INDUSTRIAL DEVELOPMENT IN THE LAN-CHOU AREA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01093A000500060001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 35
• Document Creation Date: November 9, 2016
• Document Release Date: July 7, 1999
• Sequence Number: 1
• Publication Date: April 2, 1954
• Content Type: IR

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INDUSTRIAL DEVELOPMENT IN THE
LAN-CHOU AREA
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CENTRAL INTELLIGENCE AGENCY
us-erplemis-aw
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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PROVISIONAL INTELLIGENCE REPORT
INDUSTRIAL DEVELOPMENT IN THE LAN-CHOU AREA
CIA/RR PR-55
(ORR Project 38.252)
NOTICE
The data and conclusions contained in this report
do not necessarily represent the final position of
ORR and should be regarded as provisional only and
subject to revision. Comments and data which may
be available to the user are solicited. -
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
US OFFIC
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FOREWORD
The purpose of this report is to evaluate recurring reports about
Chinese Communist intentions to concentrate new industrial construc-
tion in the Lan-chou area and to shift major concentrations of indus-
try from Northeast and North China to Northwest China.
These evaluations are based upon a detailed study of the present
state of industry in Lan-chou and on a review of regional geography,
natural resources, manpower, transport, and power facilities. These
are the factors which must provide the base for future industrial
expansion in the area.
In addition, the report estimates the expected development of
industries in Lan-chou during the next decade.
Accurate knowledge of economic activity in Northwest China, and
particularly in the Lan-chou area, is useful because it supplies a
valuable insight into the capabilities, limitations, and future in-
tentions of the Chinese Communists. Such knowledge places in proper
perspective new intelligence of a geographic shift of Chinese Com-
munist industry. It also provides the basis for an estimate of the
ability of the Lan-chou area of Communist China to absorb addi-
tional investment over a period of time and reveals the economic
indicators that should be watched for clues with which to measure
the rate of economic development.
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CONTENTS
Summary
Page
1
I. Economic Development in Lan-chou 2
A. Importance 2
B. Economic Planning 3
C. Industrial Transfers and New Construction 6
II. Industrial Structure of Lan-chou 7
A. Industrial Organization 7
B. Production Facilities 8
1. Machinery and Metalworking 8
2. Metallurgical 9
3. Electrical 10
4. Military End Items 10
5. Nonengineering Industry Production 11
C. Industrial Base 11
1. Raw Materials 11
2. Industrial Manpower 12
3. Electric Power 13
4. Transportation 14
III. Capabilities, Vulnerabilities, and Intentions 15
A. Capabilities 15
B. Vulnerabilities 16
C. Intentions 16
Appendixes
Appendix A. Tables
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Page
Appendix B. Methodology 23
Appendix C. Gaps in Intelligence 25
Appendix D. Sources and Evaluation of Sources 27
Tables
1. Chinese Communist Claims of Industrial Achieve-
ment in Northwest China, First Half of 1953 .
2. Major Machinery and Metalworking Plants
in Lan-chou, 1944
3. Consumption of Iron by Major Industrial Plants
in Kansu, 1944
4. Location of Cities Mentioned in the Text
of This Report
Map
5
19
21
22
Communist China: Northwest Area Inside Back Cover
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CIA/RR FR-55 S-E-C-R-E-T
(ORR Project 38.252)
INDUSTRIAL DEVELOPMENT IN THE LAN-CHOU AREA*
Summary
There are no indications that Communist China intends to con-
centrate new industrial construction in the Northwest at the expense
of the more mature industrial centers of the eastern provinces.
Industrial expansion is not progressing at a faster rate in Lan-chau
than in other regions of Communist Chin's- Investments in Hsi-an in
Shensi Province and Ti-hua in Sinkiang indicate that Lan-chou is not
being singled out for any extraordinary program of industrial develop-
ment.
The focus on Lan-chou is the result of (1) improvements in trans-
portation facilities, especially the construction of the Lan-chou -
Sinkiang railroad, and (2) increased petroleum production at the
Yu-men oil fields, 550 miles northwest of Lan-chou. Lan-chou is, in
effect, an expanding frontier city that is the focal point for rail-
road, highway, and river transportation throughout Northwest China.
The modest industrial expansion in Lan-chou is designed to support
the exploitation of the Northwest's natural resources, the increase of
agricultural production, and the manufacture of consumer goods for
local populations rather than to effect a major contribution to Com-
munist China's total requirements for the products of engineering
industries.
Industrial production in Lan-chou does not constitute a signif-
icant contribution to any sector of Communist China's aggregate
industrial production. This judgment is supported by the lack of the
electric power, plant facilities, productive equipment, raw materials,
and technical personnel required to manufacture engineering products
at more than handicraft levels of production. The present level of
technology is limited to the production of spare parts for vehicle
repair, the manufacture of simple agricultural implements, the repair
* The estimates and conclusions contained in this report represent
the best judgment of the responsible analyst as of 15 March 1954.
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and manufacture of simple wool textile machinery, and the manufacture
of consumer goods.
A small-scale metallurgical industry, designed to meet partial
local requirements, may be 'established in Lan-chou within the next
5 years. A shortage of coking coal makes unlikely a large-scale
metallurgical industry in the area.
With the possible'completion of the Lan-chou - Sinkiang railroad
by 1960, Lan-chou will be in a position to receive raw materials and
industrial products from the coastal provinces to the east and from
Sinkiang and the USSR to the west, and commercial activity in the
Lan-chou area will expand greatly. The effect of continued improve-
ments in irrigation, reforestation, agriculture, and exploitation of
natural resources should have a considerable impact on Northwest China
by 1960. Plants in Lan-chou should then be capable of producing in
job-shop quantities such items as water pumps, air compressors, textile
machinery, metal-cutting equipment -- including lathes and shapers of
nonprecision varieties, equipment for both the mining and petroleum
industries, and large quantities of agricultural tools and farm ma-
chinery. Major emphasis is expected to be on light industry, and it
is likely that a major woolen textile industry will be established.
