PEKING RIFT WITH HANOI SEEN GROWING WIDER; RUSS BLAMED

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-03061A000400020023-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 30
• Document Creation Date: November 11, 2016
• Document Release Date: August 4, 1998
• Sequence Number: 23
• Publication Date: November 12, 1968
• Content Type: NSPR

LCS 1.I~IGELE TII~,T,S
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Peking Riff ~Jit~i (~an~i Seine.
Growing hider; 6~~ass .69ar~ed
Officials Told by Bitter China Regime North Vietnam
~
hf, Follows Course to Disaster
Has Lost the Will to Fig
PYRGHT`
~. .
..BX RaT3ERT S. ELEGANT ; .
Tlma flail Wrltar
HONG BONG--Highly .reliable ^ a e a-
i ?list iVlaoists hate. ~ '
;sources revealed Monday that the , .The Sino -Soviet split shortly'
'division between Hanoi a~td- Pelting ~ :thereafter became a matter of ubliq
`wes rapidly growing wider~,~th a x ~ p
~'bittez: Chinese regime - rzva n~,t~ ,.record-and a major influence, on.
f~ ~~~ ., y ttie international political scene. It:
Eforming its, senior ,officials that ,;was accompanied by the cessation of
hforth Vietnam had~ost the w111 to ' `.Russian aid to China and tlye total;
#iight and was cracking under Rus-:::;_
scan pressure. ;withdrawal of Russian technicians..
~> As seen fror>:~.Peking, Russian '-' Hanoi .Not Called 'Revisionist'
influence is npw preponderant in', '' ; Though the. parallel is striking;
I'Hanoi, while ,`the Vietnamese ;are ` 'evidence . is still insufficient to
tooloowing a coizrse which will lead to ? ~ project a complete split between
;disaster. It ~ d u c t i o n in Chinese.-~ Hanoi and .Peking. However, the
:'material ,~ncl arms support- for.'; 'Chinese doziot, to say the least, call
Vietnam .is now becoming a proba- . ;their friends "revisionists" -the,
f The Chinese have not officially or
ipublicly expressed any opinion on
'the total bombing halt and the new
.phase of negotiations in 1'arfs.~-.
Preslslent's Spcec$ Reprinted
The confidential Chinese analysis'
j~of Hanoi's position and attittfdes is
probably -more significant for its`
~, revelation of Hanoi-Peking relations-
.: Instead, they -have taken the :~ of actual conditions in IV'orth Viet-'
:unpt'ecedented step of reprinting in ', nom.
full-pointedly without comment- `.= Hanoi has desperately attempted'
:both President. Johnson's speech- ? to maintain a delicate balance in its'
`announcing the bombing ,halt and ~ relations bettiveen the feuding Russl-.
President FIo Chi Minh's :response, , tins and Chinese. But : Hanoi is'
which reaffirmed Hanoi's determiri- ' 'unquestionably leaning toward lvios-.
titian to fight on to ."total victory." - ~ cow, and Peking's disapproval of Ho
' But Western intelligence' sources . ? Chi' NIinh's policies has become'
have just gained access - to the.. ` progressively more open and more
contents of confidential. position _ 'intense since the beginning of 1968.;
gapers circulated for the informs- , ? Maoist strategists condemned the?
lion of senior Chinese officials.-They ~ Tet offensive as adventurism and.
reveal that the hard-line group. 'publicly instructed the North Viet-
`
~ " ~'
around Chairman Mao Tse-lung , is ~~
bitterly denouncing Hanoi's recent r
:actions with arguments designed. in_
part to shore up its o~vn slzaky~'
:internal position.
Senior cadres of the Chinesiv'
reginzc are bcing.toId that Hanoi has'
"lapsed into acute war-weariness:"?
The North 'trietnamese, accoi`ding tip;
the secret Chinese documents, area
'd"totally controlled by the' ~5oviet
"Uniom:attd az?e following -the road of j
~crevisionism." ~ '
", ` Tho' languRge b!' ttze ~' privatep
'briefings directly~parallels the abuse;
"heaped in the early Y9GOs upon'
Nikita S: I{hrushchey aztd hts fo1-i
~ow~r~-.-~biR..~u~hAr~.,.o>..: ?~'!~der
namese to revert to "pro-
tracted guerrilla warfare."
i With the beginning of ne- ;
gotiations in Paris, Peking '
:denounced Hanoi's policy
as "capitulation and com-
zpromise."
? Paradoxically, the
"` 1liaoists are denouncing
.the North Vietnamese for
;,following precisely t h e
same strategy which won
the Communists control of
~' China. During their civil
war against the Nations-
;: lists, the Chinese Commu-
t nests were prepared to
"alternate fighting a n d?
~talldng or do both- simul- .
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'taneously." That pulic~
brought them victor-.
The Afaoists now,
however; are comtnitic~i to
the concept of the "pcrhe-
tual worldwide liberation
struggle." They obviously
-fear that the example of
their nearest Communist
:neighbors adopting a
divergent strategy w i 11
~? further undermine t h e
Dlaoist position w i t h i n
'China.
. ~ The xenophobia of the
fimall and faltering liaoist `
clique has now become so
'intense that it views any
` negotiation with the hated
"imperialists" as a devil's
trap.
A wide range of possibi-~
`lilies is opened by the
probable imminence of a
Hanoi-Peking split if the
North Vietnamese persist
din their present course- ,
as they appear determined
to cio. `
In the judgment of ana-
lysts ~ in Hang . Kpng, it is
all but certain that Peking
has already put the Viet-
namese on notice that
they can expect no further
substanttal Chinese assis-
tance if they f?nd them- ,
selves at a disadvantage as
a result of disregarding
Chinese advice. -
i~foreover, the pragmatic'
group, now powerful in
China, tivould like to re-
fluce'aid to North Vietnam"
to a' minimum in order to
conserve Chinese resour?~
ces and to diminish the .
danger of a direct confron>
'tation with tha United
States:
~1A000400020023-2
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29p}No~v(e~mHbTer X968
~'NtE~fSURES -TO STRENdTHEN SOVIET MILITIA ADOPTED
_ The CPSU Central Committee and the USSR Council of Ministers have recen y
reviewed the question of steps to further strengthen the Soviet Militia. A resolution
adopted on this question notes that in recent years important steps have been taken
by the party and government to strengthen the struggle against crime, to increase
the publics role in this matter, and to improve the activity of the militia, prose-
cutors~ offices, and the courts. The implementation of these measures has strengthened
.legal procedures in many cities and regions. At the same time the interests of build-
in&.communism require Further attention by party, soviet, public organizations and
administrative organs to questions concerned with reinforcing public order.
The organs of the Soviet Militia plap an important role in maintaining law and order'
'and legality and protecting the interests of the socialist state, creative labor,
and the legal right~~ 7P,3oviet citizens against criminalf infringements.. The
,honorable and nable~~2~a'~or. bf the Soviet Militia is highly regaz+ded in socialist
society; its activities affect many peoples interests, and they occur in constant
.dealings with the population. For all their strictness and decisiveness, the
militias actions must always be dust and understood by the broad working masses.
Militia workers have an obligation to strengthen and expand their ties with public
organizations and workers collectives and to rely on their help in forestalling
any violation of public order. The resolution draws attention to the necessity for
.eliminating shortcomings that occur in the militias work and provides for concrete
measures aimed at the creation of militia organs having the proper conditions for
.successful fulfillment of their responsible tasks.
The union republic Communist Party central committees. party kraykoms and obkams,
-the union republic councils of ministers, and kray and Oblast ispolkoms of the
soviets of working, peoples deputies have been ordered to strengthen their control
over militia organs and urgently increase their role in implementing party and
:government decisions concerned with strengthening the struggle against crime.
Whi1? increasing their control over the militia, party and soviet organs should
-.also display constant concern for strengthening the militias authority.
In the interests of further strengthening the cadres of the militia organs and
expanding ties between the militia and the people, provision is made for recruiting
into militia work the best workers and trained and competent people who are capable,
through their political and business qualities, of successfully fulfilling the tasks
of the militia organs. A procedure will be established for recruitment into city
'and regional militia organs, as a rule ,on recommendation of workers collectives
'through discussion of those recommended at meetings of party, trade union and,
Komsomol organizations. The militia organs are obliged to inform the publfe in
enterprises, establishments, and organizations of the wark'done in the militia by
those whom these groups have recommended.
It has been deemed necessary to widen the practice of speeches by militia workers
-among the population, and to consult directly with citizens at enterprises,
establishments, and homes on questions of interest to them. The militia organs
should strengthen their ties with the voluntary peoples squads and more widely
recruit, on a public voluntary basis at militia organs and through consultation
with citizens, those persons who are qualified lawyers, teachers, journalists
-and representatives of public organizations.
Tlie local soviets and their ispolkoms have been ordered to improve their control over
the work of militia organs, systematically to review their activities at soviet,session
-and ispolkom meetings, and to help militia organs complete economic, cultural. and
everyday tasks. It is planned to increase the. role of permanent commissions of local
soviets in effect ingcontrol and rendering assistance to militia organs in order to
strengthen their ties with workers collectives and improve organizational work to ,
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forestall violations of the law. A procedure has been established by which the
militiamen authorized for any particular sector are confirmed by ispolkoms of city a;;d
rayon soviets.
It is recommended that editorial offices of newspapers and magazines, radio, television
and publishing houses give comprehensive coverage to the responsible and Honorable
work of the militia and ~.ts inseparable ties with the people, so as to help strengthen
i:n every way the militiaF,s authority among the workers.
