ECONOMIC ORGANIZATION OF COMMUNIST CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A000100150001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 48
• Document Creation Date: December 23, 2016
• Document Release Date: April 23, 2013
• Sequence Number: 1
• Publication Date: October 21, 1952
• Content Type: REPORT

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SECRET
SECURITY INFORMATION
i~
CciPY - ~'3. ~' `'~
ASSI:~TA'iVT 1}If~IvCT4R ~^~'P-~-
FOR RIrSEAKCH AN13 RI;POxTS
ECONOMIC INTELLIGENCE REPORT
ECONOMIC ORGANIZATION OF
COMMUNIST CHINA
CIA/RR 12
OFFICE OF RESEARCH AND REPORTS
SECRET
CENTRAL INTELLIGENCE AGENCY
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WARNINQ~
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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_~\,
i
ECONOMIC INTELLIGENCE REPORT
ECONOMIC ORGANIZATION OF COMI~TNI3T CHIAIA
CIA/~tR 12
Office of Research and Reports
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This report represents the results of a preliminary
investigation of Communist China's economic organization,
the effectiveness of this structure as a tool of management,
and the degree of Soviet control and influence over the
Chinese Communist government. The importance of Soviet in-
fluence as a factor in directing the Chinese economy prompted
the inclusion of the formal framework of Sino-Soviet joint
companies as instruments of Soviet coat"rol.
a~-~'Sc-~ Ft-T
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coNr~ess
I. Introduction
II. Economic Planning in Coaenunist China
A. Development of Planning
B. Planning Process
III. Key Economic Ministries of the Chinese ,
Communist Government
A. Ministry of Railways
s
?
2
7_
7
8
1~
11
1. Structure ? ? ? ? . ? ? ? ? ? ? ? ?
.
. ? ?
2. Administrative Problems ?
,
l~,
3. Personnel a
15
B . Ministry of C offiaunicat ions
15
1. Structure
1?
2. Administrative Problems .".
18
3. Personnel .
18
C. Ministry of Heavy Industry
_.
19
1. Structure .
~ ...
19
2. Administrative Problems
.~.
21
3. Personnel . . ~
.
. ...-
23
D. Ministry of Agriculture
.
2~
1. Structure
25
2. Administrative Prhblems
26
3. Personnel
28
N. Soviet Penetration and Control of the Chinese
Communist Economy
2g
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A. Soviet Technical and Economic Assistance 28
B. Sino-Soviet Joint Companies 29
1, Chinese Changchun Railway 30
2. Sino-Soviet Civil Aviation Company . 30
3, Sino-Soviet Compare es in Sinkiang Province , 31
4. Sino-Polish Shippin~ Company . 32
V. Strengths and Weaknesses .. 32
A, Elemienta of Strength . 32
B . Elements of Weakness 33
~e~dixee
Appendix A, Common Program of the Chinese People's
Political ConBUltative Conference 35'
Appendix B, Personnel of the Principal Chinese
Communist D:inistries 39
50X1-HUM
Illy~@~rations
Figure 1, Central People's Government of the People's
Republic of China 6
Figure 2. Ministry of Railways (Tentative) 12
Figure 3. Ministry of Communications (Tentative) , 16
Figure 4. Mjnistry of Heavy Industry (Tentative) 20
~FrSc-$-FrT
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0 0
Figure 5. Ministry of. Agriculture (Tentative) . 24
.Following, aae
China: Ccm~aunist Administrative Areas -- 1952 (tSap) 8
S-F~Sz-B ~-T
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C IAfRR ~ S ~ C-~.-E
(ORR Project 24-5I)
SECURITY Il~'ORMATION
ECONOMIC ORGANIZATION OF COMMUNIST CHINA*
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The economic organization of Communist China is one superimposed after
the ravages of war on a country whose limited industrial and commercial
development had been largely the work of foreign capital. The theoretical
basis for, and the government framework of, the economic organization of
Communist China were established in September 1949. Control is maintained
through the customary Communist adherence to "parallelism" and "democratic
centralism."
Basic decisions are made by a small group of leaders in the Communist
Party's Politburo and the Communist Party~s Central Committee and chan-
neled down through the Party and state administrative organs for implementa-
tion.
While the Organic Law adopted in 1949 establishes the supreme govern-
mental authority in the All-China People's Congress, no date has yet been
set for the election of this body. Original authority was exercised by
the Chinese Peoples Political Consultative Conference (CPPCC) at the 1949
meeting, and subsequent meetings were scheduled for every 3 years. At
the original meeting the CPPCC elected the Central People's Government
Council (CPGC), which is, in fact, the highest executive agency of the
government when it is in session. Otherwise, authority is centered in the
Government Administrative Council (GAC), which resembles the Soviet Council
of Ministers. Within the GAC is established the important Coa~ittee of
Finance and Economics (CFE), which supervises, directs, and controls the
Chinese ecor~a~y through 13 economic ministries.
Economic planning in China has been applied unevenly and incompletely,
largely because of the mixed economy consisting of state and private enter-
prise and because of administrative incompetence and $nexperience. No Five
Year Plan has yet been formulated, although the provision for such s Plan
exists in the Common Program.
~' This report contains inforffiation available to CIA as of 1 July 1952. It
does not include certain minor changes in organization reported to have been
made since that date.
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Soviet influence has penetrated all branches of the Chinese economy
through the expanding role played by Soviet technicians and advisers.
In addition, through point Sino~oviet companies, the LTSSR has direct
control over important segments of the economy, especially i.n P;anchuria
and in Sinkiang Province.
The most important element of strength in Communist China's economic
organization is the increasing concentration of control. This control
has permitted the introduction of uniform methods and procedures, facil-
itated the adoption of Soviet organizational and management techniques,
and provided increased opportunity to apply experiences gained in
I~ianchuria to the Less highly developed areas of China.
Elements of weakness exist in Communist China's economic organization
which counterbalance the factors of strength to a considerable degree.
There is evidence of poor planning, administrative conflicts, and duplica-
tion of effort. Tendencies toward overstaffing, corrupt ion, and low
performance standards in the state administration have not been overcome.
In addition, traditional Chinese dislike of the USSR and all Soviet
administrators is a potential limitation to an effective liaison between
Communist China. and the USSR.
I. Introduction,
The economic organization of Communist China is one superimposed by
the regime in Peking (Peiping)# on a country ravaged by war, whose limited
industrial and commercial development had been largely the work of foreign
capital. The Communist Party of China formulated the theoretical basis
and established the governmental framework of the economic organization of
Communist China. As is customary in Communist-dominated areas, the Party
usually maintains its controls by adherence to. the principles of "parallelism"
and "democratic centralism." "Parallelism" means that the organizational
structure of the Party "parallels" that of the national Government, with the
head of a Party agency usually serving as the administrator of a similar
agency in the governmental structure. Even at regional and local levels,
ranking Party 'officers occupy comparable administrative posts. Tor example,
# Communist China has reverted to the ancient spelling, Pei-ching ("Northern
Capital"), since the Communists have established the seat. of the government
there. About 1928 the government of China had .changed the name to
Pei-ping ("Northern Peace"), as Nanking (Nan-Ching) was the capital city.
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Rao Rang is both chairman of the Manchurian Peoples Government and
secretary of the Manchurian Party bureau.
The theoretical basis for, and the governmental framework of, the
economic organization of Caennuniat China were established at a meeting
of the Chinese Peoples Political Consultative Conference (CPPCC) in
September 1949. At this meeting, which took place only a few months after
the decisive capture of Shanghai by Chinese Communist troops (Map 1949),
the CPPCC adopted its own Organic Law, its Common Program, and the Organic
Law of the Central Peoplets Goverrmment of the Peoples Republic of China.
None of the three basic documents represents the equivalent of a
constitution in the accepted meaning of the term, but taken together they
constitute a statement of the philosophy of the new rulers, an outline of
their program, and a basis for the structure of the new governing body.
These documents do not reflect a permanent set of principles, because the
Communist point of view is that China is entering a long transitional
period on the way to Socialism and eventual Communism.
In its own 0 rganic Law the CPPCC (which has since been named a council
instead of a conference) authorized itself to exercise the authority de-
legated to the A 11-China Peoples Congress, the supreme organ of the state,
until such time as the membership of the Congress can be duly elected and
convened. The CPPCC meets evexq ~ years. When it is not in session, its
National Committee, which meets semiannually, is authorized to act in its
stead. After the convening of the All-Chins Peoples Congress, for :which no
date has been set, the CPPCC will act only in an advisory capacity.
