CHINESE AFFAIRS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00865A000700010002-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: December 9, 2016
• Document Release Date: July 11, 2001
• Sequence Number: 2
• Publication Date: April 1, 1975
• Content Type: NOTES

Approved For Release`2001/07/30: CIA-RDP79T00865A0007W10002ecret
No Foreign Dissem
(~$UIPP K
Chinese Affairs
Secret
.L+9
April 1, 1975
SC No. 00400/75
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No Dissem A roa
Background Use OnZy/Controlled Dissem
Warning Notice
Sensitive Intelligence Sources and Methods Involved
NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
Classified by 005827
Exempt from general declassification schedule
of E. 0. 11652, exemption category:
? 5B (1), (2), and (3)
Automatically declassified
on: Date Impossible to Determine
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 Approved For Releas001/6)t cTRIA79"5A00010002-3
This publication is prepared for regional specialists in the Washington com-
munity by the East Asia - Pacific Division, Office of Current Intelligence,
with occasional contributions from other offices within the Directorate of
Intelligence and from the Directorate of Science and Technology. Comments
and queries are welcome. They should be directed to the authors of the
individual articles.
CONTENTS
April 1, 1975
Business Almost as Usual . . . . . . . . . . . . . 1
Factionalism in the Militia . . . . . . . . . . . 3
Balance of Payments - The Ink is Red. . . . . . . 6
Soliciting Singapore . . . . . . . . . . . . . . . 9
A Move Toward Dacca . . . . . . . . . . . . . . . 11
Proposals To Restructure the Provinces. . . . . . 13
Chinese Step Up Port Improvements . . . . . . . . 17
CHRONOLOGY . . . . . . . . . . . . . . . . . . . . 20
SECRET SPOKE
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Since the National People's Congress last Jan-
uary there have been several indications that Peking
is conducting its affairs in almost normal fashion--
i.e., similar to the way business was done prior to
the Cultural Revolution. Normality is a newsworthy
item in China because abnormality has generally been
the norm since.the mid-1960s. The newly constituted
government, ratified at the congress, seems to be
the most important factor in the change in operating
style.
The first sign that things were returning to
normal was a notice issued in early March by the
State Council--China's cabinet--thanking those for-
eign governments that had sent messages of concern
regarding a major earthquake that hit the northeast
province of Liaoning in February. Foreign governments
have sent such messages before, but if the State Coun-
cil issued replies, they did so in secret.
In mid-March, the standing committee of the Na-
tional People's Congress, which meets when the full
congress is not in session, held a meeting that ap-
proved a proposal to grant amnesty to all remaining
Nationalist "war criminals" still in custody. The
meeting also heard a report on the economic situation
by chief economic planner Yu Chui-li and received a
briefing on the earthquake relief program in Liaoning.
In addition, the session approved several ambassadorial
appointments, many of which were actually made last
year. In typically "abnormal" fashion, however, no
details were released on any of these subjects except
the amnesty decision.
Peking announced on March 20 that preparatory
meetings have been held to plan for the national con-
gresses of China's major mass organizations--the Com-
munist Youth League, the women's federation, and the
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trade unions. The mass organizations were destroyed
during the Cultural Revolution, but provincial-
level units for the Youth League and the trade unions
were established in every province by 1973. The only
step needed to complete the rebuilding process for
these two groups was to re-establish the organiza-
tions at the national level, but the political uncer-
tainties of last year's anti-Confucius campaign prob-
ably forced postponement of national congresses, if
indeed they were being planned. As for the women's
federation, provincial-level groups have been estab-
lished in all but one province. Peking's announce-
ment did not indicate when the three congresses would
be held, noting only that they would be convened
"after due preparation."
