INTERNATIONAL TRADE OF COMMUNIST CHINA, 1950-65 BY (Sanitized)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01049A003300110001-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 63
• Document Creation Date: December 9, 2016
• Document Release Date: March 27, 2001
• Sequence Number: 1
• Publication Date: October 21, 1966
• Content Type: REPORT

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q0 D
International Trade of Communist China, 1950-65
by
21 October 1966
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CONTENTS
Page
Foreign Trade and the Economy of Communist China. . . . . . . . . . . 1
A. An Overview . . . . . . . . . . . . . . . ...
B. Credit and Foreign Exchange Limitations . . . . . . . . . . . . .
C. Foreign Aid . . . . . . . . . . . . . . . . . . . . . . .
Mutual Cooperation during the 1950ys . . . . . . . . . . . . . . . 10
a. Industrial Projects in China. . . . . . . . . . . . . . . . 10
b. Trade Flows . . . . . . . . . . . . . . . . . . . . . 13
II. Trade with the Communist Countries. . . . . . . . . . . . . . . 10
A. The Soviet Bloc . . . . . . . . . . . . . . . . . . . . . . . . . 10
I
(1)
2. Mutual Discord During the 1960's . . . . . . . . . . . . . . . . . 15
a. USSR . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
b. Eastern Europe . . . . . . . . . . . . . . . . . . . . . . .
B. Asian Communist Countries . . . . . . . . . . . . . . . . . . . . . 17
USSR . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Eastern Europe . . . . . . . . . . . . . . . . . . . . 14
III. Trade With the Free World . . . . . . . .
A. The 1950's -- The Marginal Supplier
- ii -
19
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Pa e
. The 1960's -- The Major Supplier. . . . . . . . . . . . . . .
1. Grain . . . . . . . . . . .
2. Complete Industrial Installations . . . . . . . . . . 26
C.- Industrial West and Japan . . . . . . . . . . . . . . . .
1. Industrial West . . . . . . . . . . . . . . . . . . : .
2. Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
D. The less-Developed Countries. . . . . . . . . .
E. Unique Role of Hong Kong. . . . . . ... . . . . . . . . . . .
2$
29
IV. Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Appendices
Appendix A. Methodological Supplement: Merchandise Trade of
Communist China . . . . . . . . . . . . . . . . . . . . . . .
Appendix B. Statistical Tables . . . . . . . . . . . . . . . . . . . . . .
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Table 1. Direction of Chinese Communist International Trade, 1950-65 . . . .
Table 2. Communist China: Commodity Composition of Trade, 1959,
1962, 196+ and 1965. . . . . . . . . . . . . . . . . . . . . . .
35
38
39
Table 3. Communist China: International Financial Resources, Year-End
Balances, 1957 and 1959-64+ . . . . . . . . . . . . . . . . 41
Table 4. Communist China: Economic Credits and Grants to Communist
.Countries, 1953-65 ? . . . . . . . . . . . . . . . . . . . . 42
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Page
Table 5. Communist China: Economic Credits and Grants to Free World 43
Countries, 1956-65 and Year i964 and 1965. . . . . . . . .
Table 6. ,Soviet Project Construction Agreements with Communist 44
China, 1950-59 . . . . . . . ... . . . . . . . . . . . . . . .
Table 7. Soviet Exports to Communist China, 1958-1965. . . . . . . . . 45
Table 8. Soviet Imports from Communist China, 1958-65. . . . . . . . . . . . 46
Table 9. Communist China: Trade with Eastern European Communist ~F7
Countries, 1950-65 . . . . . . . . . . . . . . . .
Table 10. Communist China: Trade with Eastern Europe, by Country, 48
1962-65 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table 11. Derivation of Chinese Communist Trade with the Far ~F9
Eastern Communist Countries, 1950-58 . . . . . . . . . . . . . . .
Table 12. Communist China: Trade with Far Eastern Communist 50
Countries, 1959-64 . . . . . . . . . . . . . . . . . . . . . . .
Table 13. Communist China: Trade with Cuba, 1960-65 . . . . . . . . . . . . . 51
Table 14. Communist China: 'Trade with Countries of the Free 52
world, 1961-64 . . . . . . . . . . . . . . . . . . . . . . .
Table 15. Communist China: Net Trade in Grain, 1957/58-1965/66 . . . . . . . 54
Table 16. Communist China; Purchase of Whole Plants from Western 55
Europe and Japan, August 1963-December 1965. . . . . . . . . . . .
Figures
Following Page
Figure 1. Communist China: International Payments and Receipts,
Annual Averages for Selected Periods, 1950-64 . . . .
Figure 2. Communist China: Balance of Trade with the Soviet Union, 15
1950-65. .......... ...... ....
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I. Foreign Trade and the Economy of Communist China
A. An Overview
Foreign trade in Communist China is a state monopoly that is used by the Party
leaders as an important instrument of national policy for the pursuit of political
objectives, both at home and abroad. The Chinese Communist regime seeks to create a
strong, unified, and thoroughly communized China capable of achieving an independent
great-power status and a position of leadership in Asia. This objective requires
the transformation of China from a backward agrarian country into an industrialized
state, with a powerful military establishment and broad international recognition.
Specifically, foreign trade is directed toward assisting in obtaining these policy
objectives by: (1) providing capital-goods imports embodying modern technology for
the development of industry, (2) compensating for serious shortfalls and relieving
bottlenecks in domestic production, and (3) developing trade as a wedge to promote
Chinese influence abroad, both in other Communist countries and in less-developed Free
World countries.
Up to 1960, Communist China's pattern of trade was dominated by the exchange
of Chinese agricultural and mineral products and increasingly textiles, for machinery
and raw materials contributing to the growth of the industrial base. Although the
physical make-up of imports and exports reflected economic goals, the geographical
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direction of China's trade was strongly influenced by ideology. Mao established the
"lean-to-one-side" policy for China at the beginning of the Communist regime. This
policy resulted in China's economic orientation toward other Communist countries,
particularly the USSR. This policy was reinforced by the Western trade embargo
against China imposed in 1950 following China's intervention in the Korean War.
Imports were obtained from the Free World chiefly when they were not available or
were in short supply in the Communist world.
Since 1960, both the commodity and geographical patterns of Communist China's
foreign trade have shifted dramatically. The'collapse of the "leap forward" and the
withdrawal of Soviet technicians from China in 1960, the persistent need for imports
of Western grain,Nand the continuing deterioration in Sino-Soviet relations have
combined to lower the volume of trade and to alter sharply its direction and composition.
China's total trade rose from $1.2 billion in 1950 to a peak of $1+.3 billion in 1959,
and then declined to a level of $2.7 billion in 1962. This downturn was reversed in
1963, and by 1965 trade had increased to an estimated $3.7 billion. Since 1960 a
major realignment in China's. trading partners has taken place. Communist countries
used to account for two-thirds of China's trade before 1960, but today the shares are
reversed, the Free World now accounting for 70 percent of China's total trade. (See
Table l.)
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The Chinese acted with some deliberation in their liquidation of Mao's "lean-
to-one-side" policy. After such Soviet actions as the cancellation of a "defense
technology" agreement in 1959 and the abrupt withdrawal of Soviet specialists in
1960, the Chinese set about to lessen their dependence on the Soviet Bloc, and, if.
necessary, to be in a position to adjust to a break in relations. One of their
earliest acts was to. maintain the priority for the development of China's petroleum
industry, even during the time when the over-all investment program was being slashed.
The earlier concentration on development of petroleum exploration and extraction was
followed by a few orders for refining equipment and petro-chemical plants for delivery
by the Free World in 196+-65. Thus China was able to reduce sharply its imports of
petroleum from the USSR. Another of China's priority objectives was the rapid
elimination of debt to the USSR. Simultaneously, the Chinese moved toward a phasing
out of Soviet deliveries of equipment for complete plants and toward a careful culti-
vation of Free World contacts and detailed knowledge of Free World market conditions.
The decision to purchase Free World equipment for high priority plants was apparently
reached at the 10th Plenum of the Eighth Congress of the Chinese Communist Party in
September 1962, but orders were not placed until August 1963.
The commodity composition of Communist China's foreign trade has continued
to follow the trend set in 1961, despite the substantial recovery in both imports and
exports since 1963. (See Table 2.) Imports of agricultural products (largely wheat,
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raw cotton, sugar, and jute) and chemical fertilizers continued to dominate China's
imports, and accounted for i7 percent of China's total imports in 1965. In contrast,
in 1959 imports of agricultural*products and chemical fertilizer amounted to only
l+ percent of China's total imports. Impbrts of machinery and equipment, although
showing a substantial rise in 1965, amounted to only $330 million, still far short
of the nearly $1 billion in 1959. Part of this increase in imports of machinery and
equipment in 1965 was accounted for by complete plants from the West contracted for
in 1963, and,just beginning to enter the country.
