FAR EAST/PACIFIC DIVISION OFFICE OF REPORTS AND ESTIMATES CENTRAL INTELLIGENCE AGENCY WORKING PAPER WEEKLY INTELLIGENCE HIGHLIGHTS NO. 76
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Publication Date:
November 15, 1949
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?AFI EA 1' f vi' Ac i is DI ZI.s m
OFFICE OF C, .i'O `. S AND ESTIMATES G174 G Y
i C). 76
DATE: 15 November 1949
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P"31.Bldg.
11710PY .140.-
CLAS
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WPM: This docum..ent i3 a working papers not an official
CIA docume=qtr. It has been o- ordin- ted within ORE,
ba'. not k t. h the TkG _Agencies., It represents current
thinking by spec.iD ists in CIA, and is designed for
use by others engaged itb similar or overlapping
studies. The opinions expressed herein may be re-
v1,sed before final and officrf:ai pi:,blication. It is
intended solely fox, the .in"orrsation of the addressee
and not for further dis: emanation.
COPY N oaa:
DATE
36
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OFFICE OF REPORTS AND ESTIMATES, CIA
FAR EAST/PACIFIC DIVISION
LNTELLIGEE21CE HIGHLIGHTS NO. 76
9 NOVEMB1R to 15 NOVEMBER 1949
SECTION I. SUMW,AHY OF FAR EAST TIU 4DS AND DEVELOPMESSTS
The Chinese Nationalists are continuing to seek some means of
withdrawing PAT Chum-hai's forces intact into Indochina but French
authorities, appreciating the explosive potential of such a move,
have stated that only unarmed units will be permitted to enter (p. 2).
Korean President Hhee's requests for US assistance in building up
an air force at least equal to that of the northern Korean puppet
regime have received the endorsement of US representatives there (p. 4).
The growing Chinese Communist threat to the refugee Nationalist
administration on Taiwan has not yet resulted in any significant attempts
at improvement of conditions on that strategic island (p. 5). Meanwhile,
on the mainland, Communist currency has once more begun to depreciate
after a comparatively stable period of level commodity prices (p. 5).
The marginal notations used in succeeding sections of this ifeekly
( "A", "Be, or "C") indicate the importance of the item in D/FE opinion
with "A" representing the most important.
SECS -ON"""
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SECTION IL DEVF.IAPM TS IN SPECIFIED ALFAS
G EitRa
achin fi border probe begaming critical--The Importance of
Indochina as a barrier agaizat Communist expansion or as a potential
asylum for remnants of Chinese Nationalist forces has been emphasized
to the US by French and Chinese Nationalist sources as MAO Tse-tung's
forces advance through South China. Although the authorities of
both the French and National governments are hopeful of involving
the US in their own difficulties, their interests in the matter of
residual Nationalist forces diverge sharply. Apparently tailing In
their efforts to secure French authorization for the retreat of
Nationalist General PAT Chung-hails farces into Indochina, the Nation-
al Government has recently proposed that the Vietnamese living in
China be armed and despatched to Indochina on the condition that they
join forces with Han Dai against Ho Chi Minh. The strength of such a
force obviously would be negligible, and its true purpose probably
would be to serve as a careen for the entry of Chinese Nationalist
troops into Vietnam.
