THE GROSS NATIONAL PRODUCT OF COMMUNIST CHINA 1952-60

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A002100130001-2
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 46
• Document Creation Date: December 23, 2016
• Document Release Date: July 11, 2013
• Sequence Number: 1
• Publication Date: September 1, 1961
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
CONFIDENTIAL 3
Economic Intelligence Report
THE GROSS NATIONAL PRODUCT
OF COMMUNIST CHINA
1952-60
CIA/RR ER 61-41
September 1961
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
CONFIDENTIAL
Economic Intelligence Report
THE GROSS NATIONAL PRODUCT
OF COMMUNIST CHINA
1952-60
CIA/RR ER 61-41
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.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C -0-N-F- I-D-E-N-T- I- A-L
CONTENTS
Page
The Gross National Product of Communist China, 1952-60 . .
Appendixes
Appendix A. Statistical Tables
Appendix B. Methodology for Estimating the Gross National
Product of Communist China
1. Introduction
2. Basic National Accounts, 1952 and 1957-59 .
3. Gross National Product, by Sector of Origin,
1952-60
4. Special Problems Relating to the Estimates of
GNP
5
17
17
18
35
39
Tables
1. Communist China: National Income and Product Account,
1952 and 1957-59
2. Communist China: Personal Income and Expenditures Ac-
count, 1952 and 1957-59
7
8
3. Communist China: Government Receipts and Expenditures Ac-
count, 1952 and 1957-59 9
4. Communist China: Foreign Transactions Account, 1952 and
1957-59
5. Communist China: Gross Saving and Investment Account,
1952 and 1957-59
6. Communist China: Gross National Product, by Sector of
Origin, 1952-60
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
7. Communist China: Per Capita Gross National
Product, 1952-60
8. Communist China: Production of Major
tural Commodities, 1952 and 1957-60
9. Communist China: Production of Major
Commodities, 1952-60
Agricul-
Industrial
10. Communist China: Calculation of Changes in In-
ventories in Trade, Selected Years, 1951-59 . .
Charts
Figure 1. Communist China: Total and Per Capita
GNP, 1952-60
Figure 2. Communist China: Indexes of Growth of
GNP and of Major Economic Sectors,
1952-60
Figure 3. Communist China: Comparison of Increases
in Official National Income Statistics
and Estimates of GNP, 1952-59
- iv -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Page
13
14
15
33
Following Page
2
2
4
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-O-N-F-I-D-E-N-T-I-A-L
THE GROSS NATIONAL PRODUCT OF COMMUNIST CHINA*
1952-60
The Chinese Communist economy has expanded at a rapid rate since
1952, although not so rapidly as claimed in official Chinese statistics.
Gross national product (GNP), valued in constant (1957) market prices,
is estimated to have been 79.2 billion yuan in 1952 and 151.1 billion
yuan in 1960,** an average annual increase of 8.4 percent*** for the
8 years. Per capita GNP increased at an average annual rate of 5.9 per-
cent during this period.t The trend in total and per capita GNP, 1952-60,
is shown in the chart, Figure 1.tt
In spite of remarkable economic achievements since 1952, per capita
GNP remains small, and Communist China is still far behind Japan, the
USSR, and industrialized nations of the West in terms of quality and
diversity of industrial production and mastery of modern technology.
The economic program was seriously disrupted in 1960 by the second con-
secutive year of poor harvestl.by the sudden withdrawal of Soviet tech-
nicians, and by the accumulated problems in planning and organization
which stemmed from the excesses of the "leap forward" policy. ttt
The rapid growth of the modern sectors of the economy -- industry,
construction, and transportation and communications -- and the contrast-
ing slow and erratic expansion of agriculture are depicted in the chart,
Figure 2.tt Industrial production expanded at an average annual rate of
almost 20 percent during 1952-60, and the expansion of heavy industrial
* The estimates and conclusions in this report represent the best
judgment of this Office as of 1 August 1961.
** For estimates of GNP in constant (1957) market prices, see Tables 6
and 7, Appendix A, pp. 12 and 13, respectively, below. The figure for
1960 is a preliminary estimate. Based on a comparison of US and Chinese
Communist prices, the preliminary estimate of GNP in 1960 is roughly
equivalent to US $86 billion. (All dollar values in this report are in
terms of 1960 US dollars.)
xxx Measured in terms of the US price structure, the increases in GNP
and industrial production achieved during 1952-60, although still im-
pressive, would be significantly lower than those shown by valuation in
yuan.
t Per capita GNP in 1960 was roughly equivalent to 1960 US $125,
based on a comparison of US and Chinese Communist prices.
tt Following p. 2.
ttt The term leap forward as used in this report refers to the regime's
policy, instituted in 1958 and carried over into 1959 and early 1960 in
milder form, of working men and machines at maximum speed with only
secondary concern for the quality and balanced proportioning of output.
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
production was even faster. The industrial sector constituted almost 27
percent* of GNP (at factor cost) in 1960 compared with 12 percent in 1952.
The agricultural sector accounted for 35 percent of GNP in 1960 compared
with 58 percent in 1952.* Production in the agricultural sector in 1960
was only about 11 percent above the level of 1952 and, on a per capita
basis, about 8 percent below the level of 1952.
A principal explanation of the rapid growth of the GNP of Communist
China lies in the allocation of a large and increasing share of GNP to
investment. The expansion of the share of investment in GNP and the off-
setting contraction of the share of consumption are shown in the following
tabulation of the distribution of GNP, by end use, in 1952 and 1957-59:
Percent
End Use
1952
1957
1958
1959
Government purchases of
goods and services
10.9
10.3
8.8
9.4
Net exports of goods and
services
-0.4
o.8
O.
0.5
Gross domestic investment
15.1
20.9
29.5
32.6
Personal consumption ex-
penditures
74.4
68.0
61.3
57.5
Gross national product
(in current domestic
market prices)
100.0
100.0
100.0
100.0
This rapidly increasing investment has been directed mainly toward heavy
industry rather than toward light industry, agriculture, housing, and
consumer services. The share of GNP allocated to government uses de-
clined during this period because military expenditures declined from
about 6.5 percent of GNP in the Korean War year of 1952 to about 4.9
percent of GNP in 1959. Consumption and government uses, although de-
clining as a proportion of GNP, have increased in absolute terms during
these years. Net imports of goods and services were equivalent to 0.4
percent of GNP in 1952, representing Soviet credits used to import mili-
tary and industrial goods. By 1957 the Soviet credits were virtually ex-
hausted, and net exports in 1957-59 were needed to repay the Soviet debt
and to finance China's foreign aid program.
* Measured in terms of the US price structure, the agricultural contri-
bution to GNP would be somewhat larger and the industrial contribution
somewhat smaller than that shown by valuation in yuan.
- 2 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
COMMUNIST CHINA: Total and Per Capita GNP, 1952-60
TOTAL GNP
(Billion /957 Yuan)
79.2 _.-
86.6
89.8 _
94.3
05.5
45.4 _
151.1
1952 1953 1954 1955 1956 1957 1958 1959 1960
(Preliminary)
PER CAPITA GNP
(1957 Yuan)
139 149
151 154
169? 172
201 _
216
219
35362 8-61
1952 1953 1954 1955 1956 1957 1958 1959 1960
(Preliminary)
Figure 1 50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
COMMUNIST CHINA
Indexes of Growth of GNP
and of Major Economic Sectors, 1952-60
1952 1953 1954
35363 8-61
1955
1956
1957
1958
50X1
Figure 2
CONSTRUCTION
INDUSTRY
TRANSPORTATION AND
COMMUNICATIONS
TRADE AND
MISCELLANEOUS
BUSINESS SERVICES
GROSS NATIONAL
PRODUCT
(at market prices)
PERSONAL SERVICES AND
HOUSING SERVICES
GOVERNMENT SERVICES
AGRICULTURE
1959 1960
(Preliminary)
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Chinese Communist success in the basic policy of restricting in-
creases in consumption while rapidly expanding investment has in large
part resulted from the extension and refinement of government control
over manpower and materials. The rapid rise in the proportion of GNP
originating in state enterprises -- from 8.3 percent in 1952 to 24.7
percent in 1959 -- reflects the primary method of extending state con-
trol over the economy. Other ways in which state control has been pro-
gressively extended under the Communist regime are the following:
1) the allocation of major commodities according to the state plan,
2) the rationing of grain and cotton cloth to consumers, (3) the regula-
tion of prices, (4) the control over credit through the state banking
system and credit cooperatives, and (5) the collectivization of agricul-
ture.
Economic growth in Communist China has not been as great as claimed.
