could easily be 7.6 billion metric tons. Offshore reserves will add appreciably to these estimates.

Current exploration is concentrated in existing fields and in the Pohai Gulf. At least three jack-up rigs and perhaps a semi-submersible are working in the Pohai.

Exports of crude rose to more than 4 million tons in 1974 and should exceed 8 million tons in 1975, earning the Chinese more than $700 million.

In 1974, oil accounted for 17 percent of the primary energy produced in China, up from 2 percent in 1957 and 11 percent in 1970. Industry and transportation are the largest consumers of petroleum. Agriculture is consuming a rapidly growing share, up from 9 percent in 1957 to 15-20 percent today.

China is the world's fifth largest producer of natural gas. Output in 1974 was approximately 60 billion cubic meters, 52 billion cubic meters of which was produced in Szechwan Province.

Refining capacity at mid-year 1974 is estimated at up to 47 million metric tons. The industry, whose technology is comparable to Western refining industries in the late 1950's, satisfies China's product needs.

Since 1974, the People's Republic has added almost 2,000 kilometers of new pipeline, largely to facilitate oil exports, and has invested heavily in port and handling facilities and tankers.

By 1980, China should be producing more than 200 million tons of crude oil annually of which approximately 50 million tons may be exported. Peking is unlikely to allow foreigners to participate extensively in the development of its oil resources. For the foreseeable future, dealings with outsiders will be limited to straightforward purchases of equipment, technology, and services. (Williams, pp. 225-226.)

Some Japanese sources expect oil exports to rise from the current level of around 5 to as much as 25 million metric tons by 1978.

If PRC exports reach levels predicted by some Japanese sources they could earn the following amounts (at $12.85 per barrel) in future years: 1978-$4 billion (45 million metric tons); 1985-$9 billion (100) million metric tons); 1988-$12 billion (135 million metric tons).

By 1990 China may join Saudi Arabia, Iran, the United States and the Soviet Union as one of the five major oil-producing nations if a Japanese estimate of production of 450 million metric tons is exceeded. (Kim, pp. 606–607.)

8. Are Chinese industrial branches, e.g., iron and steel, comparable to similar branches in other industrial nations?

In its first 25 years, the People's Republic of China has made rapid progress in developing the key iron and steel industry. With the help of the Soviet Union, a number of large iron and steel bases were developed in the 1950's. Since then, advances have been made on the basis of China's own efforts and selective help from non-Communist countries. Some new technology has been introducedparticularly the basic oxygen furnace which has increased production efficiency— and the quality and variety of steel products have improved. Annual production of crude steel is now in the neighborhood of 25 million metric tons, making China the sixth largest producer in the world.

China has the potential for a much larger iron and steel industry. Three factors have been holding back development:

China's domestic resources of iron ore and coal, although plentiful, are of a low quality and must be given special treatment. * * *

The Chinese had not yet trained a fully competent work force when the Soviet technicians were withdrawn in 1960.

Capital shortages in the general economy have led to imbalance in the iron and steel industry. For example, the mining sector has been allocated a minimum of capital forcing it to operate in a labor-intensive fashion. * * * The Chinese are moving to correct these deficiencies, mostly through imports of modern capital equipment. Mining and ore beneficiating equipment and a large steel finishing facility have been purchased in the last few years.

Installation of this equipment will take several years, and demand for steel products will meanwhile continue to rise. Therefore, the present imbalances probably will persist through the 1970's, with output rising at only a moderate rate. Beyond 1980, progress in the industry will depend on how rapidly the

PRC improves its own capacity to produce the needed machinery and equipment and how willing it is to devote large amounts of foreign exchange to pay for steelmaking equipment and technology. (Usack and Egan, pp. 264–265.)

China relies heavily on Japan for basic metal.

Since 1968 Japan has exported over one million tons of iron and steel annually and China is Japan's second largest customer (the United States is the largest). Japan exported 1.4 million tons in 1972-7-8 percent of its total steel exports. Iron and steel account for over 40 percent of Japan's total exports to China, being the single largest export item. Thus, China is an important and stable market for the Japanese iron and steel industry.

