INVESTMENT IN COMMUNIST CHINA CUT BACK DRASTICALLY DURING 1961-62

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001600070001-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 9, 2016
• Document Release Date: May 24, 2000
• Sequence Number: 1
• Publication Date: April 12, 1963
• Content Type: BRIEF

Approved For Release 2000/06/14: CIA-RDP79TO1003AO01600070001-6
SECRET
Current Support Brief
INVESTMENT IN COMMUNIST CHINA
CUT BACK DRASTICALLY
DURING 1961-62
CIA/RR CB 63-36
12 April 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
GROUP 1
Excluded from automatic
downgrading and
declassification
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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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 Approved For Release 2000/06/14: CIA-RDP79T01003A001600070001-6
INVESTMENT IN COMMUNIST CHINA
CUT BACK DRASTICALLY
DURING 1961-62
Recent analysis of available economic information from Communist
China suggests that investment expenditures were cut back drastically
during 1961-62 to about 35 percent to 40 percent of the peak level of
1959. The estimated drop in investment spending, although derived
independently, tends to support previous estimates that output from
existing industrial facilities declined during the same period to roughly
50 percent of the "leap forward" level attained in 1959-60.
Some small increase in investment spending in 1963 above the low
level in 1962 seems likely, however, in view of current prospects for
at least a slight improvement in general economic performance and in
the ability of Chinese technicians to construct, operate, and maintain
complex capital equipment without Soviet assistance. After more than
2 years of "retrenchment on the capital construction front, " the Peiping
leadership apparently now feels that investment spending has been
"appropriately readjusted" 1/ and that economic planning can again
focus on the "prper expansion" rather than further curtailment of in-
vestment outlays. 2/ Expenditures for the expansion of industrial
capacity in 1963 probably will be confined largely to a few priority
industries, such as those producing chemical fertilizer and providing
other direct support to agriculture as well as those producing mining
products, timber, and national defense items.
Peipin&'s continued unwillingness to release statistics on economic
performance and the scarcity of information from alternative sources
preclude a precise measurement of the decline in investment spending
since the collapse of the "leap forward" in mid-1960. Reasonable esti-
mates for investment spending can be made, however, on the basis of
statistical relationships that existed before 1960 between changes in
investment expenditures and changes in the quantity of construction
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materials consumed by investment projects. For example, during
1953-59, there was a high statistical correlation between changes in
capital investment and changes in the consumption of cement (see the
accompanying chart), indicating that for every million-ton change in
consumption of cement the value of capital investment changed by a
constant amount.
COMMUNIST CHINA
RELATIONSHIP OF CAPITAL INVESTMENT
TO CONSUMPTION OF CEMENT
1953-59
-0.99
9.~
CONSUMPTION OF CEMENT
(Million Metric Tons)
- 2 -
S-E-C-R-E-T
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A comparison of the historical relationship between the consump-
tion of cement and capital investment for 1953-59 with estimates of the
consumption of cement for 1961-62 indicates that expenditures on capital
investment may have been cut back as much as 60 percent in 1961 and
from 50 to 75 percent in 1962, compared with the peak level of 1959
(see the table).
Communist China: Estimated Capital Investment
and Consumption of Cement
1953-62
Year
Capital Investment
(Billion 1956 Yuan)
Consumption of Cement
(Million Metric Tons)
1953
6.8
3.5
1954
8.o
4.3
1955
8.7
4.2
1956
14.8
5.9
1957
13.8
5.5
1958
26.7
8.1
1959
31.7
9.8
1960
N.A.
N.A.
