Created: 3/19/1957

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Tht foUmiing tnttOtgtnct orporrfaatfoiM partieipated fn (hr preparation of this estimate: Tht Central Intelligence Agency and the tnttJltgence organizations of the Departments of State, Ihe Army, the Navy, the Air Farce, and Tht Jotnt Staff.

Concurred in by the


onarchoncurring mere the Special Assistant, In-tcOlgtnce, Deportment ot State; the Assistant Chief Of Staff, Intelligence, Department of the Army; the Director of Xaeal intelligence; the Director of Inlelhgence, VSAf; rata the Deputy Director for intelBoencs. The Joint Staff. The Atomic Brtergg Commission Representative to thr 1AC. ana theDirector, federal Bureau of Ineetttgatton. aortamed.

the subject being outside of their txritatetkm.



L Th ia estimate was disseminated br the Central Intelligence Agency. tba copy ut for tbe information end us* of ihe recipient indicated on the front cover said ofunder his Jurisdictioneed to knowdditional essential dissemination may be authorised by the following offldals within their respective department.-.

a. Special Assistant to the Secretary for Intelligence, for the Department of

b Assistant Chief of Staff, lntefh-enee. tor the Department of tbeirector of Naval Intelligence, for the Department of the Navy

of InUlllgence. USAP, for the Department of the Air Force

Director for IntelUgence, Joint Staff, for the Joint Staff

I. Director of Intelligence, AEC. for the Atomic Energy Commission g. Assistant Director. FBI, for the Federal Bureau of Invtstlgslscei b. Aaabtant Dim tor for Central Reference, CIA, for any other IJepsrtmentAgency

j*jynay be retained, or destroyed by burning ln accordance withsecurity reguTSbWjs^or relumed to the Central Intelligence Agency by arrange-ment with the Office of Cerrwal^ferexice, CIA.

When an estimate Istbe overseas recipients may retain Iteriod not In excess of one year. ATTh*>end of tba period, the eeUmate should either be destroyed, returned to the fce^ardmg TTgeeicx or perm lesion should be requested of the forwarding agency to retain it In accorc^viccwllhO/a,une

White House

SsUenal Security CoaaOl Departraiat ol flUiU Departmentvrenie OperaUoDS CooidlastlDf Board Atomic Esenrvmitral Bareeo of teveeUraUxi

Utle of this estimate, when used sepsrstely from the text,




The Polities!

Popular Reaction to the

The Economy ot Communist

Planning far the Second Five Year Period

Major Economic

The Military




The Asian Impression ol Communist




Vietnam, Laos, and

Pakistan, Thailand, and the Phurpplnes.

Malaya and

Hong Kong and







Hcctrie Power and



Science and Technology




Internal Security



Nuclear Energy





To examine the present situation In Communist China and its internationaland to estimate probable developments during the next five years.


Chinese Communist Party willcertainly continue to exercisecontrol over mainland Chinatbe period of this estimate and will press forward with Its program ofa powerful industrialised Cornraunist state.ombination ofand repression the regime willbe able to prevent popularfromignificant factor in retarding the momentum of its

The Chinese Communists will probably continue to make substantial progress in industrial developraent but agricultural production will probably increase at only SO percent of the planned rate of increase and thai will tend to restrict the rate of overall economic growth.

Communist China haa placed great emphasis upon maintaining andits armed forcesasic aspect of national power. With Soviet assistance, its military capabilities have become far greater than those of any other Asian rsower and will probably continue toduring the neat five years.)

he position of the Chinesein the Communist world has been greatly enhancedesult ofsince the death of Stalin andbecause of the prominent role they have played in Bloc affairs In the past year. Peiping will probably further increase its influence within theBloc and will have an Important voice In matters affecting the Blochole. Communist China will continue to rely on the Bloc for the bulk of Its military and economic imports. Although it is probable that some conflicts ofand disagreements wQl developMoscow and Peiping. it is highly unlikely that either will permit suchto impair Sino-Soviet solidarity.

ommunist China's Influence hasmarkedly in the ncn-Cornmunlst world, and its presence is especially (alt in Asia. The Chinese Communists hare been able to create the impression in much of non-Communist Asia thatChinaynamic, permanent, and perhaps not unfriendly world power, which it is unwise to offend by too close

alignment with the Weat. At the same time, however, there is apprehensioning Communist China'secognition, though sekiom voiced publicly, of the Importance of the US in restraining Communist China from overt aggression.

he replacement of Western influence by Communist Influence In Asia willtoajor Chinese Communist objective. In its approach to thisand other international problems, Peiping will probably try to avoid courses of action which it believes wouldUS military Intervention. It will remain hostile to the US, and will not otter majoron basic Issues. Nevertheless, it will probably endeavor to appear conciliatory and flexible onissues. At the same time, It will contlnve Its subversive efforts, and will take advantage of opportunities for Communist exparisJoo. possiblythe extendon of support to armed revoltsn-CommunistPeiping will remain determined to obtain control of Taiwan, but willcertainly not attempt to seireby force so long as the US isto its defense.



Ihe pest seven years thehare brought mainlandeffective control and havestrong central government, alignedUSSR end hostile to the West Bynee or terror and by persuasionpressure, they have drasticallybasic features of Chineae society.made considerable progress towardan industrial base and lnIn other sectors of their economyCommunist armed forces arewith Soviet support, endcapability on the AsianIn adjacent waters has been greatly

The Political Situation

Chinese Communist Party ll tncontrol of the government Idcstgovernment pests at bothlocal amis sre held by members ofand the party structure parallelsthe government down to the smallestdivision. Orders from Pelping arethrough both governmental and party channels. The party cadres have Ihufunctions ot supervising the operation of provincial and local governments and ofeaOershlp for the Implementation ofrojects such as the scctartsaUon of agriculture Non-party membersew snd succaolnet posltiues bat rre there either as window dressing or In oner that their skills can be exploited,

arty membership has more than doublednd now probably exceeds llThe majority of party membersto be drawn from the peasant clear

{about SBut the proportion of urban workers bas now increased to about

ercent. Aboutercent of the members are women

he top leadership of the ChineseParty has continoed toemarkable degree of continuity, unity, and Stability The Eighth Party CBrsgraas. which met in Septemberonfirmed theposition held by Mao Tse-tung and his closest lieutenants, Liu Shao-chl, Chou En-lal, Chu Teh, and Ch'en Yun, These four men serve as vice chairmen of the Central Corn-

mtttee and aa members of the newly lorrned six-man standing Committee ce* the PnUtboro, the meat powerful organ ot the party. Mao himself remains chairman of the Centraland of the Polltbora and its Standing Committee. Hisrestige and power bare not been diminished by the Sonet attack on the "cult of personality.'"

At the samehe party bas brought some new blood Into the higher party echelons. One hundred three new members andbare been added to ths Centalfrom among provincial and municipal party committees, central government and party agencies, and the high-ranking officers ot* the armed services. By giving addedto provincial party organisations and key elements or the civil government and the military, the party has strengthened Its control over these segments of government and administration. Tbe most notablepromotion was the appointment of Teng Hslao-p'mg. Secretary-Oeneral of the Central Committee and apparently the lowest ranking mem beof the cad IS-man Pobtboro. to the Standing Committee.

During Use neat five years, the leadership of the party will probably be able to mafntsin unity and cohesion in the event of Mao's death or disability. Jockeying for power might develop which could reduce the effecuveness of the leadership. Mao would probably be succeeded as chief-of-state by the aged vice chairman, Chu Teh. However, effective power would probably Initially resideollective body made up of Ihe senior party members.

The Chinese Cornmunist Party armontinuing drive to maintain and Ughten party discipline It will probably con Unue ils efforts to improve party control In the army and In economic enterprises, in order to prevent the emergenceaste of non> poUtica) specialists There wOl also be an effort to adjust relations between locsl and central organs within both party andtn order to encourage locsl Initiative whue enforcing central control and also to prevent the development of local satrapies. Although admlnUrtrallve elBclency willimprove, the regime will continue to be hamperedhortage of trained partyand administrators

Popular Reaction lo ihe Regime

We believe that the regime Is faced with considerable dissstUfsctlon, engendered In part by rigid controls, enforced social changes, and imposed austerity, and In some areas such as Tibet, with open defiance. On the other band, the regime has the positive sup port of some groups, In partesult of its promisesew Industrie Heed andChins and Ua claims of growingand mnornce In tbe world. The bulk of the people, however, probably respond to the regimeesigned manner because of their conviction lhatan efTec Uroly exercise Its pewer over them and that tittle is to be gained by opposing It.

