COMMUNIST CHINA: RECENT ECONOMIC PERFORMANCE AND PROSPECTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001500120003-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: November 16, 2016
• Document Release Date: May 17, 2000
• Sequence Number: 3
• Publication Date: January 31, 1963
• Content Type: BRIEF

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Current Support Brief
COMMUNIST CHINA:
RECENT ECONOMIC PERFORMANCE AND PROSPECTS
CIA/RR CB 63-12
31 January 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
GROUP I
Excluded from automatic
downgrading and
declassification
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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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COMMUNIST CHINA:
RECENT ECONOMIC PERFORMANCE AND PROSPECTS
Information on the economy of Communist China continues to be ex-
tremely fragmentary. Official claims, however, note advances in some
areas of production; refugee, traveler, and diplomatic reports indicate
slight improvements in the supply of some foods and other consumer
goods; and weather data suggest slightly better growing conditions during
the year for the country as a whole. These bits and pieces of information,
including Peiping's more optimistic posture since last fall, indicate that
a slight improvement in over-all economic activity occurred during 1962
and that most of the serious economic difficulties have been eased. Yet
serious problems remain in every major sector of an economy that prob-
ably is no more productive today than it was in 1957.
The outlook for the immediate future (1963-64) is for the slow recovery
of industrial output, on the order of 5 to 10 percent a year. Agricultural
production, because it depends so heavily on weather, is most difficult to
anticipate. Normal weather conditions and a continuation of peasant incen-
tive programs should advance further the moderate agricultural recovery
that began in 1962. It is believed, however, that food supplies will con-
tinue to remain stringent. Faced with overriding problems of overpopu-
lation, backwardness in agriculture, and a low level of industrial tech-
nology, China's prospects for achieving status as a major world power in
this decade have vanished.
1. Performance in 1962
For Communist China, 1962 was marked by a continuation of the
serious economic difficulties that began in mid-1960 with the collapse
of the "leap forward. " For 3 consecutive years the Communist regime
has been faced with a level of agricultural output insufficient to support
continued industrialization and has been forced to continue its retreat
from all-out emphasis on heavy industry in order to give first priority
to agriculture. The policy of moderation and retrenchment decreed in
1960/61 was continued during 1962 with some success.
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The preliminary assessment of the agricultural situation in 1962
is for a slight increase in production of grain above the abnormally low
levels of the previous 2 years and a substantial increase in production
of subsidiary foods. (Principal agricultural areas are shown on the map,
Figure 1. ) Output of grain in 1962 is estimated to have been equal to the
185 million metric tons (mt) harvested in 1957, the last year before the
"leap forward, " when the population was 10 percent smaller. This esti-
mate is based primarily on weather data, although the probability of a
somewhat larger acreage of fall grain crops and a slightly increased
supply of chemical fertilizer has been taken into account. Continued
large-scale grain imports by China in the 1962/63 consumption year
(July-June) are indicative both of the inadequacy of the harvest of 1962
and of the regime's concern over the food supply. Thus far, contracts
have been signed for delivery of about 3. 5 million mt of grain during the
first 6 months of 1963 -- about the same quantity that was imported dur-
ing the similar period of 1962. The estimated 5 million mt of grain being
imported in the 1962/63 consumption year amounts to about 4 percent of
total food grain supplies. (Gross output of grain of about 185 million mt
is reduced to an equivalent of 115 million mt available for human consump-
tion after allowing for milling losses, seed requirements, and other non-
food requirements. ) In 1957, China was a net exporter of grain.
The further decentralization of authority within the collective farm
system in 1962 -- the production team of about 30 households is now the
basic unit for carrying on agricultural activities -- probably had little
effect on the output of rice, wheat, and miscellaneous grains. But tolera-
tion by the regime of private plots and trade in open markets resulted in
a substantial increase in the supply of vegetables, fruits, and sweet
potatoes in rural and urban areas.