The major trend in Communist China's exports since 1963 has been the recovery
in the export of agricultural products. For the first time in recent years food
exports in 1965 drew Iroughly even with food imports in value. China exchanged high-
value food products (rice, vegetables, processed foods and meat products) for cheaper
wheat. After foodstuffs, textiles remained the single largest export earner, but
exports declinea slightly in 1965 as increased shipments to the West failed to offset
the decline in exports to the Soviet Union. Exports of minerals and metals, once a
prime earner of foreign exchange, continued to lag.
B. Credit and Foreign Exchange Limitations*
Communist China's exports have been by far the dominant source of foreign
exchange, accounting for four-fifths of total receipts. The receipts of foreign
This section draws heavily on the summary and conclusion of CIA/RR ER 66-17,
"Communist China's Balance of Payments, 1950-65," Washington, D.C., August 1966.
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credits, overseas remittances, and other earnings have played a less important role in
financing China's imports. (See Figure 1.) During 1950-57 the rapid growth of the
economy provided an upsurge in exports, which, supplemented by more than a billion
dollars in long-term foreign aid from the USSR and almost another billion in
remittances from overseas Chinese, helped China meet its expanded requirements for
foreign machinery and raw materials. In contrast, the excesses of the "leap forward"
(1958-60) caused imports quickly to outpace exports, resulting in a sharp rise in
short-term foreign indebtedness and a decline in China's international reserves. The
deterioration of China's international payments position was slowed, in 1961-62 by
deep cuts in imports from Communist countries and by new infusions of foreign credit.
N
By 1963, China's international financial position began to improve because of
a revival of exports and continued restrictions on purchases of machinery and raw
materials from both the USSR and the West. By the end of 1964, China's clearing
indebtedness with Communist countries (especially the USSR) amounting to about $360
million had been almost eliminated. Moreover, by generating a large export surplus
with the USSR each year, the Chinese were able by 1965 to finish repaying their long-
term debt to the USSR.
Communist China for the first time turned to the West in 1961 for credits
and by the end of 1964 had received credits of almost $1.2 billion. Unlike the
-5-
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credits from Communist countries, however, those from the West have provided only
short apd medium-term financing, most of which have been 18 month,!s credits to cover
China's huge annual grain purchases. Other short-term credit from the West has
covered China's large fertilizer purchases. Western credits have given little respite
to China in meeting its hard currency obligations, however, because repayments each
year now almost offset new drawings. If the Chinese leaders continue to rely on
medium-term credits, repayments may even surpass new drawings in the next few years.
China, therefore, may seek long-term credits from the West to finance imports of
additional plant and equipment needed to accelerate their industrial development.
China's failure to seek long-term credits from the West probably reflects the uncertainty
of.the leadership over future requirements for Western grain and the high cost of credit.
Communist China's foreign exchange holdings do not allow for any sustained
trade expansion. China, when the Communists took it over in 1949, had almost no
international financial resources. But China was able to build-up its international
reserves by imposing a strict and highly effective system of trade and foreign
exchange controls, by borrowing from the USSR, and by obtaining foreign currencies
from overseas remittances and from the "surrender" by private individuals of foreign
exchange and gold. Chinese holdings of Western currency and gold reached a peak of about
$650 million at the end of 1957. These holdings were heavily drawn on during and
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following the "leap forward" from 1958 to 1962. By 1964 they were probably only
about $400 million, well below the peak level of 1957. Thus holdings of Western
currency and gold now are much less than in 1957, but trade with the Free World now
is more than double the 1957 level. (See Table 3.)
During 1965 Communist China's holdings of gold and convertible currencies
probably rose by $100 to $150 million as China increased the use of its export
earnings to build up reserves. In 1965, China made its first purchases of gold on
the world market, which amounted to $135 million and were paid for in sterling.
This exchange of sterling for gold reflected not only the leadership's decision to
diversify its international reserves, as a hedge against the possible devaluation of
sterling, but also its more immediate concern over the deepening political and
military crisis in Southeast Asia. The Chinese nevertheless must have continued to
hold some sterling balances overseas.
C. Foreign Aid
Communist China has used its foreign aid program in an attempt to extend its
political influence:;in both Communist and Free World countries. (See Tables 4 and 5.)
Although the Chinese have directed their trade toward the West in recent years, China
continues to channel its foreign economic assistance largely to Communist countries,
especially those of Asia, as shown in the following tabulation:
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Communist China; Extension of Credits and Grants
Countries, 1953-65
(Million US $)
to Communist and Free World
Communist Countries
1,223.5
North Vietnam
457
North Korea
330
Outer Mongolia
115
Albania
164
Cuba
100
Hungary
57.5
Free World Countries 815
Asia l10
Africa 26li
Middle East 141
Total 2,038.5
The bulk of the actual drawings on these credits -- at least $1 billion -- has
gone to Communist countries, chiefly North Vietnam and North Korea. Drawings by the
less-developed Free World countries have lagged considerably behind credit extensions
and through December 1965 were estimated at some $200 million, only about 25 percent
of total foreign aid expenditures. China made record aid extensions in 196- to the
less-developed Free World countries of $338 million, but as in the past, drawings
against these recent credits to the Free World probably will be extremely slow.
The predominant role of the Communist countries in China's foreign aid program
is likely to continue, inasmuch as these nations are the main areas in which China
and the USSR are competing for influence. The increasing political isolation of China
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n the international communist movement, however, may narrow the scope of China's
aid program. North Vietnam and Albania have been the only Communist nations
recently receiving Chinese aid. The principal focus of Sino-Soviet aid competition
is in North Vietnam. Both China and the USSR have stepped up their economic and
military aid to North Vietnam, partially as a result of US air strikes, but also
for the prosecution of the war in South Vietnam.
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II. Trade with the Communist Countries
A. The Soviet Bloc
i. Mutual Cooperation during the 1950's
Communist China based its industrial and technological growth of the
1950's on the rapid build-up of trade with the Soviet Union, in particular the flow
of Soviet-produced machinery. and equipment to China. Sino-Soviet trade grew more than
fivefold from $320 million in 1950 to more than $2 billion in 1959. More than $12
billion in goods were exchanged between the two partners during this period. Of this
amount, more than $1 billion worth of machinery and equipment for complete industrial
installations was supplied China by the Soviet Union. Financial aid extended to China
by the Soviet Union has been relatively small. The Soviet Union extended loans to
China amounting to about $1.4+ billion, of which $430 million was for economic
development and the rest primarily for military purchases. The Soviet Union provided
significant technical aid to China over the decade of the 1950's, including (a) supplying
vast quantities of blueprints and technical information, (b) sending 10,000 Soviet
advisers and technicians to China to perform a wide variety of taske, and (c) making
available its own teaching facilities in the USSR for training 8,000 Chinese technicians
and researchers and 7,000 academic students.
Industrial Projects in China
The 'core of Communist China's program for rapid industrialization was
the Soviet commitment to'assist China-in the building of 291 major industrial plants
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by 1967. The Soviet equipment for these plants was valued at $3.3 billion, or some
$11 million on the average for each project. By the end of 1959, $1.35 billion worth
of equipment for these projects had been delivered and about 130 projects had been
completed. (See Table 6.) With Soviet and Eastern European support, Communist China
expanded production of heavy industry from 192 to 1959 at an annual average rate of,
about 25 percent; without this aid the rate would have been far lower. This flow
of equipment and technical assistance had a vital effect on the quality of China's
industrialization, enabling China to produce such prestige items as jet aircraft,
submarines, large electric generating equipment, metal-cutting machine tools, tractors,
trucks,'and electronic equipment. Soviet aid to China also included extensive
training of Chinese scientists and technicians in the nuclear sciences in both the
USSR and China, including the supply of experimental reactors and other nuclear
related technology, designed to eventually provide a base which could support native
Chinese production of Soviet-designed weapons.
The sudden withdrawal of Soviet support in mid-1960 was, in the
.words of Chinese economic planner Po I-po, like "taking away all the dishes when
you have only eaten half a meal." About 20 percent of the Soviet aid plants begun under
agreements concluded prior to 1958 were incomplete. For example, much work remained
to be done on the important steel complexes of Pao-t'ou and Wu-han., and on construction
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of the large hydro-electric station in San Men Gorge on the upper reaches of the
Yellow River. Most of the 125 Soviet aid plants contracted for under agreements
concluded in August 1958 and February 1959 and scheduled for completion by 1967 were
still in the planning stage. These latter projects included facilities for the
production of chemicals, the development of a more balanced steel industry, additional
support to defense industries, and the provision of specialized machine tools and
precision instruments. Thus, the Chinese were still highly dependent on the Soviet
Union for new plants and product designs involving technology not already furnished
or with which the Chinese had little experience. The degree of dependence varied,
some industries requiring only capital equipment for further development, others
needing only tech ical assistance, and still other more complex industries -- depending
agreements calling for the construction in China of a number of large projects.
