INTELLIGENCE HIGHLIGHTS NO. 30 WEEK OF 1 DECEMBER - 7 DECEMBER 1948

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100020031-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 9, 2016
• Document Release Date: November 1, 1999
• Sequence Number: 31
• Publication Date: December 7, 1948
• Content Type: PERRPT

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FAR EAST/PACIFIC BRANCH
OFFICE OF REPORTS AND ESTIMATES
CWIRAL IITELLMNCE AGENCY
WORKING PAPER
NOTICE: This document is a working paper, POT an
MIMI CIA issuance, and has not necessarily been
coordinated with other ORE producing components.
It represents current thinking by one group of
specialists in CIA, and is desimed for use by
others engaged on similar or overlapping studies.
The opinions expressed herein .May be revised before
final and official publication. - It is intended
solely for the information of the addressee and not
for further dissemination.
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()ma OF REroris AND NBIIIWATRS. CIA
FAR NAST/PACIFIC BRANCH
IN1S/J.3(MM: IIIMILIOHTS NO. 30 .
TIBMX OF- l'DECIttlit 7,DECHM3NR 1946
SECTION If BULEARY OF FAH:BAST TU2D6 AND DEVSLOPMMTS
The USSR is using the FSC as a propaganda vehiole in an attempt to
disoredit SS policies in Japan (Page 5).
A 5-year rehabili!ation plan for Asia, proposed by a special working
oommittee of the Ur Economic Commission for Asia and the Far East, has been
criticized by both the Soviet and Indian dellgations to the IcArm Conference
which is now meeting in kustralia (nape 3). '
The expected Ur approval of the Republio of Korea (rauth) as the only
lawful government in Korea will relieve tension in that area (page 8). The
aMbitious plan for a national defense organisation adopted by the republic)
of Korea muet depend on foreign military and economic aid for its immlementa-
tiea (Page 6).
Chinese Communist leadership outlines its plans for Ania (Special
Artiole - See III, page 11).
Communist forces in the battle for Central China this .week have been
sueoessfil in isolating two of the three remaining Government centers of
resintanoe (page 7 ). Ileanwhile, the Government Is making plans to move its
prinoipal offices to Canton and Chungkinr although CRIAr.!G himself appears
determined to remain in Nanking to the bitter end (page 7 ). Ihe Chinese
Communists have reportedly published a list of a hundred "war criminals"
whioh sippificantly omits nnmerous high Government "liberal" officials
(-Pa!te 6 ).
Votes /n sucoeeding sections of this Weekly, the follovdng marginal
notations are usedt
(1) "A", "R", or "C" -- importance in B/FE's opinion, of the
item with "A" representinr the most important ones.
SENGlagiiTmi
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811:?1ART ( cor timed)
In Indochina the Trench, because of an unfavorable nilitary situation,
considering a witt:drawal from Tonkin (pap* 113.
In Indonesia the breakdown of Dutch-Recublioan conversations Play lead
to serious economic and political difficulties in the Pepublic (pap, 10),
are
SiCiaargif
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.3.
SECTION U. DEVELOPUITTS I. SPRCIFIED APEAS
GENERAL
Soviet employment of FRC as propaganda meohanisn enharrasses:US'
The US in beine embarrassed by the USSR's increasing public announoenenAs
of Far Eastern Commission (FEC) hitherto confidential debetee. For'exanele,
the Soviet revelations have led some of the other membere to hope that the
US will be forced to make public its policy on the 'future of theJapaneee
economy. The patent trend of US polioy in Japan is away from the original
idea of extensive decentralisation of Japan's iedustries adherinr to the
view that increased Japanese control over their econony will abet its
revival. However, the US has never publicly disavowed the eonoept of
"decentralisation" so that these meaer nations have been uncertain as to
what tack to take toward the US policy on the future of the Japanese
economy.
