15

Capitalist Grain

Almost immediately after the recall of Soviet experts in July 1960, a triumvirate consisting of Zhou Enlai, Li Fuchun and Li Xiannian was put in charge of foreign trade.1 Their answer to Khrushchev’s action was to move the trade structure away from the Soviet Union towards the West. By the end of August, minister of foreign trade Ye Jizhuang instructed his representatives abroad to reduce imports from the socialist bloc. All negotiations for new trade agreements were to cease, with the exception of a few strategic projects such as steel from the Soviet Union for the Nanjing bridge. No new import contracts were to be signed, on the pretext that the price or specifications of the goods on offer were not satisfactory.2 Some foreign observers at the time talked about a ruthless blockade of China by the socialist camp,3 but the uncoupling of the economy from the Soviet Union and its allies was entirely initiated by Beijing.

However, China could not fob off former trade partners with quibbles about inadequate specifications for ever. By December 1960, with Mao in retreat, a more plausible explanation was finally offered. The official version was that China was suffering from unprecedented natural catastrophes which had ravaged a great deal of the countryside, and no more foodstuffs could be exported to the Soviet Union. All trade with the socialist camp had to be reduced, with the exception of Albania.4 Besides deflecting attention away from the man-made dimensions of the famine, invoking the force of nature had a further advantage. Trade agreements usually carried a standard escape clause, Article 33, stipulating that in the event of unforeseen circumstances beyond human control, part or all of the contract could be terminated.5 Article 33 was now to be used not only to decrease trade but to cancel a whole series of agreements.6

The statistical tables presented in Chapter 10 show that exports to the Soviet Union fell from 761 million rubles in 1960 to 262 million the following year. A similar drop marked imports from Eastern Europe. Only when all arrears with trading partners had been cleared could trade agreements for 1961 be contemplated, Ye Jizhuang explained to his partners in East Berlin.7 But not only had East Germany become used to rice, it was also dependent on China for edible oils. So large was the shortfall that Walter Ulbricht was forced to turn to Khrushchev for help in August 1961.

China moved away from the socialist bloc not as punishment for the withdrawal of Soviet experts but because it was bankrupt. The best gauge of the country’s financial worthiness was the value of the yuan on the black market. It began a spectacular decline in 1960. Then, in January 1961, as news of food shortages leaked out to the rest of the world, it nosedived to an all-time low at about US$0.75 per ten yuan, or about one-sixth of the money’s official value. Overall, by June 1961 it had dropped 50 per cent in value from the previous year.8

Part of the yuan’s decline was caused by the need to raise hard currency to pay for grain on international markets. One way of coping with starvation had been to move grain from surplus areas to famished regions, but by the autumn of 1960, as another crop failure worsened the famine, this strategy had very little effect. Zhou Enlai and Chen Yun managed to convince Mao that grain had to be imported from capitalist countries. How they did this remains unclear, but they probably sold the idea by portraying imports of grain as a way to boost exports for cash. The first contracts were negotiated in Hong Kong at the end of 1960.9 Close to 6 million tonnes of grain were purchased in 1960–1 at a cost of US$367 million (see Table 4). Terms of payment varied: the Canadians asked for 25 per cent down in convertible sterling while the Australians allowed 10 per cent upfront and granted credit on the remainder. But all in all about half had to be paid in 1961.10

t8

In order to meet these commitments China had to earn a surplus in transferable currency, and this could be done only by cutting imports of capital goods and increasing exports to the non-communist world. Throughout the famine thus far Zhou Enlai had made sure that deliveries of eggs and meat reached Hong Kong every single day.11 Now, in the autumn of 1960, despite protests from a disgruntled Khrushchev who complained about lack of deliveries to the Soviet Union, he decided to redirect all available foodstuffs towards Hong Kong, greatly increasing trade with the crown colony.12 Cotton and textile products too left for Hong Kong, jumping from HK$217.3 million in 1959 to HK$287 million the following year.13 All in all, Hong Kong was the largest source of foreign currency earned during the famine, producing some US$320 million a year.14 As in 1958, Asian markets were also swamped with cheap goods. Textiles, for instance, were dumped at prices competitors like India and Japan could not possibly match, even when these goods were badly needed on the mainland.

