All Commentary
Thursday, March 1, 1973

Is Red China an Economic Paper Tiger?

Mr. Brodin, economic journalist and foreign correspondent, is working on his doctoral dissertation in Sweden.

In the wake of President Nixon’s well-publicized trip to China in the spring of 1972, many of the world’s businessmen began to get visions of a brand new market with 800 million customers. Representatives of a great many of the world’s industries and export firms made their way to various trade fairs in China. At the Canton fair in the spring of 1972, for example, 16,000 foreign businessmen were present, 1,500 from Japan alone representing almost 1,000 firms. No doubt these business interests were partly responsible for the ouster of Japan’s Premier Sato, and for the recent diplomatic recognition of Communist China by Japan. An early advocate of Red China’s international recognition is Sweden, who at the same fair had representatives from 147 firms. The Swedish Trade Minister also was there and expressed the hope for a 100 to 200 per cent rise in Swedish-Chinese trade.

Did Nixon’s visit with Chairman Mao thus open vast new trade possibilities between Communist China and the world of business beyond the “Bamboo Curtain”? We can only make guesses from some of the statistics published in China, from reports from recent visitors, and of course from the “gnomes of Hong Kong” who often have amazingly accurate reports from “contacts” who can freely pass from the British Crown Colony to Mainland China.

First of all, we are not even sure of the population of Mainland China, which has been variously estimated as 750 or 800 million. But numbers alone do not make China a consumer of international goods. Mainland China’s foreign trade has risen from $1 billion in 1950 to $4.2 billion in 1971. This is comparable to the foreign trade of Italy, or of Yugoslavia, and some 20 per cent less than that of tiny Hong Kong with its four million population. Even with one-fourth of the world’s population, Red China’s share of world trade is but two-thirds of one percent.

Peking’s income from external trade amounted in 1970 to $2.8 billion, with imports of $2.1 billion. Such imports amount to about $2.50 per person per year. Only four per cent of China’s Gross National Product is ascribed to foreign trade. It is evident, therefore, that China may either (for economic reasons) be incapable of being a viable international trading partner, or it chooses (for ideological reasons) to be a self-sufficing economy. That the latter might be the objective is evident from many official statements which insist on self-reliance and reflect the traditional Chinese hatred of foreigners. Expressed in Maoist terminology, reliance on foreign trade is “bourgeois” thinking full of “veneration of foreign technology.”

Trade patterns of Mainland China since the revolution show several changes. Foreign trade in 1966 was higher than that of 1971. It declined to $3.7 billion in 1967, then started slowly to rise again. Communist China’s main trading partner in the past had been the Soviet Union — $2 billion in 1959 — but by 1970 it had declined to a mere $55 million, indicating a complete reversal of Chinese foreign trade patterns. Formerly, 60 per cent of Mainland China’s trade was with Communist countries; now the main trading partners are Japan ($822 million in 1970), Hong Kong ($477 million), the Federal Republic of Germany ($253 million), and Great Britain ($187 million).

And where does the United States fit into this trade picture? It is too early to know what future trade relationships may be, except that they are not likely to be very significant. United States’ trade with Communist China, since restrictions began to be gradually removed in 1970, had risen by February 1972 to a mere $5 million of imports by the United States. (United States imports from Nationalist China (Taiwan) during the first nine and a half months of 1972 amounted to $2.3 billion. U.S. imports from Japan amounted to $4.9 billion in 1969, $5.9 billion in 1970.)

‘The problem in international trade for Mainland China is that they have so few products which are attractive to or needed by industrialized nations; or, if they have these products, a poor or inadequately developed infrastructure makes transport and shipping difficult. If tempted to think of 800 million potential consumers, one ought to take a closer look at the internal economy of China.