The Common Program adopted by the CPPCC consists of a manifesto of 60
articles taken largely from Mao Tse-tung~s New Democratic Program and sets
forth the Communist program in the field$ of goverim-ent, economic affairs,
culture and education, national minorities, and foreign affairs. (See
Appendix A.) The Common Program defines the various sectors of the national
economy as staterowned, cooperative, and state-capitalist. The last sector
represents mergers of private capital with state capital. All three sectors
are to be expanded, but the expansion of the staterowned sector is to be
emphasized. The sectors comprising the peasantry and the handicraftsmen are
also encouraged by the land reform program, but coirtrol is exercised through
mutual aid teams and cooperatives. The basic objective is to regulate and
coordinate all sectors of the economy in accordance with state plans.
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Communist Party discipline is maintained through the principle of
"democratic centralism," which requires that the individual moat obey
the Party directives, that the minority must obey the majority, that
the lower echelon must obey the higher echelon, and that the entire
Party must obey the directives of the Central Committee. 7J#
Basic decisions originate in?the inner core of the Party leadership.
These are channeled down through the hierarchy of both Party and govern-
ment for implementation. Frequently, directives are issued as the joint
action of Party and government, especially at the regional and local levels.
Copies of governmental directives are frequently distributed through-the
hierarchy of the Party.
Throughout the economy, in the factories as well as in the villages,
leadership is supplied by the Communists. The extent of such leadership
varies in different areas. In Manchuria, where Party control over the
economy is most firmly established, regional conferences? were held in t~iay
1951 which emphasized the need for Party direction and guidance in the
interest. of increased production. The framework and functions of the
Central Peoples Government of the Peoplets Republic of China are set forth
in the Organic Law promulgated by the CPII';C in September 19.9. At the top
of the government is the Cen+,ral Peoples Government Council (CSC), which
is elected by the CPFCC. The CPGC consists of a chairman (Mao Tse-tung)~
b vice-chairmen, and 5b members. It has legislative, executive, and
judicial powers and has the final word on the national budget. 1 Its
closest counterpart in the USSR is the Presidium of the Supreme Soviet of
the USSR.
The CPGC in turn organized thh major subordinate agencies prescribed
by the Organic: Law, which included the Government Administrative Council
(GAC) as the supreme administrative authority; a Peoples Revolutionary
Military Council (Ai.P~) as the supreme military command; a Supreme Peoples
Court (S PC); and a Peoples Procurator General (PPG), who was placed in
charge of a hierarchy of public prosecutors. ~/ The function of the
traditional Chinese censorate was given to the Committee of Peoples Super-
vision set up under the immediate jurisdiction of the GAC. The Organic Law
states that the Committee of Peoplets Supervision, which is patterned after
the Soviet Ministry of State Control, is responsible for supervising the
execution of duties by government institutions and functionaries.
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S E-C~i. E-~
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S E-Chi.-E-T
The Central People's Government Council (C PGC) is scheduled to meet
only once every 2 months, and executive control of the government is vested
in a series of subordinate committees. The executive control of civil
administration is in the hands of the GAC, which is the Chinese equivalent
of the Soviet Council of Ministers. The GAC is responsible for planning
and directing practically all economic activity, through the economic
ministries and other subordinate agencies, (See Fig. 1.)
In descending order, the governmental hierarchy which is responsible
for economic affairs may be summarized as follows: !~,/
1. China People's Political Consultative Council (CPC ).
2. Central People's (,overnment Council (C PGC) .
3. Government Administrative Council (GAC).
1,.. Committee of Finance and Economics (CF'E) .
5. N:inistries of the Central Feople's Government.
6. P-?ilitary and Administrative Committees (Administrative Regions).
7. Provincial People's Government.
8. Asian People's Government.
9. Municipal Peoples Government.
The actual functioning of this hierarchy is determined by the "parallel"
activities of the Chinese Communist Party. Although not a part of the
government, the Central Committee of the Party and its powerful agency, the
Central Political Bureau (~blitburo), direct the state's executive organs
and.are superior to the highest governmental bodies. ~ In consequence of
the Party's policy~naking and supervisory role, the activities of the
governmental bodies are largely formal and meetings are held mainly to listen
to official reports, to sanction decisions already made, and to approve
appointments already filled.
Another 13snitation of the Chinese Communist governmental administrative
organization :is the power held by the military authorities, Jurisdiction
over the Chinese armed forces has been given over to the People's Revolu-
tionary Miilitary Council (PRMC), which is not subject to control~by the
civilian organs. Of the six regions into which Communist China has been
divided, all but two, Manchuria a_nd North China, are still under military
rule. Manchuria, generally designated as the Northeast, is the only region
which has a People's Government, the prescribed form of regional administra-
tion. Plorth China is administered directly from Peking. The other four
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Figure 1. Central People+s Government of the people+s Republic of China 59
Party Central Committee ------ Part politburo
Committee of
People+s Supervision
People+s Revolutionary
Military Council
Committee of Other
Culture and Education Bureaus
Publications Administration
News Administration
Academy of Sciences
Ministries of
Culture
Education
Public Health
Chinese People+s Political
Consultative Council
Supreme
People+s
Court
People+s
Procurator-General+s
Office
0
Committee of
Finance and Economics
Labor
en ra
Plannin Burea
People+s Bank
Maritime Customs Administration
Ministries of
Finance
Trade
Heavy Industry
Fuel Industry
Textile Indus try
Light Industry
Railways
Communications
Posts Telegraph and Telephone
Agriculture
Forestry
Water Conservancy
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Commission o aw
Commission of the Affairs
of Nationalities
Ministries of
Interior
Justice
Public Security
Coirsnittee of
Political and Legal Affairs
~o ss on o
6verseas Chinese Affairs
Information Administration
Ministries of
Foreign Affairs
Personnel
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C ~~'~
regions are the ?'orthwest, the Fast the Central~outh, and the Southwest.
(See the accompanying map of China. j . According to Communist tl~eor;,r, the
relaxation of military rule is unimportant because both militaryr and non-
? military organs are instruments serving the Party's interests and both
are equally subject to Party control.
II. Economic Planning in Communist China.
The Chinese Communist concept of economic planning is expressed in
the Common Program. A system of controls over the collection and distribu-
tion of raw materials and finished products, as called for i.n the Common
Program, interferes with normal market functions. This system of controls,
coupled with the mixture of public and private enterprise, has resulted ixi
uneven and incomplete application of the principles of planning.
A. Development of Planning.
Plans for control of private enterprise were developed in two stages.
The first consisted of a complete inventory to be taken of all goods and
commodities held by state enterprises, and the second was the requirement
that all transactions with state enterprises be made in accordance with the
special directives of the Committee of Finance and Economics (CrE).
Under the provisions of a directive of 10 PSarch 1950, state trading
companies were authorized to centralize the collection and distribution of
most important raw materials and finished products. Domestic state trading
companies, nation-wide in scope with branches in local areas, were set up
under the T~linistry of Trade. ~ The original companies were the General
Grain Trading Company, the General Salt Company, the General Coal Company.
(including building materials), the General Cotton Cloth Company, the
General I~ierchandise Company, and the General Domestic Products Company. :Fore
the purpose of establishing controls over foreign trade, similar companies
were established, each to handle foreign trade in such fields as hog bristles,
oils and fats, tea, mineral products, native products, and imported products.
All transactions of these state trading companies were conducted on
a contractual basis with specifications, among other things, for quaxitity,
quality, price, and the means of transportation. In addition,?these
contracts were paid, not in currency, but by drafts drawn on the People~s?
Bank, where all state funds were deposited and where all accounts-could be
scrutinized. In this manner the Communists expected to establish controls
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gradually 'over the entire economy as the trade of the state trading
companies increased. P1o transaction, whether government or non-
government, was possible without the approval of the Ministry of Trade,
in whose jurisdiction these trading companies were placed. Thus the
Ministry of Trade became one of the key ministries in the development of
economic planning. ,v
The influence of the Ministry of Trade was extended by the in-
clusion of price control in the list of its functions, This function was
to be exercised through the state trading companies. In this manner, price
leadership was established by the state sectors. of the economy, including
the cooperatives, and was followed by the private traders. The acceptance
of price leadership influenced the pattern of production of private enter-
prises by discouraging the manufacture of unprofitable items. Thus items
on the Communist list of luxury goods were deliberately priced below cost
in order to stop their production.
