WEEKLY SUMMARY SPECIAL REPORT CHINESE AID IN THE THIRD WORLD

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500040025-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 16, 2016
• Document Release Date: December 14, 2004
• Sequence Number: 25
• Publication Date: June 30, 1972
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Chinese Aid in the Third Wirld
DOIJM!NT SJVICES B1AICFI Secret
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Chinese Aid
in the Third World
Pakistan Burundi
Tanzania Burma
Somalia Ceylon
Yemen Afghanistan
Ethiopia Zambia
Guinea Chile
Sudan Mali
Nepal Rwanda....
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China moved from the isolation of the Cul-
tural Revolution in 1969 to recoup its diplomatic
losses and compete for major power influence.
The Chinese economic aid program in the Third
World was revived after being stagnant, in terms
of new commitments, for some five years. Chi-
nese aid commitments of nearly $1.6 billion in
the past two years have more than doubled
Peking's previous total. Aid allocations thus far in
1972 maintain the pace of the previous two years,
indicating the priority given to economic aid di-
plomacy. Military aid, although totaling only an
estimated $440 million, has become important
for some recipients.
Peking has at the same time sought to re-
move the subversive taint many Third World
countries associated with Chinese aid. Ideological
rhetoric has given way to the pragmatic considera-
tion of expanding Chinese influence. Peking real-
izes that its earlier tactics, such as aiding dissident
groups seeking to overthrow the host government,
impede normal state-to-state relations. Peking is
making compromises with monarchies and mili-
tary juntas and ;s courting non-revolutionary re-
gimes in Ethiopia, Iran, Kuwait, and Turkey. The
Chinese have even warmed to the Numayri regime
in Sudan, which decimated the Sudanese Com-
munists in mid-1971.
Economic Aid Step-Up
Some 60 percent of the nearly $2.6 billion
worth of aid extended under Peking's 16-year-old
program has been committed during the past two
and a half years. During this period aid has been
extended to 27 countries, many of them new
recipients.
Of the peak extensions of nearly $710 mil-
lion in 1970, about 60 percent w; s allocated for
the Tan-Zam Railroad while some $200 million
went to Pakistan. About one fifth of the $553
million extended in 1971 went to Somalia alone.
Peking also revived $57 mii;ion of unused credits
to Burma and extended an additional $24-million
commodity credit in an orfort to normalize rela-
tions with Rangoon. Last "ear also saw China's
first economic aid commitments to Chile, Ethi-
opia, Iraq, Peru, and Sierra Leone.
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The pace has quickened this year with nearly
$305 million already extended to ten countries.
Burundi, Guyana, Malta, Mauritius, and Rwanda,
accepting their first Chinese aid, received almost
half. The largest CI inese credit to a Latin Amer-
ican country also was recorded this year when
$65 million was committed to Chile.
About 40 percent of Chinese aid has been
allocated for the construction of railroads and
roads. More than $400 million has been extended
for the Tan-Zam Railroad, the largest single Com-
munist financial commitment for an aid project in
a less developed country. The Chinese also have
built roads in Nepal, Pakistan, Yemen (Aden),
and Yemen (Sana), and others are scheduled for
Somalia and Sudan.
A third of total Chinese aid has bean in the
form of commodities and foreign exchange, con-
trasting with less than five percent of Soviet aid
devoted to these purposes. China has committed
at least $160 million in hard currency, of which
almost $60 million has been supplied since early
in 1970.
Light industrial projects such as textile,
plywood, paper, food processing, and agricultural
implement plants, which are simple to operate
and maintain and require a minimum of imported
raw materials, account for about 15 percent of
Chinese aid. The only heavy industrial project
under China's foreign aid program is a machine-
building complex and foundry-forge plant in
Pakistan. The balance of Peking's aid has been for
agricultural and multipurpose projects, sports
stadiums, conference halls, schools, hospitals,
theaters, and hotels.
The repayment terms of Chinese aid are al-
most unbeatable among world assistance offers.
All credits are extended without interest and are
repayable in goods over ten to 30 years after
grace periods of five to ten years. The Tan-Zam
railroad agreement, for example, calls for repay-
ment over 30 years beginning in 1983. The
lengthy repayment periods are intended to ensure
that the projects financed by the credits will pay
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Chinese-aided textile factory in Yemen (Sana).
for themselves. Projects usually are scheduled for
full-scale operation long iafore repayments fall
due.
The Chinese characteristically flood their aid
projects with their own personnel, including
semi-skilled as well as skilled workers. This has
speeded construction of Chinese projects, because
it avoids many labor problems encountered under
Western and Soviet programs which depend on
local workers to perform all but the highly skilled
and : ofessional tasks. The number of Chinese
technicians in less developed countries has grown
from 25 ir, 1957 to some 20,000. More than 90
percent are i Africa.