Agreements for at least 100 projects were signed and construction of about two-thirds
of these projects were completed and placed into operation by 1959, including electric
power, chemical, and sugar-refining plants.
on both imported knowledge and equipment.
Although none of the European Satellites extended long-term financial
assistance for Communist China's development efforts, they did negotiate assistance
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b. Trade Flows
(1) USSR
The USSR's share in China's foreign trade increased from a mere
5 percent before the Communist revolution to approximately 50 percent in 1959. By
1959, Soviet exports to'China were as large as those to all Free World underdeveloped
countries combined. One-sixth of Soviet exports of machinery and nearly three of
every four complete plants sent abroad went to China. (See Table 7.)
At the height of Sino-Soviet Commercial relations in 1959,
Communist China rivalled East Germany as the Soviet Union's principal trading partner.
China supplied one-fifth of the Soviet Union's total imports, two-thirds of her food
ports and three-quarters of her textile imports. Soviet willingness to accept
Chinese agricultural raw materials and large amounts of industrial consumer goods,
especially textiles, permitted China to pay for the large-scale imports of machinery
and equipment needed for industrialization. (See Table 8.)
Communist China has acknowledged the receipt of long-.term credits
from the Soviet Union amounting to $1,405 million. These included an economic loan
at $300 million granted in 1950; a further economic credit of $130 million in 1954;
a loan in 1955 covering the transfer to China of Soviet holdings in for joint-stock
companies and other Soviet-owned assets in China believed to total $330 million; and
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other miscellaneous credits totalling $645 million, probably mainly used for military
purposes. The Soviet Union provided some additional financial aid to China following
the collapse of the "leap forward" by funding $320 million of outstanding short-term
indebtedness in 1961 over a five year period, and by extending a loan of $46 million
for the import of 500,000 tons of Cuban sugar.
(2) Eastern Europe
Sino-East European trade started from a negligible base in 1950,
but increased rapidly and by 1959 accounted for 15 percent of Communist China's total
trade. (See Table 9.) Up to 1960 East Germany and Czechoslovakia have accounted for
approximately two-thirds of Chinese trade with the European Communist countries,
Poland and Hungary for less than 30 percent, and Rumania, Bulgaria, and Albania the
remainder. Although there are indications that imbalances have developed in Sino-
East European trade, Chinese imports from these countries are not known to have been
financed by long-term credits.
Next to the USSR, Eastern Europe has been the largest supplier
of machinery and equipment to China, including industrial, transport, agricultural,
and communications equipment. East Germany and Czechoslovakia have been the chief
exporters of machinery and equipment to China. During 1950-59, China received from
Eastern Europe machinery and equipment valued at about $1.7 billion, approximately 40
percent of Chinese imports of these items from all sources. The Chinese have paid for
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imports by exports of basic raw materials and foodstuffs required by Eastern Europe.
In the past some Eastern European nations on occasion supplemented their on exports
to the West by reexporting Chinese products.
2. Mutual Discord During the 196o's
Toward the end of the 1950's discord between the Soviet Union and
Communist China grew over a widening range of political and economic matters. For
example, the Soviets had second thoughts over the wisdom of supplying China with
nuclear information and the Soviets had grave doubts about China's free-wheeling "leap
forward" economic policy. Matters came to a head with the abrupt withdrawal of the
Soviet technicians from China in mid-1960. Their departure was a serious blow to the
Chinese economy at an already critical time, and marked the end of the period of
large-scale Sino-Soviet economic collaboration. Trade fell rapidly. (See Figure 2.)
Sino-Soviet trade has declined each year since 1960, dropping to a
level of $450 million in 1964, only one-quarter the level of 1959, and in 1965
amounted to only $1+17 million. Despite this reduction in trade, China maintained a
large export surplus with the USSR in order to pay off its indebtedness ahead of
schedule. In 1963 and 194 alone, China maintained an export surplus of over $1+00
million with the Soviet Union. In an attempt to bring trade into better balance in
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1965, China increased its imports from the Soviet Union by over $50 million to $192
million, while decreasing exports by $90 million, to $225 million, reflecting the
completion of Chinese debt payments.
After the withdrawal of Soviet assistance, Communist China's imports
of machinery and equipment from the Soviet Union fell to a trickle, amounting to
only $27 million in 1962. With the gradual upturn in China's industrial production
since 1962, imports of machinery and equipment from the Soviet Union have revived
slightly, reaching a level of $58 million in 1964 and $77 million in 1965. Though
still not importing any complete plants, China has been purchasing more spare parts
and replacements for existing stocks of Soviet equipment, particularly civil aircraft
and transportation and construction equipment. As for exports, in 1964 China reduced
shipments to the Soviet Union of almost all items. The sharpest drops were in fabrics
(down $51 million), garments (down $40 million), ores and concentrates (down $13
million), metals (down $9 million), and construction materials, mainly cement (down
$8 million). In 1965, China further reduced shipments to the USSR of fabrics and
clothing (down $84 million), and metals (down $12 million).
b. Eastern Euxope
Following 1960, Sino-East European trade also dropped sharply, and
in 1961 amounted to only one-half the level of 1960. This sudden drop in trade
4
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created difficulties for Eastern Europe both in marketing machinery produced to
Chinese specifications and in finding alternate sources of supply and the means of
financing of materials that were normally imported from China. Sino-European trade
continued to fall sharply in 1962, trade with some nations falling more sharply than
that with others. China's trade with East Germany, Czechoslovakia, and Hungary,
the important Chinese trade partners in Eastern Europe and those countries most
strongly supporting the Soviet position in the Sino-Soviet political dispute, declined
by 1+0 to 50 percent, while trade with Poland declined by some 20 percent. Chinese
trade with Albania -- China's strongest ally in the Sino-Soviet dispute -- increased
in 1962 chiefly due to increased Chinese aid deliveries to Albania under long-term
credit arrangements.
By 1964, total Sino-East European trade increased by 6 percent over
the 1962 level. Of this total increases in trade with Albania, Rumania, and to a
lesser extent, Poland, offset a decline in trade with East Germany and Czechoslovakia.
In 1965, China's trade with Eastern Europe jumped 22 percent over 19611., the largest
increases occurring with East Germany (up $16 million) and Rumania (up $15 million).
(See Table 10.) The bulk of China's imports continue to be machinery and equipment.
B. Asian Communist Countries
Communist China's total trade with North Vietnam, North Korea, and Mongolia
has been small, amounting to less than 10 percent'of China's total trade and has been
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governed largely by its economic assistance programs to these countries. The rivalry
between China and the USSR in the extension of aid to these countries has been
exacerbated since the flaring up of the Sino-Soviet dispute as each country has
maneuvered to win adherents in the political struggle. As a result of this struggle,
China's trade with North Korea and Mongolia has declined, while trade with North
Vietnam has increased.
The extension of credits and grants by China has played an important role in
the economic development of these nations. (See Tables 11 and 12.) Communist China
has supplied economic and technical assistance. for the development of both light and
heavy industry in North Vietnam including the Thai Nguyen iron and steel plant, and
the rehabilitation and development of North Vietnam's transportation and communications
facilities as well as in the improvement of its irrigation system. North Korea has
received equipment and technical assistance from China for light industrial projects
and powerplants., China and North Korea are cooperating in the building of a large
hydroelectric power station-on the Yalu River. Chinese economic aid to Mongolia has
been concerned primarily with the development of light industry and with housing
construction. In addition, between 1956 and 196+ large numbers of Chinese laborers
were sent to work on Mongolian construction projects.
Communist China's trade with Mongolia has declined in importance since 1959
largely because of Mongolia's firm commitment to the USSR in the Sino-Soviet dispute.
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A similar decline in China's exports to North Korea since 1962 probably reflects
the completion of drawings on credits provided by China in 1960 as well as the more
.recent political leanings of North Korea toward the USSR. Counter to this declining-
trend has been an increase in China's trade with North Vietnam. China supplied
large-scale assistance in support of North Vietnam's First Five Year Plan (1961-65).
But perhaps the largest stimulus to increasing Sino-North Vietnamese trade has been
China's increasing technical and materiel support to the bomb-damaged economy of
North Vietnam and for the prosecution of the war with South Vietnam.
C. Cuba
Sino-Cuban trade first began to assume significant proportions in 1960
following the establishment of formal trade relations and the extension by Communist
China of a $60 million interest free credit. This credit was to be drawn between 1961
and 1965 to finance exports of complete plants and for other technical aid to help
Cuba develop its economy. Trade between the two countries developed rapidly, and
between 1961 and 1965, the average annual turnover amounted to about $180 million.
