MEMORANDUMS IN SUPPORT OF FORMER PRESIDENT NIXON'S TRIP TO CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83R00184R002600620001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 54
• Document Creation Date: December 20, 2016
• Document Release Date: November 16, 2007
• Sequence Number: 1
• Publication Date: August 1, 1979
• Content Type: REPORT

Foreign
Assessment
Center
Memorandums in Support
of Former President Nixon's
Trip to China
Secret
NI M 79-10009
August 1979
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O O
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v+~~.iW 1
A.
China:
Domestic Political Overview
B.
China's Foreign Policy: An Overview
C.
China:
The Economic Outlook
D.
Biographical Sketches
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People's Republic of China: New Pinyin Romanization
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aUaaaU 1-la (a47laU)
Province-level Names
1 Conventional
Characters
Pinyin
Pronunciation
Conventional
Characters
Pinyin
Pronunciation
Anhwei
~~
Anhui
ahn -way
Kweichow
~*I
Guizhou
g way - joe
Chekiang
>'lGzY
Zhejiang
juh -jee ong
Liaoning
iI r
Liaoning
lee ow -Wing
'~ Fukien
fi>~
Fujian
foo -jee en
Ningsia
~~
Ningxia
Wing -she ah
Heilungkiang
~jE9I
Heilongjiang
hay - loong -jee ong
Peking
Jtr,'t
Beijing
bay - jing
Honan
mJl~
Henan
huh -non
Shanghai
t.~
Shanghai
shong - hi
Hopeh
aplJt
Hebei
huh -bay
Shansi
tll~
Shanxi
shahn -she
Hunan
IJA~
Hunan
hoo -Wan
Shantung
W~
Shandong
shahn -doong
Hupeh
~Jt
Hubei
hoo -bay
Shensi
~~
Shaanxi
shun -she
Inner Mongolia
~1~25
Nei Monggol
nay - mung -goo
Sinkiang
ttilY
Xinjiang
shin -jee ong
Kansu
4th
Gansu
gahn - soo
Szechwan
D9111
Sichuan
ssu - ch wan
Kiangsi
z`[~
Jiangxi
jee ong -she
Tibet
d?IflE
Xizang
she - dzong
Kiangsu
913x
Jiangsu
jee ong - su
Tientsin
Tc~
Tianjin
to en - jin
Kirin
a#k
Jilin
jee - lynn
Tsinghai
Rf+'~
Qinghai
Ching - hi
Kwangsi
f ~
Guangxi
g wong -she
Yunnan
~~
Yunnan
yu oon -Wan
Kwangtung
!`tic
Guangdong
g wong -doong
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CHINA: DOMESTIC POLITICAL OVERVIEW
Executive Summary
The post-Mao era in Chinese politics has seen a
major change in the way Chinese leaders handle their
personal and political rivalries and the effect these
political problems have on the country at large.
Gone is the extreme polarization of the late 1960s and
early 1970s when leftists, whose primary concern was
political struggle, and rightists, whose preoccupation
was the problem of nation building, clashed repeatedly.
In this earlier period, policies were put into prac-
tice with great fanfare and then suddenly shelved;
political leaders wielded enormous power and then lost
their jobs.
Today, there are several leading officials who
together form the decisionmaking core. While they differ
sharply over how to carry out some policies, they are
in general agreement on the broad outlines of China's
priorities and policies. Consequently, a basic policy
to embark on economic modernization remains fixed de-
spite disputes over concrete measures to take. Poli-
cies have been scaled down, redirected, or otherwise
modified but not reversed. This is true of even such
Many officials in the leadership do not work well
together, but the emphasis is on limiting an opponent's
influence rather than removing him from office. Leaders
contentious policies as the desanctification of Mao
Zedong and the promotion of "democratic" activity.
This memorandum was prepared by the East Asia - Pacific Division of
the Office of Political Analysis, National Foreign Assessment Center,
in response to a National Security Council request. The memorandum
has been coordinated with the National Intelligence Officer for
China_ Questions and comments may be addressed to
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SF.['RF.T
who rose to power during the disruptive Cultural Revolu-
tion--as well as Deng Xiaoping, a chief victim of that
era--are all potential troublemakers who have suffered
some reduction in their status.
Deng has weathered severe criticism that has
diminished somewhat his once-preeminent influence.
Other leaders, who have assumed larger roles, have moved
to adjust the more controversial aspects of his poli-
cies. This process has actually made his policies more
durable because thev are now more acceptable to a wider
economic specialists who are responsible for the less
ambitious modernization program. Senior victims of
the Cultural Revolution other than Deng have also seen
their fortunes rise, as has party Chairman Hua Guofeng.
The diffusion of influence within the leadership
has resulted in greater political power for .leading
constituency.
Introduction
Political life in China has undergone a major trans-
formation since the deaths in 1976 of China's two politi-
cal giants, Mao Zedong and Zhou Enlai. Although the
loss of these men was neither sudden nor surprising,
Chinese political leaders were ill prepared for the
consequences. Zhou's death was followed by a marked
upsurge in disruptive political maneuvering by the so-
called Gang of Four, extremists headed by Mao's wife
who had little interest in the nuts and bolts of running
a country but enormous concern with the political re-
liability of people in all walks of life. Zhou's
chosen successor as Premier, the abrasive but able and
popular Deng Xiaoping, was ousted from the leadership
in early 1976 and his many supporters were in danger
This period of heightened political tension came
to an abrupt end with Mao's death in September 1976 and
the summary arrest a month later of the Gang of Four.
The arrest brought to a close more than 10 years of
extreme polarization in the leadership and was greeted
with national euphoria. It left the remaining leaders,
however, somewhat uncertain about how to apportion power
among themselves, what to do first to repair the damage
of losing their political lives.
