SE-37: PROBABLE EFFECTS ON THE SOVIET BLOC OF CERTAIN COURSES OF ACTION DIRECTED AT THE INTERNAL AND EXTERNAL COMMERCE OF COMMUNIST CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79S01011A000900010030-7
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: December 9, 2016
• Document Release Date: February 28, 2000
• Sequence Number: 30
• Publication Date: March 4, 1953
• Content Type: MF

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SECt1R1TY ThFiB W10N
CENTRAL INTELLIGENCE AGENCY
BOARD OF NATIONAL ESTIT4TES
4 March 1953
PEMOMMIM4 FC1t THE It FETU NOE ADYISGRY COOMMEE
SUB ECT: SE-37: Probable Effects on the Soviet Bloc of
Certain Courses of Action Directed at the Internal
and External. Covmeroe of Camzmiot Chlis
1. The attached draft estimate has been approved by
the Board of National Estimates pursuant to a consideration
of it by the TAO representatiwas.
2. This estimate has been placed on the agenda of the
IAC meeting scheduled for 10:30 Thursday, 5 ttarah..
Executive Secretary
Distribution "A"
DOCUMENT NO.
NO CHANGE IN CI. ASS. [j
DECLAS2 ED
TO~ TS
AUTH: HR Q770-2
DATE. 2e-!'_L ( H VIEWER: _ 3 2044. 1
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Korea or Communist China undertaken in conjunction with some or all
of these courses of action.
CONCLUSIOBIS
Presence exsnto~.a on trade with Comounist China have not pre.
vented the buildup of Chinese Communist military strength,
Moreover,
Commnist Chinale industrial and internal transportation systems have
continued to expand since 1950, but at a greater cost to the Soviet Bloc
and at a lower rate than if Western controls had not been in effect,
2. A. tit embark on non-Communist tPade with Conam iniat China
would probably have no significant effect on Chinese Courminist capa,
bilities to sustain military operations in Korea or to undertake military
operations elsewhere, but would retard the expansion of Chinese Communist
industry,, An embargo would make Communist China economically more inde-
pendent on the USSR. An embargo would probably not induce the Communists
to embark on new aggression, but would ,probably lead then to intensify
political warfare,,
3,A-naval blockade of Corm moist China-s would increase
navy ocka e o ?o =mist China would not cut off seaborne
trade unless it included Port Arthur and Dairen and unless
trade with mainland China through Hong Kong and Macau were pre-
vented. It should be noted that the Soviet Eastern ports would
not be included in a blockade of Communist China
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the difficulty, oof military opertions requiring large expenditures
of materiel, either in Korea or elsewhere, The Present estimated
""'mum capeecitsY of the inland transportation facilities semi C
monist China is om`
probably adequate to carry essential tonnage now sea-
borne plus the essential traffic now carried by land
however, a
blockade would creates serious problesanea For instances milt
not serge all Q?'' do
parts of Cwt China new served by coastal shipping,
A blockade would make Cost China economically more dependent on
the USSR we Would retard the expansion of Chinese Ca unist industry
to a greater extent than an embargo. The net political effect
within
Ca "Mist China would probably not be significant,
49 In reaction to a naval blockade, the. Chinese Communists would
almost certainly attack the blOckading forces, with covert Soviet assist
5e, and might launch new acts of aggression, such as the seizure
Hong Kong and' of
iac:au? The USSR might react to a naval blockade by
attempting to bring merchant ships into Port Arthur and
Soviet naval escort Dairen under
s by attempting to force the blockade at other points,
or by waging mine and submarine warfare against the blockading forces o
However, we believe that the USSR would be unlikely to reand
arising out of ahem g incidents
Pts to force the blockade as a casus belli0* We
believe that the blockade would
not in itself induce the Cammunie=ts to
accept a Korean settlement on UN tee
ss a of of Staff
as follows "gtowever s O?2, Would prefer that this sentence read
as the blockade in ere the Krem]jn would make its decision with r
fight of the global ward pro.
bably would not make a determined effort policy th the Fib, and ss
the tOSR Was prepared to accept a t to break the blaekade unless
greatly increased likelihood of general Waransion of hostilities with
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5. Large scale and sustained air and naval bombardment of
key Chinese Communist transportation lines, in conjunction with a
naval blockade, could sharply reduce Chinese Communist military capa-
bilities- Communist Chinavs economic potential would be seriously
affected, and the physical problems of the regime in maintaining con.
trol would be increased.
6. In reaction to a blockade and bombardment, the Chinese Com-
munists would make a maximum air defense effort in China and ;Manchuria.
Units of the Soviet Air Force in the Far East would covertly partici-
pate in the air defense effort, particularly in Manchuria, The
Chinese Communists would probably also employ their air capability
against some US/UN bases in the Far East. We believe that a blockade
and bombardment would not in itself induce the Communists to accept
a Korean settlement on UN terms,
7. In the unlikely event that the blockade and bombardment
should threaten the existence of the Chinese Communist regime, the
USSR would increase its aid to Communist China, possibly even to the
point of openly comimaitting Soviet forces against US forces in US/UN
held territory and adjacent waters in the Far Fast.