China is an underdeveloped country with a per capita income among the lowest in the world. In an authoritative series of articles in November 1971, the Italian journal Successo estimated the annual per capita income in Red China to be between $93 and $97. Richman in Industrial Society in Communist China puts the figure (in 1966) at between $70 and $100, whereas the more optimistic report on China by Business International estimates it to be $111 in 1969, with a possible rise to $122 by 1980. (By that time, for comparison, estimated annual per capita income would be $3,600 for Australia, $4,517 for Japan, and $6,655 for the United States.)

It is evident that such income severely limits what the Chinese peasant can afford to buy from abroad. By the best estimates possible, a Chinese peasant today may have a monthly income of about $20, an industrial worker about $25. One of Red China’s leading authors, Hao Jan, reports a monthly income from the Peking government amounting to $44. But, it can be argued, if foodstuff and other necessities are cheap, these statistics might not be meaningful. This does not seem to be the case, however. From visitors, and chiefly from some of the refugees who are still fleeing Communist China at about 30,000 a year, we learn that the Chinese worker (with an average wage of $24 a month) will have to work from 7 to 15 days for a sweater, 70 to 80 days for a raincoat, and three months for a bicycle or a sewing machine.

Mainland China is in desperate need of industrialization in order to become self-sufficient in the goods necessary for its citizens, let alone any surplus for export. Its “Great Leap Forward” and other economic innovations turned out to be costly mistakes for the Chinese economy. It is evident that Red China needs first of all to make technical advances in its agricultural sector, and then to expand and modernize its industrial sector. Visitors to China are invariably shown a mechanized commune and a chemical fertilizer factory — showing the priority of their interests. As in any developing society, the agricultural sector is very important; China must first feed its large and expanding population. (The rate of growth has been variously estimated at 1.4 per cent to 2.5 per cent per annum, and the higher figure is more probable.) But it is the individualistic Chinese peasant who has been one of the chief headaches to the Communist regime, what with his opposition to communes and collectivist thinking. It is also in the agricultural sector where most charges of “sabotage” have been leveled.

“Class enemies and capitalists are always finding opportunities to try to wreck the collective economy” reports the Red Chinese theoretical journal, Red Flag, and this was due to the “failure of low-echelon party-cadres of following Mao Tse-tung’s line.” Peking’s Kwangning Daily of November 9, 1972, reported that “capitalism has reared its ugly head in productive teams in Sinkiang Province.” And according to People’s Daily (Peking) an “evil anarchism wind” has also swept across Mongolia which has “encouraged many to lean toward capitalism.” It appears that some of the “sabotage” is due to dissatisfaction among the thousands of students who are being shipped into the interior for compulsive (corrective) farm labor. China Mail for September 2, 1972, reports that a veritable black market in rationing cards has begun by such students “after they had been banished to the countryside.”

As long as agricultural and technical improvement and changes can be determined only by the Thoughts of Chairman Mao (poetical though they may be) there are slim chances for any real expansion in the economy of Mainland China. The Hopei Daily of November 13, 1972, in a typical reaction to a farm problem: “Under the criticism and rectification campaign, sustained anti-drought efforts have led to comparatively satisfactory harvests… Chairman Mao’s policy must be strictly observed… [and] vehement attacks must be launched against Liu Shao-chi….”

Such ideological, rather than technical, ideas are also at work in the embryonic Chinese industry. Jonathan Unger, writing a perceptive article in Far East Economic Review, attributes the slow growth of Red Chinese industry to chauvinism and ideological preoccupation which prevents the Chinese from learning new methods and importing technical innovations from abroad. The chairman of Alfa-Romeo of Italy commented, during a visit to China in 1971, that the technical efficiency of a Chinese automobile plant in Shanghai was comparable to that of his own plant in 1910.

It will be a long time until the visions of massive trade with Mainland China by the world’s businessmen and industrialists can be realized. First, the Chinese will have to abandon the unworkable ideas of Communism and the equally unworkable ideas of Chairman Mao. Until then, it is likely that Communist China will remain an “economic paper tiger.”