ECONOMIC RELATIONS BETWEEN THE SOVIET BLOC AND THE COMMUNIST FAR EAST 1950 THRO

Created: 4/15/1957

OCR scan of the original document, errors are possible

SX/c

l

AMrstont Oireclor

Office of Current Intelligence

CIA,"

fog, Copy No. 57

ECONOMIC RELATIONS BETWEEN THE SOVIET BLOC AND THE COMMUNIST FAR 0 THROUGH

Office of Research and Reports CENTRAL INTELLIGENCE AGENCY

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FORE WORD

1

whi

This reportompanion study to CIA/ Coordination and Integration of the Soviet Blocj i'ill-bb.

ich investigated planning, trade, and ons as they function within the Soviet Bloc. It also

financial relatii

discussed production specialization among the European Satellites and the present state of their economic coordination with the USSR. This reportimilar analysis of the economic relations between the Soviet Bloc and the Communist Far East.

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CONTENTS

Pur.!

I.

II. Coordination of

the USSR and the European Satellites

the USSR and tho Communiat Far East .

the Soviet Bloc and the Communist

Far

of Trade Between the Soviet Bloc and

Communist

Involved in Trade Between the

Soviet Bloc and Communist Chinaeflection

of Specialized

Assistance to the Communist Far East

Assistance by the Soviet Bloc to the

Communiat Far

Loans

for Industrial

Received to Effect Capital Transfers

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1

Appendix A. Scientific and Technical Cooperation Agreements Between the European

Satellites and Communist .

Appendix B.

Appendix C. Gaps in

Appendix D. Source

Table

Reported Soviet Loans to Communist China. and Repayment,.

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ClAj

(ORH

ECONOMIC RELATIONS BETWEEN THE SOVIET BLOC AND THE COMMUNIST FAR.0 THROUGH

Summary

Some progress has been made in coordinating the economic plans of the Communist countries in the Far East (particularly Communist China) with those of the USSR and the European Satellites. Althoughember of the Councilvof Mutual Economic Assistanceof the Soviethina attends CEMA meetings as an observer and participates in many of the Bloc's coordinating conferences.

Soviet influence on the internal economy of Communist China is most apparent in the similarity between the economic agencies of the Soviet and the Chinese governments and in the large number of Soviet advisers working in the Chinese economy. In imitating the Soviet dministrative structure concerning separation of long-range planning

* The estimates and conclusions contained in this report represent the best judgment of ORR as

** Sovet Ekonomicheskoy Vsaimppomoschi! (literally. Council of Economic Mutual Assistance).

*** The Soviet Bloc consists of the USSR and the seven European Satellites, as follows: East Germany, Czechoslovakia, Poland, Hungary, Rumania, Bulgaria, and Albania. The Sino-Soviet Bloc consists of the USSR,uropean Satellites, andar Eastern Communist countriesommunist China. North Korea, North Vietnam, and Outer Mongolia. This report deals mainly with Communist China,esser extent with North Korea and North Vietnam, and not at all with Outer Mongolia.

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and short-range planning at the central planning level, China is ahead-oi several of the Satellites.

Apart from institutional similarity, Chinese Communist officials haveertain "responsibility" for Sino-Soviet Bloc-wide coordination in supplying agricultural and mining products to European Bloc countries. An export surplus of these commodities is assurer) through Chinese planning. There is apparently no Chinese intention, however, to detract from thc internal constructionroad andindustrial base irrespective of Bloc specialization policies.

Communist Chinaear trade agreement with Czechoslovakia. Because of increasing Chinese-Soviet Bloc trade and the need for long-range planning in the export of complete industrial installations, other long-term agreements of this type are expected. 'The trade of China with the Bloc has increased fromercent of total Chinese trade0 to more than

In addition to extensive Sino-Soviet Bloc-wide trading. Communist China receives much scientific-technical assistance from both the USSR and the European Satellites. Technical aid agreements have been signed between China and all these countries. Included in theseare provisions for the exchange or assignment of technical aid and technical information and for the loan of advisers and specialists.

The coordinated economic relations between the Soviet Blocand the Communist Far East differ greatly from the relations between the USSR and the European Satellites. The former are not as extensive or highly developed as the latter, although the trend seems toloser coordination of the two areas in the future. Moreover, Chinese independence from the USSRn whatever degree itust beontinual obstacle to smooth economic coordinationar to any economic integration.

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I. Introduction.

The economic relations among the members of the Sino-Sovict Bloc are baaed on joint allegiance toesire for mutualadvantage, and unified international political strength. Tho nature of the Asiatic sector of the Bloc, however, differs from that of thesector. Available information does not indicate that eithor North Vietnam or Communist Chinaatellite of the USSR in the European sense, although Outer Mongolia and North Korea approach this status. In addition, there is the question of the extent of Chinese leadership in the Communist Far East. It is believed that, until that status Is more precisely recognized and defined, economic relations between the Far Eastern Communist countries and the Soviel Bloc countries will be conductedilateral basis.

