PROSPECTS FOR THE GOVERNMENT OF THE REPUBLIC OF CHINA

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• Document Creation Date: March 8, 2023
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• Case Number: F-2017-01898
• Publication Date: November 17, 1959

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NIE 43-59
17 November 1959
'sreRET.,
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 43-59
PROSPECTS FOR THE GOVERNMENT
OF THE REPUBLIC OF CHINA
-6/
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of State,
the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
UNITED STATES INTELLIGENCE BOARD
on 17 November 1959. Concurring were the Director of In-
telligence and Research, Department of State; the Assistant
Chief of Staff for Intelligence, Department of the Army; the
Assistant Chief of Naval Operations for Intelligence, Depart-
ment of the Navy; the Assistant Chief of Staff, Intelligence,
USAF; the Director for Intelligence, The Joint Staff; the
Assistant to the Secretary of Defense, Special Operations; and
the Director of the National Security Agency. The Atomic
Energy Commission Representative to the USIB, and the
Assistant Director, Federal Bureau of Investigation, abstained,
the subject being outside of their jurisdiction.
"Stegg. N? 423
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PROSPECTS FOR THE GOVERNMENT OF THE
REPUBLIC OF CHINA
THE PROBLEM
To estimate the strengths, weakness, and prospects of the Government of the
Republic of China, with particular reference to both its international position and
its position on Taiwan.
CONCLUSIONS
1. The past two years have been good ones
for the Government of the Republic of
China (GRC). Its international stand-
ing has benefited by its military showing
during the 1958 Taiwan Strait crisis and
by the truculence and brutality of its
Chinese Communist rival. The GRC is
supported, at least passively, by most of
the inhabitants of Taiwan, who continue
to enjoy one of the highest standards of
living in Asia. (Paras. 11, 15, 26)
2. Nevertheless, the GRC is faced with a
basic problem in that the demands of
preserving the GRC as the government for
all of China and effecting its return to the
mainland compete with the requirements
of building a viable economic and po-
litical structure on Taiwan. (Para. 10)
3. If present trends continue, the pros-
pect is for modest economic improvement
for at least the next two years, although
the rate may slow somewhat. As long as
the military establishment requires a
major portion of Taiwan's resources, the
economy will remain heavily dependent
on outside assistance. Over the longer
run, however, any regime on Taiwan will
almost certainly be faced with serious
economic problems stemming largely
from the rapid population growth. A de-
crease in the standard of living would
create political difficulties for the GRC.
(Para. 20)
4. Although, given continuing US naval
and air support, Taiwan could be defended
with smaller ground forces than now
maintained, the GRC considers that any
serious reduction in its armed forces
would cast doubt on the concept of re-
turn to the mainland. GRC leaders
recognize that existing forces are not ca-
pable of a successful invasion under pres-
ent conditions, and we believe it unlikely
than an invasion would be undertaken
without prior US concurrence. There
have been, however, recent indications
that Chiang has been considering the
training of a special force of approxi-
mately 30,000 paratroopers for possible
use in exploiting any widespread anti-
Communist uprising that might occur or
be fomented on the mainland. (Para. 21)
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5. The GRC is especially sensitive to indi-
cations of an eventual US-Soviet detente
and fears that the US may sacrifice GRC
interests whenever it may seem desirable
in the larger interests of the US to do so.
(Para. 24)
6. We believe that with strong US sup-
port the GRC will be able to hold its pres-
ent position in the UN for the next two
or three years. However, it is possible
that this position might collapse before
then, especially if Communist China re-
frains from further aggressive actions.
(Para. 27)
7. We believe that, provided the US con-
tinued to guarantee Taiwan's security,
2
the GRC would be able to survive the loss
of its position in the UN and such other
vicissitudes as the death of Chiang Kai-
shek and even the loss of the offshore
islands. The death of Chiang Kai-shek
would accelerate the domestic trend
toward concentration on the problems of
Taiwan and the international growth of
sentiment for a "two-Chinas" solution,
but it would not critically weaken the
stability of the GRC. The loss of the off-
shore islands would be a severe blow to
Chinese Nationalist morale but we believe
that the GRC would hold together and
would be able to maintain firm control
over Taiwan. (Paras. 28-35)
DISCUSSION
I. INTRODUCTION
8. The prospects of the Government of the
Republic of China (GRC) in both the inter-
national and domestic arenas depend in large
measure on factors over which it exercises lit-
tle or no control. Its existence is threatened
by a powerful and well entrenched regime on
the mainland, which has as one of its primary
objectives the destruction of the GRC and the
seizure of Taiwan. The GRC could not sur-
vive without US military and economic assist-
ance, and its international position could not
be maintained without US diplomatic support.
