EIC REPORT ON 'COMMUNIST CHINA'S IMPORTS ANDEXPORTS, 1956: TRADE AND TRANSPORT INVOLVED'

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85S00362R000400040001-2
• Release Decision: RIPPUB
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• Document Page Count: 121
• Document Creation Date: December 15, 2016
• Document Release Date: May 5, 2004
• Sequence Number: 1
• Publication Date: December 3, 1957
• Content Type: REPORT

SECRET
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- IAC-D-42/13
3 December 1957
INTELLIGENCE ADVISORY COMMITTEE
EIC Report on "Communist China's Imports and Exports,
Trade and Transport Involved"
(EIC-R1-56)
1956:
The attached report by the Economic Intelligence Committee
(EIC) will be placed on the agenda of an early IAC meeting for
approval
Secretary
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. a
ECONOMIC INTELLIGENCE REPORT
COMMUNIST CHINA'S IMPORTS AND EXPORTS, 1956:
TRADE AND TRANSPORT INVOLVED
EIC-R1-66
Approved by EIC Working Group
15 November 1957
Approved by Economic Intelligence Committee
21 November 1957
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Table of Contents
T.
Summary of Major Developments During 1956 and
Prospects for 1957 0
A, Level of Trade 0 ? 0 0 0 0 0 ? 0 0 0 0
B. Volume of Trade and Transport Services ?
00 Impaot of the Closure of the Suez Canal .
0 C. 0
0 0 0
?
?
PM!
8.1
S-1
5-3
8-5
XI.
tnternational Trade and Balance of Payments .
1
A.
Total Trade and. Balance of Payments . .
0
0
a
1.
Level and Direction of Trade, 1955 and 1956
.
.
1
2.
Balance of Trade . . 00 0
0 a 0 0 ? 0 0 0
0
0
3
3.
Balance of Payments . ? 0 ? 0 0 0 0 ?
? 0 0
0
0
4
B. Trade with the Bloc . a a . a 0 0 0 ? 0
? 0a
a
7
1.
Trade with the USSR . . . 0 0 0 0 0 0
0 0 0 a
0
7
2.
Trade with the European Satellites0
.
0 Gi?
0
7
3.
Trade with the Far Eastern Satellites.
. .
.
.
8
C.
Trade with Rowaloc Countries . a. ? .a
?o0
0
0
9
1.
General . a 0000 a 0 0 a 0 0
9
2.,
Imports . a 0 0 0 a 0 0 ? 0 0 0 0 0 0
a. Recorded Imports.
. ? 0 0 0 0 0
0 0
8 0 0
0
0
0
0
9
9
b. Use of the CBINCOM Exceptions Procedure
.
.
16
co Unrecorded tmports . . 0 0 a 0 8
a 0 a
0
8
19
3.
libZertS 1 0 0 0 0 0 11 0 0 0 0 0 000
?O?
0
0
23
a. Recordei Exports ? 0 0 0 Ca ? 0 0
01 0 0
0
23
b. Unrecorded Exports a 0 0 0 0 a a
0 0 0
0
0
29
70=?-iiiigfis to be numbered. consecutively in final printing.
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ii.r2 tit
Volume of Trade and Transport Services . 0. 0 a a
?
30
A. Tutal Trade ci . ? . ? . ci . ? . ? . ? D
?
30
B. Total Transport Services es ? 4000000600*o
3d
1. Shipping Services . ???.....??
32
2. Interior Transport Services ?..??? 4 6
a. External and Internal Arrangements for
?
37
Movement of Foreign Trade . I . 0 oO?
b. Changes in Facilities for Movement
Foreign Trade .
40
Overland Trade and Interior Transport Services
1. Total Overland Trade . . a 0 0 0 0 a ? ? 0 a 0 0
2, Trade with the Free World . . . 0 . ? . . . .
3. Trade with the Bloc 00000000000000
a.
b.
c.
USSR0 ? 40?000 0 400 41.0444.0
European Satellites ............
Far Eaetern Satellites . 0 0 0 0 0 0 ? a a a
50
50
4, Significance of Overland Foreign Trade Traffic . ? 52
D. Seaborne Trade and Shipping Services . . . . . . . . 54
1. Trade with the Free World ..........
.
tA
a, Imports . . . 0 laaa 4 a a ? a ,1 a a a a
.
54
b. Exports 0 0 . 0 0000040000000
?
55
Trade with the Bloc .40?440.0 0a0
am USBRataa00 00000000Q. 60000
59
bes European Satellites ?a 0 a ci 0 0 0 0 0 a
0
60
f!. Worth Vietnam . . ? 00000000 a ci 0
0
61
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Volume of Trade and Transport Services (contd.)
D. Seaborne Trade and Shipping Services (contd.)
3. Shipping Servide ....... D ? 0 ? ?.. ..
Pap
61
4* Review of Non-Bloc Shipping
61
b. Review of Bloc Shipping
c. Utilization of Capacity of Shipping Engaged
66
in Communist China's Seaborne Trade . . . .
72
d. Port Activity
75
IV.
Relationship of Chinese Foreign Trade to the National
EconoMy
79
A. Foreign Trade in Relation to Gross National Product
84
B. Contribution of Imports to Economic Construction
and Military Development
85
C. internal Resources Allocated to Exports
87
D. Economic Growth and. Future Trends in Foreign
Trade of Communist China ? ? ? 6 0 ...
88
V.
Impact of the Closure of the Suez Canal on the Trade
and Transport of Communist China and Prospect for 1957
91
A. Impact of the Closure of the Suez Canal
91
1. Shipping
91
a, Rerouting of Vessels
92
b. Tightening Ship Charter Market ? OOO
92
c. Bunkering Difficulties
93
d. Increased Shipping Costs
94
2. Effect of Suez Canal Closure on the Seaborne
Trade of Communist China . 0 0 ....
95
96
25X1:
100
25X1.
3.
Diversion from Ocean Shipping to Rail Transport
105
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V. Impact of the Closure of the Suez Canal on the Trade
and Transport of Communist China and Prospect for 1957
(contd.)
B. Prospects for 1957 . ? ? ? ? ? OOOOOOOO 0 ? ?
1. Trade
2. Transport
I. Introduction
Appendix A
II. !Ilan Value of Foreign Trade
III. US Dollar Value of Foreign Trade . ? ? ? ? ?
?
108
108
111
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COMMUNIST CHINA'S IMPORTS AND EXPORTS, 19561,
' TRADE AND TRANSPORT Imam* ?
I. SUmmnry of Major Developments Dtar.1ia,.....226aIdPro.esforl.
A. level of Trade.
The foreign trade of China** in 1956 was announced as 10.9 billion
yuan (spprOminately US $4.4 billion***), cared. with 11 billion yuan in
1955, marking the first year in which China's trade has declined. The
decline was on the ivort side and. reflects a sharp redaction of receipts
under Soviet loans. (See Figure 1.****)
A further decline in trade is planned for 1957, with total trade
expected to be 9,955 million yuan (slightly more than $4 billion), or
8.4 percent less than in 1956._ For the first time, exports will decline.
This further decline in trade reflects the economic maladjustaents resulting
from the overambitious economic activity of 1956 and the effects of typhoons
and floods on the agricultural production of China. Despite this decline
the foreign trade goal of the First Five Year Plan (1953-57) is expected
to be overfulfilled by 6.4 percent by the end of 1957,
4----r?.Appen=1"-ixr(iCZp. A-1) presents the revised estimates of value and
direction of China's foreign trade for the years covered by the previous
studies published in this series (EIC-E1 through EIC-R1-85), as well as a
discussion of the problems involved in the conversion of yuan values to
dollar equivalents.
** Unless otherwise specified, the terms Chinn and Chinese are used here-
after in this report to mean Communist Chinn and. Communist Chinese.
*** All dollar values in this report are In terms of US dollars or equivalents.
**** Following p. 5-1.
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Figure 1
.5%) be inserted latee
Foreign Trade of Communist China*
1950-56
Data for inclusion in figure f
US $
1222
1221
1222
1221
122i
1221
1256.
Total trade
1,300
2,650
3,100
3,300
3,450
41485
4,415
Imports
665
1,565
1,795
1,880
1,795
2,465
2,150
Exports
635
1,035
1,305
1,420
1,655
2,020
2,265
Trade with:
Bloc
435
1,680
2,420
2,490
2,780
3,675
3,325
Nonmmoc
865
970
680
810
670
810
1,090
fro be in the form of a bar chart with one bar for "Total Trade"
divided into Bloc and non-Bloc, and separate bars :thawing total
imports and exportej
* -Data VOr1950-55 do not necessarily agree with that previously published
since they reflect revisions based on later data.
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Trade with the Free World in 1956 rose by more than owe-third and
accounted for almost one-fourth of China's total trade, compared with less
than one-fifth in 1955. Unrecorded imparts fell slightly from $76 aril/ion
in 1955 to $66 million in 1956, largely as a result of the increased use
of the CEINCON exceptions procedures. The amounts licensed under these
procedures in 1956 were approximately $62 an1 ilion, compared with a total
of about $15 million for the preceding 4 years. By midi-1957 the UE:? followeei
by most other =COM countries, had. abolished the China differential,
applying COCCH trade control rules to the entire Sino-Soviet Bloc, thereby
largely nullifying the importance of the exceptions procedures.
Trade with the USSR declined about 15 percent, and, trade with
the Far Eastern Satellites fell slightly -- together offsetting an
estimated 13-percent Increase in trade with the Earopean Satellites. A
further shift in the direction of trade toward the Free World is expected
in 1957.
In 1956, China achieved for the first time an export surplus,
which amounted to about 415 million and which consisted of a $90-mil1ion
surplus with the Free World and a $25esillion surplus with the Bloc.
The balance-of-payments position of China appears to have deteri-
oriated in 1956 and. 1957, reflecting in large part the sharp reduction
of receipts under Soviet loans, the increasing commitments for the
repayment of previous Soviet loans, and the further extension of China's
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own aid program. Despite the development of an export surplus in 1956 and
1957, it appears that China has been hard-pressed to meet its foreign
exchange commitments and has had to reduce its holdings of foreign exchange
and gold 84 well as to obtain short-term credits from the USSR.
B. yaoLanme of Trade and. Transport Services.
Railroads continued to carry approximately 95 percent of Chinaes
overland foreign trade. The opening of the Trans-Mongolian Railroad on
1 January 1956, in offering the shortest route between the European USSR
and central and. south China, diverted a considerable volume of traffic
from that portion of the Trans-Siberian Railroad line connecting with the
Chinese system at Ctpor. Nearly two-fifths of the 1956 Sino-Soviet rail
freight moved on the Trans-Mongolian Railroad, more than two-fifths =owed
through Otpor? and approximately one-fifth moved through Grodekovo. The
substantial restoration of railroads and roads in North Vietnam facilitated
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the movement and distribution of an increasing amount of aid from China.
An important although relatively small amount (approximately 3 percent) of
overland trade was transported by river between China and the um.
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C. "Erect of the Closure of the Suez Caul.
The closure of the Suez Canal in late 1956 had a slight depressive
effect on China's foreign trade, although it is difficult to isolate and
measure this effect because of its coincidence with other factors affecting
trade. Increased shipping costs as a result of the diversion of trade
either by sea around the Cape of Good Hope or by land over the Trans-
Siberian Railroad may well have encouraged China to defer some nonessential
imports and exports. A scarcity of shipping following the closure of the
Suez Canal restricted trade in certain bulky items such as exports of iron
ore and coal, and imports of fertilizer from Western Eitrope.
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U. International Trade and Balance of
Ao 29:1_aladeandBalanceofts.
1. Level and Direction ofir_ail_a_2.905._and16.
The total foreign trade of China was slightly smaller in 1956
than in 1955 -- loos/ billion yuan (approximately $4.4 billion) in 1956,
compared with 11 billion yuan in. 1955.* The decline was only on the import
side and reflects a sharp reduction of receipts under Soviet loans. In
commercial trade, both imports and 'exports continued to increase.
The most significant shift which occurred in the geographic
distribution of the trade of China in 1956 (as shown in Table 1**) was in
trade with the Free World. Rising by more than one-third in 1956, it
accounted for almost one-fourth of the total trade of the country, compared
with less than one-fifth in 1955. The largest gain was recorded in trade
with Asian-African countries, which increased 39 percent, trade with other
Free World countries increasing 29 percent. Trade with the Sino-Soviet
Bloc, including aide.financed imports and exports, declined. it is
* The rate at which yuan are converted to US dollars for 1956 trade is
2.46 yuan to 1 US $0 based on the yuan-sterling-dollar cross rate. Other
currencies are converted to US dollar equivalents at official exchange rates
except the Kong Kong dollar, as noted in footnote b, Table 4 (p. 13, below).
The dollar equivalents of yuan values cannot be armivedat directly, because
information on caneWAy prices and. exchange rates involved in China's foreign
trade is limited. A. discussion of the problems involved in the conversion
of yuan values to dollar equivalents is contained in Apperelle.A. It should
be noted that yuan-dollar equivalents wherever utilized are only approxima-
tions and that these figures should be used with caution. The procedure for
converting yuan values to dollar evimalents -- involving the use of yuan-
sterling-dollar cross rates -- may well overstate the dollar value of China's
trade with Soviet Bloc countries.
** Table 1 follows on. p. 2.
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estimated that trade with the European Satellites increased about 13 percent,
that trade with the Far Eastern Satellites declined slightly, and that trade
with the USSR declined about 15 percent.
Table 1
Geographic Distribution of the Foreign Trade of Communist China, by Value
1955 and 1956
Trade witht
.....aoltadigast.