The chart, Figure 3,* presents a comparison of Chinese claims of increases
in national income and estimates (used in this report) of increases in GNP
for 1952-59. Conceptual differences between the Chinese measurement of
nationAl income and the estimates of GNP in this report partially explain
the differing rates of economic growth. The Chinese measurement of na-
tional income, for example, excludes most if not all of the income from
personal services, housing, and government services. Income originated
by these services has expanded slowly since 1952 (see Figure 2**). The
major factor explaining these differing rates of growth, however, is the
assessment of progress of agricultural production. The Chinese have
claimed that the gross value of agricultural production in 1959 was more
than 80 percent higher than in 1952. The estimates of the gross value
of agricultural production used in this report indicate that the increase
was only about 21 percent.***
Numerical estimates of the GNP of Communist China and of the compo-
nents of GNP are presented in Tables 1 through 7, Appendix A.t The
method used to estimate the GNP is summarized in Appendix B.
Following p. 4.
** Following p. 2, above.
*** It should be noted that value added in agriculture has increased
only about 16 percent between 1952 and 1959 compared with the 21-percent
increase in the gross value of agricultural production.
t Pp. 7 through 13, below.
- 3 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
250
200
150
100
COMMUNIST CHINA
Comparison of Increases in Official National Income Statistics
and Estimates of GNP, 1952-59
Figure 3 50X1
Chinese Claims of Increase
in National Income
Estimate of Increases
in Gross National Product
1952
1953
1954
1955
1956
1957
1958
1959
PERCENTAGE INCREASES OVER THE PRECEDING YEAR
35364 8-61
4.0
9.3
ED Chinese Claims
E3 Estimates
5.7
1953 1954
1955
14.0
1956
4.6. 4.3
Fri
1957
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
34.0
21.6
19.8
10.3
1958 1959
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
APPENDIX A
STATISTICAL TABLES
Tables 1 through 5 in this appendix* are modeled after the so-called
"five-account system" of the US Department of Commerce.** The various
segments of economic activity in Communist China are aggregated to give
the following accounts: (1) gross national product (GNP), (2) personal
income and expenditures, (3) government receipts and expenditures,
(4) foreign transactions, and (5) saving and investment. Each segment
of economic activity appears in two places, the system operating accord-
ing to the fundamental principle of double-entry bookkeeping.
Table 6*** gives GNP by sector of origin, in constant 1957 prices.
Table 7t combines these estimates of GNP with estimates of population to
give estimates of GNP per capita. Tables 8 and 9tt present estimates of
production of major agricultural and industrial commodities, respectively.
* Pp. 7 through 11, below.
50X1
*** P. 12, below.
t P. 13, below.
tt pp. 14 and 15, respectively, below.
- 5 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Table 1
Communist China: National Income and Product Account
1952 and 1957-59
Billion Current Yuan
Item
Number
1952
1957
1958
1959
1
Compensation of employees (see Table 2, item 10)
'9.3
18.8
21.2
25.4
2
Agricultural income
39.1
47.5
52.9
51.5
3
Agricultural taxes (see Table 3, item 9)
2.9
3.4
3.7
3.7
4
Agricultural income (after taxes) (see Table 2, item 16)
36.2
44.1
49.2
47.8
5
Income of nonstate nonagricultural enterprises
7.6
10.4
11.0
9.3
6
Income taxes (see Table 3, item 11)
o.8
1.8
1.4
7
Income (after taxes) (see Table 2, item 17)
6.8
8.6
9.6
9.3
8
Income of state enterprises
6.1
15.4
24.9
37.2
9
Dividends to former owners of private enterprises
(see Table 2, item 15)
0
0.1
0.1
0.1
10
Undistributed (to persons) income (see Table 5, item 7)
6.1
15.3
24.8
37.1
11
Rental income and personal service income (see Table 2, item 18)
5.0
7.1
7.6
8.3
12
Indirect taxes (see Table 3, item 12)
6.3
10.7
14.1
17.2
13
Statistical discrepancy (see Table 5, item 14)
0.6
1.3
1.6
1.5
Gross national product
74.0
111.2
133.3
150.4
14
Personal consumption expenditures (see Table 2, item 1)
55.0
75.7
81.8
86.6
15
Gross domestic investment (see Table 5, item 1)
11.2
23.2
39.3
49.o
16
Net exports of goods and services
-0.3
0.9
0.5
0.7
17
Exports (see Table 4, item 1)
3.2
5.8
6.8
7.9
18
Imports (see Table 4, item 2)
3.5
4.9
6.3
7.2
19
Government purchases of goods and services (see Table 3, item 1)
8.1
11.4
11.7
i4.1
Gross national product
74.0
111.2
133.3
150.4
- 7 -
c -0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Table 2
Communist China: Personal Income and Expenditures Account
1952 and 1957-59
Billion Current Yuan
Item
Number
1952
1957
1958
1959
1
Personal consumption expenditures (see Table 1, item 14)
55.0
75.7
81.8
86.6
2
Farm home consumption-in-kind
23.9
26.8
29.1
26.2
3
Retail sales to consumers
24.6
40.6
43.8
50.7
4
Wages-in-kind of government employees
0.7
0
0
0
5
Agricultural consumer services and house rent
2.4
2.8
3.0
3.1
6
Nonagricultural consumer services
1.9
3.6
3.9
4.5
7
Nonagricultural house rent
1.5
1.9
2.0
2.1
8
Personal tax and nontax payments (see Table 3, item 10)
0.4
0.4
0.3
0.4
9
Personal saving (see Table 5, item 13)
2.5
3.7
6.2
6.1
Personal expenditures and saving
57.9
79.8
88.3
93.1
10
Compensation of employees (see Table 1, item 1)
9.3
18.8
21.2
25.4
11
Workers and salaried employees
12
Wages and salaries
7.4
15.3
17.6
21.5
13
Supplements
0.5
1.6
1.6
1.8
14
Military, including supporting, personnel
1.4
1.9
2.0
2.1
15
Dividends to former owners of private enterprises
(see Table 1, item 9)
0
0.1
0.1
0.1
16
Agricultural income (after taxes) (see Table 1, item 4)
36.2
44.1
49.2
47.8
17
Income (after taxes) from nonstate nonagricultural enterprises
(see Table 1, item 7)
6.8
8.6
9.6
9.3
18
Rental income and personal service income (see Table 1, item 11)
5.0
7.1
7.6
8.3
19
Agricultural consumer services and house rent
2.4
2.8
3.0
3.1
20
Nonagricultural personal services
1.4
2.7
2.9
3.4
21
Nonagricultural house rent
1.2
1.6
1.7
1.8
22
Government transfer payments (see Table 3, item 5)
0.6
1.0
0.5
2.1
23
Personal interest income (see Table 3, item 6)
2/
0.1
0.1
0.1
Personal income
57.9
79.8
88.3
93.1
a. Less than 50 million yuan.
- 8 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
Table 3
Communist China: Government Receipts and Expenditures Account
1952 and 1957-59
Billion Current Yuan
Item
Number
Purchases of goods and services (see Table 1, item 19)
1952
1957
1958
1959
1
8.1
11.4
11.7
14.1
2
Military
4.8
6.3
6.0
7.3
3
Health and education
1.3
2.8
3.2
3.8
4
Administration
2.0
2.3
2.5
3.0
5
Transfer payments (see Table 2, item 22)
0.6
1.0
0.5
2.1
6
Interest paid to persons (see Table 2, item 23)
2,/,
0.1
0.1
0.1
7
Interest paid to foreign governments (see Table 4, item 3),
21
0.1
0.1
2/
8
Surplus on income and product account (see Table 5, item 12)
1.7
3.7
7.1
5.0
Government expenditures and surplus
10.4
16.3
19.5
21.3
9
Agricultural taxes (see Table 1, item 3)
2.9
3.4
3.7
3.7
10
Personal tax and nontax receipts (see Table 2, item 8)
0.4
0.4
0.3
0.4
11
Income taxes from nonstate nonagricultural enterprises
(see Table 1, item 6)
0.8
1.8
1.4
o
12
Indirect taxes (see Table 1, item 12)
6.3
10.7
14.1
17.2
Government receipts
10.4
16.3
19.5
21.3
a. Less than 50 million yuan.
- 9 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Table Ii-
Communist China: Foreign Transactions Account
1952 and 1957-59
Billion Current Yuan
Item
Number
1952
19>7
1958
1959
1
Exports of goods and services (see Table 1, item 17)
3.2
5.8
6.8
7.9
Receipts from abroad
3.2
5.8
6.8
IL2
2
Imports of goods and services (see Table 1, item 18)
3.5
4.9
6.3
7.2
3
Interest paid to foreign governments (see Table 31 item 7)
2/
0.1
0.1
2/
14
Net foreign investment (see Table 51 item 6)
-0.3
0.8
0.4
0.7
Payments abroad
3.2
5.8
6.8
LU
a. Less than 50 million yuan.
