PROBABLE EFFECTS ON THE SOVIET BLOC OF CERTAIN COURSES OF ACTION DIRECTED AT TH

Created: 3/9/1953

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ASSISTANT DIRECTOR.Ol

SPECIAL ESTIMATE

PROBABLE EFFECTS ON THE SOVIET BLOC OF CERTAIN COURSES OF ACTION DIRECTED AT THE INTERNAL AND EXTERNAL COMMERCE OF COMMUNIST CHINA

OA HISTORICAL REVIEW PROGRAM

RELEASE IS FULL

SE-37

3

The JoUbtMng member organuelions ef Iht Intelligence Advisory Committee participated tetlh the CentralAgency tn the preparation of this rittmate- The intelligence organisations Of ihe Department* of State the Army, the Navy, the Air Force, and the Joint Staff'. All members of the Intelligence Advisory Commilteein this estimateee. however, the comment of the Director of Naval InteUigence and the Deputy Director for Intelligence. The Joint Staff, on paragraphs J. I. and SO. Also the comment of the Director of Naval Intelligence on paragraph 35

CENTRAL INTELLIGENCE AGENCY

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ft-3

TABLE OF CONTKNTS

Page

THE

EXTENT OF PRESENT CONTROLS ON TRADE WITH

THE EFFECT OF PRESENT CONTROLS ON COMMUNIST

Effect on Foreign

Imports from non-Soviet Bloc

Exports to non-Soviet Bloc

Imports from Soviet Bloc

Exports to the Soviet

Over-all

ECONOMIC

Industrial

Effect on the Kail

Effect on Other Internal

Over-all Economic

MILITARY

Ground

Air

INTERNAL POLITICAL

PROBABLE EFFECTOTAL EMBARGO ONTRADE WITH COMMUNIST CHINA ON CHINESEECONOMIC AND POLITICAL STRENGTH. AND

Introductory

SHORT-RUN

Effect on Trade

Economic Effects

Military

Internal Political

Burden on the Rest of thc

LONG-RUN

Economic

Military

TABLE OF CONTENTS (Continued)

Page

Internal Political

Effect on Suio-Soviet

PROBABLE EFFECTAVAL BLOCKADE ON CHINESE COMMUNIST ECONOMIC AND POLITICAL STRENGTH AND

MILITARY CAPABILITIES

Including: Port Arthur and

Effect on Chinese Communist

Soviet Bloc Exports to Communist

Capacity of the Trans-Siberian

Capacity of Communist Chinese Inland Transportation

Economic

Political

Military

Effect on Slno-Sovict

Excluding Port Arthur. Dairen, Hong Kong, and Macau

PROBABLE EFFECTS OF BOMBARDMENT OF LINES OFIN CONJUNCTION WITH THE BLOCKADE

Vulnerable Elements of the Chinese Communications System .

Rail and water links with thc Trans-Siberian Railwayrail link between Dairen and Port Arthur and central

Thc rail link between Manchuria and North

Thc Cha-chou-Heng-yang rail link in South

Rail and water targets ba central

RESULTSARGE SCALE AND SUSTAINED AIR ANDCAMPAIGN AGAINST INLANp

CHINESE NATIONALIST CAPABILITIES TO BLOCKADE THE CHINA COAST AND TO CONDUCT AIR STRIKES AGAINST

LINES OF COMMUNICATIONS ON THE CHINA MAfNlJVND

NATIONALIST

Blockade

Air

PROBABLE COMMUNIST REACTION TO THEOF THESE

COMPLETE EMBARGO

NAVAL

AIR AND NAVAL BOMBARDMENT OF INLAND

CHINESE NATIONALIST BLOCKADE AND BOMBARDMENT .

i'or

PROBABLE EFFECTS ON THE SOVIET BLOC OF CERTAIN COURSES OF ACTION DIRECTED AT THE INTERNAL -AND EXTERNAL COMMERCE OF COMMUNIST CHINA

THE PROBLEM

To examine the current status and effectiveness of controls on trade withChina.

To examine the short and long term effects on the capabilities of the Chinese Communist regime of:omplete embargo;aval blockade, alone orwith bombardment of transportation facilities in Communist China; andhinese Nationalist effort at blockade and aerial bombardment.

To estimate Communist reactions to these measures.

This estimate does not consider whether the UN would cooperate in theseor what the reaction of other non-Communist powers would be li the US adopted these measures unilaterally.

This estimate does not consider the probable consequences of substantiallyUS or US/UN military operations in Korea or Ctommunist Chinain conjunction with some or all of these courses of action.

This estimate assumeslockade of Communist China would not involve interference with shipping to ports of the Soviet Far East.

CONCLUSIONS

controls on trade withChina have not prevented the build-up of Chinese Communist military strength. Moreover, Communist China's industrial and internal transportation systems have continued to expandutreater cost to the Soviet Bloc andower rate than if Western controls had not been in effect.

A total embargo on non-Communist trade with Communist China would prob-

ably have no significant effect on Chinese Communist capabilities to sustainoperations in Korea or to undertake military operations elsewhere, but would retard the expansion of Ciiineseindustry. An embargo would make Communist China economically moreon the USSR. An embargo would probably not induce the Communists to embark on new aggression, but would probably lead them to intensify political warfare.

aval blockade of Communist China1 would increase tlie difficulty of Chinese Communist military operations requiring large expenditures of materiel, either in Korea or elsewhere. The presentmaximum capacity of thc inland transportation facilities servingChina is probably adequate to carry essential tonnage now seaborne plus the essential traffic now carried bylockade would create serious economic problems. For instance,do not serve all parts of Communist China now served by coastallockade would make Communist China economically more dependent on the USSR and would retard theof Chinese Communist industryreater extent than an embargo. Wethat thc political controls within Communist China are now so strong that their effectiveness would not beby these economic difficulties.

n reactionaval blockade, the Chinese Communists would almostattack thc blockading forces, with covert Soviet assistance, and might launch new acts of aggression, such as the seizure of Hong Kong and Macau. The USSR might reactavalby attempting to bring merchant ships into Port Arthur and Dairen under Soviet naval escort, by attempting to force the blockade at other points, or by waging mine and submarine warfare

'The effectsaval blockade ol Communist China would be materially lessened If trade with Communist China through Port Arthur and Dairen, Hong Kong and Macao were not prevented.

