INTELLIGENCE HIGHLIGHTS NO. 47 6 April - 12 April 1949

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December 12, 2016
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June 13, 2001
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April 12, 1949
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CIA-RDP79-01082A000100020014-3 FAR F zS ~! PI.CIFIC B? NC`i OFFICE OF REPORTS 1? ES ?TI : A TES) C iTh,AL INTELLIG C- aGPZ',CY MOR1cINC PAPER NOTICE; This d,sct en : is a working peper, NO" official CIA, Issuance, and lux-1, not af~n.esqp--ily r= been coord.inate ". with' other ORX producing co ponente It r rsaseiat.s current thinking by o u.e group of speci.e.:Uistas in CIA,, and is desi.0ned. "a ? use by others es-gaged on similar or ovfTrlapp ,_ ,, studies,, The oin.i.ors expressed herein may revised before ?inal wand official pubiinatiOr ; It is intended solaly for the information of -he addressee and r.,~t for fur. their di~4sez 1 ,ata.or , DOCUMENT NO. DECLASSIFIED SS. CHANGED TO: TS S C NEXT REVIEW DATE; RR7C LCI/I~lA/CR? 372(1dA Approved For Release 2001/08/?& -RDP79-01082A000100020014-3 Approved For Release 2001/08/2 J OFFICE OF R ORTS AIM ESTIP TES s CIA. PAR BAST,,k'ACIFIC BRANCH IN3ELLIGi;NCH 111GHLIGFITS W o 47 6 April .u 12 April 1949 Establishment of a new !C ?~. o ittoa, which rrnay be able to work with lase intrusion of political issues,, ?r.?au the major aeoomplishmeir", of the recent NCAF1 conference In Bangkok (p,, 2) Completion of a trade agreement betty enn Japan and the Republic of Not sa appears to have been the signal for an end to previous barter arrangements between the Repia".hlic and the northern Korean puppet sta- i (p. 2)0 Dissident e1'grents in northern Korea are, reported for the first time to be organizin ; in, the un l-yEre areas (p,, 3), Regardless of the cucon ss or failure of current peace discussions in Peiping,, Chinese Communists forces probably will cross the Yangtze within the next six eks e Dhethor this advance is in the sense of a? nevly,- established *coalition" govern rib or a resumption of the shooting vn L%; the majority of National i sts still poseeseing military forces can be expected to fall back and continue regional resistance (p. 3). Poss;.hl?y indioati` of this trend is the recent report that Central China com ender PAI Chung-hd is planning to pull back from his position at Hankow (p::; 4),, Despite the Burmese Govex entts optimistic announoementa the expected "surrender" of insurg ez A. Karen fe roes did not materialize (p,, 7) Dutch and Republican oMdais in West Java are competing for oo troi over units of the creek Sil ? scngi :Division near Bandoeng (po. 7). The Nactonalista .rty, already holding the balance of power in the Philippine Senates is expected to extend its control to the House (pd, 8)p me marg. nna no .. tins a n siacine .rs sect ons of is Week: ; ("A"s "B or AC") indicate the imporUince of the items in 8, opinxi.onz with 4?A.." representing the most important. Approved For Release 200I6$T 6 : CIA-RDP79-01082A000100020014-3 Approved For Release 2001/08/26 CIA-RDP79-01082A000100020014-3 SECTION II4 DIs'VELOP!1ENTS IN SPECIFIED 41REAS GEMAL ECAPE establishes Committee on Induatr and Trade- The Economic Commission o is irk MiF ast C .~ ..., ~ inter.~..?n r^c;eting which adjourned at Bangkok on 5 April,, although marked by less polf.tical acrimony than prevailed in previous sessions, still took actions only preparatory to real economic achievement* The Committee requested the Secretariat to make several now studies, among therm trade with Japan and the dollar shortage in the ECAFE region. The most important action, howcrver, was the establishment, by an 31 to 1 vote with the USSR disssenting, of a Committee on Industry cnd Trade a The now committee will meet annually in the spring and again just before tho full ECAFO" sessions each fall. Initiative leading to this action was taken by the Indian delegate. while the US delegation did effective work in reconciling differences between the original Indian draft and a U. oounter- draft, The US delegation reports that establishment of this Committee has the positive virture of providing a permanent.body capable of examining the economic aspects of ECAPE S work more or loss free from political issuess, Ambassador Stanton, the S delegate, reports that he considers the most positive value of the session to the US was the goodwill engendered among Indian and other Asiatic delegations by US support of their etrong desires to establish the Committee on Industry and Trade and our assiratanoe in reconciling conflicting views, in sharp contrast to USSR obstructive tactics which were resented by Asiatic merrtbers, "B" Before