Document Type: 
Document Number (FOIA) /ESDN (CREST): 
Release Decision: 
Original Classification: 
Document Page Count: 
Document Creation Date: 
December 12, 2016
Document Release Date: 
May 23, 2001
Sequence Number: 
Case Number: 
Publication Date: 
December 2, 1947
Content Type: 
PDF icon CIA-RDP79-01082A000100010043-2.pdf1.47 MB
Approved For Release 2001/08/26 : P79-01082A000100010043-27 NEMUZFRESENTATION 4-'et- 2 Dec ember,1947 During the peatweek, the Chinese civil ear was narked by a lull in all theaters, but worsening conditions were reflected on the economic front. Black market foreign exchange rates, on 28 November, touched a new high of 150,000 to U$ $1, a rise of more than 50 percent since 15 November. However, this inflation- ary wave has now showed a merked subsidence0'ellich may be attributed to a series reportedly adopted of drastic anti-inflationerT, neaeures enmeeneed-by the National Government, as well an a report that the eldest son of Chiang Kai-shek has been appointed to lead the fielbt against the black narket in Shanghai. Domestic politic, were narked by China's first ions, to choose members of a Nations' Assembly, which in turn is to elect the Fresident of a new constitutional government, to be inaugurated on 25 December. The results have not been announced officially, but it is apparent that the Kuomintang will receive the largest representation, with smaller numbers of seats being parcelled out to the two minority parties and Plindependente. The general conduct of the entirely in- experienced electorate was so disappointing thet elections for the Legislative Tien, scheduled for 21-23 December, have been postponed for a month In China's foreign relations, there were two indication, in the preparations for pending peace treaties, of Soviet attention to Chinese sensitivity: (1) While rejecting China's ceieromise proposal to hold an 11-nation conference to coneider the Japanese peace treaty, the USSR suggested that a preliminary conference in January of the Foreign Ministers of the US, the U3SR, the Ut? and Chine be h laSgatj (2) At the London Conference of Foreign Ministers, Molotov proposed that the conference to draft the German peace treaty should include China as well as Ger CID neighbors and the states which took part in the ceelmon fight. State Dept. declassification & release ins on file DOCUMENT NO. Fr) o; r NEVI DATE: Approved For Release 2001/08/26 : CIA-RDP79=01122 110010043-2 4=4EfetEr_ Approved For Release 2 DP79-01082A00010001004 1947 "independents it ? T n re d out to tho h? VC In lianohurla? where CM prospects the airlift of capital rtc chat 61-R1AL orki t h was conducted on the A scheduled for 21 (b) that the CNA if no donbt dorod A CNA claim that tIvy have reopened 147 dee not include the railroad as till holds Kungchuling andMinted,' east of Chnntch'uno Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 Liu Po-sheng is moving North br th polioy toward the Turki na nt idorthg tui This by the latter last summer do ussione Northwest who advoeatoo a Cue of these Turki 231ovs ve the w4. broken off EXTERNAL (Mr, WT1ONAL 'TIONS) Signifieabt events in the field of China's external affaire for the (1) h was passed WAWA% 9IMIN2MITR*07 USin the jort'. ly vote to partition ebtleven-nat/ Approved For Release 2001/08/26: to conalder the Japans pea considering the ho h took 01082A00010001004372 suggesting a pre1irinery of the. US., USSR, UK and China to a of the fig Four Foreign black market exchange rate rAte ompanying the f and had ilitary news touthed elf thc present in: bastca3. due to the the common f as (4) An attic Ad _d the rise oo with the f Communists in Central ytille4toOpartfum Moo NW el4 possible Approved For Release 2001/08/2 could eai3r *orlowbair and load to a by 2 1947, wit Aseets On basis of figures d US 4aUare holdings of the 2$1 million as of 4 es end star ti! the ets woubi bo exhausted in 082A0001000 ?