INTELLIGENCE HIGHLIGHTS NO 33 24 DECEMBER 1948 - 4 JANUARY 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100020028-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 12, 2016
• Document Release Date: June 13, 2001
• Sequence Number: 28
• Publication Date: January 4, 1949
• Content Type: PERRPT

.'Approved For Release . U
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a In O U, and Is de ipned for use by
re. sag d on similar or o+perlapping studies.
'ape opiniona a ressed herein may be revised before
01,114
o ' e tl puibl cation. t is intended
xlf sly for t e i orrnation' of the addressee and nob
s.j)d'1*at'iono
Approved For Release
A-RDP79-01082A000100020028-8
 SECTION I. S1B 4RY OF FAR 1AST VXM. AND DEVELOP? S
Japan;e trade with China proper expected to remain at low level,, whereas
its, trade with Chinese doing business in Southeast Asia is promising (page 2).
The announced completion of Soviet troop withdrawal from North Korea
will not fi nish substantially Soviet, influence in or'control over that
strength of the Japanese Communist Party (page 2)0
Going Japanese elections will probably reflect a growing political
Polite measures are now considered necessary to spur tagging rice collect-
Ions in the Republic of Korea (page 3)e
`Inactivity characterized China's battlefronts during the past week (page
(page 4
4) ? while attention shifted to Fu Teo-yi's personal pease offensive
In Sink ng Province, Chiang Kai-shek has appointed a pro-Soviet governor
(page 6). -Prior to Chiang's New Year's speech, the Chinese .:ommunists broad-
top provincial and military leaders in a bid for a vote of'-confidence (page 5).
Meanwhile, Chiaug Ki..i-shek announced in his New Year's addresi that he is
willing to negotiate peace at 'his' price (page 5), and called a meeting of
Ll of China in 1949
The Dutch are adopting conciliatory tactics in Indonesia (p
In Indochina breakdown of the French-sponsored Xuan Government appears
pos sibls (page S) o
In Burma the political and economic situation is like
2be Philippine Government has begun 1949 by instituting import control
further in 1949 (pa 10).
and a managed monetary system (page 1d).
(1) "A", "3" or "C" -important in $ E's opinion o the item, with
Sall _w.awasrw44 mm 4,1%a mna* i ,se r+nn4 nruaia _
Yie f lloaviaj, marginal notation,
In succeeding sections of this llbekly(t
a-
cast that they will not permit Kuomintang participation as a "arty in the
 UM `rj ice Province i iere it is biMevodi thdae trooper .fort a
th,
lust
Soviett saves beb12A a etri ig
it is probeblw thaet i limited .,tuber of Soviet psrsaan i, of amt
and elvilian, have remained in No rtb lone in order to assure the acantft"
vaaoe of the ties between the govot aosnt of Port Korea anti the WR,
laii*Aim 'Imam _
~ + 29 der Icirt" ofltofal tut the
,
roment rice o ation progrs* had achieved only 22. er t of the
MO goal. The Agriculture I1 aster a rots that the "voluntary"
program has been a fi lure and the bas decided to exert force
to speed ; experience in $ a has denw-
FZ, 9noct
sated _t it # 'ter vices *'not collect b `~ tt
viii anne d saap~ppea od fa iiif it ahs isle. ' It now .`tit
the govszneent will fail to oOUeast lore than 50 percent df the gnota=
*Ic i will result in 'widespread eccnoaio unrest and further iutlaticn,
 provincial auxiliary currency and growing independence of provincial
within the I -tionai Government orbit
bvfea a ate. Sir" 1 autan'
is ap~r ' fir -t ob active. However, in the a von' off` tfie Mete
is bill already too strong to be suppressed by local elements
Liberal e3. +l taim.the province will probably consider ft f6- ii
dot p '` mss' attempts will probably be made 'to a feo a mar` c ng
a ith tale Cysts whose influence in parts c Vii t nca
n sec vse nations Officials, ncluding
-
, dicing the changeover period.
old warlprds
at C at-controlled' overnment of Dhina in
C ' s
.