The growth of Sino-Cuban trade between 1961 and 1965 was based chiefly on
the exchange of Cuban sugar for Chinese foodstuffs, including rice, soybeans, textiles
machinery and other industrial equipment, part of which was financed under the $60
million economic credit. (See Table 13.) Apparently, Sino-Cuban trade will decline in
7:966 because of a rapid deterioration in political relations. According to statements
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by Fidel Castro, China has decided to reduce its trade with Cuba in 1966 by importing
less Cuban sugar and exporting less rice and other commodities than in 1965. China,
moreover, has insisted that trade should be balanced and press announcements from
Havana indicate that a total trade turnover of about $170 million is expected in 1966.
This level of trade is slightly below the average annual turnover for 1961-65 and
considerably below the record level reached in 1965.
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III. Trade With the Free World
A. The 1950's -- The Marginal Supplier
Communist China's trade with the Free World during the first half of the
1950's declined sharply in total value and in relative importance. China's total
foreign trade doubled in the five years from 1950 to 1954, but trade with the Free
World, which accounted for 70 percent of total trade in 1950, dropped in absolute
value by nearly 30 percent and in relative terms to only 25 percent of total trade
in 1954.
During the second half of the decade trade with the Free World revived, rising
from $785 million in 1955 to $1.4 billion in 1958 and to about $1.3 billion in 1959,
when it accounted for about one-third of total Chinese trade. This upsurge was
furthered by the rapid economic advance in Communist China, and, in part it represented
an effort to develop alternate sources for industrial materials in short supply or
not readily available within the Bloc. Growth in trade with Western Europe was
particularly rapid, reflecting the rising Chinese need for chemicals and metals. Thus,
while China's trade with Western Europe more than tripled, China's trade with the
less-developed countries --,Southeast Asia -- grew by only 50 percent. Trade with the
less-developed areas expanded in large measure to promote the political policy of
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developing closer relations with many of the uncommitted countries of this area, and,
where possible, to acquire foreign exchange to cover purchases from Western Europe.
However; China's preoccupation, with its own industrialization limited its expansion
of economic assistance to the less-developed areas.
B. The 1960s -- The Major Supplier
Communist China's trade with the Free World has grown rapidly since 1960, and
by 1965 accounted for more than two-thirds of China's total trade. (See Table 14.)
.China's economic difficulties and the impact of the Sino-Soviet dispute have been
the principal factors in the redirection of trade. Beginning in 1961, agricultural
failures forced China to import 6 million tons of grain annually. At first, these
purchases were financed by means of drastic cuts in imports of machinery and other
investment goods, emergency sales of precious metals, and credits from Canada and
Australia, the principal grain supplying countries. Later, China was able to shift
exports to markets where urgently needed hard currency could be obtained.
Rapid shifts also occurred in the geographic distribution of trade with the
Free World. Canada and Australia increased their exports (grain) to China many-fold
in 1961 whereas Western Europe's exports (industrial products) declined by 75 percent.
Imports of capital goods from the industrial West, however, have revived since 1962,
-following the gradual recovery in China's industrial production. In 1963, for the
first time since 1950, the Free World accounted for more than half (55 percent) of
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China's trade. Moreover, since 1960 the greatly altered emphasis of China's investment
program has meant a growing demand for chemical and petro-chemical plants, mining
equipment, and other capital goods that the Soviet Bloc economies are less able
to supply.
Trade with Free World countries has been important to Communist China for
certain raw materials (cotton, rubber, wool), producerst goods (some types of steel
and nonferrous metal manufactures, chemical fertilizers, artificial fibers), and
more recently grain and complete industrial installations. The Chinese also have
benefited from small purchases of special purpose items embodying advanced designs
such as instruments, machine tools, and electronic equipment. Particularly since
the loss of Sovie~ technical assistance in 1960, China's entry into advanced fields
of production will depend largely on the acquisition of Western equipment and
technical knowledge. The Free World, on the other hand, has received useful but not
critical imports from China; including an increasing range of textiles and light
industrial products, agricultural commodities ranging from rice and tea through Chinese
specialties such as tung oil, bristles, feathers, processed food, hog casings, oilseeds,
and essential oils; and metals and minerals including tin, wolfram, mercury, pig iron,
and coal. For individual Free World trade partners, except Hong Kong, trade with China
has represented less than 10 percent of their total trade. But, Chinese purchases
of individual commodities have been quite important at times, such as in the case of
Ceylonese rubber and Australian and Canadian grain.
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1. Grain
Chinese Communist purchases of grain have become an established fact of
life in the Chinese economy and purchases since 1961 have averaged about 6 million
tons a year at an average annual cost of $400 million, as shown in the following
tabulation:
Communist China:
Grain Purchases from the West, 1961-65
Year
Million Metric Tons
Value (c.i.f.)
(Million US$)
1961
6.2
434
1962
5.3
371
1963
5.7
4oo
196+
6.8
x+75
1965
5.7
4oo
29.7
2,080
China's retained imports, i.e., grain imports less grain exports, are lower than
this, since each year there are shipments on Chinese account to other countries,
notably Albania. About 80 percent of these imports of grain have come from the
industrial West (Canada, Australia, and France), although other suppliers such as
Argentina and Mexico have also been significant. (See Table 15.) China's continued
need for large grain imports is demonstrated by a contract signed with Canada in
October 1965, which calls for the purchase of 5 million to 12.5 million tons over
the next 3 to 5 years.
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The reasons for China's concern to ensure future supplies are not difficult
to find. Over the past few years, food production has barely kept up with the growth
in population, and domestic production of food may now be as much as 10 percent below
the per capita level of 1957. Thus, China will have to continue importing grain for
the foreseeable future, and probably at a gradually increasing rate to say 7 to 8
million tons a year. The Chinese claim they are buying wheat to facilitate the sale of
more expensive rice. This trade makes economic sense as the caloric value of wheat
per pound is almost equal to a similar amount of milled rice. However, this claim is
only partly true as sales of rice in the past few years have averaged about 800,000
tons per year, or only about 14 percent of average annual grain imports.
`V,
As a consequence, agriculture now contributes far less to industrialization
than it did in the 1950's. This is shown quite dramatically by the shift in export
earnings from food. In 1959, China earned $8k million net from the sale of food
abroad; from 1961 to 1965, however, there was an average annual net deficit of about
$125 million in food sales. As a result, China's capacity to import capital goods
declined sharply; imports of machinery and equipment were only 300 million in 1965,
compared with almost $1 billion in 1959. China's purchases of a few key plants from
the West since mid-1963 have just 1egun to enter into China's trade returns in 1965,
but these orders add up to a little less than one-tenth of the $2 billion spent for
grain during 1961-65. The prospects that another $2 billion may have to be committed
for grain purchases in 1966-70 must indeed be a sobering thought for the Chinese planners.
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2. Complete Industrial Installations
A major feature of Communist China's foreign economic relations since
mid-1963 has been the purchase of complete industrial installations from the Free
World, financed in part by medium-term credits, and including, in some cases, the
services of Western technicians. Contracts for 30 to 40 complete plants from
Western Europe and Japan, valued at more than $170 million, have been negotiated
since mid-1963. Over half the value -af the contracts have been chemical plants,
including plants for the production of chemical fibers, chemical fertilizers, plastic
materials, and petrochemicals. (See Table 16.) These plants, most of which will not
be in operation until 1967-68 or later, will either supply vital products for the
Chinese economy or will advance Chinese technical competence in important branches
of industry. China is currently negotiating with a West German consortium for a
steel-mill complex valued at between $125 and $175 million. If this contract is
suedessfullyconcluded, it will almost double the value of Free World plants known
to have been purchased by'China through December 1965. China also has placed
several large orders for other machinery in the past two years, particularly
transportation equipment and heavy-duty, equipment for construction purposes.
.C. Industrial West and Japan
I. Industrial West
Communist China's trade with Japan and the industrial West has grown from
about $700 million in 1962 to $1.4+ billion in 1965 -- an annual average growth of
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roughly 25 percent. This growth can be accounted for chiefly by grain imports from
Canada and Australia, the two main suppliers, and Peking's turn to Japan and Western
Europe as its major source of foreign technology. The growth of trade with Japan has
been particularly rapid, and in 1964-65 this trade greatly surpassed'the earlier peak
of $150 million reached in 1956. By 1965 trade with Japan had risen to $470 million,
and Japan had replaced the USSR as China's number one trading partner. Although China's
trade with Western Europe jumped by about 40 percent in 1965 -- to $600 million --
this level of trade was still slightly less than the 1959 peak of 4670 million. The
bulk of China's imports from Japan and Western Europe have been machinery and equipment,
steel products, and chemical fertilizer.