- 10-
Declassified in Part - Sanitized Copy Approved for Release 2013/97/11: CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Table 5
Communist China: Gross Saving and Investment Account
1952 and 1957-59
Billion Current Yuan
Item
Number 1952 1957 1958 1959
1 Gross domestic investment (see Table 1, item 15) 11.2 23.2 39.3 49.0
2 "Peasant" investment 1.3 2.1 5.6 6.3
3 Budgeted investment 5.0 13.8 24.0 29.3
4 Extrabudgetary investment 1.0 2.0 5.3 5.0
5 Changes in inventories 3.9 5.3 4.4 8.4
6 Net foreign investment (see Table 4, item 4) -0.3 0.8 o.4 0.7
Gross investment 10.9 24.0 1 49.7
7 Undistributed (to persons) income of state enterprises
(see Table 1, item 10) 6.1 15.3 24.8 37.1
8
9
Remitted to the state treasury
Retained by central government ministries, local
governments, and enterprises
10 Major repair funds
11 Other funds
12 Government surplus on income and product account
(see Table 3, item 8) 1.7
13 Personal saving (see Table 2, item 9) 2.5
14 Statistical discrepancy (see Table 1, item 13) 0.6
Gross saving and statistical discrepancy
5.6 14.0 21.9
0.5 1.3 2.9
0.4 1.0 1.3
0.1 0.3 1.6
3.7
3.7
1.3
7.1
6.2
1.6
5.0
6.1
1.5
10.9 24.0 39.7 49.7
-11-
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
33.3
3.8
1.6
2.2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
Table 6
Communist China: Gross National Product, by Sector of Origin
1952-60
Billion 1957 Yuan
Economic Sector
1952
1953
1954
1955
1956
1957
1958
1959
1960 2/
Agriculture
42.1
42.6
41.2
44.2
46.3
47.5
51.7
48.7
46.7
Industry
8.6
10.7
12.5
12.6
15.6
17.6
25.6
32.6
36.5
Construction
1.7
2.8
3.1
3.4
4.6
4.2
6.3
7.5
7.5
Transportation and communications
3.7
4.5
5.3
5.6
6.6
7.3
9.3
12.4
l4.4
Trade and miscellaneous business services
6.3
7.2
7.9
8.3
9.7
9.9
11.6
13.3
13.6
Personal services and housing services
5.6
6.1
6.3
6.4
6.9
7.1
7.5
8.0
8.2
Government services
5.0
5.3
5.2
5.4
5.8
5.7
5.8
6.0
6.2
Gross national product (at factor cost)
73.0
79.2
81.5
85.9
95.5
99.3
117.8
128.5
133.1
Indirect taxes
6.2
7.4
8.3
8.4
10.0
10.7
14.0
16.9
18.0
Gross national product (at market prices)
79.2
86.6
89.8
94.3
105.5
110.0 y
131.8
145.4
151.1
Index of gross national product
Previous year = 100
109
104
105
112
104
120
110
104
1952 = 100
100
109
113
119
133
139
166
184
191
a. Preliminary estimates -- no general economic report covering 1960 has been issued by the Chinese Communist
government.
b. This gross national product total for 1957 is 1.2 billion yuan lower than the gross national product total in
Table 1 (p. 7, above) because the statistical discrepancy has not been included. The estimates for the years
other than 1957 are derived from the figures for 1957 and are in 1957 prices; consequently, there is no problem
of a statistical discrepancy for these years.
- 12 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Table 7
Communist China:
Per Capita Gross National Product
1952-60
1952
1953
1954
1955
1956
1957
1958
1959
1960 2/
Gross national product (billion 1957 yuan)
79.2
86.6
89.8
94.3
105.5
110.0
131.8
145.4
151.1
Population (million persons at midyear)
570
583
596
611
626
641
657
674
689
Per capita gross national product (1957 yuan)
139
149
151
154
169
172
201
216
219
Index of per capita gross national product
(1952 = 100)
100
107
109
111
122
124
145
155
158
a. Preliminary estimates -- no general economic report covering 1960 has been issued by the Chinese Communist
government.
- 13 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Table 8
Communist China: Production of Major Agricultural Commodities
1952 and 1957-60
Million Metric Tons
Commodity
1952
1957
1958
1959
1960 2/
Rice
75
87
99
90
90
Wheat
22
24
29
28
20
Other grains
53
53
51
46
45
Tubers (grain equivalent)
18
22
33
26
30
Total grains
168
18512/
212
190
180 to 190
Soybeans
9.5
10.0
9.8
9.5
9.0 to 9.5
Peanuts
2.3
2.6
2.8
2.3
2.1
Rapeseed
0.93
0.89
1.10
0.95
1.03
Sesame seed
0.52
0.31
0.37
0.38
0.35
Cotton (ginned)
1.3
1.6
2.1
1.8
1.8
Tobacco (flue-cured)
0.22
0.26
0.38
0.42
0.43
Vegetables 45 62 56 70 65
Meat sj 5.1 5.6 5.8 5.6 5.2
a. Preliminary estimates -- no general economic report covering 1960
has been issued by the Chinese Communist government.
b. Because of rounding, components do not add to the total shown.
c. Pork, beef (including buffalo), mutton and goat, and poultry.
- 14 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Table 9
Communist China: Production of Major Industrial Commodities
1952-60
Commodity
Crude steel
Coal
Crude oil
Electric power
Machine tools 2/
Trucks
Tractors
Cement
Timber
Paper (machine-made)
Chemical fertilizer /
Sulfuric acid
Cotton cloth 2/
Cigarettes
Salt
Unit 1952 1953 1954 1955 1956 1957 1958
Million metric tons 1.35 1.77 2.22 2.85 4.46 5.35 8.0
Million metric tons of
standard fuel equiva-
lents -12/ 61.7 64.7 77.7 91.3 102.5 121.4 213.3
Million metric tons 0.44 0.62 0.79 0.97 1.16 1.46 2.26
Billion kilowatt-hours 7.26 9.2 11.0 12.3 16.6 19.3 27.5
Thousand 13.7 20.5 15.9 13.7 25.9 28.3 30
Thousand 0 0 0 0 1.6 7.5 15.5
Thousand 0 0 0 0 0 0 1
Million metric tons 2.86 3.88 4.60 4.56 6.39 6.86 9.30
Million cubic meters 11.2 17.5 22.2 20.9 20.8 27.9 35.0
Million metric tons 0.37 0.43 0.55 0.59 0.74 0.91 1.22
Thousand metric tons 39 53 71 85 132 159 266
Thousand metric tons 190 260 344 375 517 632 740
Billion linear meters 3.83 4.69 5.23 4.36 5.77 5.05 5.7
Million cases f/ 2.6 3.6 3.7 3.6 3.9 4.5 4.8
Million metric tons 4.9 3.6 4.9 7.5 4.9 8.3 10.4
1959 1960 2/
13.4 18.4
274.5 296.0
3.7 4.6
41.5 57
33 38
19.4 16.9
5 lo
12.27 14
41.2 43
1.70 1.8
408 500
1,050 1,360
7.5 6.5
5.5 5.5
11.0 14.0
a.
b.
C.
d.
e.
f.
Preliminary estimates -- no general economic report covering 1960 has been issued by the Chinese Communist government.
Standard fuel has a calorific value of 7,000 kilocalories per kilogram.
Machine tools that approximate internationally accepted classifications for metalcutting machine tools.
Chemical nutrient equivalents based on amounts of nitrogen, phosphoric anhydride, and potassium oxide.
Including machine-made and handicraft production.
One case contains 50,000 cigarettes.
- 15 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
APPENDIX B
METHODOLOGY FOR: ESTIMATING ifit GROSS NATIONAL PRODUCT
OF COMMUNIST CHINA
1. Introduction
No single measure is adequate to assess the economic capability of
a country: the choice of a measure depends on the purpose for which
it is needed -- for example, whether for an assessment of military
strength, consumer welfare, or economic growth. The closest approach
to a general measure of the over-all economic strength of a country is
an estimate of the value of all the final (as opposed to intermediate)
goods and services produced during a specified period, usually 1 year.
This measure of total output is called gross national product (GNP).
GNP is estimated through the construction of national accounts for the
economy, in which each segment of economic activity -- such as agri-
cultural production -- is defined, measured, and aggregated.
The system of nationnl accounts used in this report, as noted pre-
viously, is modeled after the five-account system of the US Department
of Commerce. Every major transaction appears twice -- compensation of
employees, for example, appears in the National Income and Product Ac-
count and in the Personal Income and Expenditures Account. The method-
ology used to estimate a given transaction, however, is discussed only
once -- the method used to estimate compensation of employees, for ex-
ample, is discussed under the Personal Income and Expenditures Account
whereas under the National Income and Product Account reference is made
to the discussion under the Personal Account.
The double-entry feature provides a check on the accuracy of indi-
vidual estimates and on the consistency of the relationships among the
five accounts. Wherever possible, the entries were estimated independ-
ently. Where limitations of the data did not permit independent estima-
tion of the entries -- for example, in the case of personal saving,
government surplus on income and product account, and net foreign in-
vestment -- it was necesa'ary to derive the total expenditures of an
account from its total income. In these instances the dependence of
one side of the account on the other explains the absence of a statis-
tical discrepancy.
