Created: 12/1/1967

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Intelligence Memorandum

Free World Exports Supporting

Communist China's Modern Weapons Program




General Economic Background

Progress in Industrialization

The Disastrous Leap Forward

Slow But Steady

Current Economic Problems and


China's Modern Weapons ProgramBurden of the Modern weapons

China's Industrial Base

Chinese Industrial Capabilities


Machine Building Equipment

Electronic Equipment and Precision

Metallurgical Equipment and Special

Chemical Equipment and Chemicalsof Imports from Japan

and Western

Machine Building Equipment

Electronic Equipment and Precision

Metallurgical Equipment and Materials

Chemicals and Chemical Equipment

Acquisition of Technical

The Effect of Present Trade ControlsPosition of Communist Trading



Figure 1. Communist China: Valuo of Imports of Machinery, Equipment, and Scientific Instruments from the preechart) .

Figure 2. Coranunist China: Index of Population and firainchart) following

Figure 3. Communist China: Growth

of .

Figure 4. Communist China: Trade with FreeCommunist(chart)

5. Selected Countries:

Comparative Output of(chart)

Figure 6. Communist China and the

USSR: Comparative Output of Major6 (chart) following page . .



7. Communist China: AreasIndustries

Figure 8. Communist China: Industrial Needs (chart) following


CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence7


Free World Exports Supportinghina's Modern Weapons Program


Machinery, industrial materials, and technology imported from the Free World areey role in Communist China's modern weapons program. Some of these imports directly support aweapons system; most of the remaining imports contribute to the development of China's general military-industrial base. eduction of these imports, therefore, would reduce both the pace and the scope of China's modern weapons program.

In the past three, imports of machinery, equipment, and scientific instruments from the Free World totaled more0 milliona sharp increase over preceding years (seeapan, West Germany, the United Kingdom, and France have been the chief suppliers. Four generalof equipment stand out: machine building equipment, electronic equipment, metallurgical equipment, and chemical equipment.

Among China's imports from the Free Worldajor items of machinery andplustems of electronic equipment and precision instruments, have been identified as "strategic." These items include large quantities of theodolites (instruments useful in the deployment of guidedoneycomb milling machine

Note: Thie memorandum uae produced by CIA. It was prepared by the Office of Economic Research and was coordinated with the Office of Scientificand the Office of Strategic Research.

used in the production of wing and helicopter blades, whole plants for the production of military electronic equipment, equipment for refining such space-age metals as tantalum and beryllium oxide, and equipment to produce chemicals for solid propellants.

These "strategic" imports are not largetheir aggregate value probably does not0 million over the past three years. Nevertheless, they are highly important to the Chinese advanced weapons program because of the relatively love technological level of Chinese industry.

Chinese imports of industrial materials from the Free World consist mainly of general-purpose materials that the small Chinese industrial base cannot provide in sufficient amounts, such as rolled steel products. mall proportion consists

of specialized alloys and alloying materials of direct importance to the modern weapons program. Examples are stainless steel, chromium, nickel, and teflon.

The advanced machinery and materials furnished by the Free World make available technology that often is beyond present Chinese capabilities. The Chinese use the occasion of plant visits and trade negotiations to extract all possible technical information from potential suppliers in Japan and Western Europe. They also systematically procure scientific and technical literature in the Free World. This Free World technology is especially important to the modern weapons program because it permits China to concentrate its small supply of top-grade technical people on specific weapons projects.

*COCOM is an informalt non-treaty agreement among the United Statesumber of ite alliee intended to control the export to Communistof materials considered essential to military weapons and their development. The International Lists of COCOM defining the items embargoed are similar to the Mutual Defense Assistance Act (Battle Act) Control Lists put out by the United States to further reetriot such exports tocountries. CHINCOM was the China Committee of these same nations set up during the Korean War to restrict trade aith Communist China on an even broader saale than the COCOM controls. onsolidated China Special Listhe so-called China Differential Listas developed but never agreed on officially. CHINCOM and its lists were abandoned

Of thestrategic" items cited above, less than one-half are embargoed under COCOM* controls; almost all of them, however, would have been embargoed under the CHINCOM list which wag abandoned In any event, most of the COCOM items were exported legally under COCOM administrative exception procedures whereby member governments are permitted to export certain items on the COCOM list. ignificant number of items, however, moved to China illegally.