GRC prospects for re-establishing itself as the
effective government of mainland China de-
pend almost entirely on developments on the
mainland, which the GRC itself can do little
to influence. On Taiwan itself, there is some
scope for constructive initiative by the GRC
but even here the pressure of a growing popu-
lation on limited land and resources, the bur-
den of military expenditures, and reliance on
outside aid greatly narrow the regime's range
of choices.
9. The basic objective of the GRC is to pre-
serve its identity as a national government--
the government of all China, not merely of
the island of Taiwan; and all its major foreign
and domestic policies stem from or are sub-
ordinated to this objective. The GRC con-
tinues to stress its mission of regaining con-
trol of mainland China, contending that the
solidarity and esprit of the regime largely rest
on this objective; it insists that the offshore
islands be defended; and it maintains a large
military establishment, in hopes of exploiting
the first opportunity to return to the main-
land.
10. The GRC is recognized by a majority of
nations and it holds a seat as a permanent
member of the Security Council of the United
Nations. Nevertheless, its actual power ex-
tends only to Taiwan and a few smaller is-
lands.' The modest resources of this small
' These islands are: (a) the P'eng-hus (Pesca-
dores) ; (b) a few islands along the Fukien coast
(chiefly the Chinmen and Matsu groups); (c)
Pratas (about 200 miles east-southeast of Hong
Kong) ; and (d) Itu Aba (about 500 miles east
of Saigon, in the Spratley group).
"Tre-azy
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domain are wholly inadequate to support the
larger ambitions of the regime. The GRC is
faced with a basic problem in that the de-
mands of preserving the GRC as the govern-
ment for all of China and of effecting its re-
turn to the mainland compete with the re-
quirements of building a viable economic and
political structure on Taiwan.
II. TRENDS AND PROBLEMS
A. Political
11. Since the last National Intelligence Esti-
mate dealing with the prospects of the Chinese
Nlitional1sts,2 no major changes have taken
place in either the international' status or the
internal affairs of the GRC. It remains one
of the most stable regimes in the Far East, and
Chiang Kai-shek remains its unchallenged
leader. Most of the mainlanders who fled to
Taiwan with the GRC in 1949 actively support
the government. It receives passive support
from most of the Taiwanese, who constitute
about 8.5 million of the GRC's nearly 11 mil-
lion people.
12. The GRC is essentially a one-party' dicta-
torship though its unity and discipline are
by no means absolute. In early 1960 Chiang
will have completed his second six-year term
as president, the maximum allowed by the
constitution. It is conceivable that he will
choose to turn over the presidency to a trusted
lieutenant, such as Chien Ch'eng, and rule
from behind the scenes, but we consider it
more likely that he will find some means to
stay in office. Chiang faces no effective in-
ternal opposition. Communist ,efforts at sub-
version and inducements to defection have ap-
parently had no practical effect, The Tai-
wanese independence movement at present
has little active support, although the aspira-
tions of the Taiwanese people and the growing
dependence of the GRC on the Taiwanese for
manning the armed forces limit the govern-
ment's freedom of action. In any case, .the
security forces of the GRC are capable of tak-
lug care of any antigovernment strength that
'NIB 49-2-57, "The Frospects of the Government
of the Republic of China," dated 27 august 1957.
3
is likely to develop in Taiwan in the next few
years.
1$. President Chiang and his circle of loyal
supporters think of Taiwan primarily as a
base from which they will eventually return
to their rightful position on the Chinese main-
land. The recent domestic and international
difficulties suffered by the Chinese Commu-
nists have given new hope to the older leaders,
and Chiang Kai-shek's 1969 Double-10 Day
speech (10 October) expressed renewed opti-
mism concerning the imminence of Commu-
nist collapse.
�
14. Nevertheless, the long-term trend among
the mainlanders on Taiwan is toward a loss
of faith in the prospect of return. After 10
years on Taiwan, even some of the veteran
officials are. accepting the prospect of living
out their lives on the island. More or less
parallel with this trend will come increased
restiveness on the part of the Taiwanese if
they continue to be subordinated to the inter-
ests of the mainlanders.
B. Economic
15. With ITS assistance, Taiwan has made con-
siderable economic. progress in spite of the
large military expenditures of the GRC.8 The
last two years have seen a continuation of
economic gains. Taiwan's rate of economic
growth-6 percent increase in the gross na-
tional product (GNP) in 1957 and an esti-
mated 8.7 percent in 1958�has been among
the highest in underdeveloped countries of
Asia. Agricultural output expanded by 10
percent in 1957 and 5 percent in 1958. The
Index of industrial production rose 6 percent
in 1958 and was 86 percent above its 1952 base,
The inhabitants of Taiwan enjoy one of the
best standards of living in Asia.
