
- 115 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
increased coverage more than it represents actual increases in pro-
duction, and so a different trend is estimated based on weather
conditions and other evidences of actual output. The 1954 figures
for food crops claim an increase of 3 percent over 1952, but this
trend is considered unlikely in view of the serious floods in 1954.
The 1954 claims may overstate actual production because of increased
use of stocks and other factors. An alternative hypothesis would be
that Communist figures for 1952 are still understatements of actual
output and the 1954 claimed output represents further statisical
coverage of the agricultural sector. Within the total for food
crops it is believed that the claims for wheat output are too low
and that the output of rice and potatoes is somewhat overstated.
Estimates of cotton production based on requirements for
yarn production, estimated rates of home consumption, and estimates
of native yarn production result in output figures for 1952 that are
well below the Communist claims and slightly below the Communist
figure for 1953. The 1949 and 1950 figures in official claims for
cotton output probably are understated.
The average annual increase expected in the output of
food crops is estimated to be about 2 percent a year. The 1955 out-
put of food crops is estimated to be 2 percent over the 1952 level,
reflecting the floods of 1954 and the unusually favorable crop year
in 1952. Targets for increases in cotton and other industrial crops
are more feasible as the percentage of total crop land planted
to these crops is relatively small and industrial requirements
probably will lead to priorities in fertilizer and other means of
increasing production. In the absence of detailed information on
industrial crops other than cotton, the general trend in cotton
output is used for this whole category of agricultural output.
Trends in production of livestock and meat, vegetables, and
other miscellaneous crops are moved with the food crops index in
the absence of data that permit separate production indexes for
these categories.
B. Industry.
Estimates of production of industrial commodities have been
evaluated in the light of known capacity in pre-Communist periods
and of new plants added since that time
- 116 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
nx1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
For the most part, however, Communist production claims,
though usually somewhat higher than to?,als arrived at by plant-by-
plant study, appear reasonable in view of the likelihood that some
production capacity has not been covered in plant-by-plant studies
for the industry concerned.
The production series neces-
sarily reflects, in part, improved coverage in statistical reporting
for the commodities concerned during the period from 1949 to 1954.
To this extent, indexes based on trends in production of these
commodities would overstate the industrial growth that actually has
taken place.
Projections for production through 1957 are made in the
light of announced targets for the Chinese Communist Five Year Plan,
but these targets are evaluated and changed where indicated by pro-
gress of construction projects in the industries concerned.
II. Industrial Indexes.
Table 39* presents output indexes for industrial groupings. All
the indexes shown are based on physical output except weapons,
petroleum, metals, engineering items, chemicals, and rubber prod-
ucts. In the case of engineering output, an index based on Chinese
Communist claims for the gross value of output of the machine
industries is used except for 1950 and 1951. These years were
interpolated on the basis of physical production trends weighted
by available 1952 prices and by an estimated breakdown of value
added within the engineering industries. For 1956 and 1960 the
estimates are based on the average rate of annual increase between
1954 and 1957. Indexes of nonferrous metals, ferrous metals
chemicals, and rubber products were projected by estimated gross
value of physical output in 1952 prices. Prices for some non-
ferrous metals were estimated in terms of world prices, and for**
* Table 39 follows on p. 118.
** Continued on p. 120.
-117 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
50X1
50X1
50X1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03 : CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 39
Indexes of Production of Industrial Commodities in Communist China
1949-57 and 1960
1952 = 100
Commodity
1949
1950
1951
1952
1953
1954,
1955
Preliminary
1956
Projected
1957
Projected
1960
Projected
Energy
Electric power
60
64
.81
loo
126
152
173
197
235
330
Solid fuels
49
64
80
loo
109
126
146
162
178
209
Petroleum
18
32
79
loo
128
154
198
222
244
286
Metals
Nonferrous
41
62
78
100
129
157
173
221
237
286
Ferrous
12
37
65
loo
131
156
174
204
260
361
Engineering
13
35
52
loo
165
186
201
218
236
298
Electrical equipment
and machinery
27
43
58
100
138
152
169
181
206
367
Chemicals
16
44
77
loo
125
167
195
225
254
366
Rubber products
53
52
89
loo
121
137
147
162
178
220
Construction materials
Cement
23
48
86
loo
134
159
176
193
207
262
Forestry products
70
100
100
100
124
138
N.A.
