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Pitfalls in the use of China's Foreign Trade Statistics

  • Kang Chao

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There has been an impression among students of China that foreign trade data published by Peking are generally more reliable and accurate than its other statistics. This confidence is based on the following grounds. First, since the early years of the régime most foreign trade has been handled by a small number of state companies under the Foreign Trade Ministry. These companies are large in size and well organised, hence they must have respectable accounting and statistical systems. The exports and imports by private firms existing in the early 1950s were recorded by the customs office. Therefore, foreign trade turnovers for the period as a whole are relatively complete and free from serious errors. Secondly, since foreign trade always involves other countries as trading partners, which usually publish their trade statistics in great detail, it is unwise, if not impossible, for the Chinese authorities to falsify their own foreign trade statistics.

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1 See Chao, Kang, “Yuan-Dollar Price Ratios in Communist China and the United States,” in Two Studies on Mainland China's Economy (The University of Michigan Center for Chinese Studies, Occasional Paper No. 2).

2 Chi-chuang, Yeh, “On Foreign Trade,” a speech delivered to the fourth session of the First National People's Congress on July 11, 1957, Hsin Hua Pan-yueh K'an (New China Semi-Monthly), 1957, No. 16, pp. 9094.

3 Yeh Chi-chuang, op. cit.

5 For a detailed discussion, see Chao, Kang and Mah, Feng-hwa, “A Study of the Rouble-Yuan Exchange Rate,” The China Quarterly, No. 17, pp. 192204. When we were preparing that article, we only knew that suggestions had been raised in 1957 to adjust the rate to 2 roubles to 1 yuan and that this new rate appeared for the first time in a Chinese official document in July 1959. But we had no idea about when the adoption of the new rate actually took place. Now I am prone to believe that the new rate became effective in 1959 because, as will be shown later, the yuan-rouble rate implied by Sino-Soviet trade returns was still about 1:1 in 1958. The signing of the agreement on the conversion of the national currencies between China and the Soviet Union in 1959 seems to be an outgrowth of the adjustment of the rouble-yuan exchange rate, see the People's Daily (Jen-min Jih-pao), 12 15, 1959. I also suspect that the adjustment of the rouble-yuan rate in 1959 was precisely the reason why the Chinese Government did not publish the volume of total foreign trade for that year despite the fact that its trade volume as shown by other countries' trade returns reached a record high in 1959. It is easy to understand. Since the rouble-yuan rate was adjusted to 2:1, China's trade with Communist countries in that year, when converted into yuan, would be cut by half. This would consequently show a drastic but spurious decline in China's total foreign trade. I would also like to point out that a Russian source gives the trade rate of yuan and roubles exactly at 1 to 1 for April 1950 up to 1960, see Aizenberg, I. P., Valintnaia Sistema SSSR (Moscow: 1962), p. 149. No matter whether this information is accurate or not, the differences between it and my findings have little effect on the discussion and conclusions reached in this article.

6 See Kang Chao and Feng-hwa Mah, op. cit.

7 See various volumes of Collection of Treaties of the People's Republic of China, compiled by China's Ministry of Foreign Affairs (Peking: Law Publishing House).

8 Kang Chao and Feng-hwa Mah, op. cit.

9 See Kuang-ming Daily, 06 19, 1957, People's Daily, 07 14, 1957, and New York Times, 05 9, 1964.

10 Hsien-nien, Li, “Report on 1956 Final Accounts and 1957 State Budget,” New China Semi-Monthly, No. 14, 1957, p. 21.

11 For the derivation of those figures, a detailed analysis of various Soviet credits to Communist China, and other related matters, see Chao, Kang, “A Study of the Soviet Loans to Communist China,” China Weekly, No. 256, Hong Kong, November 25, 1957, pp. 12–15.

12 Sino-Soviet Agreement on Soviet Granting Credit to China, Collection of Treaties of the People's Republic of China (Peking: Law Publishing House, 1957), I, p. 45, Article 2.

14 Sino-Soviet Trade Agreement, signed on April 19, 1950, Collection of Treaties, I, p. 47, Article 5; and Sino-Soviet Protocol on Mutually Agreed Terms for the Delivery of Goods, signed on April 19, 1950, Collection of Treaties, I, p. 50, Articles 1 and 2.

15 Editor's note on p. 49, Collection of Treaties, I.

16 Li Hsien-nien, op. cit.

17 Sino-Soviet Agreement on the Soviet Union Granting Credit to China, signed on February 14, 1950, Article 3.

18 Sino-Soviet Trade Agreement, signed on April 19, 1950, Article 7.

19 Protocol on Sino-Soviet Trade for 1953, Collection of Treaties, II, p. 44, Article 2.

20 Sino-Soviet Agreement on Soviet Granting Credit to China, signed on February 14, 1950, Article 4; and Protocol on Sino-Soviet Trade for 1953, Article 2.

