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9. National Intelligence Estimate1

NIE 13–64

ECONOMIC PROSPECTS FOR COMMUNIST CHINA

The Problem

To assess the problems and performance of Communist China's economy, and its prospects over the next few years.

[Page 16]

Note

Firm information on Communist China remains so sparse that precise economic analysis is not possible and even broad judgments are subject to error. The Estimate should be read in the light of this general caution. Annex A2 gives a brief description of our information on the Chinese Communist economy.

Conclusions

A.
The Chinese economy has recovered somewhat from its 1960–1961 low, but its prospects are considerably worse than in 1957.3 Any Chinese government would face monumental economic problems resulting from the huge and growing population, inadequate arable land, and the low level of technology. The problems of the Chinese Communists are compounded by their own past errors, their ideological compulsions, the break with the Soviet Union, and extreme nationalism. (Paras. 1–10)4
B.
Grain output in 1963 was no greater than in 1957, when there were some 75 million fewer people to feed. Peiping's mismanagement and the post-1960 decline of Soviet support have grievously hurt the industrial sector; total output in 1963 remains far below the 1959 peak. A few priority industries, such as those supporting agriculture and the petroleum industry, are operating at close to capacity, but many suffer from unbalanced development, technological deficiencies, and shortages of parts and raw materials. Foreign trade is at the lowest point since 1954. That with the Soviet Union has declined more than 60 percent since 1959, and China has become a substantial importer of food from the Free World. (Paras. 11–26)
C.
We believe that the Chinese Communists will seek and obtain additional credits and technical assistance from the Free World, but in relatively modest amounts. We do not believe that diplomatic recognition by France and other Free World countries will alter this picture substantially. (Para. 27)
D.
We believe that agricultural production in the next few years is unlikely to grow much faster than the population, and that industry will grow at a rate well below what was achieved in the mid-1950s. The Chinese are likely to continue to devote more attention to agriculture in both [Page 17]their domestic and import programs, but will probably not divert enough resources from industry and the arms program to put agriculture on a sound footing. We believe that the Chinese will be anxious to revert to a policy favoring industrial development, and will be prone to do so prematurely. We believe that difficulties will accumulate in the economy, within the leadership, and between the regime and the people. We thus do not believe that China can become a modern industrial state for many years. China's direct military threat to the West will remain limited, but China will continue to be a major force in Asia, and a crucial menace to its Asian neighbors and to Western interests in the area. (Paras. 29–39)

[Here follows the Discussion portion of the estimate.]

  1. Source: Department of State, INR/EAP Files: Lot 90 D 110, NIE 13–64. Secret; Controlled Dissem. According to a note on the cover sheet, the estimate was submitted by the Director of Central Intelligence and concurred in by the U.S. Intelligence Board on January 28. The Central Intelligence Agency and the intelligence organizations of the Departments of State, Defense, the Army, the Navy, the Air Force, and the National Security Agency participated in the preparation of the estimate. All members of the U.S. Intelligence Board concurred, except the Atomic Energy Commission Representative and the Assistant to the Director of the Federal Bureau of Investigation, who abstained on the grounds that the subject was outside their jurisdiction.
  2. Attached but not printed.
  3. In the following discussion we use 1957 as a base year for comparison because it was the eve of the Great Leap Forward, and because the per capita grain output in that year represents a level of production that provided farmers and factory workers an adequate diet, made grain imports unnecessary, and permitted the export of modest amounts of grain and other agricultural products. [Footnote in the source text.]
  4. The paragraph numbers refer to the discussion portion of the estimate, which is not printed.