STAFF NOTES: CHINESE AFFAIRS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000300080011-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 35
• Document Creation Date: December 19, 2016
• Document Release Date: June 1, 2005
• Sequence Number: 11
• Publication Date: May 12, 1975
• Content Type: REPORT

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Chinese Affairs
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May 12, 1975
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CHINESE AFFAIRS
May 12 , 19 75
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Leadership Appearances: A Non-Pattern. . . . . . 7
May Day and the Military . . . . . . . . . . . . 10
May Day in the Provinces . . . . . . . . . . . 13
Chiang Ching: Both a Legalist and a
Confucianist Be . . . . . . . . . . . . . . . . 16
China: Tankers 1.9
Indian Relations: Even More Sour . . . . . . . . 20
Another Hat for Chen Hsi-lien. . . . . . . . 25
ANNEX: China's Grain Import Policies . . . . . . 27
CHRONOLOGY . . . . . . . . . . . . . . . . . . . 34
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Leadership Appearances: A Non-Pattern
F 1
A series of major events in Peking--the Kim
Il-song visit, rallies in support of communist vic-
tories in Cambodia and Vietnam and May Day--brought
most of China's leaders into public view. Not all
leaders appeared at all events, however. Some
failed to appear at events they would normally be
expected to attend, and others appeared in unusual
capacities at other festivities.
Among the more surprising inconsistencies was
the non-appearance of Politburo member Chang Chun-
chiao at the festivities surrounding Kim's visit
and both the Cambodia and Vietnam rallies. Chang
has often assumed hosting duties on behalf of visit-
ing foreign communist delegations, but his absence
from all functions associated with visiting com-
mtinists raises questions about whether he has re-
linquished this role in light of .".,is recent accumu-
lation of other duties. Chang does not appear to
be in any political trouble. He did appear on May
Day, and his art,.cle in last month's issue of Red
Flag continues to be cited frequently in the pro-
vincial propaganda, sometimes without reference to
the earlier article by fellow Politburo member Yao
Wen-yuan.
Yao emerged in an unusual role during the Kim
Il-song visit, as the second-ranking participant
in some of the substantive discussions between Kim
and Vice Premier Teng Hsiao-ping. While Yao has
often hosted visiting journalists on his own, this
was the first time he is known to have taken part
in substantive talks with a visiting head of state.
Yao appeared at all of the recent events in the
capital, somewhat overshadowing the nominal third
man in the leadership, Wang Hung-wen.
May 12, 1975
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Wang was not present for Kim 11-song's arrival
or departure, and, although he was the highest
ranking Chinese leader at both banquets during the
Kim visit, the speeches for the Chinese side were
given not by Wang but by Teng Hsiao-ping. Wang's
protocol ranking in the leadership obviously does
not automatically entitle him t, an important role
in such major events as the visit of Kim I1-song.
Moreover, despite his presence at both the Cambodia
and Vietnam rallies, it was Defense Minister Yeh
Chieng-ying, rather than Wang, who delivered the
speeches.
The appearances of Chiang Ching seemed almost
arbitrary. She was on hand to greet Kim Il-song
but did not see him off. Although she rarely at-
tends state banquets, she was present at the banquet
for Kim but did not attend Kim's reciprocal banquet.
She attended the Cambodia rally but not the Vietnam
rally. Most startling of all she was the only major
leader, other than Mao and Chou, to miss May Day.
Her absence was made even more glaring by the pre-
sentation, given by some ten thousand cultural
workers, of songs from the operas produced under
her auspices. Radio Peking called the presentation
"by far the biggest festival performance in Peking,"
begging the question of Chiang Ching's absence.,
Taken together, the recent events in Peking
and the leadership appearances associated with them
may give some claes as to the relative importance
of certain officials. Chiang Ching's political
standing, as usual, remains hazy. Teng Hsiao-ping
is clearly important, perhaps far more so than his
sixth-ranking position in the leadership would sug-
gest. By contrast, young Wang Hung-wen's performance
to date does not seem to equal his standing as third
in the leadership. The other members of the "second
generation," particularly Chi Teng-kuei, who himself
was tied up with the visiting Belgian prime minister
May 12, 1975
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but managed to appear at all the other events, are
taking on greater responsibilities. Although this
pattern has been discernible since the National
People's Congress in January, the most surprising
development is the role of Yao Wen-yuan during the
visit of Kim Il-song. Yao has not seemed to figure
greatly in the growing role of the second genera-
tion, but his future activities may merit close
watching.