1949. nese o s broadcast a December re ec _n a vance
broadcast summe-rize$.an editorial of 30 December, exposing the peace
Year Yesssge, sad made clear that the Kuomintang as a party w i ll .not-
be included in the "coalition government" promised for 1949 The
ver ieace -bronosals might `be offered inCg2ANC Kai'=sek's ew
" e
all reaotfanaiy elemn nts and oust American imperialism from china."
people and-the'-Chinese Communist Party" to "work hand in hand to eradicate
push `south' of"'the Yangtze, and the Communists "will Dell a political
consultative'conferance from which all reactionary parties will be
excluded." ?hereafter, the Communists will take the lead in forming
a central ooalition` government," to be participated in br "various
democratic parties and people's organizations" which are already allied
with the Communist Party. Although the editorial does not so state,
it remains probable that a large number of Nationalist f"notionaries,
as individuals rather than as,Kuomintang representatives, will continue
to=function in the Communist-controlled "coalition."
Soviet Embassy etre thens its staff, returns depend ents to China.
For several months the UR has been removing from China thedependenta
of Soviet representatives in Nationalist territory. Recent additions
to the USSR's offices in Nanking and Shanghai include 20 Soviet officials,
23 wives, and 12 children. The new officials, some of whom have already
given distinguished service in China, will undoubtedly strengthen the
Soviet representation. The return of nonessential dependents to
Nanking and Shanghai may indicate that the USSR no longer anticipates
any great violence in the turnover of those cities to the Chinese
Communists.
Explosive inflation again struck Nationalist China last week as
uncontrolled note Issue stimulated the sharpest price spiral of 1948,,
The 30-fold rise in prices and value of the US dollar since 1 September,
1948 approximately equals the increase during the first eight months
of 1948. Despite reduced Government expenditures caused by the lose
of North China, the Northeast and many armies, and the contracting
area of Gold Yuan circulation, the note issue has risen to at least
NC", .
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AIX
iteduced tax revenues and anticipation "of. i Comatuniat
g to " e r+~lue t'he Gold Yuan. Co naequeiitly t?emendous
~ Ctor
inl t arms'y` presautes hare: formal which the Government cannot sassn
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IND(`NP~TA
e tac in Ind . '11th the a2eae of RAs
Dutch ooilas action again the Repub ic, the ne th.rlande is pre ing to
adopt a more eonelliatorq attitude on the Indonesian m4o%em. This'changed,
more liberal viewpoint, now that Dutch aims have been seabed by use of
fares, is an obvious effort to al l ily world opinion and to, i& the ooaperati n
of influent#al Iruioneslam nationalist leaders. it may also reflect considerable
pressure from left-wing grape in Holl.acA. The Netherlands Premier and the
Dutch Ambassador to London are making a special trip to : donesia to expedite
esta-blisEurient of the joint Dateh-Iadoneeian interim gore t. me Dutch
have already suggested that 08 = Delegate Cochran intercede for them With
Republican lemaders, uhoee cooperation they consider vital for the success of
the Interim government and for containment of guerrilla activities. In another
effort to win Indonesian support the Dutch may consider the removal of High
Commissioner Beel, who was also in a position of amthority in the Netherlands
during the Dutch police actin of July 1947.
The Dutch policy will be regarded with suspicion in Indonesia where no
Republican leader could martei enough popular support to form an effective
govetneeent were be to ascent Dutch terms. Another strong, deterrent to mediate
collaboration is the relatively strong international support which the Republic
has attracted. We same factor will no doubt cause other Indonesian leaders
to hesitate before accepting positions under the Dutch.
IHDrC'IA
P ssible "nap" of the ftmo*lMms ed Gave: t. Despite "A"
se oasr f a e the question oiedmese for-
sign affairs is the major stumbling block to the return of former emperor
Sao Dai to Indochina, it is doubtful that the current c entiones in `Paris
will decisively strengthen the Vietnam Central ProvisionaGorernment of
President Xuan. The inactivity and disunity of the Vietnam delegation at the
recent Dalat economic conference; the necessity for Xuan'e government to derr
rumors of Caodaist (a strong religious movement) abandonment of auan; Presi-
dent Xuau'e denial of his reported intention to remodel the gvernment before
"the return of Pao Damn; Xuan's insistence that his family acooft pany him
even on a short official trip to Paris; and finally the resignation of three
outstanding members of the Provisional Goverrnment, all underline the possibil-
ity of an Imminent breakdown of the Xuan Government. The immediate reason
for the resignations of these leaders apparently steam from dissension within
the government over the distribution of authority among de 'ministries and
the regional governors. This, however, is probably secondary to the failure
of the Juan Government to 'effect a mdre rapid realisation of the French plan
for Bao Dai's restoration as emperor.