N.A.
177
N.A.
Fuelwood
87
100
100
100
100
100
100
100
100
100
Industrial wood
58
65
90
100
167
211
200
200
200
N.A.
- 118 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 39
Indexes of Production of Industrial Commodities in Communist China
1949-57 and 1960
(Continued)
1952 = 100
1955
1956
1957
1960
Commodity
1949
1950
1951
1952
1953
1954
Preliminary
Projected
- Projected
Projected)
Food processing
Vegetable oils
and oilcake
N.A.
N.A.
63
100
123
130
133
160
109
214
Flour
61
58
90
100
115
125
131
143
156
N.A.
Sugar, refined
43
52
65
100
108
121
148
200
276
N.A.
Cigarettes
61
71
77
loo
136
143
136
160
177
N.A.
Paper
29
39
64
loo
115
11.1.9
163
180
176
N.A.
Salt
50
86
go
loo
log
119
129
139
152
190
Pyrites
73
91
91
100
loo
109
N.A.
N.A.
136
N.A.
Cotton textiles
Cotton yarn
49
66
73
aoo
113
127
111
127
138
16o
Cotton cloth (machine) 44
68
88
loo
108
128
146
155
162
188
Handicraft cloth 27
34
43
100
119
130
114
121
131
151
Defense
61
70
loo
104
65
69
60
48
54
Munitions
76
87
loo
loo
41
43
14.14.
46
54
Weapons
19
70
100
116
134
11.4.5
105
54
54
- 119 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
some chemicals in terms of comparable price ratios with US prices for
similar commodities, where Chinese prices were not available. Avail-
able prices for machinery and equipment were limited, but the use of
a gross value index for machinery and equipment makes such prices
unnecessary. The petroleum index is based on estimated gross value
per ton of petroleum products extracted from natural and shale oil
per ton, including estimates for imported natural crude oil less the
estimated value of the imported crude.
III. Sector Indexes.
An estimate of GNP for Communist China in 1952 at current prices
is the basis for aggregating industry indexes into major sectors.
A. Agricultural Sector.
Income originating in agriculture was obtained by adjusting
the official figure for gross farm output (49.39 billion yuan) in the
following manner. Gross agricultural output was revalued in terms
of estimated price received by farmers, including the value of home
processing. This estimated value of farm output is about 40 billion
yuan, 82 percent of the official figure. The higher official valua-
tion is believed to be based on the city price for unprocessed grain
or on the producer price for the equivalent in processed grain, both
of which include a transport and trade markup and, in the case of
market sales, a processing charge as well.
Estimates of farm consumption of agricultural materials
(especially feed, seed, and waste) and of materials purchased from
nonfarm sectors were deducted.
The estimate of value added in agriculture is described in
the note to Table 40.*
B. Nonagricultural Sector.
Income originating in the nonagricultural sector is presented
in Table 41** and provides a control figure for income originating in
industry, construction, trade, transportation, and government (30.33
billion yuan). A series of independent estimates of the components***
* Table 40 follows on p. 121.
** Table 41 follows on p. 124.
*** Continued on p. 125.
-120 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 40
Output and Income for the Agricultural Sector of Communist China
1952
Billion Yuan in Current Prices
Gross farm income
Value of farm production 2/*
Subsidiary industry
Less:
Imputed value of
home production
materials including
seed, feed, and waste
Cash purchases of
production materials
other than investment
items 2/
34.08
5.79
39.87
12j 4.77
3.19
-7.96
Value added by farm output 31.91
House rent 1/ 1.68
Total farm income 33.59
* Footnotes for Table 40 follow on p. 122.
- 121 -
Gross cash income 2/
Less:
Cash purchases
of production
materials
Net cash income
Taxes 1/
Investment 5./
Imputed value of
home consumption 12/
Income originating
in farm output
Income originating
including rent
10.20
-5.19
5.01
3.63
2.00
21.27
31.91
33.59
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Table 40
Output and Income for the Agricultural Sector of Communist China
1952
(Continued)
a. Gross agricultural output at farm prices including home processing. This estimate was
obtained in the following manner:
1. The value of gross agricultural output (48.39 billion yuan) at unspecified prices,
broken down between farm and subsidiary output, was obtained from Chinese Communist
announcements.