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May 12, 1975
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May Day and the Military
I
Leadership appearances on May Day suggest that
while party-army relations remain strained, civil-
ian leaders in Peking and regional commanders have
reached a certain accommodation. The campaign to
strengthen the proletarian dictatorship, which has
so far emphasized social order and production goals
and has not been used as a means to attack the mili-
tary, almost certainly appeals to the vast majority
of military men on both counts. While provincial
turnouts are incomplete, and some missing leaders
are soldiers who hold party posts, most top ranking
military men have been accounted for. One previously
absent leader who had been heavily criticized, former
Canton Military Region political commissar Jen
Ssu-chung, h: ,s apparently been given a high ranking
military post in the Tsinan Military Region. The
effort to ease military men out of party and govern-
ment posts continues, and with some success, but
Peking's tactics are quite different than they were
during the campaign to criticize Lin and Confucius.
At that time, regional commanders were the targets
of s!--were criticis.n, and seven of them were stripped
of their provincial party posts in one bold stroke.
The current standing of the military is typified
by the appearances of two military region commanders
who are also politburo members. Shenyang commander
Li Te-sheng led the turnout in Liaoning. Li, who
lost his post as head of the PLA's General Political
Department last year and was dropped from the politburo
standing committee this year after running into
serious trouble during the anti-Lin, anti-Confucius
campaign, had been conspicuously absent from large
turnouts in Liaoning in April to greet Kim Il-song
on his arrival and departure from China. Li's
political standing remains shaky, but he apparently
remains Shenyang Military Region commander.
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Canton Military Region commander Hsu Shih-yu,
who was reported to be visiting a "grassroots unit"
on May Day, was the only one of the provincial-based
politburo members who did not head a turnout ir_ his
provincial capital. The peculiar treatment accorded
Hsu se.;ms a sign of political weakness and serves to
emphasize his separation from the locus of political
power in the region. However, the party first sec-
retary of Kwangtung was also absent from Canton,
which tends to cloud the meaning of the turnout.
Other recent indicators are consistent with
Peking's carrot-and-stick approach toward the mili-
tary. Two provincial military figures who weri
heavily criticized last year and seemed likely purge
candidates continue to appear in Peking. Han Hsien-chu,
who was rotated from Fukien to Kansu, and Hsieh
Chen-hua, who hea'ed Shansi until a play produced
there was branded a "poisonous weed," were listed
among members of the party central committee appear-
ing in the capital. Neither leader has appeared in
his province in some time, but they have not yet been
replaced, either.
Several military men were publicly rehabilitated
or given active pasts for, the first time on may 1.
Fu Chung-pi, who was Peking Garrison commander until
his fall in the 1968 purge of acting chief of staff
Yang Cheng-wu, is now listed with ranking officers
of the Peking Military Region. A continuing relation-
ship with Yang, who is now a deputy chief of staff,
cannot be established, but Fu certainly has no strong
ties to his superior, Peking Military Region commander
Chen Hsi-lien. The appointment appears to be another
example of the civilian leadership using checks and
balances to control a politically sensitive military
command. Another professional soldier who fell
early in the Cultural Revolution, former artillery
commander Wu Kuo-hua, has also returned to active
May 12, 1975
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ranks, while Tan Cheng, who was the head of the
General Political Department and a vice-minister
of defense in the 1950s, was listed as "attending"
the festivities.
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Pressure on the military nevertheless continues.