Because the title USSR Ministry for the Preservation of Pablic Order and its local
organs does not reflect all the functions which they fulfill within the system of
.Soviet Government organs, it has been deemed necessary to rename this ministry tiie
!USSR Ministry of .Internal Affairs. The ministries for the preservation of public
;order 1n union and autonomous republigs are. being renamed union and, autonomous republic
.ministries of internal affairs, and the administrations of the lcray or oblispollcoms
ifor the preservation,o~~pub'lic-order as administrations of the kray or oblispolkoms
for internal affairs r~~;~~ :.~ - , ,
Tl;e USSR 1inistry of Internal Affairs and its organs have the tusk of further impr~~??~?
their .work on the basis of very strict observance of socialist legality. Exemplar}?
fulfillment of service duty, high discipline and culture in work, and in a deep
understanding by every worker of his ~?ole in the cause of educating the Soviet people
in a spirit of conscious observance of the laws and rules of socialist society are
;demanded of the personnel of the USSR MVD.
Tl;c attention of the USSR Ministry of Internal Affairs, union republic Communist Party
.central committees, and the party~s kraykoms, oblcoms, gorlcoms, and.raykoms is drawn *,o
the necessity for strengthening political-educational work among militia personnel.
It is envisaged that there will be improvement in the teaching and training of special.
for the militia organs. The resolution specifies numerous steps concerned with
equipping the militia with technical means and improving the materia] -~^nvision for
'militla workers and other organs of the USSR Ministry of Internal Affairs.
The CPSU Central Committee and the USSR Council of 1?linisters have expressed their
conviction that party, soviet, trade union, and Komsomol organizations and the USSR
linistry of Internal Affairs and its local organs will significantly strengthen public
order in our country by implementing the outlined measures.
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 ~!
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25X1C10b
July-December 1968
SUBJECT DATE
Communism
--~-
Mao Tse-tung's Great Cultural Revolution after Two Years Aug 68
Walter Ulbricht's Stalinist Outpost in Central Europe Aug 68
Struggle for Power in Poland Sept 68
The Anti-NATO Campaign Since Karlovy Vary Sept 68
Rumania: The Maverick Satellite Oct 68
- :soviet Relations with the Communist World Nov 68
- A New, "Western" Communism? Nov 68
Is :A Split Developing Between Hanoi and Peking? Dec 68
The CPSU and Western European Communists: How Strong are Dec 68
the Ties?
Deveioping Countries _
Czechoslovakia: It's Impact on Independent Africa
South Vietnam is Learning to Stand Alone
Oct 68
Nov 68
- Agriculture: A Conspicious Weakness of Communism Jul 68
Latin America Advances Its Economic Cooperation Aug 68
Czechoslovak Economic Reforms: Little Room for Optimism Nov 68
Internationai Conferences and Fronts
The Ninth World Youth Festival: Scene of Dissension
and Discontent
Reactions Among Communist Fronts to Czech Crisis
Literature, Arts and Sciences
Sept 68
- Soviet Protesters Increasingly Articulate Aug 68
- Neo-Stalinism in the Soviet Union Nov 68
Mi i nary
North Vietnam Has Its Troubles Too Jul 68
- Rising Soviet Naval Strength in the Mediterranean Dec 68
- Expanding Role of Military in USSR Dec 68
- Indicates articles of longer term interest which merits retention
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S.i~~A'~
 ..
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Subversion and Aggression
Communists Incite Trouble Among Ethiopian Students Jul 68
Soviet Influence in the Arab Socialist Union Jul 68
North Vietnames Efforts to Conquer Laos Sept 68
Dispelling the NN~yyth of Che Guevara Sept 68
Hanoi Establishes Another Front in South Vietnam Oct 68
- The New Left _ Aug 68
Student Disturbances in Mexico Oct 68
Communists Incite Trouble Among Ethiopian Students
Czechoslovakia: Its Impact on Independent Africa
Jul 68
oct 68
Europe
The "Anti-NATO" Campaign Since Karlovy Vary Sept 68
- A New, "Western" Communism? Nov 68
The CPSU and Western European Communists: How Strong are Dec 68
the Ties?
NortYl Vietnam Has Its Troubles Too Jul 68
Mao Tse-tung's Great Cultural Revolution After Two Years Aug 68
North Vietnamese Efforts to Conquer Laos Sept 68
Hanoi Establishes Another Front in South Vietnam Oct 68
South Vietnam Is Learning to Stand Alone Nov 68
Is a Split Developing Between Peking and Hanoi? Dec 68
Soviet Influence in the Arab Socialist Union Jul 68
- Rising Soviet Naval Strength in the Mediterranean Dec 68
- Agriculture: A Conspicious Weakness of Communism Jul 68
Walter Ulbricht: Stalinist Outpost in Central Europe Aug 68
- Soviet Protesters Increasingly Articulate Aug 68
Struggle for Power In Poland Sept 68
Rumania: The Maverick Satellite ~ Oct 68
Reactions Among Communist Fronts to Czech Crisis ~ Oct 68
Czechoslovakia: Its Impact on Independent Africa Oct 68
- Soviet Relations to Communist World Nov 68
- Neo-Stalinism in Soviet Union Nov 68
Czechoslovak Economic Reform: Little Room for Optimism Nov 68
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S~Z
 Approved For Release 1999/08/24 P78-03061A000400020023-2
- Rising Soviet Naval Strength in the Mediterranean
- Expanding Role of Military in Soviet Union
Dec 68
Dec 68
Western Hemisphere
Latin America Advances Its Economic
Cooperation
Aug
68
Dispelling the Myth of Che Guevara
Sept
68
Student Disturbances in Mexico
Oct
68
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~~ITT
 Approved For Release 1999/08/24 P78-03061 A000400020023~1 s - I
IS COMMUNIST CHINA A MAJOR
WORLD ECONOMIC POWER?
1. Since-the Communists overran the China mainland in 19+9, economists
in the outside world have wrangled over what Chairman MA0 Tse-tang and his
revolutionary army would be able to do about the backward economy they had
so abruptly inherited. Opinions and estimates on the problem have been for-
mulated with precious little to go on: long-range guessing from Hong Kong
with the help of travelers' tales, heavily censored reports from a few
foreign correspondents, callings from Chinese newspapers and periodicals,
and letter and broadcast intercepts. Scattered statistics have been avail-
able, since many of China's commercial partners have issued regular trade
figures. China herself has published no comprehensive statistics on the
Chinese economy since 1959? Understandably, then, the estimates on the
state of China's economy have varied widely, from claims that China is too
weak and disordered to feed, clothe and house her own burgeoning population,
to alarmist forecasts that Peking will soon create economic havoc in Asia
with price-cutting and dumping on world markets. 25X1 C10b
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~~
 25X1C10b
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~' " ~T r ~ Y January 190
IS COMMUNIST CHINA A MAJOR
I WORLD ECONOMIC POWER?
The actual strength of Communist China as a world economic-force has
always been difficult to assess. The difficulty s.rises in-.part from dis-
tracting psychological factors, such as the world's long-nourished appre-
hensions about the "yellow peril," the awesome facts of China's skyrock-
eting population, the truculence of her foreign .policy., and the intriguing
possibility that one of the hare-brained schemes, such as the back yard
iron smelters, might actually work.
It is impossible to use traditional yardsticks in measuring and
assessing this most truly inaccessible area of the globe. .Certain sta-
tistics are available, although these must be laboriously gathered as
Communist China has not published comprehensive data on her economy for
more than a decade, nor virtually any statistics at all since the begin-
ning of the Cultural Revolution. In the past, China watchers have had the
tales of foreign travelers and newsmen visiting China -- but they are now
largely banned. China experts have had China's newspapers and periodi-
cals to scan -- but these are now almost totally unavailable to foreign
subscribers. Still available is the NCNA (1Vew China News Agency), but
it continues to offer a diet of polemics in .lieu of facts. Moreover
China's few allies are probably no better informed, and certainly are
little more forthcoming, than she about her internal business.
However, before the recent clamp-down on visitors, subscriptions,
and foreign correspondents, Far East scholars and economists were able
to piece together a reasonably comprehensive picture of China's ,economy.
Their consensus is -- ignoring for the moment her long-range potential
-- that today China is more a poorhouse than a world economic power.
They base their judgment on the following.
Industrial Production
Industrial development in China has been a start-and-stop operation,
hamstrung from the beginning by political considerations and irrationali-
ties. Some gains have been made, but they are relatively small and have
been achieved at the expense of other sectors of the economy. And even
now, 19 years after taking power, the basic products are at a minimal
level. Take, for example, steel output, which the experts estimate at
around 12 million tons annually. This is roughly a fifth of that of
Japan, which has only a fraction of the area and population of China.
Take oil: new fields have been tapped in the Northwest and China is
believed to have arrived at a degree of self-sufficiency in petroleum.
But what are China's needs? Very modest, indeed, in comparison with
her neighbors in the Far East, whose yearly consumption requirements
per capita are 88-100 liters compared to China's 16-20 liters. This
can be compared with Japan at 520 liters, the USSR at 800 liters and
t:he U.S. at 3600 liters per capita.
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Wl~.atever the industry, (:hina has borrowed her technology almost en-
tirely from abroad, often in the form of whole plants, but this appears
to have accomplished little :Por China's economy or China's "modern man."
Total annual output is so low that Peking refuses to publish statistics.
Per capita income, which China also refuses to divulge, has been estimated by
ttie World Bank a~ $95 for 1966 -- well below that of such countries as Thai-
land, Cambodia and Ceylon. :Cn contrast, Nationalist China's per capita
income for 1966 was $189 (and $209 for 1967).
China's transportation :i.s in a fearful state by modern standards.
And the difficulties inherent in the primitive nature of the system, in
which most goods and people -still move by foot, cart and canal, have been
compounded by the Cultural Revolution. Red Guards, disgruntled workers,
and peasants have committed frequent acts of idle mischief and actual
sabotage against the relatively few rail lines which exist, causing break-
downs, blockages of shipments and, in some instances, complete disruption
of an already erratic service. Other inhibiting factors in China's rail
transportation are oboslete rolling stock, reliance on steam engines
rather than Diesels, too few miles of double track for the rolling stock
that does exist, and the fact that no new lines have been laid for 10
years. (China, of course, has been very busy laying tracks -- or pro-
posing to -- in other countries, such as Laos, North Vietnam, and
Tanzania.)
