1. Data are from International Monetary Fund, Direction of Trade Tapes and from OECD, Statistics of Foreign Trade, Monthly Bulletin.

Furthermore, according to this theory, economic constraints will continue to hamper expansion of China's trade. If China's trade does expand significantly, it will be primarily because China's domestic economic situation has stabilized and its balance of payments has turned favorable in the past 2 years.

An alternative scenario would stress the effect of political factors on China's foreign trade. Thus the low levels of trade are explained largely by a Chinese aversion to economic dependence on the outside world, resulting from a long history of exploitation by the colonial powers, and most recently by the Soviets. The radicals and moderates may not have differed substantially over China's financial policies; however, they disagreed sharply over trade policies. In particular, the policy of exporting oil and other raw materials to pay for imports of high technology goods from the West was anathema to the radicals. While the radicals may not have been ensconced in the State Council and the bureaucracy, they nevertheless wielded significant influence over policymakers through their control of the press and their positions in the party. The radicals tempered what would have been an expansionist trade policy, which Chou and Teng wanted to institute. Fear of attacks by the radicals prevented the moderates from openly espousing such policies. Thus, statements by moderates that China must remain self-reliant and that China did not condone exploitation of its natural resources, were merely rhetoric-concessions the moderates were forced to make to the radicals.

According to this theory, there is a high correlation between the waxing and waning influence of the radicals and the contraction and expansion of China's trade. Commercial activity fell off at the height of the Cultural Revolution, expanded rapidly with the increasing influence of the moderates, began to contract during the anti-Lin anti-Confucius campaign, increased briefly during Teng's short reign at the end of 1975, then nearly collapsed following his purge. Since the ouster of the "gang of four," imports have again picked up, following the new leadership's call for a return to the active trade policies followed by Chou En-lai.

According to this theory, the radicals did not need to "take over" the Ministry of Foreign Trade in order to influence trade policytheir influence was more pervasive. Bureaucrats responsible for carrying out day-to-day trade operations, not wanting to be on the wrong side of the fence, became intransigent during periods of heated debate. Chinese exporters demanded prices that were prohibitively high so that they could not be blamed for giving away their products. Import negotiations, likewise, slowed or came to a standstill because of inflexibility on the part of Chinese negotiators.

The logical conclusion to this scenario is that now, with the demise of the "gang of four," the moderates are free to pursue more expansionist trade policies and China's trade is likely to take a new leap forward within the not-too-distant future.

D. The Impact of Economics and Politics on Trade

The interplay of global and domestic economic factors and of Chinese politics is complex, and the relative impact of each of these on China's trade policies and operations cannot be weighed with much precision. If economic factors were sufficient to explain not

only the absolute level but also changes in the level of China's foreign trade, the first scenario would be closest to the truth and the second could be largely discarded. And, vice versa. Since China's political struggle undoubtedly has had some restraining effect on trade, determining which scenario is closest to the truth hinges in large part on knowing the motives and intents of the individuals involved. Assessments of this nature are always tenuous, and doubly so in China's case. The sources of information for making judgments on the motives and the positions of China's leaders are largely limited to the articles. that appear in the Chinese press. Those in power control the press, and any Chinese account of the period-either those appearing now or at the height of the radicals' attack-is bound to be biased. Undoubtedly the differences between the radicals and the moderates were magnified in the propaganda as the radicals sought to discredit their moderate opponents, and vice versa. The sensitivities of the Chinese populace made the trade issue an easy target for the radicals to exploit. On the other hand, the long history of debate about China's relationship to the rest of the world suggests that the recent debates were not mere polemics but also reflected genuine differences over trade policies. Moreover, the debates are not likely to end simply because the "gang of four" has been ousted.

Thus, we are left with the untidy conclusion that both scenarios are needed to explain all that has taken place in China's foreign trade. The political struggle probably tempered general trade policy through most of the 1970's and held down trade initiatives and other trading operations at least in 1976. Yet, many changes in trends of major commodity imports correlate well with domestic and international economic forces, strongly suggesting influences having little to do with Chinese domestic politics.

V. POST-MAO TRADE: PROSPECTS FOR FUTURE GROWTH

The pro-trade rhetoric emanating from Peking and the ambitious economic goals announced at the recent National People's Congress point to some sizable increases in trade over the next 8 years. Imports of foreign technology will be the major feature in China's purchasing plans, industrial supplies will rise as production picks up, and agricultural imports will continue at varying levels. Export growth will be the key determinant of import expansion although the use of credits, perhaps under somewhat more liberal financial policies, will permit higher initial rates of trade growth.

Overall, trade may grow at perhaps 10 to 20 percent per year. Self-reliance is still the stated policy, albeit with a more pragmatic interpretation. Peking is cognizant of the lessons of the past and will continue to react to trade imbalances and balance of payments problems.

Trade expansion, of course, will mean greater exposure of China's trade sector to domestic and international forces. Prices, commodity shortages, and exchange rate fluctuations will influence trade patterns. Also, as in the past, domestic economic setbacks and political turmoil may alter the course of China's trade in the future.