Wu Hsiu-chuan, a former head of the party's
International Liaison Department, is either a deputy
chief of staff or, more likely, a deputy director
of the General Political Department. In either case,
Wu seems to continue the trend of placing putative
civilians in high military posts. Moreover, domr'stic
propaganda seems to'be telling PLA men that they
will no longer receive preferential treatment in
the form of urban employment upon demobilization.
Numerous articles also continue to emphasize that
local military leaders are to support their party
and government counterparts at all times.
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May Day in the Provinces
May Day turnouts in the provinces were con-
siderably larger than a year ago when the anti-
Confucius campaign was raging, but less impressive
than those for National Day (October 1st) when a
major effort was made to project an image of sta-
bility and unity. Accounts of this year's festivi-
ties are notable principally for their blandness.
There were no major surprises this year. No
new first secretaries were named, nor were any
purges revealed. Five provinces--Anhwei, Heilung-
kiang, Hupeh, Liaoning, and Shansi--still do not
have a publicly identified first secretary, and
civilians continue to head 16 of the 29 provincial-
level units. Military men lead the other eight.
Anhwei, Chekiang, Fukien, and Kiangsu--four
of the more troubled provinces--failed to publish
detailed accounts of their local celebrations,
indicating that the situation remains unsettled
there. Heilungkiang, whose first secretary appar-
ently :eras purged recently, also failed to provide
a name lisc of those in attendance. Yunnan, on the
other hand, turned out in force despite its con-
tinuing factional struggles.
A few provincial leaders appeared in Peking.
Most notable were Jen Jung and Lu Jui-lin, the
bosses of Tibet and Kweichow, respectively. Jon may
be discussing Tibet's long-standing economic and
supply problems with officials it the center. Lu
may be in Peking to discuss Kweichow's persistent
factionalism, although rumors of poor health neces-
sitating trips to the capital for medical treatment
continue to surface.
The strangest turnout was in Kwangtung where
Chao Tzu-yang, the party boss, Hsu Shih-yu, Canton
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Military Region commander, and Chiao Lin-i, Canton's
mayor, all failed to attend the provincial rally.
Itsu was reportedly with a "grassroots unit" some-
where, but no effort was made to account for Chao's
and Chi.ao's absence. There is no evidence to sug-
gest that either man is in political trouble. In
their absence, Kung Shih-chuan, the second ranking
military man stationed in the province, led the
turnout. Kung's role is mildly surprising because
he was apparently stripped of his provincial party
titles as a result of the anti.-Confucius campaign,
although he retained his military posts. It was
apparently in that capacity--as well as a member
of the Central Committee-- that he led the turnout
in Kwangtung.
The top party figures in Inner Mongolia and
Tsinghai also missed local celebrations. As was
the case in Kwangtung, no explanation was offered
for their absence, and neither man seems to be in
political difficulty. Inner Mongolia's number two
man did attend the festivities in Peking as a mem-
ber of the Central Committee.
May Day turnouts indicate that the campaign to
study the proletarian dictatorship has had little,
if any, effect on provincial leaderships so far.
Both national and local leaders have successfully
managed to keep the campaign focused on impersonal
behavior patterns and away from the s ecific actions
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campaign may be coming to an and, and that criticism
of individuals--which could lead to changes in some
of the less stable provinces--will be in ortly.
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Chiang Ching: Both a Legalist
and n Confucianint Be
Although the anti-Confuciun campaign has faded
into the background, nome discunnion of the histor-
ical struggle between legalints and Confucianists
continues to surface in the propaganda. Two such
articles recently received in Washington acorn to
take opposing views of Chiang Ching.
Last year, Chiang Ching's supporters appeared
to make a cane for her to be chosen an Mao's nuc-
censor by painting a favorable picture of ?mprenn
Wu, generally regarded an a terrible ruler. The
spruced-up image of the emprena, suddenly called
a "legalin:," wan countered by wall posters that
attacked Empress Wu and linked her directly to
Madame Mao.