Director of Naval Intelligence andDirector for Intelligence. The Joint Stall, believe that the transportaUoti bordena Imposed upon Communist ChinaaTal blockade may well be considerably greater Utan Is Indicated by this paragraph,

against the blockading forces.believe that the USSR would beto initiate general war solelyof incidents arising out offorce thc blockade. We believeblockade would not in itselfCommunists tooreanon UN .'

Large scale and sustained air and naval bombardment of key Chinesetransportation lines,aval blockade, could sharply reduce Chinese Communist niilitaryCommunist China's economic potential would be seriously affected, and the physical problems of the regime in maintaining control would be increased-

In reactionlockade andthe Chinese Communists wouldaximum air defense effort in China and Manchuria. Units of theAir Force in Uie Far East would covertly participate in the air defenseparticularly in Manchuria. The Chinese Communists would probably also employ their air capability against some US/UN bases in the Far East. We believelockade und bombardment would not in itself induce thc Communists toorean settlement on UN terms.

In the unlikely event that the blockade and bombardment should threaten the existence of thc Chinese Communistthe USSR would increase its ajd to Communist China, possibly even to the point of openly committing Soviet forces against US forces in US/UN heldand adjacent waters in the Far East.

Blockade and bombardment by the Chinese Nationalists alone would notpresent conditions of Chinesestrength and operational efficiency,ajor effect. In reaction to a

Chinese Nationalist blockade andthe Chinese Communists would almost certainly attack the block-

ading and bombarding forces and might retaliate by air against Nationalist-held territory.*

DISCUSSION

OF PRESENT CONTROlS ON TRADE WITH COMMUNIST CHINA

ost of the naUons outside the Soviet Bloc apply some form of export controls over trade with Communist China. The US hasa total trade and shipping embargo against Communist China, as well as controls over the dollar assets of Communist China, sinceanada, Japan,China, and the Philippines havetrade restrictions almost as severe, while Costa Rica, Honduras, Liberia, and Panama have imposed strict controls over thc movement of their vessels to Communist China. Thc UK has embargoed or restricted the exportide variety of strategic items including natural rubber. Inhe Western European countries which are members of the Coordinating Committee

"The Director of Naval Intelligence and theDirector for Intelligence. Tbe Joint Stall, bebere that. If given US materiel and training support and complete US staff planning lor all blockading operaUons. thc Chinese Nationalists could piobablylockade which would substantially reduce seaborne traffic and coastal traffic south of Shanghai and through Uie Straits of Formosa. This probably coulderiod ol sax months aftero! US asststanct and despite Chineseair and surface operaUons. Tho degree ol US materiel and training support needed to achieve this result would be at the minimum: (al Increasing US aid (Including spare parts and equipment) to Uie extent that the vessels now commissioned ln the NaUonallst Nary would be capable of ope ratine edecUrely atl the tune; (b)igorous training procram which would Include vessels operating wiUi US underway training groups; (c) Insisting that Uie Chinese Nationalist Air Force exert maximum effort to provide air search and cover for blockading units, id) Insuring thatcrewsroportionate share ot all pMw.i

n East-West trade applied to Communist China the selective controls earlier put into effect against the rest of the Soviet Bloc. After Communist China was declared an aggressor by the UN, theseInstituted controls over trade withChina more severe than the controls over trade with the rest of the Bloc. At thc present time, tlie COCOM countries embargo to Communist China all Items Included on the three International Lists plus somedditional items of particular strategicto Communist China.hina Committee (CHINCOM) parallel to COCOM was set up in the fall2 for the purpose of working out international export controls to be applied in the Far Eastreatof other nations have also taken action to restrict strategic shipments to Communist China in accordance with the UN AddiUonal Measures ResoluUon of TheAct, enacted In the fallas served to reinforce the COCOM and UN embargo by making the continuation of US assistance condiUonal upon the recipient country'sin supplying controls over strategic shipments to tho Soviet Bloc, includingChina.

here haside variation, however, in thc contraband lists and enforcement measures used by individual countries.the controls imposed by the UK and thc continental COCOM countries are fairly comprehensive, they fall short of the total embargo imposed by the US. Other nations, which are largely non-industrialized and do not produce strategic equipment, have shown little uniformity in their interpretation of the UN Resolution, which covers transportation

-Participants In tlie COCOM Include Belgium. Denmark. France. Wert Germany. Italy. Japan. Luxembourg. Uie Netherlands, Norway, andas well as the US. lhe UK. and Canada.

materials of strategic value and items useful in the production of military materiel as well as petroleum and purely militaryumber of Middle Eastern and Southeast Asian countries haveeneralto deny strategic items to theCommunists, while India, Pakistan, and Burma have not been willing to go on record as supporting the UN Resolution, although they have been cooperating Informally Inreexport of strategic items to the Chinese Communists. Ceylon, which Isember of the UN, has refused to comply with the UN Resolution so far as shipments of rubber to Communist China are concerned.

hipping controls have been particularly weak. Thc COCOM countries prohibit the sale of ships to Communist China and Impose restrictions on the sate of merchant ships to the rest of thc Bloc. Since0 at leastessels have been transferred toBloc flags. However. COCOM restrictions on sales were tightened somewhat The US alone has imposedformal controls on ship sales,and bunkering. During thc past year,loc ships,rosstonnage, receivedays or more of repair work each in Western shipyards. Only the US, Costa Rica, Honduras, and Panama prohibit vessels of their registry fromChinese ports, although Liberia prohibits vessels of Its registry from carrying strategic cargo to Communist China. Present COCOMcontrols do not prohibit the chartering of} merchant vessels other lhan tankers lo the1 Soviet Bloc and this prohibition has not beeneffective. Although the greater percentage by far of chartered vessels do not touchCommunist ports, these vessels are used by the Soviet Bloc In Western European, South AUanlic and Indian Ocean trade and make possible the release of Communist flag vessels for direct service to Communist China.