This report suggests that as a result of improved road and rail
transport, of greatly increased natural resource exploitation, and of
increased availability of electric power, the importance of Lan-chou
as an industrial, commercial, and transportation center will increase
greatly during the next 10 years.
The stress placed upon railroad construction, petroleum exploita-
tion, and electric power installations will continue to serve as indi-
cators for evaluating the rate of industrial growth in the Lan-chou
area.
I. Economic Development in Lan-chou.
A. Importance.
Lan-chou, the capital of Kansu Province., is in the remote
interior of Communist China on the historic "silk route" between China
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and the countries of Europe. It is situated at the eastern entrance
to the Kansu corridor, the only practical highway and railroad route
to Sinkiang and Soviet Central Asia. Lan-chou is approximately 850
airline miles west of Shanghai; 650 miles south of Ulan-Bator, the
capital of Mongolia; and 1,200 miles east of Alma-Ata.*
Since 1950, reports from the Chinese mainland have confirmed
the modest industrialization that is taking place in Lan-chou. Indeed,
many of these reports greatly overplay the growing industrial impor-
tance of Lan-chou and the short-run industrial importance of North-
west China. Generalities claiming that the center of gravity for
Communist China's industry has been shifting to Lan-chou 1/** are not
supported by the past industrial capabilities of Lan-chou; recent
industrial activity in Lan-chou; industrial construction in Hsi-an, ?../
in Shensi Province, and in Ti-hua, in Sinkiang 3/; and the dispersed
industrial activity in Northeast, North, and East China.
Reports of residential, commercial, and military construction in
Lan-chou were widespread during 1951 and 1952. This construction and
renovation was designed to divide the city into distinct industrial,
cultural, and residential areas. 4/
B. Economic Planning.
Since 1950, Chinese Communist sources have provided evidence
that economic planning for the Northwest was facing the normal diffi-
culties encountered by lack of experience. Chinese Communist reports
regarding the general industrialization of Lan-chou have been expansive,
but they have shown reticence in detailing industrial activities in
the area. The industrial expansion of Lan-chou, according to Chinese
Communist reports, was to include the construction of power plants,
modern farm-tool factories, plants for the production of equipment
for the petroleum industry, fertilizer plants, chemical plants manu-
facturing daily necessities) and wool-weaving and processing plants. 5/
Intermixed with the broad generalities of these Chinese Com-
munist reports has been an awareness of the difficulties involved in
industrializing Northwest China. Chinese Communist official state-
ments, when reviewed successively, reveal the government admitting
inferior production, poor management, and faulty planning. The state-
ments further indicate that attempts to correct some of these problems
have, on occasion, created additional confusion. 6/
* See the map, Communist China: Northwest Area, inside back cover.
** Footnote references in arabic numerals are to sources listed in
Appendix D.
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Plans for Kansu Province for 1951 included improvement of
existing mines and factories, establishment of "democratic" manage-
ment, and improvement of auditing procedures. The extremely modest
scope of activities is indicated by a review .of specific projects
planned for 1951. These included the equipping of the Lan-chou
Flour Mill with 4 additional grist mills and an additional wheat-
washing machine, the expansion of the cement production by 700
metric tons annually, additional exploitation of raw materials, and
the construction of a mall dam near Lan-chou for the building of
a mall hydroelectric power station. I/ In 1951, Chinese Communist
statements claimed that industrial investment in Northwest China
was to be 18 percent of the total industrial investment in Communist
China, resulting in a doubling of the industriql capital in this
area by the end of 1951.
Production goals for 1952 called for increases in the output
of coal, power, and cement. In addition, goals for that year in-
cluded increased production efficiency in existing plants; more
thorough adoption of business accounting methods and inventory systems;
suggestions from workers to improve production; a higher rate of capi-
tal turnover; and better quality of products along with increased
quantities, lower production costs, and less waste. 2/
Early in 1952, full-scale 3-Anti* and 5-Anti campaigns were
waged to expose cases involving "corruption, waste, and bureaucracy."
At the end of 5 months the campaigns reportedly held in check "bribery,
embezzlement, tax evasion, fraud in construction projects, and the
stealing of state economic intelligence." Official reports on eco-
nomic activities in Northwest China admit that, with the cadre engaged
in the 3-Anti campaign and industry and commerce engaged in the 5-Anti
campaign, serious economic repercussions resulted. Production decreased,
trade between the cities and villages was disrupted, and many handicraft
and agricultural products could not find markets. 12/ Unemployment
was prevalent. 11/
* The "3-Anti" and."5-Anti" campaigns were Chinese Communist Party
campaigns of 'voluntary" self-criticism and confession of sins, stimu-
lated by subordinates informing on superiors and neighbor informing on
neighbor. The "3-Anti" campaign concerning governmental personnel was
directed toward removing the three "vices" of waste, corruption, and
bureaucracy. The "5-Anti" campaign was directed tbward eliminating
the five "vices" of bribery, fraud, profiteering, tax evasion, and
the theft of state economic secrets.
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The economic condition became serious enough to cause the
government to call back for regular assignment between 30 and 50 per-
cent of the cadres engaged in the 3-Anti movement. 12/
Throughout the year the Chinese Communists exerted considerable
effort to increase trade in Northwest China. Each locality was required
to hold at least one so-called Goods Exchange meeting prior to the end
of 1952. 12/
In August 1953, the Northwest Committee on Financial and Eco-
nomic Affairs stated that production goals for the first half of 1953
for 97 state-operated and privately operated factories and mines had
failed to meet planned production goals, although these firms supposedly
reached 98.95 percent of the production goal in terms of total value
of output.1)-1/ Chinese Communist claims of the achievements of indi-
vidual segments of industry in Northwest China are given in Table 1.