Chiang Ching's supporters evidently tried again
in early January with another article on the virtues
of the "legalist" empress. The timing of the article,
just after the party central cormnittee had completed
a new slate of government officers that omitted
Chiang Ching, may be significant. The article smacks
of some vengeance over the obstacles Impress Wu/
Chiang Ching had to overccme to win positions of
power.
In addition to repeating the earlier theme that
Empress Wu ruled China well for many years after her
husband's death, the article made some specific claims
that seem to resemble more recent events. Striking
what appeared to be a rather vindictive note, the
article lashed out agkinst the court elders who objected
to the emperor's marriage to Wu and who vigorously de-
fended the emperor's current wiio vn one who "should
not be divorced lightly." The pansar,? seems to refer
to the controversy nuriounding Mao'ts marriage to
Chiang Ching, which many party officials opposed,
and their support for his highly respected wife, Ho
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 Tzu-chen, who had made the Long M.!rch. in its do-
fenna of Wu, the article noted the emperor wan at-
tractod to her because, among other things, she
was "well versed in literature," apparently an
allusion to Madame Mao's cultural aspirations.
The article also complained that those in power,
inclucing the court "secretary-general" and some
who hold important vernment positions, constantly
conspired against her. Upon assuming the throne,
the art,l,cle noted that Empress Wu removed 36 such
officials, including the prime minister. These
actions were portrayed in the article as praise-
worthy, legalist policies.
By contrast, an article in March on the struggle
between Confucianism and legalism complained bitterly
that the Confucianists used opera to attack the
legalists, distort historical facts, and advance
their own cause. Although the article was cant in
historical terms and the operas attacked are ancient
ones, the complaints could easily apply to the model
operas created under Chiang Ching's guidance.
The article claimed that the operas glorified
certain Confucianist figures, whose names were
widely used in the anti-Confucius propaganda last
year to represent Lin Piao, and eulogized historical
generals who advocated policies of "national betrayai."
Chiang Ching's operas, in fact, glorify some military
men a;to undoubtedly were originally intended to
represent Lin Piaoo, and several of her operas glorify
the military in general. Last year's anti-Confucius
propaganda, inter alia, accused not only Lin but some
regional military commanders of harboring traitorous
ideas.
The article noted that none of the old operas
praised the major legalist figures and that one,
"The Stubborn Prime Minister," even attacked a
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respected legalist. One of Chiang Ching'n operas
is open to similar charges. Perhaps nomewi't akin
to "The Stubborn Prime Minister," it not, only does
not praise Premier Chou En-lai but actually appears
to denigrate him and portrays him an "stubborn."
Lent there be any doubt that the discussion of
ancient operas has current relevance, the article
accuses "Lin Piao and company" of using the Confucian
practice of producing operas an "monuments" to
themselves. Any operas created after Lin gained power
in 1966 in fact were done no under Chiang thing's
tutelage. Consequently, the article's criticism of
operas created by Lin "and company" can only refer
to Chiang Ching's model operas.
Although the article lauds the "revolution in
Peking opera," it attributes this not to Chiang Ching
but to "the proletariat." It concludes with
ritualistic praise for the model operas but calls
for "conti,aued effort" to root out Lin Piao's
influence, particularly the distortion of history,
in the cultural sphere.
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China: Tankers
Poking in making a major effort to expand its
international tanker The fledgling float--
600,000 dead weight tons acquired since mid-1974
for more than $150 million--could reach 1 million
tons by the and of the year. 't'ankers account fo.:
about 00 percent of the international merchant fleet
total tonnage purchased during the first four months
in 1975. By world standards, it in a small float.
The newly acquired tanker float will carry an
increasing share of China?s growing petroleum ex-
ports. Crude oil deliveries totaling nearly 9
million tone are scheduled for this year--8 million
tons of it to Japan--of which the Chinese may carry
as much an one third. The fleet has already car-
ried one million tons of crude to Japan since July.
Chinese tankers will also participate in deliveries
of 650,000 tons to the Philippines, with chartered
tankers carrying the initial consignments.