China's enormous labor force has presented many problems for the
Communist regime since the birth of the Cultural Revolution. Factional
struggles have occurred regularly in factories. Regime-inspired wage
restrictions, bans on distribution of collectively-owned funds, and can-
cellations of year-end bonuses have resulted in reactions ranging from
outspoken dissatisfaction to fighting on factory grounds, destruction of
m.a:chinery and, ultimately, prolonged strikes which badly crippled the
plants where they occurred. In Apr:i_1 1968, some strikers in Canton not
only refused to obey the orders of the Canton Revolutionary Committee to
end their strike, but attacked those who were willing to go back to work.
The foregoing is only the top of the iceberg, so to speak, but ex-
perts conclude that what they can observe about the industrial sector of
the economy must reflect in large degree that part they cannot see. One
aspect of the economy which can more readily be seen is foreign trade,
which has been seriously affected by disorders in China's industry.
Foreign Trade
China's foreign trade was suffering from chromic ailments even
before the onset of the Cultural Revolution. As a result directly
traceable to the Cultural Revolution, China's foreign trade will decline
i.n 1968 for the second straight year and may (according to preliminary
grade figures) even decline more than the eight percent drop registered
in 1967. China has been attempting to improve her trade balance by
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cutting back imports. from the free world and boosting exports appreciably.
This should reduce her Western trade deficit, which totalled $80 million
last year. But the deed is easier in theory than in actuality. One of
the major marketplaces for western purchases of Chinese goods. is the Canton
'T'rade Fair, but the volume of trade at the Autumn Fair (15 October-15 November
1868) declined approximately 20 percent below last year's level. Although
the fair was well attended, a number of buyers left without placing orders
because prices were "unrealistic," because one-third of the orders x~laced
at the Canton Spring Trade Fair (May 1968) had not yet been filled, and
because many of the boasted "30,000 different items on show" proved to be
just that, and not for export at all.
Communist customers also attend China's trade fairs and they do not
appear to enjoy. any discriminatory advantages over their non-Communist
competitors. All have equal difficulties with currency exchange; all
are equally subject to propaganda broadsides on the joys of MAO-style
Communism; and all suffer delays in shipment and risk breakage or loss.
In fact, the official People's Insurance Company of China has just an-
nounced to all its customers its intention to renege on its commitments
to insure risks of "Strikes, Riots, and Civil Commotion." Since China
demands that all nations doing business with her carry insurance with
the People's Insurance Company of China, this, in effect, means that all
buyers wanting much-needed insurance against strikes, riots and civil
disorders will find it necessary to carry two insurance policies to
protect the same merchandise.
The overall volume of China's trade with 18 of. her non-Communist
trading partners fell by 17.8 percent in the first six months of 1968.
According to the Japan External Trade Organization, which assembled the
trade figures, Chinese exports fell by 13.5 percent and imports by 22.1
during that period. China's trade with Communist countries has also
suffered reverses, most dramatic of which has- been the drop in trade
with the USSR. According to the UN monthly bulletin of statistics for
July 1968, Soviet imports from China declined from 129 million rubles'
worth in 1966 to 51 million in 1967, while Chinese imports from the
USSR fell from 158 million rubles in 1966 to 45 million in 1967. Sino-
Soviet trade, then, has fallen to five percent of its peak level in 1959?
According to TASS, among the factors contributing to the trade decline have
been -the detention of Soviet vessels in Chinese ports (the Zagorsk in
December 1966, the Svirsk in August 1967, and the Komsomolets Ukrainy in
March 1968) and the harassment of Soviet trade officials by Red Guards in
1967. China's trade with Eastern Europe will also be below last year's
level, in part because of disruptions in trade as a result of the Czecho-
slovak crisis. China's reported cutback in aid to Hanoi, which has been
viewed as an ideological reproof to Hanoi for going to the Paris peace
talks, may have been as much a matter of necessity as of ideology.
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Agricultural Production
Experts find it more difficult to ascertain facts about China's ag-
riculture in assessing the overall economic picture in this rigidly closed
e.nd badly disorganized society. Eight out of 10 Chinese live in farm
villages which are spread oL~t over China's sprawling land mass. The re-
g;ime's attempt to keep these remote farm areas in line has been particu-
l.az?ly difficult following th.e concessions made to the peasants in the re-
cession following the disaster of the Greap Leap Forward experiment. It
requires little imagination to picture the reaction of a man accustomed
to breeding his own fish in his own pond, or growing and marketing his
own crops, or raising his own livestock when these "'privileges" are sud-
denly withdrawn. Little wor..der that the peasant farmer has claimed in-
ability to meet the state-determined quota systems for grain and live-
"tock; little wonder, too, a,t his lack of enthusiasm for participation
i.n collective farm chores.
Add to this very personal equation, the chronic material shortcom-
ings of Chinese Communist-style agriculture, which have been sharpened
by the Cultural Revolution: fertilizer and pesticide shortages intensi-
fied by breakdowns in delivery systems; replacement of archaic farm im-
x~lements postponed by industrial strikes; food shortages in the communes
e,harpened by the arrival of unwilling and unseasoned city dwellers (stu-
dents, intellectuals, administrative personnel) sent by the regime to
offer unwanted assistance ir. the harvest. Other relevant factors include
the disintegration of the rural bureaucracy which shed or lost its respon-
ti;ibilities in the past two years; the basic Chinese reluctance to divert
e,carce funds to costly, large-sca.-L~-: land reclamation projects and to
adapt the land management methods which have proved effective in the free
world; and, finally, the calamitous weather the past two growing seasons
i.n China -- torrential rains and flooding in southern China, drought in
the wheat-growing regions north of the Yangtse River, and frost in the
northernmost rice-growing areas. The foregoing combination -- even as a
.Long-distance view over China's wall -- is sufficiently discouraging to
make the experts extremely c_ubious about glowing Chinese Communist claims
of "bumper crops in 1968."
Other Problems Connected with the Growth of China's Econom
There are other problems -- some of which affect the growth of the
economy and others of which are caused by its :shortcomings -- that indi-
cate the economy is in difficulty. Some of these problems find their roots
i.n the Cultural Revolution, others are chronic and have merely been inten-
~;ified by the Cultural Revolution. Food has always been in short supply
i.n Communist China; as a result of the Cultural Revolution it has been
x~articularly scarce. Before travelers were virtually forbidden to enter
China, they had reported such incidents as: famine in :sections of
Kwangtung Province; peasants looting foodstores; 500 hungary peasants
stopping a freight train (on the way to liankow) to seize large quantities
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of food grain; hungry farmers rioting against shipments of rice out of
China; and posters prepared by city dwellers accusing the regime of
starving the Chinese people. Also reported were shortages of matches,
fish, peanut oil, meat, cotton cloth, medicine, soap, cigarettes, kero-
sene, and fuel, particularly coal. Bus service and telegraph and postal
service are reportedly erratic. The black market is flourishing and
farmers are accused of falsifying commune production reports and secretly
distributing grain instead of turning it over to .the state.
Population Growth
China faces at least one economic problem that has little to do with
the Cultural Revolution, that of an awesome population growth. Marxian
principles claim that people (labor power) are the basic source of a na-
tion's wealth; therefore, there cannot be too many people but only ex-
ploitative economic systems which create the impression of overpopulation.
China's leaders have vacillated in their interpretation of Marx on popu-
lation growth, depending on the state of China's economy. However,
is no question treat China has too many people when she is no longer able
to grow enough food to support the population and when her trade is
reaching a serious imbalance as she attempts to impart enough food to
feed her hungry 750 million. When China's masters return to all-out sup-
port for the widespread practice of birth control -- as it is generally
predicted they will be forced to do -- China will have proved once more
abstract ideology is a poor guide towards a successful economy.
To return to the initial. question -- is Communist China a major world
economic power, or is it a poorhouse? -- for the immediate future, and
viewing the disasters of the Cultural Revolution, the burgeon:i.ng popula-
tion, tYie sparse agricultural reserves, the disrupted and generally ar-
chaic state of most of her transportation and industry and her unfavorable
trade balances, the conclusion is inescapable that the economic experts
are probably correct: the Communist Chinese giant is closer to being a
poorhouse than a world power.
Reference: Communist China's Economic Growth and Foreign Trade, by
Alexander Eckstein, New York: McGraw-Hill, 1968.
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(i7NCLASSIFIED) September 1968
Following are examples of conflicting reports on Chinese Communist
harvest prospects for 1968. Local provincial authorities issue their
on-the-scene view of local situations while Peking Radio and the New China
News Agency (NCNA) view the provincial picture through their long-range
rose-colored binoculars:
Anhwei
NCNA on June 22 claimed that grain collection in the province exceeded
the figure at the same date in 1967 by 55.6. Hopei Radio broadcast an
urgent call on 23 July, by which time the north of the province was badly
flooded, to tackle the Huai River floods which were hitting transport and
threatening the summer harvest.
Nevertheless NCNA reported on August 19-that a "bumper early rice
crop" had just been harvested in South Anhwei - one of the main early rice
growing areas of China.
Honan
NCNA on June 21 reported the wheat crop to be "quite good." Cheng-
chow Radio issued a series of directives between July ~+-9 on combating
drought conditions.. On July 17 it reported heavy rain in the Hsinyang
district of Honan which had necessitated conferences to institute mea-
sures to deal with floods in that part of Honan.
Hopei
Wheat production was reported to be "quite good" by NCNA on 21 June,
although Tientsin Radio had broadcast on 12 June an urgent appeal for
increased efforts at manuring the fields to speed growth - almost cer-
tainly a sign that drought had so far delayed it. Peking Radio on
July 6, reported heavy rainfall starting July 5 was causing flooding.