16. however, underlying these signs of prog-
ress are a number of chronic problems. The
financial operations of the GRC are marked
by large deficits. The cost of operating the
national and provincial governments resulted
In a deficit of 831 million (after US aid) in
�See "Bconomic Indicators," Appendix B, and
"Taiwan's Balance of Payments," Appendix C.
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FY 1968. A similex deficit is forecast for FY
1959. Military expenditures accounted for
51 percent of total expenditures in FY 1957.
Largely as a result of the offshore island crisis
of late 1958, military expenditures are ex-
pected to reach 57 percent in 1959. These
deficits and monetary expansion, much of it
in the form of bank credit for productive pur-
poses, have resulted in strong inflationary
pressures. So far the inflationary trend has
been kept sufficiently under control to prevent
serious economic damage.
17. The chief threat to Taiwan's long-range
economic viability is the explosive rate of Tai-
wan's population growth, which at 3.5 percent
is among the highest in the world. In. 1946
the island's population was just over 6 million;
, by the end of 1950, following the influx from
the mainland, it had risen to 8 million; be-
tween 1950 and 1958, with negligible immi-
gration, the population increased to approxi-
mately 11 million, Thus far these population
pressures have not imposed a serious strain on
the island's resources. When , the main-
laxiders arrived on Taiwan in 1949 the island
was still relatively underpopulated and its re-
sources were sufficient (with some ITS aid) to
absorb the increased population. Since that
time increased US aid and the rapid growth of
the Taiwan economy have permitted the main-
tenance and even the gradual elevation of
living standards on the island.
18, Even if US aid is continued at present
levels, there is some question whether the high
rate of growth which has characterized the
Taiwan economy over the past few years can
be maintained.. With little additional land
available and with intensive methods of cul-
tivation already in general use, the possi-
bilities for any major increase in agricultural
output seem limited. Moreover, in order to
grow food for the increasing population, it
may become necessary to use land (especially
sugar plantations) now producing export
crops. Since agricultural products have con-
stituted four-fifths of Taiwan's exports, this
diversion would reduce the island's capacity
to earn foreign exchange and thus further
Impede its economic growth and viability,
19. Increased industrialization offers the best
hope of alleviating Taiwan's long-range eco-
nomic problems. � Increases in capital invest-
ment, effectively administered, would increase
the rate of industrial development. The
amount of investment which could be at-
tracted would depend in great part upon the
government's readiness to foster an atmos-
phere conducive to private enterprise and for-
eign capital. The GRC has already taken
steps in this direction, including simplifica-
tion of foreign exchange controls and elimina-
tion of the multiple foreign exchange rate.
A modest domestic bond market has also been
created. However, the GRC's willingness to
devote its own resources to economic develop-
ment will continue to be limited by the priority
assigned to military expenditures and to the
maintenance of consumption levels.
20. If present trends continue, the prospect
is for modest economic improvement for at
least the next two years, although the rate
may slow somewhat. As long as the military
establishment requires a major portion of Tai-
wan's resources, the economy will remain
heavily dependent on outside assistance.
Over the longer run, any regime on Taiwan
will almost certainly be faced with serious
economic problems stemming largely from the
rapid population growth. A decrease in the
standard of living would create political diffi-
culties for the GRC.
C. Military 4
21, The GRC armed forces have an. effective
strength of about 600,000 and constitute one
of the largest non-Communist military organi-
zations in the Far East, Given continuing US
naval and air support, Taiwan and the
Penghus could be defended with smaller
ground forces than are now being maintained.
In spite of this, the GRC is reluctant to reduce
the size of its armed forces substantially. It
considers that any serious reduction would
cast doubt on the concept of return to the
mainland. GRC leaders recognize that exist-
ing forces are not capable of a successful in-
For a detailed discussion of the military strength
and capabilities of the GRC, see Appendix A,
"The GRC Adllita,ry Establishment."
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vasion under present conditions, and we be-
lieve it unlikely that an invasion would be
undertaken without prior US concurrence.
There have been, however, recent indications
that Chiang has been considering the training
of a special force of approximately 30,000 para-
troopers for possible use in exploiting any
widespread anti-Communist uprising that
might occur or be fomented on the mainland.
22. The GRC contends that the offshore is-
lands are of great psychological and strategic
Importance and it remains firmly committed
to their defense. Hence it is unlikely to agree
to a further reduction in the military strength
on these islands. However, the GRC forces
alone almost certainly could not hold the is-
lands against an all-out effort by the Com-
munists. In response to US advice the GRC
has generally refrained from using the islands
as a base for provocative actions against the
mainland and will probably continue to do so.