The regime, concerned by the adverseof the continuing lack of general positive support, sought, In tho apnngo relax domestic tension engendered largely by the radical social changes embodied tn thetlvUali on drive of IDAS. The regime sought to counteract tho rigidities of Its policies and toore positive response to Itsand promised some amelioration of the harsh conditions of life to almost every social group In Communist China. Inthe regime has adopted Borne measures designed to improve condition* lor theand to increase Incentives forsnd urban workers This recogrrltson of what Use Chineae Communists subsequently termed Use "human factor' In production snd social reorganisation appsrenUy stemmedesire to consolidate the considerable social change which had occurred

These tactics have not Involved anyIncrease In persona) announced emphasis on materialfor peasants and workers, these In-cenUres will be limited since the regime's long term program will Inevitably require the retention of austerity and harsh economic pftttfftw Moreover, the Incentives granted to private entrepreneurs participating in Joint state-private enterprises are admittedly The toleration and even eneourane-

merit of intellectual diversity. In certain fields, deals nod to elicit the maximum eflorts of Com muiust China's limited numberi ofand trained technicians, will not beto the point where attacks on bask;and doctrines of the readme will be

vew If tbe regime tt unsuccessful Ingreater positive support. It will probably be able to maintain firm control throughout China and to Implement sweeping social changes It has large and well-disciplined police, mllltla, and securityupplementedetwork of Informers and local "residents' committees" which provide surveillance over individual family groups-Party control is further reinforcedystem of mass organizations, organised along social and occupational lines, which mobilise various groups In the population behind Communist programs and serve as channels forand Indoctrination Tbe rapid ex pan sloa of agricultural cooperatives54 has probably strengthened Communist control over the peasantry and reduced the likelihood of large scale peasant revolts Behind this control mechanism stands the large Chinesemilitary force.

he Chinese Communist* have admitted the existence of unrest among some minority national!tka on lbc borders of Coma proper, requiring military suppressionolicy of gradualism In imposing CommunistThe most serious recent armed clashes appear to hare been with the Tibetans.the Chinese Communists wore able toilitary regime In Tibett was not until8 that they look the first step toward establishing Tibet asutonomous resrion" of Communist China. Tneecognition of strong Tibetan resistance to change, has indicated that social changes will be Imposed gradually

IS. Barring Involvementajor war,the period or this estimate tha regime's control over the population will probablyIncreasingly effective as sodallredbecome more firmly established. The regime will probably continue to haveIn imposing its policies in minority areas, such as Tibet, where changes will have to be Instituted slowly and carefully.the Imposition ol CommunUt control In these areas win probably be facilitated as communications and party organisationand as the poOry of moving Haninto these areas Is implemented There appears to be, daring the period of thelittle likelihood that the existence of the regime or Its control over the mainland will be threatened by popular dlssldence, or by the alrnoat Inevitable local eruptions of discontent. The regime will probably be able toomewhat more positive support from certain privileged groups, such as skilled workers, technicians, and scientist*

Seeor additional rutcuMton of the current economic teatton.The aaa)>a* as th*oard on estimates whichtoraxlr dependent on CNnar Com-caiUW BaUiOci AlUwotm these- UaUattra often cannot b* wn"noed try Independent worccs, careful examination ind compoitaoa withdata Uia; are available ilroritly aue-gast that throe Siures constitute lot basicdata anlmbtt lo the regime and that In motl Initanros there appear* to have bees no ntourr to inflate Uirsi data. When in-aecurarln exkd, thtv appear, for tho moat part, to bo rho rwmit el aminiaoia definitions of Use Sets, dearie new* and Inexperienee n> data coi-lecttOB, privwlanol report mt, nawaasre tofulfillment ol pouts, aad Incomplete aad aetecu's reportlne ot the data ta rapportponer point* of view.

The Economy of Comsministhe transformation of agrarian Chinamodern socialist industrial" state Is an avowed major objective of the PeipingDuring the initial four years of the First Five-year. the regime has achieved considerable progress In itsof ludj*trealization Cross naUonal product has probably been expanding at an average annual rate of seven to eightrowth rale comparable to that of Japan In recent years and well above that of other Asian countries. This growth was achieved under considerable strain, involving enforced austerity and adjustments to shortages in transport, power, and other sectors Indus-


expansion appears to have exceeded the original goals ot the First Five Year Plan, while the growth of arrriculu-re has beenlees than the planned rate. The rate of investment has approachedercent of GNP and industrial output has increased at an estimated average annual rate ot nearlyercent. The output of steel Ingots Isto have Increased from5 million tons2 toillion tons6 and the urnlted electric power production has doubled. Agricultural output has increased at an estimated average annual rate of nearly three percent.

his relatively rapid rate of economic progress was facilitated by the comparatively Inexpensive rehabilitation of the modestbase, built largely by the Japanese and concentrated tn Manchuria and, to aextent. In North China and Shanghai.unification of mainland China, for the first time tn decades, provided generallydomestic conditions which enabled tbe regime to integrate the previously fragmented economy and to organize resourcesational basis. Tn addition, the regime has received from other Blocover the four-year. capital goods, raw materials, and military equipment In the amount of over six billion dollars. Of this, someillion dollars was covered by Soviet economic and militaryand the balance financed by exports. The Bloc has apparently fulfilled Chineseessential Import requirements,for machinery, though with occasional delay In delivery, and has providedtechnical assistance.

ne of the most Important factorsto tbe regime's economic program has been its success In establishing effective controls over the economy withoutajor slump in production. Thesecontrols effectively restrictedas output Increased, resulting ln theof capital which was concentrated In expanding heavy industry, and in theof commodities lo exchange for vital imports. The agricultural sector, which contributed nearly two-thirda ot GNP

presented the critical problem because of the difficulty of establishing control over theofillion peasants farming millions of Uny farms. The problem ofcontrol over industry was less difficult because the regime was able loajor portion of heavy Industryfrom the National government, though It was faced with the problems of organizing production.

2s. In the early stages of establishing control over the country, the regimearge segment of private enterprise to continue and. for the most part, exercised indirect methods of control through fiscal, banking, and trade channels. It ruthlessly enforced compliance with lis regulations and eliminated the major potential sources of resistance. The regime concurrently applied education, propaganda, and social pressures ln an effort to induce the people to accept the end of private enterprise and beganmall scale to Impose socialist controleries of transitional stages. However, by forced acceleration ofin the. the regime virtually eliminated private capitalism and gained direct control over practically alland commerce.

o ease the transition to socialism In the agricultural sector, the Chinese Communists at firsttep-by-step approach which was to rnoveimple pooling of labor and tools, through agricultural producersto full scale collectives. Thepeasant, by incentives, Induding the promise of higher Income, and bypenalties, wss induced to acceptincreasing state control.the regime moved more rapidly to gain control over the marketing of the mainproducts, und established pricerationing, and controls on agricultural loans. During the early part of the present Five Year, progress toward collectivization was slow, irregular, and rather uncertain. By4 less than twoof the peasant households were inand an insignificant percent in

peech by Moo inhe rate of coiiectieiiation was abruptlyMao called for more rapid sociauia-Uon through energetic leadership, andthose who hadlower pace. Byhe Chinese Communists claimed thatercent of the total peasant households In China were io some kind of agricultural producer cooperative, and of thoseercent were completely collcctlviied. We believe that almost all peasants have now been assigned to collect ires, bat that many of these collectives have not yet been consolidated.

t Is too early to Judge the ultimate effects ot these organizational changes. While the regime has claimed that in most instances production has increased in agriculture and industry and that trade has expanded, it has admitted thatistakes and defects were not few" in the socialiratlon program. Among the major shortcomings admitted were: (a) waste and faulty planning, (b) neglect ofand rural handicraft Industries, and (c) defective organisation due to "rapid advances of the movement" in addition to theInherent Inarge undertaking, many mistakes resulted from Inexperience and lack of training on the part of the cadres responsible for the drive. Nevertheless, in Its approach to socialisation and particularly the collectivisation of agriculture, the regime has to date avoided most of the disastrousernerlenced by the Soviet Union.