Hunan
An NCNA report on June 21, 1968 of "rich harvests" contrasted with a
Changsha Radio report of June 19 of rain all over the province with ris-
ing rivers and more rain expected. However, Peking Radio, August 18,
spoke of a "good" harvest in Hunan.
Hupeh
On June 12 Peking Home Service reported a "bumper harvest" of sum-
mer crops, including wheat but not rice, with uniformly high yields.
However, the rice crop being affected by the floods was mentioned fre-
quently in Wuhan broadcasts from-July 9 to 30.
Kiangsi
Floods affected some areas but early rice`was generally said to be
growing well in July (Nanchang Radio, July 9) and a "bumper"harvest was
expected. On July 23, however, Nanchang reported that "barring
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extraordinary calamities there 'was certain to be a 'rich' harvest." An
NCNA round-up of August 19 claimed that Kiangsi had reaped "a bumper early
rice crop."
Kirin
Kirin had suffered a drought "seldom equalled in the past" (Chang-
chun Radio, August 7) and no harvest claims have been noted.
Kwan~s i
Reports of serious floods :in Kwangsi in July were followed by a re-
port by Kwangsi Radio on August 21, surveying the general economic situa-
tion in the region, claimed that in the first half of 1868 sabatoage
plots had been smashed, natural calamities had been overcome-and that cer-
tain areas had achieved "bumper"' harvests.
Kwan,~,tun~
Reports in mid-June of the damage being caused by the "worst floods
in the history of Kwangtung" were confirmed by Canton Radio but early rice
was maturing in the Pearl River basin according to NCNA_on July 17 and on
~fuly 27. On August 18 Peking claimed a "good" harvest for the province.
Liaonin~_
A Shenyang report on August; 3 on fighting drought and insect pests
suggested that harvest prospect;? in the province are poor. NCNA has not
reported on Liaoning's prospect;>.
Shansi
NCNA reported on June 15, a "bumper" harvest of wheat despite serious
frost earlier in the year.
Shantung; _
A "bumper" harvest of wheat; was in sight in mid-June (Nanking Radio
17 June). Although Shantung suffered both flood and drought conditions,
"good" and "rich" wheat harvests were on record in some areas. (Tsian,
.]"une 18) .
Yunnan
Kunming reported on June 22 that all sorts of natural calamities had
been overcome, and that in ane county a "bumper" harvest of grain had been
reaped which was 20% better than last year.
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2
 Ap~nx>ecdlFt~' Release 1999/08/24 :CIA-RDP78-03061A000~400020023-2
17 November 196$
Pe~ang's ~'oreagn ~''ra
Decline Caused by Mixing, Politics -With Commerce?~a
x,
G~~PYRGHT ~ ~ ~ ~`~
By, CHU 5AIT0 ~'
The volume of foreign trade: In itself, the present down a synthetic fi~gr plant n ::
.conducted by Communist Chi?~ trend in the Chinese Commu- Lanchow. -
na at -the Canton autumn nist national :economy is not The British~~ supervisory
`trade fair from Oct. 15 tQQ Nov. particularly ~ significant, for staff consisted 'of five men. ;
15 is reported to have '?i$hown 'the country has demonstrat? Last Septembe , two of the
a decline of approximately 20 ed, previously, the ability to rnen'-George att and Peter
is per cent below -.last year's halt and reverse such trends .Deckart-were arrested on
`level. when they were- caused sole- the usual :vague charges of
r.uring the ~ ly by the disruption of inter- "spying." ~ ,
.?firrt years of ~? ~ nal political campaigns. Re? Deckart was subsequently':
`the Communist `~ ~;~~ cent changes in Peking's gen? expelled from Communist
regime the an ~ ~.~ `` ~, oral attitude toward all for- China. But, Watt was held
Waal trade vol rt eign countries and in the under house- arrest for six
} urne rose un `* ~~ , '~ methods of dealing with for- months; and finally sentenc
;steadily to a :?~, ~~.r;~ '~ eigners, however, ~ are likely ed to three years in prison ?
;peak of $4,265 >-~'~ ;;'~` ' to prove detrimental to Red Meanwhile, all the ma~teri-;~
'million in 1959. ; ;,~, China's foreign trade for a als for the plant were de
The disruption ~ ~- x long time~~to come. livered. The Chinese Com
caused by the ~ munists now. canceled the
Great -Leap ~ 5 Xenophobia contract, claiming that the
Forward and the antirightist The ~ xenophobia, released British firm failed to comply
.campaigns which followed, by the great proletarian cul? with the agreement to sup- ?;
however, caused a lowering of fatal revolution and per- ply the best; most modern
the annual volume, which fell, miffed to be. violently ex- design." ~
to a" low of $2,770 million for pressed, is the obvious exam- . In addition, the Chinese.;
;1963. Recovery then was ple. The attacks on foreign Communists are .demanding!
rapid, and a new high of $4,' embassies and diplomatic per- #650,000 in "compensation,"
295 million was attained in sonnet and the truculence What, the compensation is :'
`1966. with which the Chinese Corn- for has not been made clear..:
Unfortunately, , the great: munists conducted their for- But, until the mabter is
proletarian cultural revolu- ei n relations have antagoniz- settled, the Chinese Commu-
tion tivas launched in the mid- ed almost all the countries of nists are holding Watt,.:and'
-del of that year. When in? the world. The effect might they are denying' exit visas
dustrial workers-and, to have been catastrophic to to the other three British
`lesser extents, the peasants- Red China's foreign trade, technicians.
.became embroiled in the poli- were it not for the irresisti-
tical upheaval, a down trend able allut?ement the mainland's Detrimental Effect
was inevitable, and in fact 'enormous potential market Another illustrative example
phenomenal. offers to all mercantile na- concerns Red China's trade ~
The year 1967 was favored' tions-and especially those balance with Canada. Because '
by an exceptionally good anxious to expand their in- of large orders for wheat from ~:
harvest, which normally dustrial economies. Canada, Red China's sales to '
would have provided addi- Canada were only 11 per cent
tional capital for expanded Britain and Hongkong, of the .value of her imports :,
Grade. This notwithstanding, West? Germany, France and from that- country. Neverthe- ;
the volume actually decreased Italy, besides Japan, come less, it had a good chance to .
to $4,180 million. ? within this category, and improve the balance by parti-
have actually been competing cipating in the British Cohim-
Output Decline tivith each other for the main- bia international trade fair ;
This year, as a result of ]and market. Nevertheless, last year. Peking, however,
bad weather, a decline in it is precisely these coun? demanded that Ottawa cancel '
'agricultural output appears tries that have suffered the an invitation extended to Tai-
ineditable. Moreover, the most from Red Chinese wan, and when the Canadians
factory, strikes and transpor- abuse. refused, the Chine"se Commu-
tatiori tie-ups, which were- What our businessmen nists refused to attend the .
severe in late 1967 and early have suffered at the hands of fair.
,1968, have brought about a 15 the Chinese Communists is Obviously, Communist Chi-
per cent lowering of industri- too well known to be discuss- na's long-term industrial pro-
al production. This natur- ed here. The experience of spects depend largely on for-
e ally has resulted in the even the West European. countries, eign assistance, both material
::lower quantity and quality of however, is less known and and professional. Equally ob-
goods offered for export by offers additional side- lights vious is the Fact. that foreign
;Communist China at the on Chinese Communist busi- firms are now beginning to be
.Canton fair th'-s year. The ness practice: less enthusiastic about orders
tendency toward delayed and In late 1966, for example, from Communist China.
uncertain deliveries, already the British firm of Vickers- This, more than the periodic
apparent at the Canton fair Zimmer. signed a # 2,200,000 political upheavals, is likely
last spring, also has had a contract with Peking to sup- to prove detrimental to the
Further re n effect on ly the materials and ex- country's. foreign trade in the
ppt~ve~rue~ease 199f21.4tM~'~~fi~1A.0.0.04110.42~0A2-3-2
? 1
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ASIAN ANAI,Y T
June 1968
~~ SPRING FAIR AT CANTON
~HF~ SPRING Canton Trade Fair, which ended on May
z5,fproved a disappointment both to the Chinese and to
the' foreign businessmen who went there expecting to ,
negotiate trade deals. It vvas far from being "a testimony to the ;~.
great victory achieved ire the great proletarian cultural revo-='
lution", :claimed by Neu China News Agency (NCNA) on May `'
r ~, r g68.
Merchants from many foreign cities, including Singa-
pore, 'T'okyo, Hamburg and Hongkong, read with interest that
there were " 30,000 different items on show", including "70
products" never before seen in Canton (NCNA, April ry). But
-they discovered that display did not necessarily mean "for
export," as many of the: items were not for sale, including a
new make of Chinese "mini"-type car (although a very limited
number o#! Chinese-made washing machines and refrigerators
were offered for the first time). Foreign enquiries for supplies
of foodstuffs, some ehem'ical and pharmaceutical products, silk,
bristles, skins, minerals and ores (such as tungsten, antimony
and mercury) could not be met.
Many traders attended to enquire about the faiiure of
the Chinese to deliver goods ordered at the autumn fair in
rg67; it was estimated by several different merchants that about
one third of the orders placed at that fair have yet to be ful-
filled. Some complained that they are still awaiting the delivery
of goods ordered a year aga at the rg67 spring fair. In the light
of this experience, most traders tried to pin down the Chinese
exporters to firm delivery dates foP"[tfl! goods they were then
ordering; but their efforts were far from successful. The Chinese
~Adrnutted that there would be delivery delays varying from an
average of four months to as long as nine months. They
refused to quote any definite dates to buyers of some products,
including ceramics and rejected all orders for delivery in ig6g
and after.