1225.111919AAL _
Million Percent Million Percent
_ALL of Tot al US of Total
USSR 2,800 62.5 2,37Ci 53.7
European Satellites 675 15.0 760 17.2
Far Eastern Satellites 200 4.5 195 4.4
Total Trade with the Bloc 1,.?12 82.0 ..itia 11,1
Trade with the Free World 810 18.0 11229 ,1,2,zi
Total foreign trade !iLl,?D. 100.0 1.taM2 2E0.2
Recent Chinese announcements are consistent with the estimate
of trade turnover In 1955* as published in Bac41-s5 but indicate a
different geographic distribution of this trade. it is now estimated that
in 1955 Soviet Bloc countries accounted, for 82 percent of total trade turnover
(rather than 80.5 percent) and that the USSR accounted for 62.5 percent
(rather than 55.3 percent). The value of trade turnover with the Free World
Is estimated as 18 percent of the total (rather than 19.5 percent) and that
* Oa the other hand, these Chinese announcements indicate slightly different
values of trade for 1950-54 from those in EIC-R1 publications (see Appendix A).
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of the European and Far Eastern Satellites as 19.5 percent rather than
252 percent),
2. Balance of Trade.
China achieved a substantial export surplus in 1956, exports
being 5 percent larger than imports. It was the first year in which China
did not show a surplus of imports over exports. Imports were valued at
5,297 million yuan (about $21150 million), and exports at 5,568 million yuan
(about $20265 million). The export surplus with the Free World, Chased on
Indications of unrecorded and recorded trade) is estimated at approximately
$90 million, and the export surplus with Bloc countries, therefore9 amounts
to $25 million, as shown in Table 2.
Table 2
Estimated Trade Balances of Communist China
1956
Million US $
Imports &ports
(c.i.f4 I.L.9.?b.1. Balance
USSR
$11220
$1,150
. 70
European Satellites
400
360
. 40
Far Eastern Satellites
30
165
4, 135
Total Bloc
Free World
Grand total
2,11?
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The development of the export surplus in 1956 followed the sharp
decline in imports under Soviet loans and to some extent reflected the
pressures for exports to meet Chinaes increasing international commitments.
The large export surplus with the Free World which arises primarily from
trade with non-Communist Asia reflects a concerted effort to increase
earnings of foreign exchange. The export surplus with Bloc countries
reflects largely aid-financed shipments to the Far Eastern Satellites. A
small import surplus with the European Satellites is believed to have
resulted from Chinese payments for freight charges on imports. Thus the
remaining $70 million represents an import surplus in trade with the USSR,
arising in large part from utilization of $48 million of Soviet credits and
from export restrictions placed on a few commodities in the latter part of
1956.
30 Balance_efisoepts.
The balance of payments of China,
differs considerably from that of
pre-Communist China. TO cover import requirements, China has placed more
reliance on commodity trade and less reliance on capital flows such as
overseas remittances, foreign investments in China, and income from
investments abroad?
The value of capital goods imported under loan agreements (all
with the Bloc) was less than 4 percent of the value of total Chinese imports
from 1950 through 1956. It is probable that the high rate of military imports
was made possible through Soviet loans and/or grants. On the other hand,
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China has extended loans and grants to both Bloc and non-Bloc countries,
so that in 1956, exports under such aid. programs amounted to $164 million,
or $116 million more than receipts from foreign loans.
The Chinese have claimed an excess of international receipts
overpayments during the period 1950 through 1954. In 1955 and 1956,
despite favorable developments in commodity trade, China's balance-of-
payments position appears to have deteriorated. An estimate of China's
balance of payments, based on selected items only, indicated a slight
deficit in 1955 totaling $46 million* and a larger deficit in 1956 totaling
$173 mdllionl as shown in Table 3.**
The Chinese recently released information on foreign credit
receipts and the servicing of foreign indebtedness and on the extension
of foreign aid. This information indicates increasing demands on China's
holdings of foreign exchange. The data involved are shown in Pert IIA, of
Appendix A. Other Chinese receipts are believed to have declined. For
example, remittances from overseas Chinese have been smaller as a result
of growing dissatisfaction with the Chines regime and of weakening family
ties. Foreign expenditure in China fell when Soviet troops withdrew from
Port Arthur and Manchuria. Chinese expenditures abroad for diplomatic
missions and education have increased.
* It is believed that receipts from foreigners in China less corresponding
expenditures by Chinese abroad might offset this446-million deficit. The
balance of payments, however, would still have deteriorated from, the favorable
balances reported for previous years.
** Table 3 follows on p. 6.
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Table 3
Estimated Balance of Payments of Communist China
1955.-56
Payments
Imports (c.i.f.)
mahl?bms.011?.?????egge........v
Million USA
Debt repayment
196
242
Foreign aid grants and loans
160
164
Total payments
-2,821
.2, 556
Receipts
Exports (f.o.b.)
Overseas remittances
Foreign credit receipts
Total receipts
Deficit, including errors and omissions E2
2,020
80
675
2,775
46
2,265
70
48
241.?.1
+ 173
a. For example, this item includes kiarn Chinese psymea4 for which specific
value estimates are not available, such as the cost of Chinese students
studying in other Bloc countries, the cost of technical services received
from the Bloc, the maintenance of diplomatic missions abroad, and the like,
and Chinese receipts for similar expenditures by other countries in China.
In addition, this item includes changes in holdings of foreign exchange.
As a result of these developments, China's holdings of foreign
exchange and gold are believed to have decreased. Sterling balances in
London were reduced sharply in 1956 and early 1957. Although it is possible
that some of these balances were transferred to hidden accounts in Western
Enrape, it is probable that a large portion was transferred to Bloc countries
in payment of obligations.
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B. Trade with the Bloc.
1. Wade with the USSR.
The value of Sino-Soviet trade during 1956 is estimated at
$20370 million, a decline of 15 percent from the peak trade of $2,800 million
in 1955.* This decline is attributable to the sharp reduction in 1956 of
Chinese imports financed by Soviet credits. &eluding such imports, there
was an increase of almost 10 percent in 1956 trade over that of 1955.
It is estimated that China had an import surplus of $70 million
in its trade with the USSR, with imports of $1,220 million and exports of
$1,150 million. Official budget data indicate that repayment of the foreign
debts of China amounted to $242 million in 1956 (believed to have been paid to
the USSR) and, that loan receipts were reported as only $48 million (probably
Soviet loans). Although other Sino-Soviet transactions are unknown, it is
believed that China had to draw upon foreign exchange holdings:
2. Trade with the European Satellites.
According to Chinese announcements, the European Satellites
accounted for 17.2 percent of the total foreign trade of China in 1956, which
indicates a. trade turnover of $760 million.** This value is $85 million more
than in 1955, an increase of 13 percent.
* The Soviet-announced ruble values of this trade indicate lower dollar
values than the figures presented here, which are based on Chinese data
expressed in yuan. See Appendix Al Part III, for discussion of the conversion
problem involved.
** Data released by the European Satellites, however, suggest a total of only
$540 million, Approximately one.fourth lower than the Chinese announcements
indicate. There are indications that the Chinese data overvalue, whereas the
European Satellite data undervalue, Sino European Satellite trade expressed
in dollar equivalents. See Appendix Alt Part III.
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Little information is available on the balances between imports
and exports in Sino-Satellite trade. Chinese trade with each of the Satellite
nations is planned to balance each year, and there is no indication that
serious Imbalances have developed in either direction. Accordingly it is
estimated that imports and. exports during 1956 were in approximate balance
at about $360 million (f.o.b.) in each direction but that China would have
incurred freight costs on imports of about $40 million.*
East Germany and Czedhoslowakia were the principal Ehropeen
Satellite trading partners of Communist China in 1956, followed by Poland.,
Ehogary, Bulgaria, Eumamizand. Albania. East Germany and. Czechoslovakia
together probably accounted for one-balf of total Sino - European Satellite
trade.
3. Trade with the Far Eastern Satellites.
It is estimated that the trade turnover of China with the Far
Eastern Satellites in 1956 amounted to $195 million, of which Chinese aid
deliveries to North Korea and. North Vietnam accounted for about two-thirds.
The estimated value of trade turnover with North Korea was $65 million, about
$55 million of which consisted of aidedinanced exports. The estimated value of
trade turnover with North Vietnam increased to $95 million, about $75 million
of which consisted of aid-financed exports.
* As Communist China has no merchant fleet in this trade, freight charges on
imports carried in nonaloc ships (and. quite possibly on Bloc ships as well)
would, be paid in Western currencies. China, probably recording imports on a
c.i.f0 basis and. exports f.o.b., presumably recorded trade with the EUropean
Satellites as $360 million of exports and $403 million of imports
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The ettimated value of trade with the Mongolian Republic was $35 million,
which probably included deliveries worth about $5 million under a $40.mil1ihn
program of Chinese aid. to Mongolia, announced in 1956.
C. Trails with Non-Bloa Countries.
1. General.
The trade of China with the Free World in 1956 is estimated to
have amouated, to imports totaling approximately $470 million (c.i.f. Chinese
ports) and. exports totaling $555 million (f.o.b.).
25X1
The estimate of total trade amounting to $1.02 billion represents
94 percent of the $1009-billion figure for Chinese trade with Free World areas
calculated from announcements made by the Chinese. The difference betweez the
two figures falls well within the range of error to be eXpected in arriving at
such a figure, given the problems involved in arriving at appropriate valuations
of Free World trade and in converting yuan values to dollar equivalents.
2. lmports.
a. Recorded
The value of recorded Chinese imports from non?Bloc countries
In 1956 rose Sharply to $405 million, cowered with Oa million in 19550 $273
million in 1954, and $279 million in 1953. Changes in Chinese imports frost
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RET
China's various trading partners are shown in Table 4.* The increase of
$84 million in total imports during 1956 reflects in large part the greatly
intensified use of the CHINCOM exceptions procedure, particularly in the
Latter half of the year.
The value of recorded Chinese imports moving directly from
Western EUrope to Chinese ports increased by nearly 50 percent, almost, all
of the increase occurring in the second half of the year. As in 1955*
this increase was partly offset by a decline in imports from Hong Kong.
\Japan
1
Ceylon, West Germany, and the
-- imports from each of which were less than half those from Japan
"W.
Imre close contenders for second place. The only major trading partners
from whom imports were reduced during 1956 were Hong Kong, Pakistan; India,
Burma, Brazil, and Finland.
TSbri-4-P011ows on p. 11.
**, For discussion of exceptions procedure, see p. 16, below.
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Table 4
Recorded Imports of Communist China from Free World Countries, by Value
1954-56 2/*
Thousand. US
Count
Europe, Western Hemisphere,
and South Africa laj
1954 1955
Total Total First Half Second 0,43f Total
mmempa?plara
Argentina
1,495
981
916
--.
916
Austria
445
2,694
4,256
2,285
6,541
Belgium-Luxembourg
426
5,435
8,059
11,491
19,550
Brazil
2,938
4,672
3
683
686
Cuba
....
418
6
6
Denmark
185
56
549
1,684
2,233
Finland
3,390
14,606
3,270
5,269
6,559
France
8,379
6,438
8,634
9,141
17,775
West Germany
20,554
28,488
11,003-
20,479
31,482
Greece
.....
---
132
62
194
Italy
5,285
5,841
3,926
6,703
10,629
Mexico
N.A.
45
1,023
436
1,509
Netherlands
1,565
2,791
715
4,681
5,396
Norway
28
35
115
1,077
1,192
Portugal
N.A.
4
7
267
Zr4
Sweden
632
1,546
889
3,361
4,250
Switzerland (c.i.f.)
4,085
10,568
3,072
7,555
10,627
Union of South Africa
N.A.
1,043
788
337
1,125
UK
18,170
22,756
11,216
17,047
28,263
Yugoslavia
LA.
0
0
3,691
3,691
us
62/
32/
0
0
0
Canada
47
1,057
0
2,473
2,473
-
Plus 10-percent
adjustment for c.i.f.
(except Svitzer1and)2/ 6,354
Subtotal 73,984,
9,891
119,368
5,551
64,130,
9,124
17L123,944
14,675
Footnotes for Table 4 follow on p. 13.
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Table 4
Recorded imports of Communist China from Free World Countries, by Value
1954-56
(Continued)
Thousand US
Country
1954
Total.
1955
Total
Total
First Ralf
Second Ralf
Total
Rear East, Asia,
and Oceania3:2/
Australia
3,421
5,794
4,260
5,364
9,624
Burma 2/
22
13,960
9,844
1,047
10,891
Ceylon
48,429
22,814
14,157
19,609
33,766
Egypt
11,389
23,081
16,846
8,544
25,390
Kong Kong
67,154
31,143
9,008
13,515
22,523
India V
5,798
20,591
6,057
5,351
11,408
Indonesia
1,014
6,221
5,064
7,073
12,137
Japan
19,109
28,552
22,410
44,929
67,339
Malaya
6,561
4,031
774
6,837
7,611
New Zealand
50
266
114
298
412
Pakistan
26,189
34,525
5,880
10,840
16,720
Sudan
N.A.
812
2
20493
29495
Syria
N.A.
165
insig.
1,549
1,549
Plus 5 ?percent adjust-
ment for c.i.f.V.
Subtotal
Total
9,457
9,598
4,721
6,372
1981593
99437
133,821
.2_01.2151
11,093
232,958
Esau =au 1.363a67 az= 405 004
aw.bmwm
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Table 4
Recorded Imports of Communist China from Free World Countries, by Value
1954-56
(Continued)
a. These data are based on the official trade statistics of the Free World
countries involved. Those data for 1955 which differ from the comparable
EIC-R1-85 figures reflect more up.to-date information.
b. Figures for imports from countries of Western Europe, the Western Hemisphere,
and the Union of South Africa are based on the assumption of a 2-month voyage
that Is they represent recorded exports of those countries to China during the
12 months ending 31 October in each year. With the exception of the import
figures for Hoag Kong and. Japan, which represent exports for the periods
indicated in the table0 the figures for the countries of the Near East, Asia,
and Oceania are based on the assumption of a 1-month voyage and represent
recorded exports of those countries during the 12 months eadiag 30 November.