With the exception of Japan, the countries from which Communist China
mainly wishes to import -- do not offer comparable markets for China's exports. This
is particularly true of Canada and Australia with whom China has had an annual average
import surplus of close-to $300 million during 1961-64. Although China has managed
to triple her exports to these two countries over this period, reaching some $35
million in 1964, the scope for additional increases does not appear to be large. China
has managed to maintain a small export surplus with Western Europe in 1964 but it
remains to be seen whether China can keep pace with a strong upward trend in imports
once" this is resumed in earnest. Western Europe probably would buy more Chinese
agricultural products and industrial raw materials, but does not offer a ready market
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for low-quality Chinese manufactured products. The Chinese export drive must therefore
be concentrated in the growing markets of the less-developed countries, particularly
in the large overseas Chinese communities in Southeast Asia.
2. Japan
The ability of industrial Japan to complement underdeveloped China is
reflected in the rapid increase in recent years of Sino-Japanese trade, which. has
grown as follows:
Communist
China: Trade with Japan,
1956-58;average, and 1960-65
(Million US $)
Chinese exports
Chinese imports
Total
1956-58 average
72.8
59.4
132.2
1960
20.E
2.8
23.2
1962
x+5.9
38.6
84.5
1963
74+.8
62.x+
137.2
1964
157.9
152.9
310.8
1965
225.0
245.0
470.0
Japan is the most important customer for Chinese bulk products such as coal, pig iron,
iron ore, salt, coke, soybeans, some perishable foodstuffs and minerals. In turn,
China has been purchasing from Japan an increasing quantity of steel products,
chemical fertilizer, chemicals, machinery, synthetic fibers, motor vehicles, earth
moving equipment, and various other manufactures.
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D. The Less-Developed Countries
Communist China has met only with partial success in fashioning trade as a
political weapon to capture the "countryside of the world;" i.e., the less-developed
countries of Africa, Asia, and Latin America. Basically, each side has an underdeveloped
agricultural economy often producing the same type. goods, or suffering from similar
scarcities best supplied by more technically advanced and industrialized countries.
China's trade with the less-developed countries almost doubled between 1959 and year-
end.1965 -- reaching an estimated level of $825 million, or about 22 percent of
China's total foreign trade in 1965. Over half of that trade was conducted with only
five countries: Argentina, Indonesia, Malaysia,- the United Arab Republic, and Ceylon,
Trade with these countries was of special importance to China's own economy; either
for earnings of scarce hard currency as in the case of its lop-sided trade with
Malaysia (about $100 million in net exports), or for essential commodities as grain
from Argentina, rubber from Indonesia and Ceylon, and cotton from the U.A.R. With
the exception of grain purchases, China has run a trade surplus with the less-developed
nations.
Unique Role of Hong Kong
The tiny British Crown Colony of Hong Kong inhabited by approximately four
million Chinese and a small Western community provide Communist China with its most
Including Singapore.
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important source of hard currency. Hong Kong serves as China's largest customer
while selling only a minimal amount to China as the following figures show:
Communist China Trade with Hong Kong, 1963-65
(Million US $)
1963
196+
1965
Exports by China
259
34+5
407
.Imports from Hong Kong
12
10
13
Export surplus of China
247
335
394
Vith the present level of her trade surplus running about $400 million, China can
buy almost all her annual grain imports from the West with earnings from Hong Kong.
China faces a leveling off of these earnings; however, as the colony can use only
so much food, which is China's primary export to Hong Kong.
Hong Kong depends on Communist China for meat, fruit, and vegetables, dairy
products and oil seeds, rice, wheat, and sugar. It also provides a growing market
for Chinese textiles, simple machinery, and other manufactured goods.
Hong Kong also serves as an important trading outpost for Communist China.
Hong Kong reexports a portion of the foodstuffs, textiles, and other products obtained
from China to other Southeast Asian countries, Japan, and Europe. This entrepot trade
is believed to have been running close to $90 million annually in the past few years.
The many economic benefits that Peking derives from Hong Kong would be lost
or greatly diminished if it were a part of Communist China. Foreign exchange earnings
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would be sharply reduced because deliveries to Hong Kong for local consumption would
be paid for in domestic currency. The ready exchange of non-Bloc currencies would
,disappear with the loss of British backing, and the loss as a British-sponsored port
would bring a sharp reduction in the use of the commercial and financial facilities
in Hong Kong by businessmen of non-Bloc countries.
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IV. Outlook
The Chinese have claimed. that the abrupt ending of Soviet economic assistance,
although extremely damaging in the short-run, would be to China's ultimate advantage,
since it would force China to redouble its efforts to widen its own manufacturing
capability and to reduce dependence on imports. This widely proclaimed policy of
national "self.-reliance" has not been so restrictive as to have kept China from
contracting for complete plants, machinery and equipment, and in some cases even
for technicians, from Japan and Western Europe.
There are few sectors of Communist China's industrial economy that would not gain
considerably from imports of plant and equipment and production technology; in fact,
for the future development of many branches of the chemical, metallurgical, transpor-
tation, and machine-building industries such imports appear essential. There are,
moreover, various'raw materials which China must buy, perhaps in increasing quantities
including rubber, cotton, copper, chrome, nickel, cobalt, and special alloy steels.
Imports of chemical fertilizers, pesticides, and farm machinery also remain vital
and may well maintain their upward trend. Even in the case of petroleum, where the
advance towards self-sufficiency has been unusually rapid, some imports of high
quality lubricants almost certainly will be needed for some time to come. Last but
not least, Chinese imports of grain may well rise gradually over the next few years.
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Communist China then has fundamental economic needs for large-scale trade with
the outside world during the Third Five Year Plan (1966-70). The prediction of the
future rate of growth of foreign trade, its commodity composition, and its geographical
distribution is made doubly hazardous by the current political turmoil in China. The
so-called Proletarian Cultural Revolution is in part directed against "foreign"
elements that have sneaked into the society. Conceivably the strong xenophobic
elements in the political situation could hamper trade; already, foreign businessmen
find that trade officials in China are reluctant to make decisions or enter into
new agreements. No general policy decision, however, has been made to curtail trade.
In any case, the ptrong unpredicted switches in the volume, composition, and distribution
of China's foreign trade in the last 6 years should serve as an object lesson to those
seers who attempt to foretell the future of trade in 1966-70-
Over the next five years -- to lay aside these disturbing political elements --
the extent to which foreign trade can expand will depend on how successfully the
leadership deals with the problems of expanding agricultural and indufitrial production.
Although China has managed over the past five years to make progress in narrow sectors
of the economy -- including its nuclear weapons program -- the country has not
regained the economic momentum that marked the 1950's. The economy has never
recovered from the dual setback of "leap forward" economic policies and the withdrawal
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Communist China's foreign trade over the next five years will continue to grow,
but will be tied more closely to production capabilities -- particularly in agricul-
ture -- and thus a slower rate of growth subject to considerable fluctuations can
be expected than. in 1961+-65. The trend toward increased trade with the West is
likely to continue. The major growth in exports will still be in agricultural
products and textiles although there should be some increase in mineral and metal
exports. Imports of Western grain have b Thome a continuing necessity and will require
the expenditure of a large share of China's annual hard currency earnings. Thus,
grain purchases will continue to restrict the import of capital equipment needed for
the expansion of modern industry. Barring the receipt of long-term credits which
would help trade expand greatly, or a sustained increase in the export of agricultural
products, there is little likelihood that imports of capital equipment will increase
sufficiently during the Third Five Year Plan (1966-70) to make the contribution to
industrial development that they made in the 1950's.
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APPEPNDDX A
Methodological Supplement: Merchandise Trade of Communist China
Merchandise trade includes all commodity exports and imports, valued on an f.o.b.
basis. Several adjustments were made in the foreign trade data, reported by the
Chinese for 1950-58 and derived from trading partner statistics for 1959-65. It is
believed that China records its foreign trade to show the country of destination and
origin rather than the country of payment and receipt and furthermore, that its
imports from the Free World are valued on a c.i.f. basis. Therefore, two adjustments
have been made in the Chinese foreign trade reports: the first, to place China's
merchandise trade with the Free World on an f o.b. basis, and the second, to represent
China's trade by country of payment and recei t. This latter adjustment was made
because reexports of Chinese goods by the Eastern European Communist countries
averaged almost $30 million a year between 1953 and 1961.
The estimates of Communist China's foreign trade for 1950-58 are based on Chinese
official data on foreign trade and the trade data of China's trading partners. Because
China in recent years has suspended the publication of all trade data, estimates of
its foreign trade after 1958 have been derived exclusively from the information of
its trading partners. China's foreign trade in 1950-58 as derived from the data of
its trading partners approximated the comparable Chinese data for this period; thus
the estimate of China's trade for 1959-65 based on trading partners' data can be
combined with data of the earlier period.