Devaluation of sterling and the threat to the franc during
the French crisis caused the Chinese to be reluctant to deal in
sterling, US dollars anti, for a short time, French francs and to
concentrate instead,on Swiss francs. However, they eventually
decided to continue to accept dealings in French francs and in
limited quantities of sterling. But all contracts signed at the
fair had to include a new clause protecting the Chinese expor-
ters against further devaluations. The same anxiety was reflec-
ted in the price increases involving many commodities. Many
businessmen, who have made successful deals at previous fairs,
came away this year leaving for the first time failed to do any
business; they found it uneconomic in the face of price increases
amounting to as much as 2g per cent for some items, compared
with prices at the autumn, rg67 fair.
The volume of trade at the fair declined. The Japanese
Kyodo News Service, fo~? example, stated on May r 6 that despite
large Chinese purchases of steel and fertilisers from Japan, the
total value of Sino Japanese export-import deals at this fair fell
short of the amounts reached at the two previous fairs in rg67.
The r g68 deals amounted only to ~8o million as compared with
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 CPYRGHT
Approved Fo ~~~~~I'~~~j~~(1~~1e~~R~~Q~C,QCn~~@~i~0020
dding the $qo million worth of fertilisers sold by Japanese
friendly firms" in individual deals in Peking, the actual figure
f Sino Japanese trade would still be down on that of tl~
revious year. Since the pattern of Chinese trade over the past "
ears lias shown a steady increase in that with Japan, th
ecline;clearly reflects the general downward trend in z g68 which=-.
as affected all nations dealing with Qhina.
aad 'T'he atmosphere at the fair was sliglxtly
portage better than during the two ig67 fairs. The
compulsory "Mao-study" periods were
porter, there were no Red Guards to demonstrate or inter-
upt the" business deals and the presence of troops at the 1~'air
uilding and at strategic points, as well as on patrol in the city,
nsured that the control which had been re-established in
anton for the period of the fair, was maintained. The only
xception was a demonstration in support of American negroes
hich took place on April z 7.
Visitors reported that the city was suffering power-cuts
nd shortages of fuel. They noted, as they travelled between their
otels and the fair, that food was scarce, especially rice and
meat; they also saw that same of the factories and workshops
- they passed were inactive. Most of the posters which had dis-
figured the city in i g67 had been removed, but one or two were
seen to complain 'that the authorities were adopting a wrong
attitude to the'visiting traders by providing too high astand-.
and of living, and treating them in an wircvolutionary
manner by Conducting over-polite negotiations. Some of the
trade ofl`ieial9:were regarded as laying themselves open to the
charge of being pro-imperialist and pro-capitalist.
-Some visitors were told that Canton factory workers
had been threatened with dismissal if they failed to produce
in time goods urgently needed for display at the fair. Several
traders reported having heard that many Cantonese workers
were on strike in protest against bad living and working condi-
tions and .that they were aware that by stopping production
they were~sabotaging.the fair. During April, visitors stated that
many arrests had~been made in Canton as part of the tighter
CPYRGHT
security ~measures.f ja ;
MAINICH:~
22 November 1468
Farr Labor For
~` '~n~eil~cfua~'
- Doctors
Ap p rov~l~~,?~~?~1~~~~f0
/24 : CIA-RD
023-2
their destinations, medical
staffs were told they must ex-
pect to be rewarded in work
points only for the farm work'
they do. They will not receive"
anything for' any medical du-.
ties they may be Called upon
to perform.
Meanwhile, hospital staffs
that have not been. sent away
for labor are required to at-
tend nightly Mao study ses-
i sions organized by worlcers'
~ propaganda teams.
First reports received on how:
the "intellectuals" are settling
down to farming suggest that
; they are far from welcome in
the communes.. Most of them
' are totally inexperienced it}:
`farm work, and they have plac-
I ~ ~8 ~ ' ~ ` ~ Si ~ ~ ~ i 0 2
CPYRGHT
 CPYRGHT CPYRGHT
FAR EASTERNpECONOeMIdC REVlI;w e
lj October 1968
e Cu ura on; ,
lieve but could refer to some field rail Delays yin getting crude from the field
therto nae much exploited, or, as oil to the refineries; most of it travels by rail
' xperts say is possible, to some simple `though some 'Taching oil is shipped b
PETRdLEUM peratiory like turning on another tap at tanker from Dairen to the refinery a
"-'_-` well already in production. 5h:tnl;'hai.'~~Jlut China's scalxtrts hav
.The Reddest 61a~k Gold- r' The new refining claims are more been as m"oiih disturbed as the railway.
uzzling. More gasoline, kerosene, diesel by Cultural,~Revaluticmary activities, an
it and araf~in wvere .produced, the I)aircn ha~~been affected seriously.
COLIPf~Pti Mr~CDOUGA~LL
`-NEWS from London says t e tnese~are Chituese say, to 'C a rs et ?
buying lOD,O(?0 tons of industrial fue} oil 1968 compared ~to the corresponding 1966, whet ~trcxluction reached an estima
from Egypt; Hangkong's import;E of rd out ut' ear" of ed 10 mill 't tons. The bulk of this wa
pevoleum products from China drop- .1967. I,t would be no surprise t sieve to: come rom 4 e tree n
ped by 30?/, this year; ships ca tog production 'was ?a'bove 1967, -but it is oilfields of Taching, Karamai and Yr-men
at Dairen, Shanghai, Tsingtao and Can- .stretching ~~redulity a bit ~to believe that i-1 alwut equal proportions, while th ,
ton report shortages of marine fuck oiC 1967 broke any industrial records at all main rrfincries, Lanchow and Shanghai
' and a ~Iechne in quality. These are m- except for unruly behaviour. Unless the probably processed about half China' '
dicator5; of serious trouble in China's Chinese had' a stockpile of crude, refined tutal crude .between them. 'I'hc rest wa
nascent', oil industry. The near-blackout output could- hardly have gone up with- spread over the smaller plants at Tachinb
vn pctrpleum mews within China itself out a rise in crude production, and what ll;tircn, '1'ushantzu and the refineries a
tends to` confirm the dif}'iculties. Granted we know of activities in 1967, that seems the. shale oil centres of Fushun and Ma '
-that industry as a wvhole has not figured v~y unlikely. Taching was reported in ming. Not all '1'aching's crude is proresse
touch itr Chinese propaganda since the posters in 1.967 to have stopped production on the spot; much of it is transports
Cultural ,Revolution got going, it is still at many wells and' Chou En-lai himsclE elsewhere to refineries nearer to the en
rather surprising that the oil sector, which is said to 'have criticised ~i?ts workers on consumer.' In this China seems to
-was one of China's I;enuine success stories,. two occasions in .January 1967 and again adopting ?Yhe modern, logical practice o
should have sunk from. view almost with- in January 1968 for abandoning their jobs transportrng crude in bulk to refinerie
uut trace.` Nlost s-riking is the fact that in favour Hof making revolution. Japanese c]rse to centres where the products wil
'aching, China's new oilfield astride the. reports in July and August 1967 quoted ~ used. This makes :transport an
I-larbin-Ts'itsiltar railway in Heilungkiang posters in Peking as saying that produc- Pacltag-ng sense,.
Iarovince, which used to be held up as a Dion at Taching had stopped because of It pis too early to guess what kind aE
lwlitic:a-industrial. rnodcl for the whole of clashes between revolutionaries and showing 19~ will make.. It sterns likcl
China, has been blanketed in a silence workers. The Japanese also reported that the present claims that output i
rvnich resounds deafeningly in the ears of posters which said that oil deliveries had going.up contain some. truth but even i
China-watchers accustomed to reading been delayed owing to fights among the statement that in July output wa
;-huitt its excellence every other week.. transport workers - a hint that refineries approaching the record is correct, they
>ince the beginning of 1967, Tacking has may have been short of cruder is no guarantee -that China will be abl
rated Dray a fiandful of official mentions, China's-other major oilfields, Karamai to make up rite leeway lost in Khc earl
:and these scarcely note its former political and Yurr~en, in the far west, have not part of the year. Official disapprav, l
ius?~ortance. been specifically mentioned as the scenes seems to have fallen on Taching, whit
?lut the current motto in Peking is of factional fighting, but the territories almost singly was.responsihle for the su
"grasp revolution and boost production" in which they lie -Sinkiang and Kansu stantial rise in output 'between 1963. an
and in keeping with that a crop of stories ,_ have both seen turmoil. One can 1967, At Taching the workers, whatev
advertising production successes blossom- hardly escape the conclusion that output n}ee prof?aganda made out of them,- see-
ed in the Chinese press to greet the Na- of crude fell last. year (one estimate by to have been receiving twice the pay f
tional Day. A couple of these dealt with observers in Hongkong puts the drop as other wnrkcrs in China and substanti 1
oil, summing up t'he latest situation in .high as 10%15%), and presumably, incentives and Eringc hencfus as well.
the va.t;ue terms now customary among therefore, of refined products. There is The eclipse of Taching as a utod 1 _
the Chinese. Interestingly, the percentage" no information at all about China's other probably means that this artracteJ tl e
fi};ures (no absolute ones have been pub- ~ fields; Tsaidam in Chinghai, Nanchung ;eye pf tPfnp~~Tnda hlastst-all- this 4yc. r
lished since the end of the fifties) show in Szechwan, Shengli in Shantung, have ;Peking.
unmistakably haw law production fell last not been mentioned, and this normally ;'at the coils of material incentives sugge r
winter; crude oil output during August means poor performance. ~ ~ that even at Taching, so vital to t
this year, the Chinese have claimed, was The ;refinery at Ianchow, one of national economy, wnrkcrs may lose the r
34% above last January's, and refined China's biggest with an estimated capacity ' benefR ` even rthe Grisk of itn~willalsure y
products wwre up 43?/a. This confirms of 2.5~ million tons annually, made a bloc an effect nn output, even if the mo e
what is known of shortages around the modest claim in September to have dou- dramatic. and disturbing revolutionary
turn of the year, reported unofficially from bled its target in July this year for one tivities are iven u
Itwangtung and implied in the holding kind of high-grade oil, and to have "over- g p'
of }xaroleum conservation conferences in fulfilled" its quota far a 'high-grade oil
a number of provinces. Output this year (unspecii"red) fora "fraternal coantry" --
so far is said to have surpassed unspecified presumal_~ly North Vietnam, to which oil
State targets. Peking has also said that is despatched {in a British flag carrying
output in "some" oilfields Tole 4(Y?/p in tanker) Erom Dairen and Shanghai. Re-.
