INTELLIGENCE HIGHLIGHTS NO. 16

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100010005-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 16, 2016
• Document Release Date: April 13, 2005
• Sequence Number: 5
• Publication Date: August 30, 1948
• Content Type: PERRPT

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DOCUMENT N0. ,??r
i0 CHANGE IN CLASS. 0
CLASS. Ci iANG 10: TS 3
NEXT REViE:W DATE:
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Aunt: HR 0-
DATE, v
OFFICE OF REPORTS AND ESTIMATES , CIA
FAR EASTIFACIFIC BRANCH
INTELLIGENCE HIGHLIGHTS NO116
WEEK OF 24. AUGUST.- 30 AUGUST 1948
SECTION I. SUl!ARY OF FAR EAST TRENDS AND DE LOP ENT8
The Chinese Government in a formal note charged the Siamese Govern-
ment with violation of the Sino-Siamse Treaty of Amity ,(page $ ).
The planned reorganisation of the Japanese Banking structure is
designed to eliminate its former monopolistic position with regard to
Japanese industry (page 4)0
Britain and China, as 'soil as the USSR, are critical of the Japanese
Government labor policy (page 4),
Soviet attempts to use the 25 August elections in Worth Korea as the
basis for claiming "national" statue for the puppet Democratic Peoples
Republic of Korea will be handicapped by the recent denunciation of the
election by leading South Korean leftist and moderate groups (page 6).
The general lull continued on all-Chinese military fronts during the
past week (page 9). The political situation was highlighted by continuing
mass student arrests throughout all major Chinese cities (page S ). Former
Premier CHANG Chun is currently visiting Japan in order to obtain the facts
regarding. US intentions vie-a-via Japan (page a ). LI Chi-,hen informed a
US Consular official that FEND Yu-haiang i..e returning to China via Moscow
(page B ). Present trends indicate the general "slow down" tactics of the
Chinese Communists regarding land reform are not abating (page' )4 The
National Ooverriimontae economic situation appears temporarily stabilized as
a result of the new currency program although the general consensus remains
pessimistic, (page 7) o
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BtJIVARY (continued)
A critical impasse in CfOC rte( otiatione has been reached in T.tsdoneeSa
(p8Ab 8)Ok
The inartrreotiou in Burma oontdnues unabated and indeoialve (page 8)a
Scattered clashes in the Philippines bet en the Hoke and Cofetab1 a1r
may signal failure of amnesty program (page 9).
A summary of the conoluaions reached as a result of a survey by Army
Department officials in regard to the procurement of food for Japan from
Ear Eastern aburoes-SECTION III (page gd).
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S130TION II. DEVELOP?AENTS IN SPECIFIED AREA$
The Chinese Government ma formal note charged the Siamesd Covern t
The Ohinese Government in a formal note charged the Sfameee Goverment
with violation of the Sino-Siamese Treaty of Amity in the arrest bf bertain
Chinese ntionals, and demanded their. immediate release. Referring to , ,
the" arrests, the note pointed out that the Siamese ahhhoritiea have ndithor
i orid the Chinese Consulate General in Bangkok of the reasons for the
arrests nor made public the charges preferred against the Chinese nat..onale
concerned. Although these arrests which followed the recent outlawing of
the Chinese Kuomintang in Siam are smother indication of the ant i. Chinene
policy of the present Siamese Government, the Chinese Government, in its
present weak position, can do little more than protest via the diplomatic
channels any discrimination against its nationals in Siaam.
OBW
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A banking reform "gn
bill is to be submitted to the next Diet Session *ich ai7L have the effect.-
of reorganizing the Japanese banking structure, The bill contemplates a
system comparable to the Federal Reserve Banking System in the US. The
Bank of Japan would still be the central bank but. absolute gove ntal
eontrol over it would be removed. Special privileged would no conger be
available to banks, and monopolistic controls of banking would be prohibited.
1 anwhile, steps are being taken to reorganize- Jap?a,nea "big six" banks,
formerly owned. and operated by the 7aibatsu
The proposed banking bill and bank reorganization would have the effect
of denying to the government and to large industrial interests the opportun-
ity to utilize vast financial resources for their. own advantage. in the
prey-war period, the Japanese government used special institutions crash as
the Yokohama Specie bank for political purposes in foreign court: riep:,, In
like manner, the Zaibatsu had their own great banks which enabled thew to
have at their disposal funds for their expansion; and at the sate time
through their control over capital, they were able to maintain aotrong
monopolistic position in the Japanese industrial world,,
L e t le~b po~~;, Brl ish
_gM
and Chinese members of the Allied Council for Japan criticized JapaneLo
goverment labor policy at a special meeting of the Allied Council for
Japan on 28 August. The meeting wain called to enable the US chairman to
reply to a letter from the Soviet representative demanding recall of SCA:-I's
suggestions for the limitation of the trade union rights of Japanese public
servants and the repeal of the Japanese government ordinance issued in
imple>tentation. thereof. US delegate Sebald defended the-Japanese govern
mentes action as necessaryeto prevent minority pressure groups from utiliz-
ing labor unrest to seize political power. Both British Commonwealth repre-
sentative Patrick Shaw and Chinese delegate General Shang Chen noted that
the Japanese goverment' s order appeared to exceed the scope of General
MacArthures suggestions. Whale recognizing the justification of a temporary
curtailment of rights Shaw recommended great care in the consideration of
their curtailment in the drafting of long term legislation,' Be disagreed
with Sebald' a contention that the F'EC directive regarding trade unions in
Japan did not concern government workers. General Chen axpresspd apprehen-
sion lest reactionary elements in Japan take advantage of the revision of
labor laws to obstruct the healthy development of the labor movement.