The announcement made no mention of the peasants'
association, another mass organization that is being
rebuilt at a much slower pace. Few provinces have
established peasants' associations at the provincial
level. Before the Cultural Revolution, there was no
national peasants' association, and it is not clear
whether Peking plans to establish one. (UNCLASSIFIED)
April 1, 1975
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SECRET SPOKE
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Factionalism in the Militia
The campaign to improve social order by
building up the urban militia has been successful
in many areas, but recent reports indicate that
the campaign has had the opposite effect in Chekiang
and Yunnan provinces. Factional conflict, dating
from the Cultural Revolution, has continued within
the rebuilt militia units.
Militia involvement in factional strife is an
example of China's vexing problem of trying to
balance so-called democratic rights.--such as the
right to strike, to put up posters, and to criticize--
with the need for order and unity. Since the Cultural
Revolution, the pendulum has too often swung in favor
of "democracy" at the expense of production, social
order, and the implementation of central policies.
Continued factionalism--politically and personally
motivated--has necessitated the involvement of central
leaders and the continued intervention of troops. It
has also tended to undermine the authority if not the
will of provincial leaders.
the struggle
for control over the urban militia intensified in
several areas of Chekiang in mid-November. Violent
clashes occurred frequently, and a number of people
were killed. Warring factions reportedly stole
weapons from the PLA, and the limited stock of
militia weapons may have been used.
The situation was so serious that the central
authorities summoned leaders from both provinces
to Peking around the end of the year. Party
vice chairman Wang Hung-wen reportedly emphasized
to the provincial leaders that the role of the
militia was to support the local party authorities
and to maintain order. Factionalism was condemned.
April 1, 1975
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SECRET SPOKE
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Wang was said to have underscored a recent order
by Chairman Mao that in places with serious factional
disputes, militia units should not be organized in
a "hasty" manner. The militia headquarters in
Hangchow, capital of Chekiang, and units in other
cities in the province apparently fell into this
category, because orders were issued by -Peking
leaders to disband them. These instructions are also
said to have been passed throughout the country as
part of central directives two and eight.
The party first secretary of Chekiang, Tan
Chi-lung, was reportedly reluctant to carry out
the orders. He may not have wanted to remove some
militia leaders loyal to him, but he must also have
been mindful that the decision could anger one of
the factions. Tan had already been dragged out of
a guesthouse by one group last month and taken to a
struggle meeting--an experience he did not wish to
repeat. Tan finally dissolved the militia headquarters
however, after a telegram from Peking demanded action.
still, peace was not
restored in Chekiang until eng Hsiao-ping sent a di-
vision of troops from the Peking Garrison in late Feb-
ruary and made a personal visit in early March. Teng
is also said to have gone to Yunnan in early February
for the same purpose.
There is no guarantee that peace will be main-
tained. The militia in Wenchow, a coastal city in
Chekiang, was praised by the provincial radio last
May for preventing disturbances, but
indicate that factional activity resume is year.
Problems with the militia in Chekiang and Yunnan
demonstrate that institutions such as the militia
cannot in themselves create unity. Continued faction-
alism tends to frustrate the achievement of high-
priority goals such as getting the military out of
politics. For example, recent broadcasts have called
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on the regular forces to work closely with the militia.
The trend in domestic propaganda last year was to em-
phasize that the urban militia was distinct from the
regular PLA forces and operated under the direct com-
mand of civilian municipal authorities. Most reported
militia leaders have been civilians. The new first
deputy commander of the Canton Militia Command, formed
in mid-December, however, is the Canton Garrison
commander. Canton has been plagued by the economic
demands of demobilized soldiers, and civilian munici-
pal authorities apparently have turned to the garrison
for help.
The reported involvement of Teng Hsiao-ping,
who has a well-earned reputation as a disciplinarian,
may explain this adjustment in the expressed role
of the PLA. Teng was recently named chief of staff
and may have decided to increase the use of troops
to restore order. Previous reports indicated that
Wang Hung-wen had attempted to resolve factional
rivalry in several provinces, including Chekiang and
Yunnan, but his success obviously has been limited.
Indeed, the persistent lack of unity doubtless
helped to create the need to rehabilitate veterans
such as Teng and to use the campaign to strengthen
the proletarian dictatorship as a vehicle for en-
hancing central control and improving social order.