riod before 'n in eneral however, last year and
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 ~~i~'F~4- Release 1999/08/24 :CIA-RDP78-03061A000400020023-2
September 1968
The recent zc%heavals of "tlae cultural revolutio~a" have made it Icarder than
ever to get rclial~le statistics an China. This economist reviews the availaUle .
facts and concludes that "Bcneatla all the sicot.cting and ?ushing, there is the
unresolved prablem of feeding and clothing tlce millions... ,The cultural revolu-
tion has in the last two years moved to the issues of the peofile's livelihood...:'
Comrn.ur~is~ ~~.~~a:
CPY~GHT
T'he ~cc~~?rr~y and the I~.ev~lutic~r~
Professor o
BY JAN S. PRYBYLA "
Economics, Pennsylvania State University
OMMUNIST CHINA 11aS published retical organ Hung Chi (Red -Flag) ceased
only one statistical manual: a slim, publication on November 23; 1'967. In 1967
retrospective volume entitled Tcn and early 1968, Red Guard -wall posters could
-id
d
i
d
i
er to ga
n some
ea as
to
n or
Great Years, covering the years ] 949-1958. be resorte
The figures for 1949-1952 are not very re- to the progress of events, but this source more
liable because of the modest state of statistical often than not was contradictory and sensa-
science in the country at that time. The. sationalist.: In any event, curbs were put on
data for 1953-1957 (the First Five-Year Plan foreign correspondents' jotting; down items:
period) are probably the best of the lot, but from this wall literature.
even here numerous technical difficulties arise. Businessmen and tourists supplied -some
Figures for 1958 (the first year of the "great news but,.here again, the information was of
leap forward," 1958-1960) were so exagger- limited value. Travel routes were at all
ated and fanciful that even the Chinese later times strictly controlled, exception being.
declared- them to be totally misleading. No made for Communist sympathizers and others.
comprehensive statistics have been published whose conclusions about China had been ar-
since 1959. Since 1966, the information rived at .beforehand. Following " the out-
blackout has been complete. One could go break of the "cultural .revolution," the num-
so far as to say that the amount of quantified ber of foreign visitors in China declined
information emanating from Peking in the. sharply.
last three years would fit comfortably on a There is, therefore, a serious problem here.
sizable- postage stamp.. Although Western economists have been
For a while (1961-1965) the Mainland trained by Stalin's secrecy complex to deal
press carried much interesting discussion with this sort of censorship, the thoroughness
about the economy. Here and there one of the informational blackout is unparalleled
could pick up a suggestive datum, a hint on in the history of any modem nation. The
what was going on in the fields of agriculture, figures used in the present article arc Western
industry and trade. After .1965, this type estimates-informed guesses-based on tid-
of reportage was replaced by inspirational bits of news issuing from the Mainland.
articles extolling the thoughts of Chairman SOME GENERAL PRINCIPLES
Mao Tse-tong. The language of these es- A number of general principles about the
says has become frozen by Maoist ritual. For Chinese economy should be kept iu mind.
a time, a study of the provincial press yielded The designation, "planned economy," does
'some valuable information on leadership at- not apply to China. Lil;c the rest of Chincsc
titudes, since it was one of the principal society, the economy iu thr. past 19 years leas
'.media through which instructions from the been run by a series of short-term expedients,
.center were relayed to local authorities. In typically assuming the form of mass cam-
-1967, the export of provincial newspapers paigns. The only period which fits the des-
~was banned. The Communist party's theo- i u
Approved For Release 1999/08/24 : CIA~~~P~~~~I~b~~4~~02~-2
 CPYRGHT
`n various ways, among which policy disagree-
ments within the top leadership shouad cer-
tainly be included. The major stages of shift- ;
ng policy were the rehabilitation period
{1949-1952), the First Five-Year Plan
{1953-1957), the liberal interlude (]ate
1956-1957), the great leap forward (1958-
1960), the period of. retrcrichrnent a,nd re-
building (1961-1965.), and the great proms
letarian Cultural revolution (1966 to the
present) . -Each stage contained a number of
minor substages; some of them mutually con-
tradictory. Each stage also revealed policy
shifts from right to left and back again de-
pending on whether emphasis was placed on
economic calculation. or ideological euiphoria..
The cultural revolution, for example, shows
at least seven such swings in the revolutionary
lx:ndulum. To some extent, these move-
ments are consciously directed by the leaders
ort the theory of alternating tension and re-
laxation. Increasingly, hotvcvcr, the swings.
.appear to be spontaneous and uncontrollable.
Like other underdeveloped economies, the
Chinese economy is not fully integrated.
There is a considerable element of localism
antl 1o~~al self-suflicicncy in the rnerhanism.
'.['o sonu~ extent this is a legacy of the past
which the Communists have tried to eradi-
cate. On the other hand, not a few measures
taken by the Communists since 1958 have
tended to encourage local economic auton-
omy. 1'ltc interesting point about this is that
it enables the economy to withstand upheav-
als at the center, to keep on functioning lo-
cally in sl7ite of confusion at the top.l
':Che Chinese economy is "aitlless." It has
never received any grants from abroad and
the last long-term (Soviet) loan was received
in 1954. China's external economic contacts
czre based on cash (mostly hard cash) pay-
;aients and short-term credits for the purchase
abroad of specified items. Two-thirds of the
country's trade is presently carried on with
"capitalist" powers.
.A.t ]east since 1961, the Chinese economy
l as not been "Marxist-Leninist" in the Stal-
inisk sense. In the U.S.S.R. and Eastern Eu-
rope the Stalinist economic priorities were-
and to some extent still are-heavy industry,
light industry, agriculture: China's official
priorities after 1960 have been: agriculture,
light industry, heavy industry. This depar-
tw'e from the orthodox pattern was largely
dictated by the urgent need to feed and
~'17t CVSlttatiing Tt1Z-pCiSVrmai~c.o yr vw~.,.s~-
cconorny one must c:onstantly bear in mind
the cultural gap between Western and Chi-
- nese conceptions of life. It is difficult enough
to understand the workings of totalitarian
systems when one has not been exposed to
them .directly and for considerable periods.
It is even more difficult to grasp the elusive
qualities of a totalitarian system imposed on
a society whose values are very different from
'ours, and whose language loses more than the
usual share of meaning in translation. There
is no civil or criminal code in Chiria today;.
nor are there any codes in other areas of law.
The whole body of Chinese Communist law
takes up just 600 pages of rather large print,'
and most of the "laws" are, in fact, admin-
istrative decrees, many of them applying ret-
rospectively. The General Code of Laws of
tlw Ch'ing Dynasty made it a criminal of-
fensc to `?do what you ought not to do."
The Chinese, moreover, have a capacity for
'separating the public from the private face,
so that noisy expressions of obeisance on the
part of private individuals must at all times
be viewed not only in the context of a sys-
tem of fear but in the light of a special ethic
which existed long before Mao and Marx.
AGRICULTURE
At the end of December, 1966, the cultural
revolution was extended to economic' life.
Red Guards and Maoist workers' formations
("revolutionary rebels") were ordered to take
over 'offices, factories and farms. At this
juncture, the upheaval in the "superstruc-
ture" (politics and cultural life) invaded the
"base" (the economy). Since that time,
there have been several shifts to the left and
right, but the important point is that the
revolutionary turmoil is now common to both
political and econonuc life and directly af-
fects the growing of grain and the making of
steel a
i Sec Jan S. Prybyla, "Why Communist China's
Economy Has Not Collapsed After Two Years of
Guttural Revolution," in J S. Prybyla (ed.),.
Communi.an at ihv, Crossroads (University Park,
Pa.: The Pennsylvania Statr, University Press,
1968).
z Albert P. Blaustein, Pur:Jame>tal Legal Docu-
ments of Co~amunist Chiua (South Hackensack,
N.J.: Fred B. Rothman & Co., 1962), and F. Ka-
linychev, "Democracy and Legality," Izvestia,
February 12, 1967, p. 4.
a Jan S. Prybyla, "The Economic Cost," Prob-
lems of Comrnun:sm, March-April 1968, pp. 1-13.
ppt~~er~ll~ri~~~?~~8/24:CIA-RDP78-03061A000400020023-2
6
 CPYRGHT
Ap
Ap
?~ ~~ g ~ti E -
traneous matter is discarded, China's funda- ure (707 million) and the higlier grain avaii-
mental problem is seen to be what it has ability figure X205 million tons), the per
ahvays been: how to fccd and clothe agrow- capita grain availability in 1967 wo1?ks out
ing population. The economic answer to at 0.29 tons. If the higher population figure
this problem lies in modcrni~ation, that is, is tala?n (7itl ,nilli+n~) i~~t,c?thc?r with the
the breaking out. of the limits imposed on lcil;lter grain tif;nrc (21t:i lniltion t+>nti), ilte
productivity by traditional. methods of pro- lt?sn11 is ;~ her r~hita (;c~~in ;w:ciLcbility of 0.2'1.
duction, and the application of modern sci- All ihiv rn;ry 5onrtd involved, lltct the. rou-
e ence and technology to the economic process. i?hwic~n ie sincpl~~; per cscl,ita ~;t;1in availability
There arc various ways in which this can be in tlhiua was 1~t.lctir;tlly the same ir, 19(17 as
` done. Iiowevcr, because the margin between i,, 1{1~,7, aacl this can the 1i,oti6 favor:iblc as-
, food and mouths to fccd is extremely narrow, ;;,,,rthtic~nv. 'C'hert: ;,ph+,u?, tcl have, been no
the range of options is for all practical pur- vi~ihla itt,hrtcvenlent, It slcotild be noted, of
poses restricted to one: the development of cc',ur::a, that t.hr: fact that thc~ Chinrsr. C;nrn-
agriculture. During the relatively pragmatic nuutist~; h;n'e ru:u,a~ c~,l tc, keen ul-, witl- 17opu-
pcriod, 1961-1965, the Chincsc Communists l,iti,,,t ?-- ____ _
____ __ ._._a ._. ,nor. ,t.,,r? ,~~~ nn C115C.P.rn- 3. Anarchism, factionalism, groupism, sec-
probably some improvement. ?ry other stns attrtoutea to >;nose wrly ViJywc Ull:
__ _ ....ta..~ -~------- -
tlte economy. Anew note of urgency and in the steel city- of Wuhan. A month. after
installation of a Municipal Revolutionary
th
e
worry suss struck in Mainland reports, side
1968) "acute
han (March
i
W
i
"
,
u
n
ttee
great Comm
by side. with the usual references to
le" was still being talked about on
t
l
"
rugg
ass s
c
Ytpsurg+:" and "unprecedented achievements.
