FAR EAST/PACIFIC DIVISION OFFICE OF REPORTS AND ESTIMATES CENTRAL INTELLIGENCE AGENCY WORKING PAPER WEEKLY INTELLIGENCE HIGHLIGHTS NO. 80

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000500030004-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 9, 2016
• Document Release Date: January 26, 1999
• Sequence Number: 4
• Publication Date: December 13, 1949
• Content Type: PERRPT

Approved For lease 2000/08/2179-bol#090A000500030004-0
COPY NO. 36
FAR EAST/PACIFIC DIVISION
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE AGENCY
WORKING PAPER
WEEKLY INTELLIGENCE HIGHLIGHTS
NO. 80
DATE: 13 December 1949
NOTICE: This document is a working paper, not an official CIA
document. It has been co-ordinated within ORE, but
not with the IAC Agencies. It represents current
thinking by specialists in CIA, and is designed for
use by others engaged in 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.
COPY F011:
25)(1 AQ
oo dg No.
1
t.:.)::,1:s.C.1,c_p.:r.,1A.
C4FNell; DAIL
372
Nui:1141X.1.11:\i,ENN .
AUTHI B -2
-
Approved For Release 2000/08/29 : CIA-RDP79-01090A000500030004-0
25X6A
25X6A
Approved For Rase 2000/08/29 : CIA-RDP79-01460A000500030004-0
6?4111MINI
OFFICE OF REPORTS AND ESTIMATES, CIA
FAR EAST/PACIFIC DIVISION
INTELLIGENCE HIGHLIGHTS NO. SO
7 DECEMBER to 13 DECEMBER 1949
SECTION I. SUMMARY OF FAR EAST TRENDS AND DEVELOPMENTS
Unrealistic Government policies in the Republic of Korea
lie at the root of a continuing inflation that threatens the
economic stability of that country (p. 2).
In China, the Nationalist regime has finally withdrawn al-
together from the mainland and established a fifth provisional
capital on the island of Taiwan (p. 3). Meanwhile, the Communists
have begun organization of a new Security Police force (p. 2) and
appear to face fewer obstacles to their consolidation of the re-
mote province of Sinkiang (p. 4).
Following a daft maneuver which robbed the defeated Nacional-
istae of their support by the Avelino clique of the Liberal Party,
the election of ElpedioQuirino to the office of President of the
Philippine Republic has been confirmed by a special session of
Congress (p. 5).
The marginal notations used in succeeding sections of this 4eek1y
("A", "B"4 or 'IC") indicate the importance of the itene in D/FE opin-
ion with imr representing the most important
Approved For Release t e RDP79-01090A000500030004-0
till0/08/29 : CIA-
Approved For Rese 2000/08/29 : CIA-RDP79-01%03A000500030004-0
immosommomm.
SECTION II. DEVELOPMENTS IN SPECIFIED AREAS
KOREA
Inflation worse:le?Despite, an excellent autumn harvest which will
allow the export of 100,000 tons of rice, spiraling currency inflae
tion.continues in the Republic of Korea and threatens to nullify
much of the country's US-directed progress toward economic recov-
ery. Currency in circulation has increased 70 per cent since
November 1948, and the Government's overedreft with the Bank of
Korea has increased 104 per cent in the same period.
Korea's financial plight is due, in part, to the low level of
industrial production, and to poor export trade. However, much of
the difficulty lies in week or politicallyemotivated Government
policies ehieh could be corrected by vigorous action. At present,
unrealistically low public utilities rates, concealed subsidization
,.of industry by underpricing US aid goods, inefficient operation of
Government monopolies, as well as an ineffective tax eollection pro-
gram, are largely responsible for the printing and circulation of
more and more currency.