The assessment of the harvest for 1962 implies that for the fourth
consecutive year the food situation will be stringent. The average diet
in the 1962/63 consumption year probably is improved slightly over that
of the previous consumption year, largely as the result of increased pro-
duction on private plots. The food situation probably will remain critical
throughout the winter and spring of 1963, although increased availability
of subsidiary foods may make undernourishment less serious than it was
during the preceding 2 years.
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COMMUNIST CHINA
Figure 1
FOR OFFICIAL USE ONLY
U. S.
MONGOLIA
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ikhcf.1
/ !AMMO
, ANO
KASONOR
foetus d,sputel
NORTH,
KOREA
Yu o
Door,
AGRICULTURE
MAJOR RICE AREAS
Roe Tea Area- rice, wheal.
barley, broadbeans, rape-
seed tea, sweetpotatoes,
sugarcane, and cotton
36478.1
Yangtze Rice-Wheat Area:
rice, wheat. soybeans, cot-
ton, sweetpotatoes barley.
broadbcans. rapeseed and
mulberry
Szechwan RICE Area: rice.
corn, sweetpotaloes, pea-
nuts. Manhole, cotton. wheat,
tobacco, tang oil. rapeseed,
and bruadbeans
Southwestern Rice Area-lice.
corn. soybeans, millet, pea-
nuts kaohang,, broadbeans.
tune oil, wheat, and barley
Double Cropping Rice Area
rice sweetpotaloes wheat
peanuts sugatrane hull
tea and nolberry
MAJOR WHEAT AREAS
Spring Wheat Area' wheal,
rolled oats, peas potatoes,
buckwheat. flax, and barley
Winter Wheat-Millet Area'
wheat milled com. cotton.
hooking, soybeans, buck
wheat rapeseed, peas, and
barley
Winter Wheat geoliongArea:
wheal. kaohang, soybeans,
millet, sweelpotalnes, corn.
cotton, frmt, and nuts
OTHER AREAS
Manchurian Soybean-Kao
Rang Area soybeans, corn
kaohang milled rice. ban-
Len and wheal
Sinkiang Oases Anna ? corn.
wheal. rice. kaoliang bar-
ley canon. vegetables, mel-
ons arid other loll
?Won-ening
TAIWAN
yea DAM An
M ACAO
(Port.) PHILIPPINES
L. LAOS
,
'THAILAND:
RAISON
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In 1962 the Chinese Communists seem to have achieved moderate
success in carrying out their policy of reshaping industry. It is be-
lieved that there have been increases in output of priority goods such
as chemical fertilizer, some farm implements, and many types of light
industrial and handicraft products; that output per employed worker has
increased somewhat (in large part, simply by laying off excess labor
and thereby adding to the problem of unemployment); that technical and
managerial personnel have been accorded greater prestige and responsi-
bility; and that problems of quality, cost, and maintenance of equipment
have been eased (but still persist as obstacles to industrial efforts).
The evidence suggests that the level of total industrial production in
1962 was about 50 percent of the 1959/60 peak, or approximately equal
to that of 1957. Production of agricultural chemicals, some farm equip-
ment and tools, and light industrial products made of industrial raw
materials was considerably above the level of 1957, but production of
the machine building, paper, and textile industries was below that in 1957.
Production of steel and electric power may have been at roughly the level
of 1958.
A major economic objective in 1962 was to raise the level of indus-
trial technology in order to create a base capable of supporting the de-
velopment of military industries and agricultural chemical industries.
It is not known what technological progress was made in 1962 in the type
of industries needed to support an advanced weapons program, but in-
creases in output of chemical fertilizer and insecticides suggest improved
technical ability to operate plants in the chemical industry. Nevertheless,
it is believed that there are some heavy industrial plants -- for example,
aircraft, truck, and chemical fertilizer plants -- that are producing below
capacity because of difficulties in operating the plants or in obtaining
components and materials elsewhere in the economy.
Aside from heavy industrial plants that are having technical and sup-
ply difficulties, unused capacity now exists in many major industries.