Al]. trade statistics were converted at the official exchange rates except Hoag
song figures, which were converted at an average rate of 1 RK $1 to US $0.1715
for 19550 US $0.1702 for the first half of 1956, and US $0.1625 for the second
half of 1956.
c. Representing US shipments to China under exceptions procedures. These
shipments consisted of an automobile and other goods for the diplomatic mission
of a friendly country in 1954 and printed matter in 1955.
d. Most countries record imports in their official trade statistics on a c.i.f.
basis (cost, insarance, and freight) and their exports on an f.o.b. basis (free
on board, meaaing the cost of the exports involved excluding insurance and
freight). In utilizing the recorded exports of China's Free World trading
partners -- reported on an f.o.b. basis -- to arrive at China's "recorded"
imports on a c.i.f. basis, an allowance nuat be made for the insurance and
freight charges, primarily the latter, involved in moving the goods to China.
The adjustments indicated are average figures based on shipping costs and the
general nature of the commodities shipped.
e. Trade through Burmese ports other than Rangoon is only partially reflected
in these data.
f. Including imports into Tibet except for the second half of 1956.
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ea.
The changing comnodity composition or China's imports from the
25)(1 Free World from 1950 to 1956 is shown
The changes in 1956 reflected
both domestic economic develcrsorents and modifications in the operation of CHLN0011
controls.** The reduced level of cotton inserts was the result of a reduced
demand following China's abundant cotton crop in 1955. The decline in imports
or drovss was a contianaation of a 3-year trend and reflected increasing domestic
25X1produc1ion. Greater use of the exceptions procedure under CUNCOM permitted a
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sharp increase in imports of metals and machinery and. other items. The increase
in, rubber imports represented increased shipments from Ceylon under the rice-
rubber agreement with that country, as Ceylon made up a shortfall on the /955
contract in addition to fulfilling the 1956 contract. There was an increase
in imports of chemicals, consisting largely of fertilizer and industrial
chemicals, as was the case in 1955.
25X1
Imports from Western Burope, Japan, and Hong Kong continued,
as in the past, to consist chiefly of manufactured goods and chemical fertilizers?
The only significant exceptions consisted of imports of wool tops from the UK
and beet sugar from France. Of imports from Japan, machinery (especially textile
machinery) and instruments accounted for 29 percent; chemical fertilizers,
21 percent; textile fabrics, 15 percent; and cement, 9 percent. imports from
Hong 'ging showed a similar pattern: chemical fertilizers, 27 percent; machinery,
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Instruments and equipment, 14 percent; iron and steels 12 percent; and other
manufactured goods of various kinds, 15 percent.
Imports from the other Free World countries of Asia and the
Near East consisted almost entirely of agricultural products. Ceylon remained
the primary source of rubber. Pakistan and Egypt shipped cotton. Burma
supplies some rubber and cotton and was the major source of imported rice.
China continued to obtain large quantities of wool from Australia and of
coconut oil and sugar from Indonesia.
b. Use of the CHINC4343xceptions Procedure.
A, number of CHINCOMP countries during 1956 relaxed the appli-
cation of trade controls against China in anticipation of a removal of the
China differential and increasingly liceased their embargoed commodities for
export to China under =3COM exceptions procedures. The US, however, con-
tinued to maintain its complete embargo on trade with China. These governments
had been under considerable domestic pressure, both political and commercial,
to revise, if not abolish, the China differential. In the course of 1955 a
number of countries participating in CHINCON began increasingly to reflect
this dissatisfaction over the differential at controls toward China.
* =NM, or the China COmmittee, is a working committee which coordinates
controls on strategic trade with China. It is the counterpart of COCCI, or the
Coordinating Committee, which is the working committee for trade controls as
applied to the Ehropean Soviet Bloc. The two committees are subordinate to the
Consultative Group (co), in Which the following countries participate (at the
ministerial level): Belgium, Canada, Denmark, France, Greece, Germany, Italy,
Japan, Luxembourg, the Netherlands, Norway, Portugal, Turkey, the UK, and the US.
The US maintains a complete embargo an trade with China.
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By resorting to exceptions procedures, trade with China by many
CHINOOK countries in items on the control list began to increase. These pro-
cedures permit a participating country to license for export to China certain
embargoed commodities under very special circumstances and lAWan it believes
that the commodity would not contribute to the military strength of China and
would be used for civilienpurpcees. Depending on the particular procedure
employed, the other participating countries were to be notified either before
or after export licenses were granted for the goods in question.
In Ngy 1956 the UK announced that "more use will be made of
the exceptions procedure to permit reasonable exports in appropriate cases
to China of goods which are not on the Soviet ffitlo.o.7 Thereafter,
greatly intensified, use was made of the exceptions procedures. Cases pre-
sented to CHINOOK for licensing in the second half of 1956 were 2,.1e times
greater in value in the second half of 1556 than in the first half of the
year, with the result that the value of these cases reached $82 million in
1956, compared with a total of about $15 million for the 4-year period 1952-55.
It is apparent from the trade returns, however, that only about one-half of
the licensed shipments were received in China in 1956, with the remainder
presumably to arrive in 1957. The UK, West Germany, France, and Japan
were the principal countries utilizing the exceptions procedures, as shwa
in Table 7.41.
4) Table 7 follows on p. 18.
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Table 7
Value of Exceptions on Notice to CHINCOM, by Country
1952-56
Total
Thousand US $
December 1952 -
December 1956
December
1221
56
First Treilf1 Second Half
0K2/
333
424
882
6,639
20,559
27,198
28,837
West Germany
1,210
1,146
1,235
3,294
22,870
16,164
19,755
Japan
0
454
5,450
4,041
6,155
10,196
16,100
France
20
0
1,743
5,853
9,371
15,224
16,987
Italy
0
453
5
2,858
5,932
8,790
9,248
Belgium
24
444
746
1,457
2,347
3,804
5,018
Others
26
159
97
61
540
601
883
Total
1,613,
3,080
10,158
24,203
Ea_74
81,97/
'6,828
a. UK figures inc ude overseas territories.
We categories -- iron and steel products and. motor vehicles
and. parts -- accounted for more than one-half of the value of the goods
concerned. Iron and steel products increased from abut $5 million in 1955
to more than $25 million'in 1956. Mator vehicles and equipment? which in
1955 amounted to only $13,000, totaled $15 million in 1956. Tinplate submis-
sions rose sharply to almost $6 million, and submissions on excavators and
cranes, which were nonexistent in 1955, amounted to more than $5 million.
Other commodities which figured prominently were fishing vessels, bearings,
metalworking machinery, and power equipment.
Although various CHINCOM countries continued to make use
of the exceptions procedures in 1957, therbecame increasingly dissatisfied
with the China trade control syso..m. After protracted negotiations in
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? CSINCCM6 the UK on 30 Nhy 1957 unilaterally announced that it would adopt
the same lists for China as for the Soviet Bloc, thus practically eliminating
the differential. In June, most of the other participating countries took
similar action.
c. Unrecorded Imports.
The estimated value of unrecorded imports into China declined
fran 275,000 tons, valued at $76 million, in 1955 to almost 190,000 tons,
valued at $65 million, in 19560 largely as a result of declining trans-
shipments from Western Europe. These transshipments were, however, still
the main source of unrecorded trade by value,
The main source of unrecorded imports by volume was Southeast Asia, the
tonnage involved rising
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25X1?
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SC-R.E.4
(1) Transshiments of Western Commodities Through Soviet
Bloc Countries.
China was able to reduce its use of the circuitous trans-
shipment route through the European Soviet Bloc in obtaining CHINCOM-controlled
goods during 1956 as a result of greater use by Free World countries of the
exceptions procedure. The volume of transshipments through Gdynia, Poland,
in 1956 is, as a result, estimated to have declined two-thirds, compared
with 1955,
The value of unrecorded imports from Gdynia in 1956 is
estimated at $40 million, compared with ?fao million in 1955. Nonferrous
metals and iron and -steel accounted for almost all of these imports, both
25X1 by value and by volume,
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(2) UEec_or_L_ Imports Through Kong Kcn.
There continues to be 25X1C
smuggling from Hong Kong by small craft and overland to China, but the value
of this trade in 1956 is estimated at $2 million. Ey tonnage, POL appears
to be the chief strategic commodity involved in this movement. Hong Kong
authorities seized more than 800 tons of POI. products in 1956, almost
one-third more than in 1955. Two unusually large shipments of diesel oil
and lubricating oil accounted for the increase. 25X1C
3mugg1ed cargoes included up to 4,500 tons of diesel oil and
10,000 tons of kerosine, with a combined value of $1.5 million.
(3) Unrecorded Imports from Macao.
There are no published official trade statistics on
Macao's exports to China in 1956. Such exports were largely reexports of part
of the goods imported from Hong Kong. Imports from Hong Kong amounted to
$10 million in value and 66,000 tons in volume. It is estimated that, as
a maidnium, strategic commodities comprised one-fourth, by value, of these
imports, of which a portion was transshipped to China. POL shipments,
especially kerosine and diesel oil, were important in terms of volume.
Wacaoes imports of POL from Hang Kong rose to almost $500,000 in 1956, of
25X1 which about $300,000 worth is believed to have been
transshipped to China. Other strategic commodities transshipped included
copper tubes, ball bearings, auto parts, surveying instruments, and radio
tubes. The total 'value of strategic anouodities transshipped is estimated
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25X1 at $700,000 In addition, official,
25X1
25X1
information from hhcao indicated that exports of nomotrategic goods to China
amounted to 4,500 tons valued at $1.3 million.
(4) Unrecorded Imports from Japan.
The existence of a large smuggling ring in Japan which
dealt in diverting refined petroleum products to China was uncovered in 1956.
Petroleum products arriving in Hong Kong were transshipped to Japan, offloaded,
and then reexported, allegedly on consignment to Timor. The POL is believed,
however, to have been unloaded by Japanese vessels in North China. Records
(5) Unrecorded Imports frcat Southeast Asia.
During 1956, [ons of rice were shipped from
Burma to Ceylon on Chinese account in partial fUlfillment of the rice-rubber
agreammtbetveen China and Ceylon. It is believed that the Chinese recorded
the rice movement as an impart from Barna as well as an export to Ceylon.
25X1C
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3.
a. Recorded Exports.
The exports of China to Free World countries rose
almost as sharply in 1956 as in 1955. Their value, adjusted to an f.o.b. basis
from the trade statistics of the trading-partner countries of the Free World, was
$544 million in 1956 compared with $423 million in 1955, $298 million in 1954, and
023 million in 1953. The rise in exports occurred in the first half of the year,
and the higher level was maintained during the second half, as shown in Tables 10
and 11.*
Table 10
Distribution of Recorded Exports of Communist China
to Free World Areas
1954-56
Million US $
Tear
Western Urope,
Western Hemisphere,
and South Africa
Haug Kong
Japan
Asia, Near
East, and
Oceania
Total
23
17
51
131
First half
Second half
44
22
53
167
1222
First half
48
38
59
206
Second half
60
59
39
59
217
1956
First half
37
91
271
Second half
73
42
100
273
* Table 11 follows on p. 24.
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Table 11
Recorded &ports of Communist China
to Free World Countries, by Value
1954-56 !/*
Thousand US $
Countg
1954
Total
1955 . ?
Total
1956
First Half
Second Half
Total
24rope, Western
Hemisphere, and
Seuth Africa 12
Austria
878
1,009
1,175
1,339
014
Belgium- Luxembourg
2,058
2,123
2,228
4,000
-6,228
Canada
1,541
4,290
3,776
2,115
5,891
caombia
311
31
N.A.
N.A.
N.A.
Denmark
30
195
1,158
298
10456
Finland
2,953
3,583
952
1,823
2,775
France
8,972
12,002
8?390
7,466
15,856
West Gezmany
37,688
45,917
28,482
25,461
53,943
Italy
2,182
4,873
4,974
6,793
11,767
Mexico
354
288
400
230
630
Netherlands
6,306
8,524
6,482
5,103
11,585
Norway
2,439
2,554
1,006
954
1,960
Sweden
1,159
2,473
1,063
1,621
2,684
Switzerland
10,599
19,066
10,626
7,506
18,132
Union of South Africa
N.A.
1,023
445
417
862
ult
25,664
33,669
19,829
19,101
38,930
US
170
227
60
126
188
Yugoslavia
N.A.
6
3,466
1,637
5,103
Manus 15-percent
adjustment for c.i.f.
(except for the US
and Canada) 2/
-15,239
-20,600
-13,601
-12,562
-26,163
Subtotal
88,065
121,253
80,911
73,430
154,341
* Footnotes for Table 11 follow on p. 26.
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Table 11
Recorded EXports of Communist China
to Free World Countries, by Value
1954-562/
(Continued)
Thousand US $
1954
1955
1956
Country
Total
Total
First Half
Second Ralf
Total
Near East,. Asial and
Oceania 13/
Men
N.A.
667
264
297
581
Australia
3,878
4,710
1,996
2,343
4,339
Burma
306
4,522
9,748
4,791
14,539
Ceylon ?.1
32,260
16,871
7,751
18,941
26,692
Egypt
818
1,818
5,758
4,521 -
4.0,279
French West Africa
1,156
1,520
720
500
1,220
Ghana (Gold Coast)
N.A.
80
24
x44
168
India
4,922
8,960
12,015
8,000
20,015
Indonesia
4,228
10i949
16,229
14,811
33,040
Japan
40,770
80,781
39,470
44,178
83,648
Macao
5,542
5,080
3,100
3,000
6,100
Malaya
29,108
38,570
20,788
24,960
45,748
Morocco
12,493
16,973
11,227
9,704
20,931
New Zealand
628
830
448
450
898
Pakistan
1,375
394
295
8,150
8,445
Philippines
945
400
30
30
60
Sudan
N.A.
70
8
299
307
Syria
N.A.
153
129
207
336
Taiwan
3,411
10924
891
651
1,542
Thailand
N.A.
N.A.