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Conversion of the Yuan values of China's trade for 1950-58 into US dollars has
been made on the basis of the following exchange rates: US $1 equals 4 Yuan in trade
with Communist countries; in trade with,the Free World, US $1 equals 3.2 Yuan in 1950,
2.21+ Yuan in 1951, 2.1 Yuan in 1952, and 2.5 Yuan in 1953-58. This dual exchange rate
system is not reported by China but is derived from a comparison of the yuan values
of trade as-reported by China with the ruble and dollar values of trade as reported
by or estimated from the trade data of China's trading partners. China's reason
for establishing this system is not certain. Such factors as the greater stability
of prices and the different commodity mix in trade with Communist countries compared
with the Free World trade, however, could Justify a lower value of the yuan in the
Communist trade. Or perhaps the yuan value of exports and imports is established
arbitrarily under a system of prices that is insulated from domestic prices.
Estimates of China's trade for 1959-65 are based on the trade data of China's
trading partners. To reflect the value of trade as China would report it, the trade
data of Free World countries have been adjusted for (a) time leads and lags in
shipping, (b) shipping costs, (c) double counting, and (d) unrecorded transactions.*
On the other hand, only a few adjustments have been required in the trade data of
Communist countries because (a) the Communist countries present their trade data on
* For a more detailed description of these adjustments see CIA/RR ER 66-17, "Communist
China's Balance of Payments, 1950-65," Washington, D.C., August 1966, pp. 29-31.
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an f.o.b. basis, (b) reexports of Chinese products by the Communist countries to the
Free World almost completely disappeared during this period, (c) no shipping time
adjustment is required. for much of Sino-Soviet trade (that going by rail), and (d)
data are insufficient to calculate the shipping time adjustments for the remaining
share of Chinese trade with the European Communist countries. Also, the Far Eastern
Communist countries have only irregularly reported their trade with China. Trade
with these countries has been estimated from miscellaneous data on total and
commodity trade and on credit extensions and drawings.
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Statistical Tables
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 Table 1
Direction of Chinese Communist International Trade, 1950-65 a
Total International Trade
Trade with Communist Countries b
Trade with the Free World c
Total
Exports
Imports
Total
Exports
Imports
Total
Exports
Imports
1950
1,210
620
590
350
210
14o
86o
410
450
1951
1,895
780
1,115
975
465
510
920
315
605
1952
1,890
875
1,015
1,315
605
710
575
270
305
1953
2,295
1,040
1,255
1,555
670
88'
740
370
370
1954
2,350
1,060
1,290
1,735
765
970
615
295
320
1955
3,035
1,375
1,660
2,250
950
1,300
785
425
360
1956
3,120
1,635
1,485
2,055
1,045
1,010
1,065
590
475
1957
3,025
1,595
1,430
1,935
1,065
870
1,090
530
56o
1958
3,735
1,910
1,825
2,350
1,250
1,100
1,385
66o
725
1959
4,265
2,205
2,060
2,960
1,595
1,365
1,310
615
695
1960
3,975
1,945
2,030
2,605
1,320
1,285
1
370
625
745
1961
3,015
1,525
1, 495
1, 680
965
715
,
1, 335
560
775
1962
2,675
1,525
1,150
1,410
920
490
1
265
605
1963
2,755
1,560
1,200
1,245
820
425
,
1,510
740
770
1964
3,245
1,770
1,475
1,125
730
395
2,120
040
1
080
1
1965 J
3,695
1,955
1,740
1,125
645
480
2,570
,
1, 310,
,
1,26o
a. Because of rounding to the nearest $5 million, components may not add to the totals shown.
b. Including trade with Yugoslavia.
c. Trade reported by Free World countries has been adjusted for time leads and lags in shipping, shipping costs, double-counting, and unrecorded
transactions. See Appendix A.
1. Preliminary estimates based on incomplete data.
- 39 -
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 Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2
Communist China: Commodity Composition of Trade, 1959, 1962, 1961+ and 1965 a
1959
Free World
Communist
Countries
1962
Free World
Communist
Countries
1.9
Communist
Countries
1965
Total
cport s
2,202
615
1,595
1,525
605
920
1,770
1, 01+0
1,955
4gricultural products
1,100
390
720
1+25
285
1110
650
515
135
.775
(foods)
(820)
(300)
(520)
(250)
(175)
( 80)
(375)
(275) .
(100)
(520)
Industrial materials
360
70
290
300
125
175
3
150
170
1+00
-extiles
620
120
500
535
155
375
1
+1+0
200
21+0
1+25
)ther manufactured goods
115
35
85
265
1+0
225
350
175
175
355
worts
2,060
625
1,365
1,150
660
1+90
1,1+75
1, 080
3955
1,74o
agricultural products
10
10
575
455
120
820
735
85
700
(foods)
(460)
(31+5)
(llo)
(6oo)
(525)
(75)
(530)
+ertilizers (chemical)
70
70
1+0
1+0
N.A.
60
60
N.A.
1L.0
Industrial materials
740
500
21+0
305
125
180
325
195
130
1+85
4achinery and equipment
980
70
910
120
20
105 /
200
70-
130
300
)ther
260
45
215
110
25
85
70
20
50
115
Data have been rounded to the nearest $5 million. Because of rounding, components may not add to the totals shown.
Preliminary estimates based on incomplete data.
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 Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2
Table 3
Communist China: International Financial Resources, Year-End Balances
1957 and 1959-64 J
Million US
1957 b/
1959
1960
1961
1962
1963
1964
Foreign exchange reserves
645
530
415
320
335
400
Foreign currency balances.
610
450
300
215
155
145
185
Monetary gold holdings
35
80
115
140
165
190
215
Clearing account balances (with
Communist countries)
-360
-435
-625
-26o f
-205
-120
-55
Net international financial resources
285
95
-210
95 /
115
215
345
a. Table 3 is from CI RR ER 17, Communist China's Balance of Payments, 1950765,," Washington, D.C., August 19 66., p. 7. Data are rounded to the
nearest $5 million.
b. Because foreign exchange reserves were negligible at the beginning of 1950, reserves at the end of 1957 represent the net changes during 1950-57.
c. Net balance of errors and omissions (from China's balance of payments with the Free World), which are almost entirely changes in foreign currency
balances arising from transactions with the Free World.
d. Net balance of changes in holdings of monetary gold.
e. Net balance of errors and omissions (from China's balance of payments with the Communist countries), which are almost entirely clearing account
balances arising from transactions with Communist Countries.
f. The reduction in the clearing debt in 1961 and the consequent improvement in China's clearing and foreign exchange position are due almost entirely
to the USSR's funding of China's clearing debt of $320 million. (See p.if , below).
- 41 -
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 Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2
Table 4
Communist China: Economic Credits and Grants to Communist Countries, 1953-65 a/
Cuba b/
Hungary
North
Korea
North
Vietnam
S
Outer
M
li
1953
ongo
a
1954
1955
204.0
4
1956
49.5
2
7.5
40
1957
54.0
4
50.0
1958
,959
55.0
119.0
5
19
25
25
1960
1961
220.0
282.0
5
125
60
105
50
1962
1963.
N.A.
40
N. A.
40
157
1964
1965
Negl.
Total
N.A.
1,223.5
N.A.
164
100
57
5
330'
N.A.
4
.
57
115
a. With the exceptions noted, source of table is Alexander Eckstein, Communist China's Economic Growth and Foreign Trade, (New York: McGraw Hill, 19
Appendix E, p. 306.
b. Figures revealed by Prime Minister Fidel Castro in speech on 2 January 1966.
c. Albanian press reported additional aid extended by Communist China, but amount not known.
- 42 -
Million U
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 Approved. For Release 2001104/30 CIA-RDP79TO1049AO03300110001-2
Table 5
Communist China: Economic Credits and Grants to Fnae World Countries,
1956-65 and Year 1964 and 1965
Million US
1956-65 a
1964 b/
1965 a/
815
337.8
Africa
26)4
115.1
15
Algeria
50
0
0
.Central African Republic
4
4.0
0
Congo (Brazzaville)
25
25.2
0
Ethiopia
0
0
0
Ghana
40
22.4
0
Guinea
25
0
0
Kenya
18
18.0
0
Mali
'20
0
0
Somalia
22
0
0
Tanzania
45
45.5
0
Uganda
15
0
15
Asia
410
114.2
44
Afghanistan
28
0
28
Burma
85
0
0
Cambodia
50
0
0
Ceylon
42
4.2
0
Indonesia
105
50.0
16
Nepal
40
0
0
Pakistan
60
60.0
0
Middle East
141
108.
c0
Syrian Arab Republic
16
0
0
United Arab Republic
85
80.0
0
Yemen
4o
28.5
0
a. U.S. Department of State, "Communist Governments and Developing Nations: Aid and
Trade in 1965," Research Memorandum, ROB-50, June 17, 1966.
b. Alexander Eckstein, Communist China's Economic Growth and Foreign Trade, (New York:
McGraw Hill, 1966), Appendix E, p. 307.