China has tested seven nuclear devices4 and is developing systems necessary to deliver such devices. This involves programs for production and deployment of MRBM's andallistic-missile submarine program, and andelivery system. China almost certainly will continue to push its independent military research and development efforts and willseries production and large-scale deployment of missiles and other modern weapons. Imports of machinery, materials, and technology from the Free World will become increasingly important to these programs.

In the longossible constraint on these imports might be China's supply of foreign exchange, Chinese earnings from exports to the West are likely to grow much more slowly than in the past few years even if the disruptions of the cultural revolution were to end abruptly. Nevertheless, China has0 million in gold and hard currency reserves and has the option of reducing import! of grain and other less etrategic goods. Accordingly, China should have adequate means to import the critical strategic items required in the foreseeable future. Finally, over the short term, China could supplement its foreign exchange by acquiring additional foreign credits if it so desired.

1. The ultimate objective of the economic policy of Communist China is political and military power. The industrialization of China, therefore, has featured the expansion of heavy industrymachine building, steel, coal, electric power, and petroleumand has greatly increased the capacity to produce weapons. Since coming to powerhe regime has emphasized that industrialization would go forward along autarchic or "self-reliant" lines. Nevertheless, foreign supportin the early years in the form of assistance from tho Soviet Union and more recently in the form of trade with the Free Worldhasrucial role in Chinese industrial and military development. China made substantial strides toward the goal ofodern industrial nation in the first eight years of Communist rule. owuver, progress has been erratic f

Progress in Industrialization

eries of agreements signed0he USSR agreed to supply Chinaodern industrial plants worth aboutillion. These plants included almost the entire range of modem industrial installationssteel mills, electric power stations, machine building facilities, aircraft plants, chemical facilities, and the like. The Communist countries of Eastern Europe also agreed toubstantial number of industrial projects to China's ambitious development program. China could have produced these facilities domestically only after much delay andremendously high cost. China paid for this industrialization through exports of goods that it could produce efficiently at home textiles, ores, and specialty foodstuffg.

esult of increases in domestic production and assistance from other Communist countries, Communist China greatly expanded its industrial base in the first five-year plan. Production of major items increased

as follows:

The Disastrous Leap Forward

During the Great Leap,isastrous change occurred in Chinese Communist economic policy. The tempo of production was accelerated to intolerable rates, and manpower and raw materials were wasted on primitiveschemes. In agriculture, the communessupercollectives0 peoplewore established and private plots were banned. These improvident measures quickly led to disruptions in agricultural production and in the distribution of food. Adverse weatherlso hurt.

The Soviet authorities took few pains to conceal their anxiety over the economic policies of the Leap Forward. Increasing political and ideological differencesapidin Sino-Soviet relations. Finally, inhe USSR peremptorily withdrewoviet engineers and technicians then in China and broughtalt practically all of its economic assistance. At this time, only about one-half of theoviet-aided plants had been completed. Aid from Eastern Europe, was reducedrickle. During the winterhe Chinese economy reached its lowest ebb. Industrial production was severely reduced, malnutrition was widespread, and discontenteven to the army.

Slow But Steady Recovery

spite of the collapse of theCommunist China retained the legacyand Eastern European assistancethe technology, and the trained workers.

And it was not long before Chinalow but steady recovery, industrial production recovered from the low pointainly because capacity, idled by the Leap Forward, was put back into operation (see fforts to expand capacity have been limited to priority industrial sectors such as modern weapons, chemicals, electronics, specialand petroleum refining. Excess capacity still exists in many industries, particularly light industries requiring agricultural raw materials. Capacity is insufficient in some industries that produce priority finishedsuch as flat-rolled steel products.