The precision implied by the set of accounts fails to disclose the
ranges of uncertainty that surround particular estimates within the ac-
counts. The conceptual frame of reference used differs from that em-
ployed by the State Statistical Bureau of Communist China in preparing
- 17 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
official Chinese data. For this reason, it has been necessary in many
instances to adjust the available official data to fit the system of na-
tional accounts used in this report. Furthermore, on occasion it has
been necessary to derive particular estimates as residuals from larger.
reported totals. Both of these operations have been hampered by the lack
of detailed data and of full knowledge of that is included in the reported
totals. In addition, because official data exaggerated claims for in-
creases in production of grain in 1952-54 and production of grain and
other agricultural products in 1958-59, estimates by Western analysts were
employed in these instances. In the earlier period the exaggeration may
have resulted from an inadequate system of statistical collection and re-
porting, which resulted in an understatement of production in the base
year. The gross overstatement of actual agricultural production in
1958-59, however, was clearly the result of the political influences of
the "leap forward." As a result, although the detailed data presented
in the accounts are believed to adequately reflect relative orders of
magnitude, the individual entries should be viewed as having varying de-
grees of uncertainty attached to them.
Lack of data prevented the estimation of the distribution of GNP, in
current prices, by sector of origin for the years after 1957. Data also
are insufficient to provide adequate price deflators for the major end-
use estimates in current prices. For the purpose of indicating trends
in GNP in constant prices, GNP in 1957 prices (see Table 6*) has been
calculated on the basis of an estimate of GNP, by sector of origin, in
1957 and of indexes of production in each of the economic sectors for
the years 1952-60.
2. Basic National Accounts, 1952 and 1957-59
a. National Income and Product Account (Table 1**)
(1) Compensation of Employees
(See b, (10), p. 26, below.)
(2) Agricultural Income
Agricultural income as treated in this report includes the
value added*** by agriculture, forestry, animal husbandry, agricultural
side-occupations, fishery (exclusive of fishing by mechanical means),
* Appendix A, p. 12, above.
** Appendix Al p. 7, above.
*** The value added in any economic sector is the value of production
in that sector minus the value of raw materials and intermediate products
bought from other sectors.
- 18 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
handicrafts in production of goods that were produced and consumed on
the farm, and preliminary processing of agricultural products. This
entry was calculated by subtracting the value of seed and feed grains,
chemical fertilizer, and other products used up in production from the
gross value of agricultural production.
The Chinese Communists have reported the gross value of agri-
cultural production in 1957 to be 64.87 billion yuan in 1957 prices. 2/
Official data on the gross value in 1957 of production of grain, indus-
trial crops, vegetables and other crops, and livestock and livestock
products have been found to be reasonably consistent with estimates of
the gross value of these commodity groups derived by aggregating the
production figures for rice, wheat, hogs, and other agricultural prod-
ucts on the basis of sample farm sale prices in 1957 for these products.
The gross value of agricultural production in 1952 and
1958-59, in 1957 prices, was calculated by summing the gross value of
production of grain, industrial crops, livestock and livestock products,
and the other commodity groups within agriculture. The gross value of
production of grain in 1952 and 1958-59 -- 39 percent of the gross value
of agricultural production in 1957 -- was calculated by multiplying the
gross value of production of grain in 1957 by an index of production of
rice, wheat, other food grains, and soybeans in 1952 and 1958-59 (1957
production equaling 100). This index of production of grain was com-
puted by taking quantity relatives* and weighting by the farm sale price
of each product in 1957. The gross value of production of the other com-
modity groups within agriculture was calculated by the same method used
for grain. The value of products used up in production was calculated
on the basis of (a) data on retail sales of production materials to agri-
culture, 00 estimates of seed and feed grain, and (c) Chinese Communist
claims of gross value and net value of agricultural production in 1955
and 1956.
Agricultural income in 1952 and 1958-59, in 1957 prices,
was converted to current prices on the basis of an index of farm sale
prices. ..31
(3) Agricultural Taxes
This item covers agricultural taxes, which are included in
the state budget, and local surtaxes and levies for village administra-
tion, which are not included in the state budget. Agricultural taxes
included in the state budget in 1952 and 1957-59 and local surtaxes and
levies for village administration in 1957-59 have been reported by the
Chinese Communists. Estimates of local surtaxes and levies for village
* For estimates of production of major agricultural products in 1952
and 1957-60, see Table 8, Appendix A, p. 14, above.
- 19 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
administration in 1952 and 1959 can be derived from other official
data.11/
(4) Agricultural Income (After Taxes)
This entry is the residual after agricultural taxes are
subtracted from agricultural income.
(5) Income of Nonstate Nonagricultural Enterprises
This item includes income originated by (a) state-private,
cooperative, and private industrial and commercial enterprises; 00 native
transportation and handling services; (c) peddlers; and (d) construction
activities of farmers. Rough estimates of income originated by these
enterprises are as follows:
Billion Current Yuan
1952 1957 1958 1959
State-private, cooperative
(except handicraft coopera-
tives), and private enterprises
3.27
2.80
2.15
Nonstate handicrafts (handicraft
cooperatives and independent
handicraftsmen)
1.70
2.87
3.02
Native transportation and hand-
ling services
1.73
3.21
3.71
Peddlers
0.39
0.43
0.43
Construction activities by
farmers
0.46
1.04
1.72
Total
1,22
10.35
11.03
0.10
2.46
4.32
0.43
1.97
9.28
Income originated by state-private, cooperative (except handi-
craft cooperatives), and private enterprises was estimated as follows:
(a) for 1952, on the basis of an estimate of income taxes paid by these
enterprises and a Chinese Communist statement of the ratio of income taxes
to income of these enterprises; 00 for 1957, on the assumption that the
ratio of profits and depreciation reserves to the gross value of produc-
tion of these enterprises was the same as the same ratio for state indus-
trial and commercial enterprises; and (c) for 1958, on the assumption that
income originated in 1958 had the same relationship to income originated
in 1957 as the income taxes paid by these enterprises in 1958 had to simi-
lar income taxes in 1957. By September 1958 the state-private and coopera-
tive enterprises in this group were turning over their income to the state
-20-
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
treasury in the form of profits remittances. Income originated by
private industrial and commercial enterprises in 1959 was very small
and is roughly estimated to be 100 million yuan.
Income originated by nonstate handicrafts in 1952 and 1957
was calculated on the assumption that the value added by handicraft pro-
duction in these years was the same proportion of the gross value of
handicraft production as it was in 1956. The Chinese Communist figure
for net value of handicraft production in 1956 was adjusted (a) to in-
clude depreciation and (b) to exclude indirect taxes. Because of the
industrial reorganization and the formation of communes in 1958, organi-
zational control of handicraft activity changed considerably in 1958 and
1959. Of the units engaged in nonstate handicraft production in 1957,
some units came under full state control in 1958, some units came under
commune control, and some units remained as handicraft cooperatives and
independent handicraftsmen. The estimates for 1958 and 1959 of income
originated by handicraft activity represent rough estimates of the in-
come originated by units that did not come under state control and there-
fore did not remit profits to the state treasury. Budget data provide
figures for taxes on rural industry and commerce for 1957-59, and it was
assumed that income originated in handicraft-type production increased at
roughly the same rate as these taxes. The Chinese Communists have re-
ported that 37 percent of the handicraft cooperatives (according to mem-
bership) had been transformed into state-owned factories by the end of
1958 2/ and that 37.8 percent had been so converted by May 1959. g The
handicraft cooperatives that became state-owned factories probably were
transferred to state ownership in the latter half of 1958. It was as-
sumed, therefore, that only one-third of income originated in 1958 by
these units went to the state. On the basis of the above information,
it was estimated that 88 percent of the income originated by handicraft-
type production in 1958 and that 63 percent in 1959 came from nonstate
handicraft units.
Income originated by native transportation and handling serv-
ices has been estimated to be 1,730 million yuan in 1952 and 2,600 mil-
lion yuan in 1955. 1/ Income originated by native transportation and
handling services was assumed to have increased at the same rate as total
retail sales of commercial enterprises in 1957 above 1955 and at the same
rate as total retail sales in 1958 and in 1959.
Income originated by peddlers has been estimated to be 390
million yuan in 1952 and 400 million yuan in 1955. .?./ The 1957 estimate
was derived from the 1955 estimate on the basis of the increase in total
retail sales by commercial enterprises. Income originated by peddlers
was assumed to have remained in 1958 and 1959 at roughly the level of
1957.
-21-
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Income originated by farmers in construction activities was
estimated to be one-half of total budget expenditures on agricultural
construction including water conservation projects.