Beijing also emptied its reserves, sending silver bars to London. China became an exporter of bullion by the end of 1960, shipping some 50 to 60 million troy ounces in 1961, of which 46 million, valued at £15.5 million, were taken by Britain.15 In total, if we are to rely on a report by Zhou Enlai, some US$150 million was raised through selling gold and silver by the end of 1961.16 In a desperate attempt to raise more foreign currency, China also started a grim trade in sympathy by which overseas Chinese could buy special coupons in exchange for cash in Hong Kong banks: these coupons could then be sent to hungry relatives across the border, to be exchanged for grain and blankets.17

Why did China not import grain from its socialist allies? Pride and fear were the main obstacles. As we have seen, the leadership never hesitated to place the reputation of the country above the needs of the population, plundering the countryside to meet export agreements entered into with foreign partners. However, pride often does come before the proverbial fall, and in March 1961 Zhou Enlai had to execute a humiliating climbdown, explaining to his trading allies that China was no longer in a position to export foodstuffs, to meet its long-term trade agreements or to honour a number of contracts for large industrial plants. Over a million tonnes in grain and edible oils were still outstanding to the Soviet Union for the year 1960 alone, and China would not be able to catch up with food shipments in the near future. As Zhou put it diplomatically, how could his country possibly ask for grain when it had failed its socialist allies so badly?18

Beijing also feared that a request for help might be turned down by Moscow, since the entire Great Leap Forward had been designed to show up the Soviet Union. This fear was probably justified, although initially Moscow displayed goodwill. The Russians, for instance, offered to deliver a million tonnes of grain and half a million tonnes of sugar on an exchange basis, free of interest, the cost to be reimbursed over several years. Beijing turned down the grain but took the sugar.19 Khrushchev repeated his offer of grain during a meeting with Ye Jizhuang at the Kremlin in April 1961. He had every sympathy for China’s predicament, he told the minister of foreign trade, all the more so since the Ukraine had suffered a terrible famine in 1946. In a crude and rather thoughtless reminder which could only cause offence, he added that there had even been cases of cannibalism. Then he changed the topic of the conversation, casually mentioning that the Soviet Union was about to overtake the United States in steel production. Ye Jizhuang politely declined the offer.20

A few months later, as the famine failed to vanish with the arrival of summer, Zhou Enlai approached the Russians again. At a meeting with a delegation from Moscow in August 1961, he explained why, for the first time in the history of the People’s Republic, grain was being imported from the imperialist camp. Then Zhou, in a rather roundabout manner, enquired about the Soviet Union’s willingness to trade 2 million tonnes of grain against soybeans, bristles and tin, possibly even rice. Only a third would be paid upfront, the rest would follow over the next two years. Coming just after the delegation had baulked at a trade deficit of 70 million rubles, the timing of the request was poor. ‘Do you have any foreign currency?’ the Soviet side asked bluntly, forcing Zhou to admit that China had none, and that it was selling silver.21 The delegation left the issue hanging in the air, and nothing further happened for several months, till finally someone dropped a hint by telling Deng Xiaoping that the Soviet Union was experiencing difficulties and was not in a position to help. The loss of face for China must have been tremendous.22

Delaying tactics in the midst of calamity were also adopted by Moscow when Zhou Enlai asked for an extra 20,000 tonnes of petrol in July 1961: Khrushchev waited for four months until after the Twenty-Second Soviet Party Congress before acceding to Beijing’s request.23Political leverage was also extracted from a swap of grain agreed upon in June 1961. Out of all the wheat Beijing purchased from Canada, 280,000 tonnes were earmarked for the Soviet Union, which in turn exported a similar amount to China. After the wheat had been shipped directly to Russia from Canada, the Soviets acted as if the import came from North America, at the same time listing their export of grain to China in the published trade statistics for the year 1961. In the eyes of the world, with foreign experts raking over published statistics for signs of a rift between the two socialist giants, it looked as if the Soviet Union was feeding China.24

Not all of the grain purchased abroad was intended for home consumption. The rice bought from Burma, for instance, was shipped directly to Ceylon to meet outstanding commitments. Some 160,000 tonnes also found their way to East Germany to address the trade deficit with socialist allies. And China, in the midst of famine, continued to be generous to its friends. Two cargoes of wheat carrying some 60,000 tonnes were shipped directly to Tirana from Canadian ports as a gift. Since Albania had a population of about 1.4 million, this amount provided as much as one-fifth of domestic requirements.25 Pupo Shyti, Tirana’s chief negotiator in Beijing, later recalled that he could see the signs of famine in Beijing, but ‘the Chinese gave us everything . . . When we needed anything we just asked the Chinese . . . I felt ashamed.’26 Other countries, aside from Albania, also received rice for free at the height of the famine, for instance Guinea, the recipient of 10,000 tonnes in 1961.27

