FAR EAST/PACIFIC BRANCH OFFICE OF REPORTS AND ESTIMATES CENTRAL INTELLIGENCE AGENCY WORKING PAPER WEEKLY INTELLIGENCE HIGHLIGHTS NO. 69

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000500030011-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 9, 2016
• Document Release Date: January 26, 1999
• Sequence Number: 11
• Publication Date: September 27, 1949
• Content Type: PERRPT

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OFFICE OF REPORTS AND ESTIMATES, CIA
FAR EAST/PACIFIC BRANCH
INTELLIGENCE HIGHLIGHTS NO. 69
21 SEPTEMBER - 27 SEPTEMBER 1949
SWTION I. SUMMARY OF FAR EAST TRENDS AND DEVELOPMENTS
The defection of one of Korea's few coastal freighters to the
Comttuuniste this week is a blow to the prestige of the Rhee governsat
(p. 2).
The Sinkiang Provincial Government's decision to switch to the
Communist side in China completes the collapse of Nationalist resistance
in the five provinces of the Northwest (p.2). Meanwhile, the Chinese
Peoples' Political Conference has convened in Peiping and the announcement
of a new Government for China may take place by 10 October (p. 3).
Indochina's Sac ?jai "experiment", in the opinion of observers both
In France and on the spot, appears to be going badly (p. 4).
Although the impending and of the monsoon season in Burma presumably
means the beginning of widespread insurgent activity, it appears improbable
that the Government will be overthrown as a result (p. 5).
Philippine President Quirino has forestalled the calling of an
imEmediate Congressional session by means of a special "loan" to cover
current administrative expenses (p. 5).
The marginal notations used in succeeding sections of this :ieekly
("A", HBO, or "C") indicate the importance of the items in B/FE opinion
with "A" representing the most important.
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SECTION II. DEVELOPMENTS IN SPECIFIED AREAS
KOREA
Merchant ship defects to Communists--Both the prestige and economy of
the Republic of Korea received a blow last week when the crew of the
,,500 -ton coastal steamer Kimball Smith deserted to the "Democratic
2
People's.aepublic" of northern Korea. Aboard the K Smith at the
time of the defection were two US merchant marine officers, serving as
instructors. No mention of the fate of these men was made in the
Ratio Pyongyang broadcast which welcomed the ship on its arrival at
tro Communist port of Chinnwapo.
The Kimball Smith, on a routine cargo run between Pusan and Inchon
with a cargo of salt, probably was lost as a result of mutiny by the
46-man Korean crew. It is possible,' however, that the ship was lost as
a result of piratic action by northern Korean naval forces, In retalia-
tion for Republican naval raids which recently secured "defecting"
northern Korean shipping.
CHINA
Collapse in the Northwest--Late developments in northwestern China have
effectively excluded both Canton and Taiwan Nationalist authority from
the entire area. Following the lightning success of PF,NG Teh-huai's
1st Field Army offensive into Kansu and Tainghai, the three provinces
of Suiyuan, Ningsia and Sinkiang, in turn, have renounced their affilia-
tion with the Nationalist regime and have accepted the authority of the
Communists in Peiping. Nationalist resistance of any strength or character
is all but eliminated and only remnant MA forces, which have suffered
crushing defeats and are presently capable of nothing more than limited
guerrilla actions, are as yet excluded from the rush to the Communist
banner.
PENG's offensive, launched from Shensi in late July, quickly over-
ran both Lanchow, capital of Kansu and the northwest's first city, and
Sining, capital of Tsinghai. MA Pu-fang's forces, driven before the
Communists and unable to rally for a stand at any point, will find it
impossible to exert any significant retarding effect on the present consoli-
dation of Communist control. Elements of PENQ's let Field Army now are
pushing up the Kansu corridor and have reached 4uwei, some 350 miles. from
the Sinkiang border. Unconfirmed dispatches from Lanohow claim that the
Communists have occupied Suchow, 250 miles nearer Sinkiang.