1961
12
5
1962
8 to 16
4 to 6
Several additional factors suggest that the actual figure for invest-
ment in 1962 may have been slightly below the midpoint of the range
indicated by the statistical estimation -- perhaps 10 billion to 12 billion
yuan. Such a range would be consistent with Premier Chou En-lai's
statement early in 1962, when the general economic downturn seemed
at its worst, that China should "further shorten the front of capital
construction. " 3/ An estimate of about 10 billion to 12 billion yuan is
consistent also with observations from travelers and refugees that
construction activity in 1962 was not higher than in 1961 and was probably
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a bit lower. In addition, it is quite probable that, because of shortages
of timber at a time of excess capacity in the cement industry, the pro-
portion of cement used in investment projects has been rising -- a
turn of events strongly implied in a recent press article in which the
Vice Minister of the Construction Industry reported that, in 1963 at
least, cement was to be substituted wherever possible for timber in
investment projects. 4/ A rise in the consumption of cement per unit
of investment would tend to lower the level of investment in 1962 that
was estimated on the basis of previous statistical relationships.
The correlation of investment spending with other investment inputs
(such as finished steel, timber, window glass, and machinery and equip-
ment) was equally high during 1953-59, but cement was usedin the esti-
mates for this report because of the availability of recent estimates of
cement output. 5/ The quantity of cement consumed in investment
projects was derived by subtracting estimates of net exports of cement
from estimates of domestic output of cement.
The figures for capital investment spending during 1953-59 are
official statistics, deflated for price changes. 6/ Because the only
relevant price index released by the Chinese does not extend beyond
1956, 7/ it has been necessary to assume constant prices for the years
1956-59. The investment figures estimated here encompass investment
inputs that are for the most part within the state-controlled sector of
the economy, where prices are rigidly controlled, and it is unlikely
that the prices of these investment inputs have been changed to a de-
gree that would significantly affect the analysis.
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S-E-C-R-E-T
Analyst: 25X1A
Coord: None
Sources:
1. FBIS. Daily Report (Far East), 9 Jan 63, p. CCC 1.
OFF USE.
2. State, Hong Kong. Survey of China Mainland Press,
no 2912, 5 Feb 63, p. 11. U.
3. Peking Review, vol V, no 16, 20 Apr 62, p. 6. U.
4., State, Hong Kong. Survey of China Mainland Press,
no 2917, 12 Feb 6 3, p. 11-12. U.
6. Communist China, State Statistical Bureau. Ten Great Years:
Statistics of the Economic and Cultural Achievements of the
People's Republic of China, Foreign Languages Press, Peiping,
1960, p. 55. U.
FBIS, Daily Report (Far East), 1 Apr 60, p. BBB 2. OFF USE.
7. Hollister, William W. China's Gross National Product and
Social Accounts, 1950-57, Glencoe, Illinois, 1958, p. 136-7.
U.
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SECRET
SECRET
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P11 __ took 2 copies of this CB
to the White House, 17 Apr -- will be in the
April listing.
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 Analysts:
IM& MS/CST and
A/F
Approved For ReleasbffgT J16FC I,R,PA7 BI0 PDR S
Series Number CIA/RR CB 63-36
Date of Document 12 April 1963
Copy No.,
1
2,3
DAD/RR
DDI
158 - 223 St/P/C
158
159
160
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162
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168, 169
170
Recipient
St/P 25X1A 19 Apr f~i3 -J-
181 OCR 25X1A
182 -223
Filed in St/P/C
Y /)
Date
;25 1 2 S / i ^ c i .
25X1A
_- 7` .r/' oa~ 6 25X1A
Control Sheet
25X1A 25X1A
6UoUt i
E1~dHe1 from 8utep-ei16
cif NEW dow ng and
(~ ledallfasslifCaitln
CiaFsification
Number of Copies 275 _~_ __
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S-E-C-R-EmT
3 BJECT. Di tributiou of Current Support Brief No. 63-3
lnwestment in Communist China Cut Sack Drastically Purtag
1961-62 - - - 12 April 1963 (Secret
Recigient
4 O!DDI - Attn: Room 7E32 Hq. 25X1A
3-6 N1,C:
7-14 O1!i:?te?rna1
I3-17 U.E
18 - 23 Si