is going to be humanitarian and so forth; but I do say that with all that they could-they can be strong, they can be unified; they can be dynamic; and the evidence is that they do have serious economic weaknesses; you have documented that and I am inclined to appreciate your position, and I think that Senator Mansfield had to admit that your analysis seemed to be sound.

Nevertheless, they do have a discipline and an authority over their people which I think is very, very hard not to recognize. Yes, sir?

Mr. LIU. Coercion, I think, is the word that might be used.

Now, I think the Chinese people are no more and no less intelligent than other peoples. Now, if we were told one day that Lin Piao is the most loyal comrade we have, the next day we were told he is the worst criminal in the world there is, I cannot help think that the Chinese would have some doubt about the political system that rules the country.

Mr. SCHWARTZ. May I say something?

Chairman PROXMIRE. Yes, sir.

Mr. SCHWARTZ. I think that that side of the picture must be stressed. It is a strange historic phenomenon here. I do think China may change quite drastically in the next few years, particularly after Mao's death. It is very difficult to tell in exactly which direction it will go and yet I don't think that this picture that visitors get of a kind of a determination to hold together is wholly a case of Potemkin's Village or simply a case of coercion. It is something that probably goes beyond political structures. There is a desire to hold together. I believe there is a deep desire to maintain China as a strong nation. I sense, however, that behind your question was another questionwhat if China does remain unified will it be a menace to the world? Chairman PROXMIRE. That is the question that I was basically asking.

Mr. SCHWARTZ. Yes. Let us assume for the moment-putting aside the doubts-that it will remain unified. Here I would point to the constraints placed on China by the world environment in which it finds itself. I think it is always wrong to say that any society is inherently and eternally "aggressive" or "nonaggressive." Any society given a certain turn in history may be aggressive at times and nonaggressive at others. Thus I wouldn't want to make any blanket assertions concerning the distant future.

I would just submit that China is in a world where it confronts other formidable nuclear powers, where it has all kinds of external constraints on it. Unless one assumes a leadership that is wildly irrational—and, of course, that may happen-I would doubt that even a China of 800 million (and 800 million people are as much a problem as an asset) and even a China that is strongly united can easily conquer the world. With a rational leadership I would think that they would realize they were in a world where formidable power continues to reside elsewhere. Chairman PROXMIRE. Yes, sir.

Mr. LIU. Mr. Chairman, I don't think any regime can really unify the Chinese mainland without being humanistic, without paying proper respect to the better part of the Chinese long civilization; in other words, this is a fairly theoretical question, whether the Communist system as such can ever unite a country.

Chairman PROXMIRE. A very interesting observation.
Mr. SCHWARTZ. All I would add to that-

Chairman PROXMIRE. Let me think of that a little bit, because I think it is a fascinating observation. You say only a humanistic government can unify the Chinese people. I wonder if a humanistic government can ever really unify any people; humanism being the kind of thing which seems to me allows difference and dissent and for a considerable degree of divergence, and so forth.

Mr. Liu. Well, there have been many changes in the Chinese history, of course, many dynasties. The most successful one was the Tank dynasty. Of course, in the first few years it had to fight but after that it followed very humanistic sort of policies and it was still the best, one of the very best dynasties we had so that is a concrete example.

Chairman PROXMIRE. Best in terms of its kindness and decency and so forth?

Mr. LIU. Yes.

Chairman PROXMIRE. Was it effective in unifying that vast and divergent land?

Mr. Liu. Well, because it is humanistic and because it is kind, it therefore succeeded in unifying the country. The famous emperior is Tank Tai Tsung whose policies were really quite benevolent.

Mr. SCHWARTZ. I would add after Tank Tai Tsung had come to power in a sea of blood. I think that this is not a simple question. We talk of a "Communist system" and assume that we are discussing a clear and unchanging entity. I would certainly be prepared to call the present system in China a Communist system; China is still totalitarian but, as I mentioned before, China is in flux. What we now call communism in China is already different in many of its aspects (although the differences may not be attractive to many of us) from the Soviet Union. When we used the term a "Communist system" in the 1940's, what we meant was Stalinist Russia with its specific political organization and its specific economic organization.