2. The value of food crop production (26.13 billion yuan) at unspecified prices was
computed on the basis of Communist announcements that taxes on food crops were less than
7 percent of the value of food crops and less than 13 percent of total gross agricultural
output.
3. Food crop output was estimated at 164 million metric tons, in terms of grain
equivalents.
4. The ratio of the estimated value of food crop output to the quantity of food crop
output in metric tons is taken to be the average price of food crops implicit in Communist
announcements.
5. This implicit price was compared to data on retail prices and farm procurement
prices. While a sample of farm procurement prices averages about 65 percent of the city
retail price, the implicit price is 87 percent of the average percent of the city retail
price (or 159,300 yuan per metric ton). The price implicit in the Communist announcements
is probably, therefore, either the city retail price for unprocessed grain or the producer
price for the equivalent in processed grain and includes both home processing and also
some transport, distribution, and additional processing costs.
6. The imputed value of home processing for grain consumed on the farm was assumed
to be 20 percent of the farm procurement price for grain. On this basis average farm
prices, including home processing, are about 72 percent of the city retail prices and
83 percent of the implicit prices given in the Communist figures. Allowing for the fact
that home processing probably is less important for meat and nonfood crops than for grain,
- 122 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 40
Output and Income for the Agricultural Sector of Communist China
1952
(Continued)
it was estimated that the average farm price including home processing was about 80 percent
of the price implicit in Communist announcements.
7. The gross value of farm output including home processing was, therefore, estimated
at 80 percent of he value given in Communist announcements. The value of subsidiary income
in Communist announcements was used without adjustments.
b. Estimated to be about 14 percent of the value of farm crops at farm procurement prices.
c. Estimated to be 8 percent of the value of farm and subsidiary output on the basis of a
study of rural income in Shantung Province.
d. Rent is estimated to be 5 percent of total farm income and 11 percent of urban income
on the basis of income and expenditure studies.
e. Gross farm cash income (10.20 billion yuan)
(15.42 billion yuan
less the expenditure of persons classified as ru
culture (estimated to be 5.42 billion yuan on t
cash savings of 2 percent.
f. Taxes on food crops are given as less than 7 percent of gross agricultural output.
Taxes on all crops are estimated at 9.1 percent of gross output. This estimate exceeds the
figure for agricultural taxes included in the Chinese Communist budget by more than 1 billion
yuan, reflecting the difference between the tax accounting price and the farm price used
for valuing farm output.
g. Estimates at 2 billion yuan a year in the Chinese Communist press.
h. Obtained by deducting the imputed value of home-produced materials (4.77 billion
yuan), gross farm cash income (10.20 billion yuan), and the value of agricultural taxes
#(3.63 billion yuan) from gross farm output (39.87 billion yuan).
equals total cash
ral but
he basis
purchases in rural areas
- see Table 44, p. 131, below,
not primarily employed in agri-
of employment data), plus estimated
- 123 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
IA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 41
Income Originating in the Nonagricultural Sector
of Communist China
1952
Billion Yuan in Current Prices
Income originating 35.15
Retail sales 27.67
Sales to government
for investment 8.13
Sales to government
for services and military
establishments 8.36
Total sales
Less:
Purchases from farmers
Taxes
Cash purchases
Gross value added for
producing sectors,
transport, trade,
and government
44.16
3.63
10.20
30.33
Rent 21 2.37
Consumer services
including those in
rural areas by
nonfarmers 12/
2.45
Total output 35.15
a. 11 percent of income after subtracting total government income of
13.63 billion yuan.
b. Based on consumption expenditures for transpOtt, medical, educa-
tional, and recreational services; for domestic and personal services
the expenditures are based on estimated labor force in these occupations.
- 124 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
SECRET
of this broad sector have been made assuming certain markups for
trade and for commodity taxes. The sum of the individual estimates
(presented in Table 42) can be compared to this over-all control
figure. The more detailed estimates were necessary to move the
indexes on the basis of commodity estimates.
