LESSONS FROM CHINA'S ECONOMIC BOOM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000504680004-8
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: February 9, 2012
• Sequence Number: 4
• Publication Date: March 31, 1985
• Content Type: OPEN SOURCE

STAT
Declassified in Part - Sanitized Copy Approved for Release 2012/02/09: CIA-RDP90-00965R000504680004-8
1* P
By SAM NAKAGAMA
Lessons from China's Economic
Boom
are bound to grow, both within the
trade and investment for American Soviet Union and among the East
but
n companies
iew
i
f
,
g
ore
and other
es
OST Americans tend to v
European satellit .
events in China as something under conditions that involve the In fact, since ites China's boom has re-
happening on another planet. transfer of technology. suited from measures undertaken to
Thus, the historic peacetime conver- ? Intensify trade pressures on the free up the economic system, it is an
Sion of China from Marxist and Mao- United states at a time when the over- earth-shaking development from an
ist economic precepts to ideas and valued dollar is undermining the eological standpoint To make mat-
practices more akin to those of capi- American competitive position. iiddes even worse for Moscow, the lat-
tetalistesting countries is development of regarded no as an in- immedi- ? Undermine support in the United
States for the arms race as a means est liberalization measures have been
accompanied by editorials in The
ate and practical importance. In fact, of national power, as China's econ- nt
China's turn down the "capitalist omy booms despite cutbacks in mili- Peopleofficial's Daily, newspaper the , most stressing important
prag.
.road" has set off an economic chain- tary expenditures.
reaction that will inevitably alter the There is no doubt that the boom is Maoist tmoand attacking > tmod st and
international balance of power. the direct result of the economic China boom suggests several
It's difficult to exaggerate the sig- liberalization program. Since the The
-nificance of the economic boom now adoption of the "self-responsibility" important political and economic les-
under way in China. In 1984 accord- system in agriculture in 1978, China sons for the United States.
t eestimates b the Central Intelli- has doubled its output of food grain First, the American withdrawal
Bence Agency its gross national and is now the world's largest pro- from Vietnam was a great victory.
broduct increased by 13 percent ex- ducer of wheat and cotton. We originally intervened in Vietnam
ceedln that in all other major coon- Following the success of the agri- to stop "Chinese expansion,' leaving
tries. This brought China's average cultural reforms, the urban sector is china little choice but to remain un-
growth rate for the past four years to being permitted greater scope for pri- comfortably allied with the Soviet
8 percent, compared with 2.7 percent vate initiative and for the market Union. After our withdrawal, China
.for the United States and 2.5 percent determination of prices, wages and shifted decisively from the Soviet
for the Soviet Union. The fact that the allocation of resources. Workers ! camp to the status of a "quasi-ally."
China started from a far lower are to get better pay for more work And by late 1977, this train. of events
G.N.P. level than the superpowers and more freedom to change jobs, had led to the emergence of Deng
subtracts only a little from the mag- and most enterprises are to be guided Xiaoping as China's paramount lead-
nitude of its growth. by the pursuit of profits. While open- er.
Since the economic boom has re- ing up the country to foreign invest-
sulted directly from Deng Xtaoping's ment and the rapid importation of 1N striking contrast to military poli-
liberalization measures, the success technology, Peking is vigorously pur- cies here, the Chinese have
of those policies has important politi- suing the expansion of exports and trimmed their military budget
cal implications for the rest of the imports, and reduced the size of the People's
-world. The ongoing conversion of The urban reforms have brought Liberation Army. While thousands of
China to a more pro-Western and pro- about a nearly instantaneous consum- junior officers have already been re-
the im- has announced plans to
NEW YORK TIMES
31 March, 1985
er-spending boom. Japan was tired, Pekung
mediate beneficiary, avoiding an eco- put out to pasture more than. 80,000
nomic slowdown in last year's fourth officers over the next few years, in-
quarter only through a steep rise in cluding 47,000 by the end of 1986.
fi with the rank of,
rs
f
ce
exports to China. China is now ; Forty senior o
Japan's second-largest export mar- lieutenant general or higher were
ket, following an astounding 47 per-' placed in retirement last year.
cent increase in 1984. In January, , Military factories are being con-
Japan=s exports to China recorded a verted at least partly to the produc
yearto-year increase of 74 percent, Lion of civilian products. All this is
including an 850 percent rise in televi- going on even though, according to
sion sets. Much of the consumer- estimates by the Pentagon, Soviet
spending boom in China has involved military forces in the Far East have
TV sets, washing machines, refriger- been increased to 52 infantry devi-
ators and other electrical appliances lions, 1,820 tactical aircraft and 135
that are streaming into the prosper- SS-20 missile launchers.
ous countryside. These developments have a great
China's dramatic success - com- deal of relevance to the budget-policy
bined with the expansion of trade with decisions facing the United States.
that our strategic
chev takes over as the party's Gen-'
eral Secretary.
? Shift further the center of gravity
of economic and political power to the
Pacific Basin countries.
and economic system. eed, this
wildly favorable geopolitical
.went should be as shocking as the fall
of China to the Communists in 1949,
an event that shaped American atti-
tudes and foreign policy for an entire
generation.
It.is already clear that the China
boom will have major consequences
for the world economy. These are
some of the things it will do:
? Step up the pressure for change
within Russia as Mikhail S. Gorba-
? Create vast new opportunities for
Sam Nakagawa is chief economist
of Nakagama & Wallace Inc., an eco-
nomic advisory firm in New York.
the capitalist countries - obviously
poses both practical and ideological
threats to the Soviet Union. As
China's economic boom improves u.- Washington is to steno
ing standards while providing more rent policy in ground" in the
economic freedom, the pressures on the Russians into the gthe Kremlin - either to make the ex- arms race. In actual practice, how-
isting economy work or to reform'it-
Confir"or
While it is obvious
position is far stronger today than
when China and the Soviet `Union
Declassified in Part - Sanitized Copy Approved for Release 2012/02/09: CIA-RDP90-00965R000504680004-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/09: CIA-RDP90-00965R000504680004-8
ever, the economic indications are
that we are spending ourselves into
the ground with budget policies that
are destroying our competitive posi-
tion through an overvalued dollar.
In our budget policies, therefore, it
may be argued that we are fighting
the wrong war, at the wrong time, in
the wrong place," as General Omar
Bradley once said about the Korean
War. Indeed, what's happening in
China suggests that the cold war is
really over simply'because the United
States has already won it. Our major
effort should be aimed at rebuilding
our competitive position as we con-
front the economic and technological
revolution that is sweeping the Pa-
cific Basin countries, now including a
billion Chinese. ^
Declassified in Part - Sanitized Copy Approved for Release 2012/02/09: CIA-RDP90-00965R000504680004-8