4
10
14
VietnElia 2/
8,381
9,165
1,463
2,680
4,141
Minus 5-percent
adjustment for c.i.f.
(except for the
Philippines) 21 -7244 .-100202 .6,717
Subtotal 142,757 194,235 127,661
twa Kong!'
66,700 107,300 62,300
Total 2,12=2lalat mat azii26 =az
.7,432
-140149
141&255
30.1112.6.
58,000
120,300
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Table 11
Recorded. Exports of Communist China
to Free World Countries, by Value
1954-56 W
(Continued)
a. These data are based on the official trade statistics of the Free World countries
involved. Those data for 1955 which differ from the comparable EIC-R1-S5 figures reflect
more up-to-date information. Most countries report their imports by country of origin,
so that a. portion of their imports recorded as from "China" were actually purchased from
intervening owners. Data are complete except for the following countries in the second
half of 1956: Belgium-Luxembourg, French West Africa, India Pakistan, the Philippines,
and New Zealand. In these cases, estimates based on less than complete data have been
entered in the table.
b. Figures for exports from countries of Western Europe, Western Hemisphere, and the
Union of South Africa are based on the assumption of a 2-month voyage -- that is, they
represent recorded imports of those countries from "China" for the 12 months ending
28 February in the following year. Figures for Hong Kong, japan, Macao, Philippines,
Taiwan, and Vietnam are recorded imports for the periods indicated in the table. Figures
for the remaining countries are based on the assumption of a 1-month voyage and represent
recorded imports for the 12 months ending 31 January.
c. Most countries record exports in their official trade statistics on an f.o.b. basis
(free on board, meaning the cost of the exports involved excluding insurance and freight),
and their imports on a c.i.f. basis (cost, insurance, and freight), In utilizing the
recorded imports of the Free World trading partners of China -- reported on a c.i.f.
basis -- to arrive at China's "recorded" exports on an f.o.b0 basis, a deduction must be
made for the insurance and freight charges, primarily the latter, involved in moving the
goods to the importing country. The adjustments indicated are average figures based on
shipping costs and the general nature of the commodities shipped.
d. Sugar imports from Taiwan amounting to $1.223 'mu lion were deduced from first-half
1954 imports from China as reported in Ceylon's trade statistics.
e. The data for 1954 are for 'Indochina" and include trade with Vietnam, Laos, and
Cambodia. January-May 1955 data are imports by North and South Vietnam. Beginning in
June 1955, the figure represents imports by South Vietnam alone.
f. A deduction had been made from Hong Kong's recorded imports from China to eliminate
duplication resulting from the fact that many countries (all listed countries except the
Belgimm, Canada, Denmark, the Netherlands, Egypt, Australia, India, New Zealand, and
the Philippines) record imports from Hong Kong of Chinese origin as imports from "China."
Goods exported. by China to Hong Kong and reexported. by Hong Kong to these countries are
recorded as imports from "China" both by Hong Kong and by the country of destination. The
amount of this deduction for 1955 and 1956 follows:
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Table 11
Recorded Exports of Communist China
to Free World Countries, by Value
1954-56
(Continued)
(Footnotes/ continued)
1955
Total
First Ralf
Bong Kong's total imports from
Communist China
154.2
87.8
Less: Estimated reexports
recorded in import data of
other countries as imports
from China
Taiwan
2.0
0.9
Japan
12.8
6.4
Malaya
12.9
6.6
Indonesia
2.4
2.1
Vietnam
3.2
1.5
Other
3..6
8.0
Total deduction
46.9
25.5
Hong Kong's retained imports
from China plus reek-ports
not recorded in import data
of other countries as iMports
from China
?al
/214
Nillion US $
1956
Second Ralf
Total
85.1
172.9
0.6
1.5
7.0
13.4
8.3
14.9
2.7
4.8
1.8
3.3
6.7
11-La
27.1
52.6
2.12 120.3
,Hong Kong figures were converted at an average rate of exchange of 1 BK $ to US $0.1715
for 1955, us $0.1702 for the first half of 1956, and US $0.1625 for the second half of
1956.
Although China again increased its exports to nearly all of
its industrialized Free woad trading partners in 1956 as in 1955, the most
striking development in 1956 was the increase in exports to the underdeveloped
countries of Asia and the Near East. This increase accounted for 60 percent
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of the total increase in the value of exports to Free World countries.
Exports to waderdeveloped areas, nevertheless, represented only 35 percent
of Chinese total exports to the Free World, and exports to a number of
nearby Asian countries remeined negligible. China's only new trading
partner of consequence was Yugoslavia.
Hong Kong continued to be important as a customer and
broker for China's export trade in 1956. Goods valued at $173 million,
nearly one-third of China's exports to the Free World, moved to or through
Hong Kong, and of this amount an estimated $120 million worth (22 percent
of Chinese exports to the Free World) was consumed in Bong Kong. The 2-year
trend of increasing exports to Hong Kong was Interrupted, however, during
the second half of 1956, when such exports failed to rise above those of
the first half. This change probably reflected an increase in direct
trade between China and other Asian countries. In 1956, China's exports
to HongKong (including goods reexported by Bong Kong) exceeded its imports
by $150 million, yielding significant sterling earnings.
Exports to all Free World countries consisted, about
45 percent by value, of foodstuffs (including rice, other cereals, vegetable
oil, eggs, fruit, vegetables, pulses, and tea); 30 percent were oilseeds and
.other agricultural raw materials (textile fibers, oils, hides and Skins,
tune oill and miscellsneous crude materials); and 25 percent were other
goods (artinly ores, minerals, and products of light industry). The growing
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ability of China to produce and maxtetlight manufactured goods was
destonstrated by increased exports of such items as sewing machines,
flashlight batteries, small radios, and. sheet glass.
Wore than 401percent by value of China's exports to Hong
Kong were basic foodstuffs, Chiefly for consumption in Hong IbIng; 26 percent
were Chinese specialty foods and products, primarily for reexport to Urope;
and 30 percent were miscellaneous manufactures for local consumption and
for reexport to Southeast Asia. Textiles accounted for a substantial
portion of the manufacture -- $32 million, compared. with less than $2 million
in each of the 2 previous years -- despite a near cessation of exports of
cotton yarn in the second half of 1956.
Japan was China's second best Free World customer,
importing primarily foodstuffs and industrial raw materials.
h. Unrecorded Exports.
In addition to recorded exports !tons of Burmese 25X1
rice, valued. at $8.7 million, were purchased by the Chinese for shipment
directly from Burma to Ceylon in partial fulfillment of the rice-rubber
agreement between China and Ceylon.*
As in EIC-B1-85, no allowance has been made in this report
for exports of opium and other narcotics. It is estimated that earnings
from such exports were not significant in the period under review.
See . 22, above.
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Volume of Trade and Trang2rt Services.*
A. Total Trade.
l'he Chinese have released no details on the total volume of their
foreign trade since 1954, but they have announced that more than one-half
of their trade was carried by sea in 1955 and that one.balf would be trans-
ported by sea in 1956. It is estimated .
that about 25X1
8.7 million tons of Chinese imports and exports moved by sea in 1956.
Accordingly, the volume of overland trade is also estimated at 8.7 million
tons and the volume of the total trade of China at about 17.4 million tons
in 1956.
It is noteworthy that although the value of Chinese trade with the
25X1 USSR fell 15 percent from 1955 to 19516/
26X1
\ The fact that the value was higher and the volume lower in 1955
than in 1956 is explained primarily by the special loan in 1955, which did not
contribute to the volume of Chinese imports but added
Veo million to the value, and partly by a shift in 1956 from the export of
high-value commodities like pork to the export of low-value commodities like
cement.
25X1
The volume of Sino-Soviet trade in 1955 was estimated at 5.2 million tons in
EIC-111-S5. New information indicates that the trade in 1955 was larger and mey
have approached 6 million tons.
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In 1955, estimated overland imports were slightly greater by volume
than seaborne imports, but in 1956 seaborne imports probably increased more
rapidly than overland imports, largely as a result of a sharp increase in
imports of cement and fertilizer. in the Absence of mere precise data,
therefore, the volume of seaborne imports in 1956 has been set as approximately
equal to overland imports, and consequently the volume of seaborne and of
overland exports was alto approadmbely equal.
B. Total Transport Services.
1.. Shipping Service,
The year 1956 again witnessed an increase in the volute of merchant
25X1
shipping engaged in trade with China. 25X1
2
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a. External and internal Arreuvernents for Nbmenent of
Foreign Trade.
All international rail shipments in the Sino-Soviet Bloc
are governed by the multilateral "Agreement on Internatimal Railroad
Freight Traffic" (SNOB) of 1954, which is intended to facilitate send
stimulate Sino-Soviet Bloc foreign trade and overland transport relations.
Shipsents between Sino-Soviet Bloc countries Which must transit a third
country are subject to the rates and regulations contained in the Uniform
Transit Tariff (UTT) which supplements this agreement. Freight rates for
rail shipments between neighboring MS-countries are determined by the
individual tariff agreements in effect between those countries. When
freight must transit thrid countries by railroad, however, transport charges
for such transit are determined by rates contained in the UM. The rates
contained in the UTT are, as a rule, lover than the rates which formerly
smiled to transit traffic in the SIGS countries.
A reduction of transit freight rates brought about con-
currently with the inclusion of Coamunist China, Mongolia? and North Korea
in the SNMS and the UTT in 2.954 provided significant reductions in the cost
in international overland trade to these ccmntries. New UTT rates issued in
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January 1956 lowered transport costs even further, although the changes
were not great. Of the charges which China must pay On imports, re-
ductions ranged from 11 to 33 percent of many of the important commodities
which in the past few years have awed by rail. There were, however, no
?henget; whatever on many other items. Sizable reductions in the UTT
freight charges were also made on a number of commodities originated
by China and destined for the European Satellites* but rates on rubber,
silk, wool, tee, and the principal grains were not reduced.
On many items, rates in the 1956 UTT were still listed
at the equivalent of from $110 to $160 per ton (livable in rubles) on
movements to Chins from East Germany and Czechoslovakia. The new rate
on fertilizer, although now only about $45 per ton for the same through
movement, was tore than twice the sea tariff, and'amparently discounts
were not cUstomarily permitted for large bulk shipMents. UTT rates do
not decrease with increases in diatence of shipments. In this respect
the UTT differs from Soviet internal tariffs, which provide special rates
Over regular long-haul routed and which, on a kilometer basis, generally
tamer downward as the distance increases. Thus the UTT Must be working
out to the benefit of the country 'Which provides long-haul service and
to the detriment of those countries with returns on short hauls, where loading,
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overhead, and transfer costs cannot be absorbed by returns on many
kilometers of movement. Because of the long haul through the USSR for
trade between China and the European Satellites, these countries must
find that the tariff favors the USSR.
b. Changes in Facilities for Movement of Foreieics Trade.
(1) Railroads.
(a) USSR.
The appreciable increase in the capability of
China to =Me foreign trade between the USSR and China which accomanied
the opening of the Treins44ongo1ian Railroad constituted the major develop-
=ant affecting Sino-Soviet transport connections in 1956. Although basically
completed before the end of 1955, the line was not opened for through
international traffic until January 1956. The Chinese reported that on the
Chining-Erhlien section of the line the volume of traffic increased sub-
stantially each month during 1956. Iraproverauts continued to be rade in
facilities on the line in 1956, and there are indications that the cost
of transport was substantially reduced, even though the condition of the
newly constructed roadbed has required that freight cars be lightly loaded.
During 19560 China continued to improve the lower capacity rail lines
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approaching Chining in order to handle the increased amount of traffic
flowing to and from the north., This wort:will no doubt be continued in
1957, if needed, as Chinese railread investment plans call for increased
emphasis on rehabilitation and expansion of existing facilities rather then
on new line construction.
The transloading point on the Trans-Mongolian
lime is located at Chining? more than WO miles inside China. This
location permits the use of Soviet rolling stock in Chinese territory as
far as Mining. The Paiping-Trotmlime, *Midi reportedly will be one of
the first lines in China to be electrified during the Chinese Second Five
Year Plan, joins the transloading point at Chiming with the Chinese rail
system. There is little information available about the facilities in use
at Chining. It is probable, however, that the capacity to transload at
Chiming is mear1y egnal to the capacity of the Chinese rail lines serving
Chining and that it will be increased in the future as the capacity of
the connecting lines Is increased to take advantage of the shortest rail
link between the USSR and south and central China.
(b) crth Vietnam.
By early 1956 the transport system of North
Vietmes4 disorganized and severely damaged during the civil war, had been
substantially restored and in some respects improved./
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distribution of increasing material aid from China. Capability of the
aenol Ping-hsiang line would be substantially increased if the line
lere converted from the present meter gauge to Chinese standard gauge.
Die use of Chinese equipment would then be possible as fax south as
Rawl and would tend to offset any present limitation imposed by the
14eall Viet Minh locomotive and rolling stock park and by transloading
problems. No information is available to indicate that actual conversion
if the line to standard gauge has been initiated.
Reopening of the railroad from Hanoi to Kunming
in Yunnan will further enhance transport capability between North Vietnam
and China. Reconstruction of the portion of the line between Hanoi and
Leo Kay in North Vietnam was completed in 1958? and that portion of the
line was opened to traffic before the end of the year. On the Chinese
side of the borderk /he probability
that the connetion with the North Vietnam system will be nmde in 1958.
Current reports indicate that the entire line will be meter gauge. Once
the line is open to through traffic, it probably will be of more importance
to China than to North Vietnam. Restoration of the section between
L40 Kay end Kunming will facilitate the exploitation of Southwest China's
mineral resources, which can then be transshipped through the port of
Haiphong for aster export or shipment to consuming centers in China instead
of being hauled long distances overland.
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1:2. Roads.