ST, planning for tht Second Ptoe Year Period. We estimate that many of the First Five Year Plan targets7 were achieved by the endut at the cost of depletedstockpiles and an untenabty low level of working capital.esult, the7 willeriod of adjustment andbefore the more ambitious Second Five-Years begun. The regime has evinced growing concern over theproblems of consumption and Incentive and the total amount of capital available for investment It has recognised the dengers:

hortage of consumer goods will cause difficulty in maintaining price stability,

that prices paid to the farmers for many of their products are too low to encourage peasants to increase production, and (c) that an insufficiency of light Industry products will decrease worker's Incentives and loweras well as reduce the state's profits and its resources for investment in heavyAlthough the regime has recentlyits intentions to maintain industrial investment7 at about6 levels, it has admitted that cuts in nocind us trialwill berogram of austerity in other government spending has also been Introduced.

lthough such considerations willlead to some modifications in theprogram of the recently announced Second Five Year Plan, the regime willstillhe second five year period toate of economic progress about equal to that achieved In the met five year period. The announced targets of the Second Five Year Plan call for about anercent Increase In Industrial production above the level expected7 and an increase in agricultural production about one-third over the7 output, (See1 pageIf these goals were met ONP would increase by aboutercent.

ajor weakness of the proposed Second Five Tear Plan Is Its assumption thatoutput can be increasedate of six percent annually. We estimate that even with considerable effort the growth in farm output will be only on the order of threeand, therefore, will probably involve not only the curtailing of planned Increases in personalut also someIn planned investment.

ajor Economic Problems. In view of the difficulties of increasing the amount of land under cultivation, the regime's success in Increasing agricultural production will do-

'In kej sectors, by IMI tbe Chinese Communltti plan to Increase production above the probable IBM levels Of the following percentage*:yarn St percent, baste food cropsercent, cottonercent, coal Tl percent,tlactdcercent, crudeercent, and cbtmleal fertilizers *SS percent.

'Seeppendix A,lscusSon of populsUM growth.



largely on ils ability to raise yields. The quality ol the soil and the supply ol water are adequate toubstantial increase in output per acre,eavy Investment is made in fertilizers and irrigation. However, wc believe the total Investment in agriculture included in the Second Five Years Inadequate for achieving thegoals. State investmentargely limited to some large scale flood control and Irrigation projects. The bulk of thewhich will be for local projects, is to be provided by tbe collectives from their own production, over and above their contribution to the national budget.

Whether the collectives will fulfill their goals wui depend in part on the peasants' reaction to collectivisation- During tbe first year of full scalereaction was not unduly adverse, probably because of the prospectsood crop year. Weontinuation of that attitude will depend largely on whether the regime is able and willing to permit some increase in the real earnings of the peasants. The prospectising peasant Income will rest on the regime's decisions regarding total national expenditure and investments, and on the weather. We believe that the regime,this problem of peasant Incentive, will probably make some concessions to theand cadres have already been instructed to limit the investment, welfare, and reserve fund allocations from the Income of theIn order to maximize direct payments to the peasants. This situation will tend to limit the additional resources for investment which the regime can hope to mobilize through Its collectivization program, and in addition will render the program vulnerable In the event farm output falls to Increase.

Even with adequate progress in capital formation, the regime will still have theproblems of planning and of proper allocation of investment. As the Industrial sector becomes integrated, orderly progrcs will depend on timely, realistic, and accurate planning which avoids mistakes such as tbose which6 resulted In shortages of cement and steel, shortfalls In petroleum production,

low quality of output in many industries, and shortages of commodities for export. The planners must also act to end the serious congestions and delays which have occurred on various sections of the railroads.-'

The shot .age of trained personnel willto be another problem of majorThe increase tn mvestrnent, thecompletion of new plants, and theintegration of industry, are certain to accelerate the requirements for trained personnel in industry. In particular, the Communists admit that the development of necessary skills Is the critical factor bi the establishment and expansion of suchas chemical, telecommunicationsand precision machinery. During the Second Five Year Plan period the educational system will find It difficult to provide both for its own expansion and for the needs for trained personnel tn industry andMoreover, the shortage of scientific manpower will continue and scientificand development will remain limited.

There will also be the problem ofthe increasing requirements for essential imports of machinery and other commodities. Further increases in production In almost all industries win depend upon installations of new productive capacity, much of which is to be furnished by the Soviet Bloc, but some of which will come from the Westthe period of this estimate, theCommunist ability to import will beaffected If, as it now appears, the Soviet Union extends no further credits. It will also be adversely affected by the need to repay outstanding Soviet credits and by the extension of grants and credits to Asianand non-Communist countries.will therefore have to be increased even more than Imports, vriuch wUl be difficult in view of present problems in squeezing outgoods for export. Moreover,within the Soviet Union and the European Satellites may have an important adverse Impact on the volume of imports from the Bloc and the timing of their arrival. De-

'See paragraphsAppendix A, tor aof uaniportaUon.


oa curUUlment of icheduled installation*esult of stresses within tbe Bloc coulderiously depieaams effect upon tbe Chinese Oeiunurlst rale of industrial growth. However.eilern trade controb werethe ret-lme's dependence on the Bloc would be reduced and It* Import ptrjblena eased-*

here will alao be the continuing drain on resources to maintain the large rriiiilarj establishment, which I* Kbeduled to account forercent of the budget during tbeFive Year Plan, ai against IB percent ln tbe First Fire Year Plan. In absolute terras, the plan provides Ihat military expenditures will remain approximately8 levels. Not only does miliury spending reduce tbe rands available lor other purposes, but It alsofor commodities tn short supply such as steel and trucks, andarge stare of the eanungs from exports to financeImports.

rtmpteli. We believe that many of the targets of the Second Flvt Year Plan, as It now standi, are unrealistic and cannot be achieved. It is likely that the regime, which appears lo recognise this situation, wmsome of tbe goals. However, despite the existence ol the difficult problems discussed above, the Chinese Com mun nts havean ability to cope with similarin the peat, have achieved considerable momentum, have further strengthened their control mechanism, and wtn probablyto make progress

eries of natural disasters or the outbreak of war In the Far East, wethat tbe groat national product willat an annual rate of six to sevenduring lhe, as compared with sn annual rate of Increase ofseven to eight percent during thehis increase will resultotal Increase inercentthes-lSs3 as ccenpsred with theercent envisaged in the proposal See tbe Second Five Year Plan announcedgricultural output willirxieste al an average annual rate of about three percent rather than the planned rate of six percent. Since the regime will


have to rxanrjenaato for the shortfall Inthe Chlnne people, especially the peasants, win be placed under heavy sosm However. St Is not Bkely that the regimeUse five year period win push theprogram to the extant that no mciease tn per capita eerununptlon Is pcssihie.they may do so for short periods to make up lor temporary eetfeacks.

