COMMUNIST CHINA'S IMPORTS OF GRAIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01676R002900290016-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 15, 2016
• Document Release Date: April 20, 2004
• Sequence Number: 16
• Publication Date: July 1, 1963
• Content Type: IM

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RET r---
Economic Intelligence Memorandum
COMMUNIST CHINA'S IMPORTS OF GRAIN
1961-63
July 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
Excluded from automatic
downgrading and
declassification
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SECRET
Economic Intelligence Memorandum
COMMUNIST CHINA'S IMPORTS OF GRAIN
1961-63
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Sees. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SEET
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CONTENTS
Page
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. Introduction . . . . . . . . . . . . . . . . . . .
II. Imports in 1961 and 1962 . . . . . . . . . . . . . . . .
III. Imports in 1963 . . . . . . . . . . . . . . . . . . . . .
IV. Composition of Imports . . . . . . . . . . . . . . . . .
V. Financing of Imports . . . . . . . . . . . . . . . . . .
Tables
1. Communist China: Retained Imports of Grain, 1961-63 . . 7
2. Communist China: Imports of Grain for Reexport,
1960-63 . . . . . . . . . . . . . . . . . . . . . . . . 10
3? Communist China: Composition of Retained Imports of
Grain, 1961-63 . . . . . . . . . . . . . . . . . . . . . 12
4. Communist China: Value of Annual Imports of Grain,
1961-62 . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Communist China: Value of Imports of Grain, 1961-62 . . 14
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COMMUNIST CHINA'S IMPORTS OF GRAIN*
1961-63
Summary
Following the Communist takeover on the mainland in 1949, China
exported over the next decade an average of approximately 1.5 million
net tons** of grain annually as a means of paying for imports for its
industrialization program. By 1961, however, as a result of poor
grain harvests in 1959 and 1960 and the consequent food shortages,
China had shifted its trade pattern from that of a net exporter of
grain to that of a net importer.
A contract signed on 31 May 1963 for the purchase of 1.25 million
tons of wheat from Australia brings China's total purchases of grain
since the beginning of 1961 to about 17 million tons, of which retained
imports total approximately 15 million tons. By the end of 1963 the
total value of imports of grain since early 1961 may approximate $1 bil-
lion.*** Most of the imports of grain have come from Canada and Aus-
tralia, which through the end of 1962 had supplied about $487 million
out of total purchases of about $688 million worth of grain.
The initial sales of grain to China were for cash, but in the
latter part of 1961, because of a serious decline in its international
reserves, China sought and obtained credit terms for purchases of
grain from Canada and Australia. Since 1961, sales of grain to China
have been made under various credit arrangements, with terms becoming
progressively more liberal.
The large purchase of grain recently concluded with Australia and
the contract now being negotiated with Canada for delivery in 1963 may
be indicative of the regime's concern over prospects for the 1963
harvest.
* The estimates and conclusions in this memorandum represent the best
judgment of this Office as of 15 June 1963.
Tonnages are given in metric tons throughout this memorandum.
Dollar values in this memorandum are given in current US dollars.
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I. Introduction
In 1961, Communist China signed the first of many contracts for the
import of food grains to help alleviate serious food shortages that be-
gan with poor crops in 1959 and 1960. Since then, the continuation of
food shortages has required continued imports of grain. Between 1961
and the end of May 1963, China purchased, largely from Canada and Aus-
tralia, a total of about 17 million tons of grain, approximately 15 mil-
lion tons of which were for domestic consumption. These imports repre-
sented a major shift in the foreign trade pattern of China. During the
1950's, exports of agricultural commodities had been the regime's chief
means of paying for the imports for its industrialization program.
Before World War II, China had been a net importer of grain, averag-
ing imports of about 1.5 million tons annually during the period 1933
through 1937. However, during the period following the Communist con-
quest of the mainland, China had net exports of grain of about 1.5 mil-
lion tons annually. This transformation of China from a net importer
of grain before the Communist takeover to a net exporter was not brought
about by increased availability. Per capita consumption of food con-
tinued below prewar levels. However, the need for foreign exchange to
support the industrialization program necessitated the export of food
commodities that could well have been utilized domestically.
II. Imports in 1961 and 1962
Grain imported by Communist China in 1962 is estimated to have
totaled 5.3 million tons. Excluding about 300,000 tons reexported to
Ceylon, Cuba, and Albania directly from the supplying country, the
retained imports of 5 million tons were at least 500,000 tons less
than in 1961 (see Table 1*).