-I no as to pro 5fl6 th since 11.4 Day adviser to the Chinese de 5 on of this rate of decline in at this rate it is estimated that official *melange ' 94e,pGibi1 before April U3 Aidt 1JS$60 million as stop- request inc sion oI aid to China in the ei af Congress with an official statement that a 'with the economic-political crisis an Increasing number of Chinese officia active considera Approved For Release 2001/01A-RDP79-01082A000100010043-2 ITMJCA %Or r AWL, wr Ila dk IA. r.a. FAR EAST/PACIFIC BRANCH ,:prooedure No. 42-48* '-tliated 14 May 1948. APMfgefiefifttaftL2alligarttE1811RPrifiC9198PMNIW?43-2 -*Filed Intelligenee Contro1-- 0 Operations SECTION I. SUMMARY OF FAR EAST TRENDS AND DEVELOPMENTS The North Korean electric power cut-off of lit May will have an eMbaressing, although not crippling, effect upon South Korea. The Soviet- controlled North Koreans have the capability of aggravating this situation by cutting off water supplies across the border. Future moves affecting ? power and water supply will continue to be guided by the Soviet objective of forcing US withdrawal from Korea. In China, opposition to Chiang Kai-shek is increasing at a time when the National Government Aiiiff_IMounting military efforts by the Chinese Communists and growing economic deterioration. Chiang shows no disposition to take effective measures, and apparently is trying to counter his opposi- tion by reliance upon old, trusted, but incompetent, political figures. The Philippine Government is curr4-ntlyettempting to reach a political settlement with dissident groups; if successful, such attempts would mate- rially increase stability in the Philippines. A new anti4hiibUl movement, led by high Army and Navy officers, is reportedly developing in Siam, but is not yet believed powerful enough to threaten the Government. 011/401;e0$6, NOTE: In succeeding sections of thi tions are used: ? 6104.)Aleotetet. , Weekly, the foil owing marginal note- (1) An asterisk (*) ? To indicate that all or part of an item is based solely upon information from State' e "Vs' - distribution" series. (2) "A", "B", or "C" Importance, in B/FE's opinion, of . the item, with "AP representing the most important ones.. Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 Approved For Release 2001/08/264MMIIIIIIP9-01082A000100010043-2 -2- ECTION II. DEVELOPMENTS IN SPECIFIED AREAS 7>GENERAL Sale of Japanese rollin , stook to Europe discouraged The US Political Adviser in Tokyo has replied to the State Depart. "Cr' ment Is request for his comments on the possibility of Japanese rolling stock manufacturing 'capacity being used for European needs if Japan is capable of producing equipment for a standard 'guage railroad (See 13/FE, Weekly of 4 - 10 )Say.) The Adviser states that Japan has the capacity to produce such equipment,.but that it is .not feasible for Japan to export any appreciable quantities during the next fifteen months because (1) Japan itself is currently vary short of rolling stook at a time when it faces heavy transportation needs, and (2) during the .next year, Japan will be unable to produce more than about one-half of the 10,000 freight oars actually needed domestically because of its lack of raw materials, snob as pig iron or iron ore, manganese ore, magnesia clinker, coal, and possibly some types of lumber. In addition, Japan has a tentative commitment to the USSR for 310 freight oars, Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 Approved For Release 2001/0812r/MDP79-01082A000100010043-2 thy* JAPAN Outcast leader ossible Communist convert. !!ATSUMOTO Jiichiro, widely recognize as e ea ? er o e CITOTIfeasts ), and vice- president of the House of Councillors, is reportedly becoming a Japanese Communist Party (JCP) convert. Although the new Constitution legally removes the discrimination to which the Eta have been subject for centuries and they now have political equality, it would be naive to expect the age-old sooial and economic discrimination to have been completely discarded. !LATSUMOTO, himself an outcast for the past two and a half decades, has been the recognized champion of the downtrodden Eta in their struggles for equality. In the April 1A7 general elections YAT3U"OTO gained a seat in the Upper House as a Social Democrat and the Eta as a class voted the Social Demecratic ticket. If he becomes a Communist, making a public avowal of his conversion and requesting his people to follow, most of the Eta would probably transfer their ballots? to the JCP. The Japanese Govern- ment estimates Eta numbers at one million while they themselves claim three million. The JCP polled approximately one million votes in the April 1947 general election arid, since the addition of the Eta to their ranks would be invaluable, the JCP has reportedly been making consistent efforts to convert VATSUMOTO to their doctrines. KOREA Loss of North Korean power is causing hardship but not chaos in SouthIorea aE 0:_esent. The stoppai-e will. i immediately impair operation of South Korea's most essential services, but a sharp decrease in already low industrial production