There is as yet no evidence that a Chinese Comaunia t invasion of
Indochina is contemplated, although Chinese Commaniat sympathy for
the Vietnamese, as well as the withdrawal of French forces along most
of the Sino-Vietnamese frontier, may be expected to encourage and
facilitate smuggling of arms and other indirect assistance to the VistP-
namesee
VWOHOWOOO~
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KO M
Rhea wants air for cis---teports continue to indicate that northern Korea
has developed a decided advantage over soutbera Korea in air capnb.il i
ties . The matter is of major concern to President ftaeo and his defense
officials? and both General Roberts (Chief of the US Military Advisory
Group in Korea) and Ambassador Muccio have recommended implementation
of a program of US aid to supply to the Republic i diately 40 7-51
typo fighter craft, plus necessary advisors and equipment,
The northern Koreans are believed to have at least 30 adequately
armed high performaance fighter aircraft, plus sriinscelianeous trai i.ng,
observation, and transport planes, Northern Korean pilots are beng
trained in the USSR and Soviet advisors are believed to be working with
the northern Korean air forced,
The soathern Korean air force; in contrast, consists of 16 liaison
aircraft, suitable only for observation and artillery spotting, 10 armed
AT -6 trainers are now on order", paid for with limited Korean foreign earn
obangea The air force cadre includes enough former Japanese and Chinese
air force veterans to make use of 40 fighterrz, following transition
training. The cadre could be expanded to support 100 planes within 6
months. The Republic of Korea does not have the funds, however, either
to purchase the aircraft or essential supplies,
The defensive capabilities of the southern Korean security forces
would be materially enhanced by US-auppl.ied aircraft. Such US action,
moreover, mould prevent Rhee: a e penditure of K eats meagre foreign
exchange, which is essential for the Republi c' e economic rehabilitation,
Inch eas ing the strength of the air force, he aevsr, would increase the
confidence of the offensively minded Republican AnW as wail., and could
increase the danger of a Free-directed invasion aimed at regaining "the
lost territories" of northern Korea,
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In Burma the a rgence of at least three factions within the
lyuxmese Socialist Party presages important political changes In the
near future (p> 9 ).
As the residt of a recent Philippine Supremo court decision,
president Quirino Is faced with the necessity of calling a special
sessiflsi of Congress (polo )
,mOT : A B/F] summary of a recent cable from
Moscow which is considered a particularly
interesting analysis of the question of
recognition of the Chinese Couniats is
contained fan Section III p.
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3-
S.L:CTION II. DEVELOP t, `I'BS IN SPECIFIED AREAS
GEERkL
Rhee-CHIAr Military Agreement? during "A"
the Rhea CHIANG conversations at Chin has Korean Coast Guard Base) on
6-? August, military cooperation between Korea and Chinese Nationalists
was discussed on lower levels by authorized representatives. The discussions
are alleged to have resulted in tentative agreement for the exchange of
Nationalist ships, airticraft, arms, and ammunition for Nationalist use of
Koan ports and airfields including Chinhae, Inchon, Pusan and Cheju--r.o.
;.Ater reports that the new Korean Ambassador, Shin auk doo, was carrying
:rr, "important message" to Canton for CHIANG, suggest that Rhee may have
confirmed the agreement.
Korean military leaders and President Rhee are known to feel that
their need for additional aircraft and patrol vessels is urgent and they
have explored various possible means of supplementing the equipment supplied
by the US Government., In view of their impatience for aircraft and shipa
and other circumstances of the Rhee-CHIANG meeting, it appears possible
that Rhee has attempted to obtain military equipment from CHIAANG.
CHIA,`rG's interest in a military agreement with Korea is consistent
with his continuing attempts to associate the Nationalist cause with a
US-supported Pacific military union. Furthermore, Nationalist use of
Korean bases might materially assist the blackade of Chinese Communist
ports.
It appears doubtful, however, that Rhee would permit Nationalist
forces to operate ,ainst Communist China from Korean bases. Such action
would risk adverse repercussions from the US and unpopular reaction from
the Korean people who have an inherent distrust and dislike of the Chinese
Furthermore, the presence of Nationalist forces in southern Korea probably
would incite military action by Communist forces from the north to eliminate
once and for all the remnant's of anti-Communist resistance from southern
Korea.
It may be that Rhea plans to use the possibility of extending the
Nationalists Communist conflict to the US-nurtured Korean Republic only as
a bargaining point in requests for more US ships and planes.
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Arnie Smugg ing in Southeast Asia-The existence of a large international "B"
arms smuggling syndicate based in Manila and operating throughout South-
east Asia and perhaps extending to China is currently being revealed by
the Manila press. Although there is no evidence to suggest other than
profit motives behind the transactions, public disclosure of large-scale
smuggling may have unfavorable repercussions upon the Philippine government's
relations in Southeast Asia, The US may also be embarrassed since most of
the firearms are of US origin and were obtained from US war surplus stocks
in deals which in many cases involved US citizens.