Within Communist countries, oconomic cooperation Is practicodHn the fields of planning, trade, finance, and economic-technical assistance. Planning includes both over-all economic planning and specific production planning. Economic cooperation in trade includes not only intra-Bloc trade but also collaboration among the members of the Bloc in their trade with the Free World. Financial relations include payments procedures and various forms of loans and credits between the countries. Economic-technical assistance includes scientific-technical advice, the loan of technical exports, the training of unskilled workers, and the shipment to and/or construction of enterprises in less industrialized countries. These activities leadegree of coordination between various parts of the economies of tho countries involved.

9 andhe economies of the USSR and theSatellites have beenincreasingly Coordinated and have boonin the direction of-more'thoroughgoing. integration. In thia drive for coordination and integration the. key organization is CEMA, whoseconsist of the USSR and the seven European Satellites. The degree of economic coordination reached in the Asiatic sector of the Bloc,differs from that in the European sector. In thelate of full coordination and partial integration is approached; this is not yet the case in Asia. Although the two main parts of the Sino-Sovict Bloc are not at all fully coordinated, any progress in this direction involves

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important ramifications for the West, such as greater economicufficiency for the Blochole, greater over-all productiveand enhanced ability to trade successfully with underdeveloped countries.

II. Coordination of Planning.

the USSR and the European Satellites (CEMA).

The Soviet government as ofaid down the broadfor long-range economic planning for the European Satellites. The annual and Five Year Plans are first prepared in each of these countries, are then coordinated with one another and with the USSR, and are given final approval by thc Soviet government. The leading organization guiding this program for coordination is

As the main coordinating agency for Soviet Bloc-widetrading, CEMAonsiderable measure of control over(except the USSR) in these activities. Thc power andof CEMA include the right to approve each Satellite'sFive Year Plans, to supervise the coordination of all the plans into determine individual production specialties in the{for certainnd to receive plan fulfillmentstatistics from all the Satellites. 2/ The relationship ofthe Communist Far East, however, differs somewhat fromfollowed in

the USSR and the Communist Far East.

None of the Far Eastern Communist countriesember of CEMA, although Chinese Communist representatives attend most if not all of its sessions as observers. This fact in itself indicates that the economic relations of China with the USSR and the European Satellites are considerably less coordinated than those between the USSR and the Satellites. The role of CEMA in the Communist Far East, however,

* For serially numbered source references, see Appendix D. ** CEMA does not coordinate internal Soviet plans, although it obviously works harmoniously with, and probably under the influence of. thc Soviet planning bodies.

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appears to be on the increase. Closer economic coordination between the Far East and the European area of the Soviet Bloc was suggested latehen an official of the East German government talked of "dovetailing" economic plans between "Berlin andf he referred to annual plans of the Communist countries. Similarly, Walter Ulbricht, First Deputy Prime Minister and First Secretary of the Communist Party of East Germany, recently hinted at coordination of plans among all Communist countries, including those in the Far East. He stated, "Party members must realize that thetarget figures are balanced by an adjustment process between the Soviet Union and the other states of the socialist and democratic camp. Itig job to balance the most important target figures of the Five -Year Plans among all the states from Korea to the GDR $astn areaopulation ofillion. We are grateful to the Central Committee of the CPSU Communist Party of the USSR? and the Soviet government for their great initiative in the gradual solution of this/ With respect to the economic relations between the two areas, official Bloc Sources have mentioned CEMA as supervising the economic and technical aid between them, mediating disputes over lagging commodity deliveries, and establishing procedures for economic cooperation.ne unsubstantiated report describes the functioning of this coordination as follows: bilateral discussions are first held among China, North Korea, and North Vietnam; and subsequently, over-all coordination between these countries and the European Satellites is brought about by CEMA, which resolves any necessary adjustments between conflicting plans. 6/

In spite of these reports, the evidence is too limited to warrant the conclusion that the USSRecisive control over Chinese Communist planning. Coordination throughout the Sino-Soviet Bloc, however limited, can be assumed to resultertain degree ofif not actual control, over thc planning of each country. The existence of this influence in China can be deducedeport that the draft of the Chinese Second Five Year Plan is being rewritten,erhaps partly in response to the disruption of Satellite plans following the political unrest in those countries in

>

Although Communist China cannot beatellite irt the usual sense, the USSRreat deal of influence over the Chinese economy. The most apparent indication of this influence is In the governmental institutions established to handle Chinese economic affairs. In their effort tolanned economy the Chinese havo borrowed heavily from Soviet experience and have adopted many of the formal institutions which the mentor country had established. The Chinese State Council, the supreme governmental administrative body, waa patterned after the Council of Ministers of the USSR. In addition, there are Soviet advisers attached directly to the State Council, and thereoreign Experts Bureau within thia council.