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Pressure from another salient, pushed toward Ningaia, has led to the
abrupt capitulation of that province's defenders. MA Put fang and MA Hung-
kuei, Moslem strong men of the area who received no aid from Generalissimo
CHIANG, have both abandoned their forces and are said to have no intention
of ever returning to the Northwest, even as anti-Communist guerrilla
chieftains. Meanwhile, long-isolated Nationalist authorities in Suiyuan
purportedly agreed to be "absorbed" into the Communist orbit, after their
old warlord leader, FU Tso-yi, "escaped" from Peiping and arrived in Kueiaui,
laden with silver to "console" the troops. In Sinkiang, the withdrawal
of MA Pu-fang's garrisoning cavalry and infantry forces removed one of the
last props of the weak Nationalist provincial regime. These forces, assumed
to be seeking a juncture with other MA forces retreating from Lanchow and
Sining, are supposed to be somewhere northwest of Kokonor. Following their
withdrawal, native Kai.akh leaders, who have cooperated with the Nationalists
against the rebel Ili group in the past and who possess armed forces of
their own, began to seek means of leaving the province. The Nationalist
garrison at Hami, eastern terminus of the Sino-Soviet airline which operates
in Sinkiang, reportedly detected to the Communists and urged other Sinkiang
elements to follow their example. The Sinkiang Provincial Government in
Tihwa promptly accepted that advice, severing all connections with the
Nationalist Government in Canton on 26 September and accepting the authority
of the Communist regime in Peiping. Thus with the end of Nationalist
authority in these vast border regions and the total collapse of expected
Moslem resistance, the long anticipated conversion of the Northwest to
Communist control has now become fact.
Political Consultative Conference meets in Peipiwn-The long-awaited "a11- "B"
party" Chinese Peoples' Political Consultative Conference (CPPC) opened in
Peiping last week, with Communist Party Chairman MAO Tse-tung delivering
the opening address. MAO's speech emphasized the "representative" character
of the CPPC, predicted success for the future Government, and declared
"let the reactionaries at home and abroad tremble before us."
Theoretically, this plenary session of the CPPC will determine the
organization and plans of the new Government. In actuality, the session
will merely rubber-stamp fundamental decisions already taken by the
Communist-controlled CPPC Preparatory Committee. A series of speeches by
first-rank Chinese Communists and their sympathisers served to publicize
the "common program" derived from the Preparatory Committee's prior decisions.
TUNG Pi-wu, Chairman of the "North China Peoples' Government", outlined the
intended political structure of the new regime. Until the convocation of
a "National Peoples' Assembly",which will be elected by universal suffrage
and will have the task of confirming the provisional constitution, said
TUNG, a "Central Government Council", elected by the CPPC, will manage China's
internal and external affairs on an interim basis, This Council will control
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the legislative, executive, and judicial activities of the Provisional
Government, in consultation with the Standing Committee of the CPPC.
LIU Shao--chi, generally regarded as leader of the aggressively pro-
Soviet and orthodox Marxist wing of the Chinese Communist Party.,
declared that the new Government would pursue the ?minimum program"
envisaged in Chairman MAO's "New Democracy", and that the complete sociali-
zation and communization of China were matters of the "far future."
Other speeches were delivered by Chinese Comnunista, minor party leaders,
and by "democratic personages" such as Madame SUN Tat-sen, reaffirming the
unity of purpose of farmers, workers, petty bourgeoisie and "national
capitalists". These are the groups, according to the CPPC, whose interests
coincide in destroying the "reactionaries" and "bureaucratic capitalists?
and in rebuilding an independent China. dhile the CPPC has given no
indication of when the new "Peoples' Republic of China" will be officially
proclaimed, a possible date is 10 October, the symbolic "double tenth"
anniversary of the founding of the Republic.
INDOCHINA
Emperor in distress--The prepond,rance of present evidence indicates a
progressive decline in prospects for success of the Bao Dai experiment.