The inoreasing ores lure on the US to reveal its policy as to the
Japanese econony fits ii with USSR over-all tactic's in using the FRC as a
propaganda vehicle. By revealing apparent inconsistencies in the US
policies in Japan and by intensifying fears of. other nations. that suoh
policies will revive a strong Japan, the USSR is attempting to drive a
wedge between the US and other MeMbers.
Soviet and Indian delegations oppose 3CAPRIs rehabilitation len
Roth the Soviet and I-dien delegatiOna to the UN Economic Commission
for Amin and the Far East, now meeting in Auetralia, have criticizeda
013.6 billion 5-year industrial development plan which was presented by
a working committee to the .Commission on 1 Decombor. A member of the
large Soviet delegation, nhich is taking an active part in the sessions,
otated that the plan placed develonment of Asiatic countries on an
agricultural basis and was, therefore, unacceptable to the USSR. The
Soviet delegate further stated that expansion of national industries with
tariff proteotion VR8 the only sound basis for achieving independence and
higher living standards. The Indian delegate, M.C.C. Desai, openly
advocated a Marshall Plan and added that the ITS should take more interest
in Asia than in Europe. Desai also stated that Japanese industry should
be expanded to provide ksia with theoabital. goods it needed.
Despite the Soviet arid Indian critioism, many delerates emphasized the
'need for concentration or short-tern practical projects and for avoiding
aMbitious industrial development sehemes. '1.yron !!. Comae, US Ambassador
to Australia and Chief US Delegate, indicated his arreenent with the emnhasis
ehioh the rehabilitation plan placed on the need for balancing industrial
ttpll
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development with modernisation or agriculture and the inorease of nue
materials. Hr. Cowen added that the US desires the Far Nast itself to
find a my to feed its growing nopuLttion so that foram exchange assets
will be available for pronotinr a hirher standard of living. The Chief
DB Delegate two been instructed that any 0 aid to the Par Mast eountrios
would be extonded on an individual basis and that no Far Eastern Marshall
Plan is oontennlated.
mmifirpriarizmo
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'11ffeiti
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MESA
UN approval of South Korean regime will relieve tension. UN approval of "A"
the aivernment of the Republic of fore& an the only lawful government in
Korea, which is almost certain during the present GA session, will give
the Phew government certain prestige and should produce greater self-
confidence in officials of that government. While the positive effects
of UM approval should not be overrated, the lack of such action would
increase tension and feelings of instability in South Korea already present
as a result of subversive Communist activity and fears of invasion from
the North.
Korean armed forces organization outlined. The Eorean National Assembly
has enacted an ambitious law for the basic organization of the armed
forces. The peace-time Army is authorized 100,000 men, double the number
of the existing Constabulary, and the 10,000 man regular Navy authorized
would be triple the strength of the present Coast Guard. In addition,
Army and Savy nilitia units of undetermined strenrth are authorized to
supplement the regular forces. The existing pars-military ri&tist youth
organizations would provide the majority of recruits for new regular and
militia units.
The law, which in many respects, closely follows defense Organizations
in the US, gives exceptional powers to the President over details of
organization and appointment .of key officers. Although the military
organization as provided for in the law is sound, the economic weakness of
the Republic precludes implementation except with foreign military and
economic aid.
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CHINA
Communists oocupy Bsuchou, oontinde to isolate Govermmwrt forces.
&shoeing the "strategic withdrawal' of Nationalist forces fliiiftuchou,
Communist forces have sue seeded in surrounding two of the three remain-
ing Nationalist pockets of resistance. After executing, a feint in
the Bug River sector Communist units rapidly shifting northwest from
the Nuchen-Suhsien-Lingni triangle have tightly surrounded Govern-
ment forms in the Yuncneng area who were attempting to drive south
from Neuohou under the command of Gen. TU Yu-ming. (TU Yu-ming
took command in Manchuria shortly before the Nationalist debacle
there and is well known for his military incompetence). Southwest
of Suhsien one of the divisions of the encircled 12th Army Group has
already defected to the Communists and the Communist radio has issued
a "last warning* to the remainder to follow suit. The Nationalist High
Command is of the opinion that the 12th Army Group can only hold out
a few days more. When the above pockets of Government resistance
have been eliminated the Communists will then be in a position to
launch their entire force against the ill-defended Pangfou-Suai River
line. US military field observers report recent events indicate the
Nationalists are preparing for a hasty retreat from. the Pangfou area
to Pukou, on the north bank of the Yangtze River across from Nanking.