A. Export Potential

China's export mix comprises a broad range of foodstuffs, raw materials, textiles, and light manufacturers. These goods face the twin problems of either inadequate supply for marketable products such as nonferrous metals, or limited demand for such items as crude animal materials. Through 1985 China could reasonably boost its exports at least 10 percent a year. Peking's current strategy appears to aim at rapid short-term growth in exports of crude oil and coal with a gradually accelerating growth in exports of manufactures.

1. ENERGY EXPORTS

While increased sales of energy resources, particularly oil, have been touted by Peking, the long-term potential for such exports is uncertain. Projections suggest that rising domestic demand together with a levelling off in the growth of output will cause a decline in the amount of oil available for export by the mid-1980's. China's reserves are plentiful, but again, rising domestic demand and the need for investment in this sector will hinder export growth. For the near term, exportable surpluses of oil exist, yet marketability is hampered by high prices, high transport costs, and undesirable refining characteristics.

Japan, at present, is the only viable major market. The long-term agreement (1978-85) signed with Japan in February 1978, will secure a market for China's oil and coal. Deliveries for the first 5 years will total 47 million tons of oil and 9.2 million tons of coal. Quantities will rise gradually to 1982 goals of 15 million tons of oil and 6.8 million tons for coal. Increased quantities for the last 3 years of the agreement will not be negotiated until 1981. Oil and coal exports over the life of the agreement are to total $10 billion. Although the agreement is helpful to the Chinese for planning purposes, problems still exist on the Japanese side. The 15 million-ton goal is about 4 million tons more than the Japanese refiners presently desire and will require the construction of costly cracking facilities in Japan. Thus, the prospects for major increases after 1982 appear doubtful.

2. TRADITIONAL EXPORTS

China will continue to export sizable amounts of agricultural products, but the share of the agricultural sector in China's total exports will likely decline from its present 37 percent. Even if China is able to attain the ambitious targets set for agricultural output in the current plan, population increases and demands for improved living standards will hold down growth of foodstuff exports.

Manufactured goods seem to offer the most favorable area in which to boost exports by moving into higher value-added items. China has had good success in increasing sales from its manufacturing sector and has stated its intention to raise the share of manufactures in total exports. Chinese trade delegations are roving the world seeking better knowledge of foreign markets; trading corporations are making greater efforts to produce goods to buyer specifications and to insure

7 Central Intelligence Agency, Office of Economic Research "China: Energy Balance Projections, 1980 and 1985," in Congressional Research Service Library of Congress, "Project Interdependence: U.S. and World Energy Outlook Through 1990," Washington, D.C., U.S. Government Printing Office, November 1977, pp. 858-881.

prompt delivery; and two new trade corporations-China National Packaging Corp. and China National Arts & Crafts Import-Export Corp.-have been set up. Also, officials have talked of setting up industrial plants to specialize in export products. Given its abundant supply of low-wage labor, China should be able to make further gains in exports of light manufactures at the lower end of the technology scale.

Large export growth will not come overnight. In the short run, progress will still be hampered by inadequate supply, because many of the raw materials come from China's slow-growing agricultural sector. Learning foreign markets and upgrading the quality of export goods will be a slow process. Expanding exports of manufactures to the West, particularly the developed countries, will also expose China to the uncertainties of shifting tastes. Moreover, export growth will create some problems of its own. Higher levels of many traditional exports will run into barriers from protectionist actions, especially for sensitive products such as textiles and footwear, and from growth of competing industries in the Third World. Japan, Australia, and Canada have already restricted imports of Chinese silk, textiles and footwear, and the European Community insisted on a safeguard clause in the recent trade agreement with China to prevent market disruption.

B. Import Prospects

While exports will be the determining factor, imports will be the raison d'etre for China's trade expansion in the future. Purchases of foreign plant and equipment will be a major component of China's economic modernization drive, industrial supplies will help sustain growth in industrial production, and agricultural imports will compensate for shortfalls in the farm sector. Because imports will be tailored largely to export growth, they will likely grow at roughly the same rate over the 8-year period. The use of import financing (to be discussed in the next section) will permit more rapid import growth in the beginning.

1. TECHNOLOGY PURCHASES

Imports of foreign technology lay at the heart of the periodic debates over self-reliance. With Teng Hsiao-ping the driving force, the current leadership is stressing a pragmatic line on learning from foreign countries and acquiring advanced technology. Import priorities may not be firmed up yet and there could still be some disagreement within the leadership over the proper level of such purchases. A new round of contract signings is not yet underway, but judging from the number of inquiries and negotiations and the size of the facilities under consideration the level of purchases will far outstrip that of the 1970-75 period. One major indicator is the Sino-Japanese long term agreement which commits Peking to purchase $10 billion in Japanese equipment including about $8 billion in complete plants. If Japan were to increase its share of PRC plant purchases to one-half, compared with about a third in the 1970-75 period, total plant contracts during 1978-85 would be more than five times the level of 1970-75. Besides plants, Chinese purchases of other major machinery and transport equipment could push total technology purchases to the $30 billion range over the next 8 years.