(6) Income Taxes of Nonstate Nonagricultural Enterprises
In 1952, income taxes of private enterprises were stated to
be about 700 million yuan. Income taxes of state-private and cooperative
enterprises were small in magnitude and were roughly estimated to be 100
million yuan. Income taxes were reported to be 1,391 million yuan in
January-August 1958, 16.0 percent of total industrial-commercial taxes,
and 1,186 million yuan in January-August 1957, 16.1 percent of total
industrial-commercial taxes. 2/ Total industrial-commercial taxes were
11.30 billion yuan in 1957, and income taxes for 1957 were estimated to
have been 16 percent of total industrial-commercial taxes. Because of
the adoption of the new consolidated industrial-commercial tax, income
taxes were not collected after about 1 September 1958. After about
1 September 1958, income of state-private enterprises was turned over
to the state treasury in the form of profits remittances.
(7) Income (After Taxes) of Nonstate Nonagricultural Enterprises
This entry is the difference between the income of nonstate
nonagricultural enterprises and the income taxes paid by these enter-
prises.
(8) Income of State Enterprises
This item is the sum of dividends paid to former owners of
private enterprises and of undistributed income of state enterprises.
Income of state enterprises includes income of state-owned enterprises
for all years, profits of state-private enterprises remitted to the
state treasury in the period 1 January 1957 to 1 September 1958, all
income of state-private enterprises after 1 September 1958, and all in-
come of supply and marketing cooperatives in 1958-59.
(9) Dividends to Former Owners of Private Enterprises
A recent Chinese Communist publication 12/ states that pay-
ments are made from the state treasury in the amount of 120 million yuan
annmally to the former owners of private business and industrial enter-
prises. The first of these annual payments was made in 1956, and the
last payment will be made in 1962.
(10) Undistributed (to Persons) Income of State Enterprises
(See el (7), p. 34, below.)
- 22 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
(11) Rental Income and Personal Service Income
(See b, (18), p. 28, below.)
(12) Indirect Taxes
Indirect taxes were calculated by subtracting agricultural
taxes included in the state budget and income taxes of nonstate nonagri-
cultural enterprises from total taxes.
(13) Statistical Discrepancy
This item represents the excess of the estimate of GNP in
terms of final product flows over the estimate of GNP in terms of the
income generated in its production. The statistical discrepancy arises
because of inaccuracies in the estimates of components.
(14) Personal Consumption Expenditures
(See b, (1), below.)
(15) Gross Domestic Investment
(See e, (1), p. 31, below.)
(16) Net Exports of Goods and Services
This item is the difference between exports of goods and
services and imports of goods and services.
(17) Exports of Goods and Services
(See d, p. 30, below.)
(18) Imports of Goods and Services
(See d, (2), p. 31, below.)
(19) Government Purchases of Goods and Services
(See c, (1), p. 28, below.)
b. Personal Income and Expenditures Account (Table 2*)
(1) Personal Consumption Expenditures
This item is the sum of farm home consumption-in-kind; retail
sales to consumers, wages-in-kind of government employees, agricultural
* Appendix A, p. 8, above.
- 23 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
consumer services and house rent, nonagricultural consumer services, and
nonagricultural house rent.
(2) Farm Home Consumption-in-Kind
The estimate of farm home consumption-in-kind consists of the
imputed value* of farm products that are produced and consumed on the
farm. The estimates for 1952 and 1957 were derived by subtracting from
the gross value of agricultural production (a) seed, feed grains, and
other intermediate products produced by the agricultural sector and used
up in production; (b) sales -- including tax payments in kind -- of grain,
hogs, and other farm products to the nonagricultural sector of the econ-
omy; and (c) intrasector investment.
Because of the lack of adequate data on the sale of farm prod-
ucts to the nonagricultural sector, the value of farm home consumption-
in-kind in 1958-59 was computed by multiplying the value of farm home
consumption-in-kind in 1957 by an index of farm home consumption-in-kind
of major farm products in 1957-59. The index of farm home consumption-
in-kind of major farm products was computed by taking estimates of the
physical quantities of grain, cotton, vegetables, meat, and other farm
products consumed on the farm in 1957-59 and weighting by the estimated
farm sale price for each product. In 1957 the value of farm home
consumption-in-kind of these major farm products accounted for almost
three-fourths of total farm home consumption-in-kind.
(3) Retail Sales to Consumers
Retail sales of consumer goods to consumers were estimated
by subtracting from total retail sales (a) sales of office supplies and
other consumer goods to government and business; (b) sales of tools,
chemical fertilizers, and other production materials to rural areas;
and (c) sales of house repair materials. Total retail sales and sales
of rural production materials have been reported by the Chinese Com-
munists. 11/ Sales of consumer goods to government and business have
been estimated from Chinese statements on retail sales to "social
organs." 12/ Sales of house repair materials were estimated to be
roughly 15 percent of nonagricultural house rent in each year.
(4) Wages-in-Kind of Government Employees
In August 1955 the State Council issued an order on the change-
over from the supply system, under which government employees received part
of their compensation in grain, cotton cloth, and other consumer goods and
* The imputed value of a product is the value that it would have if it
were placed on the market.
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
part in money, to a complete money wage system. Under this order those
government employees who had been receiving part of their wages-in-kind
would receive only money wages, beginning in July 1955. It was also
mentioned that in 1955 about one-third of the government employees were
still under the supply system. 1.V For the purposes of this estimate,
it was assumed that all government employees were under the supply sys-
tem in 1952 and that wages-in-kind in 1952 were roughly equivalent to
one-half of total money wages. Total money wages of government em-
ployees have been estimated to be 1,340 million yuan in 1952. 114/
(5) Agricultural Consumer Services and House Rent
This entry consists of the imputed value of on-farm con-
sumer services and housing services. Agricultural consumer services
and house rent in 1952 have been estimated to be equivalent to 1.4 per-
cent and 5.3 percent, respectively, of agricultural income, not includ-
ing "peasant" investment and the imputed value of preliminary processing
of farm products. 12/ The value of house rent in 1953-59, in 1952 prices,
was assumed to have increased at the same rate as total farm housing. lg
The value of consumer services was assumed to have increased about 1.5
percent per year in 1953-57 and in 1959, roughly the same rate as the in-
crease in the farm population, and to have increased roughly 10 percent
in 1958. The value of house rent and consumer services in 1952 prices
was converted into current prices on the basis of the index of farm sale
prices.
(6) Nonagricultural Consumer Services
This item includes sales of consumer services by the nonagri-
cultural sector of the economy to the agricultural and the nonagricul-
tural population. Sales of consumer services to the agricultural popu-
lation have been estimated to be equivalent to roughly one-half of the
value of on-farm consumer services. 12/ Sales of consumer services to
the nonagricultural population have been estimated on the basis of sev-
eral reports of household budget studies, which indicate the proportion
of total expenditures for commodities and for rent, utilities, and other
noncommodity items. lg From the information in these studies, it was
estimated that sales of consumer services to the nonagricultural popula-
tion were roughly equivalent to 14 percent of total retail sales of con-
sumer goods to the nonagricultural population. Educational and medical
feea paid to the government were deducted from the total in order to
obtain the estimated value of sales of consumer services by such nonagri-
cultural activities as utilities, barbering, bathhouses, theaters, pedi-
cabs, and funerals.
-25-
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
(7) Nonagricultural House Rent
Total rent was calculated on the basis of rough estimates of
the total housing available (in square meters) 1 and an estimate of
the average rent per square meter of private housing. Treated in this
manner, total rent includes money rent, imputed rent for self-owned
housing, and rental subsidies of all kinds.
The information on rents of private housing is extremely
limited, but two Chinese Communist reports suggest that average monthly
rent per square meter for private housing was about 0.30 yuan in 1957. 2.0./
This average rental probably is related to wage earner housing in urban
centers, but it is assumed in this report to represent the average monthly
rent per square meter for nonagricultural private housing. Total rent,
in 1957 prices, was converted into current prices on the basis of the
cost-of-living index for workers and salaried employees for 1952-57 and
of estimated increases in retail prices for 1958-59.
(8) Personal Tax and Nontax Payments
This item consists of miscellaneous fees received by the
government from households for educational, health, and cultural serv-
ices. Personal taxes and nontax payments are believed to be entered in
the state budget account Other Revenue.
(9) Personal Saving
This item was calculated by subtracting from personal income
(a) personal consumption expenditures and (b) personal tax and nontax
payments. These estimates appear to be reasonable when checked against
estimates of increases in personal savings deposits, purchases of do-
mestic bonds, agricultural business savings, and business savings of
nonstate nonagricultural enterprises.
(10) Compensation of Employees
This entry includes only the compensation of workers and
salaried employees and of military (including supporting) personnel.
Compensation of employees in nonstate handicrafts and native transporta-
tion and handling services is included under income from nonstate non-
agricultural enterprises. Compensation of employees in personal serv-
ices is included under personal service income.
(11) Compensation of Workers and Salaried Employees
This item includes money wages and salaries, wages and sala-
ries paid in kind, and other labor income received by workers and salaried
employees of government organs and of state, state-private, cooperative,
and private enterprises.