Agricultural production also recovered from the low point, but, in comparisonopulation has increased more than grain production (see To help offset this decline in per capita production, China1 has been forced toillion or 6tons of grain per year from hard currency areas. These imports have used foreign exchange that could have bought modern industrial equipment from Japan and Western Europe.

During this period of recovery, China's trade with the other Communist countries fell sharply, whereas trade with the non-Communist world rose, not only because of large grainbut also because of growing imports of machinery and industrial materials from Japan

and Western Europe. When China was industrializing under the tutelage of the USSR, more than two-thirds of Chinese trade was with the Communist countries. 0 the situation has been reversed; now three-fourths of China's trade is with non-Communist countries (seehina's total trade almost certainly declinedut the relative shares did not change appreciably.

Current Economic Problems and Prospects

9. 6 the economy had completed itsfrom the low pointnd seemed to promise steady if slow development over the next few years. Mao's Cultural Revolution has

interrupted this trend, however, and continues tohadow on China's near-term prospects. The political turmoil has halted growth in industrial output and foreign trade. Industrial production for all7 may have fallen below the levelnd an appreciable decline in foreign trade took place during the last halfther sectors of the economy have been adversely affected, particularly rail and river transport and the educational system*

In spite of the Cultural Revolution, agricultural production7 rose in comparison with that But the debilitated state of administrative control in the rural areas of China poses problexs for the regioe in procuring and distributing the harvest. The modem weapons programs have been least affected by the cultural revolution. Even these priority programs, however, have suffered from political attacks on managers and scientists and from disturbances inand foreign trade.

The Cultural Revolution has fluctuated between periods of radical political action and periods of more moderate and practical policies. So long as Mao holds power, this erratic course will continue. Mao's revolution can only further complicate the solution of the fundamentalproblems of China, the most serious of which is the tendency of the population to outrun the food supply. But even if political stability is soon regained, this problem probably will not be solvedong time.

The general characteristics of Chinese industry today stem from these economic policies and events. Chinese industry is fairly large in absolute amount but smaller capita basis and for the most part quite backward in technology. National economic policy dictates austerity in living standards; hence there is no pressure to raise the level of technology in civilian industry. Furthermore, in both agriculture and civilian industry, the supply of labor is so vast that the substitution of machines for men wouldoolish use of scarce resources. The small quantity of top-grade manpower and machinery goes for the development and production of advanced weapons.

China's Modern Weapons Program General

In spite of the disruptions of the Leap Forward, the withdrawal of Soviet technicaland the Cultural Revolution, Communist China has made rapid progress in weapons development. China has tested seven nuclear devices sinceour of which have containedmaterial. Furthermore, these tests have demonstrated China's ability to deliver nuclear devices by both medium bombers and missiles.

The Chinese nuclear weapons program was started in thes with strong Soviet assistance. Chinese atomic scientists were trained in the Soviet Union, and the construction of the key installations in the present Chinese program

the nuclear rest; site

a gaseous diffusion plant productionnd a

was begun while Soviet technicia still in China.

spite of the complete Sovietsupport, the Chinese still have managedthe programs- forward with their ownthe momentum supplied by the USSR. substantial problems remain. Forsupply of fissionable material is stillthe regime isoor position to carry on

a testing program and at the same timeubstantial stockpile of weapons. This constraint will not be relaxed until plutonium becomesfor the weapons program. China probably hasew fission weapons in its stockpile which are deliverable by itsediumropeller-driven and two jet).

China is developing threefour systems for delivering The Chinese have test fired MRBM's

from the missile test range at Shuang-ch'eng-tzua facility in western Inner Mongolia constructed with Soviet assistance in thes. Soviet missiles were used in early tests, but recently Chinese-manufactured missiles probably similar to older Soviet designs have been fired. This MRBM program could be nearly ready for deployment.