D. International
23. The GRC's foreign policy derives from its
contention that it is the sole, legitimate gov-
ernment of China and its goal of regaining
control of mainland China. It is thus un-
swervingly opposed to any sort of interna-
tional accommodation with communism that
might tend to freeze the status quo.
24. At present US-GRC relations are as good
as they have been at any time in recent years.
The quick and vigorous support proffered by
the US in the 1958 Taiwan Strait crisis was
immensely reassuring to the GRC. The crisis
also served to demonstrate the critical extent
to which the GRC is dependent on the US for
its survival, and the consequent need for avoid-
ing any actions which might jeopardize this re-
lationship. Nevertheless, many Chinese resent
the GRC dependence on the US and there will
continue to be Sino-American differences on
policy matters. There is an underlying fear
that the US will sacrifice the interests of the
GRC whenever it may seem desirable in the
larger interests of the US to do so. For this
reason the GRC continually seeks reassur-
ances of American fidelity. At present the
GRC is especially sensitive to indications of an
eventual US-Soviet detente, as a result of
which the GRC's own position might be
gravely compromised, even though the US
continued to oppose Peiping.
25. The Overseas Chinese continue to be a
point of friction between the GRC and the
governments of southeast Asia, where there
are large Chinese minorities. They also are
an object of the continuing propaganda con-
test between the GRC and Peiping. However,
the position and outlook of the overseas Chi-
nese do not fundamentally affect the GRC
policies and capabilities.
26. International respect for the GRC has
been somewhat increased both by the per-
formance of the GRC armed forces in the 1958
Taiwan Strait crisis and by the restraint ex-
ercised by the government in not agitating
the crisis to greater proportions. At the same
time, the international reputation of the Com-
munist regime on the mainland has been
severely tarnished by its domestic programs,
the brutality of its actions in Tibet, and its
aggressions on the Indian border. These de-
velopments, however, have not strengthened
support for the GRC's claim to be the legal
representative of all China, but, rather, have
increased sentiment for the "two-Chinas" idea.
Especially among the uncommitted nations of
Asia there appears to be increased feeling that
Taiwan should not be allowed to fall to the
Communists and thus there is greater willing-
ness to accept the GRC as the government of
an independent Taiwan. This trend toward
a "two-Chinas" solution is repugnant both to
the GRC and to Communist China.
27. In spite of the adverse reactions to the re-
cent behavior of Communist China, the GRC
has barely held its own in preserving its inter-
national status!' There has been a growing
belief among the nations of the world that the
Communist regime must be dealt with as the
actual rulers of the Chinese mainland. There
has been a corollary tendency to believe that
the GRC should not be the legal representa-
tive of the Chinese people in the UN. Latin
American countries have been restive under
' See Appendix D, "UN Vote on Moratorium Issue"
and Appendix E. "GRC and CPR International
Positions."
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US pressure on this issue and Cuba's absten-
tion this year on the moratorium vote may
portend other abstentions or even votes in
favor of Communist China in the next few
years. Moreover, the newly independent Af-
rican countries (there will be at least four new
ones in 1960) tend to be favorably inclined
toward the admission of Peiping. We believe
that with strong US support the GRC will be
able to hold its present position in the UN for
the next two or three years. However, it is
possible that this position might collapse be-
fore then, especially if Communist China re-
frains from further aggressive actions.
28. The loss of the GRC's seat in the UN and
wider recognition of the Peiping regime as
the Government of China would be a serious
blow to the morale of the Chinese Nationalist
leadership, and would make the prospects of
return appear even more remote and unreal-
istic. However, we do not believe that such a
development would lead to the collapse of the
GRC. We believe that given continued US
protection against military attack, the GRC
would continue to oppose any kind of "deal"
with the Communists and would be able to
maintain firm control over the island of
Taiwan.
III. CONTINGENCIES
A. Loss of Offshore Islands
29. The loss of the offshore islands would,
under any circumstances, severely impair the
morale of the mainlanders on Taiwan. The
Impact of such a loss would be greatest if the
Nationalist troops on the islands were defeated
by Chinese Communist assault. After such a
misfortune the Taiwanese, who supply a ma-
jority of the enlisted men on the islands, would
become increasingly restive under GRC rule.
The initial shock to the government and the
mainlanders on Taiwan as a result of the loss
of the islands would give rise to despair, con-
fusion, and probably some breakdown in gov-
ernmental efficiency. The impact of the loss
would be less severe if the GRC voluntarily
withdrew the troops.
