MEM0RAIICU4 FOB: Hr. Walt W. Rostov
Counselor and Chairman of Policy Planning Council Department of State
Prospects for Continued Moderate
Economic Recovery in Communist China
You may find this recent study of Coamnlst Chinese economic recovery prospects vortb come attention. Our analysts conclude that, fron the purely economic point of viev, China's prospects for achieving statusajor world power in this decade have vanished. They believe thatoderate recovery over the next five years will depend on realistic rather than ideological management of the domestic economy.
DEPARTMENT OF sw.y
Economic?
- _ HIT- COPY
PROSPECTS
FOR CONTINUED MODERATE ECONOMIC RECOVERY IN COMMUNIST CHINA
INTELLIGENCE AGENCY Office of Research and Reports
Economic Intelligence Report
PROSPECTS
FOR CONTINUED MODERATE ECONOMIC RECOVERY IN COMMUNIST CHINA
warning
thla material contains jntfhnauon aflecung the national delena^lr the united states within the mea&mg of the espionage laws., the tians-mlsslonpffevelation ot which in any manner tonauthor!&ed person is prohibited by law.
CENTRAL INTELLIGENCE AGENCY Office of Research and Reports
COKTEHTS
Pag--
Summary and Conclusions
I.
II. Economic Performance in
.
2. Foreign
III.
Economic
B. Foreign
F. Population
Tables
China: Dependence on Imports of Selected
2
China: Retained Grain Imports, by Country
of
China: Estimated Supply of Petroleum
2
<>. Communist China: Imports and Exports, by Major
Commodity Groupings end
- ill -
PROSPECTSINUKD MODERATE ECONOMIC RECOVERY
TH COMtfJJIIST CHINA*
Hr.aryonclusions
General economic activity in Communist China improved slightlyomparednd the most serious economicwere eased. Chinaubstantial increase in the production of vegetables, sweet potatoes, poultry, and fruitlight Increase in the production of grain. In industry, production of some priority goods such as agricultural chemicals increased, and improvements were made in the operation of industrial plants. The moderate economic policies that were adopted in the wake of theoverambitious "leap forward"ere continued
The outlook for the immediates for amoderate recovery of industrial output based mainly on the fuller use of existing capacity. Because it depends so heavily on weather and on the morale of the peasants, agricultural production is more difficult to anticipate. Assuming normal weather conditionsontinuation of the present limited concessions to private activity in rural areas, agricultural output should continue to grow slowly. Food supplies, however, will remain stringent.
Paced with overriding problems ofuge and growing population, modernizing agriculture, and raising the level oftechnology without Soviet support, China's prospects forstatusajor world power in this decade have vanished. for even moderate recovery in theears depend heavily on whether or not the leadership will contain its strong ideologicalandealistic course in managing the domestic economy.
he estimates and conclusions in this report represent the best Judgment of this Office as of
I". Background
The fundamental fact faced by economic policymakers in Communist China ie the existenceuge and growing population in combinationelatively sewmount of arableow levelmall amount of capital plant. Immediately after seizing power inhe CoorauniBt leaders put into operation afor "forced-draft" industrialization of the economy. Key features of tbe program for tho rapid buildup of industrial capacity and output were: he allocation of an increasing share of national output to investmenthe importation from the USSR and the European Satellites of complete equipment and supporting technical services for modern Industrial plants.
Por this progran to succeed, food production had to be continuously expanded at the sane tire that important resources were being used to build up industrial and Military strength. Largely because theregime brought peace and order to war-torn China, food production7 did in fact keep up with the growth of population. The regime, however, by spreading food supplies evenly over the population and by reducing deaths from flood and disease, broughtapid increase in the rate of growth of population, and the margin between food production and the minimum needs of tbe population remainedthin.