Criticism of labor policy in Japan expressed in the Allied Council is
limited in its effectiveness by the advisory character of the Council.
Japanese opponents of the current restrictions, however, may derive some
support from the public display of disagreement by Council members who
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Aim (Conte)
have been content in the past to "go along" with SOAP on most matters of
Japanese internal administration.. Resumption of Par Eastern c lash
meetings next week after a summer recess presages further discussion and
review of policy regarding the rights of Japanese civil servants,
Am
Sri e d e fiab t
!W , ",.Rod With the election of representatives to the
Supreme People's Assembly of the Democratic Peoples Republic of Korea on
25 August, the Kremlin completed the groundwork for countering the recog
nition claims of the Republic of Korea at the September meeting of the
United Nations General Assembly (ONGA). The claim of the Democratic People's
Republic as the true "national" government will rest on the fact that it
Includes 360 representatives from South Korea elected at the recent Haeju
-donfe*renoe by about 1000 delegates alleged to have been chosen by ?7.44 per-
cent of the South Korean voters.
The People's Assembly will convene on 2 September at which time Kim II
Sung will undoubtedly be elected President. Messages of recognition from
the Soviet Union and her satellites will probably follow.
In preparation for the establishment of this rival "national" govern-
ment, the North Korean Communists attempted to gain the support of leading
South Korean "anti-separatists." Rorever, following the initial success of
the Pyongyang "unity" conference of last April.,, the hi -handed political
tactics of the North Korean Communists gradually alienated the leading
South Koreans who had attended the conference out of a sincere desire for
national unification. On 25 August, 25 South Korean political parties who
had participated in the April conference compensated for their earlier boy-
cott of the South Korean elections by denoxwedng all recent astir ties in
North Korea. This statement constitutes a strong rebuttal to the probable
Soviet claim at the UNGA fall meeting that the Democratic People's Republic
has the undivided support of all South Korean political organizations not
included in the rightist-dominated South. Korean government.
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01
The anera ul1 in sssi ? Iarv activ3t.r continued through the past week. *AO
In Central and North China, however, three separate Communist groups are
presently moving ilorth`rard. Elements of CHW Yiue forces have crossed the
Lunghai, Railro into southwest Shantung and may be bound for Communist
areas north of the Yellow River. Three of LIU Po.'.cheng?e columns are moving
north from the Heuchang area in the general direction of Chen heien, Im-
portant Nationalist city at the Junction of the Peiping ainltov and Iunghal
rail lines. Farther north, Communist troops of XIS ytm&.ohen, recently
active in the Panting area, are moving into South Chahar. from where they
will probably launch attacks on the Peiping-Suiyuan Railway. The Nationalists
now believe that autumn will bring renewed Communist drives in !Manchuria but,
thus far, there have been no major Communist military movements in that direc-
tion. In this connection, an official of the Northeast Naandit.Suppressibn
Headquarters recently stated that the Nationalist garrison at Changchun +canm
not be supplied with fuel and cannot, therefore, be expected to hold the city
after the cold weather arrives.
MA N ? s eats of studeatg in all 034
major cities, In Peiping many students are escaping to Communist territory
to avoid arrest and apparently the authorities are satisfied with this means
of destroying their power. Fifty-Vise Peiping professors this week criticized
Government action, but no violence has occurred-, perhaps because many students
are away on vacation. The break-up of student organizations has led to the
opinion in that oity that the next school year may be quieter. It does not
appear, however, that stricter Government action will permanently solve the
student problem.
T a $ e 21AQMeA:2M_ML2r_ OHM C. a is connected
with an overall plan of.CHIMO Kai-shek to persuade potentially dissident
Chinese elements to remain loyal to Nanking, so the Stat4 Department has
informed the. Acting Political Adviser to Tokyo. Presumably, CRANE 'Gleam will
explain to the Chinese people on his return, after a lenjily surrey, that
the US aid program in Japan will not injure but will 'help China.
