Busy Boats to China

One day last November, nine men wearing identical wide-brim hats and ankle-length overcoats, and carrying identical canvas bags, stepped off a plane in Duesseldorf and settled into a hotel in Duisburg in the industrial Ruhr.

They were members of a Chinese Communist delegation come to negotiate the purchase of a steel plant from Demag, A.G., West Germany's biggest producer of steelmaking equipment.

The Chinese worked with impressive togetherness. When, in the midst of negotiating sessions, one indicated that he had to go to the bathroom, all nine went. Turning down social invitations from their German hosts, the Chinese returned to their hotel each evening, gathered in a single room, and turned the radio up full-volume, presumably to frustrate eavesdroppers, as they discussed their day's work.

Ships & Factories. "We talked and talked for seven weeks, and toward the end our heads were spinning," says one of the German negotiators, "but it was worth it." With the West German government guaranteeing credits of $87.5 million, Demag is now the major partner in a consortium, also involving French and Belgian firms, that is confident it will wrap up a $150 million contract to build a steel-rolling mill for Red China. It will be the biggest deal yet in the rush among America's allies to open up the Chinese market.

Western Europe has increased its trade with Red China from a total of $321.6 million in 1962 to an estimated $622.8 million in 1965. Britain is building or has contracted to build four major plants in China to produce fertilizers, plastics and synthetic fibers. Two 15,000-ton cargo liners are being built for the Chinese in a Scottish shipyard. The French are building a chemical plant in China, have launched two freighters to be delivered to the Chinese, may also build a passenger ship and a truck-assembly plant. The Italians are selling steel and machinery, fertilizer components and marine engines to the Chinese, while Sweden has found a new market for its mining and food-processing equipment.

China is recovering from the mess left by the Great Leap Forward and the natural disasters of 1959-61 and is clearing up the debts remaining from its break-up with Russia. China has increased its trade with the West 44% in three years and earns $400 million annually as a basic supplier for Hong Kong. The Chinese pay for their imports, usually in hard cash, by selling what grows naturally: human hair for wigs, camel's hair for coats, pig bristles, soybeans and other vegetables, as well as pig iron and metal ores.

The Sponge. The rush to do business with China dismays Washington, which has maintained a total embargo on Peking trade since the Korean War--and has tried with diminishing success to persuade its allies to do the same. The nations of Western Europe have agreed not to sell the Chinese any "strategic" goods, but opinions vary considerably about just what trade there should be. It would appear obvious that steel is highly strategic. The Germans argue that they are not really providing the Chinese with steel but merely with a plant to process steel that China would produce anyway.

Congressional reaction to the German steel deal was irate. "It's outrageous," said Virginia Democratic Senator Harry F. Byrd Jr. "Why can't our State Department raise its voice to reflect American disapproval of a deal that can endanger American lives?" Last week the State Department did indeed raise its voice: Secretary Rusk publicly criticized the pending steel agreement, and U.S. diplomats in Germany were instructed to make known U.S. feelings. But it was unlikely that any of this would stop Western Europeans, who see China as a vast potential market despite the evidence that its ability to pay is limited. "That huge country," says Demag Export Manager Alfred Schulz, "is like a dry sponge for all kinds of merchandise."

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