CHINESE ECONOMIC ACTIVITY IN SOUTHEAST ASIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R00890A001100030026-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 4
• Document Creation Date: December 14, 2016
• Document Release Date: July 21, 2003
• Sequence Number: 26
• Publication Date: March 17, 1959
• Content Type: BRIEF

Approved For Release 2003/08/19 : CIA-RDP79R0089OA001100030026-4
NSC BRIEFING 17 March 1959
CHINESE ECONOMIC ACTIVITY IN SOUTHEAST ASIA
I. Peiping began an economic drive in 1954 in Southeast Asia.
Effects first really felt last year, but now, because of current
pre-occupation with the "leap forward," moving ahead on its
earlier momentum. Presents long-range threat of major implications
for position of West in Southeast Asia.
A. Chinese activity is dual-motivated: to)uake its growing power
felt in Southeast Asia through economic relations, and to
generate sterling, enabling China to finance West European
goods essential to its own developmental program.
II. China has a capability for a major trade assault which could
disrupt several Southeast Asian economies.
A. Rice sales to Southeast Asia, now totaling less than .005
percent of Chinese production easily could be expanded with
drastic effect on the economies of Burma and Thailand.
B. Chinese rubber purchases, nearly 10 percent of Southeast Asian
production,,,are shifted from one producer to another, creating
uncertainties in the market. China's first major purchases
from Malaya made in 1958 probably will not be repeated this
year, but diverted to Indonesia.
III. The impact of the Chinese drive has been mixed and program
encountered some set-backs.
A. In those countries where Chinese goods compete with local
production, domestic commercial influences have become
vociferously anti-Chinese.
1. Malaya and Singapore reacted to Chinese aggressive tactics
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by quotas, embargoes and proposed legislation on dumping.
Malaya will close by mid-April the Bank of China branches
which engaged in unorthodox transactions such as tariff
rebates, thus influencing importers to buy Chinese goods.
2. To counter the Malayan action Peiping retaliated with a
trade ban which hurt China more than Malaya and was,
in effect, subsequently rescinded,
3. Despite the obstructions to trade, China's exchanges with
Singapore and Malaya increased by 25% in 1958 to
100 million dollars (U5).
B. In other countries where there is little domestic industry
(Burma, Indonesia, Cambodia), Chinese price-cutting and
favorable credit terms have reduced import costs and hence
increased the availability of a wide range of consumer goods
and light industrial items.
1. In Indonesia, China began a drive to expand trade by 10
year loans for consumer goods (an unusual Communist tactic)
and by military credits.
a, To meet Indonesia's needs for slow ground attack air-
craft, China, in its first arms deal in the free world,
has been supplying relatively obsolescent aircraft
this year.
C. But in this case the trade drive has affected competing exporters
in Hong Kong, Japan and India.
1. But actually, Chinese sales during the trade drive
(starting 1954) account for only 15 percent of total
increased Southeast Asian imports in that period.
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2. And only certain products have been affected by this
drive, for example: textiles (India, Japan, Hong Kong)
and cement (Hong Kong, Japan).
IV. It is unlikely, however, that China, at this time, will risk its
past gains by an effort which would provoke adverse reaction
to the whole program and confirm warnings of the potential threat.
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Approved For Release 2003/08/19 : CIA-RDP79R0089OA001100030026-4