Retained imports of grain by Communist China fell from 3.2 million
tons in the first half of 1962 to 1.8 million tons in the second half,
probably reflecting some improvement in the 1962 harvest. Shipments
during both halves of 1961 were about the same -- that is, 2.7 million
and 2.9 million tons, respectively (see Table 1*).
III. Imports in 1963
The purchase by Communist China of 1.25 million tons of wheat from
Australia, which was announced on 31 May 1963, brings total purchases
of grain for delivery in 1963 to about 5.0 million tons compared with
* P. 7, below.
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5.3 million and 6.3 million tons in 1962 and 1961, respectively. How-
ever, China at present is negotiating for further purchases of grain from
Canada that could raise purchases during 1963 above the high level of
1961. It is believed that a greater proportion of the:negotiations for
purchases thus far in 1963 are for grain that will be consumed domesti-
cally than was the case in either 1961 or 1962, when 7e7,000 and 303,000
tons, respectively, were reexported to other destinations (see Table 2*).
About 3.6 million of the 5.0 million tons of grain contracted for
shipment in 1963 are scheduled for delivery during the first half of the
year (see Table l**). The 3.5 million tons of wheat to be imported by
China in the first half of 1963 is larger than the total quantity of
wheat imported in the same period of either 1961 or 1962 (see Table l**).
In spite of official claims of a slightly better grain harvest in
1962 than in the previous year, the regime has shown no tendency to cut
back purchases in 1963. The recent large purchase and current negotia-
tions may reflect concern over harvest prospects in 1963.
IV. Composition of Imports
Wheat, by far the major component in Communist China's imports of
grain during the period 1961 through May 1963, has been increasing in
importance both in quantity imported and as a percentage of total im-
ports of grain. Barley accounted for more than 20 percent of total
imports of grain in 1961, but since that time no single type of grain
other than wheat has accounted for as much as 10 percent (see Table 3***).
V. Financing of Imports
To finance these purchases of grain,t Communist China for the first
time was forced to obtain substantial commercial credits from the West
to avoid exhausting its foreign exchange reserves. China's initial
purchases of grain in the first half of 1961 were on a"cash basis, but
these imports, amounting to about $130 million, caused a sudden and
serious deterioration in China's international accounts with the West.
To pay for subsequent imports of wheat, China has negot.ated extensive
short-term credits from various Western sources. Western producers of
grain (or their governments in some cases) have been w,?ling to extend
credit in order to sell a large part of their surpluses to China.
P. 10, below.
P. 7, below.
P. 12, below.
t For data on the value of China's imports of grain, see Tables 4 and
5, pp. 13 and 14, respectively, below.
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The West extended credits of about $361 million for 1961 and 1962,
$127 million in 1961 and $234 million in 1962. The strain on Communist
China's balance of payments, however, was much less in 1961, when net
credits amounted to $125 million, than in 1962, when extensive Chinese
repayments reduced the net credits to $22 million, as shown in the follow-
ing tabulation. An advance settlement in December 1962 of $29 million
of credits due in the following year,- however, reduced the credits
outstanding at the end of 1962 to $14+7 million. Repayment of the remain-
ing credits will fall in succeeding years. In addition to these com-
mercial credits, China financed nearly half of its imports of rice from
Burma in 1961 by accumulating a $20 million credit in its clearing account.
This credit arose because Burma failed to import an equivalent amount of
Chinese goods. China has not yet repaid this credit.
Million US $
Year
Credits Extended
to China
Credits Repaid Net
by China C
redits
_
1961
127
2
125
1962
234
212
22
Total
361
214
147
In 1963, Communist China's new credits probably again will exceed
its payments. Repayment of credits outstanding at the end of 1962 will
total $137 million (repayment of $10 million has been deferred to 1964),
whereas new credits may increase to as much as $200 million, depending
on the volume of grain imported, credit terms, and prepayments.
The cost of these credits as measured by the interest payments is
relatively insignificant in comparison with total international payments.
At the interest rate of 5.5 percent that has been reported for the first
Canadian credit contracts as the average interest rate for all credits,
interest costs in 1962 amounted to about $7 million, less than 2.5 per-
cent of the value of all Chinese imports of grain for that year.
Because of its continuing dependence on exports of agricultural prod-
ucts, which are harvested and marketed largely during the fall and winter
months, China accumulates during this period large foreign exchange bal-
ances, which will be drawn down in the spring and summer months. As its
international financial position has been temporarily stabilized, China
may have diverted some of these balances from investments earning a rela-
tively small amount of interest to the prepayment of credits bearing a
considerably higher interest rate.