F. P annin~ Process.
Plans are prepared in two phases, each on the basis of annual,
seasonal, and monthly periods. One phase deals with ;projected expenditures
of the state trading companies; the other phase determines the allocation
of materials in quantitative terns. The planned expenditures are prepared
and reported by the local subsidiaries of the state trading companies and
forwarded to the state trading companies for approval and submission to the
I~~inistry of Trade for final acceptance and implementation. This financial
planning includes expenditures for materials, for labor and managerial
supervision, and for plant expansion. Limits are set to the funds which
can be transferred to private business firms.
Plans for the allocation of materials are drafted by the Ministry
of Trade after convening all high-level government agencies interested in
the over-all distribution of resources controlled by the state. In this
conference the share of state resources to be turned over to the Ministry
of Trade for allocation is determined. The Pinistry then distributes its
allotment to the state trading companies, which perform the final alloca-
tions to the local subsidiary companies in accordance with policy pre-
scribed at the time by the riinistry.
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Obviously, conflicts arise between the financial plan and the
allocation of materials plan. Control over the availability of goods,
however, sets the limits to the amounts which can be purchased by the
state trading companies. Thus the financial plan is subject to adjust-
ment in order to conform to the materials plan. The financial plan is
aimed at the internal policy of the state trading companies, while the
allocation of materials is aimed at directing the over-all pattern of
operation of the companies.-
In addition, there were indications in 1950 that the Central
Planning Bureau of the CFE was drafting a Five Year Flan as well as an
annual plan. ~/ Delay in announcing such a long-range plan may reflect
Chinese Communist administrative difficulties, technical limitations,
and the impact of the Korean conflict.
The planning process has been applied to regional plans, the
most important of which has been developed in Tlanchuria. There the local
Cor~unist regime, apparently with Soviet assistance, launched a re-
construction plan in 1947, 2 years before the establishment of the Central
Government. 10 :~anchuria's industrial potential, the predominance of
state enterprises, and other factors have facilitated I~;anchuria's planning.
There are indications that the pattern of planning in A'anchuria is being
;radually extended to all of Communist China.
In some insta-ices, increased production targets have been adopted
at top levels in the absence of any specific program for the attainment
of such goals, Official and press statements are frequently issued ex-
tolling the general principles of cost reduction, increased labor pro-
ductivity, and better techniques for plan fulfillment. Responsibility
for increasing production appears to fall in large measure on regional and
local administrators. Special campaigns are pro3ected from time to time in
order to stimulate production and to augment state resources. although
these campaigns are not formally identified with planning, their objectives
are closely associated with plan fulfillment and with the upward revision.
of production targets. Examples for such campaigns, are the "increased pro-
duction and austerity" drive of 1951 and the 1952 movement against waste,
corruption, and kindred hindrances.
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III, Kev Economic Ministries of tie Chinese Cozrununist Government.
The principal economic agencies of the Chinese Communist Government
are 13 economic ministries, the Peoples s Banl~, and the ~~"aritime Customs
Administration, under the Committee of Finance and Economics. The
industrial ministries include .those for Heavy Industry, Fuel Industry,
Textile Industry, and Light Industry. The 2~inistry of Food Industry,
established after the original 13, was abolished in 1950.
The chief function of the economic ministries, according to the
Organic Law, is to "direct their respective departments of state administra-
tion." 11 They are empowered to announce decisions, issue orders, and.
supervise implementation of those orders, Legally and practically, they
are subject to direction and supervision by higher bodies, The ministries
may make suggestions which, if approved, become the basis for action. Their
appointive power apparently is limited to the appointing of chiefs and deputy
chiefs of sections and of other units below the bureau level. These appoint-
ments must be reported to the GAC,
The general internal structure of ministries was established by the
Government Administrative Council (GAC) in December 1949. According to these
regulations, a ministry may establish a general office, ~ In practice,
this office is usually a staff office or secretariat, occupying a unique
position directly under the minister and vice ministers, It is concerned
largely with assisting the minister in matters of internal administration.
On the level below the minister are three possible types of units:
(1) units in charge of specific functions; (2) semi-independent units some-
times called central bureaus; and (3) special-purpose units such as account-
ing, legal, and administrative units, These three types represent the
equivalent of staff, line, and housekeeping units. They are usually sub-
divided into other units, which also may include subordinate units.
Unfortunately, Chinese terminology authorizes the use of certain of the
same words to apply to these second- and third-level units,
There are two types of economic ministries concerned with matters of
local administration. Some ministries! such as the Pinistry of Pailways,
have district bureaus operating directly under the main office in Peking and
subject to very little guidance from the regional governments. Most min-
istries, however, manage their enterprises indirectly through the regional
governments, which have departments and bureaus patterned after the state and
municipal government structure. 11 Consequently, there is a considerable
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~J
hierarchy of administrative organs from Central Government levels to the.
local enterprise. Whether exercised directly or indirectly, the Central -
Government~s authority is manifested at all levels, and individual state
enterprises generally are under. strict centralized control. Private enter-
prises necessarily are controlled through other means..
Commnmists generally head the most important economic ministries. (See
Appendix B.) In same instances non-C-cmrim~nists are in charge, but they ar?
controlled b9 Ca~anunist vice-ministers. ` In others, non-Co~mauniats. outnum-
t~er the Caamnunists at top levels, but they are nevertheless under strict
Communist control. Although tfie particular Communists in control cannot
always be identified, such internal control exists, supplemented by further
controls exercised through higher governmental organs and the Communist Party.
A. M istrv off Railwavs.
The Ministry of Railways (see Fig. 2) administers the state-owned
railway system, Communist China's most important transportation network..
Since its establishment in October 1949 the Ministry has been assigned high
priority tasks With regard to restoration of the main railways and construe-
tion of new lines in accordance with a 5-year railway plan. ~/ This plan
provides, in part, for establishment or completion of railways from Peking
to points on the Northwest China-JSSR border and from. Northwest China to
the Indo-China frontier. Parts of this program have .been incorporated in
the annual plans and have already been carried out.
1. Structure.
The second vice-minister heads the Staff Office. .50X1
The Minister'of Railways is assisted by three vice-ministers.
The first and second vice-ministers serve concurrently as Director of the
Engineering Bureau and Director of the Rolling-Stock Bureau res ectivel .
the third vice-~ainister had charge of rail-50X1
way operatio"ns, rolling stock, and maintenance in 1950. ~ If so, such an
extensive responsibility may indicate a paucity of capable railway admnis-
trators, at least during the first year of the existence of the Central
Government.
~ Indications are that the plan was announced in July 1949 prior to
establishment of the Central Government.
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,~F~Sc$ F~-T
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Public
Security Hygiene Education
Bureau Bureau Bureau
Figure 2. Ministry of Railways (Tentative)
Traffic
Bureau
Planning
Bureau
Personnel
Bureau
.Finance
Departmesrt
Political
Departme~
Electric
Rolling-,Stock Operations Engineering Power
Bureau Bureau Bureau Bureau
,~-Fd'-Sc-$-FrT
Shops
Bureau
Installations
Bureau
O
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In addition to the various bureaus concerned with rail~rag ,
oper?tions arad servicing, there are the usual coordinati~ _ s-taffy
unite for finance, planning, and personnel. There are also tc~o ~inits,
which have police and-political functions. The Public Security B~zreau`
supervises the railway guards crarged-with protecting the railway*s.
The political Department, assuming that it is similar to other such
units in Chinese Communist administration, is engaged in political, in-
telligence, and control activities, with~speciel reference to railway
personnel. -
At local levels the railways generally are ad~i.nis~tered
directly by the r'tinistry through-Railway Control Eureaus or Railway
Administrations located in important railway centers. These bureat~a, in
turn, have autlprity over sub bureaus or breusch offices located. in .areas
subject to the bureaus jurisdiction. In F-pril 1950 the Ministry
established a Special Commissioner's office in Tlanchuria. ~/ This offide~-
has jurisdiction over railway control bureaus managing the Chinese$ot~ed
railways in I-'anchuria.
Apparently, in connection with efforts at increased centrali-
zation and more effective control, there have been several consolidations
and administrative changes in railway control bureaus and branch offices
since T949. AIthough the I~ariister of Railways stated in October 1951
that a unified control system was established when the various railways
were taken over, recent indications of consolidations and other changes in
control offices in Plorth China indicate that the local administrative
structure is still being altered to meet demands for more effective
management. 18
Although local railway administration is handled prima~ilj by
the 2diriistry of Railways own offices, local governments and local
communications departments are also utilized, especially in connection
with railway construction and maintenance. Through these,channels such
local resources as labor and supplies are made available to the Iinistry.