THE EFFECT OF PRESENT CONTROLS ON COMMUNIST CHINA

Effecl on Foreign Trade

mports from non-Soviet Bloc Countries. The value of the goods imported from non-

Communlst countries by Communist China roseeak in the first half1 but then dropped sharply during the second halfhen trade controls became more stringent, and have remainedelatively low levelhese Imports arc estimated2 million In thc first half8 million ln the second half,5 million5 million lespee-tively In the first and second halveshe volume of imports from non-Communist countries fellons In the first half1ons in the second halfnd then roseons In the first half2ons In the second half*

Thc rise In tonnage reflects the increased import of such bulky commodities assulphate and chemicals for heavyecline occurred in thc Import of goods on which most non-Communlst countries have imposed control, notably metals and machinery, and crude rubber. (Crude rubber imports have continued to come principally fromuring theonths endingaw cotton accounted for one-quarter, and crude rubber, pharmaceuticals, fertilizers, dyestuffl, and heavy Industrial chemicals for one-half of Communist China's imports from nonmunist countries. Except for the decline in imports of metal and machinery5 million0illionhe level and pattern of Imports02 were roughly thc same.

Exports to non-Soviet Bloc Countries. Foreign exchange earnings from exports to non-Communist countries have declined steadily since their peak in the last half of

These exports arc estimated0

"The figure* In this paragraph are based on anUK intelligence study of Communist Chineae Imports1 arid Uualtnd preliminaryntiles for Uie but halfhe Director of Naval inlelligence believe! thai the volume of trade Is larger than the nsure agreed upon and included In these calculations, buta Impossible lo arriveew agreed estimate at this time. In any case,nlikely that the new figures would In rail-dale any or Uie conclusion* based on the present figures.

million5 million0 millionhe volume of exports to nonountries2 is roughly estimatedillion4 million tons, consisting largely of low-value bulky items such as coarse grains and soy beans. With the loss of markets foritems such as tung oil, bristles, eggand handicrafts, Communist China's exports to non-Communist countries havebeen limited to foodstuffs for Hong Kong and Malaya, and grains and oilseeds for South Asia and Western Europe.

from Soviet Bloc Countries.basis of Chinese Communist datagenerally consistent with otherimports from the Soviet Bloc rosemillion0 to nearlyillion in

Communist data alsothat imports2 remained atthe same level asmports2 consisted largely ofand of commoditiesnon-Communist countries,vehicles, machinery, metals,manufactures. However, thereimports from thc Bloc of itemsbeing Imported from the West, suchfertilizers, chemicals, and sugar.

Soviet Bloc shipments to Communist China by sea are estimatedonssonsn the basis of partial cargo data, it is estimated that roughly one-fifth of this tonnage2 consisted of petroleum products and two-fifths of metals and machinery. Ine value of seaborne Imports from the Soviet Bloc is estimated at0 million.

Overland imports from the Soviet Bloc are roughly estimated0 million for

total volume of overland19S2 is estimated toMilitary equipment andarge part of these overland

of0 tons ol cargo picked up by Woe vessels In non-Communist countries and shipped to Communist China. This cargo has been counted ln Communist China's Imparts from non-Communist countries.

shipments; in addition, there werecommercial Imports of machinery,and motor vehicles.

Exports to the Soviet Bloc. It isthat Chinese Communist exports to the Soviet Bloc5 million00 millionhese exports areto have risen sharply2 .and are very roughly estimated0 million. It Is believed that the Chinese Communists arc attempting to Increase these exports still furtherpparently In an effort to reduce Uie trade deficit with the Soviet Bloc. Seaborne exports to thc Bloc2 are estimated roughlyons andconsisted largely of grain, soy beans, and ores. On the basis of partial evidence, wc estimate the volume of overland exports to thc Soviet Bloc2 at three million tons.

Over-All Effects. Present trade controls appear to have been an Important factor in the sharp change Uiat has occurred InChinas foreign trade.nly one-fourth of Communist Chinese foreign trade was with thc Soviet Bloc while three-fourths was with thc West;hese proportions were almost reversed. However, other factors would have tended to increase Soviet Bloc exports to Communist China even if Western trade controls had not existed These factors are: (a) movement of Soviet military supplies in support of thewar effort in Korea; (b) shipment of non-military items to Communist China inof Soviet commitments in the Sino-Soviet agreements0 to provide economic assistance; and (c) the avowed policy of thc Communist Bloc to achieve economic self-sufficiency.

ECONOMIC EFFECTS

Effects. The restrictionInto Communist China as apresent controls has not curtailedoutput. In fact, because of thelevel of commercial importsSoviet Bloc and thc more effective useequipment and stocks inChina, Industrial output has continued

Io expand. However, this expansion would probably have been greater if the present trade controls were not ln effect.

Effect on the Railroads. The railroad transportation system of Communist China, while not expanding to the extent it would have without present Western controls, has steadily improved in capacity andControl measures have stoppedfrom thc West of locomotives, freight cars, parts for rolling stock, and rails.the Soviet Bloc has supplied limited quantities of these items which, together with local production, has permitted theof existing equipment and continued expansion of the rail network, despite the losses in Korea.

Effect on Other Internal Transportation. The expansion of molor freighthich has occurred in Communistas been made possible largely by Imports of Soviet trucks and petroleum. However, thc traffic in smuggling of parts for motor vehicles continues to be considerable, Indicaling that Soviet Bloc assistance has not kept pace with expanding Chineserequirements and that Western controls are imposing some cost on Communist China ln this regard. Coastal shipping has not been appreciably affected by Westernsince most non-Communlst countries permit their flag vessels to operate in the Chinese Communist coastal trade.during the last year thc Chinesedemand for foreign coastal shipping seems to have slackened, and it ls possible that an Increasing part of Chineserequirements for river and coastalcapacity is being met by their own fleet.

Over-All Eccmomicespite the curtailment of trade with the West, during the last two years thc Chinese Communist regime has made rapid progress In economic reconstruction, particularly in theand expansion of its Industrial capacity. However, the reduction In Communist China's net receipts from foreign trade must be viewededuction from the resources thatwould have been available to the gov-

ernment for Investment Without Western trade restrictions, Communist China'sprogress probably would have been greater than lt actually was. and lt certainly could have been accomplished at less cost to the Soviet Bloc.

MILITARY EFFECTS

Ground Forces. Although Western trade controls have made it difficult for theto acquire certain Important items such as antibiotics and other medicalcommunications equipment, andproducts, the Chinese Communist ground forces have not been adversely affected by Weslern trade controls. Communist China producesart of Its own light ground force equipment and supplies. Therequired for Communist China'sindustry are relatively small in tonnage and are for thc most part producedThc only important importarc for copper and sine, which arein adequate quantities for the most essential uses by the USSH. In addition, thc USSR is providing most of thc heavy military equipment, virtually all POL,arge share of thc light equipment and supplies used in Korea.

