THE CHINESE MARKET FOR TECHNOLOGY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01495R000500040017-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 16, 2016
• Document Release Date: July 28, 2005
• Sequence Number: 17
• Publication Date: March 15, 1974
• Content Type: MEMO

RANDUM
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15 March 1974
The Chinese Market for Technology
Background
China is a large, mostly underdeveloped, country which
has energetically raised industrial capacity and output from
the small 1949 base. Even though striking gains have been
made in production and technology, China remains 5 to 20 or
more years behind modern industrial nations in the various
branches of industry. China's machine builders do not
have at their disposal plentiful amounts of off-the shelf
components, such as high pressure valves of special materials,
all kinds of antifriction bearings, machine tools, electri-
cal and electronic components, fasteners, and materials
handling equipment, which are so well catalogued in modern
industrial countries and available for immediate shipment.
For some industries, China can afford the time to
develop a domestic capability with a minimum of expenditure
for foreign hardware and "know how". In suchrcases the
Chinese exchange technical delegations, study-foreign liter-
ature, invite foreign experts to lecture in China, and
sometimes buy a few key pieces of equipment to study and
copy. When it has been necessary to establish a new produc-
tion capability in a short time, the Chinese have been
willing to purchase turnkey installations, for instance,
the recent purchase of 13 large modern fertilizer plants
from the US, Japan, and France.
Purchases of Industrial Plants
In 1973, China ordered $2.0 billion worth of machinery
and equipment from non-Communist countries*including
*In the 1950s the Chinese relied exclusively on other
Communist countries for aid in industrial development, and
two-thirds of its trade was with Bloc countries. After the
withdrawal of Soviet technical support in 1950, the PRC turned
to non-Communist supplies, and today four-fifths of its trade
is with non-Communist nations.
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$1.2 billion worth of complete plants. More than $1 billion
were earmarked for petrochemical plants to produce fertilizer,
synthetic fibers, plastics, resins, synthetic rubber, and
other products. These purchases reflect Peking's decision
to use foreign equipment and technology in support of agri-
culture and to provide essential consumer goods. To maintain
the momentum of the drive for industrialization, sizeable
amounts of equipment have been ordered for mineral extraction
and processing and for the services sector. The Chinese
have bought or are seeking equipment for iron and steel,
non-ferrous metals, petroleum exploration, mining, all forms
of transportation, electric power, and communications. So
far, the anti-Confucius campaign has not inhibited China's
efforts to obtain foreign technology. Beginning in 1973,
Peking has shown much less reluctance to rely on foreign
credits as a means of financing imports of equipment and
technology.
In 1973-74 the Chinese have purchased 13 urea fertilizer
plants together with associated ammonia plants. They also
have bought a 16-plant petrochemical complex from France
worth some $300 million and at least a dozen other petro-
chemical plants. The urea plants will increase urea output
in China by 8 times over present levels, and synthetic fiber
and plastic production will increase by several-fold when
the petrochemical plants come on line. There are some
indications the Chinese may purchase additional urea plants,
as well as additional plants to produce fibers, resins, and
plastics. Much of the plastics will be for use in agriculture.
Development of Fuels and Power
China wants to speed up development of its large
petroleum reserves for domestic use and for export and has
bought or is negotiating for the purchase of such equipment
as seismic instruments, drill bits, offshore drilling
platforms, well logging equipment, and blowout preventers
and devices. The Chinese have also shown interest in oil
well stimulation technology and in pipeline technology, such
as pipelaying equipment, welding equipment, and tanker
loading equipment. Gas compressors are also high on the
import list.
China has huge deposits of coal and other minerals
and can support an iron and steel industry as large as the
US or Soviet industries. In recent years, the Chinese have
been unable to open new mines fast enough to keep pace with
needs. Peking is in the market for surface mining equipment
such as stripping shovels, bulldozers, and large haulers.
Underground mining equipment also is being ordered, especially
for the coal industry. Such equipment includes long-wall
mining machinery, drills and bits, cutting and hauling equip-
ment, and bulk handling equipment.
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China's electric power industry has suffered years of
neglect. Especially needed is modern equipment to improve
efficiency of generation and distribution. China makes
steam generating units of 125 MW (megawatts) and has produced
one or two 300 MW units; many more units are needed,
including larger, more modern installations. The Chinese
are negotiating for nuclear power technology in order to
establish a domestic capability for future expansion in
this field. They have purchased a dozen large gas turbine
generators for handling peak loads and are negotiating for
a number of others. In addition they hope to import a
complete plant to manufacture industrial gas turbines.