Although these processes involve indirect controls and more complex
administrative relationships, there is evidence that the hierarchy of
governmental and party organs generally assures adequate local support for
the Ministry's projects.
+~ Established about the same time as the joint Sino~Soviet Chinese
Changchun Railway .off ices, this off ice probably has represented the-Ministry
in matters relating to that railway.
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S-E-C ~-E
2. administrative Problems.
In China the Soviet pattern of railway administration was
first established in rlanchuria. It is being introduced gradually
throughout China, and many administrative problems exist. With regard
to management techniques, for example, the P?inistry of Railways initiated
the cost accounting system for its area control bureaus in July 1951 and
planned to introduce it at lower levels during 1952. If the result is
similar to Chinese Communist experience with other Soviet techniques, the
~~iinistry will be trying for several years to put this system into effective
operation throughout Communist China. Communist realization of this
possibility is indicated by a high official's statement of October 1951
stressing the need for the Chinese to exert themselves to learn from Soviet
technicians, l~
In October 1951 the Minister of Railways stated that. poor
planning and faulty construction work had characterized operations.
Apparently this unsatisfactory record, among others, was responsible for
the special directive of 10 August 1951 issued by the Committee of Finance
and Economics (CFE) wherein it was noted that only 60 to 70 percent of the
funds allotted for construction purposes during 1950 and the first half of
1951 had been accounted for by the various ministries. Plans often were
not made or approved in advance ~f work, planning and work were undertaken
simultaneously or in inverse order, and planning generally fell short of
requirements. I~iuch waste resulted. The directive required the ministries
to make reports on their projects, to improve procedures, and to submit to
increased centralized control. 20
Further evidence of the shortcomings of the h'inistry of Rail-
ways is found in the Gctober 1951 statement regarding 1952 plans. The
N:inister promised construction planning would get under way with renewed
efforts to obtain qualified technicians for making the necessary in-
vestigations and surveys, preparing the designs, and planning the budgets.
He also promised to eliminate the system of merchant contracting and to
establish state design and construction enterprises to carry out construc-
tion projects. It appears that these efforts will not resolve the problems
involved.
A Communist article on the P'orthwest Railway Administration
Engineering Department's bad planning of early 1951 reported that "an ex-
tremely chaotic and confusing situation existed. Funds were available
but the Department did not know what kind of materials to buy, taterials
were available but the Department did not know whether they were the
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proper engineering materials. There was work to be done but the Department
could not find enough manpower. There was manpower available but no work
scheduled. In such cases as these, the errors had to be corrected;
Although these administrative weaknesses relate chiefly to
planning and construction, they probably reflect a general condition in
the Ministry. In some degree these difficulties may arise from efforts to
impose a Soviet administrative pattern on Communist Chinese personnel.
3. Personnel.
The Ministry of Railways is headed by prominent Communists
who formerly headed the railway department of the Communist Pasty's Revolution-
ary Military Council. Tinister T'eng Tai-yvan, a former military commander,
reportedly studied in the USSR during the 1930'x. .Vice-Minister Lu Cheng-
ts'ao, also a former commander, served as Director of Communications in the
regional Manchurian government. 2~ Vice-Minister Wu Ching-t'ien similarly
headed the North China regional government's Communications Department in
1948-49. As previously noted, these Vice-24inisters concurrently direct
important units in the Ministry. Their background indicates that these men
personally, as well as officially, may be strong advocates of Soviet
administrative patterns.
However, Vice-Minister Shih Chin-den, a US-educated .engineer,
is a former Nationalist China railway administrator.
50X1
Shin was then free from
50X1
interference in his direction of important technical operations. ~ His
responsibilities may since have been curtailed. In any case, he evidently
has little influence in top-level councils.. Moreover, his usefulness will
probably diminish with the further adoption of Soviet railway techniques.
W=-
There is little evidence of important changes in personnel in
the Ministry's central offices, although a new director of the Pub11c Security
Bureau was appointed in December. Many shifts have occurred ~iri the area
and local offices, reflecting organizational changes. In view of the
Ministry's shortcomings and the presence of ex-Nationalist officials, the
turnover of personnel is likely to be considerably increased during the next
2 years. .
B. Ministry of Communications.
The A'Iinistry of Communications (see Fig. 3) has jurisdiction over
civil transport, with the important exception of railways. It has authority
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Figure 3. Ministry of Conmiunications (Tentative) 61
Planning Gffice
Civil
Aviation
Bureau
River
Transportation
Bureau
Public
Roads
Bureau
Transportation
Bureau
O
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Shipping
Control
Bureau
Navigation'
Bureau
P7avigat ion
Engineering
Bureau
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over ocean and inland navigation, merchant shipping, highways, and civil
aviation. Tts area of responsibility includes not only the basic trans-
port facilities, such as waterways and roads, but also the transport
enterprises which utilize these facilities, In addition, the Ministry is
concerned with manufacturing and servicing activities in certain transport
fields such as merchant shipping.
1. St~eture. _
The Minister of Communications is assisted by two vice-ministers.
In addition to the Planning Office and other staff offices, it has functional
bureaus of civil aviation, shipping control, navigation, navigation engineer-
ing, river transportation, public roads, and transportation. Each of these
presumably is subdivided into additional units.
Local administration is carried out in part through the com-
munications departments and bureaus of the governments of the administrative
regions, provinces, and municipalities. Civil aviation, however, is
administered from Peking through the Ministry's district bureaus. Likewise
these are indications that the local bureaus of shipping controls, navigation,
and inland navigation are administrative units belonging to the Ministry.
Whether administration is carried out directly by the local units
of the Ministry of Communications or indirectly through the regional govern-
ments, there appears to exist. a hierarchy of organs with both authority and
initiative emanating from top levels of the administration. Within the
framework of established programs the Ministry's central bureaus and, to a
lesser extent, its local branches and the local government units may wo rk out
details of implementation and. offer specific auggest?ions on either local or
national matters. In order to enlist support .for its programs and to offer
some appearance of consultation with local officials and others concerned,
the Ministry has convened national conferences such as that of December 1949
on shipping and highways. ~ The Planning Office may be assumed to be
responsible for technical preparation of planning programs, although it
appears likely that the functional bureaus have the main voice in deciding
planning details within their particular fields of responsibility.
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2. Admir~,ist~ rgttive Problems,
Administrative weaknesses and Communist efforts to remedy them
are reflected in the handling of the Tangku Harbor project, intended to
provide Tientsin with a deep port capable of accommodating large ships.
This project has been the responsibility of the Ministry of Communications
since 1949. In August 1951 the Government Administrative Council (GAC) took
action on the matter. According to the GAC'a resolution, the Tangku Engineer-
ing Bureau lacked sufficient equipment, ships, cadres, and technical resources
to carry out the work. ~ In order to mobilize more effectively both central
and local governmental resources, the GAG then created a Tangku Harbor Commis-
sion directly under the Ministry of Communications and gave it full respon-
sibility for supervision of the project. High officials of the Ministry and
and Tientsin Municipal Government were included in the Commissions membership.
Moreover, the Tangku Engineering Bureau, placed directly under the new
Commission, was given new leadership. The GAC~s resolution called for com-
pletion of the work by the winter of 1952 so that ships up to 10,000 gross
registered tons could utilize the new harbor. This resolution. indicates be-
lated high-level recognition of poor management on the parts of the Ministry
and the local bureau in their efforts to carry out an important undertaking,
Moreover, responsibility for ineffective planning and administration in this
instance is not entirely the Miniatry~s failure -- the blame belongs partly to
the GAC
3. PeraSnnel.
The Ministry of Communications apparently lacks competent direction
at the ministerial level. Presumably, this deficiency is counterbalanced by
reliance on control exercised by Communists occupying nominally secondary
positions and by dependence on administrators in the various offices and bureaus.
A further possibility is that top-level direction?is actually accomplished
through some other ministry, perhaps the Nfinistry of Railways.