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Complete details of the arms syndicate are still lacking but the
Manila press alleges that high Philippine and other Southeast Asian govern-
ment officials are involved. It is claimed that black-market rice, presum-
ably from Thailand, and gold bullion and diamonds from Indonesia have been
used for payment. It is believed that opium has also been a medium of
exchange. The complete story concerning smuggling activities has yet to
be disclosed. Certain Philippine officials, Including one of the brothers
of President Quirino, are said to be involved in arms deals and will prob-
ably bring strong pressure to bear upon Quirino to hush the whole affair.
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LqRFA
North Korean Premier vague on unification--Premier Kim Ilsung, in a major
policy speech to the opening session of the Supreme People's Assembly in
Ppxgyang on 8 September, gave no indication that the "Democratic Unifica-
tion Front" intends to carry out "elections" in all. Korea this month.
There was also no indication that military action is contemplated this
fall to overthrow the Republic of Korea. The speech, which dwelled at
great length on past achievements and future tasks within northern Korea,
failed to present any concrete program for the attainment of unification.
Although Kim stated at one point that the People's Army stands ready to
"mop up" its enemies, the general tenor of his speech seems to call for an
indefinite continuation of familiar tactics of "peaceful" subversion of
the Republic by guerrilla warfare, propaganda, and infiltration.
Korean food deficit to continue--The Korean food situation is still believed
to be serious despite recent reports that the 1949 crop will reach 95% of
the 1948 crop. Reasons given are the necessity to export grain and the
fact that foods were imported in 1948. ECA estimates a grain deficit of
some 3 million "auk". (6.67 "suk" to a metric ton.)
As ECA has committed its funds to essential rehabiliation of the
economy, it has said that no funds will be diverted to food imports. Fear
is expressed that the Korean Government's plan to export a million suk of
rice in return for a larger amount of coarse grains may involve FGA in
just such an expenditure. This could come about if, after the coarse
grains had been imported, the Korean Government failed to collect enough
rice for export to cover the coat of the imported grain.
A further source of concern is felt over the matter of Korea's foreign
exchange. The recent trade treaty between Japan and Korea was largely
predicated on Koreas's having a net foreign exchange Cain of $16 million
from its rice exports. Present indications are that, even if the Koreans
are able to export a million auk of rice, only $4 million net gain will be
realized. A method must be found for financing Japanese imports or the
progress of economic rehabilitation will be seriously jeopardized.
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CHINA
tilita.Z lullcontinues---The Chinese Con unists scored no major advances "Air
on the military fronto during the past -neck and their efforts to lure the
non-Communist Suiyuanese into the fold have proven unsuccessful so far.
However, the Nationalists appear to have made no significant progress in
their search for a coherent program of opposition and military stagnation
continues. Meanwhile, the Communist forces reportedly have landed success-
fully on Pingtan island, off the coast of Fukien, and, according to later
Communist claims, have overwhelmed the island's defenders. CHIN Yi's
forces moving toward Amoy are said to be on the outskirts of Changchow,
just 25 miles northwest of their objective. CCU' capture of Amoy will give
the Communists continuous control of the Fukien coast and a base for their
promised attack on Taibvan. Communist regulars on the northern borders of
Xwangtung made no appreciable progress cur i.ng the past week, but an early
break through of these forces to Canton is expected. limns in Shensi are
reportedly delaying the southward movement of Communist legions in the
Chinling Mountains. Tice Chinlings rise between the Communist positions
in the Paochl area and the defensive bases of RU Tsung ran in Nazichertg.
Reports from Peiping at-ate that FU Tso-yi's "escape" from the city
was with Conn anist contrivance and with Communist "advisors". FU apparently
was sent to Kueisui, caaital of Suiyuan, to arrange for a peaceful turnover
of the province, where the present leaders have refused to accept Communist
terms,. Despite Communist desire to take the area by negotiation and thus
eliminate any possibility of opposition from that sector, FIJ has not yet
succeeded and it is suspected that he may not be lending, himself whole-
heartedly to the effort.