The central planning organisations for Communist China are the National Planning Commission, which engages in long-rangethe National Economic Commission, which handles annualand the National Technological Commission for planningdevelopments, lt is highly probable that Soviet advisers sit on the Chinese commisions. The Chinese press frequently commends Soviet specialists and the use of Soviet techniques in planning procedures. The newly established Scientific Planning Commission, created lor the purpose ofyear program of scientific research, has the advice of top Soviet specialists In this field.ore significantly, perhaps, the USSRarge amount of capital for the Industrial development of China. Thus In long-range planning the need for closer coordination between China andSSR is particularly importantof Soviet influence in Chinese industrial construction.

Reports concerning Sino-Soviet conferences held in Moscow during6 give some insight into the degree of influence which the USSR exercises over certain parts of Chinese Communist planning,n areas of planning involving certain industrial construction, the Chinese are limited by the amount of financial and technical aid which the USSR will extend to them. The August conferencesharp reduction

* Tho USSR established two planning bodies (long-range and short-range) in the spring Not til of the European Satellites have made the corresponding changes as yet.

in the amount of planned investment available to Chinese ministries. The initial Chinese proposals for the Second Ministry of Machineand the Ministry of Electric Power in7 investment plan were cut approximatelyercent,

Soviet influence on the North Korean economy is also extensive. The economic organization of North Korea, like that of Communist China,entralized governmental structure closely patterned after the USSR.

C. Between the Soviet Bloc and the Communist Far East.

Although not members of CEMA, the Far Eastern Communist countries actively participate in some of the specific Sino-Soviet-Bloc-wide coordination programs. In the economic field. Communist China, Outer Mongolia, and North Korea4 joined the European Blocon international railroad goods traffic (Soglasheniye Mezhdunarodnogo Gruzovogo SoobshcheniyaMGS) and passenger traffic (Mezhdunarodnogo Passazhirskogo SoobshcheniyaPS) and have participated in Blocof railroad officials for thc purpose of exchanging scientific and technical information in such fields as standardization of lhe manufacturing of railroad cars and the production of technical equipment. oint Nuclear Physics Research Institute for pooled scientific research was plannedonference6 which included all European and Far Eastern Communist countries except North Vietnam. Another conference6 in standardization of production was attended by China, North Korea, and Outer Mongolia.

Both North Korea and Outer Mongolia have issued statements to the effect that the principle of division of labor* among socialist countries will be considered in long-range Publicity also has been given in the Chinese Communist press to the specialization of production within the socialist community. References to Chinese participation in the principle of division of labor, however, are vague. peech before the Eighth Party Congress inhou En-lai described the responsibility of China in Sino-Soviet Bloc economic coordination as that

* The principle under which each country specializes in the production of certain commodities for thc purposes of thc Sino-Soviet Blochole.

of supplying needed "farm products, pastoral ^atiimaO products, mineral ores, raw materials, and certain mechanical and industrial products" to the other Communist countries. National planning, according to Chou, insures adequate quantities of these matorials for export. Chou wasto explain that, in spite of economic and technical cooperation among the socialist countries, it is still essential that China establish aindustrial base rather than one founded on specialization of He cited as reasons for this the size of the country and the abun<-dance of natural/ The precise role to be played by China in any Bloc-wide division of labor scheme, then, is still largely undefined.

Another factor, not mentioned by Chou, is the unpreparedness of Communist China for extensive industrial specialization. According '. to present planning, it will require three Five Year Plans to establish an industrial base. Consequently,7 China is not likely to consider broad-scale industrial specializationloc-wide coordinated eco'r nomic program at the expanse ofarge industrial base of its. own..

III. Trade Relations.

Trade agreements between Sino-Soviet Bloc countries are negotiated and signed by representatives of the respective foreign trade ministries and are implemented by subordinate import-export corporations. Foreign trade arbitrationeestablished within the several countries to handle disputes arising between the national import and export organs on matters of quality, delivery date, and

A. Trade Agreements.

Trade agreements between Communist China and the other members of the Sino-Soviet Bloc are establishedarter basis, with the exceptionew which arc specifically designated as "barter and payments"/ The agreements arepecified period of time but remain in force beyond the end of the stipulated period unless one of the membersermination notice. The parties to the agreement meet annually and sign protocols concerning the volume and type of commodities to be exchanged in the following years. learing

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system of accounting is normally provided, and thc negotiations are bilateral. IS/

Communist China and the USSR have made long-term trade arrangements to exchange industrial equipment for agricultural products, and China and Czechoslovakia haveong-range tradewhich encompasses the period of the Chinese Second Five Year. This long-range planning for trade relations isimportant in thc export of complete industrial installations which may take several years to complete. It may be expected that China will enter into such agreements with several other European Satellites.