Air Force. Since the USSR provides Communist China with virtually all aviation equipment and supplies Including avgas and Jet fuel, present Western controls on stralegic materials have not affected the capabilities of tbe Chinese Communist Air Force. The Air Force has continued to expand in aircraft strength and capabilities throughout thc period of present Western controls.

Navy.arge part of the Chinese Communist Navy is composed of formernaval vessels, present Western controls on strategic materials have almost certainly hindered thc Chinese Communists in their efforts to put back into service and maintain their naval vessels. As far as is known, the USSR has supplied at mostew small warships to the Chinese Communists, forcing them to rely almost entirely on those ships taken over from the Nationalists.

INTERNAL POLITICALestern trade restrictions have notaffected the Chinese Communist regime's ability to consolidate its political position. In fact, the restrictions have been cited by the Communists Ln domesticas an additional Indication of thehostility of the West, and thus have provided the Chinese Communists with afor applying further stringent political controls.

PROBABLE EFFECTOTAL EMBARGO ON NON-COMMUNIST TRADE WITHCHINA ON CHINESE COMMUNIST ECONOMIC AND POUTICAL STRENGTH, AND MILITARY CAPABILITIES

ntroductory Note. The impositionotat embargo by the entire non-Communist world would presumably extend to both trade and shipping. The Implementation of such an embargo would presumably includeto prevent the transfer or charter of non-Communist shipping for the Communist China trade, the denial of bunkering,and repair in non-Communist ports of ships bound for and returning from Chinese Communist ports, and the transshipment of non-Communlst goods directly or indirectly to Communist China from other countries Ln the Soviet Bloc. The following factors would prevent effective enforcementomplete embargo:

a Although transshipment mightimited extent by placingcontrols on goods exported from the West lo Eastern Europe and the USSH.prevention of transshipment would be impossible so long as trade controls applied against these countries arc less rigid than those applied against Communist China. Such transshipment could only be stopped completely and Communist China denied all non-Corrununlst commodities If trade with the entire Bloc were embargoed.

b. As indicated above, several countries are not now cooperating with the limited embargo declared by the UN. and most Westernarc now strongly opposed to further ex-

tension of trade and shipping controls against thc Soviet Bloc and Communist China. Even should the UNull embargo on trade with Communist China, ll Is probable that various Asian and Middle Easternwould not cooperate because of theiroreign policies and thc economic importance of trade with Communist China.

SHORT-RUN EFFECTS

Effect on Trade. Thc direct Impact on Importsotal embargo would depend on the extent to which the Soviet Bloc was able and willing to: (a) make up for the loss of Western shipping (including that nowby the Communists) now serving the China trade; and (b) supply the specific commodities denied by thc West

In view of the incomplete data on Communist China's foreign trade and on thc Soviet Bloc's capabilities, it Is Impossible to estimate with precision the impactotal embargo on Communist China. The following projection is based on thc estimated level of trade

a.ontinuation of present controls. It is estimated that the total value of Communist Cluna's legitimate imports from the non-Corrununist world3 will remain at20 million. As comparedowever, imports aretoigher proportion of heavy bulk goods, particularly chemical fertiliser.esult of these changes in composition, the volume of Communist China's legitimate imports from thc non-Communist worlds projectedons as comparedons'

aw cotton Imports arc expected to decline In value frommillion to ISO million and ln volume trom eS.OOO tons to SO.OOO tons. World prices are lower aad production In Communist China Ls Increasing.

mports of rubber are estimated to Increaseillionillion, or the level called for ln the Cejlon -Comm unlst Clilna barter agreement.

mports of fertilizer are estimated to Increase br SO percent Ln volume and value In view of Chinese Communist efforts to Increaseof Industrial crops.

to Uie West fromare expected to be thc same asillion tons valued0 million.

is unlikely that Uie present ratecould beompleteeneral strengtheningClandestine imports wouldto consist of Items of smallhigh value, such as drugs andparts, but the total volume mayto be0 tons,3 under Uie assumpUoncontrols.'

On thc basis of the above projecUons, the theoretical annual loss to Communist Chinaesultomplete embargo wouldons of Imports valued0 million and thc earningsillion tons of exports valued0 million.

hc Soviet Bloc could assume the entire burden imposed by an embargo and supply to Communist China all of the commodiUcs it otherwise would have received from Uie West Such commodities are available in Uie Bloc and transport facilities would not impose an absolute limit on then* shipment. However, the degree to wluch the Soviet Bloc would compensate for Uie loss of imports from Uie West would depend in general on the Soviet appraisal of thc relative advantages of using these resources In Communist China asto using Uiem elsewhere in the Soviet Bloc. Including the USSR itself.

a. The Soviet Uniontrong interest in maintaining Chinese Communist strength and for this reason would probablyigh priority to those Chinese Communist import requirements trialignificant effect on Chinese Communist militaryMuch lower priorities would beto supplying Uie remaining cominodi-ties Communist China formerly imported from the West. It is probable, therefore, that such commodities would be supplied only to the degree that Uie burden thus imposed on Uie rest of thc Soviet Orbit would be relatively small. On the basis ot these considerations.

