FAR EAST/PACIFIC BRANCH OFFICE OF REPORTS AND ESTIMATES CENTRAL INTELLIGENCE AGENCY WORKING PAPER WEEKLY INTELLIGENCE HIGHLIGHTS NO. 67

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000500030016-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 9, 2016
• Document Release Date: January 26, 1999
• Sequence Number: 16
• Publication Date: September 13, 1949
• Content Type: PERRPT

Approved For F ase 2000/08/29: pl P79-01090A 500030016-7
22
FAR EAST/PACIFIC BRATNCH
OFFICE Or REPORTS ARD ESTIMATES
CENTRAL INTELLIGENCE AGENCY
WORKING PAPER
NO,, 67
DATE: 13 September 1949
NOTICEx This document is a working paper, not an official CIA
issuance. 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 FOR:
CUUMFNT NO.
f. CL
NEXT REVIEW 4
AUTI=
A W-1
Approved For Release 2000/08/29: CIA-RDP79-01090A00056Z 01 -7
 Approved For Release 00/08/29 : CIA-RDP79-01090A00050O 016-7
OFFICE OF ItkPORTS AND ESTIMATES, CIA
FAR .EAST/ PACIFIC BRANCH
INTELLIGENCE FIIGf LIGHTS NO. 67
7 SEPTEMBER - 13 SEPT MER 1949
SECTION I. SUMMARY OF FAR EAST TR DS AND DEVE:LOPMMT5
The continued failure by Radio Pyongyang to mention the proposed
September Korean "national elections" may indicate that they are to be
"postponed" and that the Communists have made a serious error in estimat-
ing their capabilities (p. 4 ).
in China there was little civil war-activity during the last week
(p. 5 ). The 1 August Manchurian-USSR Trade Pact, which was primarily
a propaganda gesture may boomerang (p.5 ). The success of the Chinese
Communists in maintaining the level of exports through Tientsin testifies
to the limited effectiveness of the Nationalist blockade (p.6 ).
Although reports from Indonesia concerning the effectiveness of the
month-old cease--fire order are favorable, Dutch military forces are pre-
pared to "consolidate" their positions---.a move which would preclude the
success of The Hague Roundtable Conference (p. 7 ).
The attitudes of neighboring Southeast Asian countries toward Bao
Dai's "independent" state of Vietnam are still decidedly reserved as evi-
denced by the cool reception accorded letters recently sent by the Emperor
announcing the establishment of his state (p. 8 ).
The marginal notations used in succeeding sections of this ~ieekly
("A", "B", or "C") indicate the importance of the items in B/FE opinion
with "Al/ representing the most important,,
Approved For Release 2000/08/29 : CIA-RDP79-01090A000500030016-7
 Approved For Releas&2,900/08/29 : CIA-RDP79-0109OA00050 0016-7
A favorable effect on the stability of rya will result if the
implementation of a recently-stated US policy, which would open natural
rubber to a wider market in the US, is successful (p. 9 ).
Although the Philippine presidential elections are to be held with-
in two monthhs, no one of the three cardi:dates has a sufficient edge on
his rivals so that observers may definitely predict the likelihood of
his victory (p. 9 ).
NOTE: A B/FE summary of recent cables from China
which have discussed the means available to the
lest of fostering trends toward Titoism in China
is contained in Section 111, p~ iC .
Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030016-7
 25X6A
Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030016-7
Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030016-7
 Approved For Releas+ 00/08/29: CIA-RDP79-0109OA0005dQ0016-7
KOREA
pion rang "dro a_s proposed ~jnativnal elections"-?- `or the third consecu-
tive week, Radio Pyongyang has failed to mention the proposed September
"nation--wide" elections called for by the 29 June ranifesto of the
"Democratic Front for National Unification." If, as now appears probable,
the Korean Communists have decided to drop or postpone the widely adver-
tised "national elections" they will suffer a considerable loss of face
in both northern and southern Korea with the Republic gaining a psycho-
logical victory.
Failure to conduct "elections" in southern Korea probably would
indicate that the Communists made a serious error in their estimates
last spring of their potential capabilities in southern Korea this fall?