43 -
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 Approved..For Release 2001/04130 : CIA-RDP79TO1049AO03300110001-2
Table 6
Soviet Project Construction Agreements with Communist China
1950-59
Value of Complete
Economic Credits
Number of
Sets of Equipment /
Date of Agreement
(Million US $) a/
Projects
(Million US $) a?
February 1950
300
50
N.A.
September 1953 cf
0
91
1,300 J
October 1954
130
15
April 1956
55
625
August 1958
47
N.A.
February 1959
78
1,250
Total
. 430
2 J
3,275
a. Converted from rubles at the official rate of exchange of 4 rubles to US $1.
b. Including technical assistance related to these projects.
c. An agreement signed to deliver equipment for a total of 141 projects.
d. This sum includes the value of equipment and technical assistance for all of the
141 projects.
e. The Chinese announced in April 1959 that the 211 major Soviet-assisted projects
agreed on through Apr41 1956 were reduced in number to 166 as a. result of merging of
some projects during t eir construction. Thus the total of 336 projects was reduced
to 291.
-4+4-
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 Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2
Table 7
Soviet Exports to Communist China, 1958-1965 a
1956
1959
1960
1961
1962---
-1963
1965-
Value
Percent
Value
Percent
Value
Percent
Total extorts
634.0
100
954.5
817.1
6 .3
233.4
187.2
191.7
100.0
Machinery and equipment
318.0
50.2
597.5
503.9
108.1
27.3
42.2
57.6
42.6
77.0
40.2
(Complete plants)
166,2
26.2
399.8
373.8
78.9
8.8
14.6
12.3
9.1
3.9
2.0
Industrial raw materials
(Petroleum and petroleum
173.4
27.4
176.3
188.7
166.9
127.0
107.4
56.7
42.0
71.9
37.5
(Ferrous products) tals)
92.4
14.6
9.6
1177.7
113.1
59.3
120.7
34.7-
80.5
28.2
6o.7
27.4
21.6
20.8
16.o'
15.4
2.2
34.7
1.1
18.1
(Nonferrous metals)
15.8
2.5
6.4
10.5
6.5
5.6
4.9
3.1
2.3
3.8
2.0
Consumer goods
9.2
1.5
6.6
4.4
67.2
30.6
14.2
7.2
5.3.
1.4
0.7
(Foods)
1.1
0.2
0.5
Negl.
63.8
20.8
0.7
0.1
0.1
Negl.
Negl.
Other merchandise
17.0
2.7
12.3
13.1
6,1
3.4
2.3
5.6
4.1
16.9
8.8
Unspecified
116.4
18.4
161.4
107.0
19.1
45.1
21.2
8.2
6.1
24.5
12.8
i. Figures based on Vneshr_iaia Tor ovlia S.S.S.R. za 1965 god, Ministerstvo Vneshnei Tor ovli S.S.S.R. Moskva
1965) ~ .-.g ~ and other volumes.
Exports are f.o.b. Because of rounding, components may not add to totals shown.
- 45 -
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 Approved For Release 2001/04/30 : CIA-RDP79TO1046AO03300110001-2
Table 8
Soviet Imports from Communist China, 1958-65
3 - - -
95
1959
1960
1961
1962
1963
19
1965
.
Value
Percent
Value
Value
Value
Value
Value
Cota orts
881.2
100.0
1,100
81?8.1
551.4
516.~
413.0
3111-.2
225.6
100.0
Industrial materials
233.3
26.5
277.2
218.4
128.4
103.8 /
79.0
56.9
18.1
29.7
13.2
ores and concentrates
74.0
8.4
73.3
61.2
48.3
35.3
25.9
13.2
4.2
11.6
5.1
Ferrous metals
19.2
2.2
7.6
12.8
8.7
6.6
10.9
10.6
3.4
--
--
Nonferrous metals
48.9
5.5
54.9
18.9
34.2
25.9
12.5
3.1
1.0
1.4
o.6
Textiles
37.5
4.3
91.6
65.3
22.7
13.9
8.6
6.7
2.1
3.6
1.6
Consumer goods
483.0
54.8
61+1+.4
518.4
360.6
382.3
309.6
230.1
73.2
172.9
76.6
Food
230.1
26.1
219.1
127.9
17.4
38.1
21.9
51.9
16.5
78.2
34.7
Fabrics and clothing
158.4
18.o
306.3
293.2
277.1
299.4
256.6
165.2
52.0
81.3
36.0
160.7
- 18.2
171.6
96.6
31.0
26.6
19.0
15.5
4.9
13.4
5.9
Unspecified
4.0
7.2
14.7
31.4
3.6
5.5
11.8
3.8
9.6
4.3
Figures based on Vneshniaia Torgovlia S.S.S.R. za 19 5 god, Ministerstvo Vneshnei Torgovli S.S.S.R.
Imports are f.o.b. Because of rounding, components may not add to totals shown.
Moskva, 19
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 Approved For Release 2001/04/30 CIA-RDP79TO1049AO03300110001-2
Table 9
Communist China: Trade with Eastern European Communist Countries, 1950-65 J
Million Us
1950 .
20
1951
205
5
6
15
1952
320
5
1
140
1953
340
55
1
165
1953
370
90
24
150
1955
435
0
2
130
1956
46
35
200
5
265
200
1957
500
275
225
1958
670
410
260
1960
6~0 655
325
330
1961
2
1
300
1962
3
5
65
5
160
6
230
80
150
19
3
64
225
70
155
19
6
245
85
16o
19
5 J
299
132
167
a. Including Albania and excluding Yugoslavia. Totals have been rounded to the nearest
$5 million.
b?. Preliminary trade estimates compiled primarily from official yearbooks and monthly
statistical bulletins of the East European Communist countries.
-47-
Total China's Imports China's Exports
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 Approved For Release 2001/04/30 :, CIA-RDP79TO1049AO03300110001-2
Communist China:
China's E
1962
xports
190 3 l yF>4
147
1
6
.
.6
1
160.8
Albania
42.1
41.7
61
7
l~ul .,ar is
3.2
2.3
.
1
1
Czechoslovakia
25.6
29.0
.
20
6
East Germany
Hungary
32.0
24.7
.
19.5
Poland
11.0
20.0
14.9
22.7
24.8
25
0
Rumania
10.5
14.1
.
18.0
Table 10
Trade with Eastern Europe, by Country, 1962-65
167.0
70.0
1.0
13.0
25.0
11.0
25.0
22.0
7.0
11.7
.23.4
3.3
1.3
11.9
9.3
21.9
10.4
11.9
3.3
15.1
11.2
2.2
13 8
23.9
1.5
9.3
15.6
4.3
15.0
1
5.9
1 32_0
25.0
1.019.0
26.0
15.0
19.0
27.0
Million US $
a. Trade data for 1962-b are from CIA RR ER 5-37, "Foreign Trade.of the European Satellites in 1,904: A Statistical Summary,' Washington D.C. Dec
b. Preliminary trade estimates compiled primarily from official yearbooks and monthly statistical bulletins of the East European Communist countries. 19 5?
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 Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2
Table ll
Total Trade V
Derivation of Chinese Communist Trade with the Far Eastern Communist Countries, 1950-5821/
Commercial Trade (Excluding
Credit's and Grants)
Derived Trade
Imports f/
Exports J
2 c/ 6 c/ 9 c' 15 c/ 20 J 18 J 38 e/ 82 J 102 e/
5
15
25
40
85
105
40,
90
a. Table from CIA/RR ER 6 -17, "Communist China's Balance of Payments, 195o-65," Washington, D.C. August 1966, p. 37.
b. Includes North Korea, North Vietnam, and Mongolia. Data are rounded to the nearest $5 million.
c. During 1950-54, as China restored and expanded its economy, commercial trade probably increased rapidly, although it amounted to a relatively small
percentage of the aid goods which China provided to North Korea for its wax with South Korea and to Viet Minh forces in Vietnam. Thus, commercial trade
during 1950-53 is assumed to amount to about 30 percent of total trade. Exports on credit or grant basis are the residual of total trade less commercial
trade.
d. Based on announced credit extensions and drawings and related data.
e. 'dotal trade less exports on credit or grant basis.
f. Half of the value of commercial trade, on the assumption that commercial trade has been balanced each year.
g. Total trade less imports.