The large volume of Sino-Japanese trade in iron and steel can be ascribed to several factors: the coincidence of China's increased demands and Japan's production capacity; geographical proximity; the quality of Japanese product; Japan's reputation for making deliveries on time; and a relatively low price. Apart from the question of China's continued demands, there is some ques tion regarding Japan's export capacity. Japan's steel production will face numerous difficulties environmental problems, energy problems, labor problemsand may be unable to maintain its high rate of growth. (Kim, p. 608.)

9. Has China developed a modern domestic and international telecommunications system? Is its development based on the expansion of Chinese production capability, imports, or both?

For nearly a quarter of a century, the People's Republic of China has engaged in a series of programs aimed at establishing a telecommunications system that would meet the basic needs for the economy, the government, and the armed forces. When the Communists achieved power in 1949, they inherited a primitive and badly damaged telecommunications system. For the next three years, the main task was to restore the system to its former state to satisfy the most pressing communications needs of the new government.

By 1953, the Communists were prepared to expand the existing system and to link the major provincial cities to Peking by open wire trunklines. Substantial progress was made during the First Five-Year Plan (1953-57), although the Chinese were heavily dependent on Soviet and East European equipment and technology. In 1958, as part of the euphoric Great Leap Forward, Peking announced a new four-year plan to establish a modern telecommunications system, complete with high-capacity microwave radio relay and coaxial cable trunk routes. Shortages of material and equipment, the withdrawal of Soviet assistance in mid-1960, and the general collapse of the Leap Forward forced the Chinese to postpone their highly ambitions program.

After a pause in the early 1960's, expansion of the telecommunications system was again given high priority.

Greater attention was given to the development of the electronics industry. Complete plants for the production of electronic components and test instrumentation were imported from the West. The Cultural Revolution (1966–69) caused a sharp but short-lived cut in industrial production. The adverse effect of the production of telecommunications equipment was temporary, and the technological improvement and the expansion of the capacity of the electronics industry continued.

The most significant achievement during China's current Five-Year Plan (1971-75) has been the construction of an arterial network of long-distance telecommunications facilities to provide the transmission base for future increases in the flow of conventional and specialized telephone, telegraph, and video traffic. Other achievements during this period have been the spread of radio, wire diffusion, and television broadcasting facilities and the establishment of a nationwide television network. This has been accompanied by substantial increases in the production of radio and television receivers and wired loudspeakers. Progress also has been made in augmenting both facsimile facilities and automating conventional telegraph operations as well as in enlarging and automating telephone exchanges. These achievements have fulfilled China's basic needs for long-range development of a domstic telecommunications system.

Progress also has been made in developing China's international telecommunications. Since 1972, three standard Intelsat ground stations have been purchased from the United States. A coaxial cable link has been established between Canton and Hong Kong, and agreement has been reached with a Japanese consortium to

lay a coaxial submarine cable from Shanghai to Japan. Efforts also are being made to improve the quality of radio telephone circuits and to expand international telecommunications by using the transit relay services offered by major world telecommunication centers. ** (Craig, p. 290.)

10. How has the organization and performance of the construction sector contributed to the formation of capital in the PRC?

In a developing country, construction typically grows faster than GNP. This trend holds true for the People's Republic of China. Reverses, attributable to the Great Leap Forward (1958-60) and the Cultural Revolution (1966-68), depressed all indexes. Construction and industrial output were more volatile than GNP: both fell further than GNP in bad times and grew faster in good times. Current construction activity in China reflects the revised investment priorities of late 1972 and 1973, under which Peking is attempting to bolster deficiencies in agricultural and industrial performance. Construction activity now features industrial projects supporting agriculture, the buildup of electric power capacity, port and harbor improvements, and capital improvements in the raw materials industry (mining). China in 1973 contracted with Japan, the United States, and Western Europe for $1.2 billion worth of industrial plants-mainly chemical fertilizer and artificial fiber plants. In 1974, plant purchases were about $900 million, dominated by the steel rolling mill (more than $500 million) to be built at Wu-han.

For the next two to five years, construction activity will feature industries producing chemical products, raw materials, and electric power. This activity will include the construction of the numerous foreign plants now under contract. Construction in the mining industry will give priority to opencut mining, a technology in which China has much to learn from the West. Construction of major new facilities at international ports will parallel the expansion of foreign trade. The steel industry will continue to have high priority in construction, with the major emphasis on capacity to produce finished steel. The petroleum industry has been speeding up its already fast pace. Development during the next few years will give top billing to oil pipelines and to the opening up of offshore deposits in the shallow Pohai Gulf. (MacFarlane, pp. 314, 322.)