The capabilities of some of the roads connecting
China with neighboring countries were improved during 1956.\
lIn November 1956 it was estimated that road connections
between Hanoi and China were capable of carrying 60 percent more traffic
tAan in 1955. The importance of road connections to foreign commerce
'oetveen China and North Vietnam, however, has not been so critical since
1Jra restoration of the Hanoi - Ping-hsiang railroad in February 1955 and
will be of even less importance after the opening of the entire Hanoi-
Kunming railroad.
25X1
During 1956 the Burma Road remained the principal
interior connection between China and Burma for the transport of foreign
25X1;
trade. /
\ In spite of these overland connections, most
tiino-Burmese trade moved by sea.
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(3) -----Inlan-d/te,6.1.?
The use and capability of the Sungari, River, the
only significant waterway connection available for the foreign trade of China,
remained unchanged during 1956.
(4) Air.
Signiftcant developments in air transport in
1956 included, in addition to international flights to Burma and North
Vietnam, the establishment of a jet aircraft service (flown by Aeroflot,
the Soviet carrier) from Prague to Peiping via Moscow. Further expen6ion
of civil air services between China and adjacent areas is also anticipated.
Negotiations have been going on between India and China; Ceylon and Cambodia
are seeking rights for their air carriers to fly to Canton; and there have
been rumors of a Japanese TOkyo-Peiping4lescow route.
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C. Overland Trade and Interior Tramr_ELIEKisel.
1. Total Overland Trade
The total overland trade of China in 1956 is estimated at
8,7 million tons. Exports continued to account for the larger share,
aggregating 5.75 million tons, compared with 2.95 million tons of imports.
Virtually all Chinese overland trade in both directions was with the Bloc.
30 Trade with the Bloc.
a. USSR.
The major portion of Sino-Soviet trade moves overland by
rail. The USSR reported that rail transport, apparently during 1950-55,
accounted for 81 to 85 percent of the volume of Sino-Soviet trade, river
transport accounting for 0.1 to 3.5 percent and truck transport for
2 to 3 percent.* This pattern of transport was altered somewhat in 1956,
as the share of truck traffic decreased and the share of river shipping and
rail traffic increased. The estimated tonnage of rail freight moving
between China and the USSR was about 6.1 million tons in 19560 comprising
nearly 88 percent of the total tonnage of Sino-Soviet trade during the year.
---tfirralRO:nomed by sea. See p. 58, below.
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River traffic is estimated to have reached 275,000 tons, accounting for
almost 4 percent of the total in 1956. Truck traffic in 1956 is estimated
at 140,000 tons, about 2 percent of the total.
The USSR has reported that approximately one-fifth of its
1956 rail traffic with China was transported via, Brodekavo? two-fifths
via NUashki, and two-fifths via Otpor. 'the actual freight
shipped on the Trans-Mongolian Railroad suggest, however, that its share
of Sino-Soviet rail freight was less than Otpor's share. Therefore, it is
estimated that about 37 percent of the freight moved through Naushki and
43 percent through Otpor.
(1) ,....ESE2.0
The volume of overland imports from the USSR in 1956 is
estimated. at about 2.7 million tons, of which more than 2 million tons
have been identified in official Chinese announcements
Official announcements report that China
25X1 imported 5 million tons of petraeum during 1953-56.1
__I Chinese announcements
indicate that imports of steel during 1953-56 amounted to 2 million tons.
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The figure probably includes castings, prefabricated steel, and other steel
products not included in estimates of steel imports carried in previous
SIC-R1 reports. It is believed that the annual fluctuation in volume of
steel imports has been small and that the volume in 1956 vas about
500,000 tons. It is estimated that imports of military equipment and
supplies amounted to about 15,000 tons. The 635,000 tons of imports not
identified probably included vehicles, machinery, instruments, and chemicals
and may also have included reverend wood products.
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Imports on the Cherny Irtysh and Ili Rivers in Sinkiang
during 1956 are estimated at only 20,000 tons. imports along the Sungari
River are estimated at 150,000 tons, including petroleum and petroleum
products from Sakhalin and iron and steel. These imports accounted for
three-fourths of the total international traffic on the Sungari River
during 1956.
It is estimated that 1 million tons were imported over
the Trans-Mbngolian Railroad during 1956, including large quantities of
petroleum products. Other Soviet products reported as moving into China
over the Trans -Mongolian Railroad were industrial equipment, machinery,
electrical equipment, and chemical products. Imports from the USSR mowing
on the line through Oft.gekolm) are estimated at 450,000 tons in 1956,
including petroleum products from Sakhalin and the Black Sea area as well
as rolled ferrous metals, tbbingiand other manuflactures of the flexitime
Territory.
The total volume of imports moved by truck from the
USSR into China is estimated at 100,000 tons in 1956. The balance of
overland shipments, or 930,000 tons, would therefore have been moved by
rail through Otpor.
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M ports
The volume of overland exports to the USSR in 1956 is
K.7,Jmateei at about 3.9 million tons includIrg a vide variety of agri-
-lut-,;uroil Alnd animal products, chemicals, coal, cement, pig iron, mineral
444mB, 4.114 textiles.
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b, European Satellites.
A) Imports,
The value of overland imports from the Ewmp(un
Oetellites in 1956 is ealculated at $170 million. It is hell,w,
1U3
in 1955, imports consisted primarily of high-value cornodi.'tioi
1,s vehicles machinery, electrical equipment, and pharmaktuticm.J ?IIth
vere value of $1,500 per ton0 lz is estimated from Ie
re. that the imports amounted to about 115,000 torr, all A?
moved by rail.
E.RoTts.
As estimated seaborne shipments accounted fwxrat
Ane-half of the value of exports to the European ? :Vd0
of a total of $360 million -- it is believed that the value of (r,erlazd
3hipments vas about $180 million. In contrast to exports by sea, oterland
ports have a high value per ton, for they consist or sulh. cotruataes ME
bristles,casings0 canned foods, and handicrafts. On1;v slaal elm:4)21,x of
llommodities with a lower value per ton, such as oilseeds I.:ad reqcstarrs
move to the European Satellites by rail. The average .ial.re of overlord
egports to the European Satellites is estimated at $1,000 per tix.:10 grid
wmordingly the volume of such exports in 1956 is estimatttd at :V0000 tons,
Far Eastern Satellites.
North_lcorea.
estimated at
ck*,
prports,.
Overland imports from North Kami, in 1:X6 Jlt
$5 mIllton
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ace estimated
overland,
Rvats.
Exports to North Korea, including aid shipments,
at $60 million, all of which moved
25X1 in 1956,
million, overland shipments probably accounted for
t about $8 million. Cement probably was the largest item moved overland
in terms of tonnage, and other imports consisted of small amounts of high-
value commodities such as spices, tea, coffee, hides, and bamboo.
f;b1 2rts0
total exports to North Vietnam, including shipments
financed by Chinese aid programs, rose in 1956
North Vietnam.
(a)
Be
Of the total imports of China from North Vietnam
valued at $10
25X1 at $85 million.
25X1
It is believed that iron and steel accounted
a large portion of these cavorts;
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(3) OuterMcmgolia.
(1) MEEtE?
The volume of overland imorts from Outer Mongolia
in 1956 is estimated at 50,000 tons,A
(b) Mmtl.
The volume of exports to Outer Mongolia during the
first 9 months of 1956 was reported by its government as 48,000 tons,
indicating exports for the year of about 65,000 tons.
4. Tjw_i_Ess1.2f_i_oveland
The total volume of the foreign trade of China with Bloc
countries which moved overland in 1956 amounted to about 8.5 million tons.
curing 1956 the Trans-Siberian Railroad and three of its
connecting lines with China -- the Tarskiy-Manchouli-Bafbin, the
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Voroshilcor-Suifenho-Rarbin, and the Trans-Mongolian were the only
Sino-Soviet rail connections utilized in Chinese foreign trade with the
USSR, the Etrageml Satellites, and *Algona. The importance of these lines
is indicated by the fact that in 1956 they carried about 6.5 million tons,
or nearly 38 percent of the total estimated tonnage of Chinese international
traffic moving by all routes, including ocean shipping. The Trans-Siberian
Railroad and its connecting lines, moreover, carried approximately 75 per-
cent of the total tonnage of Chinese foreign trade moving over interior
connecting routes. The foreign trade traffic of China represents also an
important part of the total traffic carried by these lines.
In 1956, international rail traffic constituted only a small
part of total tonnage originating on all Chinese rail lines. It was not
or sufficient magnitude in itself to place an undue burden on the Chinese
rail system, nor is it estimated to have added significantly to the
congested traffic situation which developed on portions of the system In
1956.
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(3) Significance of Non-Bloc Shipping in the China Trade.
The overseas trade of China is transported entirely in
merchant ships of non-Chinese registry, with the exception of a very small
volume carried in Chinese vessels between South China and North Vietnam.
Although increasing graaiholy in terms of both quantity and quality, the
Following p. 64.
** Following p. 64.
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merchant fleet of China remains old, slow, and inadequate even for Chinese
coastal requirements. There is reason to suspect, however, that of the 28
Polish ships on the Baltic-China run in 1956, about one-half are effectively
controlled, if not owned, by the Chinese through the Chinese-Polish Ship-
brokers Corporation (CHIPOLBROK).
In any ease, the Chinese must depend on increasing
numbers of non-Bloc ships to carry their seaborne trade. Of the more than
1,000 non-Bloc ships chartered by the Bloc in 1956, several hundred were for
China trade. Although chartered shipping carries the bulk of the cargo in
this trade, liner services are of more importance than the volume of cargo
carried might suggest. These ships provide a regularity of shipment which
enables the Chinese to engage space to move smaller lots of import and
export cargoes promptly without having to await charter arrangements. For
the most part, non-Bloc merchant ships during 1956 transported only the so-
called noncontrolled commodities in the China trade. This service, which in
itself is of great importance to the Chinese, also releases Bloc ships to
transport embargoed items to China. Bloc vessels continually deliver stra-
tegic goods from Gdynia and rubber from Ceylon and Indonesia.
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Non-Bloc coastal services are far more important
than movements of Chinese vessels in the Chekiang-Fukien coastal area
opposite Taiwan. Until the rail line to Amoy was completed in December 1956:
this area had been notably lacking in rail facilities, and local Chinese
ports and installations would have been difficult to supply adequately
except for the availability of non-Bloc shipping along this coast. Some of
the British-flag ships, which are owned by Hong Kong-registered firms, prob-
belo to Chinese or Communist sympathizers.\
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Therefore, without the benefit of non-Bloc shipping,
Sino-Soviet Bloc transportation and distribution facilities, already heavily
committed, would face increasing difficulties.
b. Review of Bloc Shipping.
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(3) Routes EMployed.
(a) General.
Subsequent to the seizure of the Soviet tanker
TUAPSE by Chinese Nationalist naval forces in June 1954, Bloc ships avoided
the Malacca Straits, South China Sea, and the Formosa Strait en route to
Communist China and the Soviet Far East. An alternative route through the
Sunda Strait, Java Sea, Macassar Strait, Celebes Sea, and northward east of
the Philippines was substituted for the less secure route adjacent to Taiwan.
In February 1956, however, for unknown reasons Soviet ships returned to the
South China Sea route via the Malacca Straits but continued to avoid the
Formosa Strait, proceeding northward via Babuyan Channel off the northern
tip of Luzon. In March 1957, Soviet ships
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the use of the Sunda Strait, the Java Sea, the Macassar Strait, and the
Celebes Sea route.
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(b) Tanker Voyages from the Black Sea.
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The last Soviet tanker bound for the Far East
rays before the closing of the
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The Communist Far East continued to benefit from
logistic support provided by the Soviet tanker construction progrma in 1956.
By the end of the year a total of 36 LeningradiKazbek-class (8,229 GRT)
tankers were in operation, a majority of which were in the Far East trade
exclusively or intermittently.
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Al]. POL shipments from the Black Sea to the
Communist Far East, of necessity, moved in Bloc tankers, inasmuch as non-
Bloc tankers have not been made available for trade in that part of the
world.. I.
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In addition to the movement of petrolean in Bloc
ships, a considerable portion of total POL exports from the Black Sea less
carried in chartered non-Bloc tankers to Free World ports as well as in the
intra-Bloc petroleum trade (to Albania and Poland). The availability of
Free World tanker tonnage to supplement the Bloc maritime capability in the
petroleum trade with other (European) areas enables the Bloc to allocate a
considerable portion of its ova tanker fleet to support the Communist Far
East.
0. Utilization of C__spla..91SLarAkisktniOnimed. in C .zanuinisi
China's Seaborne Trade.
The pattern of utilization of cargo-carrying capacity of
shipping arriving in China remained generally similar to that of previous
years. Utilization contiaued to be low on non-Bloc liner services fran West
European ports, although the booking of greater volumes of cargo on liners
serving China increased their utilization ratio over 1955. The cargo-
carrying capacity of non-Bloc tramp service from Western Europe continued to
be well utilized. /
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The utilization of cargo-carrying capacity of vessels plying
between China and Japan increased in both directions. 1
\Utilization of available cargo capacity continued
to be low for shipping between Hong Kong and China in 1956. The utilization
of capacity of vessels plying between Bloc ports and China continued to show
a great disparity.
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The utilization of vessels plying between China and ports in
North Vietnam, Africa, and. Free Asian countries was roughly the same in each
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d.. Port Activity.
Shanghai, the Tientsin - Taku Bar - Tangku.-Hsingkang complex,
Canton-Whaurpoa, Tsingtao, and Dairen (in that order) continued to serve as
the main ports of entry for shipping. Of the total foreign merchant fleet
arrivals in China, three-quarters were effected at Shanghai and ports north-
ward.. Shanghai, with 33 percent of the total, received the bulk of the
traffic as in previous years. The ports of ChInwangtao and. Swatow continued.
as important ports of entry, and Yulin (Hainan Island) retained its signifi-
25X1 canes as a port for the export of iron ore. \
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During 1956, there were two developments of significance on
the Chinese coast. The first was the reported develowent of the Chinese
port of Taamkong (Chankiang)? located at Fort Bayard. in the former French-
leased territory of Kwangfhowan? as a year-round., deepwater port. Tsamkong
was opened on a limited basis in May 1956, several months ahead of schedule,
and is reported to be capable of handling 1.6 million tons of cargo annually.