8 the regime tried to step up the tempo of itsprogram by launching the "leap The central premise underlying the "leap forward" philosophy wao that China's huge and rapidly growing rural population ahould be treatedajor economic aaaet. During the period of the Pirst Five Yearhe Soviet model of industrialization had been followed clOBely,oviet-type planning and statistical system had begun to take shape. In contraat, the "leap forward"hinese-style economic program. China was to "walk on two legs": at the same time that theprogram was to be speeded up, the peasants were to be mobilized into huge new supercolloctivea, ornd the economy was to be carried forward by aheer weight of numbers.
The failure of tbe "leap forward" policies ia now abundantly clear. It is apparent that tbe leadership permitted its agricultural pollciea to become divorced frcea reality. On tbe basis of directives from the canter, traditional methods of cultivation were replaced by panaceas such as deep plowing and close planting. Overnight, untrained cadres were placed in charge of constructionuge number of irrigation and flood control projects; many of these projects proved useless or even
subtracted from production. The Indiscriminate use of rural labor In such dubious projects as the small iron furnaces even led to labor shortages at harvest time. This manmade damage to agriculturalwas compounded by poor weather.
At first the results for industry under the "leap forward" seemed spectacular, but these short-run successes were achieved at the expense of long-run development prospects. Standards of quality were lowered, the care and the maintenance of equipment were neglected, and political fanatics rather than competent technicians took over the planning and administration of industry. ullback from the "leap forward' in industry was overdue. What might have been an organized retreat turnedout, however, when the USSR unexpectedlyits technicians and when the regime encountered the worstcrisis in its history.
With failures in agriculture and industry and the loss of Soviet technical help, Peking's hopes of achieving world power status in this decade vanished. The traditional Communist approach of all-oat emphasis on expansion of heavy industry run counter to the realities of thesituation and had to be set aside, at least temporarily. Paced with basic problems of overpopulation, backwardness in agriculture,ow level of technology in industry, the regime was forced during the wintero adopt economic policies of moderation andaimed, above all, at encouraging recovery of agricultural production. The regime then announced that the breathing spell in the economy wouldears.
II- Economic Performanceg
A, General Performance
2 the moderate economic policies adopted in the winterere continued. Private activity in agriculture and in rural trade was still permitted. Major industrial goals included the expansion of production to support agriculture and the mining and timber industries. Emphasis was placed on improvement of quality, on reduction of costs, on increases in output per worker, and on better care of equipment.
The communique issued afterh Plenum of the Eighth Party Congress, which met secretly in Pekinguggests that the retrenchment and consolidation prevailingI2 will be generally continued for the time being but that some tightening up of discipline in economic affairs is considered to be necessary tofurther ideological concessions. Specifically, the Party appears to naveo retain the concepts "leap forward" and "communes" at least as slogans if not as operative guides to policy; o permit
no further retreat in collectivization of agriculture, and,orollary, to restrict private "capitalistic" tendencies ino retain the recent emphasis on more conservative management policies for industry, policies which are similar to those that prevailed
Official claims, note advances in some areas of production
light Improvement in the supply of some foods and other consumer goods; and weather data suggest slightly better growing conditions during the year for the countryhole. These bits and pieces, together with Peking's no re optimistic outlook since September, Indicate moderate improvement In an extremely difficult situation. Even with improvementerious problems stillin every major sector of an economy that probably is no moretoday than it was
B. Agriculture
Tbe agricultural situation in Cocminlst China2 was slightly improved in comparison with tbe abnormally low levels0 Production of grain2 Is estimated to have Increased Slightly and to have been equal toillion tons* horvootedben the population was aboutercent smaller. Estimates of output are based primarily on weather data, although the probabilityomewhat larger acreage of fall grain crops and slightly increased supplies of chemical fertilizer also have been token into consideration. The expected level of grain imports by Cbina lnonsumption year (July-June) is also indicative of tbe inadequacy of the harvest2 (see Contracts have been signed for net deliveries ofillion tons of grain during tbeonthsbout tbe aaae as that imported during tbe similar period2 (see Theillion tons of grain being Imported during tbeonsumption year amounts toercent of total food grain supplies. owever, Chinaet exporter of grain.