In commenting on the French Overseas Ministry's report on Indochina,
writers in the conservative Paris newspaper, Le Monde, have expressed
fears that even the anti-Communist nationalists among the Vietnamese,
including Bars Dat's own entourage, desire only to "drive the French into
the sea." US Consul General Abbott, in Saigon, believes these fears are
borne out both by the deliberately intraaaigeant attitude of Bao Dai's
Foreign Minister, Nguyen Phan Long and by the increasing exasperation of
Vietnamese public opinion in the presence of a deteriorating situation
and the failure of the French-Bao Dai negotiations to show any concrete
results. Moreover, the likelihood of concrete results is further dimin-
ished by current French plans to convene a federal conference of the three
Indochinese states, which will delay until some time in 1950 oorrzpletion
of the work of the Commission for the application of the 8 March Agree-
ments. The fact that these agreements first promise internal sovereignty
and then proceed to limit it and that participants on the Commission are
unable to agree on the transfer of police power from French to Vietnamese
control, has produced an impasse.
Hopes that the position of Bao Dai might be strengthened by support
from prominent nationalists and from interested foreign governments are
further diminished by other recent developments. Bajpai, Secretary General
of the Indian External. Affairs Department, recently stated that India's
attitude toward Ho Chi Minh would be conditioned more by evidence of his
possession or lack of popular support than by evidence that Ho is a
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Moscow puppet. The Indian Consul General at Saigon has confessed his
pessimism with respect to the Bao Dal, experiment and his feeling that
the 8 March Agreements offer only a shadow of independence, even if
liberally and loyally implemented by the French, a possibility he
seriously questions. Attempts by Bao Dai both to enlist veteran nation-
alist Tran Tramg Kim, in his Government, and to send a good will mission
to Japan have failed. Proposed good mill. missions to other neighboring
countries are marking time in Saigon, pending as yet unreceived indications
teat they will be welcomed. In prance, growing desperation is indicated
by Premier Queille's query to the US Ambassador as to whether our interest
In keeping Indochina free from Communist domination might lead the US
to "share this burden with France,"
BURMA
Increased rebel activity eRected--With the end of the monsoons in mid- "B"
October, intensified activity by all insurgent groups in addition to the
current Karen campaign in the hilly Shan States, may be expected to develop
throughout large areas of Burma's lowland. Serious curtailment of the
1949-50 rice harvest, export of which provides the Burmese Government
with moat of its revenues, appears to be the chief threat posed by any each
increased activity.. If the present balance of political and military
power is maintained, however, it is unlikely that the rebels will be able
to overthrow the present Government. First, the various rebel groups,
still largely disunited or antagonistic to each other, are incapable of
mounting a decisive frontal assault upon the Government. Second, the rains
have provided the Government a respite and an opportunity to strengthen
itself. The UK, India and Pakistan have given Burma some military supplies
and the Burmese are reported to have purchased additional arms from France
and Italy. Although they have ignored the proferred advice and assistance
of the British Military Mission, the Burmese have regrouped and reorganized
their Army units to some extent and have recruited and trained new troops,
particularly Chin and Kachin personnel. Third, the Government's adoption
of more conservative domestic and foreign policies Increases the prospects
of further economic and military assistance from the dest. Although the
Government should be able to make some progress against the insurgents
during the next few months as a result of these factors, it 13 still highly
improbable that the Government will be able to pacify all Burma in the near
future.
PHILIPPINES
guirino stalling on Congress session-President Quirino is reportedly "B"
attempting a financial maneuver by which he hopes to avoid convening a
special session of Congress before the November elections (Weekly Highlights
#68). when the Supreme Court declared two executive orders appropriating
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funds for FY 1950 invalid on 16 September, Quirino was faced with the
problem of either calling a special session of Congress, since earlier
regular sessions had failed to vote the necessary appropriations, or of
finding alternate means of providing funds for his goverrnt. Having
apparently lost control of the Senate, hey had reason to fear that a special
session might Initiate a series of adverse political events. It is now
reported that Quirino has directed heads of government departments and
bureaus to draw cash advances for a three month period by means of the
issuance of warrants on the Philippine Treasurer through the Philippine
National Bank. Although government balances were insufficient to cover
three months' expenses, the Bank has permitted the necessary overdraft.
Quirino's move probably will be attacked by his political. opponents
in the current presidential campaign and there are indications that the
Nacionalista Party will file an injunction against the Philippine National.
Bank to stop this disbursement of funds. To date, however Quirino has
successfully thwarted his opponents' attempts to hinder his administration
of the government.
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