30. In any case the adjustment to the new
situation would be exceedingly difficult, in-
Th
6
volving a shift in the GRC's view of its role in
the world, some change in its policies, and
severe strains in the US-GRC relationship.
Nevertheless, provided the GRC were con-
vinced that the US was still determined to
protect Taiwan and to support the GRC's in-
ternational position, we believe that the loss
of the offshore islands would not lead to a
collapse of the GRC's will to exist, or to the
overturn of the GRC by groups seeking accom-
modation with Peiping or the creation of an
"independent" Taiwan.
B. The Death of Chiang Kai-shek
31. President Chiang, now 72 years old and in
vigorous physical and mental health, has led
the GRC and its political party, the KMT, for
a third of a century. During this time he has
been the major unifying factor among many
diverse interests. His death would be re-
garded both at home and abroad as the end of
an era.
32. Although party factionalism and political
infighting will inevitably become more intense
following Chiang's death, we believe that
Ch'en Ch'eng, the present Vice President,
Premier, and constitutional successor, will suc-
ceed Chiang in an orderly fashion. Ch'en has
considerable prestige and support within both
the party and the army, and he commands
the respect of the Taiwanese people.
33. Chiang's death probably will not result in
any immediate change in the basic policies of
the GRC. No probable successor is likely soon
to modify the GRC's claim to be the govern-
ment of all China, though expectations of a
return to the mainland will inevitably be
dimmed. In any case, Chiang's death will
accelerate trends toward policies placing
greater emphasis on the social and economic
development of Taiwan and bring increased
pressure from the Taiwanese for fuller par-
ticipation in the government.
34. Internationally, there will be a general
feeling that Chiang's death provides an occa-
sion for a basic reassessment of the situation.
There will be increased international senti-
ment for a "two-Chinas" solution.
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APPENDIX A
THE GRC MILITARY ESTABLISHMENT
Total Armed Forces
1. The actual MAP-supported strength of
GRC military components is approximately
600,000, assigned as follows: Army, 423,000;
Navy, 34,000; Marines, 25,000; Air Force,
89,000; Ministry of National Defense, 24,000;
and Combined Service Force, 8,000. In addi-
tion, there are about 42,000 non-MAP-sup-
ported officers and men, including ap-
proximately 12,000 officers in semiretired
status. Army dispositions include 69,000 on
the Chinmens and 20,000 on Matsu, with the
remainder on Taiwan and the Penghus (see
map) . Naval strength consists primarily in
five ex-US destroyers. The air force has
about 690 aircraft, about 460 of them jets.
2. While the actual strength of the GRC
armed forces is about 642,000, the authorized
strength is 673,624. Both the GRC Ministry
of National Defense (MND) and the US Mili-
tary Assistance Advisory Group (MAAG) on
Taiwan are interested in reducing the size of
the armed forces, both actual and authorized
strengths. The MND has a plan (which it is
now trying to implement) to reduce total
strength to 600,000 by 30 June 1960, the re-
duction to be effected by such measures as
retirement or discharge of ineffective officers
and men, administrative attrition, and smaller
draftee inductions. MAAG Taiwan has pro-
posed a plan to bring the over-all strength of
the GRC military establishment to 545,000
during the next five years. Under the MAAG
plan, the ground forces would absorb the
personnel decrease. However, this decrease
would be compensated for by modernization
and increased firepower. The MAAG pro-
posal has been authorized as a basis for US
planning and programming but has not yet
been discussed with GRC authorities.
3. Army. The present strength of the army
is about 423,000 troops, organized into a gen-
eral headquarters and 16 divisions on Taiwan;
the Chinmen, Matsu, and Penghus Defense
Commands; and various logistical and train-
ing units. Adding to the air defense capa-
bility of the forces on Taiwan is the Nike-
Hercules battalion sent to Taiwan in 1958 and
taken under operational control of the GRC
army in August 1959.
4. The army is engaged in a modernization
program aimed primarily at reorganizing the
infantry divisions to provide better balanced
forces. The reorganized division will have in-
creased equipment and firepower�more artil-
lery, machine guns, rocket launchers, and
4.2-inch mortars�but 1,000 fewer troops.
Even if it achieves needed improvement in
infantry-artillery coordination, transporta-
tion, and communications, the offensive capa-
bility of the army will remain limited pri-
marily because of logistical factors.
5. The army continues to be dependent upon
US air and naval support for the successful
defense of Taiwan and the Penghus Islands.
Without local sea and air superiority, the
army probably could, nevertheless, conduct a
vigorous defense costly to an invading force.