If presently announced plans to expand the port are fully consummated, its
annual cargo-handling capacity will reach 4.6 million tons. The development
of this additional port in South China was undertaken in order to reduce
dependence on Whampoa, where occasional problems of port congestion exist.
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(1) Bunkerim.
During 1956, non-Bloc controls on bunkering of merchant
vessels involved in trade with China were continued by the US, the UK, France,
and Japan. Under these control procedures, bunker supplies for merchant ships
en route to China were denied by the above countries when a vessel was known
to be transporting unauthorized strategic commodities. The UK, France, and
Japan authorized bunkers for non-Bloc vessels transporting controlled goods
to China when such shipment had been licensed for export to China by a
country participating in the cocom/cuscom organization. The US, however,
considered each bunker application on its own merits, according to the circum-
stances prevailing at the time of application. Thus, even though a particular
strategic cargo had been duly licensed under COCOM/CHINCOM exceptions
procedures, the U9 denied bunkering application of the vessel on which it was
carried.
The major difference between US bunker controls and
those of the other three countries is that only those of the US provide for
a retsriew of bunker applications for ships returning from China. ConSequently,
most Bloc vessels avoided bunkering from British, US, or French supplies en
route to China but bunkered without restriction at Singapore on the return
trip.
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The system of limited bunkering controls did not
effectively prevent the movement of controlled materials to Chime during
1956. These controls, hoverer, are believed to have continued to produce
considerable uncertainty and inconvenience for the Bloc.
(2) Non-Bloc Deliveries of Merchant_Ahle_tottLBino-
Soviet Bloc.
The Soviet Bloc and, to a much lesser extent, China
have been able to augment considerably their own international transportation
facilities by the acquisition of new and secondhand merchant ships from non-
Bloc countries. During 1956, 46 new merchant ships aggregating 132,584 GET
(including 2 tankers totaling 6,566 GET) and 2 secondhand freighters with a
total GET of 12,600 were delivered to the Sino-Sovimt Bloc from Western ship-
yards, as shown in Table 24, I and II.* This represents an increase in
tonnage of more than 100 percent compared with 1955 when 26 new ships of
62,000 GET were delivered to the Bloc.
The foreign trade of China in 19560 however, benefited
only indirectly from these new ship acquisitions. Only 2 small Finnish-
built cargo vessels, totaling 4,6o0 GET, were delivered to China but were
used only in coastal traffic. The remaining new ships were built in Belgium,
Denmark, Finland, France, West Germany, the Netherlands, and Sweden for Soviet
account, and only one engaged in China trade. Moreover, only 1 of the 2
secondhand ships, the 5,242-GET SIOWAKI acquired by Poland from Norway, was
assigned to China trade. The other, a British freighter of 7,372 GET, was
sold to Bulgaria.
* Table 2V follows on p
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(3) Non-Bloc Repairs to Soviet Bloc Vessels.
Although no Chinese merchant vessels are repaired
in non-Bloc yards, China benefits indirectly by ship repair services
provided to other Bloc countries by the Free Worlds as shown in Table 24,
I/I.* During 1956, 14 Soviet Bloc merchant ships (Soviet, Polish,
Czechoslovak, and Rumanian) were repaired in non-Bloc shipyards, about
half of which were assigned to the China trade. In the majority of cases,
these transactions involved extended capital repairs of from 2 months to
more than 1 year in duration. In numbers, however, repairs on Bloc
ships in non-Bloc shipyards represent only a fraction of those effected
domestically in the Bloc. In fact, repair of Bloc ships in non-Bloc
shipyards has steadily decreased in the last few years. The 1956 figure
represents decreases of about 50 to 75 percent in the number of ships
repaired in 1955 and 19540 respectively. The reduction reflects the growing
use of domestic ship construction and repair facilities for merchant marine
purposes, accompanied by a decrease in naval construction.
IV. Relationship of Chinese Foreign Trade to the National Ecssy.
Foreign trade has played an essential role in contributing to the recent
rapid growth of the economic and military strength of China. Starting with
an economy largely agrarian in character, China has relied on imports to
obtain much of its military supplies, capital goods, and essential raw
materials. The Chinese regime from the beginning has sought to maximize
Table 24 follows on p.80.
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exports, which reached a dollar value of $2.3 billion in 1956, more than
three times that of 1950. Thus the trade policy of China has been used
to facilitate the development of the economy with its orientation toward
heavy industry and military modernization.
A. Foreign Trade in Relation to Gross National Product.
A comparison of foreign trade turnover to gross national product
(GNP) provides a rough yet useful guide to the dependence of an economy
upon foreign trade. Between 1950 and 1955, this relationship for China was
about 10 percent, comparable to that of India, which is similarly under-
developed. Imports in relation to GNP have varied between 5 and 7 percent
for both countries.
In spite of these similarities, the composition of Chinese and
Indian imports show striking differences. Chinese imports have included
only about 10 percent of consumer goods, whereas India, in contrast, has
imported about 30 percent. In addition, of their remaining imports, India
has included a greater proportion of raw materials and fuels, and China has
concentrated on capital goods and military supplies. India and China both
obtained their imports with approximately the same relative export effort,
measured as a percentage of G. The difference in the composition of
Chinese and Indian imports is associated with the much greater Chinese
industrial and military developments.
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B. Contribution of Import8 to Economic Construction and Military
bevelopment.
Imports during 1953-56 totaled about 20 billion yuan (US $8 billion).
The Chinese have stated that imports were divided as follows: consumer
goods, 10 percent ($0.8 billion); raw materials and Awls, 30 percent
($2.4 billion); and capital goods, 60 percent ($4.8 billion). Although
the Chinese have never mentioned military equipment and supplies in reporting
the commodity composition of their imports, it is believed that the category
of capital goods includes an indeterminate proportion of material for
military use.
The Chinese estimated that during the First Five Year Plan (1953-57)
imports of machinery and equipment for state construction projects would
account for 15.2 percent of total expenditures for state construction, or
about 6.5 billion yuan. With 85 percent of the construction program completed
during 1953-56, these imports are estimated at about 5.5 billion yuan
($2.2 billion) or slightly more than a quarter of total imports. In addition,
Communist China has imported construction materials, particularly steel of
which 2.8 million tons were imported during 1953-56. The Chinese claim that
imports would supply about one-fifth of their finished steel requirements
during the First Five Year Plan.
A substantial portion of the machinery and equipment imports has been
obtained under contracts for "complete installations" negotiated with the
USSR and other Bloc countries, in which the suppliers undertake to design
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and supervise the construction and initial operation of the installations.
In 1953 and 1954 the USSR agreed to construct 156 such industrial instal-
lations with a value of $1.4 billion and in 1956 contracted for 55 additional
installations with a value of $600 million. By 19570 43 of these instal-
lations had been completed and 102 were under construction, and it is
believed that most of them are scheduled to be completed by 1960. Similar
installations, although on a much smaller scale, are being provided by the
European Satellites.
The Chinese have reported in their budgets total military expenditures
during 1953-56 of about 24 billion yuan (US $10 billion) but have not indi-
cated what proportion of these expenditures was for imported material. The
Chinese have reported receipts of Soviet credits of $2.2 billion, of which
$1.26 billion were utilized during 1953-56. Economic credits utilized during
1953-56 include a scheduled $120 million from the 1950 loan and almost all
of the $130-million 1954 loan. The bulk of the credits utilized in 1955 --
$675 million -- were specifically stated to be for military supplies and
installations turned over to the Chinese on the departure of Soviet forces
from Manchuria.
It is uncertain how the remaining Vioo minion in credits during
1953-56 were utilized, as no formal arrangement covering these credits has
been announced., It may be argued that, because of the secrecy, these were
military credits in spite of the fact that the 1954 credits ($360 million),
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which included a large portion of these renaining credits, were described
in the budget as supporting economic construction. In addition to military
material financed by loans, the Chinese are believed to finance some military
imports through trade which have been estimated very roughly at about
$150 million annually. These indications, although fragmentary, suggest
that military imports during 1953-56 may have been between $1.2 billion and
$1.6 billion.
C. Internal Resources Allocated to Exports.
Products of agricultural origin constitute about three-fourths of
the value of Chinese exports. Although exports represent only a small pro-
portion of agricultural production, exports of basic foodstuffs compete with
the requirements of an increasing population and a growing industrial economy
which requires industrial crops. Total output has been affected by adverse
weather conditions as well as by changes in the institutional setting such
as collectivization. As a result of these factors, China has encountered
increasing difficulties in expanding exports of basic foodstuffs and has
stressed greater exports of subsidiary agricultural products such as bristles,
feathers, hides, tuns oil, and silk.
Of nonagricultural exports, mineral products -- primarily nonferrous --
form the major share. Nearly all of the current output of tin, tungsten,
mercury, magnesite, fluorspar, and molybdenum is exported as well as about
half of the zinc mined. Although most of the ferrous mineral output has been
consumed domestically, in 1956 about 7 percent of iron ore production,
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12 Percent of pig iron production, and 5 percent of finished steel production
is estimated to have been exported. Between 1 and 2 percent of the coal out-
put was exported.
The pressure on Chineee export resources appears to be serious enough
to entail a cutback in the export program for 1957 and possibly for future
years. Although there are indications that China is making investments to
expand production and exports of nonagricultural commodities such as non-
ferrous metal products, the main possibilities for expanding exports in the
near future are limited to agricultural malmodities. The Chinese appear con-
cerned over the dangers inherent in reducing already-low internal consumption
further. As an illustration, the Chinese, after an unsatisfactory crop year
in 1956, apparently were forced to the decision to reduce exports in 1957
rather than to curtail domestic consumption farther.
D. Economic Growth and Future Trends in, Foreign Trade of Communist
China.
Recent events have indicated that the foreign trade of China has
become an increasingly important factor in shaping its ambitious industrial
and military programs. At the Eighth Party Congress in September 1956 the
Chinese outlined a preliminary draft of their Second Five Year Plan, which
called for a doubling of industrial output and an increase of 50 percent in
national income as well as doubling the volume of capital construction over
that of the First Five Year Plan. Since then, the regime has indicated that
it is lowering its goals and readjusting the program and that one of the
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important factors involved in this re-evaluation of their capabilities is
an appreciation of their limited import prospects Stemming from export
difficulties and other payments problems.
The September 1956 draft of the Second Five Year Plan proposed that,
compared with the First Five Year Plan, imports of machinery and equipment
Would decline from 40 to 30 percent of total needs, or from 15 to 11 percent
of total expenditures for construction. Because of the planned doubling of
capital construction, however, the volume of such imports was scheduled to
increase by half. More recently the regime has canceled several major
industrial projects and has called for increased emphasis on small and
mediumo-sized plants which woad require proportionately less imports. Recent
reports that imports of machinery and equipmentvoUld supply only 20 to 30 per-
cent of requirements for a smaller capital construction program than origipally
planned indicate that the regime is reducing scheduled imports of capital goods,
possibly to less than those of the First Five Year Plan.
Although the precise factors involved in this reassessment of import
prospects are uncertain, it is clear that payments difficulties play a promi-
nent part. During the First Five Year Plan the Chinese had current net
receipts on the nontrade items in the balance of paymente which enabled the
financing of an import surplue of 1.9 billion yuan.* In the Second Five Year
* Including military imports. Payments on foreign credits and for foreign
aid totaled V 3.4 billion, receipts of foreign credits totaled V 3.1 billion,
and net receipts on all other items amounted to about V 2.2 billion, including
particularly overseas Chinese remittances and expenditures of Soviet forces in
China during 1953-55.
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Plan, however, the Chinese appear to contemplate a sharp reduction in
receipts from foreign credits, a sharp increase in service charge payments
on existing credits, some decline in remittances from overseas Chinese, and
a considerable decline in foreign expenditures in China (largely, as a
result of the withdrawal of Soviet fortes in 1955). Although present Chinese
foreign aid camatnents total only one-third of those granted during the
First Five Year Plan, new grants or loans may be extended as current programs
expire over the next few years. On the basis of these factors, the Chinese
would be confronted with nontrade expenditures exceeding nontrade receipts by
possibly 3 billion to 3.5 billion yuan during the Second Five Year Plan. This
deficit would have to be balanced largely by an export surplus, since present
foreign exchange reserves are limited.
The Chinese, after an unsatisfactory crop year in 19560 appear to have
lowered their estimates of their export potential. A recent analysis of long-
run export prospects published in the Chinese press considered that exports
of basic foodstuffs and consumer goods, constituting half of current exports,
could not be expanded appreciably and in some cases would be reduced as the
result of rising domestic needs. The increase in total exports would then
depend on expanding the sales of other exports, particularly specialties to
the overseas Chinese populations of Asia, handicrafts to Bloc and Western
markets, minerals to Japan and other areas, and light industrial products to
Southeast Asia. Although exports rose by half between 1953 and 1957, the
regime clearly expects a leveling off in the rate of export increases. It
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may be noted that, in view of the movements of the nontrade items in the
balance of payments, exports would have to increase by about one-fourth
over the level of the First Five Year Plan in order to finance the same
level of imports.
The Chinese may also have reappraised their import needs. A recent
analysis published in China indicates that the proportion of imports allocated
to essential consumer goods and to raw materials and fuels will be increased
during the Second Five Year Plan, presumably reflecting increased urbanization
and industrialization. There is no indication of the trend in military imports.
V. al.saViRiLlhiSlosure of the Suez Canal on the Trade and Treneport of
Communist a4i11112921DETZTIlla...19121?
A.