Recent reports indicate confusion is the keynote of the Nationalist
Nigh Command and that there is considerable difference of opinion
among the planners as to where the last ditch stand should be made;
north of the Yangtze or along the river line.
In North China some 50.000 Communists launched a drive in the
Malgan sector, possibly as a prelude to an all-out effort against
Gen. my Tscrld. If these Communists succeed in taking and securing
the Wien area, they will have out Mrs purported retreat route into
Suiyuan and mey fore. a portion of the North China Nationaliats to
remain in the area between Peiping and the sea, there to face the
main weight of the Communist effort in North China. Meantime, the
Nationalists launched an offensive, minor in scope, from Teingtao with
the goal of securing the area adjacent to the city. However, if
unconfirmed reports that the communists are moving elements of their
Manchurian forces to the Central China Theater by water via the Gulf
of Chihli and thence by land via Shantung are true, these Nationalist
units will in all likelihood quickly pull in their horns SO as to
attract as little attention as possible.
National Government plans to withdraw from Nanking are being
formulated even though CHIANG Kai-ehek himself appears determined to
remain until the last moment. Present plans provide for the principal
offices of the Government to move to Canton and Chungking. Individual
movement of families of officials is currently underway. The withdrawal
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plans are for the most part unorganised and will probably result in
a hurried and disorder4 abandonment of Nanking by the Government.
This factor, plus the likelihood that when and if CHIANG flees, the
ret National Goverment will consist of only a few loyal followers
nearly totally devoid of proetige, makes it doubtful that the whole
Diplomatic Corps will follow immediately. It is more likely that the
(thief's of 'lesions with their main diplomatic establishments will follow
the indicated intention of the British Commonwealth NIssions to remain
in Nanking while sending representatives with Chianti's Government.
Barring possible assassination, as long as CHIANG remains in Nanking
there is little likelihood theta compromise will be negotiated with
the Communists or that any effective attempt will be made from within
his following to replaoe him. However, when Government top officials
finally are forced to flee from Nanking, the remaining Government
personnel will probably acquiekos in the establishment of Communist
authority. At the same time, if the heads of the diplomatic missions
fail to move with CHIANG, diplomatic relations with CHIANG's Govern-
-
mint will of necessity be greatly curtailed, while relations with non
-
Nationalist authorities in Nanking will probably be conducted on a
as ream howl at.,
Teiwan pro-Japanese group poses additional disturbing factor. -
Recent reports indioate the existence of such a group which may include
certain Taiwanese who formerly held positions under the Japanese
administration or who had economic ties with the Japanese empire.
They may take advantage of popular disillusionment regarding Chinese
rule and the potential collapse of the National Government to attempt
to bring about a new orientation toward Japan. Although the present
strength of this group is not easily estimated, it appear' that any
such movement would have difficulty in overcoming native resentment
of past Japanese policies and popular aspirations toward eventual
independents..
A reyorted Chinese Communist list of a hundred "war oriminals"
omits a number ot prominent Nationalists- whe mei play a significant
role in a future Communist-dominated coalition government. Among
significant personagei made conspicuous bye-omission ares Vies, Pres-
ident LI Tsung-jen, whose reform and peace programs have been vetoed
kor the Generalissimo, is important*. 'CHIANG,' legal auccessor and
might assist in bringing liberal antd-CHIANG elements into such a new
government; PAI Chung-hai SUN Li-jeu and others who have significant
military power; CHANG Chih-chung end SHAO Li-ttu who have advocated
oonpromiss with the Communists through Soviet mediation. These prominent
Nationalist figures of considerable ability and occupying important
.Governnent posts, have at various times been opposed to CHIANG Kai-
shek's policiee and could render important servioes in facilitating the.
aSeeierli
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advent of a Communistdominated *ooalition" government.
