Foreign Relations of the United States, 1964–1968, Volume XXX, China

118. National Intelligence Estimate¹

NIE 13–5–66

Washington, January 13, 1966.

COMMUNIST CHINA’S ECONOMIC PROSPECTS

The Problem

This estimate focuses on the two factors which dominate the economic scene in Communist China: a huge and rapidly growing population living close to the margin of bare subsistence, and the regime’s determination to invest in costly weapons programs.

Note

We noted in NIE 13–64, “Economic Prospects for Communist China” (28 January 1964), that the information available for an appraisal of the Chinese Communist economy is fragmentary, uneven in coverage, and uncertain as to reliability. There has been no significant improvement; although open-source information is currently supplying somewhat more data on production trends, these data are still spotty and consist mainly of percentage increases over an unknown base. A major intelligence collection effort is focused on this target, and continuing efforts are made to increase its effectiveness.

Conclusions

A. Communist China has managed in the past five years to pull the economy back from the brink of catastrophe and has made progress in its programs to acquire modern weapons.

B. The Vietnam conflict has not yet added serious strains to the Chinese economy. However, a sustained increase in the level of fighting in Vietnam, if accompanied by a comparable rise in Chinese assistance as well as significant defensive measures within China itself, would add greatly to China’s economic problems.

C. In any event, the Chinese economy faces slow growth, at best, over the next few years. The primary causes will be lagging agricultural production and a burgeoning population, but these problems will be complicated by the ambitious military program and by the inefficiencies brought on by Peking’s ideology. In agriculture, despite somewhat greater support in the last few years, the regime is still not doing enough to achieve the yields necessary for sustained economic growth. Since Peking’s birth control program will have little early effect, population pressure on the food supply will increase over the next decade. This narrow food margin makes the economy highly vulnerable to bad crop conditions. Moreover, growing competition for resources in China’s sluggish and nonresilient economy seems likely gradually to undermine economic stability.

D. In the face of even a critical food emergency, the present regime would probably make only grudging and piecemeal cuts in its military programs. Although China will continue to be a dangerous and growing military threat, we believe that some future Chinese leadership will be forced to a fundamental concentration on China’s economic problems.

[Here follows the Discussion portion of the estimate.]

1. Source: Department of State, INR/EAP Files: Lot 90 D 110. Secret; Controlled Dissem. According to a note on the cover sheet, the estimate was submitted by Director of Central Intelligence Raborn and prepared by the CIA and the intelligence organizations of the Departments of State and Defense, and the National Security Agency. All members of the U.S Intelligence Board concurred on January 28 except the AEC and FBI representatives, who abstained on the grounds that the subject was outside their jurisdiction.