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of more than a decade of instability, and what longer
term goals to set. Mao's successor, Hua Guofeng, had
been moved into position during Mao's lifetime, and his
promotion was perhaps the easiest decision of the im-
mediate post-Mao period. But the 56-year-old Hua was
an unknown quantity to most older leaders and to the
nation at large; no one else in the leadership was
vigorous enough or prestigious enough to seize the
reins, and there was a growing feeling that China needed
the firm and familiar hand of Deng Xiaoping at the
Deng's return in July 1977 had significant politi-
cal consequences. It marked the end of this "collective"-
leadership-by-default as Deng worked, ultimately with
mixed success, to become the dominant force: It halted
the drift in decisionmaking as the determined and de-
cisive Deng quickly outlined sweeping policy changes
aimed at vaulting China into the modern industrialized
world by the end of the century. Moreover, it ushered
in a new kind of political struggle among leaders who
are not necessarily on opposite ends of the political
spectrum and do not disagree significantly over what
China's general goals should be, but who have major
differences over how to achieve them.
of the disastrous Cultural Revolution of the mid-1960s,
and of the xenophobic, often impractical and highly
politicized decisions of the past. It would also in-
volve the removal of many officials--possibly including
The Combatants
There are roughly two main lines of argument over
how to build the nation. One, advocated by Deng and
his followers, demands a detailed and lengthy indictment
of past policies and political officials associated with
them. This would entail a thorough condemnation of Mao,
Deng's group believes that this approach is the
only way to ensure that his pragmatic policies are not
waylaid in the future by those who remain committed
to the principles of the Cultural Revolution--the su-
premacy of political reliability over technical exper-
tise, the corrosive effect of material rather than
ideological incentives, a distrust of foreigners and
foreign practices and of intellectuals and any other
Hua himself--who made their names during that time.
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group not necessarily wedded to the tenets of Commu-
nist ideology. Deng seems to believe that only by con-
demning the past can an atmosphere be created in which
people will feel free to experiment boldly with new
techniques and policies in order to further the primary
goal of modernizing the economy.
Deng's opponents, including but by no means re-
stricted to Hua, fear the disruptive effects of so sharp
a break with the past. They put a premium on political
stability now as the only hope for creating an environ-
ment conducive to steady economic growth. A purge of
the few top officials and the many middle and lower
level officials who were promoted during the. Cultural
Revolution, they believe, would paralyze people with
fear and prevent them from taking any initiatives in
the economic sphere. A denunciation of Mao and of the
recent past would have a destabilizing effect, casting
doubt on the legitimacy of all of the late Chairman's
policies, including his selection of Hua as his suc-
cessor, and creating confusion about the legitimacy of
This group recognizes, as Deng does, the residual
influence of the Cultural Revolution and all it repre-
sented. Unlike Deng, it wants to enlist the support
of the true believers of the Cultural Revolution by
allowing them another chance, by not calling into ques-
tion everything they believe in, and indeed by acknowledcl-
ing that some policies of that era were correct.
The shifts in policy in the two years since Deng's
return have occurred when one or the other group held
sway. Significantly, these were not the sharp twists
and turns of the last decade, when leaders were in funda-
mental disagreement over the direction of policies, but
were modifications, adjustments, matters of degree. The
wisdom of trying to modernize the economy has not been
at issue, nor has a greater involvement of the outside
world in order to achieve modernization. But even over
the relatively narrow issue of how to implement a par-
ticular policy, or how far to push it, the Chinese lead-
ership, with its penchant for internecine struggle,
has found much to argue over. If this has not resulted
in policy changes or the ouster of individual leaders,
it has caused modifications of policies and the reduc-
tion of the political power of several leaders.
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Deng on the March
From the time of his return, Deng moved quickly to
put his personal stamp on Chinese policies. At no point
was he without opposition,. but he advanced on so many
fronts in ways that captured a good deal of public and
official support that he enjoyed enormous success. At
the same time, however, the boldness of his initiatives
and his refusal to accommodate even the slightest
criticism of his policies sowed the seeds of stiffer,
more successful opposition down the road.
The economic modernization program is not Deng's
alone and was in fact first announced by Zhou Enlai in
1964. Many of the specifics of the program,. however,.
as outlined in 1977-78, were distinctively Deng's.
These included turning to the outside world for help
to a degree probably well beyond what Zhou Enlai had
in mind. Deng seemed willing to go much further than
other Chinese officials in accepting foreign loans,
entering into joint ventures and concessionary arrange-
ments, inviting foreign technicians to train Chinese
technicians in China, and sending thousands of scientists
and students abroad to do research and to study. Deng
won the support of workers with a long-awaited pay raise
and secured the loyalty of intellectuals when he stood
Maoist orthodoxy on its head by proclaiming that intel-
lectuals are part of the laboring class and therefore not
politically suspect. Scientists commanded Deng's par-
ticular attention and were cheered by his personal pledge
to allow them to do research unencumbered by party
politics.
Other policies even more basic to Deng's vision
of a rapidly modernizing China drew less applause and
in some cases sent shock waves throughout Chinese of-
ficialdom. A gradual effort to dismantle the Mao legacy
took a dramatic step forward last March with a public
denunciation of the last 18 years of Mao's life. De-
Maoization inevitably cast aspersions on Mao's chosen
heir, Hua Guofeng, who came under more direct attack
than at any time since he rose to the party chairman-
ship.
Deng's emphasis on discarding Maoist thinking and
finding new solutions to new problems spawned opposi-
tion among Mao's personal disciples, who feared that a
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wholesale denigration of Mao's precepts would undermine
their political positions. Public repudiations of
specific incidents during the Cultural Revolution were
discomfiting to survivors of that period and threatened
to revive bitter feuds. Deng launched a major campaign
aimed clearly at removing from office some senior of-
ficials with whom he had personal and policy differences
in the past, while moving trusted lieutenants into key
party, government, and military posts. And he personally
endorsed a relaxation of political controls on the popu-
lace to encourage open discussion of China's policies
and leaders and even its system of government.
The Retrenchment
Early this year, the political opposition engendered
by Deng's programs, the apparent or prospective failure
of some of them, and the unacceptable consequences of
others combined to force Deng to retreat. The excesses
of the economic program were trimmed, Deng's reevaluation
of the Maoist past came to a sudden stop, "democracy"
was assailed as anarchic, and Deng's political oppo-
nents became more active. Deng's own political stand-
ing reached its lowest point this spring when he was
more heavily criticized than at any time since he re-
The leadership, guided by senior economic special-
ists, took a hard look at the specifics of the economic
modernization program and concluded it was unrealistic.
In its rush to buy foreign plants and technology, to
send people abroad for training, to engage in capital
construction at home, and to expose middle-level of-
ficials to the Western world, China was spending more
money than it could afford. None of these programs
have been scrapped, but they have all been scaled down
and implemented more selectively. Goals deemed un-
realistically high were reset at levels still ambitious
but more likely within reach; priorities were redirected
away from heavy industry and back toward agriculture.