When deployed, these missiles will be able to reach:

the capitals andof Japan, Souththe Philippines,

South Vietnam, Thailand, and India;

targets in Soviet Central Asia and the Soviet Par East; and

all US bases in east and southeast Asia.

Chinese reportedly are constructing

a large new launch facility at Shuang-ch'eng-tzu. The size of the complex indicates that it is designed for anhich could also be usedpace booster.

Communist China may also be workingallistic missile submarine program. At present the Chinese havelass conventionally powered ballistic-missile submarine. However, there appears to have been little recent progress either in constructing additional vessels or in developing the missiles required for these vessels.

China has only two jet medium bombers on hand. But the regime could begin to produce jet medium bombersprobably similar to the SovietBadger)nlthoughsuch aircraft would be adequate for use around the periphery of China.

The Chinese CommunisV missile research and development effort appears to be centered

in the Peking area. I

| ' |engine test stands capable ot testing mkbm and ICBM propulsion stages exist at the Chang-hsin-tien complex. The Nan-yuan airframe plant located near Peking has also been associated with the Chang-hsin-tien complex and mayissile production facility. So far as is known, the Chinese are not now developing long-range heavy bombers or nuclear-powered submarines.

burden of the advanced weaponsthe Chinese economy has been heavy andeven heavier as these programs expandmore complex. In Large measure,programs have beer, based onby the USSR The Chinese

must now develop more up-to-date weapons using their own scientific and technological resources and must push beyond the technology provided by the Soviet Union. This may prove difficult because China continues to lag far behind the major industrialnations of the world in industrial production and technology (see

China's military andprograms may take as much asercentChina's GNP. Thisomewhat higher-GNPuch larger share ofthan in France and the United Of greater importance, China's weaponsuses manpower, equipment, andthe highest qualityscarce resourcescould be used to build up theof the economy. |

remier Chou En-lai acknowledged

tnat'Cnini's pursuituclear capability had imposed an enormous burden on the economy.

burden of China's modernis also indicatedomparison of thestrength of Communist Chinaf the USSR6 when Soviet missile, first got under way. For example,of four basic industrial commodities cement, electric power, andas two to four times6 level ofof the same commodities (see Figuremore general terms, total industrialCommunist China6 was roughly one-third

of that of the USSR6 when the Soviets were starting tneir missile production programs. 'many of China's weapons-associated industries, "Such as the machine building industry, compared even less favorably with Soviet capabilitiesears earlier.

2<. Other constraints on Chinese industrial capabilities relative to Soviet industry are the

number of highly trained engineers and technician! available to industry and the limited stock of experience embodied in the industrial work force. China does not have large numbers of experienced mechanics capable of making useful adjustments to machinery and equipment ormanagers with proved talents for organixa-tional innovation.

23. The experience of other countries indicates that Military coats will become even greater in the years ahead, especially when Communist China attempts to move various weapons systems into production and deployment. Weapons system* now being developed are based on Soviet designs and hence have most of the basic research already proved. The Chinese would be able to lessen the riseosts if they were willing to settle only for the acquisition of proved Soviet system* and thus the technology ofa. Chine, however, almost certainly is going ahead with it* ownfforts, such a*eeded for an ICBM program, and this means rapidly rising RtD cost*.

costs will also mount asto piece various weapons system*production and to deploy them in theif in the next few years Chinaimproved copies of Soviet systems,will be faced in mastering theend reproducing specialized part* Production costs relative toare likely to be higher for Chin* than

they were for the United States or Franc* because those countries already had in existence th* industrial machinery, processes, and skills nesdad to support their production programs. In addition, China will have to meet th* heavy annual operating end maintenance expenses of the deployed units.

the absence of extensiveChine's supply of skilledcertainly will prove to beigh-priority modern weapon*provide adequately for the development ofeconomy. Over tha next severalwill continue to be faced with anof scientific, managerial, end engineering