Nevertheless, the fact that "democratic" rights are
written into the constitution, have been closely
associated with Chairman Mao, and are used as a
political weapon by a variety of groups, will make
a concerted crackdown on factionalism very difficult.
(SECRET NO FOREIGN DISSEM)
April 1, 1975
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SECRET SPOKE
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Balance of Payments - The Ink is Red
A record trade deficit in 1974 pushed China's
balance of payments with the non-communist countries
into the red for the first time since 1970. Despite
a sharp increase in the use of credits and other
short-term borrowing, Peking was forced to draw down
its reserves of gold and foreign currency by more
than $350 million.
The value of China's imports from the non-com-
munist world increased by about 45 percent in 1974,
while exports rose by only 20 percent, generating
a trade deficit of almost $900 million (see table).
Foreign currency outlays for transportation services
were more than $400 million. In addition, China
made $200 million worth of downpayments and payments
for services under its whole plant import program
and spent $70 million for aid to less developed
countries.
On the plus side, overseas remittances and bor-
rowing from Chinese-controlled banks in Hong Kong
brought in $375 million. Peking received short- and
medium-term credits worth $1.2 billion in 1974 for
imports of grain and whole plant equipment. Repay-
ments of grain credits during the year, however,
totaled $800 million. Time deposits from Western
banks and other financing, such as the clearing ac-
count balance with Japan, provided perhaps $500 million.
The crunch came in the second half of 1974 as the
bulk of the repayments for short-term credits fell due
and the growing world recession cut demand for China's
exports. Forced to sell gold to meet foreign exchange
needs, the Chinese began taking additional measures to
ease the foreign exchange shortage. Contracts for
grain and cotton were canceled, short-term credits were
April 1, 1975
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China: Balance of Payments with the
Non-Communist Countries
(Million US $)
Current account (net)
Merchandise, f.o.b.
1972 1973 1974
310 -95 -1,260
Exports 2,345 3,900 4,675
Imports -2,095 -3,825 -5,545
Net transportation -130 -245 -440
Remittances from Overseas
Chinese 190 225 250
Downpayments, payments for
services under whole plant
import program - -150 -200
Capital and monetary gold (net)
Foreign aid (net)1
Supplier credits to China
(net of repayments
including interest)
- for grain
-- for whole plants
Borrowing from PRC-controlled
banks, Hong Kong
Time deposits from Western
banks, clearing account,
balance with Japan
Monetary gold (net change)2
Foreign currency holdings
. (net change)3 -260 -30
1. Deliveries by China in the form of commodities and foreign currency.
2. International purchases (-) and sales (+) of gold.
3. Increases in holdings (-) net of drawings (+).
April 1, 1975
SECRET SPOKE
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obtained for purchases of Japanese steel and fertil-
izer, and interest rates were raised in China's banks
in Hong Kong to attract increased deposits.
I)espite these problems, there is no crisis in
China's balance of payments, and the situation should
improve sharply this year. Reserves are adequate,
and Peking's credit rating is still excellent. The
import bill has been trimmed, and increased oil ex-
ports will at least compensate for the decline in
other exports. Moreover, repayments on grain credits
will be less than last year's. More whole plant
equipment will be imported under medium-term credits,
but repayment of these credits will not begin until
1976. Peking may also slow its purchase of new plants,
reducing outlays for downpayrients. (SECRET NO FOR-
EIGN/CONTROLLED DISSEM)
April 1, 1975
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Soliciting Singapore
Peking made it clear to Singapore Foreign
Minister Rajaratnam during his stay in China in
mid-March that the Chinese considered the visit
an important step toward improving relations and
that Peking saw no obstacles to the early estab-
lishment of diplomatic relations.
The Chinese apparently listened politely to
Rajaratnam's explanations of Singapore's reluctance
to establish diplomatic links now. Rajaratnam told
the Chinese this was, at least in part, a result of
"certain local impediments"--a formulation used for
Singapore's sensitivities about the political loy-
alties of its large ethnic Chinese population.