Despite this growth, the number employed
has fluctuated shat 7ly and has been determined
largely by the demands of a few labor-intensive
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construction projects. The 1,000 working on the
Sana - Al Hudaydah road in 1961 represented
more than 70 percent of all Chinese technicians
abroad at that time. During the mid-1960s large
numbers were used to construct a road in Nepal
and several plants in Guinea and Mali. The num-
ber of technicians abroad increased fivefold from
1968 to 1971 as work on the Tan-Zam Railroad
accelerated. By mid-1972, an estimated 15,000
Chinese were in Tanzania and Zambia, nearly
three fourths of all Chinese in the less developed
countries.
The presence of Chinese technicians costs
the host country little. Peking pays all of the
foreign exchange costs, such as transportation a; id
salaries. This contrasts with Soviet and most West-
ern aid programs, which usually require hard cur-
rency repayment for technical services. China asks
orly that the recipients pay room and board and
other local costs, and these usually are covered by
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Chinese technician in Guinea teaches op ration of Chinese
machinery.
commodity imports under the Chinese credit.
Furthermore, Peking requires its technicians to
live at the same standard as their local counter-
parts, keeping expenditures to a minimum.
Military Aid-Small but Selective
Military assistance has played a compara-
tively small role in the Chinese aid program. Only
about $440 million has been provided since 1956.
Most of this has gone to legitimate governments
and only a negligible amount to revolutionary
movements. About $300 million went to Pakistan
and nearly $40 million to Tanzania, the only
countries which have developed some dependence
on Chinese arms.
Pakistan, apparently concerned over its de-
pendence on US arms, began seeking an arms aid
relationship with Peking in 1965 even before that
year's Indo-Pakistani war, during which -he US
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Local and Chinese personnel work on Tan-Zam Railroad.
halted its arms shipments. During the war, Pak-
istan negotiated an agreement with China for $75
million worth of arms, which were delivered not
only rapidly, but without charge. The following
year China provided an additional military aid
grant of $42 million. Through 1971 several other
pacts totaling $130 million were concluded.
By mid-1972, China had delivered an esti-
mated $200 million worth of military equipment
Islamabad
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China has also Lecome Tanzania's chief
source of military aid. Peking has delivered light
tanks, patrol boats, landing craft, anti-aircraft
Chinese Military Aid to
Less Developed Countries
1956 - June 1972
TOTAL
Pakistan
Tanzania
Indonesia
Cambodia
Ceylon
Congo
Syria
Guinea
Burundi
Sudan
Million US $
440 a/
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300
38
21
14
6
3
2
2
2
2
aj Not including Algeria, Ghana, Iraq, Mali,
Sierra Leone, Uganda, and Zambia. M iitary aid
has been provided to these countries, but there is
no information on its magnitude. However, the
total is not believed to be significant.
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guns, and large quantities of small arms and other
military-related equipment. In aJdition, it has
constructed an arms repair facility and a police
training school.
D:.r es Salaam's decision to unify its main-
land and Zanzibar armed forces and to place the
servicing of its military establishment largely in
the hands of the Chinese apparently was made
early in 1969. Within a year, Canadian and Soviet
programs were pushed out. The number of25iX1
nese military advisers and technicians rose from
220 in 19G3 to an estimated 735 in 1971.
Chinese engineers also are supervising con-
struction of a naval facility at Dar es laam
scheduled for completion this year.
China also is developing an air defense sys-
tem for Tanzania, including the construction of
an airfield some 90 miles from Dar es Salaam.
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countries. Aid in each case has reflected the gen-
eral warming of relations between China and the
recipient and has most often followed diplomatic
recognition. It has been China's means of estab-
lishing a presence in many Third World countries
and promises to remain the most effective tool
for expanding Chinese influence in these coun-
Two new military aid clients already have tries.
been added this year-Burundi and Sudan. Tht
New aid commitments are likely to fluctuate
with political considerationu and new opportuni-
ties, but over the next few years, zre likely to
remain at a high level. Chinese programs will
continue to emphasize labor-intensive projects,
and are expected to continue to focus on Black
Africa, where Peking can meet aid requirements
and effectively challenge Soviet and Western in-
fluence. While the emphasis remains on Africa,
more Chinese ecor:,nic and military aid may
flow to Asia, the Middle East, and Latin America,
Foreign aid will continue to serve as a key but in those areas it is not likely to be as great as
instrument of Peking's policy in Third World Soviet aid.
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Chinese-built cigarette factory in Mali.
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