TOP SECRET Economic Effects of the Korean War 8. The Korean war is undoubtedly a strain on the Chinese economy which has been at full stretch for some time. Although a great deal of progress has been made on a number of capital projects, long term domestic development in China has been inevitably retarded. Although our information is scanty it is reasonable to assume that the amount of transport space that has to be devoted to the import of military items (such as vehicles, fuel, aircraft) reduces the amount of machinery and capital equipment generally which China would otherwise import from Russia.