- 49 -
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 Approved For Release 2001/04/30 CIA-RDP79T01049A003300110001-2
Table 12
Communist China: Trade with Far Eastern Communist Countries, 1959-64 J
Million U
Total Trade b/
Imports
Exports
1959
244
83
161
1960
255
96
159
1961
257
93
164
1962
262
88
174
1963
263
96
167
1964
227
92
135
a. Table from CIA RR ER 66-17, "Communist China's Balance of Payments, 1950-65,"
Washington, D.C., August 1966, p. 40.
b. Includes North Korea, North Vietnam, and Mongolia. Data based on miscellaneous and
incomplete trade data of the Far Eastern Communist countries and. information on the
extension and implementation of Chinese credits and grants. In the absence of clearing
account data, commercial trade is assumed to have been balanced between exports and
imports. China's aid deliveries were largely estimated on the assumption of a straight-
line drawing of credits and grants. -
--50
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 Approved For`Releas'e 2001/04/30 CIA-RDP79TO1049AO03300110001-2
Table 13
Communist China: Trade with Cuba, 1960-65 a
Million US$
Year Total Trade Imports Exports
1960
42
32
10
1961
182
92
90
1962
171
89
82
1963
156
73
83
1964
180
81
99
1965
213
98
115
a. Compiled from Chinese and Cuban sources but excluding shipping costs (which the
Cuban sources apparently included), which are estimated at 10 percent of the value of
imports.
51 -
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 Approved. For Release 2001/04/30: CIA-RDP7.9T01049A003300110001-2
Table 14
Communist China: Trade with Countries of the Firee World, 1961-64
1961
Exports
Total Industrial-West
Western Europe
of which:
United Kingdom
West Germany
France
Italy
Japan
Australia, Canada, New Zealand
Total less developed countries
South and Southeast Asia
of which:
Burma
Ceylon
Indonesia
Malaya and Singapore
Pakistan
Middle East
Africa
Latin America
of which:
Argentina
Hong Kong C
Im_ ports
Total Industrial West
Western Europe
of which:
United Kingdom
West Germany
France
Italy
Japan
Australia, Canada, New Zealand
Total less developed countries
South and Southeast Asia
of which:
1SX62
60
5
1963 1964
..
222 2:1:0 265 415
181 1149 172 229
73 50 47 59
35 32 34 49
13 15 19 28
10 12 19 21
29 4 71 150
12 17 22 36
304 371
165 226 270
21
21
40
54
3
.25 34
32 39
34 38
90 95
6 17
27 32 42 45
34 54
115 ig,
6C
602
234
52
46
41
38 23
17 :,
350
174
109
- 52 -
2
170 253
770 1,080
58? 68?+
184 196
35 56
18 20
67 43
21 20
66 16o
332 328
188 394
94 131
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 Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2
Table 14 (Continued)
a. Data are based on the official statistics of tree Wor.. countries, adjusted to
approximate Chinese foreign trade on an export f.o.b. and n import c.i.f. basis.
Adjustments also have been made for double counting and for undercounting such as
Chinese grain purchases sent to other countries. Because if rounding, components may not
add to the totals shown.
b. Less than $500,000.
c. Net of entrepot trade with third countries.
1961
1962
1963
1964
Burma
40
20
13
18
Ceylon
16
33
22
25
Indonesia
32
4+3
37
68
Malaya and Singapore
9
ii)
6
1
Pakistan
10
2
12
13
Middle East
27
30
34
54
28
22
54
54
Latin America
9
3k
7
155
of which:
Argentina
5
33
4
112
Hong Kong
2
2
Total Free World .
1,335
1, 270
1,510
2,120
- 53 -
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 Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2
Table 15
Communist China: Net Trade in Grain, 1957/58-1965/66
Retained Imports
Canad.&
2.5
1.7
1.3
1.8
2
3
Australia
2.1
2.0
2.7
2.2
.
1
8
Argentina
0.2
0.3
1.2
0.7
.
2
2
France
0.5
0.9
0.3
0.1
.
0
Other
0.7
0.5
0.4
0.5
0
Total
6.o
5.4
5.9
6.3
Exports
0.7
0.8
Net Trade
-0.7
+4
9
44
6
.
.
+5.0
+4.5
+5.5
3. 1 July-30 June.
b. Tentative figures.
- 54 -
1957/58 a/ 1961/62 1962J63 1963/64 19611-/65
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(Million Metric Ton;
1965/66 b
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Table 16
Communist Chiria: Purchase of Whole Plant
f
s
rom Western Europe and Japan
August 19b3 - December 1965
Plant and Equipment
Whole Plants
Country
Value
(Million US $)
Car;acit?/
Date of
Contract
Remarks
Vinylon fiber plant
Urea plant
11,000 Mt per year
175,000 mt per year
Aug 1963
Sep 1963
Trial production began in September 1965.
Scheduled to begin production of fertilizer
Synthetic anncnia plant
United Kin
d
by October 1966.
Petroleum refinery
g
om
105,000 mt per year
150,000 to 200,000 m
Oct. 196;
Dec 1963
This plant is to complement the Dutch urea plant.
per year
A:.monium nitrate plant
S
th
i
Italy
14.2
110,000 mt per year
Dec 1963
This plant is being, built in Albania
Th
yn
et
c ammonia plant
Italy
3.6
N
A
.
e
contract includes facilities f
h
Indu
t
i
.
.
Dec 1963
or t
e produc-
tion of ammonia, nitric acid
and
i
s
r
al alcohols plant
France
,
ar_mon
ura
nitrate fertili
3
N.A.
Jan 1964
zer.
Palm oil processing plant
Netherlands
N. A.
May 1964
Crude oil cracking and
olefins-separation plant
West Germany
50,000 mt per year
Jul.1964
The scheduled start-up is rid-1967.
Synthetic fiber plant. (nylon)
West Germany
Jul 1964
Polyethylene plant
United Kingdom
24,000 mt per year
:yep 1964
This plant will use ethylene produced by the I; ,
olefins-separation plant purchased from West
Germany.
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 Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2
Table 16 (Continued)
Plant and Equipment
Country
of Origin
Value
(Million. US $)
Date of
Contract
Remarks
United Kingdcm
Nov 1964
Both resin and fiber products will be made
from propylene produced by the olefinz-
separation plant.
Complete plant for the manufacture
Sweden
150,000 cubic meters
Dec 1964
of pcrous silica material
per year
Acetylene generating plant
Japan
1,100 cubic meters
may 1964
This plant is in operation and ccmple.:,ents
per year
the vinylcr. fiber plant.
Air liq,iefact ion plant
Japan
Sep 1964
This plant was delivered in August 1965.
Precision measuring instrument
0.b
Nov 19t4
To be, delivered by the end of 1966.
plant.
oil hydraulic equipment
Japan
Nsr 1;65
Construction to be completed in December 1966.
manufacturing plant
Acrylonitrile plant
West Germany
10,OJG r.,t per year
May 1965
Equipment is to be delivered by mid-1957-
Glass plant
West Germany
:J.A.
mid-i965
Polyester resin plant
United Kingdom
N.A.
Jul 1965
This plant is scheduled to begin production
before the end of 1966.
Acrylic fiber plant
,k-g 1965
Condenser manufacturing plant
236,003 condenser per
Sep 1965
year
3.3
5
Au,; 1965
1965
56 -
Approved For Release 2001/04/30 CIA-RDP79TO1049AO03300110001-2
 Approved For Release 2001/04/30 : CIA-RDP79T01049A003300110001-2
Table 16 (Continued)
Plant and Equipment
Country
of Origin
Value
(Million US $)
Capacity
Date of
Contract
Instrument plant
United Kingdom
1965
Tube-expanding pipe plant
Italy
N.A.
1965
Straw'cellulose plant
Finland
62.5 Mt of semi-
1965
Bleaching plant
chemical cullulose
daily
80 mt of bleached
1965
L-D steel plant
sulfur cullulose
daily
650,000 mt per year
1965
-strip steel rolling mill
Cold
West Germany
1965
,
Approved For Release 2001/04/30 : CIA-RDP79T01049A003300110001-2
 Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2
COMMUNIST CHINA: BALANCE OF TRADE WITH THE SOVIET UNION
100
.
000
All
900
C
HINA'S
IMPORT
S
-
--
r
-
001
L
700
EX
PORT
IMPORT
SU
RPLUS
600
SURPLUS 101
<
500
10
\CHIN
A'S EX
PORTS
100
300
00
0
*The sharp inmate in Communist China's imports in 1935 probably reflects the transfer to China of /Qint stock companies and other Soriet.held assets,
Approved For Release 2001/04/30,: CIA-RDP79TO1049AO03300110001-2
 Figure 1
Annual Averages for Selected Periods, 1950-64
196:3-64
2,000 1,500 -1,000 500 0 500 1,000 1,500 2,000.
*Excluding other miscellaneous poyments and receipts.
Drawings on Credits and Grants Freight and In Import Payments 1950-57
Export Earnings Overseas Remittances
Extended surance tj
Debt Repayments
Approved For Release 2001/04/30 : CIA-RDP79T01049A003300110001-2
COMMUNIST CHINA: 1nternationai Payments and Receipts*
1 59 38.
72
RECEIPTS
#a
1,202 ;t 1,124
17`t5
F~
_ Y
Approved For Release 2001/04/30 : CIA-RDP79TO1049AO03300110001-2