8 Blockade and bombardment by the Chinese Nationalists alone
would, under present circumstances, have only limited effects.
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In reaction to A Chinese Nationalist blockade and boub+tr ent,
the Chinese Comnurni.sts would almost certainly attack the blockading
and bombarding forces and might retaliate by air against Nationalist-
hold territoaryo
# aval Intelligence believes that, if given suff'i.
*lent U.B. materiel and training support and complete U. S. stuff
planning for all blockading operations, the Chinese Nationalists
could probably impose a blockade which would reduce up to go% of
all seaborne traffic, and most of the coastal traffic south of
Shanghai and through the Straits of Formosa.' This probably could
be accomplished within a period of six months after receipt of
U.S. assistance and despite Chinese Camnunist air
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and purely military iteems. A number of Middle Eastern and South-
east Asian countries have made a general ccs itment to deny stra-
tegic items to the Chinese Communists, while India, Pakistan, and
Burma have not been willing to go on record as supporting the UN
Resolution although they have been cooperating informally in pre.
venting re-export of strategic items to the Chinese Communists,
Ceylon, which is not a member of the UN, has refused to ooiplr with
the UK Resolution so far as shipments of rubber to Cor}munist China
are concerned.
72. Shipping controls have been particularly weak. The
COCOM countries prohibit the sale of ships to Cceaaunist China and
Impose restrictions on the sale of merchant ships to the rest of
the Bloc. Since October 1950 at least 33 vessels have been trans.
ferrod to Soviet bloc flags. However, COCOM restrictions on sales
were tightened somewhat in December 1951, The US alone has imposed
comprehensive formal controls on ship sales, repairs, and bunkering.
During the past year 61 Bloc ships, totalling 300,000 gross registered
tonnage, received 30 days or more of repair work each in western,
shipyards. Only the US, Costa Rica, Honduras, and Panama prohibit
vessels of their registry from entering Chinese ports,, although Liberia
prohibits vessels of its registry from carrying strategic cargo to cam.
munist China, Present COCON controls do not prohibit the chartering of
v7.
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merchant vessels other than tankers to the Soviet Bloc and this
prohibition has not been effective. Although the greater pereen-
tage by far, of chartered vessels do not touch Chit ee Communist
ports, these vessels are used by the Soviet Bloc in Western Euro..
pean, South Atlantic and Indian Ocean trade and make possible the
release of Communist flag vessels for direct service to Communist
China.
THE EFFECT OF PRESENT CONTROIS ON COMMUNIST CHINA
Effect on Foreign Trade
130 IYmports from non-Soviet Bloc Countries. The value of
the goods Imported from non-Cs nmunist countries by Commnist Chi.
rose to _a peak in the first half of 1951 but then dropped sharply,
during the second half of 1951, when trade controls became more
stringent, and have remained at a relatively low level through 1952.
These imports are estimted at 0382 million in the first half of
1951, 9148 million in the second half of 1951, and 0135 million and
$155 million respectively in the first and second halves of 19!.
The volume of imports from nor -Communist countries fell from Th6,000
tonal in the first half of 1951 to 2212,000 tons in the second half of
1951, and then rose to 270,,000 tons in the first half of 1952 and
330,000 tons in the second half of 1952.
The res n his paragraph are based on an
25X1X7 tudy of Communist Chinese imports Fur %%"
the first half of 1952, and preliminary US estimates for the
last half of 1952. ONl believes that the volume of trade is
larger than the figure agreed upon and included in these caloula-
tions, but it is impossible to arrive at a new agreed estimate
at this title, and in any case, it is unlikely that the now figures
would invalidate any of the conclusions based on the present
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the Soviet Bloc merchant fleet. It would require the Soviet Bloc
to fuel vessels from tankers at sea and require the Bloc to trans-
port additional fuel to the Far Fast, either over the Trans-
Siberian Railroad or by tankers. Bloc tankers are presently
carrying essential POLY
33, An embargo would also result in an increase in the value
of Communist China's exports to the Soviet Bloc but a decrease in
the value of its total exports. Because of the increased transport
costs involved and the nature of the commodities, it is probable that
it would not be worthwhile for the Communists to divert to the
European Soviet Bloc a large part of the 1,7 million tons of earmo
dities that Communist China now exports to the West. However, Com-
munist China plans to increase its production of strategic minerals
with which to pay for its imports from the Soviet Bloc, and other
exports from Communist China could be increased so that there would
be little or no net affect on Communist China's debtor position in
the Bloc,
34. On the basis of the above highly speculative estimates,
an embargo would reduce the volume of Communist China 's total in.
ports in 3953 by 300,000 tons and the value by $130 million, This
would represent a reduction of approximately 10 percent in the value
of Communist China 's total irnprrts and perhaps as much as 20 percent
The e Ow -has the ship capacity to carry the total seaborne
imports to Communist China, even without chartering Western vessels
However, under these circumstances the USSR would have to use some
lend-lease vessels in this trade, thus risking their seizure by
the US. In addition, the Soviet Bloc would have to find alterna.o
tive and more costly means for carrying on its trade with the West.