The Militarybe Chinese Communist regime has placed great emphasis upon maintaining and developing its armed force*asic aspect of national power. With Soviet assistance, It has become by far the strongest Asianpower. The ground forces of the People's Libers txc Armyany of whom are battle tested and most of whom are Isiriy well trained The air arm. Including naval aviation, la rtUmated tolight bombersel Ugh ten. The naval forces include (our destroyers andubmarines, with additional units underDon, and anircraft. OI ther* Jet light bombers snd SO are Jet fighters

armed forces probably wm notthen* personnel strength In tbeyears, but the power of Ihese fcecesas the ground force and the airmora eonrputety equipped withand at th* navy completes oradditional submarines and largeCommunist China will remainon tbe USSR for most majormilitary equipmentarge partPOi- supplies during the period of


petition of the Chineaeihe Communist world has beenesult of developments since the

MiiralJi arem parasraplis *1

f Appendixeeore ecenpktt dUcue-lon

o! the Chtnsef ComrnunM: -niEUry KtnbJUh-



death ot Stalin and particularly because of tbe prominent role they nave played in Bloc affairs in the past year. Communist China's Initial reaction to Soviet criticism of Stalin was one of aloofness and noninvoivcment. with Peiping raking care to point out Stalin's "strong points" as well as his "weaknesses.'* However,esult of the Polish andcrises, Peiping has becomeinvolved in Eastern European affairs. It has asserted the necessity for eachcountry to develop with due regard to Its own political and social backgrounds, has pointed out that no one Communist country Is entitled to adopt an attitude of superiority over other Communist countries. andhasore flexible approach In Soviet relations with the Satellites.China has so far not Joined In soviet criticism of the Polish press and there is some evidence of Sino-Soviet differences on Poland. On the other hand, It supported the Soviet use of force fit Hungary and hasthat the first duty of all Communist countries Is loyalty to internationalsolidarity under the leadership of the Soviet Union.

The tone of authority in the Chinesestatements and the need apparently felt by the Kremlin for Chinese support on Eastern European Issues haveeep impression on the Communist world, and have further weakened the concept that Moscow la the only authoritative interpreter ofIdeological guidance. The actions of the Chinese Communists would appear to suggest an awareness of the need lor some concessions to nationalism in the Interests of Bloc

The Chinese Communists, in many cases, are the channel through which Asianparties receive guidance, although most of these parties probably look to the Soviet Union for leadership. The Chineseexercise substantial influence in North Vietnam and North Korea. Communist China hasredit0 million to each of these countries, continues to maintain large forces in North Korea, and Is the principal supplier of military assistance for North Communist China is developingin Outer Mongolia, which untilwu an exclusive preserve of the USSR.he Chinese Communistsillion creditour year period to assist the Mongolians in the construction of light industrial faculties, andarge number of technicians.

Ihe period of this estimate,probably farther Increase Itsthe Communist Bloc and have anvoice in matters affecting thea whole. However, Communist Chinato rely on the USSR and theBloc as the chief source ol theaid. and technical assistanceIts military and economic programs.Peiping will almost certainlyto rely on Soviet militaryIts chief insurance against what Itthe danger of US attack. Although Itthat some conflicts of interestwill develop betweenPeiping, II is highly unlikely thatpermit such conflicts to impair


Communist China's Influence hasmarkedly in the non-Corn munLit world, and Its presence Is especially felt tn Asia. It has formal diplomatic ties with less than one-third of the countries of the world, but these Include India, Burma, Indonesia, Ceylon, and Pakistan. Thererowing pressure for normalization of relations with Communist China, especially in Japan, In Western Europe, and In the BritishUS Influence has been the major factor Inuch greater number from recognizing Communist China and agreeing to Its admission to the UN.*

Communist China has broadened itseven with those countries with which it does not have diplomatic relations, it has expanded trade with many countries In the non-Communist world and has regularlyin trade fairs. There has been a

'Sea Appendix C: Countries rtcognlamgChina.


steady increase in the exchange ol official and unofficial delegations and Chinese Cemmu-nlste have frequently cultivated specificsuch as professional, intellectual, andgroups and offered them free tours to mainland China.

n order to promote trade Ues withcountries. Communist China has in several cases selected items for trade because of their political impact For example,hortage of steel in Communist0 tons were exported to Egypt In the first hallther examples nave been the rice-for-rubber deal with Ceylon, the Slno-Burma trade ageement, and the suggestions to Japan that large amounts of coal and iron ore would be available In exchange for machinery and steel.

The Chmese Communists have also used economic assistance to gain Influence. The Shio-Cambodia aid agreement, which was signed Inrovidesrant-in-aid ofillion6? in the form of technical assistance,materials, and merchandise. Both countries have stressed the "unconditionalof this aid. Under an agreement signed Inepal Is to receive grants totalingillionhree year period- The Lao government has not yet acted on Chinese Communist offers of assistance.

The Chinese Communists haveinterest tn developing the Asian-African Bloc as an Instrument to weaken Western economic and political Influence In underdeveloped areas. At5 Bandung Conference Chou En-laleading part and actively supported the "Bandung spirit of peacefulhis has sinceenr of the main slogans of Chinese Com-munlsi foreign policy, designed to convince non-Communist Asian nations of the peaceful intentions of Communist China and toan increase in Communist influence in these areas.

Emphasis on the "Bandung spiritowever, has not caused the Chinese Communists to cease their eflorrs to gain the allegiance of Oversea* Chineseor to abandon subversive activities in Southeast Asia. Moreover, the buildup of Chinese Communist military capabilities and occasional border incursions constitute apressure on neighboring countries.

Peiping is attempting to Increase Itsand eliminate that of Nationalist China, in the Overseas Chinese communities, especially those of Southeast Asia It isto obtain control of local Chinese schools, newspapers, organizations, andand Isarge scalecampaign to revive Interest in Chinese culture. In mainland China, preferential treatment has been promised to Overseasstudents and to relatives of Overseas Chinese. Although these efforts have resulted in some Increase in Communist China'samong Overseas Chinese, the bulk of the latter still appear to be Intent on improving their poeitions In their resident countries, and seek to avoid involvement In the struggle for their allegiance.

The Chinese Communists are giving covert support to indigenous Communist groups in Asia. This policy has been followed even In the neutralist countries despite its adverse effects on Chinese Communist relations with the governments concerned. In Burma, the gorernment Is concerned over the assistance given by the Chinese Communist Embassy to the local Communists. Many Indonesians, particularly In the army and the Moslemare disturbed by the tk* brtween the Indonesian Communist Party and Peiping. Tbe Indian government Is concerned by the probability that the Chinese Communists are giving assistance to the Communists In Nepal and tbe possibility that the Naga tribes have received arms from Communist China.

Tbe Chinese Communists have continued to increase their military capabilities In the Taiwan Strait area, although Chinesepropaganda speaks almost exclusively of the intention to "liberate" Taiwan by "peaceful" means. Peiping hasmoderate" attitude toward the Nationalists, offering potential defectors positions In the Peiping regime corresponding to those of ex-Nattonaiist collaborators in Communist China.

Pelping propaganda directed toward Taiwan attempts to create the impression that the US is an unreliable ally for the Nationaland that the latter will Inevitably collapec. Despite Pelplng's seeminglyattitude toward Taiwan, the Chinese Communists continue to reject categorically any suggestionsompromise solution to the Taiwan problem involving "twohey equally reject suggestionseaningful renunciation of force in the Taiwan area.

attitude of Communist ChinaUS continues to be one of hostilityand Itsirected towardthe U8 position in the Farportrays the US as the chiefpeace In Asia and the world and themost of the problems facing theAsia. Nevertheless, the Chinesehave made some gestures to createthat current Communistapply also to relations with thegestures, however, appear to beat improving relations with the US,undermining US policies and creatingparticularly in Asia,hift Inattitude toward the ChineseImminent.

The Asian Impression of Communist Chi no

The Chinese Communists have been able to create the Impre'iston tn much of non-Communist Asia that Communist Chinaynamic, permanent, and perhaps notworld power, which willajor influence on the course of events in Asia. Many Asians are impressed by the effective control which the Chinese Communistsover the tremendous area and population of mainland China, by the sweepingof the country, by the steady andincreases tn military capability and industrial capacity, and by the growingof Communist China to trade with and to extend economic assistance to other countries.

These achievements are of particularto the people and leaders in many countries of non-Communist Asia because they too aie seeking to make profound social and economic as well as political changes, and the Chinese Communist pattern appears In certain respects toolution to many of their problems, which they are tempted to adopt Many of the people and leaders in these countries are Inclined to pay moreto the apparent material progress in Communist China than to the methods by which It was attained.