B. Pattern of Trade Between the Soviet Bloc and Communist China.

When the Communist government took over control of Chinahe amount of trade between it and the other Communist countries was expected to rise markedly. This expectation was fulfilled. The trade of Communist China with tbe remainder of the Sino-Soviet Bloc and with the USSR05 is estimated to have been as follows

Trade with Sino-Soviet

Blocwith

Total Trade

(Million US $) (Percent) (Million US $) (Percent) (Million US S)

According to official Chinese Communist sources, trade with the Soviet Bloc rose from approximatelyercent of total foreign trade0 toercentercent Ofit is estimatedercent was with theercent with the European Satellites,ercent with other Far Eastern Communist

These data show that Chinese Communistslargelythe traditional Chinese pattern from trade with the Free World to trade with the Sino-Soviet Bloc. This indicates in part the progress achieved in economic coordination between the Communist Far East and tho other components ol the Sino-Soviet Bloc. It also indicates theof Western export controls under COCOM, although this consideration may have onlyore or less inevitable Bloc orientation for Communist China.

C. Commodities involved in Trade Between the Soviet Bloc and Communist Chinaeflection of Specialized Production.

Communist China exports to the rest of tho Sino-Soviet Bloc agricultural and animal products; some pig iron and rubber; some tungsten and molybdenum in ore concentrates; and some tin, mercury, and antimony in metallic form. In return,'China imports industrial equipment and raw and finished materials needed for industrial There is little evidence, however, that China has boon officially assigned these export specialties in the interests of economicwithin the Bloc. They are in most cases native commodities which arc needed throughout&he Soviet Bloc. China does collaborate with Bloc countries in trade with the Free World, however: it buys some Far Eastern rubber for re-export to the USSR and to Eastern Europe and uses the European Satellites as agents in the procurement of strategic commodities from tHe* Free World.

The First Five Year Planf Communist China callsarge industrial units to be constructed or renovated,f which arc to havo been completed by the. endhina is to import from the USSR materials for the construction and equipmentndustrialf which are scheduled to begin construction during the period of the First Five Year Plan. Both Chinese and Soviet sources describe the latter projects as the core of the program for industrializingnd the USSR is to give assistance on them through all stages of constructioneological survey and selectiononstruction sito. designing the plant, supplying and installing the capital equipment, and beginning production. Assistance is given to projects other than these key ones through the program of technical and scientific cooperation and the use of technical experts from the

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USSR.* China, with Substantial.assistance from the European Satellites and the USSR, is to construct thcrojects of.

Communist China imports agricultural machinery, powerplants, and generators from almost every Satellite. The product specialties of each Satellite in the Soviet Bloc division of labor, together with Chinese Communist imports from that Satellite, follow.

East Germany specializes in machine tools, precisiontransportation equipment (passenger cars and truckspecifichemicals, and agricultural equipment (such as grain and potato combines and heavy- In addition to these products.China imports from East Germany industrial machinery, power-plants, generators, fertilizers, and machinend has been sent the following complete industrial installations: elecommunicationsteel rolling mill,ugar factory, cement plants,enicillin plant, arid an abrasives

Czechoslovakia specializes in transportation equipment, machineonstruction equipment, lubricating oils, and chemical plants as well as agricultural machinery (such as sugar-beet and flax combines and cultivatingircraft, and Communist China imports from Czechoslovakia the first five of these commodities into diesel motors and engines, dyes, drugs, and telecommunications China has also negotiated and possibly concludedwith Czechoslovakia for complete industrial "installations such as thermal electric powerplants, sugaritrogenadioetallurgical combine,reezing

Poland specializes in transportation equipment (buses,and passengerugar, sugar refining equipment, and chemicalsll of which it exports to Communist- plus mining products, coal and coke, shipbuilding, and cementT The following complete industrial installations have been exported to

a There are instances in which Satellite equipment and/or personnel is used in Communist China in projects attributed to the

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China: sugar refineries, port facilities,liderhemical fertilizer plant, cylinder-boring mills, arid cement factory

Hungary specializes or will specialize in the production ofequipment (diesel train units and largelectric power equipment, heavy construction equipment, machine tools, aluminum, and bauxite. Communist China imports from Hungary telecommunications equipment, precision instruments, motor vehicles, pharmaceuticals, petroleum products, and certain types of ships (cargo, fishing, tug, freighter, and patrol). Complete industrial installations in the fields of telecommunications and ore dressing may be exported to

Rumania specializes in lubricating oils, drilling equipment, and powerplants, which Communist Chinan addition tocommodities and machinery (cornumber, and wood products.

