Red China's Trade

COMMUNIST China plays an important part in the Soviet economic offensive, which started under Stalin but really got under way in 1954. This offensive has been marked by an increase in trade with the free world, the extension of credits to countries outside the Soviet orbit, and the provision of technical assistance to all who will take it — particularly the uncommitted countries, the main target.

There have been a rapid flowering of bilateral and barter agreements with many countries in Asia and some in South America, an extravagant participation in trade fairs, and a well-advertised series of state visits by those far from genial traveling salesmen, Khrushchev and Bulganin. In almost every capital of Asia, Soviet and satellite diplomats have tried to create the impression that the Soviet bloc has nothing but the most generous intentions toward countries which wish to modernize their economies and preserve their independence.

Communist powers have always traded with the rest of the world, but credits and technical assistance outside the Soviet bloc are new developments. The granting of credits at 2.5 per cent interest on a long-range basis, with no strings attached, is obviously designed, among other things, to embarrass the United States and the international monetary agencies, which charge 4.75 per cent and demand careful investigation of every project. The contributions which the Soviet Union now gives to the United Nations Technical Assistance Fund, which it boycotted and denounced up till 1953, are made in rubles, and all technical training must take place in Soviet bloc countries, contrary to the established pattern.

Otherwise the Soviet approach is not dissimilar to that of the United States, except that the recipient country usually pays for the service and there is heavy emphasis on the industrial arts. There are hundreds of Soviet technicians in 1 ndia working on steel, petroleum, coal, and diamond mining projects, and there are more than seven hundred Indians studying in the Soviet Union.

Russia is also building technical training institutes in the host countries — for example, the Bombay Technological Institute, the nuclear reactor establishment in Egypt, the technical institute in Rangoon. Soviet bloc scientists are on tour lecturing in the Middle East and other parts of Asia, and visitors to the Soviet Union report on the large numbers of Asian students and visitors traveling or studying in that land. For political reasons many technicians from the East European satellites are sent abroad, and even Communist China supplies a few technicians to Cambodia and India and has encouraged students of neighboring countries in Southeast Asia to come to the mainland for training.

China looks to Russia

Communist China goes along with the general policies of the Soviet bloc, but it plays a special role within the bloc and in Southeast Asia. The Soviet Union and the satellites are very active in Burma and Indonesia, and at the meeting of the United Nations Regional Commission in Bangkok in March, 1957, the Soviet Union offered to expand its trade and increase its economic cooperation with member countries of the Economic Commission for Asia and the Far East. The Soviet proposed to extend technical and economic assistance without strings, supply scholarships and fellowships to the Soviet Union, assist Asian nations in their economic planning, and contribute toward establishment of an Asian institute for technical research and studies in nuclear science.

The Soviet delegate naturally warned Asian nations against imperialist monopolies which, he said, encouraged agricultural rather than industrial development in Asia. This year the Soviet Union will hold a seminar on economic plans, and Asia will be invited to send participants to learn from Soviet experience. Southeast Asia is clearly an important target for all the Soviet bloc countries.

Communist China is in no position to export heavy industrial goods to its neighbors in Southeast Asia. The fact that Peiping’s export of light industry products is not the result of excess production over domestic needs clearly means that other objectives are dominant. There is probably a need for foreign exchange for use in trading with other bloc members, but the main purpose seems to be political.

It is well to remember that the Chinese Communists first of all completely reoriented their trade to the Soviet orbit in the early years of the regime, at a time when they had access to Western markets by virtue of British recognition, and at least 80 per cent of Communist China’s trade is now with the Soviet bloc. Such moves as were made toward the non-Communist countries were directed mainly toward those countries where the political atmosphere was favorable—Burma, India, Ceylon, Indonesia, Nepal, all of which recognized Peiping by August, 1950. Then came the Korean War, the freezing of Chinese assets, and the UN denunciation of Communist China as an aggressor. It was during this period that Peiping concluded its first barter trade agreement with India in January, 1951.

The importance of barter

The political significance of this act, at a time when Communist China was an outcast, was much greater than its economic importance. Peiping had broken the line. This success was followed in September, 1951, by a rice-rubber agreement with Ceylon. In 1952 Peiping concluded a private agreement with an unofficial Japanese trade delegation which was not important economically but was certainly a political triumph, because it gave an opportunity to tempt Japan with prospects of large Chinese-Japanese trade in the future.

The first trade agreements with Pakistan and Indonesia followed in 1953. By the time that SEATO came into being in September, 1954, the Chinese Communists were sending trade delegations to many countries, and everywhere they spoke of trade, peace, economic development, and the reduction of international tensions. At the Bandung Conference, Chou En-lai presented Communist China as the harbinger of peace, negotiated a new dualnationality agreement with Indonesia on the status of the overseas Chinese, and reached out to Thailand, Japan, and the Philippines, its not too friendly neighbors. Then began a long scries of state visits, trade delegations, and other devices to “ease international tensions.”

Communist China’s total trade grew from around $2.3 billion in 1952 to $3.7 billion in 1955, and of this, around $800 million was with non-Communist countries, an increase of about $200 million. For those who argue that Peiping is strongly interested in developing trade with the West, it is worth noting that during this period Peiping’s trade with the Soviet bloc also increased: it rose from 72 per cent of its total trade in 1952 to 80 per cent in 1955.