It Is roughly estimated that the Bloc would supply virtually all the iron and steel,and metals, and drugs; most of Uie heavy industrial chemicals, dyes, and paper; and only part of the crude rubber, chemical fertilizer, and other miscellaneousThe Soviet Bloc would probably not compensate for any of the raw cotton, gunny bags, and some miscellaneous .commodities. Wc esUmate, therefore, that in making up thc imports lost through Imposition of an embargo, the Soviet Bloc would probablyIts annual exports to Communist China byons valued0 million, reducing the net Import loss toons.

b. If these additional Imports from the Bloc were carried by sea, total seabornefrom the Bloc In Bloc vessels would amount toons

Controls on bunkering and other services to ships engaged hi trade with Communist China would reduce Uie cargo-carryingof the Soviet Bloc merchant fleet. It would require Uie Soviet Bloc to fuel vessels from tankers at sea and require the Bloc to transport additional fuel to thc Far East, cither over the Trans-Siberian .Railroad or by tankers. Bloc tankers are presenUy carrying -essential POL.*

n embargo would also result In anin the value of Communist China's exports to Uie Soviet Blocecrease in Uie value of its total exports. Because of Uie increased transport costs Involved and the nature of the commodities, it is probable that it would not be worthwhile for Uieto divert to the European Sovietarge part ofillion tons oflhat Communist China now exports to the West. However, Communist China

"The Soviet Bloc has the ship capacity to carry the total seaborne Imports to Communist China, even without chartering Western vessels.under these circumstances the USSR would have to use some lend-lease vessels in this Iradc. thus risking their seizure by the US. InUie Soviet Bloc would have to findand more costly means for carrying on Its trade with tho Wert.

plans to increase its producUon of strategic minerals with which to pay for its imports from the Soviet Bloc, and other exports from Communist China could be increased so that there would be IllUe or no net effect on Communist China's debtor position In the BlOC

n the basis of the above highlyestimates, an embargo would reduce the volume of Communist China's total imports3ons and the value0 million. This wouldeduction of approximatelyercent in the value ofChina's total imports and perhaps as much asercent of non-military Imports. It is evident, therefore, that impositionomplete embargo on Western imports would notajor reduction In the present total volume of imports. Communist China's total exports would be reduced by SIillion, or by more thanercent. The proportionate reduction in thc volume of ex-ports would be greater.

otal embargo on non-Communlst trade witb Communist China would not affect Uie flow of purely military Items and petroleum, all of which (except for limited quantities brought in by smuggling) now come from the Soviet Bloc. Military considerations would almost certainly determine the reiaUveof compensating shipments from the Soviet Bloc and, conscquenUy, goods related to miliiary opcraUons would probably be least affectedomplete embargo.

conomic Effects. The Chineseeconomy has already made considerable progress in adjusting to decreasedof western goods. The main effccl on Uie Chinese Communist economy of aembargo would be, therefore, to force more rapid adjustmentsattern already being developed. Although the reduction in imports resulting from thc embargo probably would retard Uie planned expansion ofCommunist industry, principally with regard to planned increases in theof consumers' goods, these losses inwould Ln part be offset by Uie increased availability for domestic consumption of some

commodities that formerly were exported to Uie Wesl. The loss of foreign Sag shipping for domesUc coastal services would reduce coastal shipping capacity. However, Communist shipping, which now carries the bulk of this trade, and the North-South rail lines could absorb the load now. handled by foreign flag ships.1* Finally, with imports and producUon of some consumer goodsand non-Communist markets virtually eliminated, tho government wouldizable loss of revenue. These losses, however, would be minor In relation to Uie total naUonal income and to totalCommunist budgetary expenditures.

Militaryotal embargo would probably have no significant effect on the capabiUUes of the Chinese Communists lo sustain rnllitary operations ln Korea and very limited effects on their capabilities tomilitary opcraUons elsewhere.

Internal PoUticalotalwould not appreciably affect thcpoliUcal strength of thc Chineseregime.

Burden on the Rest of theotal embargo would not seriously increase Uieburden that Communist Chinarently Lmposes on the rest of the Soviet Bloc. However. Uie rest of thc Soviet Bloc, to an even greater extent than before, would beto Communist China manythat the Soviet Bloc normally imports for its own use. There would also be somearisingrade deficit and an increase Ln transportation costs, but Uiey would noi assume serious proportions.

LONG-RUN EFFECTS

conomic Effects. Thc adverse economic effectsomplete embargo on Communist China would probably decrease rather Uian

"The Director ol Naval Intelligence desires to point outonsiderable portion of Chinese Communist shipping would have to be diverted from North China ports to supply the South China coastal area Such diversion wouldthe shipping; available In the Industrial North for the dUtnbuUon ol coal and POL and manufactured products.

increase with thc passage of time. The loss ol cotton and other raw materials would be made up in large part through thcof domestic production or ofproduced substitutes. Chineseplans for tlie continued expansion of heavy industry would not be appreciablysince such plans even now arealmost wholly on imports of capita] goods from the Soviet Bloc and on Increasedproduction of capital goods. However, greater emphasis probably would be placed on thc expansion of rail transport links with the Soviet Union at aome expense to other aspects of thc development program. Finally, ln view of current estimates of the rates of growth of thc gross national products of the USSR nnd European Satellites, the ability of the Soviet Bloc to provide capital goods and to bear the costs of providing such goods will increase significantly over theears.

The capacity and efficiency of the Chinese Communist railway system have apparently Improved to the point where it could handle any additional burden which mightotal embargo. Tlie plannedof Chinese Communist railway lines and Uie possible Increased load underof an embargo would require additional equipment and supplies. This would place some burden on Uie Soviet Bloc, whether it sought to supply Uie necessary rails,and freight cars Itself, or attempted to restore Manchurtan capacity for rolling stock and steel rails and to expand Uie production of freight cars and locomotives in China. However, It Is probable that Uie Soviet Bloc would be able to supply minimum Chinese Communist requirements without serious repercussions in other portions of Uie Soviet Bloc economy.

Militaty Effects.ongerotal embargo would not reduce presentCommunist military capabiliUes but it might hinder an expansion of those

Internal Political Effects.onger period. Uie embargo would probably not sig-nificanUy reduce Uie effecUveness of thecontrol over Uie Chinese people.

ffect on Sino-Sovietotal embargo would tend to increase Uie possibili-Ues offriction. Should theUnion be unfiling to continue lo supply Communist China's essential requirementsUie adverse eflect of the embargo on Communist China would be increased. Even under the projected level of Sovielto Communist China, the Chinesemight feel that their needs should be given higher priority. On Uie other hand. Communist China's complete military and economic dependence on thc Soviet Bloc would resultrogressive integration ofChina's economic and militarywith over-all Bloc planning andand thus tend to reduce Chinese Communist capabilities to disagree with Uie USSR-PROBABLE EFFECTAVAL BLOCKADE ON CHINESE COMMUNIST POUTICAL AND ECONOMIC STRENGTH. AND MILITARY CAPABIUTIES

Including Port Arthur andffect on Chinese Communist Trade. Whereas an embargo would operate only against non-Communist trade andaval blockade would interdict smuggling and 'Soviet Bloc seaborne slilpments as well, thus restricting Communist China's Imports lo those which could be brought overland from Uie European Soviet Bloc" However,China could obtain some essential Western Items overland from the Bloc. On Uie basis of our tentative projection ofChina's imports under presenta naval blockade would cutons of seaborne imports fromcountries, both legitimate and smuggled,ons seaborne Imports fromBloc sources,otalillion tons valued0 million. Likewise, Uiewould stop Communist China's seaborne export trade, estimated2 to have been

"II Communist shipping attempted to tun the blockade under navalpossibilityIn Paragraphof the Interdiction effect estimated here woulddepend on the wUUngness of the US and other blockading powers to risk an open clash.