will be inevitable. Plans are in effect which will permit continuance of essential services and industries through August but these involve partial reliance upon-stand-by thermal plants previously idle because of high operational expenses and lack of an adequate quantity and quality of coal. Yoreover, the stepping-up of hydro-electric generation involved in these plans can be effected only during the summer months when rain will give the additional necessary water supply. A severe rationing program and careful use of limited coal stocks will permit South Korea to supply 60(f. of its current needs of approximately 100,000 kw. in June. After July bituminous coal imports of 20,000 metric tons per month will be required to maintain the pro- duction of 607 of requirements. The anticipated summer rains will raise the figure to 80-90% during July and August. It is to be noted, however, that Chong P ong, a hydro-electric plant now producing about 18,000 kw. and which is now undergoing repairs in order to step-up its generation, cannot be depended upon in the present emergency since it uses water from north of the 38th parallel which can be turned off by the North Koreans. North Korea also has the capability of cutting off water used for irrigation purposes in South Korea with a resultant adverse effect on South Korean agricultural areas adjacent to the 38th parallel. There is nothing to compel the Soviet authorities to restore the 1/410, power supply to South Korea. However, propaganda considerations could induce them to make the cut-off only temporary. If the power supply is Approved For Release 2001/01/ArailidgpP79-01082A000100010043-2 Approved For Release 2001/08/2~kOP79-01082A000100010043-2 01011421t restored, therefore, it will probably be accompanied by repeated. explanations that, the cut-off was directed only against the US occupation authorities and that sympathy with the plight of their suffering countrymen prompted the North Koreans to reverse their decision. It is apparent that the Kremlin is determined to take maximum advantage of the power situation as part of its presently- indicated campaign to assure that US withdrawal from Korea will be accomplished under the most embarrassing and chaotic circumstances. The path will then be open for rapid North Korean conquest and con- solidation of the South. Adoption of an "all-Korean" Constitution by the. North Korean People's Council on 29 April marked the completion of preparations for eventual annexation of South Korea. The presence of US occupation forces is now the only factor frustrating implementa- tion of Soviet plans to dominate all of Korea. Approved For Release 2001/08/29-01082A000100010043-2 Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 &wail% CHINA Increagiing D323221a19.11 Ciaug KelAtItt There seems to be no prospect that Chiang Kai-shek will introduce any "A" reforms that might improve China's present critical situation and regain popular support for the National Government. The complexion of the National Government appears to be unchanged by the governmental reorganization now taking place. Bather than introducing into the Government liberal person". alities inclined toward positive action, Chiang Kai-shek is apparently at- tempting to balance the opposition 'voiced through LI Tsung-jen's election to the Vice4*residency by maintaining in the top government positions political figures upon whom he has relied in the past, despite their ineffec- tive records. The position of Vice-President has little constitutional power and Chiang will probably try to keep Li Tsung-jen from assuming any authority. Li, however, is following his progressive political campaign by the formu- lation of a reform program. Li's political advisor has indicated that if Chiang refuses to accept the plan, Li will force the Generalissimo into the background and take over the leadership of the Government. Li's movement appears to be gathering strength and a program for positive reform would undoubtedly command popular support. Marshal Li Chi-shen's Kuomintang Revolutionary Committee now operating in Hong Kong also gives indications of being an effective source of opposi- tion. This group is reported: to have definite plans for overthrowing the Generalissimo and negotiating with the Communists for peace. Marshal Li reasons that any government responsible for ending civil strife would be assured immense popular support and that peace is necessary to stabilize the country and prevent the spread of