In a statement to the press, Rajaratnam said
that the Chinese, although anxious to establish
diplomatic ties "as soon as possible," now under-
stand Singapore's position and are prepared to wait
for "Singapore's convenience." Both Premier Chou En-
lai and Foreign Minister Chiao Kuan-hua, however,
attempted to play down Singapore's fears by assuring
Rajaratnam that Peking had no designs on Singapore's
ethnic Chinese population.
a]ara nam claimed--that the real obstacle for
ingapore was Indonesia's concern about the presence
of a
Chinese
mission in Singapore, which Jakarta
fears
might
be used as a base for subversive activi-
ties
against
Indonesia. Rajaratnam said his govern-
ment
had assured the Indonesians that Singapore would
await
Jakarta's lead on diplomatic ties with Peking.
He said that might come within a year.
Rajaratnam, who was invited to Peking last year
by Foreign Minister Chiao, was the first Singapore
April 1, 1975
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government representative to visit China since
Singapore became independent in 1965. The visit
will enable both sides to establish direct govern-
ment-to-government contacts on trade and other
matters in the future. The Chinese also expressed
an interest in purchasing ships from Singapore and
agreed to dispatch an official economic delegation
to Singapore in the near future.
More important, both sides have opened offi-
cial channels of communication that will facilitate
rapid movement on diplomatic relations whenever Sing-
apore decides to make the plunge. (CONFIDENTIAL NO
FOREIGN DISSEM)
April 1, 1975
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The Chinese may now be prepared to enter into
direct trade with Bangladesh. This may be a pre-
lude to establishment of diplomatic relations. =
Chinese of-
ficials in Hong Kong early in Marc ot fered to es-
tablish trade links. The officials expressed an
interest in buying jute and invited Dacca to send a
five-person delegation to the coming Canton Trade
Fair.
Until now China has been noncommittal toward
the Bengalees on the question of trade, and this
latest move undoubtedly is politically motivated.
Not too long ago China claimed that it was self-
sufficient in jute, and it apparently has little
need for the fibre. Furthermore, when inviting the
Bengalee delegation to the Canton fair, the Chinese
officials strongly hinted that Peking wanted to
discuss other matters besides trade.
Peking and Dacca have been talking about dip-
lomatic ties since the UN General Assembly session
last September, but the Chinese have maintained that
Bangladesh must first exchange ambassadors with Paki-
stan before the path will be clear for Sino-Bengalee
ties. Peking adopted this position at Islamabad's
urging.
While the evidence is still tenuous, there may
have been a recent shift in Pakistan's stand on this
issue that may have prompted China to revise its own
game plan.
Prime Minister Bhutto now no longer opposes
~nese recognition of Bangladesh and has left the
timing entirely up to Peking.
April 1, 1975
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Nevertheless, Peking is still taking a
cautious approach. The Chinese have specified
that the Bangalee delegation to the Canton fair--
although it will be composed of officials from
various government ministries--should be nonof-
ficial. The Chinese may be concerned about
Bhutto again shifting ground on Sino-Bengalee
relations but, more likely, they are unsure
about President Mijibur Rahman's staying power.
If a new government should come to power in Dacca,
China will want to be able to disclaim any support
for the present group of leaders. In fact, the
Chinese may delay establishing diplomatic relations
until they are convinced that the situation in
Bangladesh has become stable. (SECRET NO FOREIGN
DISSEM)
April 1, 1975
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Proposals To Restructure the Provinces
There appears to have been an important debate
within the top leadership over the past several
years over the best way to organize the government
below the national level. Discussions seemed to
intensify prior to the National People's Congress
(NPC)--the body that would formally approve any
such changes--but none of the proposed changes has
yet been made. The debate is now muted in the do-
mestic media, but the proposals appear to have been
seriously entertained and will probably surface
again.