the Bangkok session began there had been some indication that implementation of Point IV would be a .primary topic for discussion. The other delegations acquiesced, however, to the US desire to hold off any ECAFE resolutions on Point IV until ECOSOC acts upon it following submission of the Secretary General's study and report, at its July meeting. Japan-Korea Trade Agreement= An agreement which contemplates a total "Be exchange, of 8 mIU vortsh of goods in the next twelve months bet -*eon the Republic of Korea and Japen has been concluded by SOAP, ECA. and Korean representatives. japan, under this plan, will recoi;. some $29 million worth of Korean products, almost half t ho total value being in rice. The' rest will be made up of other foodstuffs; raw materials such as tungsten concentrate, graphite, fluorite, anthracite dust and other minerals, and semi-finished steel and scrap. Korea will receive in return some $49 million in s uoh Japanese industrial products as textiles, mining, trine sport and communications equipment and parts, machinery and metal products, Dement, chemicals, and drugs. Approved. For Release 2 . IA-RDP79-01082A000100020014-3 Approved For Release 2001/08/26 : CIA-RDP79-01082A000100020014-3 l Since the Korean republic's economy is competitive with that of other non-industrial Par Eastern countries, its natural trade orientation is necessarily towards industrial Japan, despite strong Korean fears of a return to the pre-liberation conditions of Japanese economic dominatt:,iono Japan, in turn, has a critical need of Korean rice imports. If, as seems probable, Korea has no exportable rice surplus in the coming twelve months, Japan nevertheless will have use for the dollars received for exports to Korea in order to purchase imports elsewhere. Simultaneous with the announcement of the SCAP-ECA trade agreenent9 the Korean Goverment has ordered suspension of all barter trade wi",,'a its p-rrpet neighbor to the north, on the ,rounds that northern Korean t?s:< 3rs ar.s-.ed as expionage agents for their Soviet-supported rerzra?a US Oc:v:pation officials in southern Korea generally hava favored barter trade wit::: the north in the past on the grounds that even the small quantities of critical materials so received have benefited the ?epublio'ss economy nuffioic-ntly to overshadow other considerations, It appears that the Korean. Government now believes such critical items can be procured elsewhere with. ECA= supplied funds. Members of the UN Commission on Korea (UNCOK), in contrast, ha ?e advocated increased barter with northern Korea as a step towards re.-oval of economic barriers now existing along the 38th Parallel, thus imp".ementing the UN mission of promoting Korean. national solidarity? The Govermt:ientos action, in ending barter may, therefore 9 reinforce the opinion of some UNCOK members that President Phee is not sincere in his stated desire to #,,?list them in solving the problem of unification. North Korean underground"- Independent underground organizations,, having only ' imi s arms anc neither central direction nor lateral liaison;, are reported to exist in urban areas of northern Korea.. In the larger r~:i ties 9 group cormanders have been appointed, recognition signs learned and weapons cached, The actual percentage of northern Koreans enrolled in thee,.. shadowy organizations is un n.own, however, Past reports have indices' d that ' the potential opposition to the puppet re grime in northern Korea includes military personnel, farmers, laborers, students, policemen and civilians, but this is the first report to indicate that any organization of d:' o sidentss is actually under way north, of 3i34 CHINA Status ofeace ne otiationss- Chile Nationalist-Communist conversa-':,ions ffi arytos ors I" peace negotiations continue in Peiping;, it appears pre"`. - unlikely that the Naaa*cing Government will agree to Communist demand for virtual surrender despite current Communist propaganda threats, mil.tary meg Approved For Release 2001 -RDP79-01082A000100020014-3 Approved For Release 2001/08/26 : CIA-RDP79-01082A000100020014-3 movements, and the informal "ultimatum" sent to Acting President L.1 Tsung-jen. Although LI has assiduously sought a peace settlement, he has repeatedly indicated his unwillingness to accept terms tantario&mt to liquidation of remaining Nationalist power. In partial reply to the Communist pressure, LI has sent MAO Tse-tung a dramatic appeal citing the popular demand for peace in all China and offering to surrender himself for punishment as a "war criminal." While attempting; to saddle the Communists with responsibility for the probable break-down of negotiations, LI's regime meanwhile will offer various counter-proposals, seek concessions, and try to prolong the discussions as long as possible. There has been a definite trend on the part of many Nationalist leaders toward a resigned acceptance of the idea of Co?