COUNTRIES: Comparative Output of Major Industrial6


(Million MT,


{Million MT)

















iBllllon KWH)







b? CtA


COMMUNIST CHINA AND THE USSR: Comparative Output of Major Industrial Commodities



(Million MT)


(Million MT)




I 11

personnel and will be forced to concentrate its effortsarrow range of high-priority Most of China's best technical talent continues to be those Chinese who were educated abroad, both in the Free World and in the USSR. For top scientific and technical talent, China still relies heavily on those Chinese educated abroad, but significant numbers of China-trained researchersoears experience are now reaching upper levels of competence. The closing of China's universities Cor the pastonths because of the Cultural Revolution has certainly interrupted this program.

China'a Indus', rial Base

Chinese Industrial Capabilities and Limitations

capabilities of the Chinesefor supporting programs of modernare uneven. (The locations ofindustrial centers are shown on the7.) While China produces most ofand basic types of machinery forprogram, it needs to import certainand specialized machinery and The principal industrialimportance to the weapons program fallcategories) machine buildingequipment and precisionequipment and special metals,equipment and certain key

Machine Building Equipment

machine building industry carriesload in support of China's his sector ofbeen unable to support simultaneouslyof modern weapons systems andof broad economic development. Soviet aid has forced the machineto develop greater self-sufficiencymanufacture and design of newindustry has had toarger shareproduction to the manufacture ofrequired in such facilities asnuclear reactors, metallurgicaloil refineries.

the problem has been theChina to obtain from domestic or Freemost of the instrumentation/

and other specialized components formerly obtained from the USSR. Even so, over the last two or three years, China has made progress by concentrating the industry's best manpower and equipment to meet these requirements* The Chinese have been able to supplement domestic output by purchases from the West of precision and specialized types of machine tools such as jig-borers, gear-making machines, and precision grinders. Chinese imports of machine tools such as these have risen steadily

of Free World equipment notto the filling of large gaps inbut also provide the Chinesefor native designs, imports suchmachine building plants involve purchasetechnology and provide afor Chinese technicians, especiallyinstances where contracts includetraining by the supplier.

Electronic Equipment and Precision Instruments

The Chinese profited as much from Soviet assistance in buildingomestic electronics industry as in any other field of modern industry.hina met new military needs chiefly by producing its own versions of foreign-designed equipment. In addition, many varieties of Western electronics equipment can now be purchased by the Chinese, and considerable Chinese effort is devoted to adapting this equipment to meet specific military requirements.

esult of (a) earlier Soviet (b) access to Western technology, and

(c) its own capability to adapt and improve foreign designs, China is now capable of producing much of the control and instrumentation equipment including radars, computers, and gyroscopesneeded for guidance and control of first-generation surface-to-surface missiles and short-range cruise missiles. China also produces enoughequipment to meet most of the minimum requirements of its ground, naval, and air forces-






















Most of ita deployed ground radar is of domestic manufacture.

the need for more complexthe Chinese are seeking largerelectronics and communications equipmentprototypes) as well as technical dataand Western Europe. In addition tohigh-speed computers, qualityand test equipment, theis dependent on imported raw andmaterials including mica, quartz,copper.

Metallurgical Equipment and Special Metals

China has inadequate domestic capacity to produce many alloy and special steels, certain nonferrous metals, and refractory metals used in the modern weapons program. At the same time, China probably has sufficient metallurgical competence and the necessary equipment, including vacuum melting equipment, to produce smallof supers 1loys, electrical steels, and stainless steals, including special types needed for research and development. Substantial increases in high-grade alloy steel production, however, will depend on an expansion of capacity. In recent years, the Chinese have intensified their efforts to develop the production oi" stainless steel to support the expansion of the chemical industry as well as to supply new military needs such as the construction of nuclear reactors.