Deng admitted that he was criticized for the mod-
ernization program. As he himself claimed, he was not
the only leader to be blamed, but he unquestionably
created a climate that allowed if not encouraged China
to overextend itself. His highly publicized trips to
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the United States and Japan, shown to a Chinese audience
in part to enhance his political image, probably caused
him additional problems. The material benefits of these
countries, displayed to Chinese viewers in some detail,
undoubtedly fueled the spiral of rising expectations
that had been set in train when the modernization pro-
gram was first unveiled. It was left to the more sober-
minded economic specialists in the leadership to dampen
"seeking truth from facts" and "practice is the sole
criterion for testing truth"--were severely attacked
for undermining the sanctity of Mao's thought. The
criticism of these slogans in particular enabled the
so-called whatever faction--composed of political ex-
tremists who have tried to preserve whatever Mao said
Deng's policies in the political and social arenas
got him into even more hot water. He was privately
criticized for promoting de-Maoization; his emphasis
on a flexible, pragmatic approach to problem solving
and his concurrent deemphasis on the rote application
of orthodox Communist solutions--summed up in the slogans
these expectations.
Perhaps most damaging for Deng, because it raised
questions about his judgment, was the disintegration of
the "democracy" movement into social disorder. Chinese
tolerance was stretched to the breaking point when
people left their places of work to petition for a re-
dress of personal grievances or disrupted production by
striking for better living conditions. Even more appall-
ing for the straitlaced Chinese was the activity of
young people, who engaged in gambling and promiscuous
behavior. The calls for human rights and the direct
or did as beyond question--to reassert itself.
appeals to foreign leaders to help secure them were
embarrassing for the Chinese and more than anything
else precipitated the crackdown on "democracy". Ring-
leaders were arrested, and restrictions were placed on
the use of wall posters and the dissemination of unof-
ficial publications. Deng, who had unleashed the "dem-
ocracy" movement, issued the call to rein it in.
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Deng's Counterattack
In mid-May, Deng began to use the media to lash
out at his critics and to reassert his favorite themes--
the fallibility of Mao, the need for "democracy" as
a prerequisite for economic modernization, and "seeking
truth from facts" as an inviolate principle of Chinese
Communism. He attacked as "leftists" those who claimed
that the "democracy" movement had gone too far or
who had opposed "seeking truth from facts" because it
Gradually, and probably somewhat grudgingly, these
favorite themes of Deng's have won acceptance again in
Chinese political life. This has not been an unqualified
victory for Deng, however. He has had to temper his
views to make them more acceptable to a broader range
within the leadership. The fallibility of Mao, discussed
less often now, is not treated in terms of specific mis-
takes he made and always includes an acknowledgment
of his overall greatness. The defense of democracy is
coupled with a definition of and warnings against such
"excesses" as actions and statements derogating socialism.
Deng has not been able to revive critical discussion
harmed Mao's image.
of the Cultural Revolution.
In the area of ideological reform, Deng has made no
effort to tailor his views to suit a wider audience.
He has mobilized an impressive array of influential
officials to endorse publicly his pragmatic approach.
The media readily admit, however, that ideological re-
form is still being discussed nationwide, and not all
propaganda outlets have supported Deng on this issue.
Although Deng has repeatedly been thwarted in his
efforts to remove from the leadership those officials
with whom he has crossed swords in the past, and in
particular those who are trying to preserve the Mao
legacy intact, he continues to chip away at their insti-
tutional bases of support. They retain seats, but ap-
parently without specific portfolios, in the ruling
councils of the party and government. At the National
People's Congress, China's legislature that concluded
a two-week session in early July, Deng's opponents were
criticized for economic malfeasance as well as political
error, but this criticism ultimately was muted and no
specific steps were taken against the transgressors.
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The New Political Balance
The events surrounding the National People's Congress
typify a somewhat changed political situation and a
new look for the Chinese leadership. The congress
focused on the revamped economic development program
and gave pride of place to the economic specialists in
the leadership. These men, led by party Vice Chairman
and new economic czar Chen Yun, have emerged as a new
interest group that is committed to economic moderniza-
tion at a more measured pace than that set by Deng
Xiaoping. The political power that has accrued to this
group is evident in the new prominence of vice premier
Li Xiannian, long the leadership's senior economic special-
ist, who seems to have inherited some of Deng's func- -
tions; Li, for example, has often filled Deng's usual
role as host to high-ranking delegations from the United
There is clearly a greater diffusion of influence
within the leadership. In addition to the economic
specialists, a number of newly rehabilitated victims
of the Cultural Revolution played major roles at the
congress and won important posts in the government.
These men were senior political figures in the past and
probably played a central role in current decision-
Premier Hua Guofeng, too, is enjoying enhanced
prominence. He gave the major address to the congress,
in which he took the middle ground between the extremist
views of Deng and those of Deng's chief detractors. The
middle of the road, Hua's usual position, is also oc-
cupied by other leaders, especially the economic special-
ists. Hua therefore appeared to be speaking for a majority
in the leadership. He cautiously embraced Deng's "seek-
ing truth from facts" although he shied away from the
bolder aspects of de-Maoization such as the fallibility
of the man himself and a negative assessment of the Cul-
tural Revolution. He gave qualified approval to "demo-
cratic" activity and emphasized the importance of "unity
and stability" to the success of modernization, a notion
Deng consistently has ignored in his desire to remove
making.
some leaders from office.
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The increasing prominence of other members of the
leadership underscores Deng's own low profile. He
played no role at the congress, the only major event
since his return two years ago in which he failed to
participate. He undoubtedly supported the congress's
outline of a detailed legal code and procedures to give
ordinary Chinese a greater sense of participation in
their government. He probably also supported the new
personnel appointments, but his own closest associates
were not named to government positions.
There .apparently has been a deliberate effort to
clip Deng's wings a bit to bring him more into line with
the views of others in the leadership and to give other
officials a more prominent role. Deng apparently will
do no more foreign traveling, at least in ari official
capacity, a decision he revealed even as Hua's once-
postponed trip to West Europe was rescheduled for this
autumn. He also appears to have relinquished his posi-
tion as Army Chief of Staff.
Deng probably will have some difficulty adjusting
to his new role, one that takes him down a few pegs
from the perch he used to enjoy but that still leaves
him as one of the most influential members of the lead-
ership. He is not confronted with the bitter political
rivals of the sort who overthrew him during the Cultural
Revolution but with a group of men--many similar to him
in age and experience--who share his basic policy con-
cerns but do not necessarily approve of his methods.