China never ceased to cultivate its international image with liberal aid and cheap loans to developing nations in Asia and Africa. One reason why Beijing increased foreign donations during the Great Leap Forward was to prove that it had discovered the bridge to a communist future. But the main consideration was rivalry with Moscow. In an age of decolonisation, Khrushchev had started competing for the allegiance of developing nations, trying to draw them away from the United States into the Soviet orbit by lavishing aid on prestige projects such as dams and stadiums. Mao wanted to challenge him for leadership in Asia and Africa. Dismissive of the Kremlin’s notion of ‘peaceful evolution’, on which relations with the developing world were premised, he encouraged instead a militant theory of revolution, aiding communist revolutionaries in such countries as Algeria, Cameroon, Kenya and Uganda in determined competition with Moscow.

How much help was given in times of famine? Overall, China provided 4 billion yuan to foreign countries from 1950 to July 1960, of which 2.8 billion was free economic aid and 1.2 billion came as interest-free or low-interest loans.28 Most of this was granted from 1958 onwards. In 1960, as a new body called the Foreign Economic Liaison Bureau with ministerial rank was created to cope with increased donations, aid to foreign countries was fixed at 420 million yuan.29 The following year, as Beijing refused new loans or even deferment of payments offered by socialist allies aware of China’s predicament, some 660 million yuan was slated for foreign aid.30 The beneficiaries included Burma at US$84 million and Cambodia at US$11.2 million, while Vietnam was granted 142 million rubles and Albania 112.5 million rubles.31 These sums were made available as the overall income of the state shrank by 45 per cent to 35 billion yuan, cuts having been made in a number of areas, including 1.4 billion in health and education.32

Such generosity meant that on the ground, where people were starving, grain was still being exported in 1960, some of it for free. In fact, with a policy of ‘export above all else’ (chukou diyi?), just about every province had to export more than ever before. Hunan was instructed to export goods to the value of 423 million yuan, or 3.4 per cent of the total output value of the province, the produce to be exported including 300,000 tonnes of rice and 270,000 pigs.33

In the five months following Zhou Enlai’s decision in August 1960 to curb the export of food to the socialist camp, well over 100,000 tonnes of grain were procured in Guangdong and sent to Cuba, Indonesia, Poland and Vietnam, representing about a quarter of the 470,000 tonnes requisitioned in the province during that period. As provincial boss Tao Zhu explained after formal diplomatic relations were established with Fidel Castro’s regime in September 1960, delivering grain to the people of Cuba, besieged by American imperialism, was a matter of ‘international reputation’.34 Factory workers in Guangzhou were less enthusiastic about selfless assistance to the developing world: already bitter about the lack of cotton, exported and put on sale in the department stores of Hong Kong, they openly wondered: ‘why export to Cuba when we don’t have enough to eat?’35 Even in places as far away as Gansu, villagers protested that they had to go hungry because Mao was shipping rice to Cuba.36 At a party gathering in Beidaihe, the following month, the leadership decided to send Castro a further 100,000 tonnes of rice worth 26 million yuan in exchange for sugar.37

Could China have accepted aid instead of spending all its foreign currency on grain imports? President John Kennedy, apparently, noted coolly that Beijing was still exporting food to Africa and Cuba even in a time of famine, adding that ‘we’ve had no indication from the Chinese Communists that they would welcome any offer of food’.38 The Red Cross did try to assist, but approached Beijing in a blundering way by first enquiring about famine in Tibet – where a major rebellion had just been squashed by the People’s Liberation Army. The response was swift and predictable. The country had witnessed an unprecedentedly rich harvest in 1960, there was absolutely no famine and rumours to the contrary were slanderous. Adding fuel to the fire, Henrik Beer, clumsy secretary general of the League of Red Cross Societies, then sent a second telegram from Geneva asking whether this was true as well for China. A furious reply followed from Beijing, pointing out that Tibet and China were not separate entities but constituted one country, throughout which the government relied on the many advantages of the people’s communes to overcome the natural calamities of the previous two years.39

But even had the Red Cross broached the issue in a more tactful way, it is very likely that foreign help would have been refused. When the Japanese foreign minister had a quiet word with his counterpart, Chen Yi, about a discreet gift of 100,000 tonnes of wheat, to be shipped out of the public view, he was rebuffed.40 Even gifts of clothes by schoolchildren in East Berlin, offered to help typhoon-ravaged Guangdong in 1959, were seen as a loss of face, and embassies were told to accept no further donations.41 China was willing to patronise the developing world but would accept help from nobody.

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