Of the top officials, Minister Chang Po-chun and Vice-Minister
Chi Fang are minor Party leaders whose influence on policy is necessarily
slight, ~ Changes lack of prior administrative experience is a further in-
dication that he is a mere figurehead, vice-Minister Li Yun-ch'ang,
E-C~-E-T
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S ~-C~ E-T
a Communist general, lacks party stature as well as nonmilitary
administrative eocperience. His presence may indicate a close relation-
ship between the Ministry of Communications and the offices of the People's
Revolutionary Military Council (PRMC). Chang Wen-ang, director of the
Staff Office, may be a key Comznuniat official, especially since he pre-
viously served as Deputy Minister of Communications in the. North China
People's Government.
It may be assumed that many experienced officials, including
former executives and managers in transport enterprises, are in the
functional bureaus, and that a large proportion of the technical staffs
are former Nationalist China employees. The considerable number of per-
sonnel ahi.f"ts announced in October 1951 may indicate Communist efforts to
eocpand or otherwise strengthen certain bureaus, notably the Bureau of
Shipping Control, the Bureau of Navigation Engineering, and the Bureau of
Transportation. 27 Although no dismissals or resignations were then
publicized, it is likely that a significant turnover in personnel may have
occurred. Moreover, such shifts and changes are likely to be accentuated
during the neact 2 years as the Communists attempt to increase their con-
trol over transportation, to eliminate political unreliables, and to in-
stall men indoctrinated and trained~in Coommunist techniques.
C. i~g st of $eays ustrv.
The Ministry of Heavy Industry (see Fig. 4) is the most important
of the four industrial ministries. The Ministry has jurisdiction not
only over heavy industries such as steel and chemicals but also over mining
enterprises in all fields except coal, petmievm, and allied fuels, which
are under the Ministry of Fuel Industry. 28 Apparently the Ministry, at
least until 1951, was also concerned with certain segnents of the ship-
building industry, .although shipbuilding is also of concern to the Ministry
of Communications.
1. Structure.
Three vice~ninisters assist the Minister of Heavy Industry.
The ranking vicetiminister has served as Director of the Aviation Industry
B~.u~eau since October 1951, while the third vice-minister has also served
as head of the National Ordnance Administration since May 1951. Otherwise
there are no indications that vice~uinisters have directed particular
bureaus or offices.
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Figure Q. Ministry of Heavy Industry (Tentative) ~2
Aviation
Industry
Bureau
Planning
Office
Chemical
Industry
Bureau
Personnel
Department
Nonferrous
Metals Industry
Bureau
Management
Office
National
Ordnance
Administration
Machine
Industry
Bureau
Inspection
Department
Shipbuilding
Office
Accounting
Department
0
Steel Industry
Bureau
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S E-% ~-E-T
The Ministry's units include the usual Staff Office, as
well as offices or departments for planning, personnel, accounting, in-
spection, and management. There are functional bureaus for the aviation,
chemical, nonferrous metals, steel, machine, ordnance, and shipbuilding
industries. It may be assumed that these bureaus and off ices are divided
into appropriate functional and staff subunits. The aviation and ordnance
units may have been established during 1951. If so, their functions
probably were performed previously by less publicized organs, possibly
under the direction of the Peoples Revolutionary r.ilitary Council (PR.P~ ).
At local levels the work of the ~;inistry of Heavy Industr-~r is
accomplished mainly through the regional and local industry departments,
which also serve the other industrial ministries. Trese industry depart-
ments nary from region to region, but generally their administrative
structure resembles that of the national Ministry. In r4anc~uria, for
example, the industry department has 13 functional units, including machine
manufacturing and chemical industry bureaus and large enterprises such as
the Anshan Iron and Steel Company. ~ Not all of the 13 are concerned with
heavy industry. In North China, a region controlled directly by the Central
Government, the Ministry apparently exercises closer supervision over heavy
industry enterprises.
2, Administrative Problems.
Efforts at investigation and control of industrial enterprises
are .reflected in recent evidence regarding a unit called the Industrial
Inspection Passion, said to have been organized in late 1951 fox the pur-
pose of visiting enterprises in the various regions. ~ The Mission had
broad authority in checking on production capacity and methods, technical
problems, labor matters, and general conditions. The group reportedly
assigned to East China included a deputy minister, the Director of the Plan-
ing Department, officials from various functional bureaus, and Soviet
technicians. In addition there were officials and Soviet technicians from
the other industrial ministries and representatives of the Committee of
Finance and Economics (CFE) and the All-China Federation of Labor. Although
information is lacking on the Missions activities and findings,-the maneuver
probably reflects an attempt on the-part of the Chinese Communist Government
to deal with administrative weaknesses at the local or plant levels.
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The importance and wide scope of these weaknesses are
indicated by official and press statements. In December 1951, for ex-
ample, a leading paper enumerated many defects in heavy industry enter-
prises administered by the East China Department of Industry. The
reported faults included such items as poor organization of production
facilities, ineffective planning, waste of labor and materials, poor
organization of functional administrative units, and undue delays in ex-
ecuting orders for shipment of products. ~ The public admission of such
basic faults indicates that, with due allowance for Communist self-
criticism, administration and. management of East China heavy industries
are at a low level of efficiency and that numerous problems remain to be
solved.
In July 1951 the Ministry of Heavy Industry itself, responding to
a directive from the CFE,investigated the handling of construction projects
during 1950 and the first half of 1951. The Ministry reported that in
building new plants there were, among other difficulties, poor and hasty
planning, waste because of changes in plans or operations and lack of
systematic organization and control. ~ More specifically, the planners
failed to develop in advance a precise plan with proper estimates on finance,
equipment, labor, techniques, technical assistance, and the types of mate-
erials to be imported. Apparently plans were made involving use of WesteY'n
machinery or, in other cases, Soviet Bloc machinery, with little regard for
their respective availability. In regard to restoration and expansion of
existing plants, similar faults aristed, including persistence in hasty and
wasteful expansion despite disapproval, in certain cases, by the CFE. Mush
of this trouble was attributed to overzealous leaders who tried to build or
pcpand local enterprises in disregard of general plans and of higher
authorities. The Ministry asserted that unless competent plans could be
worked out by Chinese technicians, complete reliance should be placed on
foreign (presumably Soviet) experts.
Still further weaknesses were discovered. Within the Ministry
of Heavy Industry the work was not well organized, the division of labor was
not clearly defined, and efficiency was not high, At lower levels, many
projects were below standard in both quality and quantity. Moreover,
corruption was reported in regard to purchase and construction contracts.
Although this official review of problems dealt specifically
with construction activities, apparently similar weaknesses and faults
generally beset the Ministry and the local organs through which the heavy
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industries are administered. Shortcomings with regard to planning, control.
of plans, and general lack of efficient organization and manageffient at
various levels are particularly significant of weakness,-'as is the Ministry's
dependence on Soviet advisers and technicians.
3. ~grsonnel.
With one exception, the top officials of the Ministry of Heavy
Industry are prominent Communists. 3y,/ Ch'en Yun, Minister until April 1958,
still a Vice-Premier and chairman of the powerful CFE, apparently was the
only Politburo member to head an economic ministry. Minister Li Fu-ch'un, his
successor, is a member of the party's Central Committee and a vice-chairman of
the CFE. Previously he was the second ranking man in both Party and govern-,
ment in Manchuria. Both Chen and Li spent several years in the USSR and both
had contact with the IISSR in Manchuria after 1946. The first Vice Minister,
Ho Chang-kung, likewise was prominent in Manchurian government as head of the
Communist Army's War Industries Department there. Vice Minister Liu Ting, who
is Soviet-educated, previously served prominently in North China's regional
government. Vice-Minister Chung Lin, though not identified as a Communist, is
a member of the CFE and also director of its Technical Skills Control Bureau.
Characterized as an economic specialist, he may be useful. chiefly for his
technical knowledge of heavy industry.
There is little evidence of key personnel shifts in the Ministry
of Heavy Industry, although they may be more extensive than is indicated.
The Director of the Aviation Industry Bureau was demoted, in 1951 and the post
assigned to the ranking vice-minister. 3~f Moreover, the Steel Industry
Bureau underwent a shakeup in late 1951. In August a new director, formerly
in Manchuria, was appointed. ~ Later a deputy director of the Steel In-
dustry Bureau was dismissed for allegedly falsifying the accounts of a large
steel plant. At lower .ministerial levels and in regional and local adarinistra-
tion the turnover probably has been considerable, especially in the last year.
It probably will be intensified during the next 2 years as the Communists
attempt to deal further with corruption, inefficiency, and other weaknesses
in the administration of heavy industry, and an effort will probably be arcade
to eliminate politically unreliable employees, including those who formerly
served Nationalist China.