The adjustments to Deng's policies probably enhance
the prospects for their survival. It is clear now that
the unbridled enthusiasm Deng generated last year would
have led to economic disaster had not cooler heads pre-
vailed. Just as important, Deng's inclination to ride
roughshod over his weaker opponents would have created
rifts in the leadership as wide as those of the recent
~ past. 25X1
The compromises that China's leaders seem to have
worked out in recent months do not eliminate the pos-
sibility of either economic or political upheavals in
the future. Indeed turmoil seems very much in the cards
when the current leaders, most of whom are in their
seventies, pass from the scene. But for now, the chances
for orderly progress toward rational goals have markedly
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CHINESE FOREIGN POLICY: AN OVERVIEW
Executive Summary
During the past two years, China has continued to
refine its strategy of maintaining the international
status quo by resisting the expansion of Soviet influ-
ence. This strategy resulted from China's ideological
and military conflict with the USSR that started in the
late 1950s. It is based on China's sense of its own
weakness and is consequently defensive, but this defen-
siveness does not diminish China?s inherent sense of its
own importance or its interest in projecting its influ-
ence abroad. A central aspect of this strategy is a
political tilt toward the United States, Japan, and
Europe designed to offset the Soviet threat to China
while Beijing obtains Western credits, technology, apd
arms for its long-term self-strengthening programs.
The deterioration of relations with Vietnam has com-
plicated Beijing's planning by imposing increased defense
costs, causing large numbers of refugees to flee to China,
and inviting a stronger Soviet presence in Southeast Asia.
China's invasion of Vietnam in February raised Sino-Soviet
tensions to their highest point in a decade.
Shortly thereafter, Beijing denounced the long-dormant
1950 Sino-Soviet Treaty. To achieve the tactical expe-
dient of reducing the dangerously high level of tension
in Sino-Soviet relations, however, Beijing paired its
This memorandum was prepared by the East Asia - Pacific Division of
the Office of Political Analysis, National Foreign Assessment Center,
in response to a National Security Council request. The memorandum
was coordinated with the National Intelligence Officer for China,
Office of Strategic Research, and the USSR Division of the Office
of Political Analysis. Questions and comments may be addressed to
PA M 79-10345
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denunciation of the treaty with a new call for negotia-
tions with Moscow. The talks that result are likely to
be long and arduous. The initiative thus far has not
produced any detectable lessening of tension along the
Introduction
Basic to understanding Chinese foreign policy is an
awareness of China's perception of threats to its survival.
The Chinese have faced threats from menacing and often
technologically superior enemies to the north for thou-
sands of years. The Great Wall was the first, monumental
effort to keep predatory nomads from swooping down on
the agricultural population in the north China plain.
In recent centuries the Chinese have also faced threats
from the south and along the eastern coast. The Chinese
usually dealt with these threats by aligning with the
In the aftermath of World War II and the subsequent
civil war, Beijing's hold on the country was still chal-
lenged by the Chinese Nationalists on Taiwan. The United
States, then indisputably the mightiest power in the
world, was seen backing the Nationalists' threat to re-
turn to the mainland. At the same time, the Soviet Union,
ruled by ideologically like-minded people, was willing
to assist the Chinese Communists consolidate their power
and modernize their industry and military. Beijing there-
lesser danger to resist the greater.
The Sino-Soviet alliance, formalized in a 1950
treaty, was China'?s insurance policy against the United
States, Japan, and the Nationalists. Its importance to
Beijing grew when the Korean war erupted and the United
States was perceived as preparing to move against China
once the Korean Peninsula had been pacified. The Sino-
Soviet alliance grew increasingly strained, however, as
the Chinese chafed under Soviet efforts to meddle in
Chinese politics and to dictate the ideological line.
The Sino-Soviet Rift
By the late 1950s, the breach in Sino-Soviet rela-
tions was widening rapidly. The Soviets abruptly halted
their assistance programs and demanded repayment despite
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the hard times in China following the failure of Mao's
social experiments. This bitter experience intensified
Chinese resentment, reducing Sino-Soviet relations to
near nonexistence.
The foreign policy consequences of China's Great
Proletarian Cultural Revolution (1966-69) were isolation
and weakness. Although the Sino-Soviet Treaty continued
to exist on paper, the Soviets and--to a much lesser
extent--the Chinese had rapidly built up their forces
along the length of the Sino-Soviet frontier and in
Mongolia. By 1968, Beijing faced enemies to the north
(the USSR), the south (the US forces in Viet-
nam), and the east (Taiwan, which was united in a security
treaty with the United States). China's only trusted
ally was remote, feckless Albania.
At this point, some of China's leaders began to
question this isolationism and to recognize the need for
change. One major spur toward a new policy was China's
inability in 1968 to dissuade Vietnam from attending US-
proposed peace talks in Paris. The Vietnamese followed
Soviet advice to go to Paris despite the dogmatic urgings
of the Chinese, who for years had worked hard to assist
Hanoi and build influence there. The Soviet invasion of
Czechoslovakia in August, and the subsequent iteration
of the Brezhnev doctrine of "limited sovereignty" for
"socialist" states convinced Mao and Premier Zhou Enlai
that new policies were needed. The Chinese also began
to perceive that the United States was on its way out
of Vietnam, and thus was a waning threat to China.
The Turn to the United States
Tentative signs began to appear in China of a de-
sire to improve relations with the United States and to
rebuild China's diplomatic apparatus. The first major
step came in late 1968 when the Chinese agreed that
ambassadorial talks be resumed in Warsaw the following
Within China, however, there were continuing. signs
of a dogmatic unwillingness by some leaders to come to
realistic terms with either the United States or the
USSR and the Warsaw talks were called off at the last
minute. Lin Biao, Mao's designated heir and Defense
February.
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Minister, was among those who preferred a go-it-alone
policy that would have put increased power into his
hands as Defense Minister. This unwillingness to make
commitments to foreigners went beyond mere jockeying for
power. In a deeper sense, Lin appealed to a conservative
tradition in Chinese thought that has appeared in every
generation, one that is repelled by close relationships
with outsiders and is deeply suspicious of introducing
foreign ideas into China.