The defensive capability of the major offshore
island garrisons is being improved by aug-
mentation of medium and heavy artillery,
further development of physical defenses, and
additional training. Again, however, success-
ful ground defense of the offshore islands is
tied directly to air and sea superiority and to
continued logistical supply. Without these
elements, the offshore defense commands
would be isolated and subject to early capture.
7
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6. Navy. The GRC naval establishment has
a personnel strength of 59,000 of which 25,000
are marines. Ship strength is as follows:
Destroyer (DD)
5
Escort Vessel (DE)
5
Patrol Escort (PF)
2
Escort (PCE)
7
Submarine Chaser (PC)
16
Motor Gunboat (PGM)
2
Motor Torpedo Boat (PT)
6
Coastal Minelayer (MMC)
2
Fleet Minesweeper (MSF)
5
Coastal Minesweeper (MSC)
4
Amphibious Vessels
61
Auxiliary Vessels
15
7. The size and composition of the navy en-
ables it to carry out certain limited offensive
assignments, such as lifting and supporting
amphibious assault missions within a re-
stricted radius of Taiwan, shore bombard-
ment, reconnaissance and interdiction in the
Taiwan Strait, and assault minesweeping.
The navy is capable of providing logistical
support to the offshore islands and furnishing
patrol surveillance and destroyer gunfire sup-
port. Its antisubmarine warfare and mine
warfare capabilities are limited. Under US
guidance and support, further augmentation
and modernization of the navy is taking place.
8. While the state of training of the navy
is good, maintenance and repair of ships and
equipment are generally substandard. Logis-
tic capability is adequate but dependent on
continued US support. The navy is capable
of successfully engaging Chinese Communist
naval forces of similar size and composition:
however, intervention of Chinese Communist
submarines and PT boats would seriously re-
duce the GRC navy's capabilities and limit
its effectiveness.
9. The marine corps has a strength of 25,000,
organized into a headquarters, a supporting
establishment, and the operating forces. The
operating forces consist of 1 division, 1
brigade, and 2 LVT, LVT (A) battalions, or-
ganized and equipped under modified US Ma-
rine Corps TO&E. The marine corps con-
tinues to haN c! the capability to execute am-
phibious operations involving the division and
brigade against light to moderate resistance,
assuming adequate naval and air support.
8
10. Air Force. The personnel strength of the
Chinese Air Force (CAF) is about 89,000, in-
cluding almost 2,100 trained pilots. The CAF
has about 690 aircraft, including 460 jets, in
principal tactical units as follows:
15 Fighter-bomber squadrons (jet-3 F-840;
12 F-86F)
2 Tactical-reconnaissance squadrons (jet-1
RB-57D/RF-813F/RF-100A; 1 HF-84F)
4 Transport squadrons (prop-3 C-46; 1 C-47/
C-54)
3 Troop carrier squadrons (prop-2 C-46; 1
C-119)
1 Search and rescue squadron (prop�SA-16;
helicopter�H-19)
11. The ability of the CAF to conduct tactical
air support is only fair. Dive-bombing and
rocketry scores in the air force are poor and
the air force would have difficulty carrying
out an effective ground support, airfield neu-
tralization, or interdictory mission at the pres-
ent time. However, strong training emphasis
is being placed in the areas of air-to-ground
gunnery and air-ground coordination and the
CAF's tactical air capability can be expected
to improve. Reconnaissance over the main-
land is a major tactical mission of the CAF.
12. The CAF possesses an excellent air defense
capability for limited daylight aerial warfare.
The decisive air victories scored by its F-86F's
in the 1958 Taiwan Strait engagements dem-
onstrated the qualitative superiority of the
CAF interceptor units. A kill ratio of about
10 to 1 in the dogfights was achieved by CAF
pilots. In the one engagement in which Side-
winder missiles were employed, four kills were
scored out of six missiles fired. However,
against a full scale onslaught by the Chinese
Communist Air Force, the Nationalists could
fight only a delaying action until US aid
arrived.
13. A significant CAF weakness is the present
lack of any all-weather fighter capability. Al-
though radar coverage from Taiwan sites is
fairly good, the radars on the offshore islands
of Chinmen and Matsu have limited ranging
and height-finding capability. Air transport
capabilities are excellent within the limita-
tions of aircraft strength. The two air trans-
port groups performed well and gained valu-
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able operational experience in aerial supply
missions to Chinmen during the 1958 crisis.
14. A significant increase in air force capa-
bilities is expected in the next five years, re-
sulting primarily from equipment modern-
ization and personnel specialization. The
F-84G's will phase out to be replaced by
F-86D, F-100A, and eventually F-104 aircraft.
Activation of missile squadrons (Bomarc and
Hawk) is planned and the radar capability
will be improved.