Many Asians, In part because of theirdistrust of Western intentions, have been impressed by Communist China's antl-colonlalist propaganda and do not believe that the Chinese Communists Intend totheir control throughout Asia. Tbeir receptivity to this propaganda is encouraged by the tendency in Asia to equate capitalism and private enterprise with colonialism. There Isendency among many Asians to accept the Communist charges that the US program of developing military pacts and basesolonialist policy which threatens the independence of Asian countries andthe danger of war.

Although Communist China has been able to exploit Asian distrust of Western intentions, there is also an undercurrent of apprehension regarding Communist China's real intentions. This apprehension has been caused byChina's role in Internationalparticularly its connections with the support of indigenous Communist movements In individual Asian countries, and by mistrust in many Asian countries of historical Chinese expansionism. Pelplng's efforts to exploit the Overseas Chinese communities In mostAsian countries have also created fears of Its intentions, as have Communist China's activities In border areas, and its support ot recent Soviet repression in Hungary.

Asians realize that Communist China is now the strongest Asian military power, and tbat they are dependent upon the US for defenseossible Communist attack. Because of their dislike of such dependence and their concern as to the effectiveness of US action in their defense, many prominent Asians, especially in South and Southeast countries, have come to believe that they

should show discretion in some form ofor atillingness to be friendly and to reciprocate Chinese Communistand finally, thatend towardsuccess should develop, they should not be the last to attempt some form of political Many Asian leaders seem to confidence that, even though theytheir political and economic contacts ih Communist China, they will bo able to resist attempts to encroach upon theirindependence. These factors exist to some extent even in many of the countries aligned with the US. At the same time, even In non-aligned neutralist countries there is athough seldom publicly voiced,of the 'mportance of the US InCommunist China from owl aggression.

IV. PROBABLE CHINESE COMMUNIST EXTERNAL COURSES OFhe Chinese Communists, In theirto internationalillendeavor to appear concilialoiy andbut joint Smo-Sovkt policy will in fact permit no major concessions to the West on basic issues such as Taiwan or the status of Worth Korea and North Vietnam.China will continue to encourage the neutralist, anUcoIooiaust. and nationalist sentiments In Asia and will continue Its efforts io discredit US actions and motives and toeduction in Western Influence and military power hi Asia, it will encourage wherever possible the formaUoo ofIn which the Communist influence could be expanded. Coasrmmlst China will almost certainly Increase Its official andcontacts with the governments and people In non-Communist Asia, and wincontinue to Increase trade withcountries, especially with Japan and other Asian countries. Peiping will alsooffer economic assistance to selected non-Communist countries and will propagandize the "iwnpoli Ileal" nature of such assistance. Peiping will continue Its attempts to acquire influence over, and the support and allegiance of. the Chinese residing In non-Communist Asia. Peiping wUl continue to seek admission to the UN.

BO.sort" policy toward its Asian neighbors. Communist China will continue ils subversive efforts, will probablyelective- basis lo remind the Asians of Its power, and will lake advantage offar CornmunW cpansWn. possibly including the extension of aupport to armed revolts against rson-Oomnunlet governments. During Use period of thai estimate. Peiping will probably try to avoid courses of action which it believe* would provoke US military intervention However, the possibility cannot be excluded that the Chinese Communists will step up military action against the offshore Islands, or will attempt to seise one of the smaller islands, lo teal US Intentions and to increase external pressure on the US to bringationalist evacuation of these islands if the Chinese Communists become convinced thai Uie US would not assist in the defense of these islands wilh Its own forces, tbey probably would attempteise them. Should the Communistorth Vie:nam or North Korea le subject to external attack the Chinese Communists would almost certainly give material support to the OxauminaH regUnwa In these countries and would if necessary commit "volunteer" units toefeat. However, the Chinese Communists would probably aeek to limit the area of conflict and lo obtain a

Tke OS. Communist China recognises that tho US la tha chief obstacle to ItaIn Asia. Ita efforta will almostcontinue to be centered on neutralising sources of US support. Isolating the OS from Its allies, and, ultimately, destroying the USsia. However. In Its "peace" strategy, Peiping may make conciliatoiyrelating lo peripheral questions in an effort to create the impression ofPeiping wuT almost certainly continue to presseeting with the US at tbeisters' level, and will exploitfor other contacts that may present themselves.

Tanoaa. Peiping remains determined to obtain control of Taiwan. However, theregime apparently recognises that Its military forces will not be able to seise

wan against US miliUry oppositlori.ttempting to reduce morale on Taiwan, ln the hope thatleaders may ultimately be Induced towtth Pelping over Taiwan's tastm ils tion into Communistajor objective ln any conference with the US would be tothe removal ot US military protection from Taiwan. The Chinese Communists will continue to improve their militaryin the area opposite Taiwan and theislands, but they will almost certainly not attempt to selte Taiwan by force so long as the US Is committed lo Ite defense. (See)

Korea. The Chinese Communists, inwith the USSR, hope to secure aof UN forces from Korea andto eliminate the ROK.eant of putting pressure on the US to withdraw its troops, there may be additional withdrawals of Chlrieee Communis', forces, but they will almost certainly mam tain adequate forces in Manchuria to permit Immediate relnterven-tion. The Communists will almost certainly refuse any settlement in Korea whichCommunist control of North Korea.

Japan. Communist China In conjunction with the Soviet Union will continue to seek to neutralize Japan and prevent Its re-emergenceajor military and politicalala. It will attempt to weaken Japan's links with the US by exploiting US-Japanese policy differences The Chinese Communists will seek to Increase the tolerance for Communism among the Socialists and other groups. They will probably also offer trade Inducements, seeking both to Increase Sino-Japacese trade and to induce Japan to break the CH3NCOM rmbargees. CttrnraunUt China will also seek to Increase slg.iificantiy cultural and other semiofficial contacts with Japan, anticipating thr establishment of formal diplomaticThese policies will contribute fa, the -tear-stung of Japan's willingness x> support US policy toward Communist China.

ietnam,nd CatnboeUa, Peiping win continue to supporttrisrneseIn their efforts to extend Communist control to South Vietnam and will probably act In concert with Hanoi to expand Coro-munist influence In Cambodia and Lace-Through pressure, subversion, and overtthe two Communist regimes willto discredit and undermine theof the Diem goverruncnt The Chinese Communists probably will not encourage North Vietnam to Initiate open hostilities against Diem, but might encourage Hanoi lo initiate guerrilla activities. In theeak government earns to power In South Vietnam. Peiping mightonciliatory approach ln order toeutralist development Toward Cambodia and Laos, the Chinese Communists will continue their gestures of friendship and goodwill and win probably not engage In overt hoe tileat least so long as tht authorities in these two governments reciprocate.China will probably expand lis relations with both countries and famal diplomaticare likely to be established.

Pakistan. Thailand, and the Philippines. Allhoogh Chinese Cornmunist efforts have thus far concentrated on the uncommitted nations, the coming years are likely to see greater emphasis on the steles allied wtth the West, including Pakistan, Thailand, and the Philippines at the Asisn members of SEATO. Pelping will seek to exploit growing sentiment fx trade with the mainland, will'Informal" contacts as an entering wedge, and will attempt to exacerbatedisputes within these countries overpolicies concerning relations with the West

Indonesia. The Chinese Communists probably estimate that the capabilities of the Indonesian Communist Party, the strongest indigenous Communist Party in rtoa-Commu-nktt Asia, win ecriUnue lo be rnadmtreri if they themselvesriendly attitude tnward the Indonesian government TheCommunists will continue to give covert support to the Indonesian Communists.