As I have tried to indicate in my statement, in the economics sphere the Chinese leadership has departed most drastically from the Soviet way of doing things. Their political structure remains in flux.

I think there is even hope of their moving in the direction of a somewhat greater relaxation and flexibility in the cultural and educational spheres.

In other words, the "system" may have within it the potentialities for change over time.

Chairman PROXMIRE. Thank you very, very much for your exchanges and responses. They have been very helpful.

The committee will stand in recess until tomorrow morning at 10 o'clock when we will have as our witnesses Owen Lattimore, director, department of Chinese studies, Leeds University; Prof. Joyce Kallgren, deputy director, center for Chinese studies, University of California at Berkeley; and Prof. Yuan-li Wu, University of San Francisco and Hoover Institute.

(Whereupon, at 12:45 p.m., the committee was recessed, to reconvene at 10 a.m., Wednesday, June 14, 1972.)

ECONOMIC DEVELOPMENTS IN MAINLAND CHINA

WEDNESDAY, JUNE 14, 1972

CONGRESS OF THE UNITED STATES,
JOINT ECONOMIC COMMITTEE,
Washington, D.C.

The committee met, pursuant to recess, at 10:05 a.m., in room S-407, the Capitol Building, Hon. William Proxmire (chairman of the committee) presiding.

Present: Senators Proxmire, Fulbright, and Javits; and Representative Boggs.

Also present: John R. Stark, executive director; Loughlin F. McHugh, senior economist; John R. Karlik and Courtenay M. Slater, economists; Lucy A. Falcone, research economist; George D. Krumbhaar, Jr., and Walter B. Laessig, minority counsels; and Leslie J. Bander, minority economist.

OPENING STATEMENT OF CHAIRMAN PROXMIRE

Chairman PROXMIRE. The committee will come to order.

Our first day of hearings on China was a most productive one. Led off by Senator Mansfield, the majority leader, and Senator Scott, the minority leader, there were a number of points of agreement and some differences in judgment.

Points of agreement were: (1) Although China may continue to bear a heavy defense burden, it will use its capabilities primarily on its own borders. Thus, if we withdraw from Indochina, we may expect little danger of military threat from the People's Republic of China; (2) the major shortrun problem is Vietnam; Taiwan is a longrun problem; (3) trade and exchanges may be modest but are of value; (4) China's major external concern is with the Soviet Union.

Points of disagreement are: (1) Is China strong, unified, and dynamic? (2) Is the present Chinese regime stable? Will the stability continue? If not, why not? (3) Can we assess China's economic performance? Are they doing better outside the defense area? (4) How is China ruled-by coercion or consent?

We feel that not only are United States-Chinese relations changing-which is long overdue-but China itself is changing.

During the course of our study, and increasingly as the hearings progress, we are struck by the need for a thoroughgoing reassessment of China. We are aware that many of the larger questions cannot be definitively answered. But we are making progress. Our new relations with China will help us make more progress.

For those of you who received the hearings announcement, I am pleased to add the name of Col. Angus Fraser, USMC (retired), a distinguished military analyst, to our third day of hearings.

Today we turn first to Prof. Owen Lattimore. We are especially honored to hear from Prof. Owen Lattimore, one of the world's leading specialists on Chinese, Mongolian, and Asian affairs in general. Mr. Lattimore has flown over here from England where he has been instrumental in developing a fine program of Chinese studies at his center in Leeds College.

Once we could call Professor Lattimore our own. Because of the terrible attacks of my predecessor, Senator Joseph McCarthy, in hounding Professor Lattimore unmercifully for views which today are recognized as facts of life, he decided to emigrate to another land. Professor Lattimore, as Senator from Wisconsin, I want to take this occasion to apologize to you for the indignities you suffered in the ordeal of the early 1950's. I hope it will never again happen to any man. I think it is time, certainly, that we should recognize that whether we agree or disagree on foreign policy matters, we should not question the patriotism and devotion to the fundamental principles of our country of a man who just happens to disagree with us. If there is one fundamental tenet in our democracy, it is the notion that people can express themselves according to their own conscience, no matter how that may disagree with somebody who happens to hold office and to hold power, whether it is senatorial power or executive power.