Communism. It is rumored that Li Chi- shen's group is associated with the movement centering around Li Tsungjen. Their combined forces might be able to force Chiang's withdrawal, which they both desire, since, as long as Chiang shows no indications of taking effective measures to handle the present crisis, the demand for new leader- ship will increase. However, in any political upheaval the process of disintegration will probably be accelerated at first and the initial advan= tages will therefore accrue to the Chinese Communists. The tenor as. Chiang Kai?shek's recent appointments is indicated in the "C" naming of an old reliable, Marshal Ku Chur.tung, to be Chief of Staff, eucceed- ing General Chen Chong. Marshal Ku? who has been Chief of the Army Ground Forces and concurrently commander of the Advance Headquarters at Hsuchau, is considered one of the most incompetent generals in the Nationalist Army. General Yu Han-mou, another of the Generalissimo's trusted bat hardly qualified reliables, succeeds Ku. Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 Approved For Release 2001/08/2)-01082A000100010043-2 .6- The zit= az Genera/. Isa_klcia, new Soviet Ambassador to China, has nr aroused speculationeas to whether the USSR will now adopt a more positive policy than hitherto in Chinese affairs. There has been no Soviet Ambassador at Nanking since last June. General Roschin may renew talks with Chinese officials regarding a compromise settlement of the civil conflict, and it is possible that hi may offer Soviet mediation. In addition it is.likely that Roschin will undertake mediation of the current impasse in Sinkiang, and that this will be accepted by General Chang Chile-chung, top Chinese official in that province. No real progress has been made toward solving the dead- lock in Sinkiang through the exchange of notes during the past eight months between Gen. Chang Chile-chung and the Ili Group. As minimum conditions for a resumption of negotiations, the Chinese demand return of Ili leaders to Tihwa; the Ili Group demands dismissal of Masud Sabri as provincial Governor. Neither side will agree to the condition demanded by the other. So far, the exchange of notes has resulted only in keeping the situation open to dis- cussion, and in forestalling resumption of large-scale warfare. Soviet mediation will probably result in further Chinese concessions to the Group. Finely/a/ Position /ef..j...tsmuut, China. There appears to be little hope within the government of arresting the deteriorating economy in the visible future. Among factors for this growing realization area (1) effective US aid is still months off, (2) prices are advancing much faster (almost doubled during the past month) than the note issue, (7) government revenues are said to be only 40% of expenditures, which now amount to CN $24 trillion monthly; first half 1948 budget of CN $96 trillion is already exceeded, and (4) the discrepancy between the "open" and black-market exchange rates is ruinous to the export trade. 25X1X 25X1X serious concern over the general economic and firms,. cial position of the government, and is considerably pessimistic over the US aid program in relation thereto, He said; (1) foreign exchange is com- pletely exhausted except for working balances, and the Central Bank has been borrowing exchange from the Bank of China the past six weeks, (2) April note issue increased 405 over March, while the budgetary situation is "completely out of hand", and (3) the ineptitude, indifference, fear, and general low morale in high government circles have become much worse in the past three months. Getsemirm? Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 SIBIll 25X1X Approved For Release 2001/61111MMIXRDP79-01082A000100010043-2 PTIILIPPINES "%uirino Government attempts to solve law and order_problem. The new "A" luiriiiii?acrilin-CM?st on, in a dramatic effort to establish its power and prestige, has reversed the stern policy of the Poxes administration toward dissident groups. The Government is currently negotiating for the surrender- of Luis Taruc, leader of the Hukbalahap, and his followorepand has peepared an amnesty proclamation which the Philippine Congress reportedly is prepared to accept. Although neither the terms of the surrender nor the provisions of the amnesty are yet known and although serious obstacles could easily develop, the negotiations thus far represent a significant achievement. If a surrender is negotiated which will effectively reduce the number of firearms in circulation and if a reasonable amnesty is issued, substantial progress toward stability in the Philippines can be anticipated. Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 Approved For Release 2001/0879-01082A000100010043-2 4.8?11 SECTION III. DIGEST OF IMPORTANT STUDIXS AND ESTIMATES Economic Importance of Manchuria Manchuria is almost unique among the areas of the Asiastic mainland "B" in that, under existing conditions of technology and population density, it possesses a oapacity to produce more than it oonsumes for current purposes that is, a capacity to oreate capital. In addition, Manchuria possesses an industrial plant which, despite Soviet removals, war destruo.. tion and deterioration, is valued at approximately us 2.5 billion. Under favorable circumstances this plant could be increased to US :36.6 billion within a decade, or four times as large as the total industrial plant in China proper in 1936, and half the size of Japan's 1936 industrial plant. Manchuria is of little direct economic importance to the US in terms of future trade possibilities, However, in terms of the future balance of power in northeast Asia, Manohuria is of somewhat greater importance to the US. Given a friendly China in control of Manchuria, US capital could utilize the eoonomio potential of that area to develop China into an industrial power. On the other hand, Communist control of Manchuria would complicate the problem of economic recovery in Japan and provide the USSR with a trade weapon that could be used for political purposes in Asia. In addition, the USSR mould acquire Manchuria's large agricultural surpluses, useful to the development of Eastern Siberia. It is considered unlikely, however, that the USSR could or would in the short-term future realize upon the Manchurian potential for industrial development. )440'44I/ (Th conomic Importance of Manchuria to the DePE7-77TE-TOIR Report No. 4160, 23 January 1948. CONFIDENTIAL -US Officials only. Distributed in April 1948.) Approved For Release 2001/08/14441a79-01082A000100010043-2 Approved For Release 2001/ 43-2 OFFICE OF REPORTS ArD ESTLteTES0 CIALC FAR 7;ASTAACIFIC BRATOFte5C-15--- f41? e OTELLIGENCE HIGHLIGHTS WEEK 0E 30 DECEMBER - 5 1,4094//, GENERAL [Rule on Government - government: Capital letter if refer to -.----- specific regime, small letterif a type of government is Japan Peace Treat involve d0 --"--MirFo7i7r^,o-v,irmient replied to the Chinese note of December 5 on the Japaneee peace coeference_ta interpretine the Potsdam An-Pe-tient as REVIATIONSrealing It lemdetory net the CIL) oreoere 4reaty and :Iv maintaining o punctiatitke position Lbut the Toscow Arreeeent of 1945 especially stiPulatee necessary. that the Far Eastern commission will omeern itself with the settle-. CFM, FEC, ment of territorial questions, one of the important constituents of any USSR, etc peace settlement with japan. Concession to the other netiono which are OK.0 fought Real-est Jargon is allowed in ti,e oroposal that might work on subcommittees and an informational consulta%ive conforeecceraraneeo Error by political parties have been spending, a dispropertionete amoUf7MOrlyIntell. and vocal power in discussing the Japanese eecce tocaey, Until recently,Control. political leaders have, net only been expecting an early peace treaty bet also hoping that Japan might be permitted to be present at the peace table. The political strategy appears to be that the Cabinet Timing the treaty will then be able to claim Allied support for its domestic policies. (However, the intransigence of the USSR and the position taken by China make the feasibility of a peace treatyIn the near future highly question- able.) (ktisz vsawskarapc--t Control of UK occupation forces in Japan -----7Tra-live 1 January-I-94S contra-Or the UK occupation force in Japan was tested in the Australian Governront and Australian service chiefs. The Chiefs of Staff 000mittee, composed of representatives from the British, New Zealand, and Indian forces, will be dissolved, according to Acting Minister for Defense Drekeford. Possible l'eeltralior labor ban on arms to China e us ra /n V-.aterside ',Inion 38 considering, the imposition of a ban on loading of arms for the Chinene rationalist GovernmentQ NOTE: As rule of thumb, any item involving 2 or more FAR EAST countries should be sent to Intelligenoe Control for incorporation into GENERAL section. amacarammon NW ? 