Bulgaria speciali zes in ore production (pyrites and miscellaneous ores and concentrates) and agricultural machinery. Communist China imports from Bulgaria agricultural machinery, cotton, tobacco, ore dressing plants, and chemical fertilizers. Some Bulgarian exports to China are known to be reexports of Hungarian and Czechoslovak

Albania specializes in otfrtain agricultural products (such as medicinal plants and tobacco) and mining products-such as chromend has agreed to send Communist China copper, tobacco, and cotton

The terms of trade between North Korea and the Soviet Bloc are somewhat different from Chineseatellite trade in that many North Korean imports from both the USSR and the Satellites come as economic aid rather than as purchases. The Satellites are sending to North Korea technicians, complete industrial installations, andequipment. Commodities shipped to North Korea include the:

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Czechoslovakia

Poland

Hungary (prospective)

Rumania

engine plant

Publishing and printing plant Electrical equipment plant

Telephone switchboards

Agricultural equipment Construction machinery Electric motors and transformers Medical equipment

Hydroelectric power stations Automotive parts plant Machine tool plants Cement plant Transportation equipment Agricultural equipment Medical supplies

Locomotive repair plants Motors

Passenger and freight cars Trucks and tractors Concrete mixers Consumer goods

Machine tool plants Dye plants

Measuring instrument plants Buses and trucks Medical supplies Organic chemicals Telephones

Cement plant Aspirin plant Brick plants Freight cars Fishing boats Passenger coaches Tractors and bulldozers Consumer goods

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plant

plant

Textile machinery Glass

Consumer goods

North Vietnam receives aid from and trades with virtually all countries of the Soviet Bloc. North Korea and Outer Mongolia arein this exchange, and both of these countries have made token contributions to the rehabilitation of North Vietnam. The USSR has0 million* in aidear period to buildndustrial and public utility enterprises, to check epidemic diseases, and tocertain foodstuffs. Chinese Communist aid to North Vietnam7 millioncar period. This aid is to assist in rebuilding railroads; river docks; highways and bridges; textile mills; tanneries; and factories for manufacturing medical, electrical, and agricultural equipment. Commodities reportodlto be shipped from the Satellites to North Vietnam indludetthe

Polygraph printing works Chemicals Medicinequipment for chemical works Optical equipment Machine tools Mining equipment Electrical equipment

motors Textiles Water pumps Chemicals

* Dollar values are given in terms of US dollars throughout this report.

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vehicles and equipment

(automobiles, trucks, and ships) Medicine and medical equipment Textiles Rice

machinery

Industrial machinery Transportation vehicles Medicine and medical instruments Consumer goods

equipment

Consumer goods

equipment

Construction equipment

Chemicals

Medicines

IV. Technical Assistance to the Communist Far East. A. Forms.

**

The industrialization program of Communist China requires technical assistance in thc form of capital equipment, production techniques, specialists and technicians, scientific information forand designing, and manpower training. The USSR and the Satellites extend such technical assistance to Chinaumber of forms. Trade contracts for the construction of complete industrial installations in China involve technical aid in planning and designing, in construction of plants and installation of equipment, and in the training of local The individual contracts fix the type of assistance to be furnished. Academicians and technicians are sent to China in conjunction with com-merical fairs and exhibits, and they often remain to lecture and travel

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throughout the country. Specialists and advisers are sent from industrial ministries and academic institutions to corresponding Chineseunder cultural exchange agreements. Soviet advisers are plentiful throughout the Chinese economy. The Chinese press has frequentlySoviet production techniques in agriculture, forestry, electric power, coal mining, petroleum, heavy and light industry, andand has praised management techniques for labor, finance, and planning and statistics as well as for Ihe assistance' renderediin scientific research.

One of the moat publicized forms of technical aid is theby means of scientific-technical collaboration commissions. Since

ommunist China has signed agreements for scientific andcooperation with the USSR and with all of tho Satellite countries. Each of these bilateral agreements provides for the establishmentoint scientific-technical collaboration commission which meets annually or biannually to determine the fields of cooperation. The location of the

meetings alternates between the two countries. Three types of aid are distinguished in each of the agreementsechnical aid, technical information, and advisers and specialists; the choice of form apparently depends on the field concerned.

B. Administrative Machinery.

Available information dosV not reveal the extent of the authority of the scientific-technical collaboration commissions. How muchthese commissions do and how much control they exercise in the exchange of information and specialists is Only vaguely known. Some technical aid is carried out as an integral part of trade contracts, as shown above, and therefore is conducted through the ministries of foreign trade and their technical import-export corporations. In addition, each of the Soviet Bloc nations is presumed toovernment officewith the planning system which is responsible for scientific and technical cooperationuch is the case in East Germany. Czechoslovakia,nd Hungary. Inlthe'USSR! the Chief Directorate;for Economic Relations (GUESJ* and its subordinate Directorate for Scientific and Technic cal Collaboration are responsible for economic and technical assistance

* Glavnoye Upravlcniye Ekonomichcskikh Soolnoshcniy.

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lo other countries. In Communistechnical Cooperation Bureau has been set up under the Ministry of Foreign Trade (or thelanning and negotiation of industrial projects which China is buying from the Soviet The ministry carries out thc programechnical import corporation and special bureaus for trade with the USSR and the European Satellites.

In the Soviet Bloc, bilateral agreements on scientific andcooperation are coordinated through thc bilateral councils of theCommittee of It appears likely that such agreementsthe Satellites and Communist China are made under the guidance of CEMA.