China's metallurgical industry is able to depend on domestic resources for most of the raw materials used to produce basic metals and alloys. Among the exceptions are chrome, nickel, and cobalt. Imports of rolling mill equipment and complete plants will be required if China ia to cover its own requirements for finished steelparticularly shaet and strip. In the missile program, capacity to roll stainless steel will be especially important. Little is known of China's ability to produce and fabricate such metals as titanium, tungsten, tantalum, beryllium, colombium, and molybdenum. However, evidence exists of problems with steel processing and of efforts to import certain of these special metals and the equipment for their processing. This evidence

suggests that China is having difficulty producing and fabricating these metals.

Chemical Equipment and Chemicals

technological development ofchemical industry lagged behind thatheavy industries up Sinceprogress has been made in theof basic chemicals,5 the Chinese have placed aon the development ofoutput of chemicals seems adequate toof the present needs of its advanced of weapons-re* iateanabeen limited in type and quantity.

is capable of producing aof solid and liquid propellants forand rockets. In the case of solidthe munitions complex at T'ai-yuantypes of double-base propellantsamounts for test and Recent acquisition of Westernproduction of nitroglycerin willfor production of traditionalbut the more advancedof solid propellants are not believed to

be in production. Of the liquid propellants, China produces alcohol, kerosine, liquid oxygen, and concentrated nitric acid in quantity. China, however, probably produces only small amounts of high-strength liquid propellants such as liquid hydrogen, nitrogen tetroxide, hydrazine, and other amines.

plastics industry of China isunderdeveloped. Chinese chemistsin producing some of the moreof polymers but cannot mass-producetypes that are useful in hina claimed to haveproduction of teflon; output is small,quality probably is belowumber of strategic uses inand electronice industries and isimportant (because of itsasket material in theprocess for the production.

types of synthetic rubbersfor military programs, yet Chinalittle rubber and relies on imports forof its needs. China still lacksof mass-producing silicone rubbers,synthetic rubbers, and lightweightmaterials. Ins arubber plant was built by the USSRproduction from this plant stillbelow capacity. Imported plant andbe required for expansion of China'sindustry. ajor reorientation wouldfollow in rubber fabricating since presentin fabricating is based on the use of

Significance of Imports from Japan and Hesterr. Europe General

Although China has scored some striking successes in meeting the industrial requirements of modern weapons, it is still unable to produce many of the needed items. Important requirements are and will continue to be mot through imports, mainly from Japan and Western Europe. Durings, China relied heavily on industrialfrom the Soviet Union and Eastern Europe, and more than two-thirds of China's trade was with the Communist world (see After the breakdown in Sino-Soviet economic relations, Chinese trade plummeted and did not begin to recover Total trade by now has returned to theevel, buttartling change in patternoday three-fourths of China's trade is with the Free World. whereas Communist support ins provided China with basic across-the-boardequipment and technology, current trade is providing China with plant and equipment that embody the latest technology available in the Free World.

Imports from the Free World of machinery and equipment and scientific instruments began to grow rapidlynd in the past three years such imports from Japan and Western Europe totaled more than one-half billion dollarsup sharply from the first years of the decade (seeest Germany, Japan, and the United

VPPlie" of machinery

Million us $


Japan Kingdom France

Machinery and equipment

Of which:

Metalworkingfor special




Eluding transport equipment

Although these goods are crucial to Communist China, the Chinese market accounts formall portion of exports by the four suppliers.

Imports of industrial materials from Japan and Western Europe have also risen sharply. hese importsexcluding chemical fertilizerwere0 million compared withillion hese imports included such items as stainless steel, chromium, nickel, and teflon.

