CURRENT INTELLIGENCE BULLETIN - 1954/06/22

• Document Type: SPECIALCOLLECTION
• Collection: Current/Central Intelligence Bulletin Collection
• Document Number (FOIA) /ESDN (CREST): 03001366
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 10
• Document Creation Date: August 20, 2019
• Document Release Date: August 30, 2019
• Publication Date: June 22, 1954

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Top SECRET
22 June 1954 (1:
Copy No.
80
CURRENT INTELLIGENCE BULLETIN
DOCUMENT NO. .:4?4-
NO CHANGE IN CLASS.
I-I DECLASSIFIED
CLASS. CHANGED TO: TS S 0
NEXT- REVIEW DATE: Oita
AUTH: HR 70-2
DATE: 4Z149-.0 . REVIEWER:
Office of Current Intelligence
CENTRAL INTELLIGENCE AGENCY
TOP SECRET
3.5(c)
3.3(h)(2)
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SUMMARY
FAR EAST
1. The 1954 Chinese Communist budget (page 3).
2. Comment on Peiping's abolition of regional administrations (page 4).
SOUTHEAST ASIA
3. Recent coup attempt in Laos believed supported by Laotian Commu-
nists (page 4).
4. Vietnamese officer foresees loss of five south Vietnamese prov-
inces (page 6).
WESTERN EUROPE
5. Triestines may demonstrate to block any partition agreement (page 7).
6. Bonn adopts "wait and see" attitude toward Mendes- France (page 8).
7. Mendes-France's views on Indochina and EDC (page 8).
LATIN AMERICA
8. The situation in Guatemala (page 9).
* * * *
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FAR EAST
1. The 1954 Chinese Communist budget:
The budget for the calendar year 1954,
belatedly adopted by the Peiping govern-
ment on 17 June, provides for record
expenditures of 249. 5 trillion yuan, the
equivalent of $10. 4 billion, and for revenues of 274. 7 trillion yuan
($11. 4 billion). Estimated current expenditures are to exceed last
year's by 16 percent, the increase to be entirely in nonmilitary fields.
The military establishment is to cost $2. 2 billion this year, or
21 percent of the total budget.
Although expenditures as a whole last
year were reportedly 8. 4 percent under original estimates, last
year's actual military outlays were "somewhat higher"--about $0. 3
billion higher--than the budgetary estimate of $2. 2 billion published
in February 1953. The chief reason for this, according to Peiping%
minister of finance, "was that in the first half of 1953, the United
States attempted to enlarge the Korean war, and we had to adopt ef-
fective measures to deal with any situation that might arise."
Comment: The admission by Peiping that
nonmilitary programs last jr were cut back by a large amount, while
military costs exceeded original estimates; strengthens other indica-
tions that an extensive shift in emphasis from economic to military
programs occurred after the 1953 program was published in February.
The final figures for 1953 show a concealed
surplus of $0. 6 billion more than was actually specified, thus suggest-
ing that economic plans suffered more from technical and material
difficulties than from financial stringency in their implementation.
Despite the decline planned for military out-
lays this year,, it is estimated that, with military expenditures con-
cealed in other categories of the budget--such as those for arsenals--
something more than $3 billion a year is being expended on military
items. This rate of expenditure is not expected to change substan-
tially through 1957, the last year of Communist China's first Five-
Year Plan.
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2. Comment on Peiping's abolition of regional administrations:
Peiping's decision on 19 June to abolish
regional administrative committees and
to control provinFial governments directly
is in line with the recent emphasis on the
danger of private empires or "independent kingdoms." The elimina-
tion of these posts will restrict the authority of the six major regional
leaders and their lieutenants, including many key party and military
figures.
There have been indications for more than
a year that the "reorganization" of the party, under way since 1951,
would extend into its high command during 1954. Some of the regional
leaders affected by the 19 June decision, such as Kao Kang in North-
east China, have not appeared publicly for several months and may
already have fallen from favor. The great majority of regional leaders,
however, are expected to retain important positions.
On the provincial level, Peiping's decision
provided among other things for the incorporation of Ningsia into
Kansu and that of Sungkiang into Heilungkiang. It also reconstituted
Liaoning by combining Liatung and Liaosi (see map, p. 5). Municipal-
ities under the direct control of the central government will be returned
to provincial administration except for Peiping, Tientsin, and Shanghai.
SOUTHEAST ASIA
3. Recent coup attempt in Laos believed supported by Laotian Communists:
The abortive coup in Laos on 16 June was
attempted by "Free Laotians"- -a term here-
tofore applied to the Communist movement
in Laos--in addition to followers of Prince
Petsarath,
The former were trying
to exploit the prince's prestige to undermine
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21 JUNE 1954
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THAILAND
SZECHWAN
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LAOS
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� the government during the Geneva
conference. There was apparently no
bloodshed and most of the rebels were
arrested.
believes
that, provided no more French troops are withdrawn and the Tonkin
delta is held, the military situation in Laos will remain static. If
the delta falls, one Viet Minh division could conquer Laos at least
as far south as Thakhek, the charg�tates.
reports "good" indications the Viet Minh is building and improving
roads between Tonkin and the Viet Minh-controlled sector of Laos.
The Viet Minh is apparently planning either a limited attack in Laos
during the rainy season, or more probably, a full-scale invasion in
the fall.
4. Vietnamese officer foresees loss of five south Vietnamese provinces:
that security in five once-safe provinces in
that area has deteriorated so markedly during
the last half year that without immediate re-
medial action "all would be lost" within two
or three months.