C. Specific Agreements.

GUES is known to assign code, or "Tema,umbers to scientific and technical cooperation projects for both the European Satellites andChina, ecent study of such code numbers assigned todentifies thc projects under the numbering system with those enumerated in the scientific and technical cooperation agreements signed between the USSR and China. 4 the USSR has agreed to send to Chinaon industrial construction (power stations and metallurgical and machine buildingesigns for coal mining facilities, railroad facilities, blast furnaces, concentration plants, pumps and compressors, transportation equipment, crushing and grinding machines, agriculture machines, industrial chemical equipment, ore-dressing plants, and petroleum plants; anddata on such items as pigments, dyes, and other chemical products. Chinese specialists will go to the USSR to study the coal, metallurgical, petroleum, textile, and building industries as well as

As is the case with commodity exports, therearallelthe technical information which an individual Satellite furnishes to Communist China and the type of production in which it specializes under the Sino-Soviet Bloc division-of-labor concept. Thus Bulgaria provides agricultural information; Hungary provides specification on transportation equipment, machine tools, and heavy industry; Rumania provides techniques of petroleum extraction and processing;provides information regarding heavy industry production, machine

* The precise meaning of Tenia in this context is unknown, although il is derived from the Russian word tema, meaning "theme" or "subject,"

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building, and textiles; Poland provides technical assistance on metallurgy, mining, chemicals. Sugar refining, and port and ship construction; and East Germany provides assistance in the field of general machine building. Chinese contributions to this exchange are usually in the fields of water conservancy, light industry (such as food processing, porcelain, andnd agriculture. *

orth Korea has signed scientific and technical cooperation agreements with all of the Satellites except Albania. The USSR is sending technicians to assist in agricultural and city planning in connection with the installation of all types of industrial enterpriseson the metallurgical and mining industries). Chineseassistance to North Korea concerns largely railroads, light industry, and construction. The joint Sino-Soviet Bloc effort to rebuild North Korean industry also reflects Satellite production specialization. Technicalin transportation and construction comes from Poland, in electric power and machine tool production from Czechoslovakia, in theindustry from East Germany, in the timber and forestry industries from Bulgaria, and in the construction industry from Rumania.

V. Financial Assistance by the Soviet Bloc to the Communist Far East.

Communist China is receiving some financial assistance in the form of loans from the USSR, but its economic relations wiih the.Satellites are conducteday-as-you-gft*basis. North Korea, on the other hand, has received promises of extensive aid from both the USSR and the

North Korea has signed economic agreements with Communist China and the Soviet Bloc countries (with the exception of Albania) for aid in its rehabilitation. The Satellites have promised to extend assistance to North Korea4 amounting0 million (which North Korea is under no obligation to repay) in the form of technicians, complete industrial installations, and commodities. Total aid received from the Bloc by the North Koreans45 million and5

* ore complete list of fields in which scientific and technical information will be exchanged between the Satellites and Communist China, see Appendix A.

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Soviet financial assistance to Communist China has taken the form of loans for military purposes, for industrial development, and for the purpose of effecting the capital transfer of the Soviet share of four Sino-Soviet joint-stock companies.

A. Military Loans.

Military loans from the USSR to Communist China possibly averaged more0 million annually No announcements have been made concerning military loans, and the intelligence for this period is incomplete. Analysis of Chinese foreign trade during this time, however, suggests that some form of military credit was extended. The most recent information contained no referenceilitary loan from the USSR The Chinese budget6 implies that the only foreign loan available to China from the USSR was an installment on the industrial-loan of

he Chinese Communists received militaryworth approximatelyillion in the form of loans or grants from the USSR. These are estimated to be as follows:

6

(Million US $)

B, Loans for Industrial Development.

Soviet financial assistance to Chinese Communisthas taken the form of two modest loans. Under the agreement ofredit0 million was extended to be used in

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equal amountseriodears, beginning/ The -Chinese agreed to repay the loan withinears at the rateannually. The first installment was due not later than Onctober an additional credit0 million wasnformation concerning its terms was not released. It appears toontinuation of credits along the line of the agreement

A summary of Soviet loans to Communist China for industrial development, including available information on their actual use and repayment, is shown in the table.

Table

Reported Soviet Loans to Communist China for Industrial Development, Their Use, and

Million US $

64

80

68

55

0 r-

Grand

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C. Loans Received to Effect Capital Transfers.

When the Communists took control of China, four Sino-Soviet joint-stock companies were formed in areas of special interest to the USSR. Two of these, the Sino-Soviet Petroleum Company and the Sino-Sovict Nonferrous and Rare Metals Company, were established in Sinkiang to promote the exploitation of mineral resources. hird company, the Sino-Soviet Company for Aviation, was established to promote civilourth company, the Sino-Soviet Shipbuilding Company, wasto engage in shipbuilding and ship repair at Dairen. The USSR furnished capital equipment and technical knowledge. The production of these companies was to be divided equally between the two countries.

ll four Sino-Soviet joint-stock companies were turned over to Communist/ The Soviet share of the companies is carriedong-term loan, which China is to repay by the normal export of commoditieseriod of years. It ifl estimated that the share thus acquired by China is worthillion.

