Office of the Historian

272. National Intelligence Estimate1

NIE 13–5–67
Washington, June 29, 1967.

ECONOMIC OUTLOOK FOR COMMUNIST CHINA

Conclusions

A.
Economic activity in China, especially in the industrial sector, is being slowed by the Cultural Revolution. Nevertheless, military production and development continue to enjoy a high priority, and have been considerably aided by imports from the Free World.
B.
Foreign trade has grown, and the non-Communist world now accounts for three-fourths of China’s trade. China’s balance of payments position has improved over the past two years. Support of North Vietnam has been substantially increased during the past year, but imposes no undue strain on the Chinese economy.
C.
The economic outlook depends heavily upon the development of the political situation. During the next year or two, assuming a continuation of the present level of political turmoil, the economy seems likely to deteriorate somewhat, though probably not to the point of causing a sharp decline in industrial production, widespread unemployment, or acute food shortages. The weapons programs could be continued, though some stretch out in particular items might be necessary.
D.
We think it unlikely that Mao will achieve sufficient political success in the Cultural Revolution to permit him to embark upon a new economic initiative similar to the Leap Forward. When Mao disappears from the scene, there will probably be a period of confused contesting for power during which economic recovery will be neither rapid nor sure.
E.
The unfavorable food-population ratio, the economic costs and imbalances inherent in the military program, and the shortcomings of the educational system are problems likely to persist for at least a decade. A pragmatic regime could probably surmount them, but any successor to the present regime will also inherit some of the ambitious political goals of its predecessor. These will strongly affect the allocation of resources, probably at the expense of laying foundations for self-sustaining economic growth.

[Here follows the Discussion portion of the estimate.]

  1. Source: Department of State, S/S Files: Lot 90 D 110. Secret; Controlled Dissem. According to a note on the cover sheet, the estimate was submitted by Deputy Director of Central Intelligence Rufus Taylor and prepared by the Central Intelligence Agency 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 June 29, except the Assist-ant Director of the Federal Bureau of Investigation, who abstained because the subject was outside his jurisdiction.↩