In 1969-71, Mao and Zhou moved to isolate Lin Biao
politically. Their efforts were aided by the first
major armed clash along the Sino-Soviet border in March
1969, and an even more intense firefight on the border
the following August. These events demonstrated China's
vulnerability to Soviet military pressure and the need
for lines to other countries. Anew call then went out
for the Warsaw talks to begin, and anti-US commentary
diminished in the Chinese media. Zhou Enlai also moved
diplomatically to manage Sino-Soviet tensions by agree-
ing to meet Premier Kosygin at Beijing's airport in
September 1969, and by setting up a framework for border
talks which still continue sporadically. Outmaneuvered,
Lin Biao died in an abortive coup attempt against Mao in
In the period 1971-73, China made rapid diplomatic
gains, displacing Taiwan in the United Nations and open-
ing relations with a broad range of countries. China
essentially stopped putting its foreign dealings to an
ideological test. It showed a strong preference for the
status quo, urging countries to form regional groupings
to resist Soviet inroads. There are variations on this
theme, such as in southern Africa, where China supports
change but opposes Soviet influence. Beijing's primary
concern was and still is that the influence of the
Soviet Union be contained and not permitted to develop
into an overwhelming preponderance of power--or "hege-
monism." A corollary of this Chinese view is that the
United States should not allow its strategic position
As Mao and Zhou physically declined after 1974,
there were fewer foreign policy initiatives. Jockeying
for the succession to Mao increasingly occupied the
leadership and politicized foreign affairs. After the
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death of Mao and then the arrest of the radical Gang of
Four in October 1976, the way was once again cleared for
an activist foreign policy. By mid-1977, Deng Xiaoping,
who had fallen in early 1976, returned to power and
immediately set about resto momentum to China's
foreign policy.
The "Theory of the Three Worlds"
To justify this pragmatic strategy in ideological
terms, Beijing published "Chairman Mao's Theory of the
Three Worlds" in November 1977. This document elabo-
rated the policies initiated in 1969, arguing that the
USSR constitutes the "main danger" to world peace and
that a "united front" of countries opposed to the USSR
was needed to counter this danger. This "aritihegemonist
united front" is to include the less developed countries
of the "third world" and the developed countries of the
"second world." The role of the United States, as one of
the "superpowers" in the "first world," remains ambiguous,
suggesting that as long as it does not replace the USSR
as the "main danger," it is welcome to join in resisting
Until China acquires sufficient power and prestige
to counter the USSR more directly, it is forced by cir-
cumstances to rely on the United States as the main pil-
lar of its strategy. The Chinese recognize that, in
order to make this strategy work, the United States and
China must cooperate, at least to the point where Soviet
defense planners become unsure to what degree the two
countries would cooperate during a Soviet crisis with
either of them. Theoretically, each side in the triangle
can attempt to improve relations with another in order to
extract advantage from the third. In late 1977, for ex-
ample, China tried to demonstrate its maneuverability in
the triangle by making small but conspicous gestures to
the USSR. In practice, however, China's vulnerability
Chinese calculations, nevertheless, are based upon
the assumption that the United States is a fairly reli-
able partner with which it can cooperate in attempting
to contain Soviet power and pressures. Doubts on this
issue led to strains in the nascent relationship in the
1974-76 period. Recent developments could renew such
to Soviet power has left little room for maneuver.
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doubts. The Chinese have clearly taken note of SALT II
testimony in the US Senate pointing to relative US stra-
tegic weaknesses in the early 1980s. A recent commen-
tary in the People's D, aily, moreover, underlined indica-
tions of "disarray" in the US domestic and strategic
position--an unprecedented characterization and one that
Beijing avoided even in the summer of 1974.
In addition to strategic inducements to improving
Sino-US relations, American scientific, technical, and
financial resources have also been major incentives.
Beijing, having been stung by overreliance on a single
benefactor in the 1950s, has an interest in diversifying
its sources of technology, equipment, and trade. But
the US domination of high technology, particularly in
weapons and deepwater oil drilling, makes American ctood-
The United States constitutes the last and most
important foreign support for Beijing's longtime rival,
the government on Taiwan. Beijing has viewed reducing
the US-Taiwan connection less as a means of getting at
Taiwan than as removing a stumblingblock in the way of
will invaluable to China's modernization programs.
Strategic Considerations
Strategically, China's tilt toward the United
States continues to be reflected in important state and
party documents, such as the recent government work re-
port by Party Chairman and Premier Hua Guofeng to the
National People's Congress. Beijing has taken a less
obstructionist tack in its treatment of the recent SALT
II agreement and has quietly supported the Egyptian-
Israeli peace treaty.
These decisions are sometimes difficult for Chinese
leaders, who are sensitive to criticism from those who
still apparently harbor antiforeign views in China and
who oppose an exposed position in support of the "impe-
rialist" West. Cases in point were China's eager and
visible assistance to Zaire last year after the Shaba
incident and Chinese support for the Shah of Iran--both
actions urged on China b Washin ton.
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The Chinese also remain fundamentally resistant to
enticements into disarmament negotiations. Their posi-
tion, simply put, is that China should not freeze its
military strength into permanent inferiority by joining
in agreements with militarily superior powers. There-
fore, Beijing argues that genuine disarmament must begin
with destruction of the weapons that give the United
States and the USSR their edge over lesser powers. Any-
In order to "catch up," the Chinese continue nuclear
testing, usually in the atmosphere. They are somewhat
sensitive to criticism of this practice, but we believe
they lack the means at present to conduct their testing
entirely underground. In difference to the wishes of
the United States and others, the Chinese have asked
that their seat be reserved at the UN Disarmament Con-
ference in Geneva, and observer delegations have been
sent to the sessions. Beijing remains unwilling, how-
ever, to take an active part in the talks for fear of
eroding its principled position concerning disarmament.
Beijing is also very skeptical about the mutual and
balanced force reduction talks in Vienna, emphasizing in
its media the inability of the conference to resolve im-
portant East-West differences. The MBFR talks are a
matter of concern for the Chinese because the possibil-
ity of agreed troop reductions raises the specter that
the Soviets will transfer larger forces to China's
Similar geopolitical considerations influence Chi-
nese views on the Western energy crisis and the politi-
cal instability in the Middle East and Africa. Beijing
fears that, as a result of the energy problem, economic
weakness and disunity in the West will strengthen the
Soviet hand, inviting adventurism and inevitable war.