The former share of the USSR in the four Sino-Soviet joint-stock companies Is estimated as:

Million US $

Sino-Soviet Petroleum

Sino-Soviet Nonferrous andetals

Sino-Soviet Company for

Sino-Soviet Shipbuilding

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APPENDIX A

SCIENTIFIC AND TECHNICAL COOPERATION AGREEMENTS BETWEEN THE EUROPEAN SATELLITES AND COM MUNI ST CHINA

.Subject -

Germany to Communist

Textile manufacturing Metallurgy

Heavy machine building Electrotechnical development! Telecommunication Drugs for experimentation

to Communist

Light industry Power equipment Building materials Synthetic silk Asbestos extraction Chemicals Antibiotics Polarization analysis EngMee ring Consumer goods

to Communist

Light industry Food industry Port construction Sugar refining Machine building Metallurgy Coal and coke Building materials Chemical fertilizers Sugar-beet cultivation

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t

lo Communist

Rumania to Communist

Bulgaria to Communist

Albania to Communist

industry

Cold storage plants

Hydroelectric machine production

Coal

Iron and steel Chemicals Pharmaceuticals Automobile s

Telecommunications equipment

Hydroge nation Hygiene

Agriculture Geophysical survey

Food industry

Crude oil extraction and processing Drilling installations Vaseline production Textile industry

Cellulose manufacturing Health protection

*

Soap Lacquer

Agricultural inspection methods Cotton processing and cultivation Vegetable and fruit processing and cultivation Seeds for medicinal and agricultural products Tobacco cultivation

Construction of minor hydroelectric power station*

Cultivation of tobacco and olive plants Experimental crop seeds and cereal seeds Social insurance Public health

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Communist China to East

Communist China to

Communist China to

Communist China to

Textile industry Paper industry Foodstuffs Agriculture

Food industry Light industry Irrigation equipment Water conservancy Magnesium processing Cigarette processing

Procurement and processing of skins and furs Health service

Agricultural seeds and plant species Research on contagious disease germs Tobacco cultivation

Textile industry Water conservancy Nonferrous metals Tile manufacturing Fluoric acid production Silk production Ruftfrand carpets Paper

Fountain pens

Research on tropical equipment

Light industry

Food industry

Communications

Forestry

Flood prevention

Agriculture

-

Subject

China lo

Chilled metals China Foodstuffs Silkworm culture Raw silk processing Agricultural products: rice, and fruit trees

China to

Communist China to

manufacturing Penicillin manufacturing Paper manufacturing

Magnesium processing

Dyes

Soap

Silk fabrics Lacquer

Cultivation of hemp, fiber, and herbs for medicinal purposes

Plaster manufacturing Rock and wood carving Plant seeds and seedlings Rice^fultivation and processing

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APPENDIXETHODOLOGY

This report is largely descriptive; it attempts to piece togetherwithin which economic relations are conducted throughoutBloc and to determine how much central coordination isin this field. The information is fragmentary and not welltrade data and information on scientific and technicaltaken from published announcements of bilateral protocolswith respect to the amount of information released and thecommodity breakdowns. Theae limitations on the basicreflected in the analyses of this report. Productionthe European Satellites were derived from

Coordination and Integration of the Soviet,ay

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APPENDIX C

GAPS IN INTELLIGENCE

There tiimited amount of reliable information available on Soviet Bloc industrial aid, technical assistance, financial credit, and trade contracts with the Communist Far East.

More information is needed on the nature and extent of this trade as well as on the means of negotiating, coordinating, and implementing the trade contracts.

More detailed information is needed on the coordination of planning (bothational and on an internationaln the precise influenc of CEMA, on the role of the bilateral scientific-technical collaboration commissions, and on GUES as it relates to CEMA.

V*.

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CS. 6Jul56. vai.RR2.

Ibid.

FBIS, Daily Report (USSR and Eastern

J.

OFF USE. Eval; RR. State, OIR, Intelligence Brief,3 OFF USE. Eval. RR

FBIS, Daily Report (USSR and Eastern

5.

.

S. Eval. RReport (USSR and Eastern Euroo

p. GG-1. OFF USE. Eval. RRIA. 8 C. Eval. RR 3.

FBIS, Daily Report (USSR and EasternT"GG-6. OFF USE. Eval. RR 2.

FBIS, Daily Report (Far OFF USE.

9.

Eval. KR 2.

Economic Rehabilitation of North Korea,

Peking Trends andol. C. Eval. RR 3.

FBIS, Daily Report (Far1 OFF USE.

eval. RR 3.

Ibid. , OFF USE. Eval. RR OFF USE. Eval. RR 2.