- 26 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
(12) Wages and Salaries
Total money wages and salaries have been reported by the
Chinese Communists for 1952-57 22/ and were claimed to have increased
2.38 billion yuan in 1958. 22/ Total money wages and salaries in 1959
were estimated on the basis of fragmentary data (a) on increases in
average money wages and salaries and the number of workers and salaried
employees in 1959 and (b) on the planned increase in total and average
money wages and salaries and in the number of workers and salaried em-
ployees in 1960.
(13) Supplements
This item consists of wages-in-kind of government employees
in 1952 and of nonwage and salary expenditures of enterprises and govern-
ment organs for labor insurance, free medical care, subsidies for medical
services, canteens and other welfare services, and other fringe benefits
in 1952 and 1957-59. This entry does not include budget expenditures for
subsidies to students and for relief; which were treated in this report
as government transfer payments. The entries for 1952 and 1957 were esti-
mated from several Chinese Communist reports on wage supplementary expend-
itures. 22/ Estimates for 1958-59 have been derived from the 1957 esti-
mate on the basis of claimed increases in these expenditures. 212/
(14) Compensation of Military, Including Supporting, Personnel
This item consists of the pay and allowances of military
personnel and of supporting civilian personnel. primarily coolie labor.
For 1958-59 it 50X1
was assumed that the number of personnel remained constant and that
average pay and allowances increased at the same rate as the average
money wage of workers and salaried employees (not including those newly
employed in 1958-59). aY
(15) Dividends to Former Owners of Private Enterprises
(See a, (9), p. 22, above.)
(16) Agricultural Income (After Taxes)
(See a (4), p. 20, above.)
(17) Income (After Taxes) from Nonstate Nonagricultural
Enterprises
(See a, (7), p. 22, above.)
-27-
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
(18) Rental Income and Personal Service Income
This entry includes income from (a) agricultural consumer
services and house rent, (b) nonagricultural personal services, and
(c) nonagricultural house rent.
(19) Income from Agricultural Consumer Services and House Rent
This item was assumed to be the same as expenditures for
agricultural consumer services and house rent (see b, (5), p. 25, above).
(20) Income from Nonagricultural Personal Services
Personal service income of the nonagricultural population
was assumed to be roughly three-fourths of the value of nonagricultural
consumer services (see b, (6), p. 25, above). The remaining income from
nonagricultural consumer services was paid to the state for urban trans-
portation, electricity, water, and other utilities.
(21) Income from Nonagricultural House Rent
Rental income of the nonagricultural population was calculated
by subtracting from total rent (see b, (7), p. 26, above) the cost of
house repair materials.
(22) Government Transfer Payments
(See cl (5), p. 29, below.)
(23) Personal Interest Income
(See c, (6), p. 30, below.)
c. Government Receipts and Expenditures Account (Table 3*)
The entries in the Government Account were derived largely from
information contained in the annual state budget of Communist China and
from other Chinese reports on budget revenue and expenditures.
(1) Purchases of Goods and Services
This item is the gum of budget expenditures for (a) defense;
(b) administration; (c) social, cultural, educational, and health ex-
penses; (d) other expenses included in the state budget; and (e) other
purchases for defense programs included under the state budget account
Expenditures on Economic Construction minus budget expenditures for
* Appendix Al p. 9, above.
- 28 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
student subsidies, relief, and investment in administrative, cultural,
educational, and. health facilities plus expenses of village administra-
tion not included in the state budget.
(2) Military
This entry consists of explicit budget expenditures for de-
fense and rough estimates of other budget expenditures, military in
nature, that are believed to be included under other accounts in the
state budget. For example, it is believed that (a) other purchases for
defense programs are included under the state budget account Expenditures
on Economic Construction; (b) scientific research leading to new weapons
is included under the state budget account Social, Cultural, Educational,
and Health Expenditures; and (c) wages and subsistence of public security
troops and construction of border and coastal defenses are included under
the state budget account Expenditures on Administration.
(3) Health and Education
This item was calculated by subtracting from the reported
budget figures for social, cultural, educational, and health expenditures
(a) investment expenditures in this category, (b) estimates of government
expenditures for relief and student subsidies, and (c) estimates of scien-
tific research leading to new weapons.
: (4) Administration
This item is the residual derived by subtracting from total
government purchases of goods and services (a) military purchases and
(b) health and education purchases.
(5) Government Transfer Payments
Government transfer payments consist of budget expenditures
(a) for subsidies to students; (b) for social relief and special bene-
fits; and (c) in 1959, for government grants of aid to communes and pro-
duction brigades. Total social relief and special benefits have been
given in the budget data for 1952-57. 22/ Social relief and special
benefits were assumed to have been roughly two-thirds of the 1957 level
in 1958 and to have roughly doubled in 1959 compared with the level of
1958. Subsidies to students in 1952 and 1957 have been estimated on the
basis of budget expenditures for culture, education, and health and of
the Chinese Communist statement that subsidies to students were 9.3 per-
cent of the total expenditures for culture, education, and health during
the period of the First Five Year Plan (1953-57). 2.?i Subsidies to
students in 1958 were calculated by subtracting total subsidies to stu-
dents for 1952-58 from total subsidies to students for 1952-57. E.22/ Sub-
sidies to students in 1959 were assumed to have been roughly three-fourths
- 29 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
of the level of 1957. Subsidies to students are believed to have been
lower in 1958-59 than in 1957 because students were participating in
the "leap forward" production drives. Government aid to communes and
production brigades was claimed to have totaled 1 billion yuan in 1959.
(6) Interest Paid to Persons
This entry represents government payments for interest on
domestic bonds and has been calculated on the basis (a) of scheduled
payments of interest and bond redemptions, calculated from the Chinese
Communist regulations for these bonds, and (b) of the actual payments
from the state budget for domestic debt service -- interest and bond
redemptions. Ei
(7) Interest Paid to Foreign Governments
This item covers interest paid by the Chinese Communist
Government to the USSR on credits received from the USSR during
1950-57. 32/
(8) Surplus on Income and Product Account
This entry was calculated by subtracting from government
receipts (a) government purchases of goods and services, (b) government
transfer payments, (c) government interest paid to persons, and (d) govern-
ment interest paid to foreign governments.
(9) Agricultural Taxes
(See a, (3), p. 19, above.)
(10) Personal Tax and Nontax Receipts
(See b, (8), p. 26, above.)
(11) Income Taxes from Nonstate Nonagricultural Enterprises
(See a, (6), p. 22, above.)
(12) Indirect Taxes
(See a, (12), p. 23, above.)
d. Foreign Transactions Account (Table 4*)
(1) Exports of Goods and Services
This entry consists of (a) exports, which were calculated
on the basis of trade data reported by communist China, the USSR, other
* Appendix A, p. 10, above.
-30-
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Soviet Bloc countries, and non-Bloc countries; (b) remittances from
Overseas Chinese, which were calculated on the basis of reports from
Hong Kong and other countries of South and Southeast Asia; and (c) pro-
duction of gold, which, on the basis of prewar figures for production of
gold in China, was estimated to be roughly 25 million yuan per year.
(2) Imports of Goods and Services
This entry is the sum of (a) imports, which were calculated
from trade data reported by Communist China, the USSR, other Soviet Bloc
countries, and non-Bloc countries on an f.o.b. basis, and (b) a rough
estimate of the insurance and freight charges associated with these im-
ports, which was calculated as a percentage of the value of imports --
the percentage used depending on the distance of the countries from China,
the type of transportation used, and the type of commodities involved.
(3) Interest Paid to Foreign Governments
(See cl (7), p. 30, above.)
(4) Net Foreign Investment
This item was derived by subtracting from total receipts
from abroad (a) Imports of goods and services and 00 interest paid to
foreign governments.
e. Gross Saving and Investment Account (Table 5*)
(1) Gross Domestic Investment
Gross domestic investment is the sum of (a) "peasant" in-
vestment, (b) budgeted investment, (c) extrabudgetary investment, and
(d) changes in inventories.
(2) "Peasant" Investment
This entry represents total purchases of investment goods
by the agricultural sector of the economy. The total of such purchases
is composed of (a) purchases of investment goods by the agricultural
sector from the nonagricultural sector, through retail trade channels,
and 00 purchases of investment goods produced in the countryside by
the agricultural sector itself.
(3) Budgeted Investment
Budgeted investment consists of expenditures from the state
budget for (a) investment in capital construction (not including expendi-
tures for construction of barracks, military airfields, and similar
* Appendix Al p. 11, above.