21 Sino-Soviet Trade Agreement, signed on April 19, 1950, Article 5.

22 Li Hsien-nien, op. cit.

26 For instance, see the figure quoted in Hakosaki, “Sino-Soviet Economic Relations,” Soviet Studies, Soviet Research Institute, Tokyo, No. 104, 1961, p. 14.

27 It was given in an editorial in People's Daily, 04 9, 1956.

28 Using the rate of 4 roubles to the dollar and 2·617 yuan to the dollar, which was the official rate since 1957, 5,294 million yuan is converted into 8,092 million roubles. More recently, the figure of 1,816 million new roubles as the total for Soviet loans to China has been repeatedly cited in some Soviet official statements (see New York Times, April 4, 1964 and Kommunist, No. 5, 1964). This figure has been most puzzling to those who do not understand the very complicated exchange rate system in Communist China. The 1,816 million new roubles is nothing but a newly converted figure of the previously reported 8·1 billion old roubles. If one multiplies 1,816 million new roubles by the new dollar-rouble rate of 1.11:1, he will get $2,015 million which, if compared with Li Hsien-nien's figure (5,294 million yuan), gives an exchange rate also at 2·62 yuan to the dollar. Moreover, this new figure in fact strengthens my argument that the U.S. dollar has been used as an accounting unit for all Soviet loans to China. In other words, the sum of the Soviet credits to China was $2,015 million which can be converted either into 8·1 billion old roubles according to the old rouble-dollar rate or into 1,816 million new roubles according to the new rouble-dollar rate. Had all the loans not been connected with dollar accounts at all, the Soviet Union would have used the 10 to 1 conversion rate between old roubles and new roubles. Then, 8·1 billion old roubles is equivalent to 810 million new roubles, or 1,816 million new roubles is equivalent to 18·16 billion old roubles. However, there is a really puzzling element in the information which the Russians have recently released. They mention in Kommunist, No. 5, that this total includes eleven long-term credits. One possible interpretation is that the Korean war loan was made in several separate credit agreements according to the nature of the war expenditures involved and/or that the transfers of the Soviet shares in four Joint Stock Companies were concluded in four separate documents but the official announcement of the transfers combined the four separate transactions.

29 Sino-Soviet Trade Agreement, signed on April 19, 1950, Collection of Treaties, I, p. 48.

30 The only exceptions are the years 1954–57 when China was receiving loans and in the meantime amortising the outstanding credits in instalments. Part of the current loan payments were “balanced” by the repayments. However, they are relatively small in size and would not invalidate my argument here.

31 Alternatively, one may count this sum as including $70 million from the second economic loan and an annual instalment of $60 million from the first economic loan. Thus, another $60 million left from the second loan was carried over to 1956 and 1957.

32 A recent letter from the Chinese Communist Party to the Soviet Union mentions that most of the total Soviet loans was for the purchase of war materials during the Korean War period. See New York Times, 05 9, 1964.

33 Kuang Ming Daily, 06 19, 1957; and People's Daily, 07 14, 1957.

34 For example, the story related by a Chinese Communist cadre who escaped from Canton. See Central Daily, 02 20, 1964, Taipei.

35 Communiqué of the Conference between the Chinese Delegation and the Korean Delegation, November 23, 1953, Collection of Treaties, II, p. 3.

36 They include: Tzu-ying, Wang, “Public Finance in Our Country,” Ta Kung Pao, 01 27, 1955;Pei-hsin, Yang, “Problems of Capital Accumulation in the First Five-Year Plan,” Ching-chi Yen-chiu (Economic Research), No. 4, 1955; Ching-Chih, Wang, Our Country's Budget (Peking: Popular Readings Publishing House, 1956), p. 20; Chi-hsi, Feng, “The Growth of Our National Economy as Viewed from the State Budgets,” Tung-chi Kung-tso (Statistical Work), No. 12, 1957;Public Finance, No. 8, 1957, p. 32; Chih-ta, Ke, China's Budget in the Transition Period (Peking: Public Finance Publishing House, 1957), pp. 16 and 53; Tan-ke, Wu, The State Budget (Peking: New Knowledge Publishing House, 1957), p. 105

37 The totals of various categories of budgetary expenditures for the period 1950–52 as a whole are (in million yuan):

They have been computed from Ten Great Years, p. 23.

38 This is very close to what Professor Holzman has called the “customs union effect” or “mutual price discrimination” in the trade among European Communist countries. See Holzman, H. D., “Soviet Foreign Trade Pricing and the Questions of Discrimination: A Customs Union Approach,” Review of Economics and Statistics, 05 1962, pp. 134147.

* I have greatly benefited from talks with Professor Alexander Eckstein on various issues discussed in this paper.

Pitfalls in the use of China's Foreign Trade Statistics

  • Kang Chao

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