TO I' JBCliHT

illion tons, ofillion Ions were exported to non-Communistandillion tons to the Soviet Bloc.

aval blockade would also presumably operate against Communist China's coastal trade.lockade would not be effective against local inshore coastalit would virtually eliminate Communist China's ocean-going coastal traffic which is estimated toons of cargo per dayillion tons per year. The mostant components of tills traffic are theof coal, POL, and manufactured goods between Dairen, North China, and Shanghai; the movement of soybean cake from Dairen lo South China; and the exchange trade oi manufactures for foodstuffs betweenand South China.

aval blockade would cut off Chinese Communist total seaborne imports, which amount4 million tons per year. The amount by which Communist China's total imports would be reduced thereby wouldprimarily on the extent to which tlie Soviet Bloc increased its present level ofto Communist China. Secondarily, thc amount by which total imports were reduced would depend on the capacities of the Trans-Siberian railway and of Communist China's inland transportation facilities.

oviet Bloc Exports to Communist China Although the Soviet Bloc would piobablyConununist China's essential importthc Bloc probably would notall ot Communist China's Imports lost becauselockade. Of the3 seaborne import tonnageillion tons, about one-third consists of controlledsuch as petroleum, metals, andwhile two-thirds consist ofwhich can now be imported from non-Bloc countries. It is roughly estimated that Lhc Soviet Bloc would continue to supply all ol thc controlled commodities but only aboul one-third of the other commodities,otal ofons. Of the non-controlled materials, thc Soviet Bloc wouldin part Communist China's imports of rubber, industrial chemicals, and drugs hut would replace little or none ot the imports of

raw notion, ammonium sulphate, paper,and gunny bags. On this basis, the total of Communist China's imports over the Trans-Siberian railway primarily from the East would probably be on the orderillion tons per year compared with thcillion tons. Communist China wouldbe able to* increase its exports lo the Soviet Bloc sufficiently to avoid any significant increase Ln its trade deficit with the Bloc.

Capacity oi the Trans-Siberian Railroad. Overland Soviet imports to Communist China2 were estimated toillion0 tons perhe bulk of which came eastward over the Trans-SiberianWe believe that the Trans-Siberian Railroad has thc capacity to carry the total projected seaborne4 million tons per yearer day) plus thc minimum needs of thc Soviet Far East. In this event, however, the cost to tlie Soviet Bloc ofthese commodities would be substantially increased. Thc movement of this tonnage could be accomplished by:iversion of additional rolling stock from other rail lines in the Soviet Union;eduction in Lhc peacetime volume of commodities moving to the Soviet Far East; and/or (c) movement oi freight by sea to Vladivostok to be on-carried lo connecting Manchurian railways.

Capacity of Communist Chinese Inland Transportation Facilities. The additional burden imposedlockade wouldercent to thc total volume of freight currently carried by the railroads of Communist China. It is estimated thatof the long average haul involved, the transportation overland of the freight cut oillockade would require aboutercent of the freight car park andercent of the locomotive park. We believe the Chinese Communist railroads have'the capacity to carry this additional freight, but it should be noted that some parts of mainland China now served by coastal shipping arc not served by rail lines.

Since the additional burden of essential tonnage placed on both the Trans-Siberian Railroad and the internal transportation sys-lein of Communist China could probably be

TO I'

carried with existing cupacity, we believe that the reliance on overland transportationwould not limit the extent to whichChina's essential seaborne imports could be replaced. Moreover, it should be pointed out that it would be possible for the USSR to ship goods to China by sea toand thence by rail to China.11

conomic Effects. A naval blockade wouldreater effect on the Chinese Communist economy than would an embargo. The planned economic growth would beretarded, additional strains would be placed on internal transport, and further gains from trade and further budgetarywould be lost- In those areas which arc now served by coastal shipping and which arc not served by rait lines, particularly Southeversion to moreeans of transport would result. Thcin Imports of fertilizer and Industrial chemicals would adversely affect plans tooutput of industrial crops and sonic

12

consumers' goods. The sum or these losses would, however, be small in relation toChina's total naUonal income or total budgetary expenditures.

olitical Effects. Internal controls,strong in Communist China, couldany serious Increase in poliUcalto thc regime. However, the adrrunis-Irativc burden of these controls would On Uie otherlockade would provide the regimelausible excuse for its failuresew propaganda theme to mobilize popular support for its policies. The net political effect within Communist Chinalockade would probably not be significant

"The Director of Naval Intelligence and theDirector for Intelligence. Tbe Joint Starr, believe that paragraphsi do not adequately reflect the probable effectsaval blockade upon Inland transportation. This belief is baaed upon tbe following conslderaUons: (a) Estimates of capacity of Uie Inland transportationserving Communlsi China are predicatedarge extent upon Incomplete and InsufficlenUy corroborated evidence. For this reason, these estimates should be regarded with reserve us being subjectossible large margin of error. On tbe outer hand, the minimum amount oftonnage entering and leaving Communist China Ls known from reliable Information.ship movements. vUual observations, and masters reports, (bl The seaborne tonnagesas aboveinimum. It lathat the actual figure Ls larger, but the extent of the Increase cannot be determined due to inability lo determine all cargo tonnagecarried. Tho capacity ot the shippingCommunist Clilna Ls many times larger than the known cargo tonnage, (el la arriving stt an estimate of thc ability of Uie Inlandsystem lo absorb Che tonnages nowthis paper therefore deals on the one hand with estimated figures of rail capacity, of quesUonable reliability, and on thc other hand, with actual minimum figures of seaborne It does not attempt lo compare estimated rail capacity with known shipping capacity.