Despite your protestations of lack of familiarity with the current China scene, we know you are one of the most knowledgeable experts in this field, and we shall gain lasting insights from your testimony today. Go right ahead, sir.

STATEMENT OF OWEN LATTIMORE, PROFESSOR AND DIRECTOR, DEPARTMENT OF CHINESE STUDIES, LEEDS UNIVERSITY, UNITED KINGDOM

Mr. LATTIMORE. Thank you, Senator.

Chairman PROXMIRE. I should say--and I want to apologize again; this is most embarrassing to me with these distinguished witnesseswe did this to the majority and minority leaders yesterday. We have a timer here, and we try to limit your testimony to 10 minutes and then after that go into questions so we can have more time for questions.

Mr. LATTIMORE. Thank you, Senator. Before the timer goes on, may I make just one correction. I was not hounded out of this country. I was engaged in teaching very successfully at Johns Hopkins University and suddenly, quite unexpectedly, from a university which I had never even visited, I received an invitation to go there and found a new department, which toward the end of a man's career is a wonderful opportunity to start something new based on a lifetime of experience and to be allowed to do it your own way. It is a very, very great compliment.

Chairman PROXMIRE. I appreciate that correction. Thank you, sir. Mr. LATTIMORE. Mr. Chairman and gentlemen, it is an honor to be asked to testify before this committee, but I should point out, before somebody else does, that my qualifications for the honor are limited. Although I spent some 25 years in China, my last visit was 27 years ago and lasted for only about 10 days, including Christmas 1945 and New Year's Day 1946. Unlike a number of other so-called American experts on China-none of us is really an expert-I was not there

during the years of the civil war which ended in the liberation of China by the Communists in 1949.

I have been asked to address myself in the first instance to the "People's Republic of China: An Economic Assessment" prepared by the able staff of this committee, but here again I must be careful not to pose as an authority.

Economics is a branch of mythology which I have never studied. All I can say is that I spent about 6 years as an employee of a business firm in China, rising to be manager of their Peking office. This was the office in which we kept a supply of grease for the palms of Government officials. In those years, which were years of chronic civil war, I also traveled frequently in the interior trying to negotiate passage for goods which had been held up either by corrupt officials or by warring armies. I therefore know something about the economics of corruption, and I can also say that I was a participant in the economics of imperialism in the years when it was breaking down.

While I doubt whether economics exists as a science, the world is full of economic facts and in my opinion the contributors to this "People's Republic of China: An Economic Assessment" have provided us with an admirable collection of facts, useful for a better American understanding of China. They have achieved a higher standard than most American academic studies of China; but then one must remember that the standard of academic studies of China is distinctly lower in America than it is in countries like England, or France, or Russia or Japan.

The merits of this study speak for themselves and will doubtless be made even more clear by questions asked by members of this committee. I shall, therefore, proceed directly to a few points on which, right or wrong, I have strong opinions.

To begin with, I think an historical introduction is desirable. China had what may be called a prerevolution lasting much longer than that in Russia. From 1911 there was always civil war in some part of the country. From 1931 there was a foreign invasion which occupied the richest parts of China. From 1945 there was renewed civil war, made worse by lavish American aid to the losing side. The mere cessation of fighting in 1949, therefore, and the installation of a government that really ruled the whole of China for the first time in nearly 40 years, was a genuine liberation and equivalent to the most massive relief program in China's history.

One should next proceed directly to what may be called the American factor in Chinese politics.

Since President Truman and the beginning of the cold war, it has been a Washington shibboleth that you can't, you mustn't negotiate with Communists except from a position of strength. Yet the stark, staring, naked truth is that today, under President Nixon, America is for the first time trying to deal with both China and Russia from a position of weakness. Only the agile histrionics of the President and Mr. Kissinger distract attention from the fact that the emperor has no clothes.

It is America's growing weakness, and especially defeat in Vietnam, that marks the difference between the great cultural revolution period and the present period in China. The years of the cultural revolution were the years in which Chinese statesmen had to face a real danger that American bombing might be escalated all the way into China,