D. Ministrv of A ericulture.
The Ministry of Agriculture (see Fig. 5) is responsible for a:dminister?w
ing Communist China's most basic economic activity, involving directly or
-~3-
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Figure 5. Ministry of Agriculture (Tentative)
Agricultural
Administration
Office
Agricultural
Water Conservancy
Bureau
Farm
Equipment
Bureau
Foodstuffs
Production
Office
Industrial
Raw Materiels
Office
Land
Reclamation
Bureau
Pestilence
Prevention
Office
O
Veterinary
Bureau
+~ Other ministries have certain administrative offices, such as planning, personnel, and accounting, and it would appear logical
to assume that the Ministry of Agriculture also has offices of such administrative nature in addition to those shown on this
chart. However, no actual evidence of the existence of such offices has been found, and theq are therefore omitted.
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indirectly about four-fifths of the population. Because agriculture is"the
chief foundation of the economy, and because industrialization depends in
large part on increased agricultural production?in order to provide the
necessary capital for investments, the Communist regime is greatly concerned
with agricultural policies. Agriculture is subject to far less direct con-
trol than are industry, transportation, or finance. The establishment of
individually owned small farms is the first step of the "land reform" movement,
In N1a.nchuria and North China, attempts -have been made to organize the peasants
into mutual aid teams, but it appears likely that private farming will remain
the dominant type of agriculture for several years. ~ Pheanwhile, mutual aid
teams, cooperatives, and state farms will continue to be emphasized and to
assume increasing importance, In October 1951 the Minister of Agriculture
stated that 60 percent of the peasants in North China. and 70 percent of those
in Manchuria had joined mutual aid teams.
The ministry of Agriculture apparently has four vice ministers. The
top officials are largely non-Communist figureheads and technicians whose lack
of prominence gives the appearance of belying the 1~Linistry's actual importance,
The A;inistry's functions include, in addition to the direct or in-
direct administration of agricultural production programs, certain manufactur-
ing enterprises such as agricultural drugs. ~ In December 1950, part of
the functions of the former ministry of Food Industry, presumably the ministry
dealing with food production, was assigned to the i~.inistry of Agriculture. 3,S/
Likewise, in P;ovember 1951, jurisdiction over land reclamation was trans-
ferred to the 2inistry of Agriculture from the former Zinistry of Forestry
and Land Reclamation, which became the Pinistry of Forestry. ~ The Ainistry
of Agriculture is also responsible for the fishing and marine products
enterprises. L1
1. Structure.
The Ainister of Agriculture is assisted by four vice ministers,
the fourth having been added in July 1951. There is no evidence that any of
the vice-ministers have responsibility for particular bureaus or offices,
each of which is headed by a director. The only one of the staff and
coordinating units which has been identified is the Staff Office, which pre-
sumably is concerned with internal administration. Exact information is
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lacking on the planning, personnel, and other staff bureaus usually
found in Chinese Communist economic ministries. There are at least
eight functional bureaus or offices for agricultural administration,
foodstuffs production, industrial raw materials, veterinary services,
pestilence prevention, farm equipment, water conservancy, and land re-
clamation. Pressably these bureaus have subordinate functional and
staff units, although these have not been identified.
Local administration of the I~Sinistry of Agriculture is con-
ducted by regional and local goverrunents and especially by either the
agriculture or the agriculture and forestry departments at various levels.
General plans and programs of prime importance are formally enacted by
the General Administrative Council (GAC) and directed to the regional
goverrunents for elaboration and dissemination to lower governmental levels.
The 2finistry itself issues numerous directives, sometimes jointly with
other ministries or organs. These provide instructions and general guid-
ance to the local agricultural departments. Although indirect control is
usually exercised through local administrations, certain enterprises in-
cluding insect drug factories, apparently are managed directly by the
N,inistry. 1,~2
2. ,~lministrative Problems.
Various directives issued in early 1952 reflected Communist
efforts to implement the current year's production plan as adopted by the
GAC. General instructions to agricultural offices, cooperatives, farm tool
stations, and banks regarding increased utilization of farm tools were set
forth in a directive issued joi-qtly by the N~inistry and the All-China
Federation of Cooperatives. L,~ In January 1952 the East China I~lilitary
and Administrative Committee directed each province to establish promptly
both a manufacturing plant and an experimental plant for farm equipment and
instructed smaller administrative districts to set up a repair plant. It
became the responsibility of the local goverr~nents to carry out this program, !~
It seems doubtful that local governments could provide for the stipulated
manufacture and repair of farm machinery in time for effective use in 1952
production. The same may be said of directives on better disease prevention,
the use of fertilizer, and the propagation of better seed.
In seeking to reach planned production goals, the regional
governments rely heavily on local forms of authority, such as the Party,
cooperatives, and mutual aid teams, to exhort the peasants to increase-their
efforts. An East China directive on spring planting, for example, required
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that all levels of government submit periodic reports on such organiza-
tional efforts aiming toward increased production. ~/ In Manchuria the
top regional official gave general instructions regarding mobilization for
spring production to local government, Party, and mass organizations. ~/
Provincial governments were to report every 5 days on the development of
this program. Inspection teams headed by high-ranking officials of the
Manchurian regional government were instructed to visit the various pro-
vinces
Despite all these efforts to achieve increased production,
there are indications of serious weaknesses in the administration of the
Ministry of Agriculture. Repeated emphasis in directives on particular
problems of coordination, on the lack of compliance with instructions, on
the desirability of utilizing cooperatives and other organizations for per-
f orming assigned tasks, on the existence of inadequate leadership, on un-
satisfactory performance in providing for loans and tools, and on frequent
failure to achieve effective mobilization of peasants .for greater production
are indications of unsatisfactory administration. In Manchuria, where
agriculture is under stricter control than in other regions, a recent direc-
tive set forth a temporizing policy regarding inefficient or corrupt local
officials. !~/ The directive also reminded overzealous Communists of. the
present moderate policy in such matters as hired labor, private loans, and
the formation of cooperatives on a "voluntary" basis.
Further evidence of weakness of the administration of the
Ministry of Agriculture is given by an official Northwest China report of
May 1951. In claiming certain progress in coordination between agriculture
agencies and related organs, the report indicated that such coordination
should be strengthened. ~8/ The report criticized local leaders for their
ignorance or misunderstanding of the plans, for using wrong methods, for the
failure to coordinate their varied efforts, for overzealousness, and for in-
difference. It noted that certain local positions were left unfilled for
months. In various areas, production activities were neglected. Training of
staff workers was generally inadequate. The report also noted inadequate
organization of facilities for the manufacture and repair of farm tools.
A further aspect of the administration of agriculture is the
problem of effective coordination at ministerial levels. The Tinistry of
Agriculture is necessarily dependent in important matters on certain itadustrial
ministries, such as the People's Be-nk, the Ministry of Finance, the Federation
of Cooperatives, and other national organs. This problem involves not only
these agencies but also the CAC as the directing organ of administration. From
the evidence available and by inference from indications of poor coordination
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at regional and local levels, it may be inferred that unsatisfactory co-
ordination also exist between the ministries.
- 3. Pg~.
The Ministry of Agriculture is headed by a group of undistin-
guished officials, of whom only the ranking vice-minister is identified as
a Communist. 1,,,~f Minister Li Shu-ch'eng is regarded as a figurehead, since
he is a retired general nearly 80 years old. He had not held an important
office since 1936 until appointed Minister in October 19,9. Vice-?4inister
I,o Yu-cr.'uan, a Communist, probably controls the Ministry. He previously
served in secondary administrative offices of the local Comm~~unist governments
in North China areas. The next two vice-ministers are agricultural experts
who studied in non-Communist countries. Wu Chueh-Hung, a Shanghai tea ex-
pert and merchant, once served as technical adviser in Nationalist China.
Yang Hsien-tong, a IIS-educated expert, previously held both teaching and
middle-level administrative posts in Nationalist China. The fourth vice-
minister, Chang Lin-ch'ih, appointed in July 1951, previously directed the
Ministry's Staff Office.
It may be assumed that many former Nationalist officials are in
the Ministry of Agriculture. Although there are few indications of change
in the Ministry's personnel at top and bureau levels, some dismissals have
occurred, especially during the past year. Attet~pts to eradicate administra-
tive weaknesses, to get rid of politically unreliable personnel, and to re-
ward Communist devotees of the agrarian program probably Neill bring about a
considerable turnover during the next 2 years..