Domestic production of hydropower equipment, which is quite
advanced in China, may be supplemented by occasional
purchases of such specialized equipment as pump turbines
for pump storage systems.
Support for Transportation Sector
All forms of transportation in China are coming in for
increased priority. Large passenger aircraft, helicopters,
and small airplanes are on the shopping list, as well as air
traffic control systems. Heavy trucks, and diesel and
electric locomotives have been purchased in large numbers
in recent years. China is presently importing modern truck
production equipment from the US, Japan, and Western Europe.
Port facilities such as portal cranes and container handling
equipment are much needed. The Chinese also are purchasing
various types of cargo ships, including tankers, and are
interested in improving their capabilities in naval shipbuilding.
Machine Tools and Metallurgy
The Chinese have the capability to produce adequate
amounts of ordinary machine tools. Some specialized tools
will be acquired through the purchase of complete plants.
Individual purchases of special machine tools including a
few numerically controlled tools are likely for specific
projects or for familiarization and copying. China's anti-
friction bearing technology is behind the world level; nego-
tiations for ball bearing plants are in progress to reduce
dependence on imports of bearings (more than $100 million
worth were imported from 1965-73). Sizeable imports of
industrial and scientific instruments will continue to be
needed to maintain an acceptable rate of technological advance.
China's steel industry lags behind domestic require-
ments in both quality and assortment of products. China
must spend large amounts of foreign exchange to import
finished steel and alloy products. For more than a year,
China has been actively negotiating with Japanese and West
German consortiums for a large rolling mill complex worth
about $400 million, and capable of processing about 3
million tons annually of hot rolled sheet, cold rolled sheet,
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tin plate, galvanized sheet, and electrical steel. A
contract with the Japanese consortium headed by Nippon
Steel Corp. is near agreement for the largest part of the
plant. China is still dependent on foreign built air separ-
ation plants to produce oxygen for steel making. Foreign
technology for iron ore beneficiation is also needed.
As for nonferrous metals, the Chinese need additional
plants to produce basic commodities such as aluminum,
copper, lead, and zinc. They are in the market for technology
to produce high-purity metals, especially titanium, tantalum,
and magnesium. Other areas of interest include vacuum
melting equipment and annealing furnaces, electric arc
furnaces, forging equipment and carbon electrode technology.
Electronics
China is interested in complete plant and "know how"
for making modern solid state electronic devices, particularly
large scale integrated circuits. The Chinese computer
industry is still small, producing about 100 medium scale
computers annually which are limited in performance by
inferior input-output equipment. China would like to acquire
the technology to produce a few large scale computers and
to mass produce mini-sized computers. China is only starting
to establish a modern national telephone system and is a
potential customer for carrier and switching equipment and
the technology for its production. The Chinese are buying
submarine cable technology and cable laying ships from Japan.
They are presently engaged in negotiations with both Japanese
and US firms for the purchase of complete plants to make
picture tubes and receivers for color television.
Other Machinery
Spinning machinery for synthetic fibers and new tech-
nology for production of fibers and blends will be required
to. handle the large volume of output from the synthetic fiber
plants being purchased. Machinery imported to improve tradi-
tional export products includes canning equipment, textile
finishing equipment, and equipment to produce such packaging
materials as linerboard, aluminum foil, and cellophane.
China also may import technology to produce ball point pens
and other items intended primarily for export. To improve
paper making capabilities the Chinese are importing wood pulp
plants and other machinery.
Reliance on Many Suppliers
Peking does not want to depend on a single large supplier
for its industrial equipment and technology. The abrupt
withdrawal of the Soviet technicians in 1960 was a costly
blow, leaving China with many uncompleted plants as well as
completed plants that could not be operated without Soviet
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help. Thus Peking now deliberately spreads its orders
among Japan, the UK, West Germany, France, the US (recently),
and other leading industrial nations. The US has an advan-
tage in the China market for various types of high-technology
equipment -- civil aircraft, advanced computers, communica-
tions equipment, oil exploration and drilling equipment, and
specialized machine tools. China's oft-stated goal is
self-sufficiency in industry and technology; yet for the
foreseeable future Peking must continue to rely heavily on
Japan, Western Europe, and the US.
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