An apparent improvement in the food situation in Nationalist cities
has resulted tram inoreased SCAWente and-Inoreased urban-rural
trade. The over-all economic situation, however, is still dominated
by uncertainty and instabilitys economic condition' in various areas
of Nationalist China largely reflect current local military situations.
Throughout Central and North China there has been a stampede on the
part of wealthy Chinese to unload real estate, luxury goods and even
rice hoards and bo transfer personal wealth into easily portable gold
and silver. The Government in reported to have removed stocks of
gold, silver, and foreign exchange from Central Oink offices in Shanghai
to safe havens in Canton and Hong Kong. In addition there have been
reports that the Central Trust is transferring its assets to Taiwan..
Current status of the China Aid Program. Stepped-up shipments of
food to TIentsin, Peiping, Tsingtao and Shanghai are rapidly depleting
ECA's China commodity allocation, but sufficient stooks have now been
accumulated to feed these cities through the winter. Much of the
petroleum allocation for the future is now held in bond in Shanghai.
Prospects for using the US 470 million industrial allocation grow
increasingly dim since Taiwan and Canton are now the only accessible
industrial areas etioh the Nationalists may be able to exploit in the
foreseeable future.
The prospective fall of Shanghai and Nanking presents the kCA
with the alternatives of closing dawn in those cities or continuing
operations under the Communists. Two immediate advantages to the US
of continuing aid operations to occupied cities are: 1) such obvious
evidence of American altruism to Chineee who suspect the good intentions
of the US in China probably would impress the Chinese very favorably;
and 2) if the US continues aid shipments until disoontinuanoe is
forced by the Communists, the onus of shutting off aid is put an
the ?Ommunists rather than on the US.
Aesuming that the US desires to continue its support of the National
Government, future economic aid will be limited by the inability of
.the greatly reduced and disorganized economy of the National Govern-
ment to effectively absorb large grants of commodities and equipment.
Moreover, it is doubtful that the US will be able to oontinue a large-
scale European Recovery Program and, at the same time, meet commitmento
to supply raw materials, fuel, food and industrial equipment to China
in exoess of the present program.
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araligotiter?
INDCCHINA
Frewle.considerita withdrawal trap Tonidji. Increasing evidenoe nir
Indicates tMt the French military position in Tonkin is extremely
tomato, despite the 7-11 November operation which resulted in a
slight extension of French control northwest of Hanoi. Isolated posts
are subject tO constant attritico from disease and Vietnamese attacks,
and, in addition, the French lack transport and reserves. ?The situation
is probably' a direct result of Viet Minh military strategy, which was
apparently aimed at encouraging the French to overextend their lines of
ocemonination rather than conducting an organised can:feign of resistance.
As a reilult of this generally unfavorable military situation, there have
been renewed and stronger reports that the French are again considering:
(1) the abandonment of Tonkin, with the exception of its thief ports; and
(2) a withdrawal to southern Indochina.
IIIDOPST.A
Repablic aprehenstve of renewed Dutch olice action." The breakdown nAn
of Dutch-Republ an conversations will increase ?comae and political
diffieulties in the Republic of Indonesia. Republican leaders are reported
as gloomy about the future, but resolute. They feel that the Dutch had no
intention of making any reasonable concessions and are now apprehensive of
renewed "police action." On the other hand, all political groups in the
Republic have gone on record as opposing ant agreement with the Dutch which
would impinge upon the Republic's sovereignty. Meanwhile, the Dutch Amy
Information Service, supported by the pro-Dutch press in Batavia has again
intensified its egaggerated? and often deliberately erroneous propaganda re-
garding Republican truce violations which may be a buildup to justify mili-
tary action. There are, however, certain political aspects in favor of the
Republic, because it remains a ecarbol for widespread nationalist aspirations,
which may serve to counterbalance Dutch political and contemplated military
maneuvers. It has been reported that some influential Indonesian members
of the Dutch-sponsored Bandoeng Conference hav?. stated that they Would not
permit the interim government to be used ae a "oat's pawn to order "police
action." The Prime Master of the Dutch-created states of Pasundun and ?