If there were any doubts as to Peiping’s overriding political objectives before this time, they were cleared up by Mao Tse-tung in his definition of Peiping’s policy in September, 1956: “We must endeavor to establish normal diplomatic relations on the basis of mutual respect for territorial integrity and sovereignty, and equality and mutual benefit, with all countries willing to live peacefully with us. We must give active support to the national independence and liberation movement in countries in Asia, Africa, and Latin America as well as to the peace movement and righteous struggles in all countries throughout the world.”

Dual motives

Communist China’s political motivations are twofold: to build up Communist China as a powerful, industrially based military-economic power, and to penetrate and subvert the neighboring countries of Southeast Asia. The trick is to make the one serve the other. The Chinese Communists have to export in order to import certain selected items as determined by the needs of their economic development plans, and they are apparently determined to maintain a favorable balance of trade with the free world in order to help pay for the goods they get from the Soviet bloc or from the free world by way of the bloc.

The more the Chinese Communists earned in their trade with the free world during the last five years, the more they bought from the Soviet bloc — an awkward piece of information for those who argue that our trade restrictions have forced Peiping to trade with Moscow.

The degree of success that Communist China has in building up a favorable trade balance will have a bearing on the pace of Communist China’s industrialization. This is an important consideration and one for which great sacrifices would be made. As most, if not all, of the favorable trade balance comes from Communist China’s trade with Southeast Asian countries and Hong Kong, this consideration has a great deal to do with the way in which Peiping pursues its political objectives in those areas.

From the point of view of its industrial base and communication system, Communist China is really a heavily armed cripple, but so long as it is allied with Moscow it is a power to be reckoned with, and in any case it towers over those neighbors that are trying to be neutral. This military posture is coupled with a pervasive propaganda, which is most persuasive when men are most afraid. Political power, as Mao so delicately put it, grows out of the barrel of a gun; behind the Five Principles and the public wooing are covert pressures. These pressures are applied largely through the overseas Chinese minorities in Southeast Asian countries.

Pressure on the Chinese overseas

Because of the presence of Chinese minorities in the countries of Southeast Asia, Peiping is in a position to make a unique contribution to the “new look” of the Soviet bloc. Here economic and political advantage go hand in hand. While the shadow of Peiping’s military power lengthened over the lands to the south, the Communist Chinese went out of their way to encourage the flow of investments from the overseas Chinese by giving them advantageous terms as to interest rates, taxes, landownership, and freedom of travel — all of which are denied to ordinary citizens.

These measures have had some effect, even though it is a short time since the brutal treatment of businessmen on the mainland in the three-anti and five-anti movements during the Korean War. Money is moving to the mainland through the Overseas Chinese Investment Companies, which were formed for the special purpose of attracting savings, and there is considerable coming and going between the home country and Chinese settlements abroad.

Trade with Communist China is growing even in Thailand. As trade and political infiltration steadily move ahead, the overt attitudes of overseas Chinese toward Peiping begin to show measurable changes, but the pace is not forced nor will it be until the time is ripe. Nothing is done to scare the host government at this stage; the flag will follow trade.

One of the most important weapons in Southeast Asia for Communist China is prestige. In this regard, the grants made by Peiping to Cambodia and Nepal are particularly significant. In June, 1956, Peiping announced a grant of $22.4 million to Cambodia for two years to be spent on materials for the construction of textile mills, cement, paper, and plywood plants, universities, hospitals, youth and sports centers, roads, bridges, and power plants. The following month nine Soviet experts arrived to survey the possibilities of industrial and agricultural investments.

This grant was followed by a trade and payment agreement with Czechoslovakia by which manufactured goods were to be exchanged for Cambodian rubber, corn, pepper, rice, and leather. Czechoslovakia also promised scientific and technical equipment and technicians. But China had made the biggest splash, in spite of Chou En-lai’s mock modest statement that “Because of our limited economic strength the assistance we can provide is rather insignificant.”

Bases for subversion

When the Cambodians discovered that the Chinese were trying to deduct the expenses of their good-will mission, including a football team, from the grant, they were a little disappointed. One of the weekly papers said, “Members of the Chinese economic aid mission in Cambodia, not yet having given anything to the Cambodians, are only engaging in political activities in our country.”

In October, 1956, Communist China made a grant of $12.6 million to Nepal, one third in money (paid on time) and two thirds in capital goods. Here again it is not the amount of money involved that is important, but the fact that the Soviet bloc has entered this strategic area and therefore has a base for infiltration and subversion.

Where Communist China has diplomatic missions, subversion is that much easier — witness the Communist influence in Chinese schools in Indonesia and the open training of cadres in Burma. Peiping immediately recognized Malaya when it achieved independence, a compliment not yet returned, but prudently keeps up the flow of indoctrinated Chinese students from Singapore to the guerrilla forces in the jungle.

Friendly relations with Thailand also are sought on the diplomatic, cultural, and economic levels, while cadres are being trained in the Thai autonomous area just across the border.

All around Communist China’s borders, infiltration and subversion arc the main threats, the real price that has to be paid for economic relations, cultural missions, and technical assistance.