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Payment terms have enabled Communist China to defer the bulk of its
payments for imports of grain for periods of from 6 to 18 months. During
1961 and most of 1962, Western credits were extended lirgely on a short-
term basis, with a downpayment of 10 to 25 percent and the remainder pay-
able within 6 to 12 months. For example, Canadian bankers required a
payment of 25 percent at the time of shipment with the balance payable
in 9 months, whereas Australian bankers offered slightly more favorable
terms through a complicated payment schedule calling for the payment
10 percent at the time of shipment, 40 percent in 6 months, and the
remaining 50 percent in 1 year. Late in 1962, most Western lenders
extended the repayment period by a few months. Australian bankers
changed the payment schedule slightly, permitting half' of the repayment
originally due in 6 months to be paid in 9 months. Canadian bankers
extended the repayment period to 1 year, thereby providing as favorable
terms as the Australians. French bankers, however, b;- extending the
time period allowed for repayment from 1 year to 18 months have become
the first to extend intermediate-term financing.
Although Communist China has pressed for even longer term credits
than those now extended by France, few banks without government backing
are able to provide anything other than short-term credits. The Canadian
government has insured credits to other Communist countries for a period
of 3 years but so far has been unwilling to insure credits extended to
China for more than 1 year. Australian and West German banks cannot
obtain government insurance for any credits extended to China. French
bankers who can obtain government insurance provide the same credit
terms -- 18 months -- to all countries importing French grain.
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Communist China: Retained Imports of Grain x-
1961-63
Thousand Metric Tons
Wheat Flour Barley Corn Other Total
1961
Free World 1,749 63 550 29 120 2,511
Argentina
Australia 1,107
Canada 642
France
West Germany
Burma
53 209
314
27
USSR c/ 50 61
50 161
Subtotal 19799 124 22-0 29 170 2,672
Second half
Free World 1,760 250 687 4 12 2,713
Argentina
Australia 977
Canada 783
France
West Germany
USSR J
Subtotal
Total
33
217
137
347
203
29
65 1,434
956
27
10
55 55
4
12 1,126
1,130
236
217
51 62 50 163
1,811 X12 687 4 62 2,876
3,610 436 1,237
13 232 5,548
Footnotes for Table 1 follow on p. 9.
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Communist China: Retained Imports of Grai
1961-63
(Continued)
a/
Thousand Metric Tons
First half
Free World
Argentina
Australia
Canada
France
West Germany
USSR L/
Subtotal
Second half
Free World
Argentina
Australia
Canada
France
West Germany
Rhodesia
South Africa
USSR J
Subtotal
Total
Wheat Flour J Barley Corn Other Total
1962
2,364
163 276
206
38
3,o47
88
294
976
1
38
1,015
182
1
192
1,374
,
118
39 84
241
123
123
50
125
175
41
2
163 276
206
15
3,222
5
1,173
105 51
253
40
1,622
98
170
23
291
207
17
224
624 11
635
244 40
284
105
58
58
25
25
50
125
175
22
1
105 51
253
15
1,797
3
,
268 327
6
L22
~L8
3,
37
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Communist China: Retained Imports of Grain a/
1961-63
(Continued)
Thousand Metric Tons
Wheat Flour Barle Corn Other Total
1963
First half J
Australia 1,855
Canada 900
France 705
West Germany
South Africa
140
1,855
922
705
23
140
Subtotal 3,46 2 22 1#0 -
Second half J
1,250
Australia 1,250
1,250
Subtotal 1,250
Total 4,7lO 22 140 4,895
a. Total grain purchased minus reexports.
b. Converted to a wheat equivalent basis (82 percent extraction rate .
c. Estimated to have been about evenly divided between the first and
second half of 1961 and 1962.
d. On the basis of contracts signed through 31 May 1963-
-
9
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Communist China: Imports of Grain for Reexport
1960-63
TYaousand Metric Tons
Wheat
Corn
Rice
T
otal
Second half of 1960 /*
Australia
France
10
29
10
29
Total for 1960
First half of 1961
Argentina
Australia
Canada
France
Burma
18
51
8
18
51
8
125
125
69
18
125
212
Second half of 1961
Canada
324
Burma
324
191
191
Subtotal
T
324
191
1
otal for 1961
393
18
31
727
First half of 1962
Canada.
47
France
47
Burma
N.A.