-munist domination; hence a dangerous drift toward CCPIt365R orientat::on. Despite this trend, if the LI-.HO regime cor< eludes an overall surrender agreement with the Chinese Communists., the commitments probably will be repudiated by a majority of Nati.onal:i.:it leaders, who will atte.apt continued resistance from the South and claim that the "recognized" government still functions from Canton.: Meanwhile the Chinese Communists are likely to demand that the Nanking Government: (1) a.scept full responsibility for the civil war; (2) repudiate CHIANG Kai-shek and all treaties with the W$; (3) transfer to a Communist-controlled "coalition" all of its authority as a "National Government," together with title to all assets; and (4) fornally transfer all Nationalist armies to the "coalition" for subsequent "reorgani,at,ion." Li's government can comply with all of the above demands simply by signing an "agreement." Such an "agreement" could not keep the Generalissimo from. reclaiming his position as "President of the Re public," destroy remaininP anti-Cocmmunist forces, or deliver Nationalist armies to the "coalition.. But it would greatly weaken the Generalissimo's claim; it would confirm as "criminals" those refusing to surrender Government assets and it would make outlaws of those armies refusi;?,g to be "reorganized." Thus all of these forces would become in ef# ct the object of a Communist-led "bandit suppression" campaign. If the Nanking government sips such an agreement, its leaders will be removed from the 'twar criminal" list and accented into the "coalition." If those leaders refuse to sign--and they will not b,.4 allowed much more time--the Chinese Communists will resume the offensive. Whether in the name of the "coalition" or the Chinese Corimunist Ps:-ty alone, Communist armies probably will cross the Yangtze within the next six weeks. Hankow evacuation plans-- As superior Communist forces continue FW' their southern push along the Pinghan railroad towar 1 llankow, the Central China commander PAl Chung-hai appears to be readying his forces for a hasty evacuation of that important central Yangtze port area.., The American Mission school in +Ouchang-across the rivcr from Hankow- has been asked by PAI's headquarters to vacate their buildings by Approved For Release 2001MIPIP"A-RDP79-01082A000100020014-3 Approved For Release 2001/08/26 : CIA-RDP79-01082A000100020014-3 16 April to allow use of the premises as the advance headquarters for the Central China Command. Indications are that PAI's main headgzarters probably will be moved south to Changsha as the first phase in wih_ drawal to his home province of Kwangsi. Almost all of PAI's heavy equipment has long since been moved south. The timing for the with- drawal of his troops is dependant upon the rapidity of Red troop move- ments toward Hankow, PAI will probably offer only token resistance in the Hankow sector, thereby conserving his troops for possible inclusion in a southern bloc or an authonomous Kwangsi regime. aHa Communists infiltration of Taiwan-- Increased Communist activity in Taiwan is apparent and Taiwanese dissatisfaction with Nationalist Chinese rule continues to mount. The 4hinese Communist radio recartly announced the presence of a Taiwanese woman Communist in North China. a Hong Kong Communist group has announced its program for Taiwan,, and the distribution of Communist propaganda on the island has been greatly increased. The Communists may also have been active in the recent student demonstration in Taipei which led to the detention of some twenty sti,dents and to the closing of the university. The arrival of additional mainland troops may provide the means for further munist infiltration. Meanwhile, soaring prices, ;rowing economic instability and Chinese corruption, especially as evidenced by recent private transactions in US military equipment, are fanning the flames of Taiwanese resentment against Chinese rule and increasing the possibility of an uprising. Soviet Policy in Manchuria-- Scanty reports coming out of Mini eBa churia indicate that although USSR covert influence there is powerful, the Soviet is operating through the Chinese Communists, and is being careful to avoid either jeopardizing the USSR's strong legal rights in Manchuria or offending Chinese Communist nationalist sensibilities. There are apparently no Soviet troops in Manchuria outside the Kvr'antung Peninsula, with the possible exception of detachments reported t