401... ??? tho Far awt, Like Alrope, unite in the creation of a CoHinform. aeports fror, UationLliet circles aeeert that Com:mist leaden; Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 ammemORRIPImmmm. Approved For Release I" ?1flLLU -4- Lin Ilea and Li Ii-un have cloned neotiations vdth the USSR for exchane of Soviet arms for Nanchurian commodities. Chiang Kai-shek, in his annual "State of the !;ation" athress on 31 becember 1947, described the present Communist menace as coming "as much from without as from within". He declared that the main Hed forces must be annihilated 1:ithin a year, out admitted it woula take years to clean up Communist remnants. pxternal Affairs the Chinese 4mbascactor in ;.losco. opposed a collective diplomatic corps protest over the new ruble exchak'e rate, .and refused, au Lean of the Corps, to call a meeting uith a view to.:are t;Lkirk; such el protest to the USL,A. The Oritish Ambassador then agreed to take the initiative anu was assured of support from the US Lmbassy. Lioacow's recent radio blast al:-inst the _uceintang and the new Chinese Constitution. represented the strongest attack yet made on the Chi- nese Government by an official Loscou orn, and, according to some sources in Nanking, reflects e change in tactics toward China on the part of the Soviet Government. Hitherto the Soviet-controlled press in China hs main- tained neutrality in comment on the Chinese civil 1;ars while the radio and press within Aussian borders has refrained from openly siding tith the Chinese Coeuunists or directly attacking the Generalissimo. The Soviet Consul at keipine has denied the report by the Chief of Stuff of the_Generalissimols Teipinir headLluarters alleging Soviet' military aid -to the Chinese Commnists. The Consul also repudiated the recent story of a Soviet-Chinese Communist agreement for. military aid, and used the occasion to emphasize that the ustu recognizes only the, Chinese altional Government. ? Meneral notet ON $26,400 billion; US $296,000,000; "1"rom ON $84,000 Economic?LI? 90,000n 'Finance 7,:inister O.K. Yui, in a report to the Resident Committee at the keopleis folitical Council on 3 January, stated that the national Government budgetary deficit at the el30,of the year 1947 uus 26,400 'billion Chinese dollars (or approximately =72960000,000 at the official "open durket" exchange rate). He pointed out that China's forcien trade position allowed some improvement in 1947 over previous years,'bnt the unfavorable balance of last year amounted to 4,270 hillion Chinese dollars. Currency. The US dollar on the ShaOlui black market reuained fairly steady the past tm ;:eeks, Uth money continuing tight in face of the deraanu for lunar i:e;: Year settiements. The 13L rate Was CN 152,000 on 2 January compared with 135,000 of a month ago. The "open" selling rate Ms increased on 30 Lecember from CN 84,000 to 90,C00._.? .1 rices. The general cost of living index for Lecember 1947 reached 66,200 eomparedith the basic year 1936, ad increase of 22.-i!, over Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 mmmileIMPPEmmmm Approved For Release 200 ..kati .ILIA-ADP79-01082A000100010043-2 November. For the period of 24 to 29 Loceratxx inclusive at:Increase of uz-c, reported in zenerhl index of .Jholesale prices of basic co:::;ioditiee, 4th food and building Laterials raking the greatest gain. Fcreign Traee. Aeiorts from rankint: on 27 December reseal that the Jtate Council has a.proveu a teasure to increase iL4ort duties by 5t.) effective 1 January, or all cormodities except cotton, rice., :heat flour,. caeoline, kerosene., ane diesel oil. This is another round in increasing buck:Aar; revenue, which, if trends -continue, will be offset by increased expenditures because of rising prices. ,Budget. The _State Council is reportee to be studying a CN 90 trilr-on budget for the Arst half of 1948; a huge sum compared Ath the CN (.3 trillion sot up l'or the 1947 budget. Views On itenorde Conditions by Forel nidnister Lr. -ang Shih-chieh. reports that the Cabinet feels pray a stab> 'zee currency can im- e:bove the economic sittv-tion; that militarv expenditures cannot Le reduced dne that increased taLes are ineffective al_linst constantly depreciating currency. lie aLrocs that ctuu:lization of the currency alone v?ould be in, sufficlent, and must be accompanied by ade,uate improvements and reforms in other fields. Cnticernirc US aid to China, Dr, tang has raised no ob- jection to the inciasion of those reservations included in aid plans now in elfect or being prepared for ..L.urope. L,:eneral unstable ourrvncy zald infiLtion are results, no the basic cause of China's present VP' ecosomic K?, nrEAD estimates, believes, ete. "' for all division opinions." Transportation: Railroads. According to recent information the raily situation China worsens in the face of continued Communist offensives. Heti4een 50 and 64: of all rail lines are now disrupted. The lines which have consistently remained open are the Shanghai-Nankin7. line, the Canton- Hank= and the line in Communist territory from Lanchouli to Suifenho in Lumhuria. The railvay from Tientsin to Chinhuangtao was open on -2 January after having been almost constantly inoperable since 1. December, but further tweaks are expected. In most cases ties are burned aria rails are removed which Lakes repair almost impossible. No double-trackeu lines are consis- tently in service in China since rails from one line have been removed to rear the other. ?vs. UNR.?.it Fis4 Catches, The Government appears reluctant to inter- vene in the Shanzhai fish market dispute over UnIti-ZArs efforts to increase catches L.nd bring pricce uown in opposition to the fish monopoly who wish to reduce catches ane keep irices up. The question is just how far 'All the Goverment go in bucking the powerful .vested fishing interests. (Re Fai. 7alekly 22 December 1947). Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 milbeft.11 Approved For Release 2001/ P79-01082A000100010043-2 The Siamese provisional government last week proclaimed the repeal. by Royal decree, of the emergency powers held by the Army since 20 Nov 47. These emergency Dowers had enabled the military to make legal house searches and arrests in order to insure the preservation of peace and order and to forestall possible counter-coup activities. The announced reasons for the repeal of these Dowers were that the present regime is now free from attack, that Peace and order is established, and that the Police Force is oapable of handlina, the present situation, li aranch feels that this proclamation was issued probably for either or both of two objectives: (a) to remove nrounds for opposition obaages that the Army has too much power and is in a position to control the eleotions at the end of January, and (b) to win foreign recognition by creating an aura of responsibility and tranquility about Siam and the present regime. If the latter objective is achieved, the opposition groups, in attempting to stage a forceful comeback, would be placed in the role of rebelling against a stable and duly recognized aernment. As the situation exists at present, a ruccessful return to Dower ,y the opposition would negate the question of recognition since foreign recotnition of the Thamrong Government continues. BURMA Burma became a sovereign independent republio,known as the Union of Burma, on 4 January at the precise moment ordained by certain Buddhist astrologers, after some disagreement, to be the most auspicious for Burma's future. Burma enters into independence with the most honest Olvernment in its history, enjoying the support and assistance of the UK, hut nevertheless beset with several dif4vit problems. The major problem is the establishment of a strong centravernment and effective admin- istration under a constitutions-the provisions of -which permit the formation of almost any type ofayernment. The realization of anything approaching goodC4vernment dependseto a large degree, upon the continued internal cohesion of the Anti-Fascist League, the dominant political organization in Burma. Friction within the AFL has been reported on several occasions since Aung San's death, and its disintegration would lead to chaos throughout the oountryn The development of effective administration is handicapped by the shortage of qualified administrators which will continue as long as Burma's . educational system continues to deteriorate. Lawlessness is still rampant and unchecked in various parts of the country, often instigated by dissident personalities and political factions - notably the Communists. Minorities, both foreign and indigenous, pose another serious problem. Although most of these ethnic groups have made an uneasy truce with the predominantly Burmese Government and have accepted the constitution, tension continues, C: particularly among the Karens. N >Suggest "with the Government (which is predominantly Burmese)I, aRIPIPOPIiiimmem Approved For Release 2001/08/26 : CIA-RDP79-01082A000100010043-2 Suggest avoiding use of variations Approved For