Except for the United states and the Soviet Union, nations embarking on modem weapons programs must import certain advanced machinery andmaterials. These imports often have non-military uses as well. In the case of China, however, it is highly probable that such imports arc in fact used to produce modern weapons; in

China, (a) civilian needs are kept simplej

(b) available high-quality resources are scarce;

and (c) the system of economic priorities favors

weapons production, ationroader

industrial base and higher living standards, the

end use of these imports would be far harder to


value of the items which haveas delivered or contracted formillion0 million. Many of theprocured by China outside normalat premium prices; thus, the costfor these imports probably was ln theof ths above estimate. These estimates,

it should be emphasized, are based only on the items which have been identified- The value of these commodities would be considerably larger if detailed information were available on all shipments of strategic itemspossibly up0 million in the past three years. Metallurgical plant and equipment represent the largest value figurea minimumillion and possibly as much0 million. Electronic equipment and precision instruments constitute the largest number of items,inimum value figureillion. tems delivered on the machine building listinimum value figureillion, and thetems delivered or under contract on the chemical listinimum ofillion.

Machine Building Ecuipxent

of special purpose andtools from Japan and from thrsein Europe (the Federal Republic ofUnited Kingdom, and France) increased sharply

from about SI million3 to moreillion Orders for future delivery almost certainly will continue to increase as weapons production grows in size and complexity. Recent Chinese purchases have included high-precision jig-borers, profile milling machines, copy milling machines, precision gear grinders, and numerically controlled machine tools.

good exampleachine thatis destined for use in theprogram is the honeycomb millingversatile machine shapes honeycomb coresform for wing and helicopter In addition, China has importedproduction of hydraulic mechanisms usefulaerospace industry and has contractedcapable of the precision machiningmissile parts.

Electronic Equipment and Precision Instruments

impressive list of electronicscientific instruments has moved fromWorld to China in recent years.


contribution ot tnese items to aa van ceo. weapons programs has been accelerating. ecent example is China's intensive buying of high-precision theodolites in the West during Instruments of this type are needed in the deployment of surface-to-surface missiles. The Chinese have purchased or were negotiating for moreheodolites to be delivered; they purchased only aboutrom the West. The number and quality of theodolites far exceeds Chinese needs for geodetic surveying or construction work. The list covers end products, components, and test equipment and includes vibration equipment, tracking radar, telemetering equipment, digital computers, special-purpose electron tubes such as magnetrons and klystrons, and equipment for acquiring missile flight data.

items of productionalso moving, including complete plants. the import of semiconductorfrom the Free World is mainlyrecent Chinese progress in establishingof transistorized military Of somenown majorfacilities in Communistwere originally equipped by theand in operation by Theput into operation during thowere equipped with Free Worldequipment or domestic equipment copiedWorld production equipment.that in at least two of tne originalplants, Soviet equipment haswith Free World equipment. In addition

to electronic equipment, China continues to ba dependont on imports of raw and semifinished materials, including quartz and high-purity copper.

Metallurgical Equipment and Materials

development of new lines ofcalls for parallel advances inand processing. China has beena broad range of production andfor space-age metals. China hasto buy special furnaces forof refractory alloys and Peking has scored some successesncluding the purchase offor the production offor rocket engines^ f

52. China also has had some success inequipment for refining and fabricating such materials as tantalum and beryllium oxide. In addition, China hasumber offor precision rolling and finishing mills, including mills capable of high-temperature rolling of such metals as tantalum, uranium, and zirconium. Finally, resource deficiencies in important alloying metals have been made up through imports. Some of these latter imports such as

chrome, cobalt metal, and nickel have come from Free World countries.

Chemicals and Chemical Equipment

53. Over the past two and one-halfrowing number of items of chemical equipment and special chemicals have moved from the Freo World to China.

1 inciuaea among the equipment and tecnnoiogy nave been:

to producefuel binders for

plant to producehave importantin electronics usedand missileand

for thenitroglycerin infor productionpropellants.

Among the chemical products that have been imported arei lubricants, fluids, and corrosion-resistant plastics which can tolerate extremely wideranges and certain amines and other chemicals useful in the production of missile fuels.