-31-
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
50X1
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
military projects, which were included under government purchases of
goods and services); (b) stockpiling of construction materials; (c) state
material reserves; and (d) agricultural operating expenses. This entry
was calculated from data contained in the annual state budgets and in
several articles in Chinese Communist periodicals. la/
(4) Extrabudgetary Investment
This item consists of investment expenditures by central
government ministries, local (provincial and county) governments, and
enterprises from funds other than state budget investment funds. These
extrabudgetary funds include (a) major repair funds, (b) enterprise bonus
funds, (c) the share of above-plan profits not remitted to the state
treasury, and (d) funds raised by private and state-private enterprises
from their own operations. Expenditures for major repairs in 1952 and
1957 have been estimated It is believed that Chinese Com- 50X1
munist claims for extrabudgetary investment in 1958-59 include expendi-
tures on major repairs. The estimates of extrabudgetary investment for
1952 and 1957-58 were derived by subtracting the official claims for in-
vestment "under the plan" -- that is, investment through the state budget
carried out through the annual national capital construction plan -- from
the official claims for "total investment," both of which are given in
the regime's statistical compendium, Ten Great Years. 5../ The figure for
1959 also is the official Chinese estimate. .1.Y
(5) Changes in Inventories
This item consists of changes in inventories in trade and
industry and changes in government stocks of tax collections-in-kind.
Changes in inventories of construction materials held by construction
enterprises are included in budgeted investment. Changes in inventories
of transportation enterprises and of the agricultural sector are believed
to be small and in this report were assumed to be zero. Changes in in-
ventories in trade were calculated as in Table 10.*
Total inventories and changes in inventories in industry in
1952-57 have been estimated . The increase in inventories 50X1
in industry in 1957 is the official Chinese Communist claim. Since 1957
the Chinese have mentioned only that in 1959 "the stocks of materials
and equipment of the industrial departments ... registered a fair in-
crease." Additions Additions to bank credit funds and to working capital from the
state budget in 1958 and 1959 were larger than in 1957, and industrial
enterprises have been largely dependent on budget allocations and bank
credits for increases in their working capital. It was assumed, there-
fore, that increases in inventories in industry were less than the in-
crease in 1957, or roughly 1 billion yuan each year in 1958-59.
* Table 10 follows on p. 33.
- 32 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Table 10
Communist China: Calculation of Changes in Inventories in Trade
Selected Years, 1951-59
Billion Current Yuan
Type of Enterprise
1951
1952
1955
1956
1957
1958
1959
State, state-private, and cooperative
5.33
8.82
23.54 2/
20.84 2/
24.67 2/
28.37 .../
35.75 2/
State
4.78 2/
7.15 2/
15.24 2/
12.79 2/
State-private and cooperative
0.55 _d/
1.67
6.53 2/
8.05 2/
Private
4.77 2/
4.38 2/
0.43 e
0.29 y
0 jj
0 1/
Total inventories
10.10
13.20
23.97
21.27
24.96
28.37
35.75
Changes in inventories
3.10
3.69
3.41
7.38
a. Calculated on the basis of official claims of absolute and percentage increases in inventories of state, state-private, and cooperative
enterprises. J.12/
b. Calculated on the basis of official claims of annual percentage increases in inventories of state trading enterprises, 1950-56. 31/
c. Inventories of state, state-private and cooperative, and private enterprises in 1955 were assumed to have been in the same proportion to
total inventories as trade turnover of these enterprises was to total trade turnover.
d. Assumed to have been in the same proportion to inventories of state enterprises as trade turnover of state-private and cooperative enter-
prises was to trade turnover of state enterprises.
e. Calculated by multiplying the value of inventories held by private enterprises in 1955 -- 2.20 billion yuan -- by the index of the value of
inventories in private trade 50X1
f. The figure of 23.54 billion yuan in inventories of state, state-private, and cooperative enterprises in 1955 is believed to include inven-
tories of nearly all commercial enterprises, including larger private commercial enterprises but excluding the small quantity of inventories
held by small private commercial units that were socialized in 1956. The small private commercial units handled 1.8 percent of total trade
turnover in 1956 and were assumed to have held 1.8 percent of total commercial inventories in 1955.
g. Assumed to have been the same as in 1955.
h. Assumed to have declined at the same rate as retail sales by private trading enterprises. L41/
i. Assumed to have been zero.
- 33 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11: CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Changes in government stocks of tax collections-in-kind occur
because the state budget is calculated on a calendar year basis and col-
lections of agricultural taxes are made on a fiscal year basis (1 April
to 31 March). These changes are relatively small; official data on tax
collections-in-kind and budget revenue from agricultural taxes indicate
that increases in government stocks of tax collections-in-kind were about
100 million yuan in 1957. In the absence of similar information in 1952
and 1958-59, it was assumed that government stocks of tax collections-in-
kind in those years did not change.
'(6) Net Foreign Investment
\
\N
d, (4), p. 31, above.)
(7) Undistributed (to Persons) Income of State Enterprises
This item is the sum of (a) income remitted to the state
treasury and (b) major repair funds and other funds retained by central
government ministries, local governments, and enterprises.
(8) Remitted to the State Treasury
This item is the official budget figure for profits and de-
preciation reserves of state enterprises less budget expenditures for
dividenda to former owners of private enterprises in 1957-59 and for
the "four expenses" in 1952 and 1957.*
(9) Retained by Central Government Ministries, Local Governments,
and Enterprises
This entry is the sum of major repair funds and other funds.
(10) Major Repair Funds
Major repair funds have been estimated to be equivalent to
3 percent of the total value of industrial fixed assets during 1952-57. L42/
Major repair funds in 1958-59 were assumed to be equivalent to 3 percent
of the average annual value of industrial fixed assets of state, state-
private, and cooperative enterprises in those years.
* The "four expenses," as they are called by the Chinese Communists, in-
clude expenditures for (1) "organization of technical works," (2) trial
manufacture of new products, (3) labor protection, and (4) purchase of
miscellaneous assets. It is believed that these expenditures should be
treated as expenditures on intermediate products. The income remitted
to the treasury was therefore reduced by the amount of these expenditures
in 1952 and 1957. In 1958-59 the "four expenses" were covered by retained
profits.
- 34 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
(11) Other Rinds
This entry consists of (a) enterprise bonus fundsl, net of
expenditures for employee welfare, (b) the share of above-plan profits
not remitted to the state treasury, and (c) the funds for the "four
expenses," net of expenditures for the "four expenses." In 1952 and
1957 the figure for other funds was essentially the share of above-
plan profits; the enterprise bonus funds were largely expended for
employee welfare, and the "four expenses" were covered by state budget
expenditures. The estimates for 1952 and 1957 were made on the basis of
the planned share of above-plan profits for 1958, La/ and the estimates
for 1958-59 were calculated by subtracting from reported total retained
profits1111/ the following: (a) rough estimates of expenditures from the
enterprise bonus funds for employee welfare in 1958-59; (b) the reported
expenditures on the "four expenses" In_1958212; and (c) a rough estimate
of expenditures on the "four expenses" iii-1959, which was based on the
planned figure for 1959 )2g and the actual increase in total retained
profits in 1959.
(12) Government Surplus on Income and Product Account
(See c, (8), p. 30, above.)
(13) Personal Saving
(See b, (9), p. 26, above.)
(14) Statistical Discrepancy
(See a, (13), p. 23, above.)
3. Gross National Product, by Sector of Origin, 1952-60 (Table 6*)
GNP for each year was calculated by summing (a) value added in the
various sectors of the economy and (b) indirect taxes. The value added
by each sector and the indirect taxes were all expressed in 1957 internal
Chinese Communist prices. The estimates of value added by the various
sectors of the economy in the years 1952-56 and 1958-60** have been cal-
culated, for the most part, on the basis of indexes of production in each
sector, 1952-60, and the value added by the sector in 1957. Estimates of
value added by agriculture, industry, and other sectors of the economy in
1957 were derived from the detailed estimates that underlie the figures
* Appendix A, p. 12, above.
** The estimates for 1960, which are preliminary in nature, have followed
this same general methodology but were based on the limited amount of in-
formation available on actual production in 1960.
-35-
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
for compensation of employees, agricultural income, income of state and
nonstate enterprises, rental income, and personal service income presented
in Tables 1 through 5.*
The methods used to estimate the value added in the several sectors
of the economy in 1952-56 and 1958-60 are discussed below, using the esti-
mate of GNP for 1959 as an example. The contributions of the sectors of
the economy to GNP as calculated for 1959 are as follows:
Economic Sector
Billion
1957 Yuan
Percentage
Distribution
Agriculture
Industry
Construction
Transportation and communications
Trade and miscellaneous business services
48.7
32.6
7.5
12.4
13.3
37.9
25.4
5.8
9.6
10.4
Personal services and housing services
8.0
6.2
Government services
6.0
4.7
Gross national product (at factor cost)
128.5
100.0
Indirect taxes
16.9
Gross national product (at market prices)
145.4
a. Agriculture
In agriculture, value added for 1959 was calculated by subtract-
ing the value of chemical fertilizer, seed and feed grain, and other
products used up in production from the gross value of agricultural pro-
duction, in 1957 prices. (The method used to calculate value added by
agriculture is summarized in 2, a, (2), p. 18, above.)
b. Industry
In industry, value added for 1959 was calculated by summing the
value added by iron and steel, coal, machine building,, food processing,
textiles, and other components of industry.**
* Pp. 7 through 11. above.