"B"
F N-mbligna Is Xgumialz C grMOM-Ahe 111S.-vin- Hoe-00 te and will
no; arrive un;11 a People 9ss Consultative Cenferenoe is convened in Commtaniet
territory, according to. LI ,Chi-ehen, F `G is a member of We Rubmintane,
Revolutionary Committee. However, plans for this co orenco, to 'W converted
by the Chinese Communists and the Kuomintang dissidahte under LI, still
appear vague, LI has said that it will be held some time between 10 October
and next spring but that success depends on the Communist capture of a
politically strategic Central China city. The Communists have as yet made
no definite statement. LI, although claiming to be anti-Communist, is trying
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to utilize the Communists to advance his own cause. His negotiations with
the Communists thus far imply that he will have a major This in the con-
ference, but it appears likely that any role LI and PING might play in a
coalition with the Chinese Communists will result in the former being re-
duced to the status of Red pawns.
tuting a more lenient attitude toward missionaries in newly liberated avow.,
following a modified policy laid down several' months ago. National Govern-
ment propaganda is playing up reports of six reformed Communists concerning
dissatisfaction in Communist territory. The Communists are probably facing
administrative problems in instituting their program but from their point
of view it is logical that a sound program cannot be based on too sudden a
change.
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U5 U2712-W 000 1 ve
- end r i ren ha bee M&rMn1JeX2d "B"
to Chinese banks by 30 Augee.st, 1948, indicating the black market in hard .
currency has virtually disappeared for a short time. The wave of arrests,
fines, and confiscations in Shanghai markets during the week shows that some
prices are being pushed above the pegged levels. The general feeling in Chin-
ese banking circles and foreign communities is that inflation and the black market
are merely temporarily curbed. The present.lull appears to be due more to
a "wait and see" attitude than to confidence in the new financial controls,
lie C e F e Off ce has a es eai US Government assistance in "C"
enforcing one of the most ticklish of the recent financial regulations-
registration and control of private Chinese assets in the US. The Embassy
again informed the Chinese, as it had earlier this month that thc. IN can's
do nothing.
The Shs.ndhM PA&rkett X75 Exch 9e C Seli one Ra el Wholesale Price of Rice
ffi C " Hlaclcmarke t per. 172 lb ni al
This week (24 Aug 48) GY*$ 4,00 GY $ 4.50(?) GY $ 19.00
Week ago (17 Aug 48) ON $480,000 CN $11,700,000 ON $65,000,000
Month ago (24 Jul 48) 480,000 6,800,000 36,000,000
Year ago (24 Aug 47) 12,000 42,000 450,000
Yt 1 GY(Gold Yuan) ; 3,000,000 ON
SE
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U1D(SP1ESIA.
Critical irotpaase in GM negotioations continues. The position In "A"
Iridonesia of the t3-Maes C mst~t 8e G(?C~"') remains precarious.
bile the Netherlands Government continues its efforts to awplete a
draft act for an Interim government for all of Indonesia which 'arrai1d
limit the influence of the Republic, the IM is faced with the immediate
necessity of advancing .a formula for continued negotiations, The Repub-
lican Government has already challenged the legitimacy of any interim
government created outside the GOC negotiations and may be expected to
mako a determined appeal to the trod Security Council if the r.~OC does not
offer a workable c ?omise. The Dutch plan envisages the completion of
discussions vith non--(Republican elements by the. end of j".ugust, approval
of the act in the Netherlands by the end of September, and the estab i- sh-
nient of an interim government by the end of October. The TIS Delegation
in the '"rc faces a particularly critical period in vier of its tacit
approval of this display of Dutch initiative outside the r.0. Unless
this dilemma is resolved in the near future the "final" 'Republican appeal
to the Security Council is likely to emerge as a major test of US and
TTSSR influence in the Republican Government hIch shoves increasing signs
of becoming a militantly left-sing organization.