ilitary Effects. aval blockade would not direcUy affect Uie movement of military supplies from Uie USSR, most of which arc being brought in by overland routes. Uie denial of seaborne imports and of coastal shipping facillUcs would probably impose some curbs on thc importaUon and internal distribution of military suppliesof congesUon of land routes. the impactaval blockade on the economyhole would reduce the totality of domestic resources which could bein support of Uie war effort. Thein Chinese Communist militarywould not be great enough toeduction of the Chinese Communistcommitment in Korea. It would,make more difficult offensive operations requiring large expenditures of materiel, cither in Korea or elsewhere.

ffect on Sino-Soviet Relations. aval blockade would tend to increase Uieof Sbio-Sovlet frlcUonreater extent tlian would an embargo. Although Soviet exports to Communist China wouldlockade, as compared with an embargo, Uie cost ot providing thesebecause of transport difficulties, would be greater and Uie possibility ofIncreased imports from Communist China would be less. On thc other hand, awould decrease Communist China'sfor independent actiononsc-

of lhe Increased dependence upon the Soviet Bloc for economic and military

Excluding Port Arthur, Dairen, Hong Kong, and Macau

Thc effectsaval blockade ofChina would be materially lessened if Dairen and Port Arthur were excluded. These ports together are believed capable of handling0ay, or many times tho estimated total daily seaborneof all of Communist China at present. The readjustment of internal distribution necessitated by the blockade of all otherwould impose additional strains on thc Chinese Communist railway system."

The effectsavnl blockade ofChina would be materially lessened if trade with Communist China through Ilong Kong and Macau were not prevented. These ports, together with their road and railwith Communist China, couldarge part of the projected seaborne Imports of Communist China. The readjustment of internal distribution necessitated by aof all other seaports would imposestrains on the Chinese Communistsystem

PROBABLE EFFECTS OF BOMBARDMENT OF UNES OF COMMUNICATIONS INWITH THE BLOCKADE

Vulnerable Elements of the Chtnoso Communications System

China ls heavilycertain critical rail and Inlandfor the execution of militaryand the maintenance of thcand cash croj) sector of itsdependence Is less withinthc existenceell-integrateddiversified rail net andumberhighways and waterways providesin transportational the other extreme, in vast areas of

rural China, notably in Uie West, which have such poor communications with the outside world as perforce to remain largely solf-sufil-clent. In general, however, the maintenance of the present level of Chinese Communist military und economic activities depends on continued availabilityeavily utilized roil and water network which contains aof bottlenecks andupplementary road system capable of carrying heavy traffic on an all-weather basis. These bottlenecks, all within bombing range of US land and carrier-based aircraft, provideail targets for bombing and someaterfor aerial mining.

hese potential targets can be divided into five general categories, as follows: "

a. Rail and water links with the Trans-Siberian Railway. At present there are only three routes by which heavy overlandfrom the USSR can be brought into Communist China and over whichChinese shipments can move to thehe rail line from Man-chouli on thc Westernhe rail line from Sui-fen-ho on the east to the rail net aroundinanchuria;he Sun-gari River, which links Harbin with the Trans-Siberian Railway on Manchuria'sborder. An additional rail line is infrom the Trans-Siberian Railway near Vladivostok in North Korea, where it Joins the Korean rail net, which Ln turn has aat Tu Men with the Manchurian railIn the eventaval blockade of the China coast, these already important routes would obviously be of critical significance. Mo alternate rail routing Is possible over theiles from Man-chou-li to Harbin, while the first junction point on the Sul-fen-ho-Harbin line isiles from the border.

b. The rail link between Dairen and Port Arthur and central Manchuria. Thc rail line linking Port Arthur and Dairen with Mukden and Harbin would be of critical importance in the eventaval blockade wasexcluding these ports.upplementary road system Is available, this

See attached map.

P r

14

syslem accounts for lessuarteraulage capacity out of these two ports, all of which would be required to compensate for the blockade of other Chinese seaports. No alternate rail routes are available for theiles from Uie terminus at Port Arthur.

rail Unk bettceen ManchuriaChina. Nearly all rail trafficand the rest of Chinaile stretch of coastalChin-chou and Tientsin.of this route would severtransportation link betweenand the rest of China.

Chu-chouHeng-yang rail linkChina. All rail traffic into souththe rest of the country mustile stretch of railroad betweenand Heng-yang. Effectivethis stretch would not only sever thetransport route between Cantonand northern China, but wouldthc only rail line which would permitof supplies from north andin support of the Viet Mlnh forces

and water targets inumber of Important railtransport targets in central China.stretch of trackage betweenChinan, Including an importantover the Yellow River, is used bytraffic as welt as by the mainOther rail targets Include theRiver bridge north of Cheng-hsien onroute, therailroad ferry on theroute, and the Yangtze River ferryat WU-chang. Thc mosttargets are along the Yangtze(West) Rivers, which together withRiver in Manchuria are estimatedthree-quarters of thcf cargo carried annually onAlthough these targets areas important as those notedtheir effective interdictiona heavy strain on the

RESULTSARGE :SC ALE ANDAIR AND NAVAL BOMBARDMENT CAMPAIGN AGAINST INLANDFACILITIES

aval blockade of the China coastPort Arthur and Dairen were inlarge-scale and sustained air and naval bombardment of this target system would have an extremely serious effect onChina's military and economic potential. It is probablerolonged disruption of tlie main surface routes' In Manchuria leading from the USSR would critically reduceCommunist offensive capabilities Inand seriously reduce their defensiveIn Korea. Some supplies could be scut from the USSR directly into North Korea by means of the important alternate route from thc Soviet Maritime Province Into Northeast Korea at Hongui. However, large-scale and sustained air bombardment of all bridgeover the Yalu and Tumen rivers, inwith air bombardment offacilities in Manchuria and China, wouldevere strain upon Communistcapabilities In Korea lo the point where their offensive capabilities would be severely -curtailed. If not eliminated. Airof the key Chu-chouHeng-yang raU link into south China would gravely handicap Communist military operations In Southeast Asia. Large-scale and sustainedof the vital rail link between Manchuria and China proper, coupled with attacks on selected targets within central China would put severe pressures on the Communisteconomy. There arc indications that thc Mukden-Shanhaikuan line has beenby the restitution of the Chinhsien-Kupclkou line,ouble link between China and Manchuria Taken together, large-scale and sustained bombardment of all these roules could progressively undermine Communist Chinaoint where itscapabilities would be sharply reduced and the physical problems of maintaining the regime's controls would be increased.

