Foreign Relations of the United States, 1961–1963, Volume XXII, Northeast Asia

17. Special National Intelligence Estimate⁰

SNIE 13-61

Washington, April 4, 1961.

THE ECONOMIC SITUATION IN COMMUNIST CHINA

The Problem

To assess current Chinese Communist economic difficulties, with special reference to the food situation, and to estimate their economic and political consequences: (a) over the next few years, and (b) in the event 1961 should prove a poor crop year.

Conclusions

1. The Chinese Communist regime is now facing the most serious economic difficulties it has confronted since it consolidated its power over mainland China. As a result of economic mismanagement, and, especially, of two years of unfavorable weather, food production in 1960 was little if any larger than in 1957—at which time there were about 50 million fewer Chinese to feed. Widespread famine does not appear to be at hand, but in some provinces many people are now on a bare subsistence diet and the bitterest suffering lies immediately ahead in the period before the June harvests. The dislocations caused by the “Leap Forward” and the removal of Soviet technicians have disrupted China’s industrialization program. These difficulties have sharply reduced the rate of economic growth during 1960 and have created a serious balance of payments problem. Public morale, especially in rural areas, is almost certainly at its lowest point since the Communists assumed power, and there have been some instances of open dissidence. (Paras. 7-25)

2. The Chinese Communist regime has responded by giving agriculture a higher priority, dropping the “Leap Forward” approach in industry, and relaxing somewhat the economic demands on the people. Perhaps the best indicator of the severity of the food shortage has been Peiping’s action in scheduling the importation of nearly three million tons of food-grains during 1961, at a cost of about $200 million of Communist China’s limited foreign currency holdings. (Paras. 26-30)

3. While normal crop weather in 1961 would significantly improve farm output over the levels of 1959 and 1960, at least two years of average or better harvests will be required to overcome the crisis and permit a restoration of the diet to tolerable levels, some rebuilding of domestic stocks, and the resumption of net food exports. If Soviet technicians in large numbers do not return to China, industrial production is likely to increase about 12 percent annually, as compared with about 33 percent in 1959 and 16 percent in 1960. (Paras. 31-35)

4. If 1961 is another poor crop year the economic and political effects for Communist China are likely to be grave. There probably would be no increase in gross national product (GNP) in 1961, and growth prospects for later years would also be affected. Unless there were substantial food imports, malnutrition and disease would become widespread, and a considerable amount of starvation probably would occur. Public disaffection probably would become a major problem for the regime, perhaps forcing it to undertake a massive campaign of threats and terror. It is unlikely even in these circumstances, however, that public disaffection could threaten continued control of China by its present leadership. (Paras. 38-40)

5. We do not believe that Peiping would accept food offers from the US even under conditions of widespread famine. (Para. 42)

6. We do not believe that even famine conditions would, in themselves, cause Peiping to engage in direct military aggression. Such difficulties probably would, however, prompt Peiping to avoid actions which would exacerbate its relations with Moscow. (Paras. 40-41)

[Here follow paragraphs 7-42, comprising the discussion portion of the estimate, and a map showing China’s agricultural areas.]

0. Source: Department of State, INR/EAP Files: Lot 90 D 110. Secret. According to a note on the cover sheet, the Central Intelligence Agency and the intelligence organizations of the Departments of State, the Army, the Navy, the Air Force, the Joint Staff, and the National Security Agency participated in the preparation of this estimate. All members of the USIB concurred in this estimate except the representatives of the AEC and the FBI, who abstained on the grounds that the subject was outside their jurisdiction.