May 12, 1975
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Indian Relations: Even More Sour
Sino-Indian relations are likely to be quite
frosty over the next few months, but the Chinese
have not closed the door on eventual rapprochement.
Poking's verbal reaction to what it sees as Indian
moves to eliminate the remaining vestiges of
Sikkimose autonomy has been strong. In the past.
several weeks, Sikkim's monarch has been removed
from office with the assistance of Indian troops,
and the parliament in Now Delhi has passed a resolu-
tion approving statehood for Sikkim.
In a government statement issued on April 29,
the Chinese bitterly denounced India, charging that
it engineered the monarch's removal and that the
parliament's decision is simply the "legalization"
of Sikkim's annexation. This is the first time in
nearly two years that Peking has expressed its views
through a government statement, and it represents
the highest level criticism of India since the India-
Pnkistani War of 1971. Poking's statement prompted
Now Delhi to issue one of its own, which accused the
Chinese of interfering in India's internal affairs.
The language in the Chinese statement is the
strongest used ''.ince Indian moves in Sikkim began
to attract Peking's attention last summer. In this
regard, the statement dwelt at greater length than
past commentaries on Indian "expansionist" ambitions
in South Asin.
As might be expected, the Chinese have ruled
out--at least for the present--any improvement in
Sino-Indian relations. Chinese diplomats are now
saying privately that Vice Premier Chen Hsi-lien's
friendly overtures toward the Indians in February
carried no special significance.
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Chinese concern about Sikkim goes beyond the
fact that India's strategic position has been
strengthened at China's expense. Equally important
is the belief that Sikkim is yet another Indian probe
designed to test China's resolve to maintain the
status cgio in other parts of the buffer region.
The Chinese may fear that anything short of a strong
reaction could be misinterpreted in New Delhi an a
lack of resolve on China's Part.
The Sikkim developments were also a bitter pill
for the Chinese because of the political context
in which they came. Peking has been trying for a
number of, months to improve relations with New
Delhi. The Chinese must have hoped that aside from
serving their long-term interests, friendly over-
tures would also work to their advantage in the
short term by providing an incentive to the Indians
for restraint in Sikkim. New Delhi not only failed
to respond favorably to China's overtures but it
undertook rapid and blatant actions to incorporate
Sikkim.
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Moreover, these moves came shortly after Soviet
Defense Minister Grechko's trip to New Delhi. The
Chinese are undoubted) suspicious that a new arms
deal was concluded
n may now ear that India's
coolness toward the Chinese overtures and its moves
in Sikkim are part of a quid pro quo. Treatment
of the Soviets in Chiaa's government statement seems
to strengthen this interpretation. The statement
goes beyond pr~a iuus comment and labels Moscow
the "main threat" to the sovereignty of South Asian
countriers and the "most dangerous enemy" of the
people of the region. In the past, India and the
Soviet Union were held equally culpable for Indian
actions.
Despite profound unhappiness over Sikkim, how-
ever, the Chinese continue to display interest in
eventual rapprochement.
an-hua
that, at
prey , ons wi In di, are neither
very good nor bad" and that in the long term
relations will be "good."
--Although Peking protested to the Indians
over anti-Chinese demonstrations which came
in the wake of China's government statement,
Peking did not publicize the issue in an
obvious effort to keep polemics from esca-
lating further.
--During his recent trip to Pakistan, Vice
Premier Li Hsien-nien reassured Islamabad of
continuing Chinese support in the face of
developments in Sikkim, but left little doubt
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that Pakistan would have to prepare itself
for some measure of Sino-Indian rapproche-
ment. In this regard, Li urged Islamabad
to continue to repair its differences with
New Delhi; this, of course, would help to
remove stumbling blocks to improved Sino-
Indian relations.
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At this point, China's dilemma is how to in-
crease its leverage vis-a-vis India without jeop-
ardizing hopes for better ties in the future. The
optiu.'s are few.