Table 1
Chinese Communist Claims of Industrial Achievement
in Northwest China 12/
First Half of 1953
Industry Percent of Goal Achieved 2/
Petroleum 102.04
Electric Power 101.71
Machinery 93.00
Textiles 99.64
a. In terms of total value of output, June produc-
tion estimated.
Of 48 industrial plants in Northwest China, only 6 fulfilled
all of the 5 monthly plans from January to May. The problems hamper-
ing industrial production continued to be poor management, lack of
adherence to government directives, poor planning at the plant level,
and a "failure to mobilize the working masses" and gain their full
cooperation. No hint of the inadequacy of basic governmental plan-
ning or operation was given. 1..6_/
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C. Industrial Transfers and New Construction.
Since 1951 there have been frequent reports of industrial
firms being transferred from the coastal regions to the Northwest
and Lan-chou. These reports included the transfer of the First
Plant of the Shanghai Government Machine Manufacturing Plant, 1//
a portion of the Mukden Automobile Manufacturing Plant, 1.g./ and the
East China Pharmaceutical Manufacturing Company. 12/ Additional
automotive repair facilities were also reported transferred to Lan-
chou during this period. 22/ One report claimed the establishment
of automotive manufacturing and aircraft assembly plants in Lan-
chou. 22/
Reports of the transfer of plants to the Lan-chou area have
been vague and have contained little information on the types and
number of machines sent to Lan-chou for the establishment of auto-
motive repair facilities. The Mukden plant was dismantled by the
Russians in 1945 and has never resumed automotive production.
Activities in Mukden were restricted to automotive repair and the
manufacture of spare parts. 22/ Similar activities in Lan-chou would
appear likely.
The establishment of modern, expanded automotive repair
facilities in Lan-chou is a logical development planned to meet the
demands of growing truck traffic throughout Northwest China. In
addition, the war in Korea undoubtedly served as an incentive for the
Chinese Communists to strengthen their lines of communication with
the ussa. The reported establishment of an aircraft assembly plant
in Lan-chou, however, is not realistic in view of the industrial back-
ground of this area and the shortages of power, materials, and skilled
labor.
A T'ai-pei. report in May 1952 claimed that a napalm bomb plant
was to be constructed in Lan-chou. L/ There is no confirmation of
this report beyond the general availability of petroleum products and
a reported chemical warfare school in Lan-chou. EL/ Because of the
relative ease of manufacture of the napalm bomb, it is difficult to
evaluate the validity of the report.
Construction of a major automotive repair shop in Lan-chou
was reportedly begun in October 1951 at a site southeast of the Lan-
chou airfield. 22/ It is probable that this plant is now in operation.
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A modern textile plant is presently being constructed in
Lan-chou. The plant is scheduled to contain facilities for wool
washing, combing, weaving, and dyeing, The plant, located in the
western suburbs of Lan-chou, was to be completed by 1954. 2.t/ This
plant, like the automotive repair plants, is well suited to an indus-
trial expansion program in Lan-chou.
A large sulfuric acid plant is reported under construction
in Lan-chou and is supposedly scheduled for completion by October
1954. .21/ Additional reports have indicated the construction in
Lan-chou of either a nitric acid plant or a sulfuric acid plant,
or both. 2..Y Small quantities of nitric and sulfuric acid were
produced in Lan-chou as early as 1944, an indication that available
facilities may have been greatly expanded. 22/
The new cement factory in Lan-chou has proved inefficient.
The plant has been singled out by the Chinese Communists as an
example of poor planning and bad management. Actually, adequate
supplies of limestone have not been available for full-scale pro-
duction, and the completion of the Lan-chou railroad permitted cement
from the eastern plants to be sold cheaper than the local product. Ef./
Other reported construction activity in Lan-chou supporting
the industrialization of that city has included railroad yard and
petroleum storage facilities. 21/ The Chinese Communist radio has
also claimed that an oil refinery was to be established in Lan-chou
or adjacent localities. 32/ There has been no confirmation of the
construction of an oil refinery in Lan-chou, and because of its
distance from the Yu-men oil fields to the northwest and the major
consumption centers to the east, it is doubtful whether Lan-chou
offers a particularly high potential as an oil refinery center.
II. Industrial Structure of Lan-chou.
A. Industrial Organization.
A study of industry in Lan-chou does not show a large, com-
plex industrial organization. Rather, the industrial capabilities
of Lan-chou must be related to individual plants with motors totaling
135 horsepower, and to semihandicraft machinery plants of 20 workers,
a lathe, a vise, and a forge.
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Industries in Lan-chou do not make a substantial contribution
to any sector of Communist China's aggregate industrial production.
When compared to Western concepts of industrial significance, the
future industrialization of Lan-chou is starting from a practically
nonexistent base. A study of Lan-chou, however, reveals considerable
information regarding the industrial capabilities and limitations of
a remote Chinese city. Considering the limitations in power:equip-
ment, and raw materials, the plants in Lan-chou show a high degree
of self-sufficiency. These factories are the "bailing wire" holding
together a backward, regional economy and are the base which must
support the future industrial growth of Lan-chou.
Much of the substantive material describing industries in Lan-
chou dates back to 1944-45. In the immediate postwar period, however,
there was little industrial activity in Lan-chou.211/ The industrial
eastern provinces, freed of the Japanese, were in the industrial lime-
light, and the civil war in China further disrupted economic conditions
in the Northwest. The Kansu Machinery Plant, the largest plant in
Lan-chou, did not resume full production prior to 1950. 22/ Because of
these conditions, the "bench mark" picture of Lan-chou for 1944-45 is
valid for as late a period as 1950 and 1951.