The reason for this situation in light industry is clear -- it has been unable
to obtain the necessary raw materials from agriculture. The reasons for
idle capacity in heavy industry are more complex. An important factor
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seems to be that the process of retrenching and redirecting output of
heavy industry has reduced the need for basic heavy industrial items
such as steel, electric power, construction materials, and some types
of machinery. In those industries that are supporting agriculture,
however, especially chemicals, additions to plant capacity and to the
managerial-technical force of the plants are sorely needed.
II. Prospects
Although the Chinese Communists seem to have entered 1963 in a
mood of cautious optimism, the outlook for the next year or two is for
a slow upturn in industrial output, on the order of 5 to 10 percent a year.
Further moderate agricultural recovery seems likely, but the depressed
agricultural scene colors the entire economic outlook for the present and
will continue to do so in the immediate future. (Comparative agricultural
statistics for the US, China, and India, pointing up the basic nature of the
Chinese problem, are shown in the chart, Figure 2.)
There can be no speedy solution to the problems confronting China's
agriculture even if the reasonable elements in the leadership prevail dur-
ing the next few years. Such measures as the decentralization of day-to-
day decisions and the continued tolerance of private plots and peasant
markets would spark some continued recovery. If increased supplies of
chemical fertilizer and other inputs are to yield maximum results, they
must be accompanied by responsive seed strains and improved farming
methods. Research and extension services cannot be created overnight,
nor can they be expected to bear fruit on any scale within less than a
decade. Furthermore, it remains to be seen just how much effect the
recent steps toward decentralization will have on the crucial question of
peasant incentives. In the case of the private plots, the effect clearly
has been to stimulate output.
Because the level of imports from the USSR has fallen so sharply
and because China is running an annual export surplus of about $200 mil-
lion in its trade with the USSR to service Soviet loans, a complete Sino-
Soviet break would have relatively little impact on Chinese growth, There
would be some disruptive effects, for China imported about $80 million of
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Figure 2
COMMUNIST CHINA, US, AND INDIA: COMPARATIVE DATA* ON LAND UTILIZATION
AGRICULTURAL OUTPUT, AND POPULATION DISTRIBUTION
Communist
China
US
India
LAND UTILIZATION SOWN AREA PER CAPITA
MILLION HECTARES
200 400 600 800 1,000
Cultivated
Noncultivated
GRAIN PRODUCTION PER CAPITA**
Communist
China
US
India
36479 7-62
0
METRIC TONS
0;2 0.4 0.6 0.8 1;0
5A11 data are estimates as of (961
**Excluding tubers
Communist
China
US
India
0
HECTARES
0;2 0.4 0.6 0.8 1;0
Grain"
Other crops
POPULATION DISTRIBUTION
Communist
China
SECRET
US
India
MILLIONS
200 400 600 800 1,000
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petroleum products from the USSR in 1962 and the USSR continues to fur-
nish China with some industrial supplies. Within a few months, China
could reorient enough of its present Soviet trade toward the West to gen-
erate the necessary foreign exchange needed to replace Soviet petroleum
and industrial supplies.
For the prospects beyond 1963-64, should a level of agricultural re-
covery be achieved satisfactory to the leadership -- and this level might
well be less than the per capita level attained before 1960 -- industrial
production could be pushed rapidly for a year or two because idle capacity
exists in many industries. After existing capacity is put to use, growth
in industrial production would slow down if present goals for the long run --
which stress variety and quality rather than quantity -- are retained.
The Peiping regime still insists that it intends to create a Communist
society and to build a militarily strong state, but it probably no longer be-
lieves that substantial progress toward these goals will be feasible during
the next few years. The Malthusian dilemma is a real and present threat
in China today. The rate of population growth averaged 2. 4 percent from
1953 through 1958, and although it has slowed down to 1. 5 to 2.0 percent
in recent years, it probably will rise again as average diets improve and
the death rate falls. There seems to be little that the regime can do to
control effectively the birth rate over the next few years. Especially in
rural areas, where social beliefs are hard to change and medical services
are poor, family planning and birth control require generations to take
hold.
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Analyst:
Coord:
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25X1A
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