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December 9, 2016
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April 27, 2000
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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 25X1A9a P"31.Bldg. 11710PY .140.- CLAS Approved For Re ea a 2000/08/29 79-0l 090A000500030010-3 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 DOS & USAF declassification & release instructions on file Approved For Release 2000/08/29 : CIA-RDP79-01090A000500030010-3 Approved For Rele 2000/08/29 : CIA-RDP79-01090A000030010-3 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""" Approved For Release 2000/08/29 : CIA-RDP79-01090A000500030010-3 Approved For Releas"000/08/29 : CIA-RDP79-0109OA0005 330010-3 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~ Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3 25X6A Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3 Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3 Approved For ReIAW6 2000/08/29 : CIA-RDP79-0109OA006 030010-3 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, Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3 Approved For Release 2000/08/29 : CIA-RDP79-0109OA00050000030010-3 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. Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3 Approved For Rele 2000/08/29 : CIA-RDP79-01090A000030010-3 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. Approved For Release 2000/08/2;x;, RDP79-01090A000500030010-3 Approved For Rele 2000/08/29 : CIA-RDP79-01090A00SA0030010-3 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. 25X1C8b 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. 25X6A 25X6A Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3 Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3 Approved For Rele 2000/08/29 : CIA-RDP79-01090A000030010-3 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. Approved For Release 2000/08/ CIA RRDP79-01090A000500030010-3 Approved For Release 2000/08/29: CIA-RDP79-0109OA00 50(0030010-3 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 Approved For Release 2000/08/2.- CTA=RDP79-01090A000500030010-3 `Approved For Relea 000/08/29: CIA-RDP79-0109OA0005 30010-3 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 Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3 Approved For Relebag 2000/08/29 : CIA-RDP79-0109OA000 030010-3 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 Approved For Release 2000/08/29 : Cl OA000500030010-3 Approved For Releasi 2900/08/29 : CIA-RDP79-0109OA00050U010-3 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. Approved For Release 2000/08/29 RDP79-0109OA000500030010-3 25X6A Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3 Next 1 Page(s) In Document Exempt Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030010-3