S3 Malaya and Singapore Pelping willcontinue to encourage Malayanlo work (oi- popular front governments, to extend control over Chinese youth and tbe labor movement, and, at the same time to

maintain in being their guerrilla organization. Following the achlevcTaent of independence in Malaya (expected innd self-government In Singapore, Peiping will seek to obtain recognition by these governments and will try to promote greater Chineseinfluence In relation to the Malay

octal. Although CommunUt China win seek eventually to supplant Indian influence in Asia, It will probably continue, at least for the next few years, to strengthen friendlywith India and to encourage India's efforts toeutralist sentiment throughout Asia and the Middle East But this genera] approach will probably not cause the Chinese Communists to cease their efforts to increase theU influence In the Indo-Tibetan border area

TO. Bvrase. Peiping wUl continue its efforts to woo the Burmese government while at the same time encouraging the Commonisttn the country. Communist China win probably be willing to agreeettlement of tbe boundary dispute on terms thst appear conciliatory but Is unlikely to cease itsactivities among tbe ethnic minorities In the border region

ong Kong end Macao Communistommitted to theof Hong Kong and Macao in Itsalthough this has not been staled asas In the case of Taiwan. However, for the period of this estimate the Chinese Communists will probably not attempt to seize these colonics by force Non-Commurrtst Bong Kong and Macaoertain uUItty to Peiping as points of contact with the West; furthermore. Peiping probably believes that an attack on Hong Kong at least wouldraastlBoes wtth the UK and possibly with the US as well. Nevertheless, during the period of this estimate, Communist China wUl attempt to exploit frictions which arise over Hong Kong and Macao Peiping will almost certainly continue unabated Iti campaign through outright subversion snd "peaceful penetration" to Increase its political andInfluence In Hong Kong and Macao, to reduce the effectiveness of these areas as Western listening poets, and to undermine the resolve of the uk and Portugal totheir positions.




ne regime during the First Five Year Plsn has concentrated IU investment cei heavy loduetry. especially machine building, metal-lorgy, power, and armamentsesult, Industrial production (excluding individual handicraft) has expanded at an averagerate of aboutercent while the output of heavy Industry hasate ofof aboutercent. (Seelthough the regime hasolicy of okceotralhdng industry, investment Inin the First Five Year Plan has not altered the bask concentration of product on in the established industrial areasan-churls. North China, and Shanghai

1 Kngfmeerbtg Induitrtet Communist China Is seeking to develop engineering industries which will ultimately be capable of producing Its own requirements of machinery,and armaments. The engineeringhave become self-sufficient in theof textile machinery, and arethe volume of the production of some types of machine tools (after Soviet Blocagricultural equipment, andequipment (See)he Communists announced the assembly {probably at Mukden North Airfield)

'Tbe analrals La Ibis appendix la based an estt-matee wsien are largely depandani cat Ccicest Commanlit trams lea. Altbooah Chines*ataUstiea oftao cannot be cordrrroed by mdependent snare te, careful raadnaOoa and comparison with independent data thai are available strongly mental that these Qgaresthe basic economic data available to the reffUnt sad that In mmt Instances thento have been no moUve to Innate these data. Where tnaceomcie* exist, they appear, for the most part to bt tht resort of amfakr-^u' defniuons of the data, dtlkaawctatata coOeetSaa. prorkSoaal re porttss- preMure toalf.iUr.rnt of pUm and IneecnpSete and avkctrrt reporting of the data to HTppott certain pottey pctna of vkw.

SIJet aircraft, bul they almost certainly used Soviet components. We believe their ability to produce aircraft and their components will probably increase markedly during the period of this estimate. The Chinees Communists still must depend largely on imports forand refining equipment and formachinery, although the completion of the telecoramurucations production center near Peiping in late IBM will enable them toa sizable quantity of electronicsand some of the more complicated electronics and telecommunicationsAlthough the armaments Industry is advancing along with general Industrialproduction capacity has not been established for must heavy military end-items.

Ketallurgg. The Chinese Cornmunlsts are making rapid progress In expending their steel produc tion and are estimated to have raised steel ingot output5 million tons2 toillion tonsowever,6 they still had toercent of their total supply of steel products. Steel production continues to be hampered by tow quality coking coal and Iron ore, andeficiency of the alloying elements, chromium and nickel While there has been somein the production of other metals, thereontinuing deficiency in the production of copper and aluminum,

Electric Power and Coal Althoughpower production has been Increasing at an average rate ofercent annuallyt has not quite kept pace with Industrial demand. Coal production, despite announced shortages, generally has been adequate to meet essentialc demand and even to allow fee limited exporta

PesTOfeam. The production of petroleum and petroleum products Inqualled about one-third of domastk consumption, andimports of crude oil and refined products

estimated chinese communist economic OBOWTH' (Billion tom)

Indicated Annual Innn Rate of Increase

s factor prtoea) Annual Increase (Id percent)

Production Inuaote (la percent)

al ProductionSndirfdtial

Annual increase (in percent)

UsTkl Io dm try ProduoUon


Annual Iccreaie (ln percent)

roduoU Annual Increue (In












UfD-JSTIilAL OUTrUTCOMMUNISTatiratln!S7Chlnn* Cj-amu.-iW fotdi for

continue to bo necessary. The quality and variety of petroleum product* hereelatively completeow produced. The major exceptions are aircraft fuels and high grade lubricants, which5 constituted about one-fourth of thei Deficiencies In refinedwfil be partially corrected when the Lanchou refinery comes Into, and when the yumen refinery begins production of the high qualitywhich It has been testing, announced In September IBM to nual crude oil production (natural andfrom the IBM level ofillion tons to about five or tlx million tons2 Much of this Increase depends on higherIn the Yumen fields, and exploitation of newly discovered, bul Incompletely proven, fields in the Tsaldam and Diungaria Basins. Even with substantial attainment of2 targets. It Is probable that Communist China2 will stlfl have to Import substantial quantities of aviation fuels and high grade lubricant*

Other InAvttiy. The chemical Industry has not been developed significantly, and over two-thirds of the very modest state investment In this field haa probably been for fertilizer. Chemical fertiliser output probably will besignificantly In the next few years though large Imports will still be required. The cement industry, despite remarkablesince 1MB. was not able to meet the high domestic demand6 in part because of exports to the USSR The Chinesehave announced plans to double6 output2

The growth of light Industry has been and will continue to be nmliedow Investment priority and by ahortagre of agricultural raw materials. However, the Chinese Communists probably over-fulfilled theiroals in the cotton textile Industry, which accounts for about one-third of the total value of lightChinese light Industry is generally plagued with the problem of poor quality. This results from the absence of effectivecon troll and from the pressure to stretch raw materials and to Increase output per sharker.


gricultural production has expanded at an annual average rale of nearly three percent during the. (Beeutput per unit of land has beenprimarily through gieater use ofand increased Irrigation. Someland has also been brought under

he expansion of major crops does notto have been hindered by the wholesale colfathrlmtion of agriculture, although tbe output of other farm prod-acts has apparently been adversely affected. Fanners have traditionally produced auch Items as lung otl. tea, silk, hogs, and other commoditiesupplementary activity. But the wmter construction program* and other duties assigned by the needy organizedreduced the time available for, and the Incentive to engage in, auch activity.


ommunist China's transportationrelies heavily on railroads, whichcarry th* bulk of total Inland traffic and tlie major share of trade with Ihehere Is an extensive inland waterwayoperating primarily In Central China. There is Important coastal trafficubstantial share of which Isby the Chinese merchant marine The road system Is generally poor, althoughemphasis tt befog placed on road Improvement and on th* eonatroction ofroads Communist China at entirely dependent on foreign vessels for oceanwhich6 carried overercent of

'Tbe Chiccte CMuawnlatasnaoonctd that UM railroad* oelclneud im mUlSoo tons of rrdafat la lata, or about io percent lest than tht plan goal. Wahai IM actual tonnage orlelnated may Davt bean last than litf

Tht Depuly Director tor Intt4li|*nee. The Joint Staff.not nerve wilh tho above footnote which could be raad to Imply that triebetween use nolunl to miner lot-Usled anS tha Cliintae CommnnM announced agure may bt Might Ha beJIera* thatnrofflcMnt iTWence lo )udaa tha degree of error involved


EttlmaUi of pnystctl raodoctlon In the atrltmlttiral sector areect to aerloui limitations in statistical reporting and coverage. AtdcuHural output data seem loubilautial upward Wa;ect In part Incrrtuod vtnttsttcnl cortraee as local reporting ib improvedn part the unreliable sampling procedures on which the cropaaed. The tonnages Involved arc very Urge and cbinjei In total production ore imall In relation to the level ot production. Ttwtrends tn phvBlta] produciion lor the basic food crop* arerimartif on incrcasM In culuvntnl ianu. landrrfgaSon, and capabilltiei of fertlilier Production trend, are considered somewhat mora rtllfto* than the level of prodacUaa In any one rear.