There is sufficient evidence to describe in
broad terms two basic proposals, but detail is lack-
ing as to the specifics. one line of argument appar-
ently favored regional units, while another plan
called for increasing the number of provinces while
reducing them in size. Paradoxically, these opposing
views shared some of the same basic goals: strength-
ening the central government in the political and
economic spheres and reducing the power of provincial
authorities, especially the military. For the most
part, however, the two proposals conflict.
reported that the idea of
combining provinces into regions was under serious
consideration in the summer of 1973.
that the State Planning Com-
mission was working on a new system of regions that
in some instances would involve merging several prove
inces. added that the system would over-
come "provincialism," which had been an obstacle to
economic planning, and that plans were being laid to
merge local party and government units into a single
body.
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did not mention any regional po-
litical organizations, such as the party bureaus
which existed prior to the Cultural Revolution, but
some sort of party oversight organization would logi-
cally accompany the establishment of regional economic
organizations of the type described. Thus, the plan
seemed to raise the spectre of regional power centers
and perhaps regional party bureaus of some type, and
it could be expected to draw onposition from those
who opposed such bodies during the Cultural Revolu-
tion, quite possibly including Mao.
Discussion of the plan to increase the number of
provinces, which may have been spurred by the proposal
to create regions, came to the fore last year. Sev-
eral sources reported that the figure of 50 provinces
had been proposed. In addition, a number of articles
appeared in the domestic media supporting the pro-
posal. Arguing by the use of historic example, sev-
eral articles described how the first Chin emperor
undercut the power of the feudal princes by basing
provincial administration on a revised system of "pre-
fectures." The modern day equivalent of princes would
be regional military commanders and provincial leaders.
one article, which appeared in the November 1974
issue of the Shanghai journal Study and Criticism,
referred to the proposal of a much praised legalist
"to divide the vassal states into smaller fiefs to be
granted to the descendants of the princes to curb
their powers." The article noted that the proposal
was not put into effect and the princes, although ap-
pointed by the ruler and thought to be extremely loyal
to him, eventually became more committed to expanding
their own power and prerogatives and overthrew the
dynasty.
This line of argument is strikingly similar to
the theoretical underpinning of the current campaign
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to strengthen the proletarian dictatorship--the
main danger of capitalist restoration comes from
forces within the socialist society rather than
class enemies, foreign or domestic, and precau-
tions must be taken to prevent these potentially
revisionist buds from blooming. The campaign is
being carried on in Mao's name and features the
chairman's repetition of quotations from Marx which
endorse this reasoning. The logic, moreover, par-
allels the theme of several Lo Szu-ting articles
that seemed to call for the elimination of the threat
posed by military political power on similar grounds.
Whatever his current position, Mao may well have sup-
ported the proposal to increase the number of prov-
inces last year as a means to break the power of
provincial military men. If so, this is another in-
stance of Mao not getting his way (see annex).
The preferences of other key leaders are more
difficult to fix, although civilian moderates would
probably tend to support the idea of creating re-
gional authorities to strengthen economic planning
and balance military region chiefs and would prob-
ably be mindful of the threat to central government
control posed by a proliferation of provinces. The
issues are by no means this clear-cut, however, and
the battle lines certainly not as easily drawn. Re-
gional organizations, for example, could be rivals
to the central government much as the militar re-
gions seem to have become. Moreover,
- who reported that under the regime's ten year
economic plan economic regions would be established
as well as the number of provinces increased, may be
reflecting a compromise proposal.
Whether or not these proposals came close to
being adopted, the existence of provinces and revolu-
tionary committees was written into the government
constitution adopted by the National People's Congress
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in January. i+onetheless, the debate over the or-
cganization question may have contributed to the
long delay in convening the congress. Furthermore,
one or more of the issues will probably be revived
soon. In February, for example, Peking changed
the English translation of the Chinese term for
the governmental level between the province and the
county from "special district" to "prefecture."
This may mean nothing, but since prefecture is the
same term used in the historical articles, it leaves
open the possibility that a new drive will be
launched to abolish or reconfigure the provinces.