15. Taiwanese in GRC Armed Forces. The
passage of time has brought the GRC face to
face with a military manpower problem that
threatens the "mainlander" character and
spirit of the armed forces, Many mainlanders
who came to Taiwan with Chiang a decade
ago are beginning to near retirement and are
of doubtful combat effectiveness but are re-
tained in uniform largely as repayment for
past service and loyalties. However, air force
pilots have maintained a high degree of effec-
tiveness even though 98 percent of them are
mainlanders. A major source of manpower
to replace the aging mainlanders, particularly
those in the enlisted ranks, is the indigenous
Taiwanese youth. The mainlanders were re-
luctant to see the proportion of Taiwanese in
the armed forces grow, however, because of
doubts as to their willingness to fight for the
traditional Nationalist objective of return to
the mainland. ,As prospects of returning to
the mainland have dimmed and emphasis has
turned to an effective defensive posture, the
leadership of the three services has come to
regard the Taiwanese as dependable in the
defense of Taiwan and other offshore islands
and potentially educable to an offensive role.
16. The proportion of Taiwanese in the armed
forces is approximately 35 percent which the
regime has tried to keep as a maximum figure
for the armed forces as a whole. Few officers
are Taiwanese and the number is likely to
remain small over the next 10 years; young
mainlanders coming of military age will con-
tinue to supply most officer replacements. In
the lower grades of the enlisted ranks, how-
ever, the proportion of Taiwanese reaches 65
percent. It is this heavy percentage of Tai-
wanese at the basic fighting unit level that
concerns the GRC leadership. However, Tai-
wanese troops performed well under Commu-
nist artillery bombardment during the 1958
crisis, and in general their morale has been
excellent. In the next few years the GRC
will have to choose between accepting a higher
proportion of Taiwanese in its armed forces or
accepting a reduction in number of military
personnel. We estimate that the Taiwanese
will continue to serve satisfactorily in the Na-
tionalist armed forces, particularly in military
actions related to defense of Nationalist-held
territory.
-8-L1434?...EZ
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"rE-6-14-E-T-
APPENDIX B
ECONOMIC INDICATORS
1952
1953
1954
1955
1956
1957
1958
1959
Agricultural production index"
100.0
113.3
112.0
111.3
118.9
130.7
137.3
n a
Industrial production index'.
100.0
124.2
132.9
148.0
155.4
176.6
185.6
n a
Gross National Product-1957 prices
(milnons of US $)
678
795
872
891
930
986
1,071
1,140"
Per Capita GNP-1957 prices
(US $)
79.6
90.3
94.5
94.2
95.0
97.2
101.2'
105"
Wholesale price index"
100.0
108.8
111.4
127.1
143.2
153.5
155.7
159.0'
(Aug)
' Group index for farm crops.
h Group index for mining, manufacturing, construction, utilities.
'Yearly averages.
"Estimate. 1059 figures a projection based on small amount of developed statistics.
10
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of'
�rerrfrr...12�EZ
APPENDIX C
TAIWAN'S BALANCE OF
PAYMENTS
1957
1958 1959
(Estimated)
A. Goods and services:
Exports, f.o.b
162
158
127
Imports, c.i.f.
�266
�244
�263
Trade balance
�104
�86
�136
Services
�19
�10
�17
Balance, goods, and
services
�123
�96
�153
B. Private capital
14
18
18
C. Official long-term fi-
nancing:
Grants (US)
78
72
77
Loans (net)
18
�3
8
Total, grants and
loans
96
69
85
D. Total A, B, and C
�13
�9
�50
E. Net errors and omis-
sions
6
4
n a
F. Total change in official
gold and short-term
capital
�7
�5
�50
NOTE: All figures in millions of US dollars converted
at NT $36.38 per US $1.00.
11
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APPENDIX D
UN VOTE ON MORATORIUM ISSUE
NOTE: Since 1951, the question of whether the GRC or the Peiping regime should
represent China in the UN has been deferred each year in the General
Assembly by adoption of a US-sponsored resolution to omit the item from
the agenda. Hence, in Appendices D and E, a vote recorded as "FOR" is
In effect a vote to allow the GRC to occupy the Chinese seat for the
ensuing year.