B. Production Facilities.
1. Machinery and Metalworking. 2Y
In 1945 the Kansu Machinery Plant, operated jointly by the
National Resources Commission and the Kansu provincial government, and
the Lan-chou Machinery Plant were the only two industrial plants in
Lan-chou that contained sufficient metal-processing tools and equip-
ment to manufacture complicated engineering-industry products. Of -
these two plants, only the Kansu Machinery Plant approached a mall
modern industrial plant in either size or productive capabilities.
Production was geared essentially to "job-shop" production methods
rather than to large-quantity production of particular items.
The extensive plans for this plant were never realized,
although the factory included a machine shop, a foundry, a forge, and
repair shops. Products of the plant included lathe beds, shapers,
hydraulic presses, air compressors, steelyards, and various other types
of selected machinery. Production was never satisfactory, either in
quality or in quantity, although many of the plant difficulties were
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undoubtedly caused by a lack of adequate supply and by inferior raw
materials: The plant contained 18 motors totaling 135 horsepower.
The Lan-chou Machinery Plant was the second largest
industrial plant in Lan-chou. Equipment was extremely limited, con-
sisting of 1 shaper, 3 drills, 1 arc welding machine, 7 engine lathes,
3 planers, and 4 motors totaling 35 horsepower. The items manufactured
were used primarily for the repair of the flour mill and chemical
works' belonging to the same company and as spare parts for textile
mills.
In addition, there were in Lan-chou 25 additional plants
considered to be machinery and metalworking plants. The equipment of
these plants was extremely limited, consisting in many instances of
"1 drill press, 1 hand drill, 2 vises, and a forge." Such establish-
ments specialized in automotive and machinery repair operations and
in' the manufacture of such items as cotton scutchers, wool combers,
and simple castings. The ingenuity of these small-scale producers
was high, as is often the case in areas of the world characterized by
low levels of modern industrial capacity and technology. Small pro-
ducing units with a minimum of mechanical power, material, and machinery
were capable of duplicating many of the more complicated items of
Western technology. The total output of such plants can be considerable.
Such producing units, however, are not capable of either the engineering
design function and precision operations in terms of both raw materials
and processing or large-scale production of particular items. Produc-
tion is geared to local needs. The primary purpose of many of these
small-scale plants is to keep the textile, food-processing, and other
industrial, military, and transport operations functioning.
The eight major metalworking and machinery plants operating
in Lan-chou in 1944 are listed in Appendix A together with data on
equipment, production, capitalization, labor force, and location.
2. Metallurgical. 22/
The iron foundries in Lan-chou were capable of only limited
production of poor-quality cast iron. Although the two major machinery
plants, the Kansu Machinery Plant and the Lan-chou Machinery Plant, use
cupolas in their foundry production, the other foundries in Lan-chou
were dependent upon small crucibles producing iron products suitable
for tools, plowshares, stove grates, and shovels.
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In the production of crucible iron, several dozen clay
crucibles are placed in a horizontal furnace and fired by coal placed
beneath and around the crucibles. Hand-operated or, in a few cases,
power-operated bellows supply air for the furnace. The heating pro-
cess requires from 3 to 9 hours to prepare the metal for pouring.
The amount of iron that can be poured at any one time is
relatively small, and a high-grade product is not possible, because
high temperature cannot be obtained. The crucibles can be used only
once, and they often break during the firing process.
3. Electrical. 1,EY
In 1941 the Lan-chou Branch of the Fourth Factory of the
Central Electric Equipment Company was established in Lan-chou. Pro-
duction consisted of various types of flashlight batteries and A., B,
and C batteries for radio and telecommunications use.
Originally located in Shanghai, the Central Electric Equip-
ment Company manufactured dry cell batteries, under the trade name of
"Sun and Moon," which were widely used throughout China. Because of
the evacuation of the .coastal provinces, a number of 'battery plants
operated by this company were relocated throughout the interior pro-
vinces.
Operations in Lan-chou were hampered by inadequate supplies
of materials. Securing sufficient quantities of carbon and ammonium
salts proved to be a major problem, and distant sources in Ningsia and
Sinkiang were exploited.
The electric battery industry in Lan-chou was a wartime
expediency. Lan-chou is located far from the major chemical industries
that can best service the requirements of a battery industry. No
information is available regarding the output of this plant aince 1950,
and it is doubtful whether the plant is presently engaged in battery
production. In 1944 the plant was reported to have 1,136 square meters
of floor space and to employ 154 workers.
4. Military End Items. ._2/
One small arsenal is known to have been located in the
northern suburbs of Lan-chou. This arsenal is presently reported to
be engaged in the repair of weapons. Considering the productive '
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capacity of Lan-chou, it would appear likely that work is limited to
the repair of weapons or the production of simple spare parts.
5. Nonengineering Industry Production. )12/
Plants in Lan-chou, both handicraft and semimodern, have
been engaged, for the most part, in the production of consumer goods
to fulfill regional demands. Production has included textiles, mainly
woolens -- including military blankets and clothing, leather goods,
glassware, flour, paper, chemicals, matches, printing supplies, ciga-
rettes, bricks, and small quantities of cement. The great majority
of these plants were of the family, or semihandicraft, variety, solely
dependent upon handpower.
C. Industrial Base.
1. Raw Materials.
The mineral resources of Northwest China are considerable
in both variety and total reserves, and large sections of the area
remain geologically unexplored. Gross estimates of reserves in
Northwest China vary greatly for individual resources, emphasizing
the incomplete nature of geological work in the area.
The Chinese Communists have placed considerable emphasis
upon the large number of prospecting teams presently surveying the
Northwest area, but statements regarding the results of these surveys
have been limited to claims of discovering large deposits of copper
in Kansu, rare bornite in Shensi, chromium in Ningsia, extensive coal
deposits, and reserves of manganese, bismuth, zinc, and beryllium.)11/
In addition to large reserves of iron and coal, Northwest
China is known to contain deposits of manganese, wolfram, gypsum, lead,
silver, gold, bauxite, sulfur, borax, nitrate, and graphite.11-2/
Uranium deposits are reportedly widespread throughout Sinkiang, L1-2/
but detailed information on the great majority of these uranium deposits
is not available. Although reserves of iron and coal are extensive,
actual production in Northwest China has not been of national importance.