__..2toftl...____i_ie_amsureoft_he Suez Canal.
1. S_Dui_ahn.
Probably the most significant development in 1956 affecting ship-
ping engaged in Chinese foreign trade was the closure at the end of October
of the Suez Canal -- through which about 20 percent of Chines total foreign
trade moves. The effects of the closure were manifested primarily in early
1957. Bloc shipping services, whose employment in Chines trade even under
normal conditions is limited (reflecting a serious weakness in the over-all
Bloc supply system), were restricted further during the period of the closures
and to a greater extent than non-Bloc shipping services.
The interruption of shipping between Europe and Asia compelled
the use of much longer alternative sea routes for trade between these areas.
Bunkering was difficult as rerouting became widespread and bunker ports
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beasme congested. Moreover, the maintenance of the flow of commodities
over extended sailing distances greatly increased world shipping require-
ments. As a result, the tight ship charter market created when Egypt
nationalized the Suez Canal in mid-1956 became increasingly restrictive,
and shipping costs rose steeply.
a. Rerouting of Vessels.
The closure of the Suez Canal interrupted traffic on the
shortest all-season sea route between Europe and the Far East. Vessels
engaged in Chinese trade and normally using the Canal had to choose between
the Panama Canal or the Cape of Good Hope routes. The use of either.laeezio.
a significant increase in Sailing time and drastic revisions :in delivery
schedules. For the most ;Art, shipowners found it more advantageous to use
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the Cape route. \
\As a result, voyage
time between Europe and China became one-third or more longer. For example,
the distance between Hamburg and Shanghai is 10,785 nautical miles via the
Suez Canal; around Africa the distance is about 14,150 nautical miles. The
time and distance differentials between Mediterranean or Baltic Sea ports
and China became even greater.
b. Tightening Ship Charter Market.
The extension of voyage time for vessels carrying a sizable
segment of world,trade greatly increased the need for both tankers and cargo
vessels, thus aggravating a charter market that had been tightening since
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the Suez Canal was nationalized on 26 July 1956. Over-all tonnage
offerings in October, before hostilities in Egypt, were barely able to
cope with traffic demands. Hostilities in Egypt wade it even more difficult
to find vessels, especially for the Far East. Some liners serving the area
were rerouted to other trades, and. many cargo vessels previously available
for charter on a one-trip basis were withdrawn. The impact on shipping
between Europe and the Far East in general is best illustrated by the
freight-rate increases of 15 percent in early November and 17.5 percent on
1 February 1957 which were incurred by traffic between these areas. To
these additional costs must be added increased insurance premiums.
c. Bvaikerinipifficulties.
14ost vessels engaged in regular traffic are built to operate
on particular trade routes, with consideration for obtaining fresh food.,
fuel, and. water at certain ports along the way. On the long-established
route to the Far East through the Suez Canal, there are many ports equipped.
to provide these necessities. Forts along the Cape of Good Hope route are
not so numerous; neither are they sufficiently large to service. efficiently
large numbers of vessels diVerted from the Suez Canal. Vessels using the
route, therefore, had to incur certain- dimdrantages in addition to those
imposed by increased sailing distances.
The diversion of China-bound vessels around. Africa caused
lays in bunkering of from 2 to 8 days. Regular lines normally using the
facilities on the west coast of Africa and at Capetown were given preference,
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and owners of other vessels had to arrange for agents and negotiate bunker
contracts. Bunker facilities for Bloc vessels engaged in carrying strategic
commodities to China were even more limited, inasmuch as Western bunkering
regulations which normaDy apply to ports east of Suez were interpreted. to
cover ports east of Capetown.
The impact of bunkering difficulties on the Bloc is illus-
trated by the report in December that Czechoslovakia almost found it necessary
to withdraw its vessels from the China trade because of the difficulty in
obtaining bunker facilities on the route around Africa, Moreover, the USSR
was compelled to bunker some of its vessels at sea from a Soviet tanker.
?d. Increased Shipping Costs.
As a result of the increased voyage time of 30 days per round
trip between Europe and. the tar East, operating coats for a standard cargo
vessel in trade between these areas increased by about $87,000 (approximately
$2,900 a day). To cover the additional costs of fuel, wages, and. supplies,
shipowners raised freight rates -- the additional rate applied to Chinese
import traffic routed via the Cape of Good Hope amounted to a minimum of
$4.20 per ton. As a result, it is estimated. that from November 1956 through
April 1957 China incurred an additional expense of approximately $3 million*
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for imports via the Cape of Good Hope. This expense is in addition to the
general freight-rate increase incurred immediately after the Suez Canal was
nationalized in July 1956, which amounted to about $4 per ton. The aggre-
gate of these additional freight charges incurred by Communist China amounted
to about *6 million.
2. Effect of Suez ganal Closure on the Seaborne Trade of Communist
China.
Although some shipowners began diverting their vessels around. the
Cape of Good Hope after nationalization of the Suez Canal in July 1956, the
major impact on shipping was not felt until the Canal closed at the end of
October 1956. 1
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'the chief impact on shipping service pro-
vided for China was felt during the period January-April 1957./
Thus the closure of the Suez eanai aaa some curtmu was
commerce of China. Chinese exports, mainly iron ore, soya beans and food-
stuffs, and fertilizer imports were affected by the shipping shortage and
increased freight rates which ensued. The closure of the Suez Canal, however,
coincided with other factors which also had a depressive effect on China trade,
such as shortages of exportables and of foreign exchange.
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The downward tread in'Artivals prevailed among Bloc as well
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as non-Bloc vessels, although the former showed the greatest relative decline.
This increase =attuned a trend evidenced early
in 1956 and maintained throughout the year. This trend is believed to be a
reflection of the increase in non-Bloc liner services between Europe and the
Far East and in tramp shipping from Japan.
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b. Reasons for Decrease in Merchant Shi ? Arrivals in Communist
China.
The decline of the seaborne trade of China, reflected in
decreased arrivals, apparently cannot be explained as being entirely the result
of the closure of the Suez Canal. It is quite certain that the worldwide
shipping shortage and the consequent increase in freight rates were important
factors influencing the over-all dammawd trend in merchant ship arrivals in
China. There have been reports indicating that cargoes to and from China
have been delayed by the dislocation of shipping since the end of November
1956. For example, shipments of iron ore to East Germany and coal deliveries
liSri-27-Talows on p. 101
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to Pakistan have lagged because of the scarcity of shipping. Moreover, the
unavailability of shipping has hindered China in obtaining desired imports
such as fertilizer from Western Europe.
Other factors, however? probably have also had a depressive
influence on China's seaborne trade. Defects in industrial planning in 1956,
in large part involving overinvestment in some sectors of the economy, led
to the need for "suitable retrenchment" in 1957. During 1957, it was
announced that China's construction program will be 20 percent smaller than
in 1956 -- investment will be limited to about one-third of total government
revenues, compared with about 45 percent in 1956. Internal and external
economy drives have also been undertaken which may have caused cancellation
of some contracts for equipment abroad.
Further., the faulty planning in 1956 led to serious
shortages of some domestically produced commodities. Iron ore and coal,
both major export items, were reported to be in short supply internally in
early 1957 and therefore probably were not available for export in the same
volume
as in 1956. Typhoons and floods in the summer and autumn of 1956?
ehich were apparently more serious than originally thought, also affected
the availability of some basic products for export. It was subsequently
announced that exports of certain major commodities in 1957 would be
?tali:aced greatly compared with 1956.
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3. Diversion from Ocean ShiEp_46.102Asilimstport.
No specific data are available upon which a quantitative
estimate can be made of the diversion of the foreign trade of China from
ocean routes to overland rail routes as a consequence of the closing of the
Suez Canal. Nevertheless, an estimate can be made of what may have taken
place based upon knowledge of historical movement patterns aed the supply
position of China.
Owing to the imperative need of maintaining a constant supply
of petroleum., the overland movement of this commodity for China via the
Trane-Siberian Railroad may have been expected to increase by approxteatele
25,000 tons per month (equivalent to a daily movement of about :it tone, or
slightly mere than one half train load) as a result of the suspension of
sea movements. No Black Sea petroleum is believed to have r?oached China
either directly by sea or indirectly by ocean veyage around Africa to
Vladivostok and by rail from there to China vie the Grodekovo border point
during the time the Canal was closed.
The emWeew ;ark of the ussr may well have been placed under an
extra strain owing to the relatively long car turnaround time required for
the overland movement of petroleum te China and the Soviet Far East which
probably totaled gos000 tons per month, or the addition of about l trains
per day. It is even possible that eetroleum deliveries of lower priority
within the USSR may have had to be deferred. No additional strain, however,
was probably placed on the rail system of Chins, because even with the Canal
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in operation there has been a normal rail movement from Vladivostok via
Grodekovo to China of the petroleum received at Vladivostok by sea from ?
European USSR.
Certain other goods on order by China from the European Satel-
lites undoubtedly were shifted from sea to overland rail movement as soon
as it became clear that the Canal would be blocked for a matter of months.
These goods probably consisted mainly of high-value priority items. Diver-
stop to rail up to the end of 1956 of dry cargoes from the Satellites to
China is estimated to be about 15,000 tons. In 1957, such &ailments probably
amounted to less than 5,000 metric tons per month.
Westbound freight from China and North Korea for the USSR and
the Satellites, the absence of which might have interfered with Soviet
or Satellite key industrial plans or developments, may have been shined
overland also in limited amounts. Possibly in this category would, have been
rubber, jute, nonferrous metals and concentrates, oilseeds, soya beans, and
certain chemicals. Although the Satellites are known to have been short of
iron ore during this period, an estimate that there was e likelihood of an
overland movement of any great amount must be ruled out because of the
excessive transport cost for such movement. A rough estimate of the maximum
tonnage which under the most urgent circumstances might have been diverted, to
the railroad for westbound movement during 1956 would be in the neighborhood
of 30,000 to 35,000 tons. It would, however, be reasonable to assume that
overland freight costs and the necessity for providing Soviet exchange
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precluded the shifting of an amount so large to the rails for the account
of the Satellites exclusively. A rough estimate is that diversions to the
railroads during 1957 probably were no more than 5,000 tons per moeth until
the Canal was reopened, when, after a short lag, they probabty ceased. The
impact on the railroads of having to move diverted dry cargo was of lese
consequence than the increased petroleum movement? because the volume was
lower and the need came after the season of peak demand on closed cars had
passed.
One principal factor in restraining the demand for overland
transportation on the part of China and the Suropean Satellites was the
great excess of land freight rates over ocean shipping rates. Following
the closing of the Suez Canal, it appears reasonable that except in the most
urgent cases the Chinese and European Satellites would have accepted the
delays ? hipmente occasioned by the routing of ships via the Cape of Good
Rope rather than pay the added transportation costs resulting from a rail
movement including the release of ruble exchange for the transit through
the USSR. I
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B. Prospects for 1957.
1. Trade.
At the National Peoples Congress in July 1957 the Chinese
announced that the 1957 trade plan provided for total foreign trade valued
at 9,955 million yuan (slightly more than $4 billion), or 8.4 percent less
than in 1956. This total would consist of imports valued at 4,755 million
yuan and exports valued at 5,200 million yuans 10.2 percent and 6.6 percent,
respectively, below 1956 level.
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Planned exports are $150 million less than in 1956. The major
reduction is reported to be in grain exports? which are expected to decline
by 540,000 tonal, or 41 percent less than in 1956. EXporte of edible vege-
table oils are to be reduced from the 1956 level by 10000W tons, pork by
65,000 tons, and cotton yarn by 12,200 bales. These cuts would be partly
compensated for by planned increases in exports of minerai*. and industrial
and handicraft products. The planned reduction in import T.t of $220 million
apparently reflects China's currently weak export and fore exchange
position. There are Indications that imports of machinery will be particu-
larly affected, reflecting concentration on less pretentiouc ?lent
construction for which the Chinese can themselves supply :at of the mater: 4U5
This reduction in machinery will, however, be partly offset by increased
Imports of consumer goods to alleviate domestic shortages.
Despite the planned reduction in 1957 trade, the Chinese have
reported that the aggregate volume of foreign trade in the First Five Year
Plan will exceed the original target by 6.4 percent and that the plan will
be overfulfilled by 8 percent for imports and 4.8 percent for exports,
Our present estimate of China's 1957 balance of payments indi-
cates a probable deficit of about $203 million, compared with the estimated
deficits of $46 million in 1955 and $173 million in 1956.*.? The increase In
Wetiarn A: 3, p. 4
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these estimated deficits in 1956 and 1957 compared with 1955 probably
reflects in large part receipts of goods under barter agreements with the
USSR not paid for by exports during the periods in question. The failure
to meet these export commitments was tantamount to an extersion of short-
term, Soviet credits. In additions the deficits probably reflect some
drawing down of foreign exchange holdings. (See Table 26.)
Table 28
E timated Balance of Payments of Communist China
1957
minion qs_i
Payments
Imports (c.i.f.)
Debt repayment
-1,930
- 250
Foreign aid grants and loans
- 207
Total
-2,1E
Receipts
Exports (f.o.b.)
2,115
Overeeas remittances
60
Foreign credit receipts
9
Total
2 184.
Deficit, including errors and omissions
203
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A slight farther shift in the direction of China's trade toward
the Free World is expected in 1957. /
\Considering that the total trade in 1957 is scheduled.
to decline, the maintenance of the non-Bloc trade at the 1956 level would
result in an Increase in its share to at least 27 percent.
The Chinese have announced that 1957 trade with the USSR would
be 4 times that of 1950 and would account for half of total trade: indicating
a decline in the Soviet trade of as much as 15 percent. Assuming no change
in the Satellite share of trade, this suggests that the Bloc share of trade
will be about 71 percent of the total: a level consistent with the indications
of the non-Bloc share mentioned Above.
2. Transport.
The opening of the Suez Canal removed an impediment to shipping
engaged in China's foreign trade. Shipping services to China recovered
during the second Ii. months of 1957/
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The effect of the increase in shipping service during the
-,eriod May-August 1957 was to compensate for the reduction in shipping
lervice sustained during the first 4 months of the year, so that the average
It now appears that shipping service provided China during
4957 will not be substantially greater than that provided during 1956.