A socialist recession appears w 11C4VG u...~+- --- ----- - .
aped rapidly, gathering momentum as t:he 4. Urgent calls to "make: revolution thrift-
_ _... ~t_.+~ _..,..... L.,.;.,.. 1,r..n.anoct ,n thn enr,nv and
SCCnIS tO have deteriorated further In t~nti, aS ~uuuuca Va aJVV? +++~?~~ ~j Y?-?--~ ??~-- --
_ .. _ .i>..,...,..) .-....,.,.,..;t?; t)N THE most serious
and persistent economic prob-
lems f`or China's leaders is how
to increase 'the populous nation's
agricultural lroductivity.
The acuteness of the problem
becomes evident when it is rea-
lizrvd that agriculture in China
I ague china
But it generally averages below
30 percent, and it typically oc-
curs in sinuous and relatively
narrow bands along the river
valleys and on the immediately
adjacent slopes. '
pansion of land under cultiva-
tion. Most plans for significant
increases in agricultural output,
j therefore, have been. geared to
' improving yields.
Basic Problems
The further expansion of
irrigation and multiple cropping
may increase output. However,
a substantial improvement in
agricultural productivity ap-
pears to depend more on the
greater use of chemical fer-
tilizers and the use of improved
seed.
Basic to all plans for increas-
ed agricultural production is the
need for better land manage-
ment and coordination of the
land and water conservancy
programs.
New Lands Opened
The cultivated area of China
has fluctuated within relatively
narrow limits during the past 15
years. Although new land has
I been. brought into cultivation it
I apparently has not been suf-
ficient to offset the losses caused
by greatly expanded urban and
' industrial areas, as well as the
i construction of a large number
' of reservoirs, and a number of
physical factors such as saliniza-
tion and erosion.
Most of the new land has
been opened in Northeast China
and in Sinkiang by state farm
and military resettlement pro-
f jects. Although a potential for
opening new land for cultivation
remains, most land that is not
already in use is in marginal
agricultural area. Aridity, al-
titude, short growing season, and
other physical factors discour-
age farming there.
A reluctance of the Chinese
Communists to invest in costly,
accounts for almost 50 percent
;of the national income, employs
-about 80 percent of the labor
'force axed provides a major pro-
. pox?tion of the country's exports.
Additionally, the size of the
yearly harvest vitally affects
i consumption, industrial produc-
,tion, capital investment, rev-
emte, foreign and retail trade
and other economic variables.
,'~ln estimated ll percent of
Ghina's land area is now cul-
tivated, and about 40 per-
cent of it is probably double-
cropped. The total sown area is
roughly equal to that in the
United :hates. However, almost
all tilled land is located in the
eastern half of the country,
where there are sizable areas
with 50 percent or more of the
land under cultivation.
These areas include nearly all
of the North China Plain and
the valley of the lower Yangtze ~
below' Wuhu as well as parts oY
the Manchurian Plain and the
Sz~e]ckr~wan ~~Bya~s{in. The~amou~nst~
oi' -~al;tern "Uhina~v~rie~"~~13~'
~~ e~xal~8 h~i[1fd.J1~[e/
Rice Dominotes South
The most significant division
in China is that which separates
the rice-growing southern pro-
vinces .from the northern pro-
vinces that specialize in wheat
and small grains. Within these
two broad groups a large variety
of other crops is grown.
Rice is dominant almost every-
where in South China, where
ablo~tut 35 to 80 percent of the
3~fi~~t~~~en?-
 CPYRGHT
~
erally accounts for 50 percent or
~ more of the area sown to food
crops. Double-cropping of rice
is dominant south of the Nan
Ling River in Kwangsi, and in
southern Fukien.
To the north, in 5zechwang a
combination of corn and swcrl
potatoes is extensively cultivat-
ed. Corn is a particularly im-
portant crop for the non-Chinese
hill people of Yunnan and
Kweichbw because it suits
the cooler temperatures and
shorter growing season of ;the
uplands. `
The Yangtze Rice-Winter
Wheat Region is a zone: of
agricultural transition bet~een
the North and the South. 'The
northern boundary of this rQgion
- approximately the Huat Ho
- marks the northernmost ex-
tent of rice as an important
corp. Similarly, the southern
boundary roughly marks the
Southward extent of wheat as a
anajor crop, even though some
heat is grown throughout South
~hina.
r
WASHINGTON POST
22 November 1968
portanee, is planted throughout
the wheat regions; Honan i
th
s
e
Wheat is the most important ~ leading producer.
crop in the three agricultural re-
gions of North China. In the
Winter Wheat-Kaoliang Region,
where the annual precipitation
ranges from 20 to 30 inches,
secondary crops include millet,
corn, soybeans, and. sweet pota-
toes. In the drier west, hardier
and more drought-resistant
secondary crops, such as millet,
oats, and buckwheat, are com-
monly planted.
To the northwest, increasingly
severe winters and less rainfall
mark the transition zone be-
tween areas growing winter and
spring wheat.
Cotton and tobacco are impor-
tant crops in North China.
Cotton is widely grown in the
wheat regions - particularly in
the western half of the North
China Plain where well-irrlga-
tion is possible -and in the
valleys of the Wei and Fen rivers
!n Shensi and Shansi provhices.
Hopei is the leading cotton-
producing province of China.
CPYRGHT
CPYRGHT
~~~aa's A~cultua e ~adig~
Korean Pioneers
The Koreans who inhabit the
Yen-chi area near the border
with North Korea have pioneer-
ed the cultivation of rice in the
Northeast. Mice culture in a
few additioMal areas is being
encouraged.;'' Other crops In-
clude asmall amount of cotton
in Liaoningg" and sugarbeets in
Kirin and Fieilungkiang.
Agriculture to the area of far
western (~htna is extremely
limited. The land mainly con-
sists of etcher high barren
plateau and mountain country or
desert basins that are hostile to
all crops. Exceptions occur to
Sinkiang where highlu produc-
tive oases ri~n the great basins
of the province and where some
land has been reclaimed durtnp
the past decade.
~ ~e~ther and ~~t~~ ~.~v~~~nt~~~-
CPYRGHT
Apparently in an effort to
dtscipllno and mob[11ze lax
pcasattts, oC[lciala in a fow
parts of the country have re?.
portedly taken steps to elim?,
taste the concessions made'
to the rural population dur?
By Stanley Karrwty ` 'putt' of? -cereals may have ~ reaucracy, and this 'has led ; t at followed the collapse of
~~dropped as much as 6 per ~~ to two problems that, judg-', t t e Great Leap Forward,
waea-~aton Po.c rore~sn aerrla . ;;cent below the 18f371~arvest E, 3ng from authoritative. ao'a 1968 attempt to mod-.
? ,:~o some i ~
Agricultural production, the .Y ~Y~hile the likelihood o!' a~t the moment. ?: ~ At that time, peasants
backbone of Communist ; ~;: ~ re allowed to have small
China's economy, appears tb ;',mote, ? chronically deficit `,iwl]dered or dismayed by the i private plots and sell their
have suffered th[s yeat from ~` ~: p r o v i n c e a liko Ii o P easy ! ently shed their responalbJll- ,..produce at free markets as a
}Shansi and Shantung, way of boosting produclion
a combination of bad : a well as the large coastal -ties, with the result that no > by providing incentives.
weather and the cumulative 13c,' cities, could face food ahort?'real authority exists do Now, according to mporta
disruptions caused by Mao ~-ages later this winter and "many farm regions. +~ from a? few counties in
Tse?Tung's tumultous Cui-'..next spring. The bureaucratic break-` ,nearby Kwangtung Prov-
tural Revolution. ~~~? ~~ down has reduced the con-?. lace, peasants are being de?,
Torrenblal rains .that .:e,~enewed Instability ' straints on peasants to sell' prived of their private tracts
flooded tMe southern Cinese ; ~ These shortages may con- "Rheir Cereals rt.o the govern- ~ : of land and ponds in which
provinces ' of Kwangtung, ';" IriUuted to renewed political ~ meat. ~A recent radio broad- '.
Iiiangsi and Fukien this .;":instability, particularly at a ;`? cast from Norl'h China, for'' ` dhey were permitted to
spring and summer seri?'' time whCn moderate mill- !example, warned against ;breed fish an thctr own.
ously damaged rice crops In ~~,;Rary and civilian ieaders;~~"class enemies" nr~ho are ;'~ In the view of specialists
those areas, vu+hile drought ~; now in charge of most of the; ` "falsifying production re? here, this trend towards in?