The further decentralization of authority within the collective farm system2 (the production team of aboutouseholds is now the basic unit for carrying on day-by-day agricultural activities and for handling the distribution of income) probably had little effect on the output of rice, wheat, and miscellaneous grain. Encouragement by
...
* Tonnages are given in metric tons throughout this report. ** ollows on p.ollows on p. 6.
JKE^T
Table 1
Comsunlst China: Dependence or. Imports of Selected
Thousand Metric Tons
Wet Importa
Pood grains b/ Rubber
Chemical fertlllEer (gross basis)
Total
Domestic
From the
egl.
Kegl.
Availability Production c
O Cj Kegl.
the Went
0
110
Dependence on Imports (Percent)
h>
100
are rounded.
gralnB include tubers, on the basisons of tuberson of grain.
C. Available for human consumption after ar. estimated deduction of about tuo-fifthoross outputillion tons. This deduction accounts for losses resulting from the milling of grain, from handling, and from damage In transportation and storage and for such nonfood uses as reserves for seed, feed, and industrial requirements.
Table 2
Cocminist China: Retained Grainby Country of Origin
Thousand Metric Tcr.s
12^
-iair
Jinir
Half
Half
6
the regime of work on private plots and of trade in openubstantial increase in tbe supply of vegetables, fruits, and sweet potatoes in rural and urban areas.
The assessment of the harvest2 implies that for the fourth consecutive year the food situation will be stringent. The average diet inonsumption year is probably slightly higher than that of the previous consumption year, largely as theof increased production on private plots. Some decrease incan be expected during the spring, when supplies areat their lowest. Further improvement ln per capita food availabilities is highly unlikely before the first harvest
Cotton output2 is estimated to have been no moreillion tons (ginned) compared* million tona The acreage planted to cotton2 was well below7 acreageof tbe urgent need to expand production of food. Production of other industrial cropo probably increased slightly but, together with cotton, these crops provided little or no increase in supplies of agricultural raw materials to light industry. esult, textile rations and supplies of cany other industrial consumer goods willstringent.
C. Industry
2 the Chinese Communists seem to have achieved moderate success in carrying out their policy of reshaping industry. Comparedbere probably have been increases in the output of priority goods such as chemical fertilizer, of some farm implements, and of many types of light industrial and handicraft products; output per employed worker probably has Increased somewhat (in large part, simply by laving off excess labor and thereby adding to tbe problem ofechnical and managerial personnel probably have been accorded greater prestige and responsibility; and problems of quality, cost, andof equipment probably have been eased (but still persist as obstacles to industrial efforts).
total1 percent of
peak, or approximately equal to that Production of agricultural chemicals, petroleum, aome farm equipment and tools, and light industrial products made of industrial raw materials was considerably above the level ofhut production of the machine building and textilewas below that of Production of steel and electric power nuy have been at roughly the level
a major economic objective2 was to raise the level of industrial technology in order toase capable of supporting
the further development of military industries and agricultural chemical industries. It is not known what technological progress was made2 In the type of industries needed to support an advanced weapons program, but increases in the output of chemical fertilizer and insecticidesimproved technical ability to operate plants in the chemical nevertheless, there probably are some chemical fertilizer plants as well as other heavy Industrial plantsfor example, aircraft,and truck plantsthat are producing below capacity because of technological deficiencies. These difficulties may exist in the plants themselves or in supporting industries that supply components and materials.
Aside from heavy industrial plants that are having technical and supply difficulties, unused capacity now exists In many major industries. The reason for this situation in light industry is clear: light industry has been unable to obtain the necessary raw materials from agriculture. The reasons for idle capacity in heavy industry are more complex. One important reason in addition to the technological factors mentioned above is that the drastic cutback in the investment program and the sharp decline in industrial output have reduced the need for basic heavyitems such as steel, electric power, construction materials, and several major types of machinery.