Since the opening of the Suez Canal, petroleum shipments by sea
have not completely resumed their pre-Suez pattern, It
Over-
Land movements of other diverted goods have probably long since returned to
he sea.
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There are, however, other forces conducive to the maintenance
cf adequate shipping service for China's foreign trade in 1957 and the
immediate future. Since the reopening of the Suez Canal, there has been
decline in the world charter markets for both dry cargo vessels and tankers,
so that China, as well as other Bloc countries, should have no difficulty
in chartering Free World vessels at relatively reasonable rates for trade
movements during the year. Moreover, as the result of the elimination of
the so-called China differential by all countries in the cocompunam
erganization except the US, in May and June 1957, controls on the use of
Free World vessels in the China trade are being relaxed by a number of the
leading maritime powers. Similarly, efforts are being made to reduce if not
eliminate bunkering controls. The relaxation of these controls would place
China Charters on an equal footing with Free World charters and would elimi-
pate an irritant and inconvenience to China. Furthermore, the elimination
of bunker controls would in effect increase the payload carrying capacity
of Bloc vessels engaged in China trade which previously had to sacrifice
badly needed cargo space for the carriage of bunker supplies required for
the long voyage to China.
These circumstances, which would increase the availability of
shipping to the Bloc with its attendant lower transportation costs, may
result in some increase in the portion of Chinese - Soviet Bloc traffic
m)ving by sea. The decline in intra-Bloc trade and the relative increase
Li trade with the Free World projected for 1957 would have the effect of
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tleo increasing the relative share of seaborne trades because the bulk
cf Free World trade with China moves by sea, and a large proportion of
Lloc trade normally moves overland. Thus, some increase in the relative
atare of China's seaborne trade is expected, barring unforeseen develop-
menta which would disrupt shipping in the China trade.
China may now also increase the size of its oceangoing fleet
ihrough purchase of merchant vessels up to 15i knots in speed from major
Pre. World shipping and shipbuilding nations except the US. The purchase
cf even secondhand vessels will require considerable outlays of foreign
cxchange or other exports, and Free World shipbuilding yards are already
teavily committed with orders to build new vessels well into the future.
3t is improbable, therefore, that China will be able to avail itself of
ihis opportunity during 1957. There is no need for China to do so as long
es shipping requirements are provided by other Bloc countries and the Free
World. There is some evidence, however, that the Chinese may hare plans
for the auployment of their own merchant ships in trade with Southeast Asia
vithin the next few years.
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eeneCeReE-T
APPENDIX A
STATISTICS FOR THE FOREIGN TRADE OF COMUNIST CHINA
.m..Ne?enp?wwg?oe.ae.nrgejr.::5iroe?r.m?mximw?...unm,?.aw.????ms..aa.,.0 ,m....aroommre
I. Introduction.
More information on the foreign trade of China was released during
1956-57 than in any previous comparable period by the goververants of China,
the European Satellites, and the USSR. Many of the releame are obscure
and difficult to interpret. Most figures of trade activity are given as
index numbers and percentage changes from earlier periods, sed there are
apparent irreconcilable conflicts among some figures. An increasing nember
of absolute figures, however, have been announced. On the basis of this new
information a number of estimates in EIC-R1-S5 have been revised, the revisions
being referred to in footnotes throughout this report. This information raises
questions regarding the validity of the method foe conversion of yuan values
into dollar equivalents at the cross rate with the yuan-sterling rates re
ported by the Chinese -- as has been done in EICeRl-S5 and in this report.
AS estimates of the yuan value of the foreign trade of China for 1950-56
are considered relatively reliable, they are presented in this report as
a point of reference for the less reliable dollar estimates.
II. Yuan Value of Foreign Trade,
A. Total Trade and Balance of Trade.
In September 1956 the Chinese published an index of the value of
total foreign trade for 1950-55. The value of trade during these years
has been computed from this index and an official figure tor trade in 1954
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(8,487 million yuan). The value of exports and imports and the resulting
balance of trade have been calculated from a recent announcement of import-
=Port ratios for 195045. These data, together with the announced value
of exports and imports for 1956 and the 1957 plan, are presented in Table 31.
Table 31
Estimated 'Dian Value of the Foreign Trade,
Imports, Exports, and Trade Balances of Columnist China
1950-57
Million Yuan
Year
Total Trade
Imports
Exports
Trade Balances
1950
14,160
2,122
2,038
. 84
1951
5,949
3,510
2,439
- 1,071
1952
6,490
3,764
2,726
- 1,038
1953
8,112
4,624
3,488
- 1,136
1954
8,487
4,413
4,074
- 339
1955
11,024
6,063
4,961
- 1,102
1956
10,865
5,297
5,568
+ 271
1957 (Plan)
9,955
4,755
5,200
+ 445
B. Direction of Trade.
The direction of trade has also been estimated from Chinese official
data. In 1956 a table was published showing the percentage of the trade of
China with the three main areas of the Bloc and with the Free World from 1950
through 1953.* In 1957, comparable official data for the distribution
* These percentages were released in conjunction with indexes of Bloc and
total trade which differ from the recently-ammounced index of total trade.
For example, total trade for 1953 was reported at 181 percent of 1950,
compared with the recent figure of 195 percent indicated in the index. The
differences may reflect use of different units of account or incomplete
coverage. It is believed, however, that these percentages despite their
inconsistencies, indicate reasonably well the direction of trade
in these years.
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of trade in 1956 were published. Only miscellaneous announcements reporting
the Bloc and Soviet shares of the trade of China have been released for the
intervening years 1954 and 1955. The Bloc share was reported for those 2 years
as 80.55 percent and 82 percent, substantially larger than in 1952, 1953,
or 1956. The Soviet Share, however, was announced as 55 percent and 55.3 per
cent for 1954 and 1955, approximately the same share as in 1952 and 1953
and again in 1956. These figures would indicate that the share of the
Satellites (European and Far Eastern) in the foreign trade of China increased
considerably over their share in 1952 and 1953 and that their there decreased
in 1956.
No other information, however, supports this indication. It appears,
on the contrary, that the substantial increase in Bloc participation in the
trade of China in 1954 and 1955 was a result mdre of expansion of trade
with the USSR than of expansion of trade with the Satellites. In both these
years the USSR extended loans -- amounting to about $360 million in 1954 and
$675 million in 1955. Such loans have been observed in earlier years, but in
1953 they totaled only slightly more than $175 minim That the Soviet share
of Chinese trade should be higher than the announced percentages is also
suggested by a recently published Chinese index of Sino-Soviet trade for 1955
and 1956 (with 1950 as the base year) which indicates that the Soviet share of
trade in 1955 was approximately 6205 percent. The Soviet share for 1954 may,
therefore, be estimated at 59 percent, With credits reduced to less than
$50 million in 1956, the Bloc and Soviet shares of Chinese trade would be ex-
pected more closely to approximate the 1953 level. This expectation is con-
firmed by the Chinese trade announcement for 1956.
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trade with the European Satellites suggest
that their share of China trade deolined from 29 percent in 1953 to about
16,55 percent in 19514 and 15 percent in 1955,, On the basis of these figures
the share of the Par Featern Satellites is calculated as rising frau
4,52 percent in 1953 to 5 percent in 1954 and declining to 4.5 percent in 1955.
The percentage distribution of the foreign trade of Chins, shown
Tarda 32$ was used as the basis for estimating the distribution of the
plan 'value of trade, as shown in Table 33,*
Table t2
Percentage Distribution of the Foreign Trade of Communist China
1950-56
Percent of Total Trade
1950 1951 .12E 1235.
Non-Bloc 66.52 36.72 21.92
Bloc .33.48 63.28 71621
USSR 30.89 48.72 57.34
European Satellites 1.99 13.24 1902.
24.51
19,45
18
24.7
75.49.
80.51
82
750
56.39
59
62?5
5307
16.56
16.55
15
17,2
Far Eastern Satellites 0.6 1.32 1.72 2.52 5 4.5 4,h
eta.; waretivoir.pason.a?64...4.84.
n Table 33 fo.Uows on p. A-5.
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Table 33
Than Valve of the Direction of the Foreign Trade of Communiet Mina
1950-56
Million 'Man ...,
1959 J2 __1'E2 _22ik ,1211.
143.?.?2 wig 6 490 8 112 slya 21 024 lam
amen =:Azesta
de
;3.icao trade 2,767 2,184 1,123
c trade .1)393, 22765 5.2.2?1
4285 2,898 3,721
oropert. Satallitee 83 788 1,234
;-....fritern Satellites 25 79 112
01?.ibal
1,988
4652
4984
210684
6it6
21240
181
4,574
5,007
6,886
50834
1,345
1,405
19658
1986?
2014
424
496
1478
Gepital Movements
The budget report of Srioa-Prealar II Haien-am to the 1951 National
1.,010$ Congress provides oonaidereble initirmatiou of the value of Soviet
loAnn to (44ina. Li reported that the USSR has estended to China loans.ammatang
tc
52914 million yuan* of which 2074 million ire used before 195) and
-4120 ffnllion are being used in the period of the First Five Year Plano The
Aget report also provides the basis for calculating the annual utilisation
of the Soviet loans ertanded daring the Five Year Plank
Other capital iv/memento have been revealed in budget reports. FarriV,,
*VI expenditures; have been reported for the years 195547. Service on debts
(bolt domestic and foreign) has been reported for the years 195147. Aa infor.
Nation Is available an domestic debt service, foreign debt service has been
outvlated as rusiduale, These data are shown in Table 340*
Po A-6.
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Table 34
Selected Capital Movements in the Balance of Payments of Communist China
1950-56
??????????????????romwairrammonn.
Million Than
Period
Receipts of
Foreign Credits
Foreign Debt
Service
Foreign
Aid Extended
195042
2953
2954
1955
1956
2,174
4,38
884
1,657
117
Negligible
Negligible
135
480
595
N.A.
N.A.
404 .
en repo on yuan.
III, US Dollar Value of Forakm Trade.
In previous EI0411 reports, yuan values of trade have been converted into
dollar equivalents by using the yuan-sterling exchange rate reported by China.
Although Free World trade data warrant the use of this rate in converting the
yuan value of Free World trade to dollars, there has never been adequate
evidence for using the same =Change rate in trade with the Bloc countries.
Data in recent Soviet and Satellite releases about their trade with China
indicate that this method for yuan-dollar conversions should be reexamined.
These data indicate lower dollar values for Chinese trade with Bloc
countries than are carried in previous BIC-R1 reports. The USSR has announced
the ruble value of its trade with China as 1,656 million rubles (at the
official rate of exchange equivalent to $414 million) in 1950; 4,140 million
rubies ($1,035 million) in 1953; 4,500 million rubles ($1,125 million) in
1954; and 5,500 million rubles ($1,375 million) in 1956.
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The reports of the European Satellites of their trade with China indicate
a value of total Sino-European Satellite trade in 1956 of approximately
$540 milliono These dollar figures maybe compared in Table 35* with the
estimated value obtained by converting Chinese figures expressed in yuan value
to dollar equivalents by using the yuan-sterling-dollar cross rate. A com-
parison of the figures reveal that for 1950 the conversion ratio for Sino.
Soviet trade is about the same as the official cross rate, but that those for
succeeding years indicate a higher conversion ratio.
There are several possible explanations for the discrepancies in the data.
These explanations highlight the difficulties and limitations of attempting to
reconcile these differences and to express Chinese trade data denominated in
yuan into meaningful equivalents*
Part of the disparAy. between dollar estimates based on Chinese data
and those based on Soviet and European Satellite data idipt be explained by
Bloc methods of pricing commodities in intra-Bloc trade. According to
Chinese statements, trade with the Soviet Bloc is conducted at constant
ruble prices, based on 2950 world prioes. Thus the value of the trade as
reported by China should be the same as the value reported by the USSR if it
also reported trade in constant (1950) prices. If,however, the USSR
reported trade in constant (1950) prices and Chins reported it in current
prices, the value of the trade as reported by China would increase acre
rapidly between 1950 and 1956 than the value as reported by the USSR, for
world prices rose during these years.
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5uch price rises are, however, insufficient to account fully for the die-
wales. The discrepancy in Sino-European Satellite trade, as reported by
the ChinPle on the one hand and the European Satellites on the other, can be
amounted for to even a smaller degree by this price factor, The evidence
ndiostee that unit prices in this trade were not as constant as in the
5:thy-Soviet trade.
Airthermore? in computing trade data, the USSR may have excluded some
Items of trade that China may have included, since the reported value of the
USSR of its trade with China appears especially low as compared with intelli-
gence estimates as well as with Chinese reports. The items most likely
excluded are military goods shipped to China. This, difference in statistical
procedures could account for the disparity in 1953 but not for that in 1956,
when military deliveries were small.
Amther possible explanation is that the Chinese figures present foreign
trade as valued in domestic rather than in international prices. It is
known that several Bloc countries record foreign trade valued in domestic
vt003 as well as in international prices for purposes of planning and
accounting?
in Bloc countries the foreign trade price of a commodity usually differs
from its domestic price. The ratio of domestic prices to world prices varies
from one commodity to another. Thus a conversion ratio from yuan to dollars
fir trade within the Bloc would vary from country to country depending upon
the commodity composition of the trade. Information presently available does
not permit the calculation of meaningful conversion ratios based on domestic
prices tor Chinese trade with Bloc countries?
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Thus there is no available explanation for the discrepancies in trade
data, and a reconciliation would probably encompass all of these factors and
possibly others., The Paucity of information about the methods of China of
recording and reporting foreign trade, including data on exchange rates,
precludes a completely satisfactory explenation or exact estimate of the
dollar value of this trade. It is believed, however, that conversion of yuan
25X1
values to dollar equivalents by using the sterling cross rate gives a use/t1
approximation of the value of trade.
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1
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