11. What are the limits or constraints on the growth of agricultural output? Even with burgeoning population will the Chinese be able to adequately feed and clothe their population?

In spite of serious attention and significant progress agricultural performance remains a major economic variable. How well the PRC will be able to cope with the problem of improved performance is a subject on which specialists differ.

Peking has assured itself of grain for the medium term and has made the sizable adjustments in investment priorities necessary for longer term solution to the agricultural problem.

Major changes include:

Concluding multi-year agreements with Canada, Australia and Argentina to provide a maximum of 4.8 million tons of grain annually through 1976.

Downgrading the concept of the small plant churning out low quality in

puts.

Importing 13 large chemical fertilizer plants to provide firstclass inputs and synthetic fiber plants to supplement supplies of natural fibers.

Intensifying work on capital construction projects to improve and extend farmland.

Limiting sideline activities that might interfere with peasant obligations to the collective.

Increasing the acreage of grain crops by expanding multiple cropping and limiting the acreage of industrial crops.

The fertilizer plants are the key to China's agricultural development. When the last of these plants come into operation in 1978 or 1979, China's supply of nitrogen fertilizer will reach 8.0 million tons, double the current availability. The giant increment in nitrogen fertilizer clearly will be a major shot in the arm for agriculture although marginal returns will probably be low, at least initially, because fertilizer will outstrip the availability of complementary inputs-effec

tive water control; very high yielding varieties of seed; sufficient trace elements, phosphoric and potassium fertilizers of agricultural chemicals, etc.-necessary for top yields. Even so, grain output could increase to about 300 million tons by 1980. Peking's use of its limited scientific capabilities to achieve practical short term objectives (such as simple seed selection and crossing) rather than to do basic, in-depth research (such as sophisticated varietal development) may prove to be the most serious impediment to China's progress in modernizing agriculture. Through the rest of this decade China will continue to rely on imports to maintain consumption, especially in years of below-normal harvests. Moreover, China's population and hence requirements for food and fiber for domestic consumption will also increase. Even with the accelerated programs to modernize agriculture, the PRC may not be able to attain self-sufficiency in both grain and essential non-grain crops by the end of this decade. (Erisman, pp. 325–326.)

The problems that Chinese agriculture will have to face over the coming decade differ markedly from those in other less developed countries. There are no obvious and gross inefficiencies in Chinese farming that could be quickly overcome if only the rural population would understand the needs to do so or if an effective extension service could be created that could teach them new methods. The Chinese extension service based in the commune system appears to have been functioning well for a decade or more. Where in the early 1960's there was a considerable backlog of new technology waiting on government actions to supply the required inputs, there is no comparable backlog today. And therein lies the problem.

At no time since 1949 have increases in Chinese farm output been achieved with ease, but there is reason to believe that future increases will require even greater effort and an effort of a somewhat different kind from that in the past. Future expansion is not simply a matter of digging more tube wells or pouring on more chemical fertilizer although both will help. New breakthroughs are required in the basic agricultural sciences in China and in the harnessing of the irrigation potential of China's northern rivers. * * *

*** it is clear that China's shift in priorities toward agriculture in the 1960's was both real and large in scale. * * *

For all this outpouring of effort and resources, however, there was no enormous leap in farm output. Agricultural production did rise, but at a rate only a little above population growth if the 1957-1974 period is taken as a whole. Rural incomes per capita did rise by more than this, but mainly as a result of the improvement in the agriculture-industry terms of trade.

The main reason why agricultural growth has not been faster appears to be simply that China is attempting to achieve large farm output increases under basically unfavorable conditions. When land under cultivation cannot be extended except at enormous expense and when inputs of fertilizer, water, and labor are already being intensively utilized, the return on further additions of these same inputs will not be high.

For the future, there is every reason to believe that Chinese agricultural output will continue to grow although no major breakthroughs appear to be in sight. To achieve this continued growth, however, some shift in emphasis in China's agricultural policies is probably necessary. The silt problem of China's northern rivers will have to be solved. There will also have to be a considerable improvement in the quality of China's research in the basic sciences. These changes appear to be well within China's capacities and they are likely to be carried out if for no other reason than that China appears to have few other options. China is simply too big to follow the lead of Japan or Europe and rely increasingly on imports to meet its food needs. (Perkins, pp. 350, 365.)

