THE EFFECT OF THE CULTURAL REVOLUTION ON COMMUNIST CHINA'S FOREIGN TRADE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP70S00385R000100250013-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 15, 2016
• Document Release Date: April 19, 2004
• Sequence Number: 13
• Publication Date: June 2, 1967
• Content Type: IM

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CENTRAL INTEL
Directorate Ott%
23.
INTEEL(GNCE
MORANDUM
The Effect of t Cal carol Revolution
on Cymrounist Chboil reign Trade
PA
S maiy
The cultural revolu*pt in Communia# C ina has not
yet had an appreciable effect an the volume and pattern of
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So Jar in 1967, the effects of the reveler on trade
appear limited to remittances axed a poe
in export supplies of chemicals and textiles. Early
returns on trade in 1967 from seven of China's major
Free World trading partners indicate that China's exports
to these countries increased by a respectable 10 percent.
A contimuation of the revolutia at its present pace, bow-
would gradually impair emport s, increase
the need for b- ports oo grate and, in general., increase
the importance of Fr
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41 The cultural revolution b
late 196.x, spilled over WW the economy August 1966
with the appearance of the militant Red tuardt: and was
formally extended to factories and fa ms in December
1966. The regime almost immediately had to remedy
the resulting excesses. but in spite of calls for both
"Production and revolu t, " Political turmoil has con-
tinued to affect the orderly operation of the economy
during 1961.
2. The effects of the cultural revolution on the
Chinese economy were first apparent in the last quarter
of 1966 when industrial production began a gradual
decline. This del
vied over into the first
to dis..
half of 1967. Agriculture bas also
assessment of the forth
so waits on an
g spring harvests.
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. Many o.
on foreign trade will
evolution
economi
y reduced capabilities
of export industries. An it rs sdiate effect of the revolu?
boas is confusion in the phuming of foreign trade an
gotiation for purchases of foreign machinery
ct will not be re-
Elected in current foreign txado data. which, of course,
deal with completed shipments of gouts rather than with
inquiries and contracts for fu re delivery. A third
foreign trade -, obii in the composition and
geographical distribution of trade - also will be re-
flected only ae
Jain Trade in 1966
riod of time.
4. Comm ist China's foreign trade grew by an
estirnat ibd 12 percent in 1966.. to $4.2 billion compared
with $3. g billion in 196Ss indicated in Table 1. This
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substantial increase followed two years of even sharper
rises (averaging IS percent) and reflected the continuing
recovery of the Chinese economy from the near-disastrous
Leap Forwarc1. The annual data for 1966 could of course
mask. difficulties occurring in the final quarter. Howevex.
all of the available avid
to foreign trade
activity supports the general caa4"ion that the cultural
revolution during this petted did
Chinese Cormm-nunist fo I
Continuo d shift to r"
igni#cantly disrupt
5. China's trade with the Free World roes by an
estimated 13 percent in
6, whereas trade with Corrs.-
tries fell off by perhaps 4 percent. Conse
quently, the Free World's share in China's trade rose to
73 percimt. Japan strangthensd its lead as China's major
trading Imrtner and now accounts for one-sow nth of
China's total trade. Hong Kong took over second place
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from tlet USSR, although practilow all Hong Kong' a trade
is one way, 1. e. , imports from China. (Table 2 presents
the volume of China's t ale with leading partners for 1965
and 196 6.)
6. Arnong Western Europmu countries, West Germany
and France and ahead of the United Kingdom in 1966 as
the leadjxig sources Wiese imports. Trade with South
and Southeast Asia and the Middle East rose moderately
during the year while trade with American
showed little change. AftOr a sharp rise in I95. trade
with African countries declined in 1966, apparently because
of China's setbacks in ii gu policy in that area. Sino-
Soviet trade fell by 23 percent, to the lowest level since
1950. Deliveries by Clibs to North Vietnam rose to $95
million is 1966, compared with $70 million in 1965.
Grain In orts Down, l e chAnery Up
wr .wrgr wwrw a..wws
7. China's imports of grain declined faces 6.2 milli,
tons to a: out S. d million tans in 1966. In contrast, China
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steel. There was a sharp rise
finish"
imports from Japan
a Weeitern lope of rnachb ry, equipment,, and
entif.c instruments that play a Important role in
China's modern weapons programs,
Commodity Co osition of Imports
1965.66
lion US
1A2 1966 W
Tclta1
Agricultural products
Gin
industrial aarterla1a
Fertilixers
Machinery wid
Other imports
180
a. Leta ere rounftd to is nearest $5 mil-
11 on. cause of roundiagt co n eats =gr
nct add to the tot ahovn.
b. Preliminary its.