East Indonesia told Republican Premier Hatta that they would not enter tho
provisional government unless the Netherlands promised not to use force against
the Republic. Finally, the Republic is considering a program of establishing
autonomous states Irohich include areas now held by the Dutch. Should the
Dutch regime "police action'', which they are prepared to do, they will meet
strong and determined opposition not only from Republican forces, but also
from extensive pro-Republican elements in areas nos occupied by the Dutch.
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?II3tJILDT
SECTION III. DIGEST OP IMPORTANT S1UDIi3S AFD ESTIMATES
CliINESE COMMUNIST LEADERSHIP OUTLINES ITS PLANS PM ASIA
Future Chinese Communist policy has probaKy been correctly outlined
in, a recent article byTAIU Shao-dh'i, a hirl-rankine member of the Politburo
of the Chinese Communist Party (CCP). TIU's article, "On Internationalism
and rationalism", defines the present Communist strategy and future Communist
tactics, and emphasises the imperative need for unifying the "anti-imperialist"
world under the leadership of the USSR.
According to LIU's orthodox Marxian exposition, "bourgeois nationalism's
concept of the nation" proceeds "solely from its own narrow class interests
...founded uponimpitalist exploitation", erhich is compelled "to utilise
every poesible method to seek monopoly ,over (its own) country and the
world." Reliever, the "American imperialist plan for world enslavement
accelerates the development of the general crisis of capitalism," and
"brines nearer the death of ir-perialism." The "proletarian" (Communist)
concept "advocates moving step by step toward world unity," through a
"free federation (of) the various nationalitiee." To this and, Communists
everywhere will "employ every method of unconditional aid to the national
liberation movements of ooloniel and semi-colonial countries."
There is, LIU says, "on the one hand the Soviet Union,...the Aongolian
People's Nepublie,...southeast Europe, liberated Forth Yorea, East Germany,
and China's liberated areas," as well as "The people already liberated in
Viet Reza, Indonesia, Greece, eta.... On the otter hand, 1,300,000,000
(people) directly or indirectly under the rule of a single American
imperialism." In this historical crisis, "people must stand either on
the one side or on the other.... !,eutrality is impossible."
however, at certain times, LIU believes that "the proletariat should
cooperate" with boureeois elements which will help "to overthrow the rule
of imperialism...." This policy is not necessarily the best for "India,
Burma. Siam, the Philippines, Indonesia, Viet "am, southern roma...,"
but, in generia, "Communists should establish anti-imperialist cooperation,
...even though it be unreliable, temporary, and vacillating." In conclusion,
"true patriotism reflects the equality of other nationaltties,...and advocates
the warm unity of the people of all countries."
This policy statement appears genuinely to represent the vices of the
tiarxiet-Leninist-Staliniet group presently ascendant in the CCP, that
"capitalism" cannot resolne its "contradictions" and is doomed; that a
Communist federation will frustrate the "imperialist" effort; that the CCP
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should actively assist Communist movements throughout southeast Asia;
that Communist novements in Asia should align themselves firmly vitt. the
URRAt that Communist movements in Asia, inoludins the CCP, should pursue
a policy of tentative cooperation with non-Comnunist elemental and,
finally, in the Communist dialectic, that the only good nationalist is
at internationalist, and the only good internationalist is one who
recognises and will follow the leadership of the USSR.
ET
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