Release 20011,05)PleMP79-01082A000100010043-2 BURKA lesonomioally, the oountry has made slam but steady nrogress towards rehabilitation, except in areas most affected by lawlessness, and is new almost able to pay its own uay wath receipts received largely from the export of rice. The Government's polimavareedly, leftist, is the socialization of land and industry. Despite considerable talk of drastio measures, it appears that sooialization will be carried out gradually, locally, and by the payment of oompeesation for exproprieted property. It is essential therefore that the AFL, whloh sponsors the current Government, maintain its present unity ad integrity at least for the meat tee years, if Burma is to acoome an eeonomioally and politioally stable nation responsible for its internal tranqpility azd international reputation. AUSTRALIA 11551505a PLC negotiations with Government. The PS Foreign Liquid- datiainiaiiioni---repeesentatve? eydneye hanqported that the Australian Covernment roquests imeediete occupancy and use of US Navy re-ditties In the anun area. A representiltive or the Gommonmealth Govern- ,;ts the puremne rri,11,to be a teeen fiture without regard for gizatO investme. The Ful r,..r.,*eseutative reports further that he that might 1.eer losuoaesiful in obtaie_r.7 ^averablc: Australian reeetion to a one-. oonfuse quiolibeeoe: deal ihvoliiniE Culn=,4rwta eritise Lend-Lease surplus uninformed TheC,----c, gny such deal Lb a reader. Lesol to the US and han ..nde-sted that it is prepared tc exert auy 40-ant; necessary to settle an its own terms. Zurrently the Ceeetralia7Deceeeueeet has indicated an intention to withdraw any interest in Taanus if terms are not accepted, in which case it may publicly cite the "unreasonable" US demands as making its plans for !leans impossible., ahilo reoognizing the political advantage of acceding to their request regarding Menus, the PLC representative has recommended that a price be set on a take-iteoreleave- it basis. Goodwill mission to India. At the request of the Indian 0:merle/re-et, Australia is sending a imamo good-will missioa to India expeoted to arrive in January. Its function is to report on scientific developments in Australia and the application of solenee to natural resource'', It is probable that the use of atomic energy will be one of the topics of dismission. The importance of the mission is indicated by the oaliber of men composing'it? most of whom are leaders in the fields of Physics, Industrial Chemistry, Agricultural research, and Electrical angineering. Economics. An interesting effect of the dollar shortage is the impetus givei-TE-raitialials export trade and manufacturing industry Increased production at lower costs is necessary to enable Australia to compete in the dollar market. he Government is considering restrictions on home consumption in order to take advantage of export opportunities. *to- Approved For Release 2001/08/20PfieffiftP79-01082A000100010043-2 Approved For Release 2001/08/26 :CIA-RDP79-01082A000100010043-2 6?Dellalirem AUSTRALIA XXXXICEXXX Domestic prisms are expected to rise somewhat in 1948. The 40 hour pork meek, (instituted 1 January), the abolition of federal subsidies, and tho rise in overseas prices are contributing factors. NEW ZEALAND. ?f-4411f474-4744 lIilitei7. Plana for the postsvair ?ores envisar-e maintenance of five aqua( one comprising 4,000 regular eLsficters cd nen together Isith 2,000 now.regular personnel b Total cost when the l'orce is fully established is estimated at 4,600,000 pounds a year, Tile plan has been approved by the Defense Council and enabling legislation is now being prepared. PHILIPPINES r_vpz?q.14..vution 01-0 t4..1)r,0 ul..4r-7.,f cons izpor- tces in viov of tinuoe: rei:ortc or i.oesible jor clieturnces in the ihiliu.iness s *ueon the ro:.xtivLtion of t,l)e i?i1jFire ConstL- bulxy on 1. JLtsuir: ochoduleti :Corner Chief c.?.:1 the !filitLry i?olioo CccrLd, Gctra. J.3iLr1Oez-...L.A.L.neec,,z its h. :hilo it is not nova consii.oreci that CLct,:ne&L 1:111 1au iiivolvoci in Lny overt 1:10V0 the LtiL,inaitnzi,5.0n it 11.1.t; .0etin &trek:, icolinis of r..utuLl dictruc,t. olt tee .1-T051th:zit itaxas and C4anco.:-.... Thc eiti-Ltion tort6e to ireeiLe:t CJility ? to c.e:A. orfoctivo17 -.-_-Ith Vic irolaiou of L.:.;; ric orcier tic vthen Cicsiciont elente continuo to threen LnO recult in if tin i_.crEenm:l. In both the Cont.iuL.19 and Ard Ferece. Approved For Release 2001/08/26 :CIA-RDP79-01082A000100010043-2 081418111PIOND-