Table 42
Income Originating in the Nonagricultural Sector
(Excluding Consumer Services and Rent)
of Communist China
1952
Billion Yuan in Current Prices
Sector
Gross Value
(Including Indirect Taxes)
Value Added
Modern industry
(except food processing)
Food processing
(including meat
17.66
6.37
slaughtering)
8.52
1.00
Handicraft (except food
processing)
3.47
0.77
Total industry
34.32
9.44
Modern transport
and telecommunications
1.19
Trade, native transport,
and other business
services
10.96
Construction
1.95
Government
3.87
Indirect taxes
4.00
Total
31.41
- 125 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
The sum of the individual value-added estimates in Table 42
is 3.5 percent higher than the control figure for those sectors
presented in Table 41. This difference is of such a small magnitude
that the value-added estimates lend support to the control figure
derived from the end-use estimate.
The sum of computed gross values of industrial commodities
was 16 percent lower than the official figure for gross industrial
production. The difference between the sum of the estimates and the
official figure probably is due for the most part to the fact that
part of handicrafts output could not be directly measured and that
the producer prices derived from wholesale prices may have been too
low. The official figure was therefore accepted as a measure of
gross industrial output. The independent estimate of value added by
trade was based on estimated markdowns of available city market
prices and on a breakdown of expenditures based on data of state
trading charges as percentages of total net commodity turnover in
state trade.
For purposes of weighting indexes of output by sector of
origin to estimate changes in GNP, the percentages of the total in
Table 42 were applied against the control figure of 30.33 billion
yuan.
Estimates of components of the nonagricultural sector are
as follows:
1. Industry.
Wherever possible, the gross value of output of the
components of the modern sector was obtained by pricing the physical
output of industrial commodities and services. Considerable data
are available on the output of leading commodities in the modern
industrial sector. These production figures are subject to error
but are quoted regularly in the Chinese Communist press and in many
cases can be compared to prewar data and with data on available plant
facilities. Price quotations for producer goods are fewer and less
representative than those for agricultural commodities and consumer
goods. In the case of some metals, world prices were used to deter-
mine the price of domestic output because a substantial portion of
the output of these metals is exported. Other industrial subgroups
could not be priced at all, and their gross value had to be estimated
in indirect ways.
- 126 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Value added for the various components was obtained in
three different ways: (1) the direct valuation of wages and other
factor costs; (2) the deduction of purchases of materials, transport
services, and the like, from gross value; and (3) the use of pre-
Communist Manchurian analogy. In order to obtain a measure of factor
cost, the approximate value of indirect taxes was subtracted from
total value added on the basis of commodity tax rates.
Direct estimates of gross value and costs were made for
cotton textiles, electric power, and iron and steel. The gross
value of output for coal, petroleum, nonferrous metals, ferrous
metals other than iron and steel, industrial chemicals, cement, rub-
ber products, cigarettes, paper and pulp, and printing was directly
estimated, but the percentage of gross value that is value added is
based either on an analogy to Manchurian industry in 1941 or on
independent estimates. Engineering output was valued on the basis
of a Communist statement that it constituted 5.2 percent of indus-
trial output in 1952. Weapons and ammunition were valued in dollars
and then converted on the basis of an estimated yuan-dollar ratio
for such output. Gross value of miscellaneous textiles, ceramics
other than cement, and chemicals other than industrial chemicals
was estimated on the basis of their probable value in relation to
those commodities within the general industry.
The absence of production information for some components
of the food industries and the lack of an adequate basis upon which
to allocate the output among modern industry, handicraft workshops,
and individual handicraft restricts the usefulness of the food-
processing measures. The indexes of flour, edible vegetable oils,
and refined sugar were employed to project the food sector to 1960.
The weights used were as follows: flour, 1.01 billion yuan, vege-
table oils, 5.66 billion yuan; sugar, 2.99 billion yuan; and wine,
grain polishing, and miscellaneous food-products, represented by
the flour index, 4.13 billion yuan. Individual handicraft is esti-
mated to account for 2.5 billion yuan by value in these catepries.
Table 39* presents the production indexes used and
Table 43** the gross value and the value-added weights used to
derive gross value and value-added indexes for industrial output.
* P. 118, above.
