A-3. China: Imports by area and country, c.i.f.... 735 A-4. Aggregate dollar price and terms of trade indexes for China's trade with non-Communist countries..... 736 A-5. China: Exports to non-Communist countries... 736 A-6. China: Imports from non-Communist countries, f.o.b..... 737 A-7. China: Commodity composition of exports, f.o.b., by sector of origin.. 737 A-8. China: Commodity composition of imports, c.i.f., by end use. 738 738 A-10. China: Foreign debt position, 1970-76- 740 741 I. INTRODUCTION China's foreign trade, although a small component of gross national product, plays an important role in sustaining and modernizing the Chinese economy. A relatively small trade' sector, of course, is expected of a vast and populous country such as China, which has extensive domestic resources and a huge domestic market. Yet, the share of trade in China's GNP, only about 5 percent, is low by world standards reflecting the residual role assigned trade in the centrally planned economy and the conservative attitudes toward trade as a result of historical and more recent experiences. * In this paper, the term trade means foreign trade. Trade is the balancing sector in the planning process with imports making up for shortfalls in domestic production and providing goods that cannot be produced in sufficient quantity, or at all, in China. Exports are not viewed as an end in themselves but as a means to pay for imports. Moreover, trade and financial policy has been very cautious, colored by Peking's view of the unhappy experiences with trade in both pre-1949 China and the period of Soviet cooperation in the 1950's. Self-reliance has been the guiding principle although its interpretation has been the subject of some debate in China over the years. Never officially defined, self-reliance has been described in such terms as "maintaining independence," "relying primarily on our own efforts," "keeping the initiative in our own hands," and "learning what is good from foreign countries." In practice, since the SinoSoviet split, self-reliance has meant spreading imports among different suppliers, balancing trade over time, and making only sparing use of credits. Despite its small share and conservative policy, trade has been quite important to the PRC. Imports aided the rebuilding of China's industrial base in the 1950's, have alleviated agricultural failures, and have provided industrial supplies and advanced technology to spur economic growth and modernization. In addition, trade has often provided a useful entree in China's relations with other countries. China's trade since the 1950's has followed the changing fortunes of the economy, rising during periods of economic stability and suffering from the economic setbacks of the Great Leap Forward and the Cultural Revolution. This paper will focus on China's trade sector in the 1970's, a period of rapid trade growth, then setbacks, and policy debate. Trade trends in the 1970-76 period will be examined along with the economic and political influences on the trade sector. For the future, China's trade prospects will be discussed in light of the renewed emphasis on trade by the Hua regime and of China's economic capabilities and limitations. II. TRADE IN PERSPECTIVE-THE FIRST TWO DECADES 2 A. The 1950's-Lean to One Side Economic and political necessity led to heavy dependence on the U.S.S.R. The need to rebuild the economy amid the Western trade embargo imposed during the Korean War impelled Mao Tse-tung to pursue a policy of "leaning to one side," by which China based its industrial and technological growth on a rapid buildup of trade with the Communist countries. As a result of the close economic cooperation with the U.S.S.R. and Eastern Europe, trade between China and the Communist world shot from only $350 million in 1950 to almost $3 billion in 1959. (See Table A-1.) Trade with the West fell off after 1951 and accounted for only 25 percent of China's trade in 1955. (See fig. 1.) With the relaxation of Western trade restrictions in the second half of the decade, trade with the non-Communist countries rose. However, this trade still represented only about 30 percent of total PRC trade in 1959. ? For a more detailed treatment of this period see Robert L. Price, "International Trade of Communist China, 1950-65," in U.S. Joint Economic Committee, "An Economic Profile of Mainland China," Washington, D.C. U.S. Government Printing Office, 1967; and A. H. Usack and R. E. Batsavage; "The International Trade of the People's Republic of China," in U.S. Joint Economic Committee, "People's Republic of China: An Economic Assessment," Washington, D.C.: U.S. Government Printing Office, 1972. Dependence on the Soviet Union in the 1950's produced one of the largest technology transfers in history. Trade with the U.S.S.R.— about one-half of China's trade over the decade-provided the major impetus to China's industrialization efforts, supplying both capital goods and industrial raw materials such as petroleum and metals. From 1950 to 1959, the Soviets delivered 1.35 billion dollars worth of equipment and completed about 130 projects, including factories for trucks, machine tools, and generating equipment. In addition, the Soviets provided massive technical aid in the form of blueprints and technical information, some 10,000 Soviet technicians and advisers, and training for 15,000 Chinese in the U.S.S. R. Soviet financial aid helped, although only $430 million of the $1.4 billion in Soviet loans was specifically for economic development. More important for Peking was the U.S.S.R.'s and Eastern Europe's willingness to accept large amounts of China's raw materials and consumer goods in payment for Chinese imports. Despite the close cooperation over the period, tensions were building in the Sino-Soviet relationship. Disagreement over economic development strategy was an important factor in the growing dispute, particularly Mao's push to organize agricultural communes and his Great Leap Forward (1958-60). These two programs, in addition to the political strains they placed on Peking-Moscow ties, were also putting strains on China's agriculture and industry, which would affect trade in the years to come. B. The 1960's-Reorientation to the West The rift with the Soviet Union opened wider in midyear 1960 when Moscow withdrew its technicians, blueprints, and all. This was an added blow to the Chinese economy, already overstrained by poor agricultural performance and the excesses of the Great Leap. Many Soviet projects were abandoned or left in the planning stage and completed projects suffered from the lack of Soviet technical guidance. From 1960 to 1962 China's exports fell as industrial production declined, and imports were cut back sharply. Trade with the Communist countries plummeted from the $3 billion level of 1959 to only $1.1 billion in 1964. The U.S.S.R., and its ideological allies in Eastern Europe, Mongolia, and North Korea absorbed all the cuts as trade relations opened with Cuba and improved with Albania, Peking's partner in the split with Moscow. Trade levels would have been lower but for Peking's determination to repay its Soviet debts ahead of schedule by running a hefty surplus in trade with the U.S.S.R. from 1960 through 1965. Following a brief upturn in 1965-66, trade with the Communist countries fell below the billion dollar mark during the Cultural Revolution and accounted for only 20 percent of China's total trade in 1969. Offsetting the modest recovery in Sino-East European trade in the latter half of the decade was the steady decline in Sino-Soviet trade. Annual trade agreements were suspended in 1967 and relations hit bottom with the Sino-Soviet border clashes in 1969. Trade with the U.S.S.R., which had accounted for almost 55 percent of China's trade in 1959, was less than 2 percent of the total 10 years later. |