For example, prior to 1950 the annual primitive production of pig iron
in south Kansu did not exceed 1,000 metric tons.122/ The consumption
of iron by the major users in Kansu is given in Appendix A.
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Coal is available in the immediate vicinity of Lan-chou,
but grades suitable for coking purposes are scarce. Available local
coke has a low thermal value and is generally unsatisfactory for
metallurgical use. 112/
Although the Chinese Communists have noted that production
of the cement factory in Lan-chou has been hampered by unavailability
of limestone, geological gormations of limestone are common throughout
southern Kansu./1.6./ Fluorspar is locally available and is used as a
flux in smelting iron. 47/
Present exploitation of petroleum in Northwest China is
restricted to the Yu-men oil fields in Kansu and the fields in the
vicinity of Wu-su in Sinkiang. Although undeveloped petroleum reserves
cover extensive areas throughout Kansu and Sinkiang, present (195)-i-)
production of the Yu-men refinery is estimated at only 400,000 metric
tons annually, which accounts for approximately 25 percent of the
total mainland requirements of Communist China. 48/
Petroleum products from the Yu-men oil fields are presently
being transported by tank trucks, and by oil drums loaded on trucks,
from the oil ffelds to the railhead in the vicinity of Yung-teng. The
first shipment of crude oil to a refinery in East China was reported
in late 1953.)12/
Petroleum production in Sinkiang is small at present and
has little relationship to the immediate industrialization of Lan-chou.
Until the completion of the Lan-chou - Sinkiang railroad, petroleum
production in the Sinkiang area will remain oriented toward the USSR.
and local uses.
2. Industrial Manpower.
Recurrent reports of an explosive increase in the population
of Lan-chou have been responsible for focusing increased attention on
the area.
In 1943 the total population of Lan-chou and Kaolan Hsien
was 277,572. 22/ In 1952 the Northwest Daily News fixed the population
of Lan-chou at 698,000. 21/ Other expansive statements from Communist
China have predicted that the population of the city will reach 1 mil-
lion 22/ to 4 million 21/ within the next few years. -
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Such an increase in the population of Lan-chou is not
indicated by recent population movements in Northwest China. There
have been reports of some voluntary and some forced migration from
the coastal provinces as a result of the 3-Anti and 5-Anti move-
ments.221/ Railroad construction, irrigation projects, industrial
expansion, and increased petroleum and mineral exploitation have all
increased demands for labor in Northwest China. ?The most pressing
demands, however, have been for technical workers and skilled and
semiskilled personnel. Reports of transfer of technical workers to
the Northwest have been recurrent, 55/ but the scope of these trans-
fers ?has been modest and is not indicative of wholesale transfers
of industrial facilities.
In 1944, only 2 percent of the population of Lan-chou was
engaged in manufacturing. The total labor force in Lan-chou during
this period consisted of 3,383 workers. Fewer than 800 workers were
employed in the metalworking plants, including handicrafts. L/
Soviet advisers have been reported in Lan-chou since
1950, 22/ estimates of their numbers varying from a "small group" Zi_/
to over 200. 22/ The Russians are in Lan-chou reportedly to support
construction activities, to supervise Sino-Soviet air traffic, and
to act as technical advisers in at least one industrial plant. f2/
In addition, the Yu-men oil fields L4.../ and the construction of the
Lan-chou railroad have received Soviet technical assistance.
3. Electric Power.
During World War II the electric generating capacity in
Lan-chou totaled 974 kilowatts, divided between 1 turbine of 500
kilowatts and 1 steam unit of 474 kilowatts.
Since 1950, several piecemeal attempts have been made to
increase electric generating capacity in Lan-chou. An additional
1,000 kilowatts of generating capacity was installed in Lan-chou in
1951, LI/ and a small hydroelectric installation of not more than
200 kilowatts was placed in operation in 1952. .L./ Present (195)-)
capacity in Lan-chou does not exceed 2,200 kilowatts.
A modern thermal electric power plant is scheduled for
construction in Lan-chou together with additional plants in T'ai-yuan,
Hsi-an, Ta-yeh, and Pao-t'ou. 66 Construction is believed to have
begun on the Lan-chou plant. 67 A plant of 5,000-kilowatt capacity
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would appear as a reasonable installation for Lan-chou. This con-
clusion is based upon the recent construction of an estimated 10,000-
kilowatt thermal plant in Hsi-an. .?_/ A 10,000-kilowatt plant would
be an absolute maximum for a plant constructed in Lan-chou in the
immediate future.
4. Transportation.
Much of the increased economic importance of Lan-chou is
not the result of major industrial construction but of improved trans-
port facilities and increased petroleum exploitation at the Yu-men
oil fields.
Lan-chou has long served as a hub for truck transport,
with roads radiating outward to Sinkiang, Tibet, Ningsia, Shensi,
and South China. The road system in this area, however, remains crude,
although substantial road improvements have been made since 1950.
Recently, railroad transport has displaced, to a large extent, through
east-west truck traffic. The present trend is toward highway feeder
lines joining the outlying districts of Kansu to the rail line at
Lan-chou.
The completion in August 1952 of the long-proposed west-
ward extension of the Lung-hai railroad to Lan-chou marked the attain-
ment of a major objective by the Chinese Communists. The next objective
of the westward extension of the railroad from Lan-chou is Yu-men.
Once this point is reached, a marked increase in the eastward shipment
of petroleum products can be expected. The ultimate objective of rail-
road construction in Northwest China, however, is to secure an addi-
tional line of rail communication with the USSR, lessening Communist
China's dependence upon vulnerable eastern railroad connections with
Soviet industrial centers. In addition, completion of the railroad to
Sinkiang will strengthen Communist China's political influence in this
area and permit an equitable distribution of the petroleum or mineral
resources that are being jointly exploited by the Russians and the
Chinese Communists.