The Chinese see the Soviets attempting to foster Euro-
pean, Japanese, and US weakness by fomenting and taking
advantage of political instability in southern Africa,
the Horn of Africa, and th Middle East in hopes of gain-
ing control of the major oil routes. Beijing maintains
that war can be postponed through concerted anti-Soviet
efforts, but the accent in China's propaganda falls
heavily on the possibility the West will not meet the
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challenge. The unspoken final portion of the Chinese
argument is that, after Europe, the next Soviet target
would most likely be China. Thus, as China's leaders
have stated privately, Beijing within its limited capa-
bilities must do its part to counter the Soviets. Mili-
tary assistance to Egypt,. including warplanes and spare
parts, is a recent example.
Policy Toward Taiwan Since Normalization
Normalization of US-China relations has reduced,
but not eliminated the importance of the Taiwan as a
divisive issue. For Beijing the economic and strategic
elements in Sino-US relations still take precedence over
the recovery of Taiwan. The evolution of closer rela-
tions with Washington has been accompanied by a modera-
tion of Beijing's rhetoric on the issue and a shift in
emphasis to political and economic approaches to recov-
ery of the islands which the Chinese consistently say will
not come for some time. Beijing has adopted a more open
stance toward the government on Taiwan, which it now calls
the "Taiwan authorities" rather than the pejorative "Tai-
wan clique." China has called for talks and the opening
of trade and postal and aviation services. Some small but
politically significant reductions in military strength
This more moderate approach, however, does not in-
clude abandonment of the "right" to use force to reunify
Taiwan with the mainland, or any relaxation of China's
claim to sovereignty over the island. Nevertheless, the
importance of other international and economic goals and
military deficiencies makes a Chinese attack on Taiwan
have occurred opposite Taiwan.
unlikely at least for much of the next decade.
New Links to Japan
As China was making major gains in its relations
with the United States, it also moved rapidly in 1978
to achieve the Sino-Japanese Peace and Friendship Treaty.
The treaty was a milestone on China's road to economic
development and it established a political basis for
relations, ending the theoretical state of war between
the two countries.
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From the Chinese point of view, the treaty's inclu-
sion of an "antihegemonism" plank, despite intense Soviet
pressure on Tokyo, helped dissolve strong memories of
the Japanese invasion and occupation of China. In order
to facilitate movement toward the treaty, both sides agree
to put off to "later generations" the thorny question of
the disputed Senkaku Islands south of Japan and near
Taiwan, which are widely believed to bear oil. The Chi-
nese also agreed to end the explicitly anti-Japanese
1950 Sino-Soviet Treaty, although the method of termi-
Having laid this political foundation, the Chinese
are building close economic relations with Japan. They
recently obtained substantial loans and development
assistance from the Japanese Government and banks to.
finance industrial and mineral extraction projects. In
exchange for this enormous contribution to China's
modernization program, Japan is expected to receive oil,
nating the treaty was left unclear at the time.
coal, nonferrous metals, and light industrial products.
China's Vietnam Problem
As China laid the ghosts of its former enemies, the
United States and Japan, new specters arose. Vietnam,
traditionally suspicious of its northern neighbor and
deeply antagonized by China's support of the PoI Pot
regime in Kampuchea, demonstrated its unhappiness with
Beijing early last year by kicking off a campaign to
drive potentially disloyal ethnic Chinese out of Vietnam,
starting the great Indochina exodus. By May 1978, the
Chinese were viewing the situation with alarm.
The Refugee Problem
The Chinese are still faced with enormous numbers
of refugees entering the country from Vietnam. By mid-
1979, top Chinese officials claimed that more than
250,000 refugees, mostly ethnic Chinese, had been proc-
essed into China and that more than 10,000 per month
were still crossing the border. The economic burden
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created by this massive influx is obvious. In addition,
there are some signs that the dislocations caused by the
heavy concentration of refugees in some parts of South
China have created resentment and opposition among local
altogether.
Beijing has seized on the refugee issue as a means
to bring international pressure on Hanoi. From China's
perspective, it is an example of Hanoi's oppressive
internal programs and its expansionist foreign policies.
China sees the refugee problem, not as a disease that
can be treated externally, but as something only Hanoi
can correct. Beijing has tried to broaden the issue
further by linking the USSR with Vietnam's treatment of
ethnic minorities. Thus, both Moscow and Hanoi are
described as attempting to sow racial dissension and
economic chaos in neighboring Southeast Asian countries
by forcing ethnic Chinese onto these countries. The
Chinese are not sympathetic with proposals to facili-
tate the relocation of larger numbers of refugees,
arguing that it would only encourage Hanoi to continue
expelling them. Instead, they have sided with some
members of the Association of Southeast Asian Nations
(ASEAN) in demanding that Hanoi halt the flow of refugees
tance to get deeply involved in economic aid to Vietnam.
While the Chinese express support for humanitarian
proposals aimed at a speedy resettlement of the existing
refugee population, these proposals clearly take a back
seat in Beijing's view to steps that would bring pressure
on Hanoi to end its persecution of ethnic Chinese. The
Chinese hope to achieve this objective by encouraging a
unified anti-Vietnamese stance on the refugee issue among
ASEAN countries, and a policy of no economic support on
the part of Western countries and Japan. Beijing, there-
fore, has been pleased with the unwillingness of the
United States to recognize Hanoi and by Japan's reluc-
Anti-Vietnam Strategy
China's broader strategy for dealing with Vietnam
goes beyond the refugee issue, however, and attempts to
use the limited resources of China and other South-
east Asian nations to maintain political, economic, and
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military pressure on Vietnam. The Chinese, who had long
looked to Kampuchea as a counter to the growth of Viet-
namese influence in the region, found themselves reduced
to making a last-ditch effort in December 1978 to aid the
failing Kampucheans. Despite escalating threats from
China, and increasing numbers of Chinese forces on the
Vietnamese border, the Vietnamese had pushed into Phnom
Penh by early January and triggered China's decision to
take direct action and invade.
Chinese party documents published in December sug-
gested that Beijing then believed that the normalization
of Sino-US relations and the newly strengthened ties with
Japan would strengthen China's hand against Vietnam and
the Soviet Union. Hanoi and Moscow had signed a Treaty
of Friendship and Cooperation in November, and Beijing
sought to convey the impression its new links would off-
set this Vietnamese advantage. Vice Premier Deng was a
strong advocate of the invasion of Vietnam, and his trips
to the United States and Japan in late January and Febru-
ary were calculated, in part, to create the impression of
US and Japanese support for China's pending action.