D. Petroleum
It is estimated that the total amount of petroleumin Communist China2 was slightly less thanhe last year for which data were published,apparently were adequate to meet the essential needs ofand military consumers. The domestically produced sharetotal amount of petroleum productsa.
increased to aboutercent2 (seeercent The eight major
igh level of operation throughout the year. Thepriraary sources of crude oil continue to be the oilfields at Yu-men, Karamai, and the Tsaidam Basin and the shale oil plants at Fu-shun.
* ollows on p. 9.
Imports of petroleum products are estimated to have declinedillion tonsIillion tonsith the sharpest decline taking place in imports of motorillion tons1illion tons The decline in Imports of motor gasoline is believed to have been absorbed mainly by the civilian motor transport industry rather than by the military services, whose requirements probably increased late2 because of military operations in Tibet. Communist China continued to rely
.
Table 3
Communist China: Estimated Supply of Petroleum Products a/
Total Supply
imports of aircraft fuels and high-quality lubricants, which remained2 at the levelI. China has tbe capability of producing jet fuel, although such production would necessarily reduce output of other petroleum products, and difficulties with quality probably would be China probably does not have the capability to produce high-teat aviation gasoline and certain high-quality lubricants.
E. Foreipi Trade
* All dollar values In this report are In current USollows on
S-E
The economic and political difficulties with which Communist China now finds itself confronted havearked effect on ita foreign trade. The reduction ln agricultural products available for export, the deterioration in Sino-Soviet relations, tne cutback in Investment, and the decline of industrial output have combined to lower the total volume of trade and to alter sharply its direction and composition. Total trade (Imports plus exports)2 may have amounted3 billion5 billion* compared2 billion9 (see Table The regime
table u
coenuniet china: importe and exports, by major commodity grouping! and sources a/
mujipiii..
i.UU1. Miniufitftue ta
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:
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1
y
m
mm.u*
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saaaa kmaasi
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fv
E
B
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U VUmwn
ft)
m
|
us
s
M
irw i
at
n aa
M4
m
a aa
nCentrflnp0rtfl ofmaterials:aehloery and equipment may have dropped byercent9
USSRpeak0 billion9
0 million0 million To .
obligations to the USSR Peeing Is currently retired Ssurplus of0 million in trade between the two countries
fI!!iVfri ladlcating that the Chinese deliberatelyorts from the USSR while exporting as much as possible. This nro-
n adV*nCe of aDillon trade debt that had been scheduled to be paid.
2 the Cnlnese Communists were actively contacting cZZ?r f J'Paneaeof industrial products, but few contract, of any size or inportaace were concluded. China', foreignalned tight, but the regime managed to meet its
^ eVen t0 nake earlier-than-scteduledsome debts to Bloc and non-Bloc
HI. ec lb
a. Immediate Prospects
ALthQUgh the Chinese Communists seem to haveood of cautiou. optimism, the outlook for the next year or twols foroderate upturn in Industrial output, on the orderoear. Some further agricultural recovery seems likely. Riven TaZZ^T'i tUltbfagricultural scene colors tne'enUre
Th*t^ntua during the lastSPP^Portions, which60Sraln outputoint where per capita
consumption could be elevated to7 level wouldroduc-
o be*2of
"X WOUMonal increase, of aboutmion tons annually.
apparently believe that the point of
worst difficulties has passed and that the road ahead, althoughshould bring continued improvement. For example, they have
.wifi! dTlt !aOUSbthc food wUoolt to say that more emphasis SSJ COttCa ot^er industrial crops, but ^rcon-
ontinue in
Kte nnual rate as1 and
Although increasingly optlaistic, Peking apparently believe.
that It Is premature to order an all-out production drive and seeao to he hoping to lay the foundation for an "upsurge" or the third yearow, the economy ia to give priority toand to concentrate oc "readjusting" industry. According to Peking, readjustment In industry3 means giving support tostrengthening the mining and timber industries, and raising the technological level In order better to meet agricultural andneeds.