For the next few months, the Chinese can be
expected to consolidate, to some extent, relations
with Pakistan and Nepal. There may-even be some
movement toward normalizing ties with Bhutan. At
the same time, Peking and New Delhi will probably
continue their battle of words while carefully
monitoring each other's actions. While Sikkim has
done much to fire suspicions between China and India,
statehood has gutted the issue as a future irritant.
Whether some form o rapprcc ement is possible, after
the heat of the issu subsides, will probably rest
heavily on Indian behavior in the buffer state
region during the next several months.
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Equally important will be how the Chinese
view relations between Moscow and New Delhi. At
present, Peking continues to maintain that there are
inherent conflicts in the Soviet-Indian relation-
ship which will become increasingly apparent.
However, China's treatment of the Soviets in its
government statement on Sikkim hints at some
reservations about this assumption. If India
should appear to the Chinese over the next several
months to be making political concessions to Moscow
in return for military aid--an unlikely course--
Peking may decide that rapprochement is a futile
pursuit which hazards more than its promises.
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Another Hat for Chen Hsi-lien
Peking regional military commander Chen Hsi-
lien has added another job to his growing list of
responsibilities. The only military man among the
newly appointed vice premiers of the government,
Chen was identified on May 11 as a member of the
Military Commission, the organization through which
the party maintains its control over the military.
Radio Peking coyly refrained from specifying whether
Chen is a "leading member" of the Military Commis-
sion or "the" leading member. The distinction is
important because he could either be one of several
vice chair-,ten of the commission or the ranking vice
chairman, a job generally thought to belong to De-
fense Minister Yeh Chien-ying.
Despite Yeh's presence at the military sports
meet, at which Chen's new job was publicly revealed,
it was Chen rather than Yeh who gave the opening
address. Chen welcomed the participants "on behalf
of the Chinese PLA," the only military leader other
than Yeh Chien-ying to use those words since the fall
of Lin Piao. Chen's speech dwelt on military training
and preparedness and made no reference to a political
role for the PLA.
Chen seemed to clash with moderate leaders in
,Peking when he led an attack during the summer of
1973 on the use of university entrance examinations.
He was also attacked by historical analogy during
last year's anti-Confucius campaign. Since that time,
however, he has performed well in his capacity as
vice premier and has shown no recent signs of opposi-
tion to current moderate policies. His apparently
docile behavior in recent months can perhaps best be
explained by the number of new jobs he has been given.
He was transferred to Pcki,ng in the rotation of mili-
tary commanders at the end of 1973, thereby bringing
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him to the oenter of political power, allowing him
to participate in the national government, and
giving him an opportunity--pons.tbly limited when
he wan stationed in Liaoning--to be prevent at all
Politburo meetings. The range of Chen's current
jobn nuggonta that he in one of the most
members of the regime.
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May 12, 1975
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China's (;rain Import P es
F I
5ihce 1961, China has regularly imported latirt
quantities of grain to maintain rations in northern
cities. Initially, short-term purchases of wheat
were made as an emergency measure, following the
collapse of the Great ieap forward. Imports became
a permanent feature of Chinese policy when it he-
came apparent that aciricuitural development wan
lagging in the trorth China Plain. In the winter
of 1963/64 and again in 1966 long-term (3-year)
purchase agreements were signed with Canada and
Australia.
New investment flowed into agriculture in the
1960x, and by the end of that decade the iovernrent
apparently was confident that the gap in grain out-
put would soon be clcsed. Upon tt.7 completion or
the long-terra agreements with Canada and Australia,
Peking reverted to a short-term import policy. in
the fall and winter of 1969, the Chinese beoan to
contract for grain to satisfy minimum projected
requirements and then, if required, planned to sup-
plement tiese purchases with short-term purchases
the following year. In late 1969, one-year con-
tracte were signed with Canada and Australia. in
1970 and again in 1971, China purchased from Canada
exclusively, ostensibly because of Peking'a disaatin-
faction with Canberra's failure to grant diplomatic
recognition. In 1971, grain imports fell to only
3.03 million tons, lean than one half the record
6.31 million tons purchased in 1964 and substan-
tially below the trend established over the prior
decade. (See table.)