'Tajuated toaUo.



AinTiaf Increase

AnnualZ 2






(grain tqalv.)'






(raw talus)


Vegetable OlH


(sinned bads)



its total foreign trade. (Seehe civil air fleetery limited role. The telecommunicaLions net Is poorly developed.

Railroads. The railroad network (see map at the end of the estimate) is largelyIn the east and northeast where It connects important Industrial and population centers. Traffic consists largely olew bulk commoditiesel-aU'cly small number of places of originew principal destinations. Transport of coal, tbe most Important single item shipped, makes up more than one-third of the total rail traffic, while agricultural products end construction materials each make up about one-fifth.

The railroads received someercent of total state investment during the. About one-half of this was allocated to the construction of additional lines,l lea of which have been completed, principally In western areas. The opening of the Trans-Mongolian link with the Trans-Siberian railroad inheof the line westward from Lanchou, via Yumen and Unimchl to connect with the Soviet system near Aktogay, and theof Uie projected line into the Tsaidaro (oil) basin, all will hare an Important impact on the opening of new areas In the west and win facilitate trade with the USSR. Work Is abo underway on sections of track which will provide an additional north-south trunk line parallel to, and west of, the Peiping-Hankow-Can ion line. This line will pass through Pao-tou, Lanchou, Chengtu, Chungking, andand will ultimatelyhinese Inner belt line linking North Vietnam and the Soviet Union. Other new lines such asang-Fort Bayard line and the recentlyYlrrgtan-Amoy line have greatlyChinese Communist military logistic capabilities In these strategic areas.

The other half of the total investment hi railroads was devoted to Improving theplant and equipment o( existing rail lines. The program included the construction and lestoratlon of double tracking, theof yard facilities, the installation of communlcatt("> uablein the roiling stock inventory of higher capacity freight cars, and tha adoptionew central system of administration.

Despite the increased capacities andutilisation of facilities and equipment, there have been indications4 that the development of rail facilities has not kept pace with the Increase la the volume of traffic.6esult of the sharp increase in demand arising out of the rapid acceleration In Industrial development, the inadequacy of line capacitiesajor transportIn particular, during the past year there have been increased references to the general lack of adequate transportation and toparticularly on key sections of such rati tines as the Peiplng-Hankow, tho Lunghai, and the Shlhmen-Taiyuan railways, and at Important border tiansloadlng polnts.

We believe that the railroads, thoughhave met most of the requirements of the economy. However, railroad capacity will be an Increasingly critical factor as tbo economy shiftsecentralizedeconomy to an Increasingly lndustrial-lced economy. To deal with this problem the regime will have to Increase Its Investment in rail transportation, partlculariy in expanding the capacities of existing lines.

hipping. The small merchant marine, estimatedhips ofross registered tons0 dead weight tonnages restricted to coastal runs from Shanghai north exceptmalltrade to North VirHnam. It, however, shares control with Poland over the services provided by Polish vessels on the China run.

' Incomplete date Indicate an even greaterin tonr.see arrivingith non-Bloc shipping Increasingabout li percent.

here was an Incresse ofn the gross registered tonnage of the ships arriving In Communist China' (Seeommunist Chinato be heavily dependent on non-Bloc shipping, much of it chartered, whichforercent of the tonnage of5 arrivals. Moreover. non-Bloc shipyards render Important shipbuilding and repair














* TW


Communist China, transferred to thai countiya excluded from5 figures, trade6 with the Bloc probably Increased slightly.

reliminary reports lad lea te that trade with non-Bloc countries6 was consW-erably above the5 level Imports under the CHTNCOM "eicepUonsIncreased sharply6 Tbe amounts licensed for shipmentillion, as comparedotal ofillion lor the four year. If gcods licensed* were delivered, they would representf total Imports from non-Bloc countries. Two categories, iron and steel products and motor vehicles and equipment, accounted for over half or the exceptions shipments Other significant categories were Unplate. exesand cranes, metal-working rnacrilnery, and power equipment. The principalwere the UK, West Crermany, France, Italy, and Japan.

The maintenance of effective multilateral trade controls would continue to hamperCommunist economic and militaryby complicating Import problems,coats, and reducing more, preaent unilateral US flnanc troU will continue to deny to Ihcounlsts remittance* as wellignificant former export market. Although Increased trade with the Free World would almostdevelop if CHINCOal controls wereto the level presently main lamed with the European Bloc, such increases wouldnotubstantialof Chinese Cornmunart trade. We believe thaie taxation of controls couldCommunist Chinas annual Impartand would increase Its flexibility tn planning, procurement, and shipmentCommunist Chinas basic foreign andpolicies would probably not bechanged In either case.

The Sues closure is having an adverseon Communist China's seaborne foreign trade. Cargo shipments have been curtailed, although alternaUve. costly rail facilities are being used for the most Important items. Of total trade, overercent by volume iscarried through the Suez canaL II the canal should remain closedrolonged period, the Chinese Communists would sutler from delays, dislocation, and Increased coats for many of their imports. Moreover, they would be facedifficulttoring agricultural products, tbe export of which would almost certainly be delayed.the most serious Impact upon the Chinese Communists would develop If non-Bloc vessels {which5f tonnage arrivals In Communist China) were diverted to other trade.

Science and Technology

ommunist China is severely handicapped in the economic sphere by its extremelyresearch and development capability,evere shortage of scientific and technical manpower, and by the poor quality ofIt plans, during the nextears, to increase the number ol experienced technical and professional personnel from theo about one million, particularly in such fields as engineering, agriculture,ond education. These plansor the graduation of0 annually in engineering and physical science, or numerically slightly more than chose graduated In this field In the USarge proportion of these graduates must be retained as teachingWe estimate that shortages of skilled personnel available to Industry will become particularly acute during the Second Five Tear Plan.


he population of Communist China was recordedillion In3 census and the regime officially estimated Ithowing an indicated rate of increase5 percent per annum.spokesmen have recentlyercent natural rate of increase. At that rote the population2 would totalillion.ate of growth wouldonsiderable burden an the economy. Within the past year the


CccraurUiU have shown Increasing concerntheir populationirective pramoUng birth control hu beta issued and articles hare appeared reconirnmd Lng later marriage It appear* probable that thewill slap up tu campaign to central tbe growth of population; however, ibe outcome of any iuch campaign is uncertain Theplanners have stated that six to seven million jobs In industry will be created during the Second Five year Plan. It follows that, tf the ranks of the unemployed are not to be increased, tbe majority of the entrants into the labor force over the next five years win have to be absorbed by the agricultural sector, which iseed by atowty risingor Inrund urinal pursuits where productivity is low. In any event, the rising population is likely to operaterake on any projected rise In per capita consumption




Total Chinese Cccnmunlit ground forces are estimateden, o!0 are organised inrmies andunits. This primary combatnfantryrmored1 and possibly as many asavalry divisions, andrtillery divisions Most armies have0 men and most Infantryhave0 men (TOR strengths are00 respectively) Infantry division orsranbnstson includes an artillery regimentield pieces andeavy mortars, an AA battalion ofight AA guns,ank regimenten andedium tanks. At present only IS toercent of the infantry divisions are believed to have lank regiments. Anbattalion withram AT guns has been reported as organicnfantry divisions. An armored division includesen,edium tanks,eavy tanks,elf-propelled guns. Paracbuteare estimateden. Theof thartillery divisions and their TOE equipment ts as followsield artillery divisions, each aimedieces ofupocket launcherarmed withmm multiple rocket Uunchersntitank divisions esch armed withntitank guns, and 3divisions armedight and medium guns each. Most ground force units are estimated to have aboutercent of TOE

Aboutercent of the total strength of the ground forces is sUUoned tn Manchuria and North Korea Anotherercent is in the triangle bounded by Shanghai, Hankow, Canton, and the southeast coast, and aboutercent Is retained in North China In the provinces ol Shantung, Hope! and Shansi. Part oi the remainder of the (oice Is inof coastal defense in the areas north of

Shanghai and southwest of Canton, and the balance bt disposed in central, western, and northwestern Chinseneral reserve and border security force.