Although Communist guerrillas were increasingly effective daring July
and August, strong summer action by the Republic has disrupted much of
the Communist underground, including key cells in the National Assembly,,
while promises and threats of Pyongyang failed to gain the support of
southern political leaders for the "election" and the "Unification Front,"
Faced with failure of their greatest propaganda effort to date to
create confusion and instability in southern Korea, the "Joint nists have
several possible courses of action in the immediate future: (I) They
simply may drop the election issue and again concentrate on rebuilding
the underground in southern Korea while following usual propaganda lines;
(2) The current meeting of the Supreme Peoples i Assembly may revive the
election line and announce that the elections have been postponed due to
the severe repression of "democratic forces" in southern Korea by the
"brutal" Rhee government; (3) Pyongyang may issue an a nnon ei ent stating
Approved For Release 2000/08/29: CIA- 0 UUM0030016-7
 Approved For Release,,., 000/08/29: CIA-RDP79-0109OA00051 QO0016-7
SECRET
5-
that the elections were held despite severe repression and quote figures
to show the southern people overwhelmingly in favor of the Manifesto of
the the "Unification Front"; (4) All further attempts to effect unifica-
tion by "peaceful" means may be dropped in favor of an early invasion by
the Peoples' Army,
From information presently available it is impossible to define
Communist intentions with certainty. However, it now seems most probable
that they will adopt either the first or second course of action outlined
above while continuing to push expansion and training of the Peoples'
Army for future action against the south.
CHINA
M.lilittarymall prevails--There was little civil war activity in China "A"
during the past week. The Com unists, however, gave evidence of preparing
for two major assaults while Nationalists' defensive manuevers appeared
as forlorn as ever. CHEN Yi made no significant advances toward Araoy,
but, in the face of gradual Nationalist withdrawals and their general
unwillingness to tight, CFLEN can take ' Aa sy whenever he chooses. Regular
Communist troops on the south--central front have not yet entered Kwangtung
in any strength, but advance units, joining with Kwangtung irregulars have
extended guerilla operations to within 35 miles of Canton. As a result
of the recent appointment of YEH Chien-ying to lead the Communists in
Kwangtung, the CCF main force, marking time somewhere east of the Hengynag-
Canton rail line, can be expected to launch their Canton offensive soon.
The Northwest Communists, apparently halted after taking Kanchow and Sining,
are now increasing their activity in west central Shensi, menacing HU Tsung-
aan and Szechwan. The Nationalist defenders of the Lanaho,&-Sining area
have reportedly fled into the Kansu corridor. MA Fu-fang has gone to
Taipei, MA Hung-kuei is in south China, and MA Chi-yuan, son of the former
and acting commander of the MAs left for Chunking. The MAe reportedly
have lost all. will to fight after their futile "talk" with the Generalissimo,
ahd their troops are reputedly disgruntled due to their recent defeats and
the absconding of their generals.
Manchurian-USSR Trade Pact May Boomerang The 1 August announcement of a
d.rade pact between Manchuria and the USSR was primarily a propaganda gesture
intended to demonstrate Soviet friendship and to express Chinese defiance
of the "imperialist" blockade, The widespread publicity expressing support
for the pact, and regional demands for similar pacts, are all signs of
official Communist pride in the agreement. The embarrassing features of
the pact, however, are even now realized by many Chinese-namely, that the
USSR is neither a good market nor a good supplier as far as China is
concerned.
Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030016-7
 `Approved For Release 2000108/29 : %0016-7
The Liberated i . i inadvertently points out the disadvantages of
the pact in a recent editorial answer to a critic of the pact. In explain-
ing why Manchuria food is to be exported in the face of China's shortages,
the editor states that the agreement is only with Manchuria, not China,
thereby admitting either that such an agreement would be harmful to China
or that China has no priority on Manchuria's surplus. He argues that
paper is imported rather than pulp because Manchuria's paper mills are
not restored, which is contrary to the fact as there is plenty of unused
capacity in both China and Manchuria. He explains that the Soviet Union
wants corn and grain instead of China's traditional eorts--bristles,
tea, vegetable oil, etc.-by the self-contradictory statement: ". ten
though the Soviet Union has abundant agricultural products, statis:,ica1
data over the years show it has imported corn and grain." Fina.Ll!r, ho
discourages hope of an industrial loan from the USSR, arguing that China
has ample barter goods to exchange for what it needs,
These specious explanations will not justify the agreement to the
Chinese intelligentisia whose support the Communists are now trying to
solicit, and certainly not to the sceptical businessmen in Shanghai to
whom the economic disadvantages of trade with the USSR will become
obvious.
Communists continue; to export through Tientsin---Despite the blockade
by the Nationalist navy., exports from Communist China through the port of
Tientsin have held up fairly well in past months. The most recently
announced figure for exports through T.ionts.i.n compares favorably with the
figure for the same month last year. The reliability of the Communist
statistics is generally supported by the US Consul General at Tientsin?