Acquisition of Technical Data

54. Communist China has long been engaged in an extonsive program of acquiring and exploiting foreign scientific and technical literature. Most of this information is readily available in non-Communist countries from libraries, bookstores, universities, and scientific publishing houses. Furthermore, Chinese commercial and scientific delegations obtain as much technical and scientific literature as possible during their visits to industrial sites, commercial laboratories,institutes, and scientific conferences. A

given Chinese delegation may leave several hundred pounds of literature behind for their local embassy to ship to the Mainland.

data and training areby Communist China as the resulttraining provided by Free WorldChinese engineers and scientists. Perhapssource of technical literature,from China's commercial activities. use every contract and every stagenegotiation as vehicles forquantities of information on The Chinese may even requestcompletely unrelated to the items Lastly, on some occasions,havepecific requirementtechnical literature on agentsin order to procure suchdemonstrating Chinese interest in

The Effect of Present Trade Controls

less than one-half of the


under the cocom controls ana nearly all of the items probably would have been embargoed under the defunct CHINCOM list. In the electronic and instrument category, close to one-half the items are COCOM controlled, and almost all would have been on the CHINCOM list. Only thelistajority of items shipped or delivered as being embargoed, and many of these are subject to differing interpretations of the COCOM list.

57. Despite the presence of many of these items on the COCOM embargoarge number of strategic items have been or are being shipped to China from nations which generally support COCOM controls. The largest loophole is the administrative exception procedure,overnment unilaterally permits the export of an item in the list. The increased use of this mechanism is shown in the following tabulation of electronic equipment and scientific instruments exported under administrative exceptions from China's principal Free World industrial trading:

5 a/ 6 a/




West Germany

Minimum total

Becaueo of rounding, components do not add to the total* ehovn.

loophole is the differingof the definitions of items onlists. Examples of this are theof production and processingthough the end-product of suchprocessing is itself embargoed. of the most critical items exported,items clearly falling under theare shipped illegallybya third country, by falseby outright smugglingsually as alax administrative procedures in thegovernment ministry. All of thesehave been used at one time oritoms on the appended lists.

Minor PoBition of Communist Trading Partners

with the USSR and theCommunist countries nowto China's weapons program, despitethat it consists primarily ofequipment. Much of this trade is inequipment, and most of theof simpler items than thosethe Free World. Even though China didfirst electron beam furnaces from Eastall advanced technology securedyears has come from the Free World. were cut off from Western materialsthe USSR and the Easterncould supply many of the itomsfor its weapons program. However,could not supply in quantitiesall of China's needs and almost certainlymeet the high technological levels embodied

in present Chinese imports from the Free World.

Because of the present political tension between China ana other Communist states, these nations might not wish to help China in its weapons program.


60. The need to expand imports of strategic goods from the West will grow as China continues to pursue more independent military RfcD efforts and ambitious production-deployment programs. In the longossible constraint on the flow of these imports might be China's supply of foroign exchange. Chinese earnings of foreign exchange probably will grow only slowly in the next few years. Prospects for substantialin agriculture and industrywhich are necessary for the expansion of Chinese exportsare poor. In addition, the expansion of exports to the Free World in the past few years has in part represented recovery of markets lost; thus, marketing problems will become much greater as Peking attempts to expand exports. Further shifts in exports from Communist to Free World markets are not likely to be large with trade with the USSR and Eastern Europe already at an extremely low level.

61. In the next few years, however, foreign exchange limitations on China's ability to import strategic goods will not be severe. China now has0 million in gold and hard currency reserves and could obtain additional foreign exchange for purchase of strategic goods byimports of such non-strategic goods as, for example, grain or transportation equipment. There are current indications of cuts in imports of non-strategic machinery and equipment. The most recent statistics on trade with the principal suppliers of strategic materialsrop in total imports of machinery and equipment from Japan. West Germany, France, and the United Kingdom. However, imports of the items most closoly related to modern weapons continue their upward trend. Accordingly, China should have adequate means to import the critical strategic items required in the foreseeable future. Lastly, substantial credits from Chine's trading partners are likely to be available if China becomes facedight foreign exchange situation.





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