** Table 43 follows on p. 128.
- 127 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 43
Valuation of Industrial Production in Communist China
1952
Billion Yuan in Current Prices
Industry
Value Added
Gross Value
Metals
Nonferrous
Ferrous
Energy
0.11
1.25 2/*
0.17
1.96
Coal
0.80
1.10
Petroleum
0.21
0.35
Electric Power
0.71
0.87
Engineering
0.63
1.4l
Military end items
0.20
0.68
Food processing
Modern
0.29
2.50
Handicraft workshops
0.41
3.50
Industrial chemicals
0.07
0.27
Rubber products
0.16
0.39
Cement and limestone
0.10
0.19
Lumber
0.21
0.72
Salt
0.12
0.85
Paper and pulp
0.23
0.35
Textiles
Cotton yarn
0.45
2.33
Cotton cloth (machine)
0.26
1.39
* Footnotes for Table 43 follow on p. 129.
- 128 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 43
Valuation of Industrial Production in Communist China
1952
(Continued)
Billion Yuan in Current Prices
Value Added
Gross Value
Cotton cloth (handicraft)
0.31
1.59
Other textiles (yarn index)
0.36
1.44
Cigarettes
0.22
1.15
Printing 12/
0.17
0.64
Matches
0.07
0.18
Total
7.34
24.03
a. Including value added for metallurgical coke.
b. Machine-made paper index used.
2. Individual Handicraft.
To estimate trends in the output of individual handi-
craft, the gross value series available from Communist aggregate
figures was used for 1949, 1952-54, and 1957. The years 1950 and
1951 were interpolated on the basis of gross value for consumer goods
from the industrial index. The year 1955 was assumed constant in
relation to 1954, and a constant rate of increase from 1955 to 1957
was projected to 1960. Value added was estimated from sample data,
and labor force income was assumed to be 30 percent of the gross
value of output or 2.19 billion yuan in 1952.
3. Modern Transport and Telecommunications.
The index for modern transport was derived from an esti-
mated value added per ton-kilometer and per passenger-kilometer for
rail, highway, and water transportation. To this was added an index
of estimated gross revenue for posts and telecommunications with a
value-added weight of 0.14 billion yuan. The value added for modern'
transport and communications totaled 1.43 billion yuan in 1952.
- 129 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
4. Construction, Government, and Other Services.
Value added by construction was estimated from wages and
the relation of profits to wages and projected by the index for
cement output. An index for government services was constructed from
budget data for nonmilitary government administration and deflated by
a price index. For military expenditures, trends in the number of
men under arms were used against estimated 1952 budget expenditures
for pay and allowances. Miscellaneous consumer services and urban
house rent were projected by the trade index, and rural house rent
was projected by the index for agriculture.
III. Indexes by End Use.
Table 44* presents estimates of GNP by end use and summarizes the
estimates introduced in Table 4o and Table 41.
The end-use estimate of Communist China's GNP in 1952 is calcu-
lated from: announced retail sales, the government budget, the
imputed value of farm home consumption, and estimates of house rent
and miscellaneous services. Announced retail sales include sales
to consumers, sales of production materials to peasants, and goods
sold to enterprises for their own use (which is reported as not
large). These totals are subdivided into urban and rural sales.
The budget forms the base for estimates of government investment
and government purchases. The imputed value of farm home con-
sumption is estimated indirectly by subtracting the value of
imputed home production materials and cash income (based on the
rural retail sales figure) from the estimated value of farm output
at farm prices. Finally, the estimate of house rent and miscella-
neous consumer services was made on the basis of typical rural and
urban consumption expenditures together with an estimate of the
portion of the labor force in these personal consumer services.
A. Index of Consumer Goods.
The index of estimated final sales to consumers is based
on allocations of output by value which is also consistent with
reported consumption patterns in rural and urban areas. The com-
ponents of the index are as follows: food, 64.o percent, projected
by the food crops index; clothing, 9.8 percent, projected by the
* Table 44 follows on p. 131.
- 130 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 44
Estimated Gross National Product in Communist China
by End Use
1952
Billion Yuan in Current Prices
Consumption expenditures
Consumer goods
Farm imputed home consumption 2/*
Cash purchases by farmers and
others in rural areas
Less:
Purchases of raw materials,
tools, and investment items
by farmers 12/
Investment items
Raw materials for agriculture
and supplementary industry
2.00
3.19
15.42
Subtotal nonconsumption cash
purchases 5.19 -5.19
Cash purchases in rural areas
of consumer goods
Cash purchases in urban areas 12/
21.27
10.23 10.23
12.25
Total purchases of consumer
goods 43.75 43.75
Consumer services (other than government-
supported)
House rent
Rural 1.68
Urban 2.37
* Footnotes for Table 44 follow on p. 132.