It has been estimated that the railroad should reach
Yu-men (549 miles from Lan-chou) by mid-1955, Ti-hua (1,233 miles from
Lan-chou) at the end of 1959, and the Soviet border near Ta-ch'eng
(about 1,677 miles) early in 1962. /2/ If the Russians should take
an active part in railroad construction in Sinkiang, it is probable
that a connection between Communist China and the USSR would be
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achieved several years earlier. At present the railroad is north of
Yung-teng, approximately 70 miles northwest of Lan-chou. 11/ In the
long run, with ultimate rail connections with Chungking and Pao-t'ou,
the importance of Lan-chou as a rail center will increase further.
Downstream from Lan-chou, the Yellow River is navigable
only to inflated animal-skin rafts and to barges of shallow draft. 12/
III. Capabilities, Vulnerabilities, and Intentions.
A. Capabilities.
At present, Lan-chou is not significant as a manufacturing
center for the engineering industry. The small-scale industry in
Lan-chou is oriented toward the production of consumer goods, agri-
cultural support, and area rail and truck transport.
Activities in Northwest China to be watched as indicators of
industrial growth include continued and expanded railroad construction,
new electric power installations, increased petroleum production and
changes in the pattern of distribution of either crude or refined
petroleum products, and new plant construction.
Up to the present time the Chinese Communists have stressed
railroad construction more than other construction activities in
Northwest China. An estimate of the stress placed upon the North-
west area will be possible after the completion of the railroad to
Yu-men. An immediate westward extension of this line will indicate
growing emphasis upon exploitation of natural resources in this
area and upon the securing of an alternate line of rail communication
with the USSR. It may also be indicative of a desire on the part of
the Chinese Communists to increase their own influence in this sphere
of Soviet influence. Additional railroad construction connecting
Lan-chou with Hsi-ning, Chungking, or Pao-t'ou would indicate increased
Chinese Communist capabilities.
The rate of installation of electric generating capacity in
Northwest China will also serve as a measure of the industrial impor-
tance of this area. Industrial North and Northeast China are pres-
ently in the most advantageous position to achieve large-scale
increases in generating capacity. Power installations in the interior
can be expected to develop much more slowly. In the next decade
Northwest China should claim an increasing percentage of newly
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installed generating capacity if Northwest China is to become of major
industrial importance. This rate of increase can be indicative of the
emphasis placed upon Northwest China by the Chinese Communists and
can provide a measure of its future growth potential.
B. Vulnerabilities.
The modest industrialization program undertaken by the Chinese
Communists in Northwest China suffers from a lack of electric power,
undeveloped natural resources, inadequate transport, the dry climate,
and lack of a technically trained labor force.
C. Intentions.
The present industrialization policy of Lan-chou can be ex-
pected to continue to stress the production of consumer goods, the
increased utilization of regional agricultural products, and the con-
tinued production of construction materials. Increased production
of hides, leather goods, animal casings, and food products probably
will continue. Substantial modernization and increased productive
capacity for the wool-processing and woolen textile industry is most
likely.
During this period, general construction, including road
improvements and commercial, residential, and industrial construction,
as well as initial attention to water supply and sewerage problems,
undoubtedly will continue.
Any substantial increase in the industrial output of Lan-chou,
with the city becoming a modern industrial center, is dependent upon
the installation of increased electric generating capacity. Indus-
trially, Lan-chou is handicapped by inadequate and obsolescent power
facilities. Although the Chinese are installing increased generating
capacity in Lan-chou, it is doubtful that even a modest increase in
capacity of several thousand kilowatts can be installed prior to 1955.
As the industrialization of Lan-chou progresses, it is probable
that a mall engineering industry concentration will be established.
This industry, from present indications, will be oriented toward agri-
cultural, water conservation, petroleum, and mining requirements. The
beginning of a modern inland military production center in Lan-chou is
a possibility.
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If adequate raw materials prove available, it is likely that
a small iron and steel industry will be established in Lan-chou to
meet local requirements. It is improbable that a major metallurgical
center will be established in Lan-chou in the next 5 to 10 years.
Completion of the railroad to Yu-men will greatly facilitate
the shipment of refined petroleum products and crude oil to eastern
consumption centers. Lan-chou is the logical distribution point for
southeastern Kansu, but because of its distance from the Yu-men and
Sinkiang oil fields and the eastern consumption centers, it is doubt-
ful if large-scale refinery facilities of national importance will
be established in Lan-chou. The ultimate construction of a pipeline
from the petroleum areas to Lan-chou would increase Lan-chou's potential
for becoming a refinery center. Because of the distances involvedsand
the adequacy of rail transport, the construction of a pipeline to
Yu-men would not appear feasible for a period of at least 5 years.
Upon the completion of the Lan-chou - Sinkiang railroad,
Lan-chou will bp in a position to receive raw materials and industrial
products from Sinkiang and the USSR. Commercial activities centering
on Lan-chou as a gateway to Communist China will undoubtedly expand.
The effect of continued improvements in irrigation, reforestation,
transportation, agriculture, and exploitation of natural resources
should have had a considerable effect upon the industrialization of
Northwest China by 1960. The Northwest should by that time account
for a considerably greater share of Communist China's national product.
By 1960, plants in Lan-chou should be capable of producing in
modest quantities such items as water pumps, air compressors, textile
machinery, metalworking cutting equipment -- including lathes of non-
precision types, agricultural tools and farm machinery, and equipment
for both the mining and the petroleum industries. Additional thermal
power installations, large-scale automotive repair facilities, and
railroad yard facilities, as well as greatly expanded woolen textile
production, can be expected.