~a d v e r s e 1 y affected the .? country are striving to res- 'cords, distributing grain se?,' ?, tensive collectivization prob%
wheat-growing regions north ~, tore law anti order after': cretly, keeping more for 'ably represents an excess of
of hhe Yangtze Rivera t'years of turbulence. .' themselves ... in order to `,zeal on tho cart of . ocal
~, Meanwhile, months of turf," This year's production aet? ~ disrupt procurement." ~% cadres rather than tho be?~
.moil evidently obstructed ;back also underlines the,.Without Iocal leaders as-a~.ginning of a natlonwido re-
the manufacture and trans- ;' fact that the Ghinese .Com= signing them' priorities, ~'; turn to the policies of the:
port of pools; chemical fertl? '`munlsts, despite all- their . peasants in some areas have -Great Leap Forward.
lizers 'and other farm sup-: ,hopes for becoming a major, :been concentrating more on ~:' Moreover, these special-
,plies and, perhaps more sig? :~ power Jn rt,he foreseeable fu- their private gardens than' .tats point out, it lurihcr sal;?
nificantly, weakened the re- ? tare, are still losing the cru?,? on "collective" Crops like "fiesta that Chinese a;;ricul-
+gime's rural administration, .: cial long-range race between ; rice and wheatr They have : tare is drifting in rudderless
;.prompting peasants Ro ig? ,~ food av~allability and popula-. also neglected to maintain ;fashion, without guidelines
more or dcfyr'Peking's direc? ,',tion growth. ~ ~ irrigation fac[ltties, collect,?`and without any hope o!.
ttiVes: "' ~ ~: ' ' ~ ~~ C' During the 'past decade. ,manure and perform other. -.achieving morn than intai?
p~r?v~~Fotpf~~~h~'91,i!~~'6TE~~~o~11~~tt~d0O4O~~~'b~`~'t`' M;...~..:.
~ o o esser im-
 C~~~d r~d For Release 1999/08/24 :CIA-RDP78-03061A000400020023-2
at leash 20 per cent, end now;,
probably totals more than
In contrast, grain output
has only laereased about 8'.
per cent over the same pe-
i?iod. .
The lag in agriculture has'
`-created periodic .scarcities
of fibers, cotton, soy}7eans,
oilseeds and other rawAmate=;
rdals essential for Chinese
;industry or as export com=
xr-oditlea to iCain shard cur ,
? r. ency,
:~ To reed their large cities,;
? China's leaders are continu?'
ring to import roughly four
million tons of wheat per'
year from Australia, Canada.
and France. These imports
cost more khan $3U0 million
dollars, or about 25 per cent
o! Peking's foreign.' ex?~
change earnings. ' '
;Private Crops
Ah the same time, by per-
muting peasants to cultivate
vegetables and raise , live-'
stock far private profit, the
Comrmumists have managed
ito compensate for the short-
ages of rice, wheat .ands
other cereals.: ' . -.
But these- temporary.
"measures, while ,necessary..
:far survival, .are' not likely.
to aa]v~e thv country's farm'
problems.. The main ohai?
~ lenge for Peking is tp con?.~
~trlve some kind of durable
agricultural poldcy.'
.Most od the evidence;
reaching here indicates,
'however, That the divided
Communist hierarchy is too;
'preoccupied wiNl- politics aR`
present to focus 'on eco-;
namic planning.: ~ ,.
' ~ Much of the current con~<
'.fusion stems directly fmm '
'~khe Cultural Revolution,'
which shattered administra-
tive controls, paralyzed tac-
tortes and railways, and'
spurred clashed, between
rival faotions in many areas.
?; Among other Nhings, ship
menu of chemical fertilizer;
from Japan and Europe
'were de]ayed at , orts or en
"route to their destinatfona,
Inside the Country, while in?:
dustrial trovb~es under-"
mined the prgduction o!~
..farm equipment;' ~'
In several r glens, pcas~
'ants abandone~ their ilelds
to loin the'- competing ~.
groups fightlr~~ ~ fn nearby.;
:towns, or 4ook adva>ytage ol,~
crumbling controls to black a
'aaarket kheir produce rather `
than turn tt over ta?atate
,;.purchasing agents.:. ?~ .i.
Ono of the moat debilitat?:;".
ing efdeots o! ttie~d3sorder;?;
t:howavez. `' 3faa a.:lieegs. they
WASIiINisTON POST
2i+ fiepvember 1968 CPYRGHT CPYRGHT
~~tl~~~d ~'ri~~xt~ inter ~i~~~
Y a ?
By ~~tanley Karnow
washtr,7ston.Post 7*oreign 8ervfce
1-TONG ISONG, Sept. 24-?1
1?rivate enterprises are eme7?a-
ing ~throaghout Communist
i;17rma, reflecting a widespread
l7reakdow77 in central political
and econamir controls as a re-~ ~
suit of Mao Tse-tung's Cul-! ;
aural revo]ution.
'These bootleg businesses in-
clude small and medium-sized
factories--some employing as
many as 1110 workers-th~at~ avoid red tape or because
produce glassware, leather China's bureauctratic macil7in-
goods, textiles, hardware, me- cry has been paralyzed by the
chanical devices and other 'turmoil triggered in the Cut-;
consumer merchandise, ~ tural Revolution.
Evidence available here in-: ~ ___ .
dicates that increasing num-
begs of peasants are selling,
rice, wheat, edible oils, catton~
and other agricultural com-
modities to free-lance interme-
diaries instead of to state pur-i
chasing agents.
.Iourneymen artisans are re-
ported traveling through sub-~
urban and rural areas, con-
structing private houses and
even transacting real estate
deals.
While denounced officially
as "react~'~~~~t~t~r,;
revolutio a , iii`tt~~ I
~re apparently tolerated or
promoted b,y local Communi
functionaries for two main
easons:
? Many low-ranking offi-
ials are said to be receiving
vibes or a slice of the profits
tures.
? Provincial industrial man-
agers, anxious to boost produc-
tion, are sal-d to' encourage il-
prise apparently represents a
growing lack of respect for
Mao's rigorous brand of com-
munism and an erosion of
China's social fabric.
Anaylsts here suggest that it
also mirrors an accelara~tion im
the trend towards decentrali-
zation that began ]nova than a
deoade ago.
China has already reached a
stage at which, politically and
I~~ ~9~a is
s onger in the provinces. tih.a~n
CPYRGHT
in r77any'ingenious ways, some
of them legal.
Tiny textile or knitwear fac-
~! tortes in the back streets of
Shanghai; for example, rely on
dealers who buy raw cotton
?~~ ~a ?+? +h a ..;+Y~
c easants and small machine
rhos et tools ice rem
in Peking and, to use th~
pert Audrey. Dannitharne, the
"cellular" rather than "mono-
; lithic" character of the coun-
,try incoming out.
Also cnmimg out, -from all
'. 9Crnl7 nit S~ is Cho n~+nv~l c1:; 771
and manipulating ~as~sorted~targets, delivered its quota of
business schemes while payirig~motars to .the state and sold
lip-semvice to ideology ands th.e surplus to black market-
structure. leers.
Industries Camouflaged Mitch like New York tele-
In ` Shaghai, Canton and phone-booth brokers, these
back market operatives func-
other cities, far example, the tion out of tea houses. Official
"underground" industries are purchasing agents, unable to
often camoufla~gcd, with the obtain needed equipment.
complicity of Communist, through ,clogged government
Party cadres, as neighborhood channels, often deal with
factories originally sponsored shady expediters.
in 1959 to enlist housewives One Cantonese craftsman,
and elderly oar handicapped according to a reliable source,
persons for produotive labor. runs a thriving electrical re-
Many of bhese industries pair shop. with the help Hof rel- ~
raise capi~tai by,7+equiring, like silver i7i Hang Kong, who
cooperatives, that their work- send him wire, fixtures and
err invest in the illegal frrm light bulbs instead of cash re?
before they are given jobs. In mitances.
many instances, workers. join- In the villages, peasants are
ing these shops are unaware evidently establishing unoffi- ~
that they are breakins; the cial handicraft enterprises. A
law. . ne~wspaper~gdgo coastal Ghek-
.I~~~R?''~Y~~~n`@~~`"lf e~tly berated
77 .that had
terials are reportedly acquired sold its .draft animas to fi?
state?owne pants.
Black Market Sources
An accountant who" arrived
.here recently from Canton
 CPYRGHT
Approv
nonce an enterprise and stole
motors designed for irrigation
jpumps.
Another Innovation In rural
areas are groups of artisans,
described officially as "under-
ground construction teams,"
engaged in private contracting
.jobs.
A mombgr of ~ane of tl~aso
teams in Kwangtung Province; '
who recently escaped to Hong
Kong, said his nine-man group
included bricklayers; electri-.
;cians and carpenters, as well .
a5 a salesman. ?
According to the refugee,.
the salesman scouted the terri-
tory for customers and, on oc-
casion, the team itself would
buy .a lot, construct a house
and sell the whole- package.
The team obtained its build-
Ing materials on the black
`marke.t. Official warnings
aKainst_ thefts .af bricks, tiles
and cement from majur con-',
struction sites suggests that
many of these underground
building groups exist.
This "capitalist restoratlon,"
as Peking calls it, is not only
.worrisome for ideological. rea-
sons. The regime appears to
regard it as a refuge far -all
sorts of opponents of the es-
tpblle~Aed ayatQrr~,
Among the system's' oppo-
nents are the thousands of
urban youths now being
shipped. to the countryside,
many of whom will slip back
to the cities. Deprived of -a-
tion coupons-and regular jobs,
fihey can survive only by work-
ing in the industrial under-
world.
Other private entrepre-
neurs, meanwhile, are being
blamed for "econ~omism;'
which in Chinese Commuirist
jargon Is" th'e 'equivalent of
Khrushchev's . "goulash com-
munism: `
023-2
Approved For Release 1999/08/24 :CIA-RDP78-03061A000400020023-2
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