- 131-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
IA-RDP79R01141A000600110001-1
S-E-C-R-E-T
Table 44
Estimated Gross National Product in Communist China
by End Use
1952
(Continued)
Billion Yuan in Current Prices
Miscellaneous consumer services
Total consumer services
Total consumption expenditures
Government expenditures
2.45
6.50 6.50
50.25 50.25
Investment 8.13
Military expenditures 5.01
Education, health, and propaganda
including student subsidies 1.78
Administrative expenditures 1.57
Total government expenditures 16.49 16.49
Private investment on farms 2.00 2.00
Total GNP at market prices 68.74
a. Obtained by deducting the imputed value of home-produced materials
(4.77 billion yuan), gross farm cash income (10.20 billion yuan) and the
value of agricultural taxes (3.63 billion yuan) from gross farm output
(39.87 billion yuan).
b. Investment estimated at 2 billion yuan a year for peasants out of
own income (from the Communist press). 8 percent of the value of farm
and subsidiary output is estimated to be purchases of materials for
current production (based on a study of Shantung rural income).
c. Based on income and expenditures studies of rural and urban areas,
rent in rural areas is estimated at 5 percent of net farm income and
in urban areas 11 percent of urban income.
- 132 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
S-E-C-R-E-T
yarn index; fuel, 2.0 percent, projected by indexes for fuelwood,
kerosine, and coal; tobacco, 3.0 percent, projected by the cigarette
index; wine and other food products, 3.0 percent, projected by the
food crop index; and miscellaneous (including printing), 3.7 percent,
projected by the paper index.
B. Index for Investment.
The aggregate index for investment is composed of an index
for investment goods, the trade index, and the index for agricultural
output. The investment component of GNP may be subdivided as follows:
private farm investment, 2.00 billion yuan; government investment,
8.13 billion yuan. The latter is estimated to include the following:
basic construction, 4.55 billion yuan; increased inventories, 2.40
billion yuan; and capital repairs, 1.18 billion yuan.
The index for investment goods, employed to project basic
construction and capital repairs, is a weighted composite of steel,
cement, lumber, and engineering output. The indexes for agricultural
output and trade, used to project private farm investment and inven-
tories, respectively, are described above.
C. Index for Government Purchases.
The composite index for government purchases is constructed
from an index for military expenditures and an index for nonmilitary
expenditures. The four components of the latter and their respective
1952 values are as follows: administrative expenditures, 1.31 billion
yuan; cultural expenditures., 0.29 billion yuan; educational expendi-
itures, 0.57 billion yuan; and medical expenditures, 0.26 billion yuan.
The components of the index for military expenditures and their 1952
weights are as follows: personnel, 1.77 billion yuan; weapons and
ammunition domestically produced, 0.68 billion yuan; weapons and
ammunition imported, 0.54 billion yuan; petroleum, 0.34 billion yuan;
electrical equipment, 0.29 billion yuan; and transport and tele-
communications, 0.28 billion yuan.
-133-
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
R
Next 9 Page(s) In Document Denied
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
50X1
66
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
mom
72 78 84 90 96 102 108 114 120 126
132
138
48
Hobsogol
Dalay
78
84
90
96
COMMUNIST CHINA
ADMINISTRATIVE DIVISIONS
MARCH 1956
??????? International boundary SHANGHAI SHIH Centrally-governed municipality (th,h)
?x?x? International boundary, indefinite ? National capital
Province or autonomous-region boundary 0 Province or autonomous-region capital
0 100 200
Scale 1.10,000,000
300 400 500 600
Statute Miles
0 100 200 300 400 500 600
Kilometers
1?+
24
102 108
0012'2 1.cg
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03: CIA-RDP79R01141A000600110001-1
Boundaries are not necessarily those
recognized by the U.S. Government.
114 120
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1
SECRET
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2013/07/03:
CIA-RDP79R01141A000600110001-1