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A ural EMrt
3. China's saIss of foodstuffs and
agricultaral products increased markedly
categories of arts
a crude
1966. other
gains. Textile
sales rn sy have cos -uad to decline in 1966, again be-
cause of reduced sales to the USSR.
Ccmodity Composition of
1965-66
w
Total
Afp~icu1tural prodwU
Woods
Industrial mterIvIs
Te stiles
Other manufactured goods
545
a. i)teta sre roux ed to - s t 5 minion.
tai se of rounding, cc*tponsnts my not std to the
tota.1.8,,,~shown.
b. I .rel *Wtii Mes?
w 8 ..
w
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9. The only direct impact of
the
harp cutback is overseas r
1966. As a result, r
reached only estix at . $43
$60
the trad-D balance wi
in 1965 ;;o a small sur
A plve
'a trade with Communist t
principally because China
surplus in 1966.
revers
10. Became of China's
a to depend on ?sig
s coal revolu-
6 was the
ea in the last four
for the year
pared with
a deficit
with the USSR
istance,
-9-
r
M1_
U
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China ha-s been face
each year,
when a large re;
credits ; cU due. payments probably eqt
drawingir. Long-tern credits which would defer repay-
or more gars would be
advanta e. The leaders, however, has a p:
iition and es
of repayments
for the poesibility that requirements for
cern for the long
may ris,.
siti and se
credits, Western European
probably Wei =ake such credits
availabl;r. The cultur+ revolution appare l bas not
jeopardized China's ability to Obtain long-term credits,
but adm ttedly the within nose of Yv" World dens to
advance large credits is not
Trade Developments 195'
wrrwrrrrnrrrir ~
11. Early
of China e s trading
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61 percent of China's exporter to Amd 54 percent of Chip-a' a
in ports from the Free World in 1966. As shown in
Table 3, China's impar
by 2 ,pex cent, while expos to these countries increased
10 pe ? cent,
iod in 1966.
While no broad conclusions can be drawn from these in-
cc plat; data, the cultuz -revolution apparently has had
aly a slight effect on China's trade with its principal
Free W vrld trading partners the first quarter of 1967.
12. Trade agreements concluded during late 1966
and the i:irst friar mont
changes in China's 1967
1967 do not i ndicaft substantial
ue some difficul-
ties during January and February, contracts with Western
businessmen are now being placed at a norm pace.
1 191:7 appear to have reached the levels of previous
years. The recent disturbances in Hong Kong have not so
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far had feedback effects on the mainland economy;
-lz~>
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14. The Free World share of China's trade probably
of growth in trade with
the courtries of Western Ewa" and a further reduction
in Sino- Soviet trade. Sino-Japa s. trade probably will
not continue the rapid growth of She past few years be-
cause Japanese mark is Dot readily absorb additional
;se goods.
15. The ownposition of C'oma's trade in 1967 is
e cted to show substant changes over 1906.
Grain contracts for the first six months are down
slightly,, compared with the saxne period in 1966. The
volume of fertilizer cued for in 1967 is more
rcent higher than 1966 purchases; how
result of shrewd Chinos* bargaining
Europezn and Japanese producers, the value of these
fertiliser contracts is only slightly higher than the estj
sated value of $180 million for 1966 imports. Orders
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placed Suring 19 6 for the whole plant and other capital
equip nent to e. e delivered in 1967 and later were sub--
].y lower than during the previous two years.
until April 1967. Machinery and equipa:-ent
cornplex were
penned (luring the laa half of 1966 and did not
1967, however, ax
the stre agth of orders placed dur
tracts with Japes.
fi=r" eeterr: European
down in the
196?.
16. Ther
tic Crisis
movement in the Chinese
indication of a g
During .April and May
. Early con
1966 on
ble slow
rd
economy and some
c.eney.
nnoi1 associated with
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the cultts:ral revolution c
orderly operation of the
of the r;svolutiori, which
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e with the
conom Ry. The excesses
atoned ser-oua econor-sic di
locations in eta.rly 19 7, have been largely brought to an
encl.
ative confusion and sporadic disrup-
to industry and transport continue to
econo ny-. Even thou h the decline in industrial produc-
tion noted in the fourth quarter al 1966 and the first
quarter of this year
1967 will be difficult to assess until harvest time
continue at least through
acid-1967, there does not appear to be any danger of an
im ediate economic crisis. The revolution appears to
have had no a*ffect on agriculture in 1906 and its effects in
this summer.
Prose is
17. There appear to be this
the cultural revolution could take in the near future.
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the revolution were to intensify and result in lengthy dis-
orders an t