B. Future Economic Policy
The outlook for the Chinese Communist economy over theyears or so will be heavily influenced by the policy decisionsleadership and by their ability to carry out these policies
^pconaBc" failures haveof conTl^erx^ir^nc^^adership. Even thoseare committed to the regime and whose loyalty remains fairlybeen affected. These include Partyillion),million in secondary and highernd evenillion). Peasant apathy and distrust of Partyis near the alltiae high. In industry, in spite of theduring theears of moderate policies designed toforward" mistakes, tha morale of vorkerois still low.
The future trend in economic policies is still obscure and is an Important element ln the uncertainty of future economic developments. The present priority accorded agricultural development Is uniqueooeminiBt state, and many leaders in Peking probably will becomeimpatient with continued deferral of the national goal of buildingodern industrial and military power. There are strong radical as well as moderate elements in the Party leadership, and although both factions seen to be agreed that "leap forward" methods were wasteful, they can be expected to disagree over such matters as how much reliance should be placed on ideological andsolutions to economic problems. The radicals probably would like to Introduce more experimentation in economic organizations and programs. The moderateshole probably would be satisfied with the general Soviet-style approach followed during most of the First Five Year Plan, but they alsoiberal wing, which early2 Indicated that It would like to see more stress on profit Incentivesreer type of socialismalthough this kind of thinking has not been in evidence since There is little chance that the liberal views win be adopted, but they may serveheck on the more extreme radical elements in the leadership.
Ineveral high-ranking officials, including four Politburo members, were appointed to the State Planning Commission.
It Is probable that the augmented commission is servingask force to vork out guidelineshird Five Year Plan to run3 The outline oflan could be announced at the next session of tbe National Peoples Congress, which is scheduled to convene in the second quarter Bylan for theears, even though it probably will be general andrather than specific, the Party may hopo toeasure of public confidence. The goneral lines that may be adopted for agriculture and industry have been suggested in articles published sinceh Party Plenum of
C Agriculture
The regime intends to continue to give priority to agriculture and at the present time appears to be thinking in terms of anprogram that will requireoeara. Moderation andreasonableness ore evident both in the gradualness implicit in the effort and in the apparent emphasis on research and extensionand on production of chemical fertilisers. The question,is not whetherrogram will beer fruitthe scope for improvement ia so great that it could hardly ovoid doing sout whether increases of the magnitude required will be forthcoming quickly. It is believed that they will not, in spite of China's being in ato draw on and profit by the experience of such Asian countries as Japan and Taiwan, which have dramatically increased form output in recent years.
The Japanese and Taiwanese cases point up two basic factors regarding agricultural modernisation. The most widely recognisedof course, la the prime importance of chemical fertilisers under Asian systems of intensive cultivation. The "agricultural miracles" in both countries were directly associated with the increased use Of fertilizer, and in both countries the rate of fertilizer application far exceeds that in Communist China, as follows:
stimate)I crop year)I crop year)
Kilograms of Chemical Fertiliser
Applied per PlantedContent)
Frequently overlookedecond factor: that agricultural inputs are closely interdependent and that they oust be developed in con-Junction if they ore to produce moxle-jm results. Thus increased yields in Taiwan and Japan reflect not only the heavier use of chea-lcal fertilisers but also cany other Influences, Including improved cultural practices, new crop varieties that are reaponslve tothe wider use of pesticides, and better control of water.
The immediate outlook for Communist China is not favorable with respect to any of these factors. China's ability to produce chemical fertilizers is still negligible and haft been affected markedly by the current economic crisis and the dispute with the USSR. The Installed capacity of chemical fertilizer plants amounts to no core thanillion tons (gross basis) cost of It provided by the USSR, andombination of poor operating procedures, breakdowns of equipment, and shortages of raw materials is believed to have kept outputillion tons. Up to the present, China has made little progress in construction of new fertilizer plants by its own efforts, although the regime during the past several years hasigh priority for building such plants. 9onstruction of eight new plants was begun, eachapacity ofons (gross basis). Thus far, only two of these plants have been completed; their construction tookears; and In both plants, technicalare believed to be causing faltering production. Three more new plants may be completedut they also are expected to experience problemsear or more.