'331TR`TA
Insurrection continues indecisive. The insurrection in Burma con-
tinues unabated and inde:cie~..1iv_ . _o3+-..'Al hough there is still no evidence of
an overall coordination of rebel groups and while the Government forces
generally have the upper hand in combat, the rebels are free to carry on
their activities in large areas of the country. The result has been a
steady econorile deterioration XLth Ran/ ooxn already experiencing rising,
prices. 'later and rail transportation have been effectively disrupted,
the timber industry has been brought to a standstill and the export of
rice seriously curtailed. Tn addition, and perhaps representing evidence
of precise outside direction,. Burma's only cement plant, located about
200 miles north of Rangoon, which produced nearly enough cement before
the Naar to satisfy the country's needs and which was scheduled to begin
operations on 1 September, has been sabotaged to the extent that it now
cannot be put into operation before 1950. Under these conditions the
present Government will probably continue its struggle for survival as
long as it can anticipate effective outside assistrnce and fools that
there is a reasonable chance of suppressing the insurrection. However,
if the r overnment fails to make progress against the rebels or becomes
convinced that its overthrow is inevitable it is possible that (1)
Prime "sisnister Thekin Ahu may again attempt to reach an agreement with the
rebels, and (2) Government officials, of increasing importance, may go
over to the rebels thus precipitating the gradual disbandment of the
present regime. in any case the result would be a formation of a new
SLORMT
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PTYPI.M (continued)
coalition government far more to the left, but without the capabilities
of maintaining stability in Burma for any appreciable length of time,
Peace and order deteriorate in central Luzon. Peace and order, which
has generally pion-ail in central. Luzon since midw"_say, has recently given
vra;y' to scattered clashes between the Tiuks and the Constabulary. Although
President merino claims a moral victory for his amnesty program, Huk
leader and Congressman Luis Tarug has stated that peace efforts have failed.,
Both Quirino and Taruc have attar ed each other, The President has accused
Taruc and his subordinates of being opportunistic Communists Instead of
constructive peasant leaders. Taruc, in an open letter, has charged that
the Qluirino administration has not lived up to its commitments and declares
he wil..l continue to lead, the peasants and to preserve the peace but that
he will never submit to a peace "imposed by imperialist guns." Teruo con-
eludes, hover, that:. (1). there can be no democratic peace "as long as
we are under imperialist domination"; (2) democratic peace can be guaranteed
only by "the close working unity of the workers and peasants"; and (3) "legal,
constitutional, parliamentary methods of struggle alone cannot achieve
democratic peace," Taruc t a final statement was quickly repudiated by the
leader of the Democratic Alliance (the party on whose ticket he was elected
to Congress) and his attempt to place blame for the amesty program "failure"
on the Government has drawn blunt criticism from a hitherto friendly local
paper. 14eanwh3le, the Government appears confident of its course and is
planning to proceed with a social amelioration program as well as undefined
measures for maintaining law and order.
T
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SECTION III. DIGHST OF IPM?,ORTANT STUDIES AIM ESTIMATES
FACTORS AFFECTING FAR EASTERN FOOD PROCUREMENT IN JAPAN
(a) Japan is already making near maximum use of its arable land,
There is no prospect that Japan's food import requirements will diminish
in the foreseeable future; there is strong likelihood, in fact, that these
requirements will be increased to compensate for the increasing population
and to provide for a level of feeding above bare subsistence.
(b) The degree of control exercised over the distribution cf food
in Japan is more stringent than in any other country in the worlds
(a) The food collection program initiated by SCAP during the last
rice harvest represented the maximum feasible effort to collect indigenous
productions
(d) The importance of maintaining the rice component of the ration
throughout the year can not be overemphasized, if the rice component is
out in Japan and Korea immediately prior to collecting the new crop, it
will be a physical impossibility to. avoid black marketing and hoarding.
(e) Japan will require approximately 2,200,000 metric tons of
imported food (brown ripe equivalent) in FY 1949. Of this, 1,650,000
should be cereals or cereal substitutes. It may be possible to substi-
tute up'to 500,000 tons of sugar and pulses for cereals, leaving a net
cereal import requirement of 1,350,000 tons.
(f) The significance of imported fertilizers for both Korea and
Japan is stressed most strongly and it is absolutely essential that the
Army retain it sources of American nitrates unless it is prepared to
import much larger stocks of food. Japan and Korea make better use of
their fertilizers than any of the other countries visited,
(g) Increasing amounts of food in the Far East will become avail-
able for shipment to Japan in calendar year 1949. However, relatively
small quantities only available from this area during the critical period
(June - October) immediately ahead,
.(h) Maximum.availabilities of Far Eastern foods should. be procured
for Japan and.these proouremente tied in closely with the export of Japanese
products.
(1) Japan has no prospect of becoming self-supporting except through
a high degree of industrial and maritime activity. There are many obstacles
to achieving this goal which it is believed are not fully appreciated in
ET
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Washington, The most significant of these obstacles are: (1) Reluctance
of other Far Eastern countries to assist Japanese reoovery. (2) Intense
nationalism an the part of Asiatic countries coupled with a determination
to achieve. national self.'suffioiency. (3) Currency exchange difficulties.
(4) Travel restrictions on business men, particularly, Japanese nationals.
(51 A growing tendency on the part of Asiatic countries toward. government--
controlled eoonamies. 'While it is possible to obtain certain basic oornod9
ities,, such as rice, on a government-to-government basis, negotiations are
necessarily too cumbersome to favor trade in the large number of consumer
items which . Japan produces.
Prepared by the direction oft
Colonel H. H. Vissering, G30
Executive Officer
Office of the Food Administrator for
Occupied Areas, Department of the Army.
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