IV; Soviet Pe~etrat~io~~-nd_ Cog~rol_ of the Cl~ine~e Communist Eby.
Soviet influence in Chinese affairs antedated Mao Tse-Tong's rise to
leadership within the Chinese Communist movement. Moscow's formal recogni-
tion of Mao and a subsequent increase in Soviet influence came after the
leadership within the Chinese Communist Party had been decided. This tool
the form of technical and economic assistance, Sino-Soviet joint companies,
and Sino~Soviet trade and credit agreements.
A. Soviet_Technic 1 and F~,conomic Assistance.
Since 19l,$ an increasing number of Soviet technical advisers have
appeared in Communist China, and their services have received frequent
recognition in official statements in the Chinese press. The total number
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~~ f~
of Soviet advisers cannot be estimated accurately. They are in virtually
every braaeh of the econoagy_although they appear to be moat prominent in
railxay transport, heavy industry, and mining They xere first recognized
in Manahuria, the moat important area in which the USSR acquired special
rights by virtue of the Sino-,Soviet treaty and agreements of 1945. Soviet
experts have also been concentrated in North China and Northxest China and
have been reported to be in other parts of the country.
The importance of the Soviet technical advisers varies in different
areas and in different enterprises, but their influence on the Chinese
economy is probably considerable and in some cases may amount to direct con-
trol, The influential role of the Soviet technical advisers is 'indicated by
frequent Chinese praise of Soviet technicians, dependence on_them bsenuse of
the increasing use of Soviet machinery and techniques, the establishment by
the Peking regime of Soviet economic patterns, and the nature of Sino-Soviet
economic obligations. These advisers are expected by the USSR to help safe-
guard Soviet interests regarding the production of materials for export to
the Soviet Bloc. Whether they participate directly in the policyynalcing
processes cannot be established, but their recommendations on important pro-
jects appear to receive careful consideration and may often be decisive.
Despite the influx of Soviet technical adv d their increasing in-
fluence, they have taken over the 50X1
general re on an con ro o the Chinese Communist economy or that such
? complete control may be an early probability.
B. 3ino-Sovie~tiJoint C~p~ies,
Sino~oviet joint companies, nominally organized on a parity basis,
afford the IISSR direct control over important segments of the Chinese
Communist economy, especially in Manchuria and Sinkiang. Officially announced
Sino-Soviet agreements provide the legal basis for the Chinese Changchun Rail-
way in Manchuria, for a joint civil aviation company operating lines between
North China and Soviet Asia, and for two companies concerned with roduction
of petroleum and nonferrous metals in Sinkiang Province.
other Sino-Soviet 3oint companies may have een o o un er-
take specific industrial and coamercial activities. Soviet control is also
exercised indirectly through at least one joint oantpany involving an Eastern50X1
European Satellite. An officially announced Sino-Polish agreeouent provides
fora joint shipping company to operate vessels engaged in trade between 50X1
Poland and Camanunist China.
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1. Chin se h gchun R ilwa~.
The Chinese Changchun Railway, the most important railway net-
work in Manchuria, was given legal sanction as a jointly owned and jointly
managed enterprise by the agreement of 14 August 1945 between the USSR and
Nationalist China. ~/ According to this agreement, the new railway was to
be formed by uniting designated trunk lines and certain auxiliary lines of
the former Chinese Eastern and South Manchurian Railways. The USSR thus
regained with respect to Manchurian railways substantially the position held
by Russia before her defeat by Japan in 1905.
The subsequent agreement of 14 February 1950 between the USSR
and Communist China sanctioned this position with minor modifications but
also stipulated that the USSR should transfer its rights in the Chinese
Changchun Railway to Communist China by the end of 1952. ~#
The main lines of the Chinese Changchun Railway extend from
Manchouli, on the northwest frontier, eastward to the border town of Suifenho,
and from Harbin, in north Manchuria, to Dairen and Port Arthur. The railway
thus affords the USSR a direct route across Manchuria toward Vladivostok and
also to the Port Arthur naval base and to Dairen, Manchuria's principal port,
in south Manchuria. The railway reaches cities from which major lines extend
to Korea as well as to North China. Consequently, it is of vital importance
not only as a network linking Manchuria with the USSR but also in connection
with shipments to and from North China and North Korea.
The railway also owns certain nonmilitary properties, although
they are of slight importance in the Manchurian economy. Among them are timber
concessions, electric power plants, and two coal mines.
2. Sino-S~g~ ~~ Aviation ~iQ~v.
The Sinn-Soviet Civil Aviation Company was established in accord-
ance with a 10-year agreement of 27-March 1950. This agreement authorized
creation of a joint company to operate air lines linking Peking with the Soviet
Asian cities of Chita, Irkutsk, and Alma-Ata, and with intervening points in
China. ~/ Thereby the USSR obtained legal sanction for greatly extending the
scope of jointly operated air lines in China. Previously, under the 10-year
* In. September 1952 a Sino-Soviet communiqub announced that steps had been
initiated to complete the transfer by 31 December 1952. The USSR, however, is
expected to continue to influence the operation of the railway through Soviet
technicians, continued control of the Port Arthur naval base, and other methods.
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agreement of 1939, extended in 1949 by an unwilling Nationalist China, a
joint S ino-Soviet company operated air transport facilities only between.
Qltaa-Ata and Hami, in eastern Sinkiang. The original agreement was con-
cluded at a time when Sinkiang Province was under Soviet domination.
The new civil aviation company's organizational pattern is
similar to that of the other joint companies with regard to nominal parity,
equal sharing of expenses and profits by the two parties, and alternating of
top administrative posts between Soviets and Chinese. However, key operational
and management personnel are Russian, and the Soviets apparently have complete
domination over the company's activities.
Through this company the USSR has direct control over important
air transport facilities which not only monopolize air traffic between Peking
and major points in Soviet Asia but also serve Chinese border provinces from
Manchuria to Sinkiang, areas in which the USSR has a primary concern.
Establishment of such afar-flung and vital air transport network indicates
the USSR's intention to contirnae to control and exploit these facilit ies on a
long-term basis. It is unlikely that this control will be weakened or cur-
tailed during the next several years despite popular Chinese distrust of the
exercise or such privileges by the Soviets.
3. ~i~-Sog,~,gt~,~Qg~oanies in Sinkiang Province.
Authorized by two agreements of 27 March 1950 valid for 30 years,
the Sino-Soviet Petroleum Company and the Sino-Soviet Nonferrous and Rare
Metals Company were organized to exploit mineral resources in Sinkiang Pro-
vince. $~/ According to Communist press statements, the first company is con-
cerned with discovering, producing, and refining oil and gas in Sisilciang;,while
the second company, concerned primarily with nonferrous metals, also has both
exploratory and production responsibilities.
These companies are organized on a nominal parity basis, both
parties ostensibly sharing in expenses, profits, production, and personnel.
Top administrative-posts are to be alternated between Soviet and Chinese
citizens every 3 years. During the first 3 years a Soviet manager is to be
assisted by a Chinese deputy, while the Central Boards are to b e headed by
Chinese, with Soviets as vice-chairmen. However, these formal arrangements have
little effect on the management of the companies, which are under strict Soviet
control. It has been reported that they are being utilized exclusively for
Soviet advantage.
Establishment of these joint companies indicates the USSR's in-
tention to develop, exploit, and control on a long-term basis the considerable
mineral resources of Sinkiang, especially strategic metals. These resources
have been little utilized hitherto, although the USSR attempted to develop
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some of them during the decade of Soviet domination of Sinkiang before 19/.x..
The Chinese Communist potential with regard to supplying equipment, facili-
ties, technical skills, and top management needed by the joint enterprises
is very slight. Moreover, Chinese Communist economic and administrative in-
fluence in Sinkiang as a whole is weak. It is likely that Soviet control
over important parts of the Sinkiang economy will be maintained at least for
a considerable time, and this control will become more extensive as the joint
companies increase their scope of operations. .Over the longer term, growing
resentment of the Chinese and the indigenous population over Soviet exploita-
tion may become a source of vulnerability in the position of the USSR.