(SECRET NO FOREIGN DISSEM/NO DISSEII ABROAD/BACKGROUND
USE ONLY/CONTROLLED DISSEM)
April 1, 1975
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Chinese Step Up Port Improvements
Recent improvements to Chinese ports may
have added over 45 million tons of cargo-han-
dling capacity, largely eliminating significant
congestion. During 1973 China invested twice
as much in nine major ports as it had the year
before. Investment probably increased further
in 1974. Construction included addition of over
12 berths, mechanization of loading and unload-
ing points, dredging of harbors, and railroad
trackage and roads to improve access. At least
80 percent of China's foreign trade moves by sea.
Although all ports were improved, Peking
emphasized those involved in handling petroleum
shipments--Chin-huang-tao, Dairen, Huang-tao,
and Chan-chiang. Ch'in-huang-tao, at the end of
the pipeline from the giant Ta-ch'ing oil fields,
now has a new oil wharf accommodating 30,000-ton
tankers and is readying another to take 70,000-ton
tankers. Dairen's port, which can handle tankers
of up to 50,000 tons and has berths for four
10,000-ton class ships, will add a sea berth for
100,000-ton tankers in 1975, and one for 200,000-
ton tankers later. Dairen will be fed by a pipe-
line from Ta-ch'ing that is nearing completion.
At Huang-tao, a new oil port near Tsingtao,
a recently completed oil wharf probably will be
able to accommodate 70,000-ton tankers. And the
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China Increases Port Facilities
wnri WYl lu.uuu-IVJI lailRalb unuct GVAii/VGllLlf
Chin-huang-tao t
?""" JDa;ren
Tientsin' Sea berth for
Two container-ship berths planned Sea berth for 2
r e' l-k
,,Tskrgtao s,,
Huang-too
Wharf for 70,00Q-ton tankers 1974
Shanghai'
10 new whewes for 1&000-ton ships
Two container-> p berths planned
Two container-ship berths planned
Huang-pp
none Kong
Macao tux.)
(PCn.)
`Chan-chiang
Wharf for 70.000-ton tankers
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port of Chan-chiang, in south China, was expanded
last year and can also take 70,000-ton tankers.
Ten new wharves for 10,000-ton ships were
added to China's largest port, Shanghai. The Chi=
nese also plan to build six container-ship berths:
two each at Tientsin, Shanghai, and Huang-pu. (CON--
FIDENTIAL)
April 1, 1975
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China-Poland trade agreement for 1975
signed in Warsaw by Vice Foreign Trade
Minister Chen Chieh. (U)
China and Guyana sign economic and
technical cooperation agreement.
(U)
Chinese delegation to the Law of the
Sea Conference departs China for
Geneva. (U)
Delegation from Sri Lanka, led by the
Prime Minister's son, arrives in China.
(U)
Moroccan delegation, headed by the for-
eign minister, arrives in Peking. (U)
March 17 Soviet broadcast says Moscow recently
made another request that the Chinese
release Soviet helicopter crewmen
captured in March 1974. (U)
March 17-18 NPC Standing Committee meets, grants
amnesty to all remaining Nationalist
"war criminals," hears reports of 1975
economic plan and Liaoning earthquake
relief program, and approves ambassa-
dorial appointments. (U)
March 19 Chinese turn down Mongolian request to
lay wreaths at monument for Mongolian
soldiers in Manchuria. (U)
Delegation of North Korean Nodong Sinmum
officials meets with Politburo member
Yao Wen-yuan in Peking. (U)
April 1, 1975
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March 20 Peking announces preparatory meetings
have been held for the national
congresses of the Young Communist
League, the Women's Federation, and
the Trade Unions. (U)
Singapore Foreign Minister Rajaratnam
concludes official visit to China.
(U)
Philippine oil delegation visits Peking
to negotiate future purchases of Chinese
petroleum products. (U)
March 24 Tsinghai Province makes first reference
since Cultural Revolution to province-
level People's Court. (U)
March 27 Chinese vice premier and Politburo mem-
ber Chen Yung-kuei, as head of delegation,
departs Peking for visit to Mexico. (U)
April 1, 1975
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