-36-
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
(
C-0-N-F-I-D-E-N-T-I-A-L
Within industry, the value added by production of iron and steel
in 1959 was calculated by multiplying value added by production of iron
and steel in 1957 by the index of production, 1959 over 1957. This index
of production was computed by taking quantity relatives* and weighting by
the value added contributed by each product in 1957.
The value added by the other components of industry was calculated
by the same method used for iron and steel.
c. Construction
In construction, value added for 1959 was calculated by summing
(1) compensation of employees, which was estimated on the basis of frag-
mentary information on the increase in number of construction workers,
1959 over 1957; (2) profits, Which were estimated to be equal in amount
to the same percentage of state capital investment as in 1957; and
(3) the imputed value of construction activities of farmers which was
estimated to be roughly equivalent to one-half of total budget expendi-
tures on agricultural construction, including water conservation proj-
ects.
d. Transportation and Communications
In modern transportation and communications, value added for 1959
was calculated by multiplying value added by this component in 1957 by
the index of ton-kilometers hauled by modern transportation in 1959 (1957
equaling 100).
Native trnnsportation and handling services are closely related
to domestic trade, and the value added by these services was assumed to
have increased at the same rate as sales in domestic trade (deflated for
increases in prices).
e. Trade and Miscellaneous Business Services
Value added for 1959 was calculated by gumming (a) value added
by foreign trade and (b) value added by domestic trade and miscellaneous
business services. Value added by foreign trade for 1959 Was calculated
by multiplying value added by foreign trade in 1957 by the index of total
foreign trade in 1959 (total foreign trade in 1957 equaling 100). Value
added by domestic trade and miscellaneous business services was calcu-
lated by multiplying value added by this component in 1957 by the index
of deflated retail sales in 1959 (retail sales in 1957 equaling 100).
* For estimates of production of major industrial products during
1952-60, see Appendix Al Table 9, p. 15, above.
-37-
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
Miscellaneous business services such as insurance and rental of ware-
houses are closely related to domestic trade, and the value added by
these services was assumed to have increased at the same rate as de-
flated retail sales.
f. Personal Services and Housing Services
Income from personal services and housing services represents
(1) money income from rented housing; (2) an imputation of the income
from owner-occupied houses; (3) an imputation for rental subsidies; and
(4) an estimate of the wages and other income (mot paid by the state)
received for labor in such activities as barbering, bathhouses, theaters,
pedicabs, and funerals. (The method used to estimate income of the agri-
cultural population from personal services and rent, in current prices,
has been discussed in 2, b, (19), p. 281 above.) The estimate for 1959
in current prices was converted into 1957 prices on the basis of the index
of farm sale prices. Rental income of the nonagricultural population in
1959 was calculated by subtracting from total rent, in 1957 prices (see
2, b, (7), p. 261 above), the cost of house repair materials. (The method
used to estimate personal service income of the nonagricultural population
in 1959, in current prices, has been discussed in 2, b, (20)1 p. 28,
above.) The estimate for 1959 in current prices was converted into 1957
prices on the basis of the estimated increase in retail prices.
g. Government Services
In government services, value added for 1959 was calculated by
multiplying the value added in 1957 -- compensation of employees in the
military establishment, in administration, in health and education, and
in public organizations (political parties and labor unions) -- by the
index of the number of employees in each of these components in 1959
(the number of these employees in 1957 equaling 100). The number of
government employees in 1959 was roughly estimated on the basis of frag-
mentary information.
h. Indirect Taxes'
The estimates of indirect taxes for 1952-60, in 1957 prices, were
calculated by summing estimates of indirect taxes on trade, heavy indus-
try, and light industry. (The method used to estimate total indirect
taxes in 1957 has been discussed in 2, al (12)1 p. 23, above.) Indirect
taxes on trade in 1957 were calculated by summing retail trade taxes,
customs taxes, and miscellaneous taxes. Indirect taxes on industry were
derived by subtracting indirect taxes on trade from total indirect taxes.
Indirect taxes on industry in 1957 were allocated between taxes on heavy
industry and taxes on light industry on the basis of several Chinese Com-
munist reports on profits and taxes collected from heavy and light indus-
try.21.g/ The estimates of indirect taxes on trade, heavy industry, and
- 38 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
light industry in 1952-56 and 1958-60 were calculated by multiplying in-
direct taxes on each of these sectors in 1957 by the index of value added
by each of these sectors during 1952-60.
4. Special Problems Relating to the Estimates of GNP
a. Prices
The estimates of GNP presented in this report have been compiled
in terms of Chinese Communist internal prices, and the output as measured
reflects the impact of Chinese price policies and other economic policies.
The most important of these policies in terms of the estimates of GNP are
as follows: (1) the hiel valuation of producer goods and the low valua-
tion of consumer goods* compared with the US, (2) the relatively low
state purchase prices of agricultural products and the relatively high
profits accruing to the state from the resale of these agricultural prod-
ucts, and (3) the heavy commodity taxes placed on industrial goods. Be-
cause the Chinese economy is geared to increasing production of producer
goods faster than production of consumer goods and services, valuation
of Chinese GNP in US prices would show a rate of growth significantly
lower than valuation in Chinese prices. In addition, valuation of Chinese
GNP in US prices would yield different sector weights from valuation in
Chinese prices. Agricultural income would be a higher proportion, and
income originated by industry and trade a lower proportion, of GNP at
factor cost. The effect on sector weights of the heavy commodity taxes
placed on industrial goods has been isolated by inclusion of these taxes
in the estimates of indirect taxes. Like the sector weights, the end-
use shares of GNP would be different if Chinese GNP were valued in US
prices. The share of investment would be lower, and that of consumption
and government purchases higher, than the proportions of GNP indicated
by valuation in Chinese prices.
b. Handicraft and Household Activity
It is quite likely that the existence of a large and declining
element of handicraft and household activity in the Chinese Communist
economy has led to some overstatement of the rate of growth of GNP, but
it is believed that the overstatement is so small as not to bring into
question the main themes of the analysis. The difficulties that arise
are not unique to China. They include the problem of identifying and
properly treating (1) economic activity that has been transferred from
the household to the market place, and (2) petty, hitherto unrecorded
* High internal prices of producer goods relative to prices of consumer
goods are in part a reflection of the relative scarcities that existed
within China at the time of the establishment of the Communist regime.
Since 1952, prices of producer goods have declined relative to prices of
consumer goods.
- 39 -
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
C-0-N-F-I-D-E-N-T-I-A-L
handicraft activity that has been swept together into cooperative group-
ings under state control and is now more thoroughly recorded in the state
figures. Under WI if a woman who has been washing clothes in the house-
hold now washes the village's clothes in a public laundry the GNP figure
would rise, but so would the GNP figures of almost any country that is
industrializing; the peculiar difficulty in the case of Communist China
is that the industrialization, and consequently the distortion, is squeezed
together into a few short years. Under (2), estimates of commodity pro-
duction used in the calculation of value added by industry took into ac-
count, to the extent permitted by the information available, the division
between handicraft and modern and between state and cooperative production;
most of the important increases in industrial production in Communist
China have been in areas where the handicraft element was either small
or nonexistent -- for instance, in steel,* electric power, petroleum,
electrical equipment, machine tools,** and transportation equipment.***
In the case of agricultural production, the estimates for specific crops
were based on sown acreage, weather, and level of technology and there-
fore largely bypass the problem of handicraft activity; where the size
of crops -- for instance, vegetables -- depends on the regime's attitude
toward private plots, the estimating was more difficult, but all in all
the danger of substantial overstatement appears small.
c. Data
In addition to the problems noted above, the estimates of value
added by the several sectors of the economy, of the basic income com-
ponents of GNP, and of the end-use components of GNP suffer in varying
degrees from lack of data. Data problems (primarily in relation to agri-
culture and industry) have been discussed in several studies.)12/ The
estimates for the other sectors of the economy could be improved consid-
erably with more information on the labor force in these sectors. During
the period of the First Five Year Plan (1953-57), labor force data for
the state-operated components of the economy were reasonably good, but
there was very little information on the number and compensation of per-
sons employed in handicrafts, private trade, native transportation, and
personal services. Since 1957, data on the size, distribution, and com-
pensation of the labor force, even in the state-operated components of
the economy, have been fragmentary.
* Production of the much-publicized native furnaces in 1958 is specifi-
cally excluded from national statistics on production of crude steel.
** Estimates of production used for the index of value added by indus-
try are based on international classification standards.
*** Coal is an exception to this statement, but it is believed that the
"native" element is fairly well identified and, in the calculation of
the industrial index, adjustment was made for the decline in the quality
of coal during 1958-60.
-40-
C-0-N-F-I-D-E-N-T-I-A-L
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
R
Next 3 Page(s) In Document Denied
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
50X1
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2
CONFIDENTIAL
CONFIDENTIAL
Declassified in Part - Sanitized Copy Approved for Release 2013/07/11 :
CIA-RDP79R01141A002100130001-2