Morale In tbe ground forces ts good,of preferential trestrratnt affordedof the armed services and because the Chinese Communist scadiera areense of pride In their army and therrixed annual training cycle ts developing which begins with basic training for recruits In the spring and appears to progress to regimental and divisional siae maneuvers by the followingervice school system for offlceis andofficers is also operative, and higher level staff colleges have been established To supplement indigenous training, nurnbvs Of both Junior snd senior officers are sent to appropriate Level mililary schools In the Soviet Union

The Chinese Cocununtst ground forces are making efforts toetter balanced force through an increase in the proportion of support units to infantry units, and arehift ln tactical doctrine to meet problems posed by nuclearumber of atomic warfare exercises have been held which have emphasised theot individual protective measures similar to those of the Soviel Army and whichforeshadow some change In Chineseground combat tactical doctrinesthe abandonment of concentration and mass attack in favor of greater mobility and dispersion.

The Military Service Law5hree year term of serrate ln the ground force, and provideseserve made up, tn part, of conscripts who have completed their three years' service. This will adden annually to the trained reserve, and will In any year8 resulteserve of upen who have undergone active military service within the

three prrrtou* years. The quality of person-net available for service tn both the active and reserve component* has been improved by tbe InstiUitlon of reserve training In high schools and unrverslUee Other preservtce training is carried on In tbe National Defense Athletic Club and the New Democratic Tooth Lessee, which hava extensive military sports training programs for cMUaru.he bulk of the heavy equlprnent for the Chinese Communist ground force, especially armored vehicles, artillery, end complexequipment, Is being supplied by the USSR. The Chinese Communists produce most of their present requirements for small arms, mortars, recoil leas nfles, rocketand ammunition for these weapons. Tbe general Increase In Chinese Communistproduction6 hasincreased the Chinese Communistto produce greater quantities ofbut the ground force will continue to depend upon the Soviet Union for most of its heavy equlprnent during the period of this

Internal Security Forces

Mnlstry of Public Security andof Defense share theInternal security. The Ministry ofcontrols the People's Armed Police,police force of approximatelysupports local civilChina. The Publicwhich are still an Integra! partarmy and under the control of (heof Defense, are responsible forinternal or border security problemsthe capabilities of tlie police.Security Forces have anofrganized intoofivisionshese units are smaller andarmed than comparable line units,nevertheless contain the service andelements necessary forin the field.

Air Forces

China's air arm Is heavilyupon the USSR (or planes,supplies, and training. The Chinese Communist All' Forte (CCAF) and theCommunist Naval Air Force (CCKAF) together are eattmaled toircraft of all types tnunits.ets Tbeya reaaonsbty wen developed air arm with modern aircraft, and concepts ofare im proving The personnel are young and vigorous, with excellent esprit de corps. Tbe forces are organised Into bcanb-er. fighter, attack, and transport units, snd operatearge complex of air bases which permits launching attacks from many points on Cornraunlst Chinai periphery. Tbey alsoairly well developedcapability.

major strength of the Chinesebomber force la estimated to consistlight Jet bombers (BKAQLKS) andlighl bombershe BATSreplaced by BEADLES In asupported by the USSR.ound bomb loads, havespeednots sndsdlua/rangemiles when operating st sn altitudefret Opera Uceial effectiveness offorce is reduced by factors suchequipment of limitedunder other than visual or idealaffects bombing accuracy, andof combat experience.

Chinese Communists arehave tn operationaliston fighters. Most ofstrength is deployed nearpopulation centers, with themost heavily defended Replacementfighters try Jet fighters Isand piston ftVhlers should becompletely by th* endircapability is hampered by aadequate OCIerious shortageIntercept equipment, byexperience in night and all-weatherand by only fair but improvingthe ground control of InterceptionHowever, ths CCAF-CCNAFa substantial threat to bombersunder conditions of good visibility. The


ol the CCAF to support ground opera-tkMu et being enhanced through operational training.

The bulk ol the Chinese Communist alr defense ia concentrated in certain areasmajor military and Industrial targets. Theyadar system which covers the entire coast and major industrial andcenters. This provides fair to good capability to detect pen*trailer) of coastal and major tercel areas, except by aircraft at very high altitudesentralexists, the defense system is inisland" system because of the longand the relaUvely poor comrounkatlons facilities.

The Soviet-supported modern nation and training programs are progressivelyChinese Communist air power. Byiston light bombers win probably be completely replaced. The piston medium bomber force will probably rise loircraftt whKh time we believe that piston medium bombers will begin to be phased out as |et medium bombers phase In. Wethat3 the total fighter strength will increase by aboutercent and the proportion of all-weather fighters from less than two percent to aboutercent. As the all-weather Jet fighter program expands and communications Improve, the air-defensewill improve significantly.


Chinese Communist Navy has anStrengthatrol vessels5essels (Includingmall patrol craftmotor Junks. Meet of thesubmarines have been obtainedost of the largeroperate from Hang chow Baythe greatest concentrations ofbeing based at Shanghai endOnly small patrol vessels andare operational In the area oppositeThe Naval Air Force baa0 piston fighters andet andiston light bombers concentrated Inareas of Bast and Northeast China. This small, recently organised force has shown steady growth and improvement

ne navy, though small andoastal defense force, Is the moat effective fn-dlgenous Asian navy. It can inflict losses on an enemy in Chinese Communist waters with submarine attacks, air attacks, mine warfare, and destroyer and torpedo-boat attacks. The greatest offensive potential probably lies rn snort range amphibious operationsthe employment of Joint sea-air-ground forces) utilising not only conventionaltypes, but also merchant shipping, Junks, and other small craft The navy's capabilities are limited by lack ol majorunits plus the age and motley origins of their vessels. These conditions will prevail until overcome by the indigenous Soviet-assisted building program now iohe Cninese Communists havea reaaonable degree of proficiency tn amphibious assaults against coastal Islands.esult ot periodic exercises, they probably are continuing to improve their techniques. Through the maximum employment ofconventional amphibious vessels andfavorable conditions they have theagainst the Offshore Islands for thelift variations:00 lightly armed troops,0 troops supported by an armored division and sn artillery division with reduced motoror (c) two divisions each of armor and arUiiery, also wilh reduced motor transport. Eighty-nine available merchanttherwise committed) withWT together wilh coastal craft plus motor and sailing Junks provide an addltkmel short-ban) liftroops. Against Taiwan, however.stimated that various factors would limit their bubal assault force to0roops. Completion of the Amoy rail line, and the near future completion of the Foochow branch greatly enhance the logistic support capability in the Taiwan Strait area. Against the Nationalists alone the Chinese Commu-

rusts have the capability to seise andcontrol of the air andhe Taiwan Strait and can erganise, launch, andarge scale amphibious assault against Taiwan.

IS. The USSR is proridtne; most of thesuppon tor the nary, particularlyelectronic gear, ordnance, and fuel. Under tho supervision and direction of Soviet ship building experts, the .Chinesehave recently expanded their naval con-strucUon program to Include submarine, large patrol vessels, minesweepers, and motorboats However, in spite of Chinese Communist Industrial growth, the navy will continue to depend in large measure oo tbe USSR for support through the period of this estimate.

Nuclear Energy Program

ommunist China dees not have anumber of qualified nuclear scientists tognlftearit atomic energy pro-gran Through the Soviet atomic aidand the Joint Nuclear ResearchCommunist China is receiving help In the training of her scientists In basic nuclear physics and the application of atomic energy techniques to medical, agricultural, andresearch. Even with this aid It Is not likely that Communist China will be able,the period of this estimate, to support an independent atomic energy programif the USSR were to provide the necessary equipment and technicians, the Chinesecouldhort time achieve theto use nuclear weapons.


UN members which recognise Communist China:






Czechoslovakia Denmark


Israel Nepal








United Kingdom USSR Yugoslavia Yemen

Non-UN members which recognize Communist China:

Switzerlandrmany North Korea North Vietnam Outer Mongolia


Original document.

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