Tom

CHINESE NAIIONAUST CAPABIUIIES TO BLOCKADE THE CHINA COAST AND TO CONDUCT AIR STRIKES AGAINST LINES OF COMMUNICATIONS ON THE CHINA MAINLAND

NAIIONAUST CAPABILITIES

Blockade. The Chinese NaUonallst Nary currentlyotal ofea-going vessels suitable for blockading operations. Inthere are moremaller types Uiat could be used inoastal areaangeiles of Taiwan. Thc Nationalist Navy nowowcapability because of poor staff planning, poor maintenance of vessels and 'equipment, and serious deficiencies in communications, surface-firing, AA-flring, and radar and sonar detection.

At present, Uie Nationalist Navy,by aerial surveillance, air cover, and aerial mining of Chinese Communist ports by the Chinese Nationalist Air Forcerobably has the capability to intercept aboulercent of all sea-goingven If no Chinese Communist naval or air resistance were offered. If the Chinese Communist Navy offered resistanceationalistthe Nationalist Navy would be forced to withdraw from the Yangtze River areaoint south of Nbigpo, thus drasticallythc Nationalist Navy's blockadeIf the Communist Air Force in China were committed to nullifying Uie blockade, the Nationalist Navy would probably be un-

-II the Chines* Nationalists devoted all efforts towardlockade and staUoncd and operated their lorces Inanner as lo (a) blockade nine mainland ports capable of handling vessels0 GRT or larger In the area between Pearl Hirer and the Yangtze Klver. and (b) Interdict coastal traffic tn the areaHong Kong andt Is estimated that Ihey could Intercept aboutercent o! seagoing traffic. It Is noi believed, however,the Chinese Nationalists now possess thecaiclcrtey la planning and opcraUons to accomplish UUs result.

uble to maintainlockade of thestraits.14

The total effectshinese NaUonallst blockade on Communist China's seabornetrade might be considerably greater,at least, than suggested by theirListed above. Charter and insurance rates would rise and non-Communist ship owners would be unlikely to charter their ships for trade with the blockaded ports. So long as Uie blockading effort demonstrated Its effecUveness, therefore, the Chinese Commu-nlsts would suffereduction Ln ships available to cany their foreign trade and an increase ln shipping costs.

Air Strikes. The Chinese NaUonallst Air Force (CNAF) currentlyotalombat7 fighters;ighters;5 light bombers; andediumhe CNAFow combat capability because it lacks jet aircraft, has shortages of spare parts, equipment, and supplies, including POL, and has had limited operational experience and training.

If Its total combat air strength wereto air strikes against tbc mainland, the CNAF initially could inflict some damage on Chinese Communist rail lines and other LOCs in Eastowever, because of CNAF logistic and maintenance deficiencies andCommunist capability for counter-air operations, CNAF air attacks against thc mainland would be limited in duration and effectiveness.

PROBABLE COMMUNIST REACTION TO THE IMPLEMENTATION OF THESE MEASURES

COMPLETE EMBARGO

complete embargo onwith Communist China would haveeffect on Communist China'scapabilities and only limited effects oneconomy. Thc Communists would

"See footnote of the Director of Naval IntcLLtgcnc* and the Deputy Direclor for lntelUger.ee. Tbe Joint Staff, to paragraph a

"Shanghai. Canton, and the entire raU system be-iween these cities. Including the vital Chu-chou -Heng-yang rail link. Is within the range of all CNAF combat aircraft.

probably launch an intense campaign otand economic warfare designed to weaken the unity and resolution of thepowers This campaign wouldstop short of new identifiable aggression, but might include (a) efforts to precipitate strikes and internal disorder within theof the embargoing powers, andilitary pressure on the borders of Hong Kong, Macau. Indochina, and possibly Burma.

NAVAl BLOCKADE

mpositionlockade would increase thc difficulty of military operations requiring large expenditures of materiel, either Inor elsewhere, but the blockade in itself would probably not induce the Communists toorean settlement on UN terms. Communist reactionaval blockade would almost certainly Include an intense campaign of political warfare that would probably include any or all of the measures noted above in the case of an embargo. In addition. Communist China would almost certainly commit its air and naval forces against the blockading forces with covertassistance and might launch attacks against Hong Kong and/or Macau,If these territories were in any waythe blockading powers. The USSR might reactaval blockade by attempting to bring merchant ships Into Port Arthur and Dairen under Soviet naval escort, byto force the blockade at other points, or by waging mine and submarine warfare against the blockading forces. However, we believe that the USSR would be unlikely to initiate general war solely because of incidents arising out of attempts to force the blockade, but the USSR would exploit such incidents to create dissension among the non-Communist powers.

AIR AND NAVAl BOMBARDMENT OF INLAND TRANSPORTATIONarge-scale and sustained air and naval bombardment of key Chinese Communist transportation Uncs, in conjunctionaval blockade, could sharply reduce Chinese Communist militaryut would probably not in itself induce theCommunlsts toorean settlement on UN terms. Communist China's economic potential would be seriously affected, and Uie physicalof Uie regime in maintaining political control would be increased. In reactionlockade and bombardment, Uie Chinese Communists wouldaximum aireffort in Clilna and Manchuria. Units of Uie Soviet Air Force in Uie Far East would coverUy participate in thc air defense effort, particularly in Manchuria The Chinese Communists would probably also employ their air capability against some US/UN bases in Uie Far East If. in the unlikely event Uie blockade and bombardment should threaten Uie existence of the Communist ChineseUie USSR would increase Its aid toChina, possibly even to Uie point cf openly committing Soviet forces against US forces In US/UN held territory and adjacent waters in the Far East

CHINESE NATIONALIST BLOCKADE AND BOMBARDMENT

ommunist China would almost certainly reacthinese Nationalist blockade ellort by committing its air and naval forces against Chinese Nationalist blockading forces, and might launch air strikes against naval and air installations of Nationalist China. TheChinese would probably reacthinese Nationalist effort to bombard lines of communications by strengthening their air defenses in East China and might retaliate by air action against territory held by Nationalist China.

RAILROADS IN CHINA

Original document.

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