LOO
100
47
100
147
Second half of 1962
Canada
France
56
Burma
56
100
Subtotal
T
t
l f
00
156
o
a
or 1962
103
x_'00
3 03
* Footnotes for Table 2 follow on
p. 11
- 10 -
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Communist China: Imports of Grain for Reexport
1960-63
(Continued)
Thousand Metric Tons
Wheat Corn Rice Total
First half of 1963 12/
Burma
Total
100 100
100 100
a. Imports during the first half of 19 0 were negligible.
b. On the basis of contracts signed through 31 May 1963.
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Table 3
Communist China: Or,-Position of Retained Imports of Grain
1961-63
1961
1962
1963
Total grain
Thousand
Metric
Tons
5,548
Percent of
Total Grain
100
Thousand
Metric
Tons
Ol
Percent of
Total Grain
100
Thousand
Metric
Tons
8
Percent of
Total Grain
95
L,
100
Wheat
3,610
65
3
637
2
Flour c2
1+36
8
,
268
7
4,710
95
Barley
Corn
1,237
22
327
5
7
23
1
Other /
33
232
1
1+
1+59
328
9
22
14.0
1
3
7
0
0
a. Total grain purchased minus reexports.
b. On the basis of contracts signed through 31 May 1963-
C. Converted to a wheat equivalent basis (82 percent extraction rate).
d. Including oats, rice, sorghum, and ?-v??.
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Table 4
Communist China: Value of Annual Imports of Grain a/
1961-62
Million US
Wheat Flour Barley Corn Other Total
1961
Free World 225.1 14.9 53.1 2.4 37.6 333.2
Argentina 2.1 2.1
Australia 111.7 3.2 15.8 3.0 133.6
Burma 34.6 34.6
Canada 113.4 28.0 141.4
France 1.4 9.4 0.4 11.1
West Germany 10.4 10.4
5.5 21.6
Total 232.2 23.9 53.1 2.4 43.1 354.8
1962
Free World 236.2 14.6 18.5 22.4 24.6 316.3
Argentina 11.9 19.2 J 31.1
Australia 67.9 Negl. 2.6 70.5
Burma 22.0 22.0
Canada 129.5 12.1 141.6
France 26.9 2.4 6.4 35.7
West Germany 12.2 12.2
Rhodesia 2.2 2.2
South Africa 1.0 1.0
USSR 6.o 11.0 17.0
Total 242.2 14.6 18.5 22.4 35.6 333.3
a. Because of rounding, components may not add to the totals shown.
b. Including sorghum.
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Communist China: Value of Imports of Grain
1961-62
Thousand US
Wheat
Flour
Barley Corn
Other
1961
102,502
3,539
24,287
2,216
19,331
151,875
Argentina
1,843
119843
Australia
58,491
3,164
9,605
2,537
73,797
Burma
16,794
16,794
Canada
44,011
13,524
57,535
France
1,158
373
1,531
West Germa
ny
375
375
3,500
4,500
2,750
10,750
Total
106,002
8,039
24,287
2,216
22,081
162,625
Second half
Free World
122,640
11,398
28,825
213
18,279
181,355
Argentina
213
Australia 53,220
6,171
446
59,837
Burma
17,833
17,833
Canada 69,420
14,438
83,858
France
1,389
8,216
9,605
West Germany
10,009
10,009
3,600
4,500
2,750
10,850
126,240
15,898
28,825
213
21,029,
192,205
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Communist China: Value of Imports of Grain
1961-62
(Continued)
Thousand US -$
Wheat
Flour
Barley Corn
Other
Total
1962
Free World
153,515
8,578
15,166
9,900
12,800
199,959
Argentina
5,630
9,900
15,530
Australia
56,014
1
1,800
57,815
Burma
11,000
11,000
Canada
83,853
11,479
95,332
France
8,018
2,393
3,687
14,098
West Germany
6,184
6,184
USSR
3,000
5,500
8,500
Total
515
156
8,578
15,166
9,900
18,300
2o8,459
Free World
,
82,714
6,055
3,357
12,450
11,800
116,376
Argentina
6,290
9,300 J
15,590
Australia
11,901
800
12,701
Burma
11,000
11,000
Canada
45,612
650
46,262
France
18,911
2,707
21,618
West Germany
6,055
6,055
Rhodesia
2,200
2,200
South Africa
950
950
USSR
3,000
5,500
8,500
Total
714
85
6,055
3,357
12,450
17,300
124,876
,
a. Including sorghum.
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