12. How is agriculture in the PRC organized to provide incentives and a measure of efficiency?

China's commune system consists of four parts: commune; brigade; team: and household. This system, born in the optimistic fervor of the Great Leap Forward in 1958, was reduced to a skeleton during the lean years from 1959–62, but has developed greatly in the past 12 years.

Currently, China has 50,000 communes, about 25.000 less than the number in existence in 1963. Essentially the commune level functions as the basic unit of local government. This level is charged with the responsibility of procuring grain, collecting taxes, providing public security, and reporting statistics and information to higher levels. In addition, it formulates specific production plans for its subordinate units after adapting policies received from higher levels to

local conditions. The commune also provides leadership for the management of water resources, construction, afforestation, and transportation projects which require the direction and control of a large organizational unit. Moreover, it manages local industries which produce consumer and producer goods for local consumption.

The persistence of the team as the basic unit and similarities in organization and ownership patterns of contemporary communes with those in 1962 tend to mask important changes which have taken place in the past 12 years at commune and brigade levels. These levels provide more services, control more inputs, have better trained cadres and stronger Party organizations than they did in 1962. Indeed, there has been ideological pressure in the Party to abolish the team and amalgamate households directly into brigades bringing agriculture one step closer to ultimate socialization. This pressure, understandably, has been supported by poorer teams desiring to increase their share of collective income. However, pressure to change the status of teams has been arrested by the newly passed 1975 Constitution which specifically sustains the continued functioning of these units. Moreover, the requirements of China's labor intensive agriculture necessitates a unit similar to the team in size and organization, which can effectively manage and motivate the farmers of China to produce the foodstuffs needed for this country's huge and growing population. (Crook, pp. 366–367.)

13. Is regional, rural dispersion of economic activity in China a result of economic or political choice or a product of necessity?

The encouragement of small-scale industries in rural areas in China is an essential element of regional development programs which today focus on agricultural development and diversification, local raw material utilization, resource mobilization and long term employment impact.

However, rural industry in China is not a homogenous concept as it is the outflow of two different strategy approaches. First, it is the logical outcome of a sector strategy involving technology choices in a number of industrial sectorsmost of which were initiated during the Great Leap Forward or earlier. This has required the scaling down of modern large-scale technology through a product and/or quality choice combined with design changes in the manufacturing process. Second, rural industry is part of an integrated rural development strategy also initiated during the Great Leap Forward-where a number of activities are integrated within or closely related to the commune system. They are often rooted in the traditional sector of the economy. and have often been preceded by a long tradition of village crafts. Such industries are often based on the scaling up of village crafts. The scaling up of cottage industries in China is not based on improvement of technology alone, but the cottage industries have been converted into modern small-scale industries through cooperativization, electrification and access to low cost simple machinery. ***

The justification of rural industrialization is economic as well as political. Economic growth may, however, in the short run have been sacrificed because of the need to transfer technical, financial and planning resources to rural areas in order to start rural industrialization is likely to contribute to a more rapid economic growth than would otherwise have been possible. Firstly, a decentralized pattern of urban development is likely to lead to a less capital-intensive expansion of industrial growth, which is better adapted to prevailing factor availabilities and relative factor prices. Secondly, if a majority of the rural population-through integrated rural development-might be persuaded to remain in villages and expanding county capitals, this is likely to require less investment for expanding large urban centers. Thirdly, rural industrialization provides the opportunity of simultaneously promoting agricultural and nonagricultural elements in the same local areas and non-agricultural elements are just as dependent on a thriving increase in farm output and income as the latter are dependent on them. Fourthly, a rural industrialization which has a strong core of local engineering enterprises is likely to play an important role in any decentralized industrialization policy. (Sigurdson, pp. 411, 433.)

14. What does an assessment of Chinese military force development and use of force reveal about the strategic policy of the PRC?

*The professional judgments on Chinese strategic policy have been based on a review of the kinds of forces the PRC had developed and maintained and the use to which these forces have been put. From this assessment some central conclusions have been reached :

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