Deng cautiously prepared for the invasion by ensuring
a vast numerical superiority, evacuating civilians from
wide stretches of Chinese territory bordering the Soviet
Union in case of Soviet retaliation, and proclaiming lim-
ited objectives. He recognized that the invasion could
not reverse the situation in Kampuchea, that it could not
be prolonged without unacceptable damage to the eco-
nomic modernization program, and that it was unlikely to
reverse Vietnam's anti-China policies. Deng rationalized
nonetheless that it was necessary to do "something" lest
the Vietnamese and Soviets think there would be no nega-
tive consequences for their actions and the West w
begin to think China does not "mean what it says.."
In the event, these calculations appeared to be ap-
proximately correct. China invaded and then withdrew in
what appeared to be a determined, orderly fashion. The
Soviet Union proved unwilling to retaliate directly.
China then reinvigorated its broader anti-Vietnamese strat-
egy of urging the ASEAN states to unite against the Vietnamese,
imposing political and economic isolation on Hanoi, and
periodically threatening a "second strike" against Vietnam.
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It has in fact withdrawn considerable forces from the
immediate border area, but insists on impossible terms in
the Sino-Vietnamese negotiations that began after the
Chinese withdrawal, waiting for the Vietnamese to crick
under the internal and external strains.
Sharp Debate in Beijin
Despite the appearance of a "diplomatic success" in
the invasion, an intense internal debate erupted. Even
before the invasion, some in China were questioning the
Army's capability to do the job or handle possible Soviet
retaliation. After the invasion, stories of high, almost
Pyrrhic casualty rates circulated in China, and there were
complaints about the quality and utility of the Army's
equipment. So intense was the argument that six weeks
passed after the end of the invasion before the party was
able to muster a leadership turnout to congratulate the
heroes of the fighting.
A second factor was the economic costs of the inva-
sion. Economic readjustment was already under way in
China when the invasion was launched. Overly ambitious
programs were being scaled down and budgets were cut. The
Chinese recently revealed, however, that the defense budget
for 1979 had to be increased 20 percent, in larcte part to
pay the direct costs of the invasion.
Third, the organizers of the invasion were vulnerable
to charges that in the most important area of concern--
that of the Soviet threat to China--they had strengthened
the Soviet position. While China's troops were still with-
drawing from Vietnam, it was already becoming clear that
relations between the Soviets and Vietnamese had become
much clgser as a result of the attack. Soviet military
aircraft and warships for the first time enjoyed access
to Vietnamese facilities and Vietnam had become more de-
pendent than ever on Soviet assistance.
The Call for Talks With the USSR
Internal criticism of Beijing's Vietnam invasion
arose at a crucial time for China's broader diplomatic
strategy. From early 1978, tensions between Moscow and
Beijing had been rising steadily. The Chinese turned
aside a Soviet proposal in February 1978 for talks to
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improve relations and stiffened their own terms for the
normalization of Sino-Soviet relations. President
Brezhnev then made a conspicuous visit to the Soviet,Far
East and witnessed a Soviet military exercise near the
In this climate of heightened tension, Beijing was
confronted with the need to devise a means to end the 1950
Sino-Soviet Treaty. According to the terms of the treaty,
if Beijing did not "denounce" it by 11 April 1979, it
would have automatically remained in force at least until
1985. Having earlier promised the Japanese that China
would allow the treaty to die, failure to denounce it
would have prompted fears in Tokyo and perhaps elsewhere
that Beijing was backsliding on its commitment to moderni-
zation and to anti-Soviet policies. Yet, denunciation of?
the treaty without something to soften the impact ran the
Consideration of this question coincided with criti-
cism within China of the Vietnam invasion, producing a
sharp debate over the immediacy of the Soviet threat and
China's domestic needs. In the end, the Chinese decided
to pair their denunciation of the treaty with a call far
negotiations with the Soviets. Beijing apparently rea-
soned that the denunciation would reassure'Japan and the
West about China's fundamental strategic orientation, but
that the Soviets, after years of issuing their own calls
for talks, would find the Chinese offer irresistible.
Soviet willingness to talk in turn might prompt Vietnamese
fears of a Soviet sellout of Hanoi's interests. The
proposal had the added advantage of portraying the Chinese
as "reasonable" in the wake of the Vietnam invasion. Most,
importantly, if the initiative succeeds in managing ten-
sions, it might buy time for China to carry out its eco-
nomic modernization plans without dissipating new resources
risk of increasing Sino-Soviet tensions even more.
to offset increasing Soviet military pressure.
The Chinese media have even argued that limited agree-
ments in some areas with the Soviets might lead to China's
acquisition of Soviet management and industrial technology,
some of which is better suited to China's level of moderni-
zation than the Western alternatives. The terms of trade
would be barter, permitting the Chinese to husband foreign
exchange while providing what might be a ready market for
China's expanding, production of light industrial and agri-
cultural goods.
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Finally, the Chinese proposal was issued while a mod-
est antiforeign reaction was taking place in response to
the sudden influx into China of Western social values and
behavior. It also followed the passage of the Taiwan
Omnibus legislation. Beijing's more conservative leaders
may have reasoned at that time that the call for talks
might remind Washington that Beijing has some maneuver-
ability in the strategic triangle.
These are all essentially tactical considerations.
There may have been other motives at play as well. The
relationship with the USSR has been a source of contro-
versy in Chinese Communist politics almost since the party
was formed. Recent "rehabilitation" of long-purged former
leaders--some of whom had fallen while advocating a less
contentious relationship with Moscow could have somewhat
changed the climate, and perhaps the terms, in which
policy toward the Soviet Union was discussed. In any
event, we have long been aware of shadowy evidence sug-
gesting that some Chinese military leaders believe that
China's vulnerability to Soviet pressures might be re-
duced by a less bellicose attitude toward Moscow. Recent
evidence points toward similar sentime~UNC
where second-level o icia s are
en y concerned about Chinese overreliance on
the United States.