In view of the difficulties that the Chinese have experienced in implementing even thla limited expansion program, substantialin tbe availability of fertilizer seem to be out of theduring tbe next few years. Some increase may be obtained through expanded imports from the Vestost of at0 per ton) and from manure as the animal population recovers, but truly significant additions can only come from domestic chemical output. If the Chines* relied upon importa to provide an annual fertilizer supplyillion tons (grossbe total coBt in scarce foreign exchange would be at0 millionyear period. It thus aeeas unlikely that they will place heavy reliance on imports to meet their long-termrequirements.
Fertilizer-response estimates for China rest on extremely spottyatioons of grain for each additional ton of chemical fertilizer (grossowever,ery rough rule of thumb. On tbe basis of this ratio. In order toillion additional tons of grain each year, or one-half of the annualneeded to keep pace with population growth, China would have to bring Into production the equivalent ofon plants each year.
That tha Chinese Communiste themselves believearget would prove beyond their capabilities for many years to come isto by their objective of elevating fertilizer production to 8tons (gross basis) inears, presumably This goalrepresents what Peking feels to be the best that can be obtained from the substantial effort recently announced, including conversion of atxisting machine-building facilities to the manufacture o* equipment for fertilizer plants.
Importation of fertilizer plantsossible alternative. Complete plants purchased abroadotal annual capacityillion tons (gross basis) of fertilizer probably would0 million0 million, however izable amount in view of China's tight foreign exchange situation.
Some Increases in output of course may be expected to accrue rrom such complementary Inputs as better water control, pesticides, and improved crop varieties, but the magnitude of these gains probably will be modest for some years. It took Japan and Taiwan more than SO years to build up the technology and the scientific understanding that underpins the productivity of their agricultural sectors. Although Communist China isosition to take over and profit from much of this knowledge immediately, to apply it to local conditions willime-consuming and complex task, one that will involve patlontand testingumber of ycaro. It isask that China is poorly equipped to undertake. Because industry took preference over agriculture in the regime's early Investment and training programs, China now finds itself with fewerompetent agricultural scientists. Until these few scientists begin to be Joined by others, perhapsears, they will be devoting most of their efforts to laying the foundation for future gains.
Itot possible to soy how beneficial the recentof controls will be on production in rural China, but it Is worth noting that moot of the new-found zeal2 is believed to have been directed by the peasants to their private plots and not to thecultivated land and that the greater part of the recentin food supplies is most likely attributable to private, not collective, production.
D. Industry
The current emphasis on industries producing goods forand for consumers is likely to continue for at least the next year or so. Also, Borne branches of heavy industry that cannot produce enough to meet the requirements of the economy are likely to be allocatedresources for expansion of plant and technical competence.
industries that probably will be emphasized include mining, producers of chemicals and machinery for agriculture, producers of some chemical raw materials for light industry, and industries that will heln to broaden chinese communist technological capabilities. the latter group of industries will be needed toative capability fora wide variety (but notarge volume) of complex machinery and selected metals and chemicals, which in turn will be needed .in the development of chemical fertilizer industries and the production of nuclear weapons and guided missiles.
prospects for resuming industrial growth are contingent onin agriculture. agriculture historically has been the key sector of the chinese economy, but today lt is, as never before, the pivotal component. evel of agricultural recovery satisfactory to the leadership is achievednd this level might well be less than the per capita level attainedndustrial production could be pushed rapidlyear or two because idle capacity exists in many industries. after existing capacity is put to use, growth inproduction would slow down if present goals for industryhich stress variety and quality rather than quantitynd peking's go-it-alone policy are retained. the slogan of overtaking the uk inoears in total production of basic industrial items is now dead. similarly, the regime has dropped its one-time goal of producing Uotons of crude steelnd it probably would be satisfied now if it attained half that amount.