CCP 1a1in oundwork for "reacetirse" err Y._-i4ith the coming of comparative "B"
peace to wide areas of Communist -he.id China, the CCP has begun to concentrate
upon defining the proper position in the Commmunist hierarchy of its post
war army. It appears that, once its primary military uses are come to an
end, the army is to be shorn of a large measure of its power. As the mili-
tary phase of the Communist revolution draws to a close, the power of the
FLA in areas already liberated is being carefully curtailed. The top
political leaders, itAO Tse-tung and LIU Shao-chi for example cannot continue
to tolerate the great popularity of military leaders-LIN Piao and Liii ?o-
cheng for example.--nor can they permit them to gain positions from which
the preeminence of the political. leadership could be threatened. However,
the exigencies of the present military situation require that, in areas of
active combat, this debilitating of the military must be delayed or held
in abeyance,
The Party has lately taken the following steps to clarify this post-
war subordination of the military. It has abrogated Forth China's war
service regulations which had provided the legal basis for mobilizing the
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area's population and resources. It has broached plans for the creation
of a "modern" army in Manchuria. It has set up various "bandit suppression"
bodies to occupy the troops and keep them away from the corrupting influence
of city life. It has introduced a new organizational twist into the army
reducing large numbers of combat troops to garrison status. It has separa-
ted certain commanders whose influence la-distrusted from direct command
of their troops, split up the forces of other, and transferred still others
from; the areas where their power had been based.
The Communists have added a series of organizations called Military
Ai yes, garrison commands charged with the maintainence of peace and orecr,
to their Field Armies, whose responsibility remains the successful completion
of assigned tasks of liberation. Following liberation, the Field Armies are
either: (1) moved as a unit to another area for further operations; (2)
retained intact to garrison the area liberated; or (3) split with a contin-
gent to each assignment. LIN Piao was deprived of his carefully nourished
position in the Northeast (Manchuria) under the press of military necessity.
He was shunted from the "Northeast to North China and from there into Central
China, He is now committed to operations near Hengyang in southern Hunan.
The military authority in the Northeast has passed to the Northeast Military
Area under KAO Kang and CHOU Pao-chung. KAO is concurrently chairman of
the Northeast People' 3 Government and CHOU has boon in Manchuria since 1931,
first as an anti-Japanese guerrilla and later as a top subordinate of LIN Piao.
After the liberation of North China, NIEB Jung chan's north China command
lost two of its three major units. These were dispatched to assist PENG
Teh-huai in the liberation of the Northwest. The unit which remained in
North China then formed the nucleus of the North China Military Area under
NIEH's command. Chen YI in Fast China and PFAQ Teh-huai in Northwest China
now command both Field Armies and Military Areas and may remain in control of
the areas they are now liberating.
The steps taken are but preliminary to the Communists' principal task
in this regard--that of demobilization. They must find or create positions
which offer returns commensurate with the contributions of military leaders
but which at the same time will not provide these commanders with spring-
boards from which they could eventually challenge the elements presently
controlling the Party. Demobilized troops must be assured of an adequate
means of liv'libood to keep them loyal to the concept of a Communist China
and out of the ever-present armed bands opposing that concept. No Chinese
regime since Dr. SUN's revolution has successfully dealt with the "tiger" of
demobilization, but the CCP has made a start.
Manchvrian harvest ~rrospects poor-Estimates based on the scanty available "B"
information indicate that this year's Manchurian harvest will be extremely
short and will at best. provide only a small. exportable surplus. Since the
war kanchurian crop acreage has been sharply reduced and the weather condi-
tions throughout the present growing season have been the most adverse in
many years. The acreage reduction is one result of widespread unrest which
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Ek ,s discouraged farriers from cultivating in excess of their owe immediate
new, in addition curtailment of railroad services has restricted cultiva-
tion on the more remote farms. Export markets have been inaccessible,
further reducing the production of cash crops for market. Dro ht,, an
aver--present agricultural hazard, has materially damaged current crops in
north and central Manchuria. No rain fell in Krin Province until late
July and the drought extended for still another month in Hellungkiang ,and
5t ngkiang. The major crops, wheat and soy beans, will have suffered most
einco they are less resistant to drought than millet and maize.. In southern
churia, where kaoliaag is the forest; crop, the Liao River, which Y-~1[38
t"_-rough its richest agricultural area, was flooded by excessive rains during
vane and July, and nearly one million acres of crop land in Liaohsi and
?..iaoning were reported dam ged. In addition the Chinese Communists in
Manchuria have been unable to provide the farmers with sufficient fertilizers,
proper irrigation, transportation, tools, draft animals and other agricul-
tural stimulants formerly available.