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-10?
iica2 and isawasio tuatiaas UU]s to detsri 1949, ?$#
Poli e e oo an LUMAY %a o pro ve-
ly worse dee'iag IM* lawlessand the insurgency of were ; disaffected
PS ,, political olsoruts aontums unabated in 8angoon and thro a most of the
.,entry. eavau"at military efforts to restore law and ard~sr are still
often ball-hs rtsd and Ineffective. More are no ixdioatjess that the delicate
Seven aiaoadty problem will be settled in the foreseeable' future, and It In
believed that nasty kress ill tight if they are not ran d a separate stymto
tlToamg t Burr= arlportiatiens. The already tr mtod i ntt4uassist Peoples
The authority support
with di affiliati n of the All-Burma Youth Lem. lost
the
AFPYL 0ovSr9M-sat extends only over.linitsd areas of the country. Furthermore
no effective leadership has developed frays any politioal group.
Beoaonio prospects for the taming year are no brighter than the political.
Busaars financial position, both internally and externally,, is expected to
ooutinmms to deteriorate. 22" exports for 1948 tell acme 270,000 tons short
of the original target, lu~sly because of insurgent activities, and will
probably miss f$s 1949 target by an even greater margin. ? All major saw mills
may have to aloes down in the near future because of insurgent interference
with t3ar estrrattan end pion of teak logs. Fur ermore, the Govern-
mates aaaatic alistia policies my force the Sarah Oil Cc,ipa ay and various
nritish aiming enterprises to suspend operations. Since rice, teak and
minerals are I I's major exports, the economic loss through such develop-
main is obvious. An additiaanl problem will be created by considerable m-
e aloyaaent which in turn is likely to create additional wrest. The breakdown
of transportation will iaureasi*gly interfere with daaestie oomeaerot and
prevent badly needed consumer goods from reaching neny areas of Bm-m in
sufficient quantities.
As* the French Minister to Burma recently stated, "18nile things in drops
have been serious they have seldom been desperate, but in' Bureau things are
always desperate, but seldan serious.
PWILLIPPlNE$
ting oro
d
asCpree. On 29 Dece? r, Presidentissued an soaatt sn r carry-
e
iu
ing cut Legislation passed in Juzas 1% for the central imports of to nriee
and aau-essentials. on 3 JaMary, the Cenral Boris opened for business.
Both of these measures were, reconnended with ague degree of urgency by the
Joint Philippine-American Finance Commission in June 1941log cal steps
In making the Philippine ecaaoc leas dependent upon the US.
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p
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In pMS of Oaltt's1 is to sem@ITS the e
da 3ar 3 hr 1r ws. so Osamu" aedae 00144101do-9 it
oby- qnftg an ssms In wM*2w at ratrss 20 to " pw "aR bslal-
as?
iapoe1s at IW O MU&IM In float 1%9* Both thou prodaats e
sd e Pes Mrr to 1l114phdn! seosoW sad oh donews
sMr~slils~iN we ar u be - ssa3lsbss w lasladed. lighfir psr cent,
of two !slant apowe, wL1.i be slissa ed to stsb11ssd . s and the
M1111111112 SAW srs aside tw nr v appktLeaala. (b a statistioai bads the nesewe
ssde . lessons 1w ali3Sran.
NOW
The Caetrat Bash will, ahsn its aegwnisation and m'oaed es are oaM1etid,
oaessset the P I l ippdna I~aer spats f+at its wesennt do]la 3 9=bang standard
to a r sd gaatan. %saa~:foIi* !mama Coa cn in rsaaamanding this de-
pWttiare felt the aatsp awe essssaary In ordar to taoilitate damestia financing
sad banter soesrtrol wet the eem s aacnomia desalopment. Miguel Cuaderno,
who bredsd the Philiphdos $sstion of the 71000109 Caa~ies#an, resigned as
ad ?Snow* to bas ors Geed raoe at the Ceartaral Bapk. Mad cno is
peridbico. will, ~embeeb, ,bbe sisted by a oentr l baddag
.V. ,& frost the us Federal Awsess-e go*,
Bdh i t control ad esptral Uddng legislation have reaeired
oppeei" JIM MS ba iassr Interests In the Phil. negotiating
with the 'torld Aria fo! lom to !ia^ses Ifftentmatrie pro3sats, h..,
phflipaln? sew lris woes atidsor Pmmwx* to earn oat tee. coast IND
aR~isb hod bass sssa ^ee~dsd b r the Joist "name Cesesiwi . 3lsssre is little
gsasstiou tint than are lssteal steps In the wok W'='- t
srds>