None of this, however, resolves the Chinese dilemma--
Beijing continues to have relatively little room for ma-
neuver. It is even possible that such senior leaders as
Deng may hope to demonstrate precisely this fact by allow-
ing the talks to go forward. Room for Sino-Soviet accommo-
dation--even of a very limited sort--has in any event been
appreciably reduced by Hua Guofeng's statement at the re-
cent National People's Congress that Moscow will have to
embody its newfound opposition to "hegemonism" in deeds
rather than words. This suggests that the Chinese expect
that the broad issues of the Soviet relationship to Mongo-
lia and Vietnam--topics inappropriate for discussion in
the narrow confines of the long-stalled Sino-Soviet border
talks--to be major topics in the new forum. Moscow is not
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Indeed, it is far from certain how successful Beijing's
initiative will be. The Soviet response has been extremely
wary. Moscow had been at pains to reassure the Vietnamese
that their interests will not be sold out. Moscow also
suspects that China will still revert to the unacceptable
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preconditions for successful talks. They have exposed in
the past but have thus far avoided in the current context:
that the USSR must agree to maintain the status quo along
the border, reduce troop levels in the region, and remove
all its soldiers from Mongolia. .The Soviets' doubts have
been fed by what they claim to be recent hints from the
Chinese that they may attempt to embarrass the Soviets
when Bei-iinct has trained all the mileage it can from the
In the most important area of concern, Sino-Soviet
border tensions remain high. The shooting incident on 16
July demonstrated the explosiveness of the border situa-
tion and the deep mutual suspicions of the two sides.
Both the Chinese and the Soviets continue to improve their
forces in the border regions.
Despite the indications that some middle-level offi-
cials in China would favor significantly improved Sino-
Soviet relations--and continue to think this possible even
after Hua's demand for Soviet "deeds"--senior officials
have persistently attempted to deflate these hopes as they
pursue a long, drawnout exploratory course designed to
yield nothing in advance of the talks. In the larger con-
text, Chinese officials remain adamantly opposed to the
spread of Soviet influence and power. The Chinese speak
in terms of very long negotiations. Without some hint of
Chinese concessions to keep the Soviets interested, real
progress is not likely. Indeed, it may depend as much on
an evolution in Chinese domestic politics as on strictly
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CHINA: THE ECONOMIC OUTLOOK
Executive Summary
This year, and in 1980-81 as well, China's post-Mao
leadership will be concerned primarily with realigning its
long-term program for economic modernization. The leader-
ship's reassessment of pace and priorities was summed up
by Premier and Party Chairman Hua Guofeng at the National
People's Congress (NPC) in late June:
The work of recovery and development in
the previous two years (1977-78) has yielded
results far in excess of our expectations.
But the grave effects of the sabotage by Lin
Biao and the Gang of Four cannot be eliminated
in a short period. We did not take this into
full account and some of the measures we adopted
were not sufficiently prudent. [As a result, it
is] absolutely necessary that we concentrate our
efforts within these three years [1979-81] on
readjusting, restructurin consolidatin and
improving our. economy. Emp asls a e
Aside from the forthright discussion of current dif-
ficulties, Hua and other officials gave out an unprece-
dented number of economic statistics that generally
confirm their appraisal of economic recovery in 1977-
78. On the other hand, the new policies are forcing
a slowdown this year in the rate of growth of industrial
production and a sharp reduction in budgetary appropria-
tions for capital investment projects. For the first
time in many years, China's managers have been directed
to emphasize quality, product mix, and cost effective-
ness rather than sheer output.
This unclassified memorandum was prepared by the China Division of
the Office of Economic Research, National Foreign Assessment Center,
in response to a request from the National Security Council. Ques-
tions and comments may be addressed to
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The five major objectives under the slogan of
readjustment center around:
-- Praising growth rates for foodgrains and
other farm products in relation to population
and industry.
-- Increasing the growth rate of consumer goods
production, both for domestic consumption and
to expand exports.
-- Assigning higher priority to energy, trans-
portation, and communications.
-- Cutting back an "overextended" investment
program so as to concentrate resources on
completing vital projects.
-- Raising the incomes of rural and urban workers.
The new policies of restructurin and consolidatin
require an "overall reform o t e structure o economic
management." While efforts in this regard are still
experimental, they apparently are expected to evolve into
some uniquely Chinese model of market socialism in which
local authorities are given greater powers over planning,
investment, finance, material supply, and foreign trade.
Policies in the improvement category are aimed at raising
labor productivity and capital efficiency.
Despite the revamping of economic strategy, China's
leaders insist that their need for foreign equipment,
technology, and capital remains large. What is new is
that their shopping list now is more practically focused,
reflecting a better appreciation of the high costs of
acquisition and the difficulties in absorbing foreign
technology.
The comprehensive character of all that Beijing is
attempting to accomplish in 1979-81 has inevitably up-
set the targets and timetable of the 10-year plan for
1976-85 announced early last year by Chairman Hua. That
plan--or "draft outline" as Hua now calls it--has been de-
clared overly ambitious and hastily conceived; neither it
nor its first phase, the Fifth Five-Year Plan (1976-80),
are given much mention at present. The State Planning
Commission, having revised the original version of the
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annual plan for 1979, is currently reworking earlier plans
for 1980 and 1981. A draft of the Sixth Five-Year Plan
(1981-85) will not be presented to the NPC until sometime
in 1981.
Finally, we believe that the policies of realignment
and retrenchment may be in place longer than the three
years now envisaged:
-- Institutional changes proposed under the
new policies seem too far reaching to be
completed so quickly.
-- Leadtimes required for bringing new invest-
ment projects into production in bottleneck
sectors are such as to make it unlikely that
these constraints will be lifted by 1981.
-- In a country as poor and populous as China,
the problem of matching supplies to consumer
demand will necessarily be around for a long
time to come.
Nevertheless, there are grounds for optimism. In con-
trast to the Maoist era, the present leadership seems
pragmatic and relatively unconstrained by orthodox
ideology in its policy choices. And, perhaps most
important of all, it has already demonstrated this year
an ability to react quickly to adverse consequences of
these policy choices.
Economic Performance in 1976-79
One of the milestones distinguishing the recent Na-
tional People's Congress from all others since the late
1950s is the public disclosure of major speeches and a
large body of economic and social statistics. Although
most of the data cover only the years 1977 and 1978,
enough information was provided to show the performance
of key economic sectors in 1976 as well. Some data also
were released on planned targets for 1979.
A comparison of the new figures with CIA estimates
shows that our appraisal of recent economic trends in
China has been close to the mark. This is not surprising
inasmuch as our estimates have been attempts to reconstruct
official data from piecemeal claims of percentage increases
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