Still another turnabout in China's import
policy began to emerge in late 1972. Crop pros-
pects in North China deteriorated rapidly in the
May 12, 1975
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late summer of 1972, forcing )'eking to peek grain
for immediate de l ;very . The timing could not have
hpen worse. World supplies of grain for export
v;;re the lowest in yearn; deliVorips from Canada--
China's sole supplier at the time--were snarled
by a Canadian clock strike, and harvest prospects
were uncertain in all major grain exporting coun-
tries except the US. In September 1972, the Ch!.-
nese purchased 595,000 tons of us wheat through a
third country trader as a stopgap until deliveries
from traditional suppliers could be resumed.
tleginning in mid-October. 1972 the Chinese,
following their normal practice, began to purchase
grain for delivery in 1973. The initial purchase
was for 1.0 million tons of Australian wheat--the
first contract signed with that country since 1969--
followed by a contract for 1.7 million tons cf
Canadian wheat. Almost before the ink wan dry on
these contracts, the Chinese were informed that
Australian deliveries would be halved because the
harvest was lower than expected, and the continuing
dock strike in Canada would also likely force addi-
tional cutbacks in deliveries from Ottawa. To
make matters worse, inclement weather continued to take
a heavy toll of the grain harvest in north and north-
cast China. Thus, the Chinese wore forced to turn
to the US for a second time, this time for 575,000
tons of corn which was cheaper and more readily
available than wheat.
By entering the market when international
stocks were near rock bottom, the Chinese were
forced to scrounge for grain and pay inflated prices.
Peking was determined not to get caught short again.
In the winter of 1972, the Chinese began to pur-
chase grain to cover the maximum rather than the
minimum projected requirements for 1973.
In late 1972 and early 1973, Peking purchased
13 chemical fertilizer plants from the west; the
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Chinese expect to achieve ael, -sufficiency when
these plants bpcom fully operable about 1977. To
ensure grain imports In the interval before the
fertilizer plants come on stream, Peking signed
three-year purchase aqreements with Canada, Aus-
tralia, and Argentina in late 1973 to buy a total
of from 3.0 million to 4.0 million tons annually
during 1974-75. These purchases are a upplemented
with short-term contracts as needed.
The Chinese apparently contracted foi more
grain in late 1972 and early 1973 than they could
cope with financially or logiaLically. Record
deliveries of grain and other agricultural cornn-
modities exceeded the capacity of northern ports,
especially during the winter months. By November
1973, long lines of ships began to queue up at
northern ports awaiting discharge. Some vessels
were unable to berth for 2 or 3 months after arriv-
ing off the coast of China, a costly oversight con-
siderirg the daily demurrage charge for each vessel
exceeded $5,000.
Poking began to look for excuses to postpone
or delay grain deliveries without being forced to
pay penalties for contract violation. Poking was
especially anxious to force a postponement in
deliveries from the US, by far China's leading sup-
plier at the time. In October, 1973, Peking began
to complain that much US wheat was contaminated with
a rare and relatively harmless smut, TCK, and that
the moisture content of US corn was too high, thereby
causing problems for human consumption. In February
1974, the Chinese rejected several cargoes of US
wheat and in April failed to arrange shipping for
several cargoes of US corn. The traders suspended
deliveries of US wheat until a solution could be
worked out. The Chinese refused offers of cancella-
tion and also rebuffed offers of consultation until
after the port congestion had #ubsided.
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Peking shifted gears in May and June 1974.
An agreement wns worked out to resume shipments of
US wheat= shipping was provided for US corns and
a series of new contracts wore ni(Ined for US, French,
and Canadian grain, increasing total purchases for
1974 delivery t} 9.5 million tons. Deliveries of
thin magnitude--about 1.0 million tons each month--
would again have exceeded China's port capacity.
But another problem had surfaced. The terms of
trade had turned against Peking. Total imports
were at an all time high whs markets for China's
major exports had noftenec,, giving rise to foreign
exchange difficulties.