Increasing inflationary pressures are making the task of re-
habilitating the Korean economy increasingly more difficult. De-
velopment of foreign trade, essential to Korea's survival, can be
expected to suffer. The ECA Counterpart Fund (a depository for
local currency received from the sale of ECA goods which is used to
finance internal reconstruction) already is receiving only half as
much Won per dollar expended as is paid at official bank rates,. The
greatest danger inherent in such an inflationary spiral comes from
a lessening of public confidence in the currency and resultant un-
rest as wages fail to keep pace with rising prices.
CHINA
Communists create new securieLoolkt--The first detachment of a
new uniformed police force, the "People's Public Security Force",
has been formed in Peiping. LO eui-ching, Communist security boas,
stated that the new organization will be used to "wipe out bandits
and secret agents and suppress sabotage and disturbances by enemies,
both inside and outside the country". 140 indicated that the Peiping
detachment would serve as 4 modal for eee creation of similar de-
tachments throughout the military areas and large cities of "new"
China.
awl
Approved For Release 2000/08/29 : CIA-RDP79-01090A000500030004-0
Approved For Rase 2000/08/29 : CIA-RDP79-04090A000500030004-0
This new security apparatus probably will develop as a
political farce, a Party instrument for the surveillance and re-
straint of the People's Liberation Army and other non-political
agencies. It will be a compact, tightly-organized force with
permanently assigned officers hand-picked personnel, an its
own equipment, including artillery. As a check on the Army, the
new force will tend to reduce the Party's reliance on the peasant-
stocked Army, in accordance with the Party's official reduction
of the position of the peaaantey. Coordinating its work with
that of political officers in the Army, the security police
probably will come to supervise political activity in the Army.
In addition, it may become the overseer of the Army when that
body takes up its post-war functions as a mobilized "army for
production".
Owing its existence and prerogatives to the Party, the new
force will be a loyal and reliable weapon for the Party leaders,
and represents a further concentration of power in their hands.
Once the security police has been firmly established, the CCP
will be able to reduce resistance to, and in some cases, to in-
sure compliance with, policies such as the 'leadership' of the
urban worker and Sino-Soviet 'friendship', which have proven un-
popular in practice. However, the organization As still in its
infancy, and, for the next few years the Party will have to con-
tinue to rely primarily upon the loyalty of the ArNy.
pationalists move to Taiwan?Transfer of the National Government
of Mina to a fifth "provisional capital" in Taipei marks the
Nationalists' loss of virtually all mainland China. The reported
anti-Nationalist 22,112 in Kunming probably provides a general
pattern for the future of remaining Nationalist mainland areas
in western Szechwan, Sikang and southern Kwangai. Lose of the
mainland also serves to reduce the Nationalists'claim of being
the Government of China in the eyes of nations who base recogni-
tion on territorial oontrol.
Concentration of Nationalist remnants on Taiwan can be ax-
pscted to increase economic and military instability on the island,
thus heightening Taiwanese unrest and stimulating Communist pene-
tration. The dissatisfaction, bickering and tendencies toward
non-resistance and defection which are evident already in the
Nationalist Navy, Air Force and Argy, as well as in Nationalist
political circles, will be materially heightened. The long-
standing struggle between Governor CME N Chang and Taiwan Defame
Commander SUN Li-jen will be sharpened. To the top-heavy admin-
istrative structure, which includes the Kuomintang Emergency
Approved For ReleaseCIA-RDP79-01090A000500030004-0
get:72;
25X6A
Approved For Rase 2000/08/29 : CIA-RDP79-04400A000500030004-0
Comeil.t.fte aid CHIANG's *arty Leader" Office will be added the
remnants of the Executive Yuan, headed by TE; Hsi,aban. Conflicts
between Central Government and provincial officials probably will
add to the confuaion.
apparently aware of their hopeless situation, the Naticnal-
ists are publicly admitting their inability to hold Taiwan without
extensive aid. With a view to appealing more effectively for US
assistaace, Nationalist reformers such as IL C. WU and SUN Li-jen
may persuade CHIANG to replace Governor CHEN with a well-regarded
civilian administrator. However, any such new governor would face
insoluble problems and would also be under CHIANG's control. None-
theleas, the Nationalists probably will step up their appeals for
further MI help for Taiwan. At the same time, Acting President
LIle group may make competitive appeals on behalf of Hainan.