Q. S o-Polish Shipnin~ Company.
In accordance with the Sino Polish shipping agreement of January
1951, a joint company has been organized on a parity basis to engage in the
shipping trade between Poland and Communist China. 50X1
each signatory agreed to furnish an equal number of vesse s, var ous y s a
as from 10 to 16. ~ Poland agreed to pro- 50X1
vide officers and technicians for the Chinese ships and also to train Chinese
deck officers. During 1951, various delays and difficulties reportedly were
experienced in implementing the agreement. In particular, the~Peking regime
is said to have failed to provide promptly the stipulated number of ships.
The company, when fully in operation, may contribute much needed shipping
facilities for the expanding trade between Communist China and the European '
Satellites.
The weak position of Communist China with regard to shipping re-
sources and trained crews suggests that the Chinese will have a subordinate
role in the management and control of the company. Moreover, ultisu~.te control
presumably is held by the USSR.
V. Strengths and Weaknesses.
A. Elements of. Strength,
Probably the moat important and far-reaching element of stren~*th in
the economic organization of Communist China is the concentration of control.
This control is becoming more firmly established and centralized as greater
administrative skill and experience are attained. Development of control
has provided an opportunity to introduce uniformity in methods and procedures,
both in the operational aspects of economic enterprises, as well as in the
information-gathering processes so essential for a planned economy.
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The consolidation of control has also facilitated the adoption
of Soviet organizational methods and management techniques, This factor
most probably must be regarded as an element of strength for a predominantly
agricultural country such as China, Mao Tae-tong has succeeded in practically
isolating his new China so that a condition of dependency upon the tTSSR exists,
and the consolidation of control under these circumstances probably represents
a gain rather than a loss for China, In addition, the facility of exercising
greater control has broadened the opportunities to apply the experience gained
in the more highly developed 2~lanchurian area to the remaining areas of China,
B. Elemen ,as of Weakness,
Elements of weakness exist in the economic organization of Communist
China, however, which counterbalance the factors of strength to a consider-
able degree. These elements of weakness are associated largely with the
initial phases of development in aCommunist-controlled state, the customary
faults of Soviet-controlled organizations, as well as the traditional administra-
tive habits peculiar to China,
In the first instance, there is evidence of poor planning, administra-
tive conflicts, and duplication of effort. 2~:uch of this difficulty stems from
the failure to follow directives or to understand the purpose and objectives
of these directives.
Communist China has possibly attempted too ambitious a program for
the administrative and management skills available. As a result, Mao has been
forced to use former Nationalist administrators in his government at a time
when political reliability is of paramount importance.
With reference to purely administrative problems, other elements of
weakness are the traditional tendencies of overstaffing, nepotism, corruption,
and low performance standards in the civil service. Only limited progress
apparently has been achieved in correcting these wealolesses. Consequently,
there exists in Communist China an excessive hierarchy of administrative organs
which encourages bureaucracy, restricts initiative, and slows up administra-
tive action.
Another important weakness, although not directly 'related to
organizational features of the economy, is the traditional dislike. in China
of the USSR and all Russian administrators, This attitude reflects adeep-
seated Chinese anti-foreign sentiment,. Although this attitude has not yet re-
flected itself in the lack of cooperation, nevertheless it is a significant And
potential limitation on effective liaison between Communist China and the USSR.
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APPEbID IX A
COD~iON--FR.O(~?,AA; OF THE CHIAIESE_ PEOPLES POLITICAL COI~ULTAT~,VE CONFER~N~E
The following articles of the Common Program of the Chinese Peoples
Political Consultative Conference are those concerned chiefly with
economic policy.
Article 2b. The basic principle for economic construction of the
People's Republic of China is to attain the goal of developing production
and bringing about a prosperous economy through the policy of taking into
account both public and private interests, benefits to both labor and
capital, mutual aid between the city and the countryside, and the inter-
flow of goods at home and between China and countries abroad.
The state shall coordinate and regulate the staterowned
economy, cooperative economy, individual economy of the peasants and
handicraftsmen, private capitalist economy and state capitalist economy in
the spheres of operation, supply of raw materials, and trade, so that all
components of the social economy .can play their part and effect division of
work and cooperate under the leadership of the staterowned economy to pro-
mote the development of the entire social economy.
Article 27. The agrarian reform is the essential condition for the
development of the productive power and the industrialization of the country.
Iri all areas where the agrarian reform has been carried out, the rights of
ownership to the land obtained by the peasants shall be protected.
In areas where the agrarian reform has not yet been carried
out, the peasant masses must be set in motion to organize peasant organiza-
tions and to realize the slogan "Land to the tiller" through such measures
as the elimination of local bandits and despots, the reduction of rents and
interest, and the distribution of land.
Article 28. The state-owned economy is of a Socialist nature. All
enterprises vital to the economic life of the country and to the peoplets
livelihood shall come under the unified operation of the property of all the
people. They are the main material basis of the People's Repub lic for the
development of production and the creation of a prosperous economy and are
the leading forces of the entire socie.l economy.
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Article 29. Cooperative economy is of a semi-Socialist nature and is
an important component of the entire peoples economy. The Peogle~a Govern-
ment shall foster its development and accord it preferential treatment.
Article 30, The Peoples Government shall encourage the active opera-
tion of all private economic enterprises beneficial to the national welfare
and the peoples livelihood and long-term development.
Article ~. The economy based on cooperation between state and private
capital is of a state capitalist nature. Whenever necessary and possible,
private capital shall be encouraged to develop in the direction of state cap-
italism -- for example, toward point operations with the state or operation
of state-owned enterprises and exploitation of the state-owned resources
through the forth of concessions.
Article 32. The system of workers taking part in the administration of
production shall at present be put into practice in state-owned enterprises.
That is, Factory Administrative Committees shall be set up under the leader-
ship~of the factory director.
In privately owned enterprises, collective contracts should
be signed by the employer and the trade union representing the workers and
employees in order to carry out the principle of benefits to both labor and
capital, At present an 8- to 10-hour day shall i.ta general be enforced in
publicly and privately operated enterprises, but this may be dealt with at
discretion under special circumstances. The Peoples Government shy 11 fia.
the minimum wage according to the conditions of various places and trades.
Labor insurance shall be gradually instituted, The special interests of
juvenile and women workers shall be protected, Inspection of industries and
mines shall be carried out to improve safety devices and the sanitary facili-
ties of the industries and mines.
Article 35. Industry: To lay down the foundations for the industriali-
zation of the country, work shall be centered on the planned, systematic re-
habilitation and development of heavy industry, such as the mining and steel
and iron industries; light industry; the machine building industry; the elec-
trical industry; and the main chemical industries. At the same time the
production of the textile industry and other industries beneficial to the
national welfare and the peoples livelihood shall be restored and incree.sed
to meet the daily consumption needs of the people.
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tlrticle 3E~. Communications; Railways and roads must be restored and
transport facilities increased.. Rivers must be dredged and waterway trans-
portation expanded; postal and telegraphic services must be improved and
developed; various communication facilities must be built up and civil
aviation inaugurated step by step, according to plan.
Article ?7. Commerce: A 11 legitimate public and private trading shall
be protected. Control of foreign trade shall be enforced, and the policy of
protecting trade shall be adopted. Domestic free trade shall be adopted
under the general economic plan of the state, beat commercial transactions
disturbing the market are strictly prohibited.
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APPEI~ID T~ B
Pr'~'~OIr"rEL (7I' TIC A3.II~IPAL CHIN; COi~~~~NP~,~1Ia"T.~!IIl1TIaTRIES
As of May 1952, personnel assigned to posts of importance in the
four most important ministries were believed to be as follows:
1, I~inistrv of Rail~aavs,
1`linlster T' eng Tai-yuari
Vice-I~iinister Lu Cheng-ts' ao
`Dice-I-sinister Wu Ching-t' ien
VICE.'-I iinlster . , . , , . ' . . . , , ? . . , , . SI'iih Ghih- j eri
Staff Office, Director `r1u Ching-t' ien
General Engineering .Bureau, Director Lu Cheng-ts'ao
General Rolling-Stoclo Bureau, Director Shih Chih-jen
Electric Power Bureau, Director .Ching Chen-ch'ang
Shops Bureau, Director Lang Chung-lai
Finance Department, Director ,Chu Shao-t'ien
I~Saterials Bureau, Director ,Lai Ping
Personnel Bureau, Director I~?:'a Chien
Planning Bureau, Director Chien Ying-lin
Public Security Bureau, Director . Li Chen
Installations Bureau, Director ,Lin 5hih-pv
Political Department, Director Lu P'ing
Hygiene Bureau, Director ,Sung Chieh
2. I.~nistrv of Communications,
I