RR V

I OFF USE. Eval. RR [j BIS. Daily Report (USSR and Eastern2FF USE. Eval. RR 3.

14. iuan-ii.. An economic Purvey of Communist China,. U. "" '

Communist China's Imports and Exports.

15.

i ranlTport Involved, S.

p.,. U. Eval. RR 3.

- 32

S5bove).

.Ihirt

21. FBIS, Daily Report (Far1 OFF USE.

Sino-Soviet Trade and Trade Relations,.

i-val. RR 3.

CIA/I-

. i.

23.

Economic Coordination and Integration

of the Soviet Bloc, ,. U.

Summary, C. Eval. RRBIS, Daily Report (Far5 OFF USE. Eval. RR 3.

State, Hongkong. Survey of China Mainland Press, U. Eval. RR 3.

C. Eval.

>L. Eval. RR 3.

CIA. CS.IA. CS, S'T^vji. ru. j.

FBIS, Daily Report (USSR and Eastern

p. OFF USE. Eval. RR OCI, Current Intelligence above).

C. Eval.

FBIS, Daily Report (USSR and Eastern Europe), FF USE. Eval. RR9 OFF USE. Eval. RR2 OFF USE. Eval. RR 3.

U. Eval, RR 3.

29. cTaT

OFF USE. Eval. RRDD Summary, C. Eval. RRBkT C. Eval. RR 3.

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TOP SKCRF.T

Jf BIS, Daily Report (Far3 OFF USE.

Eval. RR 3.

CIA

FBIS, Daily Report (USSR and Eastern5 Dec

55. OFF USE. Eval.,RR3.

bove).

FBIfj, uauy report (USSR and Eastern Europe),

OFF USE. Eval. RRavy, Warsaw. 8 C. Eval. RR 3.

bove).

|FDD Summary C. Eval. RR 3.

33. CIA, CIA

34.

Nepszabadiajj, Uucapc t, U. Eval. RR 3.

FBIS, Daily Report (Far7 OFF USE.

Eval. RRIbid., OFF USE. Eval. RR 3.

35. FDD Summary, C. Eval. RR 3.

State/Gt Brit,ungarian Press Summary.

aFBIS, Daily Report USE. Eval. RR 3.

p. 6. U. Eval. RR 3.

FBIS, Daily Report (USSR and Eastern8

State, Hongkong. Survey of China Mainland Press,

p. 9- U. Eval. RRtate, Budapest, OFF USE. Eval. RR 3.

C. Eval.

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39. j BIS, Daily Report {USSR and Eastern8FF USE. Eval. RRtate, Hongkong. Survey of China Mainland Press,. 2. U. Eval. RR 3.

FBIS, Daily Report (USSR and Eastern3

p. KK 1. OFF USE. Eval. RR 3.

era?

above)

S. momic Planning. 1. S.

44. CIA. CIA North Vi

45.

U. Eval. RR CIA.

. C. Eval. RR. OFF USE. Eval. RR 3.

CTAT

46.

JEconomic Planning and Organization in 7,

. 8.

49.

any Report (USSR ancTEasternOFF USE. Eval. RR^J.

, FBIS, Daily Report (USSR and Eastern Europe),

OFF USE. Eval. RR8 OFF USE. Eval. RR 2.

FBIS, Daily Report (Far East), OFF USE.

CIA. CIA/

. 5

r-vaf RR 2.

. S.

-bil. 6.

S.

52. CIA. of the Foreign Trade of Communist

China,o

China's Imports and Exports.

Trade ana Transport Involved, above).

-

top secret

FBIS, Daily Report (Far2 OFF USE.

Eval.

Treaty and Agreements, U. Eval. RR 2.

FBIS. Daily Report (Far2 OFF USE.

bove).

Eval. RR CIA. IA. CIA/

bove).

FBIa, Daily Report (USSR and Eastern9

Reconstructs, Feiping, volo U. Eval.

RR 2.

CIA,

OFF USE. Eval. RRIA. CS, S. Eval. RR 3.

60.

"OF

4FF USE. Eval. RR9 OFF USE. Eval. RR 2.

I FBIS, Daily Report (USSR and EasternSE. Eval. RR 2.

56. U. Eval. RR 2.

rH*arb OFF USE.

55. C.

n;vai. kk d.

62.

C. Eval. RRauhhar an. rj; Eval. RR 2.

FBIS, Daily OFF USE. "EvaT RR 2.

FDD Summary C. Eval. RRBIS, Daily Report (USSR and Eastern6

63.

Ibid

J

USE. Eval. RR 2.

FBIS, Daily Report (Far0FFR 2.

BIS. Daily Report (Far6 OFF USE. Eval. RR 9 OFF USE. Eval. RR 2.

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FBIS, Daily Report (USSR and Eastern4FF USE. Eval. RR9 OFF USE. Eval. RR0 OFF USE. Eval. RR 2.

:

:

:

;

;

I

56. C. Eval. RR 3.

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Original document.

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