economic elements important to the chinese communist advanced weapons program include the extent of soviet aid, chinese industrial capabilities, and economic priorities. soviet technical assistance to industryncluding services of technicians and scientists,data, and assistance embodied in machineryhas been very small independent chinese technological capabilities in industry 6eem to have been overrated in the past, judging from the many reports receivedbout difficulties in operating existing industries and in completing even the simpler construction projects abandoned by soviet technicians in thexodus. this situation of extremely limited technical resources suggests that the chinese must allocate their relatively few competent scientists and technicians with great care to activities of the highest priority.
extent
ertain supplying materials andto the advanced weapons program must compete for scarce resources with the development of industries supporting agriculture, which is now another high-priority area. in view of the slight improvement in
tha agricultural situation, however. It la likely that some limited program fcr advanced weaponsw accorded top
E. Foreign Trade
Prospects for increasing the foreign trade of Communist China are limited, partly because of Peking's heightened desire for self-sufficiency. The Slno-Sovlet trade pactigned in Moscow onfteronths of talks. So Indication of the level of trade anticipated this year waa given, suggesting that Slno^oviet trade inwill continue at roughly the low level Although China may turn to the West to replace some Sloe sources of machinery, such purchasea probably will be selective. The Chinese will continue to be reluctant to buy machinery that they cannotand repair themselves. Moreover, accordingemberhinese technical mission that recently toured Uestem Europe, it will be Chinese policy to import technology mainly by importing prototypes, including whole plants, to be copied inractice that tha Chinese have used to some extent in the past. In view of tbe backvard-neaa of the Chinese machine buildingolicy of importing primarily prototypes wouldlow method of building up industrial technology.
The outlook for trade with Japan la obscure ln spite of the signingong-term trade agreement ln Japan couldighly profitable market for low-priced, bulky minerals such as salt, aagnesite, coal, and Iron ore that are hard for Communist China to sell elsewhere. Perhaps for political reasons, however, China has not made large quantities of auch products available at attractive prices and conditions, and erratic and unstable political relations have discouraged potential Japanese industrial users from regarding Chinaource for large quantities of auch products. Nevertheless, Slno-Japanese trade has been rising slowly and may continue to expend.
Further disruptive effects on China's economy wouldomplete Slno-Sovlet break, but the Chinese could recover from this break if they were willing to pay the economic and political costs of Increasing their trade with non-Bloc countries. 0 million of the exports to Bloc countries2 could be diverted to non-Bloc markets, on amount at least equal to Chinese imports from Bloc countries The Chinese could import from non-Bloc countries all of the chemicals and metals imported from the Soviet Bloc2 and nearly all of the machinery and equipment, the petroleum products, and the industrial raw materials. Large-scale diversion of Chinese trade from Bloc to non-Bloc countries wouldinitial costs to the Chinese of developing new markets for their exports and new sources for their imports and would require costly and
tine-consuming adjustments to Western specifications for most machinery imports. Chinese attempts to expand exports to non-bloc countries, after on initial adjustment period, would run into increasingbecause the marketing of greater quantities of Chinese products would disrupt some Western commodity markets. In addition, large-scale expansion of trade with non-Bloc countries would place restraints on Chinese foreign policy, including the subordination of political goaln ln trade with Japan, and would require the Chinese to supply technical data to Western businessmen, to accept non-Bloc technicians In China, and to send Chinese personnel outside the Bloc for training.
F. Population
Regardless of what approach the Chinese Communists may take to economic recovery in theears, the population pressure on food resources will continue toajor underlying problem. The rate of population growth averaged anercent3lowed downercent in recent years, and probably will rise if average diets improve. There is little that thecan do to control the birth rate effectively, especially in rural areas where social beliefs are hard to change and medical services are poor. Since the spring ofa low-key campaign has been conducted in urban areas to encourage late marriages and family planning, but thla policy will haveegligible effect or. the national birth rate. The idea of birth control is not popular among Marxists In any case, and the stress in China, sinceh Plenum in September, on increasing labor productivity ln both industry and agriculture suggests that the leadership continues to hold the orthodox view which regards population primarilyroductive asset ratherroblem.
-
Original document.
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