Developments in Sinkianiv,--The death, last September: of the tmo
most important leaders of the pro-Soviet Ili Group in western Sin-
kiang, Achmad Jan, top political leader, and Ishak Beg, C-in-C of
the Ili Army, will facilitate the extension of Chimes Communist
control over that remote province.
Basically, however, the USSR's strategic stake in Sinkiang
still holds. As in Manchuria, the government of Sinkiang will be
strongly Soviet-influenced, and will give top priority to Soviet
interests. Thus, the long-range prospect that the province will
become a Soviet satellite area remains the same.
feCH
001157
Approved For Release 2000/08/29 : CIA-RDP79-01090A000500030004-0
Approved For4441ease 2000/08/29. ? CIA-RDP79$0090A000500030004-0
kwo
25X6A
9211121,22utlitslion officiallyyroclaimed?Supported by a reunited
Liberal Party, President Quirino and Vice-President;-elect Fernando
Lopes, were declared officially elected by a special joint session
of Congress on 13 December. The clearly partisan 64-15 vote re-
sulted from a reconciliation which Quirino effected on 11 December
with Senator Jose Avelino, who split the Liberal Party last Way
by establishing an independent wing. Quirino and Avelino reached
agreement with the concurrence of 12 Senators, representing both
Liberal Party factions, who constitute a majority in the 23-at
Senate. According to the press, the Senatora signed an agreement
pledging among other thinga: (1) cooperation of the two factions
in proclaimins the election of President Quirino and Vice-Presideat-
elect Lopez; (2) reinstatement of Senator Avelino as President of
the Senate. (3) election of acting Senate President Cuenco a
Quirino follower, ae Senate Presi entprotAw Av
_Es and olinois
eventual successor. Quirino has reportedly offered Avelino a top
diplomatic post in South America. The first two provisions ware
implemented on 13 December and it is probable that the Sentate has
already acted upon the third,
Prior to the agreement, Quirino forces held a majority in the
House of Representatives but not in the Senator where Avelino Sena-
tors had reached an agreement with Racionalista Sento ra to prevent
Approved For Release 2000/08/29: CIA-RDP79-01090A000500030004-0
ItBM
25X6A
Approved ForRVIGase2000/08/29 : CIA-RDP7944030A000500030004-0
ammogyeatm......
-6-
or delay the proclamation of Quirino's election in the joint can-
vassing session of Congress. (See Di/FE Week17 #79.) The reconcili-
ation of the Liberal factions nullified this agreement and de-
feated Nacionalista efforts to cancel Quirino's election.
Approved For Release 2000/08/29 : CIA-RDP79-01090A000500030004-0
Approved For Re!hie 2000/08/29 : CI P79-01094A000500030004-0
25X6A
-7
S.E.A. NEWS NOTE
New Burmese concessions offered to Karens--The Burmese Foreign
Minister, E Maung, has indicated that the Burmese Government is will-
ing to make even greater concessions for a peaceful settlement of
the Karen rebellion than were originally reported. Maung stated
that his Government was prepared to (1) restore Lt.Gen. Smith Dun
(a Karen) to his post as Commander-in-Chief of Burmese military
forces, (2) permit the Karens to establish their own police force,
(3) grant them complete cultural autonomy and (4) invite US and UK
representatives to witness negotiations as impartial observers, so
that the Karens will be assured of the Government's sincerity
These additional concessiona increase the attractiveness of
the Burmese Government's peace offer to the Karens and it will be
difficult for the Karens to remain obdurate in the face of such an
apparently genuine Burmese desire for settlement.
Approved For Release 2000/08/29 : CIA-RDP79-01090A000500030004-0