YEAR
FOR
AGAINST
ABSTENTIONS
VOTES NOT
RECORDED
TOTAL
MEMBERSHIP
1951
37
11
4
8
60
1952
42
7
11
60
1953
44
10
2
4
60
1954
43
11
6
60
1955
42
12
6
60
1956
47
24
8
79
1957
48
27
6
1
82
1958
44
28
9
81
1959
44
29
9
82
SE-E61+-E�T�. 12
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"Tireit-E4
APPENDIX E
GRC AND CPR INTERNATIONAL POSITIONS
UNGA VOTE ON MORATORIUM ISSUE
RECOGNIZES 1957 1958 1959
COUNTRY GRC CPR FOR AGAINST FOR AGAINST FOR AGAINST
1. Afghanistan x x x x
2. Albania x x x x
3. Argentina x x x x
4. Australia x x ' x x
5. Austria Unclear x Abstained Abstained
6. Belgium x x x x
7. Bolivia x x x x
8. Brazil x x x
9. Bulgaria x x x x
10. Burma x x x x
11. Byelorussian SSR . - x x x
12. Cambodia x Abstained x x
13, Canada x x x x
14. Ceylon x x x x
15. Chile x x x x
18. China (GRC) x x x
17. Colombia x x x x
18. Costa Rica x x x x
19. Cuba x x x Abstained
20. Czechoslovakia x x x x
21. Denmark x x x x
22. Dominican Republic x x x x
23. Ecuador x x x x
24. El Salvador x x x x
25. Ethiopia Unclear x x Abstained
26. Finland x x x x
27. France x x x x
28. Ghana Unclear x x x
29. Greece x x Abstained x
30. Guatemala x x x x
31. Guinea x x
32. Haiti x x x x
33. Honduras x x x x
34. Hungary x x x x
35. Iceland Unclear x Abstained Abstained
36. India x x x x
37. Indonesia x x x x
38. Iran x x x x
39. Iraq x x x x
40. Ireland Unclear x x x
41. Israel x Abstained Abstained Abstained
42. Italy x x x x
43. Japan x x x x
44. Jordan x x Abstained x
45. Laos Neither Abstained Abstained x
48. Lebanon x x x x
47. Liberia x x x x
48. Libya x x Abstained Abstained
See footnote at end of table.
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GRC AND CPR INTERNATIONAL POSITIONS (Continued)
UNGA VOTE ON MORATORIUM ISSUE
RECOGNIZES 1957 1958 1959
COUNTRY GRC CPR FOR AGAINST FOR AGAINST FOR AGAINST
49. Luxembourg x x x x
50. Malaya Neither x x x
51. Mexico x x x x
52. Morocco x x x x
53. Nepal x x x x
54. Netherlands x x x x
55. New Zealand x x x x
56. Nicaragua x x x x
57. Norway x x x x
58. Pakistan x x x x
59. Panama x x x x
60. Paraguay x x x x
61. Peru x x x x
62. Philippines x x x x
63. Poland x x x x
84. Portugal x Abstained Abstained Abstained
65. Rumania x x x x
66. Saudi Arabia x Abstained Abstained Abstained
67. Spain x x x x
68. Sudan x x x x
69. Sweden x x x x
70. Thailand x x x x
71. Tunisia Neither Abstained Abstained Abstained
72. Turkey x x x x
73. Ukrainian SSR - x x x
74. Union of South Africa x Not Voting x x
75. USSR x x x x
76. UAR x * x x
77. United Kingdom x x x x
78. United States x x x x
79. Uruguay x x x x
80. Venezuela x x x x
81. Yemen x x x x
82. Yugoslavia x x x x
� UAR not yet created. Egypt and Syria voted separately against.
RECOGNITION BY OTHER COUNTRIES
NON-COMMUNIST RECOGNIZES
GOVERNMENTS GRC CPR
West Germany Neither
Holy See
South Korea
Switzerland
South Vietnam
COMMUNIST REGIMES
East Germany
North Korea
North Vietnam
Outer Mongolia
OTHER
The "Provisional Government of
the Algerian Republic"
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�1.699� WO 60/L0/61.0Z :aseaia Joi pancuddV
TAIWAN STRAIT AREA
NATIONALIST AIRFIELDS SUITABLE
FOR SUSTAINED OPERATIONS:
0 Jjet,ilieirtelu,bers and Century
rTs Naval base
t Naval station
iaailrsad
* Pne-Century series tighters Road
64 1059
vA75�J AvIv Nationalist-held island
. 1.0:61,1!
WARA�
(1.1.1nC-Crle
��
� NAN PENS Cta'UNTA0
MS ON t�ISA.
QUEMOY ,
CCHIN MEN TAO)
frrit Chinni
kso:.,Deferise Corn an
69,000 ,.Tr ops
�N Penghu
Defense Command
:21,02p:froopsA
PEMCMU
(PESCADORES)
re:
r lova
PING-TURN
P���[ lunt
Total Jet Air Strengrt,
in 0 erational
370
(343 are fighters)..
.. � r
.P4iLIPPINE
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