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production of consumers3 goods, these losses in output would
in part be offset by the increased availability for domestic
consumption of samle ccmuroditiee that formerly were exported to
the Went, The loss of foreign flag shipping for domestic coes l
services would reduce coastal shipping capacity, However,
Chinese Cotvrunist shipping, which now carries the bulk of this
trade, and the North-South rail Linea could absorb the load now
handled by foreign flag ships o Finally, with imports and pro-
duction of some consumer goods reduced and non-Cmmunist markets
virtually eliminated, the goverment would be confronted with a
sizable loss of revenue, These losses, however,, would be minor
in relation to the total national income and to total Chinese
Ccwununiat budgetary expenditures
37. Military effects. A total embargo would probably have
no significant effect on the capabilities of the Chinese Cc..--
muniste to sustain mill tary operations in Korea and very limited
effects on their capabilities to undertake military operations
elsewhere.
38, Internal Political Effects. A total embargo would not
appreciably affect the internal political strength of the Chinese
Communist regime
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Bloc increased its present level of exports to Conmunist China.
Secondarily,, the amount by which total imports were reduced would
depend on the capacities of the Trans-Siberian railway and the
capacity of Communist China's inland transportation facilities.
48. Soviet Bloc Exports to Communist China, Although the
Soviet Bloc would probably provide Comunist China 'a essential in
port requirements, the Bloc probably would not replace all of Com-
munist China's Imports lost because of a blockade, Of the projected
1953 seaborne import tonnage of 1,4 million tone, about one-third
consists of controlled commodities, such as petroleum, metals, and
machinery, while two-thirds consist of commodities which can now
be imported from non-Bloc countries. It is roughly estimated that
the Soviet Bloc would continue to supply all of the controlled comob
dities but only about one-third of the other commodities, or a total
of about 800,000 tons. Of the non-controlled materials, the Soviet
Bloc would replace in part Communist China's imports of rubber, indus-
trial chemicals, and drugs but would replace little or none of the im-
ports of raw cotton, anvnonium sulfate, paper, sugar., and gunny bags.
On this basis, the total of Canmunist China's imports over the
Trans-Siberian railway primarily from the East would
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average haul involved, the transportation overland of the freight
out off by a blockade would require about 10 percent of the
freight car park and about 8 percent of the locomotive park.
We believe the Chinese Caimnvniat railroads have the capacity to
carry this additional freight, but it should be noted that some
parts of mainland China now served by coastal shipping are not
served by rail lines.
51. Since the additional burden of essential tonnage placed
on both the Trams-Siberian Railroad and the internal transporta?.
Lion system of Communist China could probably be carried with
existing capacity, we believe that the reliance on overland trans-
portation facilities would not limit the extent to which Communist
China's essential seaborne imports could be replaced. Moreover,
it should be pointed out that it would be possible for the USSR
to ship goods to China by sea to Vladivostok and thence by rail
to China.
52, Economic Effects. A naval blockade would have a greater
effect on the Chinese Communist economy than would an embargo. The
planned economic growth would be seriously retarded, additional
strains would be placed on internal transport, and further gains
from trade and further budgetary revenues would be lost, In those areas
which are now served by coastal shipping and which are not served by
rail lines,
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EICLUDIPNG PORT ARTHUR, DAIREN, iI)NG KONG, AND :%ACAU
56. A naval blockade would almost certainly be ineffective
if Dairen and Port Arthur were excluded. These ports together
are believed capable of handling about 45,ooo tons a day, or
many times the estimated total daily seaborne imports of all of
Communist China at present, The readjustment of internal distrii-
bution necessitated by the blockade of all other seaports would
impose additional strains on the Chinese Communist railway system
57. A naval blockade would almost certainly be ineffective
unless measures were taken to prevent trade with Communist China
through Thong Kong and Macau,, These ports, together with their
road and rail crnnectione with Communist China, could handle a
large part of the projected seaborne imports of Communist Chinas
The readjustment of internal distribution necessitated by a
blockade of all other seaports would impose additional strains on
the Chinese Communist railway system,
See Paragraph 50,
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is need by east-west traffic as well as by the
main coastal railway. Other rail target. include
the Yellow River bridge north of Cheng-heien
on the Peiping-Han r?Kowloon route, the Pu-chen.Y
Nanking railroad ferry on the Peiping-Sharw,
routes and the Yangtze River ferry crossing at
Wu-change The most important waterway targets
are along the Yangtze and Hsi (West) Rivers, which
together with the Sungari River in Manchuria are
estimated to carry three