In the decade 1960-70 Lan-chou will develop the potential of
becoming a major transportation, commercial, and industrial center
in Communist China, although there is no reason to expect that Lan-Chou
will outstrip in industrial importance Shanghai, MUkden, T'ai-yuan, or
other present-day industrial centers in North and Northeast China.
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APPENDIX A
TABLES
Table 2
Major Machinery and Metalworking Plants in Lan-chou
1944 2/* /2/
CD
CD
CD Factory Name Date Follnaed Location
Kansu Machinery Plant September 1941 Tlumentun, Lan-chou
CD
. .
0
^ Lan-chou Machinery Plant 7 July 1941 Ch'i-li ho, Lan-chou
(J^ D
c
a- Linshen Machinery Plant July 1942 Imin Lu, Lanchou
(JD
C4
O Chisheng Iron Works -August 1942 Chung.-shan Lu, Lan-chou
CD
CD
CD
CD
CD
CD * Footnotes for Table 2 follow on p. 20.
CD
CD
CD
Capital
(Thousand 1944 Yuan) Production Equipment
36,900
18 motors (135 total
horsepower), 29 lathes,
9 planers, 5 scutching
machines, 1 punch press,
5 drill presses, and 1
arc-welding machine,
500 4 motors (15-horsepower,
12-horsepower, 5-horse-
power, 3-horsepower),
7 lathes, 3 planers, 1
scutching machine.
100 Three 6-foot lathe beds,
1 drill press, 1 sprayer,
1 electroplating machine.
50 One 5-horsepower motor, 2
lathe beds, 3 vises, 1
drill press, 1 powered
knife, 1 rotating drill.
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Number of
Workers Annual Production op
416 Ten 6-foot lathe beds, to
ten 8-foot lathe beds,
5 shapers, 8 water
CD
pumps, 1 air compressor,.
5 steelyards, 3 engines
for raising and lowerinD
sluice gates, 20 vises,
and 33 hand drills.
78 16 cotton scutchers, 1
flour milling machine, -0
and 5 turning lathes. -4.4
CD
c
17 Repair parts. CD
CID
Ca
29 2 cotton scutchers, 3 a
looms, 5 silver chests,C3
5 drill presses, 3
01
wool-beating machines, a
5 vises. CD
CD
CD
CD
CD
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Table 2
Major Machinery and Metalworking Plants in Lan-chou
1944 2/ /3/
(Continued)
Factory Name
Chien-kuo Automobile
^ Repair Shop (formerly
C) Tahsing Iron Works)
Lan-chou Imin Lu Machinery
CD Production Cooperative
CD
OD
CD
CD
co Lan-chou Industrial
CAD
Association Iron Works
CAD
11Z3
CD
0 Hohsi Industrial Company
Iron Works
Date Founded
Location
September 1943 Imin Lu
January 1943 Tmin Lu
July 1940
Ho-chia-chuang, in the
southern suburbs of
Lan-chou
May 1944 325 Chungcheng Lu,
Lan- chou
Capital
(Thousand 1944 Yuan) Production Equipment
100
1 lathe, forge and auto-
motive repair equipment.
70 Electric motors, oil
motors, lathes, planers,
drill press, scutching
msphines, and vises.
100 3 lathes, 1 planer, 2
drill presses, 7 vises,
2 forges, 1 set of cast-
ing equipment.
N .A .
3 turning lathes, 2 drill
presses, 5 vises, 1
forge.
Number of
Workers
Annual Production
0
CD
27 100 sheets each of fronta
and back steel plate, M
200 copper sleeves, 0
1,000 screws. -1
P3
21 Wool spindles, wool com-CD
hers, joining machines,r,
flour milling machines,i;
wool looms, wool OD
scutchers, stocking CD
knitters, cotton looms."
CD
30 2 wool combers, 1 revol-up
ving spinning machine, (1)
wool-washing machines,
wool-beating machines, up
iron roller looms, and
other parts.
13 Parts for automobiles
and other machinery.
5
a. Following World War II, because of the unstable economic and political conditions, there was little industrial activity in Lan-chou.
%.J metalworking plants is indicative of Lan-chou's industrial capabilities for as late a period as 1951.
C^ D
cb
a
CD
CAD
a
a
a
a
a
a
cri
a
a
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Table 3
Consumption of Iron by Major Industrial Plants in Kansu
1944
Metric Tons
Name Annual Consumption
Kansu Machinery Plant 120
Lan-chou Machinery Plant 60
Lan-chou Power Plant 12
Northwest Highway Bureau Repair Shop 60
Plants under National Resources Commission 60
Northwest Highway Bureau 24
T-ien-shui Auto Repair Shop 24
Kansu Cement Company 24
Kansu Mining Company 25
N.A. -- small foundries in Lan-chou 120
N.A. -- farm implements and miscellaneous 300
Northwest Salt Administration Repair Shop 6o
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Table 4
Location of Cities Mentioned in the Text of This Report a/
Alma-Ata, Kazakh SSR
43?12' N -
76?57' E
Chungking, Szechwan
29?34' N -
106?35' E
Hsi-an (Sian), Shensi
34?16' N -
108?54' E
Lan-chou, Kansu
36?03' N -
103041' E
Mukden (Shen-yang), Liaotung
41?48' N -
123?27' E
Pao-tiou, Suiyuan
40?361 N -
110?03' E
Shanghai, Kiangsu
31?03' N -
121?24' E
Chuguchak (T'a-ch'eng), Sinkiang
46?45' N -
82?57' E
T'ai-pei, Taiwan
25?03' N -
121?32' E
Trai-yuan, Shansi
37?52' N -
112?33' E
Ta-yeh, Hupeh
30?05' N -
114?57' E
Ti-hua (Urumchi), Sinkiang
43?48' N -
87?35' E
Ulan-Bator, Mongolia
47?55' N -
106?53' E
Wu-su, Sinkiang
44?27' N -
84?37' E
Yu-men, Kansu
40?17' N -
97?12' E
Yung-teng, Kansu
36?44' N -
103?24' E
a. See the map, Communist China:
Northwest Area, inside
back cover.