Peking's initial reaction was to postpone
deliveries. In all, about 2.5 million tons of
grain--divided among all of China's suppliers--
wore carried over into 1975. Poking had contracted
for US wheat in the winter and early hummer of
1973-74 when international prices were high. In
January 19'75, international markets weakened, prices
declined, and additional price cuts worn expected.
Thus; when the world price dipped below the con-
tract price for US wheat in late January 1975,
Peking decided to cancel all outstanding contracts
for US grain. In all cancellations the Chinese
agreed to pay the trader the spread between the
contract price and world price on the day of can-
cellation. At the same time the Chinese claimed
damages for unsatisfactory grain already delivered,
reducing actual payments from about $11.5 million
to about $650,000.
Peking is not likely to abrogate the 3-year
purchase agreements with Canada, Australia, and
Argentina. However, the agreements were recently
modified to provide for split year deliveries,
April-March in place of the customary calendar
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Peking's buying intentions beyond 1976 are
unclear. It is unlikely that all of the new fer-
tilizer plants will be in full operation by 1977
as planned. Thus, China will probably require
grain imports until at least the end of this decade.
A top Peking trade official recently remarked that
China would continue to buy grain for a number of
years to come. The Chinese now view the US as a
residual source to be tapped only if a string of
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poor harventn are encountered. However, in view
of pant oxparioncen, tradern may be reluctant to
provide US agricultural commodition unlonn Poking
in willing to agree to qunlity guaranteen above
thong rovidod in the standard grain con t ract.
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April 17-20 Members of the Soviet border nego-
tiating delegation tour several
Chinese cit.'os at invitation of
the Chinese government.
April 19 Chinese and North Vietnamese sign
annual border za ilway protocol.
April 20 Vice Foreign Trade Minister Chen
Chien signs protocol for 1975 trade
between China and Mongolia in Ulan
April 25 Japanese economic delegation r-
rives in China.
Director-General of the Japan-China
Friendship Association arrives in
Peking.
April 27 Vice Foreign Minister from El Sal-
vador arrives in Peking.
April 28 Kuomintang Central Committee meets
in special plenary session in Taipei;
elects Chiang Ching-kuo chairman and
issues manifesto on future party
April 29 Japanese Socialist Party parlia-
mentary delegation arrives in
China.
-34-
May 12, 1975
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parts for visit to North Korea.
Chinese friendship delegation de-
denouncing India for its Sikkim policy.
China issues government statement
Mexican trade delegation arrives in
China.
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April 29 - Shantung holds its Peasants' Con-
May 4 grass, becoming th-i ninth province
to rebuild this mass organization.
April 30 - Mao, Chou En-lai and Chu To send
May 1-2 congratulatory message to PRG and
North Vietnamese leaders on the fall
of Saigon. Tong Hsiao-ping delivers
message to Vietnamese Communist em-
bassies in Peking. Yeh Chen-ying
speaks at rally in Peking attended
by Tong and lesser members of lead-
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May Day celebrated with leadership
appearances in the parks; Mao, Chou,
and Chiang Chin were onl notable
absentees.
May 4 56th anniversary of May 4th student
movement goes unmentioned in national
ership.
May 1 Trade promotion group from China de-
parts for visit to Bahrain.
media.
May 12, 1975
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May 4 - 8 Common Market official Christopher
Soames visits China; meets with
Foreign Minister Chiac' Kuan-hua and
Foreign Trade Minister Li Chiang.
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May 5 Japanese Socialist Part dele ati n
arrives in Peking. 25X1?
Chief Soviet border negotiator Ilichev
returns to Moscow after three months
in Peking. F__ I 25X1
May 8 Economic delegation from Trinidad and
Tobago, led by minister of industry
and commerce, arrives in China. 25X1
May 11 Chen Hsi-lien identified as "leading
comrade" of the part 's Military
Commission. 25X1
May 12 Teng Hsiao-ping and Chiao Kuan-hua
begin an official visit to France.
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