Among the causes cited were the poor pay and
inadequate arms of the local militia and the corruption or incompetence of
provincial governments. In addition, the Vietnamese army was "con-
cerned much more with tailoring of uniform and unearned decorations
than with its primary purpose of combating the Communist enemy."
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Indications support the probability of increased
activity during the rainy season throughout most of the
Tonkin delta. The greatest increase is expected in the southern sec-
tor. Intensified activity is to take the form of sabotage, ambushes,
attacks on the Hanoi-Haiphong axis, and assaults on isolated posts.
WESTERN EUROPE
5. Triestines may demonstrate to block any partition agreement:
The local political parties in Trieste may
organize popular demonstrations in an
attempt to keep the Italian government from
agreeing to a Trieste settlement based on
tory, according to American political
adviser Higgs.
While the Trieste population is remaining
outwardly calm, Higgs believes there is deep concern over press re-
ports that a settlement dividing the Free Territory may be imminent.
Party leaders of all shades are showing signs of planning an active
campaign against partition.
Higgs notes that in the past the effectiveness
of pro-Italian "popular demonstrations" has been dependent upon the
degree of support received from Rome.
Comment: While the moderate pro-Italian
center parties in Trieste oppose partition and would probably demon-
strate in protest following any announcement to this effect, this is the
first report that they might do so in advance. Rioting�the normal
outgrowth of "demonstrations" in Trieste--at this time would seriously
jeopardize current efforts to conclude a Trieste settlement.
An official of the Italian Foreign Ministry
Informed the American embassy on 18 June that the Italian political
adviser in Trieste would try to convince the Trieste parties that
demonstrations would be harmful. Rome will probably discourage
demonstrations as long as it sees any possibility of finding a Trieste
settlement satisfactory to Italy.
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6. Bonn adopts "wait and see" attitude toward Mendes-France:
Bundestag deputies of the West German
government parties now appear to be adopting
a "wait and see" attitude toward the investi-
ture of Mendes-France as French premier,
cording to AmertcaifOIicials in Bonn. The majority Christian Demo-
crats have no plans at present for formally requesting that the Bonn
and Paris treaties be separated in order to facilitate the end of the oc-
cupation.
All coalition deputies canvassed by the
American officials stressed that if France has not ratified the treaties
by October, Chancellor Adenauer will be forced to take the initiative
in breaking the deadlock on West German sovereignty and rearmament.
Comment: The 27 June state elections in
North Rhine-Westphalia may have considerable influence on the atti-
tude of the coalition parties on Adenauer's EDC policies. If the outcome
Is fairly favorable for Adenauer's party, his parliamentary support will
tend to wait for him to set his own pace in considering alternatives to
EDC.
7. Mendes France's views on Indochina and EDC:
French premier Mendes-France told Under
Secretary Smith on 20 June that it was
essential to end the Indochina war promptly.
He added, however, that he would not under
any circumstances accept a settlement which constituted a surrender
to the Viet Minh.
The premier said he planned to confer with
Chinese Communist foreign minister Chou En-Lai, at Chou's sugges-
tion. He would try to arrange the meeting for some place other than
Paris or Geneva, Mendes- France said, in order to reduce Communist
propaganda exploitation of the encounter to a minimum and to avoid
giving the impression that the meeting was a step toward French recog-
nition of Communist 'China.
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The premier said he expects to have
considerable difficulty in getting the new Vietnamese government to
accept any agreement he reaches with the Wet Minh on Indochina.
The premier argued that an Indochina
settlement would greatly help in obtaining ratification of EDC, since
the return of the French expeditionary force would make more French-
men willing to agree to German rearmament as provided for in EDC.
Moreover, an Indochina settlement would greatly enhance his pres-
tige and thus enable him to ask the National Assembly to take a deci-
sion which it might otherwise be unwilling to do.
Mendes- France said that he strongly favors
the movement for European unity in every field. He feels, however,
that it would be unfortunate if the assembly voted for EDC by a narrow
majority and over the opposition of an embittered minority. He there-
fore intends, he said; to try to form a large majority for the treaty
by uniting those who believe in European unification and those who are
prepared to accept German rearmament.
Such a majority could be formed, he believes,
if certain changes were made in EDC. If he could obtain French ratifi-
cation by a large majority, he would then feel that he was entitled to
ask France's partners to accept the changes, since France's whole-
hearted and enthusiastic support for EDC would be guaranteed.
The premier said he would hope to put the
treaty to a vote before the summer recess.
LATIN AMERICA
8. The situation in Guatemala:
The American embassy in Guatemala
reported at 4:00 p. m. on 20 June that
"rebel forces" were operating in eastern
and northeastern Guatemala, in some
rontier, but that they were not known to
hold any important towns. The embassy could not substantiate
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reports that an "invasion" had occurred or that uprisings had taken
place. The embassy said that both the Guatemalan government and
Castillo Armast "Radio Liberation" were disseminating highly ex-
aggerated rumors.
The embassy was informed that two troop
trains had left Guatemala City in the direction of Zacapa on 19 Arne.
Comment: To date there is no informa-
tion on the stands taken by top Guatemalan army officers, and there
Is no reliable evidence that any major armed clashes have occurred
between the opposing forces.
A government radio broadcast late on
20 June called on all labor unions to submit membership lists so
that "a civilian army can be organized to defend the capital."
Further defections among air force officers
have been reliably reported.
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