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APPENDIX B
METHODOLOGY
Prior to the preparation of this report, there existed no defini-
tive statement regarding the industrial capabilities of Lan-chou.
Readily available information on Lan-chou was sketchy and conflicting.
This study initially developed a "bench mark" picture of Lan-chou that
would clearly define its industrial capacity and importance. The base
established was for the period of 1944-50.
Information on Lan-chou since 1950 has been evaluated and collated
in order to estimate the present industrial importance of the area.
Reports of industrial developments in Lan-chou were too fragmentary to
give conclusive evidence of the scope of recent industrial activities
in the area. It was necessary to evaluate the interrelated effect of
railroad construction, movements of skilled workers, commercial activ-
ity, and petroleum exploitation upon the industrialization of Lan-
chou.
Estimates of Lan-chou's future industrial potential are based upon
a review of factors that can be expected to restrict or accelerate its
industrial growth. These included estimates of the probable impact
upon Lan-chou of future transportation improvements, natural resource
exploitation, past industrial 'capabilities of the area, and the trend
of recent Chinese Communist industrial activity.
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APPENDIX C
GAPS IN INTELLIGENCE
I. General.
Concise information regarding recent industrial construction in
Lan-chou, including data indicating the size, equipment, and produc-
tive capabilities of new industrial construction is lacking.
II. Specific.
Of considerable importance from an intelligence viewpoint is
information that can supply positive indications of Chinese Communist
intentions regarding the following:
A. Lan-chou's long-term role as a center for engineering indus-
tries.
B. Lan-chou's role in the development of the petroleum and min-
eral resources of the Northwest, and the impact of these developments
on the extent and type of industry established in Lan-chou.
C. The impact of the Lan-chou - Sinkiang railroad upon the in-
dustrial development of Lan-chou.
Of immediate value would be an evaluation of Sino-Soviet activities
in Sinkiang related to industrial activities in the Lan-chou area of
the Northwest. Reported uranium mining and atomic activities, as
well as known Sino-Soviet mineral and petroleum exploitation and indus-
trial plant construction, have made this area of considerable intelli-
gence interest.
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APPENDIX D
SOURCES AND EVALUATION OF SOURCES
1. Evaluation of Sources.
Information regarding Chinese Communist operations and intentions
in Northwest China has been fragmentary. The Chinese Communist press
and radio have reported railroad and highway construction, reforesta-
tion, and reclamation projects in considerable detail and have been
generally reliable. Petroleum and mineral exploitation in this area
has been discussed in much more general terms. Chinese Communist
statements detailing industrial transfers and expansions in Lan-chou
have been almost totally lacking.
25X1C
Recent information regarding economic activities in Lan-chou has
depended upon CIA SO (CS) sources and Army, Air, and State
and a few Japanese coming out of the Northwest
area. The CIA sources have been fragmentary and often tend to over-
emphasize the short-range industrial importance of Lan-chou and North- 25X1C
west China.
However, some
of these latter reports have supplied valuable general information on
Lan-chou.
Background information on the industrial significance of Lan-chou
was Obtained in most part from the exploitation of previously un-
available Chinese documents. Industries in Kansu, 1944 was of major
importance in detailing and confirming the fragmentary picture of a
"bench mark" Lan-chou. For this same purpose, Japanese documents and
China Project reports were of considerable value.
Basic intelligence reports, such as NIS-39, Terrain Study No. 5,
North Central China, and basic Australian intelligence reports supplied
valuable information regarding the general physical and economic char-
acteristics of the area. These reports, however, were not of value in
defining the specific industrial capabilities of Lan-chou. Material in
the Industrial and Biographical Registers reflects the general lack of
information that is available on this part of the world.
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2. Sources.
Evaluations, following the classification entry and designated
"Eval.," have the following significance:
Source of Information
A - Completely reliable
B - Usually reliable
C - Fairly reliable
D - Not usually reliable
E - Not reliable
F - Cannot be judged
Information
Doc. - Documentary
1 - Confirmed by other sources
2 - Probably true
3 - Possibly true
4 - Doubtful
5 - Probably false
6 - Cannot be judged
"Documentary" refers to original documents of foreign governments
and organizations; copies or translations of such documents by a staff
officer; or information extracted from such docvments by a staff officer,
all of which will carry the field evaluation "Documentary" instead of
a numerical grade.
Evaluations not otherwise designated are those appearing on the
cited document; those designated "RR" are by the author of this report.
No "RR" evaluation is given when the author agrees with the evaluation
on the cited document.
25X1A
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45
Kuldja (1-ning)"W.-nu
Wu-SU
A N
COMMUNIST CHINA
NORTHWEST AREA
Selected railroad
Railroad, proposed or under construction
(alignment approximate)
Selected road
Oilfields
Area of known or possible economic
oil deposit
Scale 1:16.000000
O 100 200 300 400 Miles
O 100 200 300 400 Kilometers
105
110
Kashgar
Varkand
Khotan
Ho-tien)
NINGSIA
An-kai ? ALA SHAN
VU-MENr- E R T
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(Ningsia)
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HENSI
13201 3-54
100 105
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Approved For Release 1999/09/26 : CIA-RDP79-01093A000500060Wilia,
OFFICE OF RESEARCH AND REPORTR, "8.1
rfrunbers_s__
De of Document 2
Projects Control Staff
Control Sheet
D..7)CHMENT
NCICHANGE IN CI AS. Ili
;
.',HANr-1:71? TO: TS SO f17
I IF
Id.I P
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7O-
AprilII" ICS 15
ITVT.WER: _231_2044
Classification J r
Number of copies 135.
D/STRIHNION
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RETURNED
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