Widespread hunger and scattered famines are in prospect for Manchuria
this winter. These conditions will increase the already existing anti-
Communist discontent and may lead to further armed uprisings. Little if
any food will be available for North, China, where famines will be epidemic.
It appears unlikely therefore that Manchuria will be the attractive haven
for North China's excess population as envisaged by the forth China People'e
Government. Moreover, major food shortages in Manchuria will result in a
great curtailment of that area.'s contribution to the US SPA liancharian trade
pact.
BURMA
New lit3.cal schism ssib:a.e _The position of the Burmese Socialist Party "B"
) in Burmese politics, since its leaders resigned from the Cabinet in
Apri]. 1949, has been relatively obscure. Two trends, however, have become
increasingly discernable. First, BSP and Government policies have diverged
to a considerable degree since April. The now comparatively conservative
Government has shown a growing tendency to align itself more closely-with
the nest and defer the implementation of nationalization policies, while
than 13SP has continued to advocate a program of extrer-m and more immediate
leftism. Second, there appear to be forming at least three factions in
the BSP: (1) an ultra-lof '.ist group under U Ba Swe, the party's General
Secretary, (2) a group led by former Foreign. Minister U t;yaw Nyein which
is perhaps somewhat less radical than Ba Swe's and (3) a group which follows
Defense Minister and Supreme Commander Pie din. As matters now stand, the
Ba? controls the parliament and has reluctantly acquiesed to the Government's
more conservative approach to Burmese problems. Both Socialist and Govern-
,
maent leaders probably recognize the serious consequences which could rezLLtt
from new political.. crises, and have thus avoided a ma f or i deological collision.
Nevertheless, tti.srrltherelarechanges
number the
of possible developments. xents ly
possible. In respect
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ire din, who has meticulously avoided identifying himself with any political
organization or expressing his views on controversial issues, figures
prominently in all of them. First, it is possible that Ne din will ccntin-
tie to support the present Government and its policies, and that the BSF
will regroup into two factions: those supporting the Government and those
gApea" it. Seconds the Socialists may attempt to regain control of the
Government and restore a program based upoa complete state socialism. How-
ever, to accomplish this aim, they would at least require Ne din's tacit
consent, and probably be forced to accept his leadership. Third, No in
may attempt to assume personal control of Burmese affairs.
PlILlPPf?FS
Special session imminent--As the result of a recent Supreme Court decision e'BK
nullifying two of his executive orders providing for appropriations in
FY 1950, President Quirino is faced with the necessity of calling a special
session of Congress--a measure which he would prefer to postpone until after
the November election.
Last May when it appeared that Quirino forces had lost control of the
5enatee, the regular session of Congress adjourned suddenly without passing
the budget and other important legislation. Instead of calling a special
session of Congress, Quitino decided to use emergency powers derived from
a law passed in December 1941 which has never been repealed. By ecutive
order he authorized a budget for FY 1950 and a fund of ~6,000,,000 for the
November elections.
In July the Nacionalista Party brought a petition before the Supreme
Court challenging the constitutionality of Qu: ino's use of the smergency
powers in peacetime. On 16 September, by a majority vote of 6-2, the
Supreme Court held that the executive orders were issued without authority
of law. The Courts decision becomes effective within 15 days and the
Commissioner of the Budget reportedly has stated that If President Quirino
fails to call Congress into session before the end of that period, the release
of further funds will be halted.
Should' a special session of Congress be called, Quirino forces are
likely to face political defeat in the Senate where they no longer control
a working majority. A Nacionalista-Avelinista coalition may be formed to
depose the pro-Quirino acting Senate President and elect a man of their
own. There is also a possibility that supporters of Jose Avelino, Quirino' .s
rival for the Presidency, within the Liberal Party,, Will be able to obtain
his readmission to the Senate from which he was suspended by Quirino forces
last April. Such a favorable change in the political fortunes of Avelino
way draw vacillating L:bera: from Quirino back to Avelino thus further
:iividirig the Liberal vote and further improving the chances of Nacionaliata
candidate Josee P. Laurel.
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