According to the Consul General, consular declared exports to the United
States totaled $1Rta million in August - somewhat less than the figures
for June and July, but twice the figure for May.
The success of the Chinese Communists in maintaining the level of
exports through Tientsin testifies to the limited effectiveness of the
Nationalist blockade. At Shanghai, the blockade has succeeded almost
completely in shutting off the port from foreign shipping. Farther
north, however, foreign-flag vessels have been subject to less harassment
from the Nationalist navy. The relative freedom of North China from the
blockade has prompted a few Shanghai firms to relocate their offices in
Tientsin. Other firms have swelled the Tientsin export totals by shipping
goods to Tientein rather than attempting to run the blockade out of
Shanghai.
Exports from North China have also been encouraged by subsidies
which the Communist authorities have granted certain exporters. The North
Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030016-7
 Approved For ReIr re 2000/08/29: CIA-RDP79-0109OA00NA0030016-7
-7?
China Foreign Trade Bureau has followed a fairly open policy of selling
tutrade
for export at prices below cost. The losses to this Communist
agency are presumably made up from the government treasury.
have taken a more hidden form in the shape of loans to exporters at pre-
ferential rates. Another form of hidden subsidy has been the purchase
of dollars from exporters at rates far above the official quotations.
Although the various subsidies render cargoes from China subject to counter-
vailing duties by the United States, such duties have not thus far been
imposed, and the Chinese Communists continue to press these measures for
maintaining their export trade.
NEMS NOTE
Over 80% of the world's tungsten reserves have been captured by
the Chinese Communists in their recent drive through Kiangsi into
Kwangtung. The USSR now not only has access to more than adequate
supplies of this strategic metal for its oven needs but may well be in
a position to prevent the non-Soviet world from getting
postwar years Chinese production of tungsten concentrates has been over
one-third of world production. The 2 million--odd tons of tungsten in
China are concentrated in southern Kiangsi, where most of the modern
can be expectedconcentrating tote~loitrequire
mills are located. Since
tJSSRneither
elaborate machinery, the
China's tungsten in the near future.
INDONESIA
"Csaae-fendan exed__ Local reports as to the effectiveness of the
month-old cease-firs order in Indonesia have been surprisingly optimistic-
One of the most Important Dutch political representatives in Indonesia
has estimated that "armed contacts" have decreed decreased by which were cent
since 10 August. All thirteen of the local joint committees
now
organized to supervise implementation of the military agreement
functioning. Committees in Sumatra and best Java have made considerable
progress in the delineation of zones of patrol, but in other areas progress
has been much
ay~laaused Java, nubyican
commanders
pursuing independent militant courses.
One of the greatest obstacles to the continued success of the truce
will be the attitudes of high-ranking Dutch military officers in Indo-
nesia. Despite the low percentage of actual "incidents", many Dutch
commanders are concerned over the extent of Republican infiltrations
and feel that Netherlands sottaey argue the~~uation deteriorates.
as
data their positions if,
Approved For Release 2000108PPV CIA-RDP79-01090A000500030016-7
 Approved For Release X0/08/29 : CIA-RDP79-01090A000500W016-7
Any offensive action undertaken by the Netherlands military, even though
it did not attain the proportions of former "police actions." could e i sily
lead to incidents which would destroy the truce and preclude success Of
The Hague Roundtable negotiations.
INDOCHINA
Bao Dai's diploma.ic problems--The attitudes of neighboring Southeast "B"
Asian countries toward I3ao Uai's "independent" state of Vietnam are still.
decidedly reserved as evidenced by the cool reception accorded letters
recently sent by the Emperor announcing the establishment of his atar'e.
their
Similar messages to the US and the UK were also dispatched follcrwi.n
approval by the French Foreign Office. SBA countries are now apparently
awaiting action by the US and UK before committing themselves to receive
a good will mission or to extend formal recognition. The Indian Prim
Minister has indicated that it would be ninconvenient" to receive a mission
before November, a decision which was presumably reached in view of his
October US trip and in order to await further developments in Indochina.
The Phibul Government in Thailand has reserved public comment, and may
further temporize by adopting a Defense Council recommendation that it
express a desire to recognize an independent Vietnamese Government without
either the Ho or the Bao Dai regime.
Since it is obvious that Bao Dal's prestige will suffer further unless
he achieves some measure of diplomatic success before November, it has been
suggested by the US Consul General in Saigon that the US reply to Bao Dai's
letter cooperate with the British in urging SEA nations to establish early
relations with the Bao Dai Government and take the initiative in publicly
supporting the Emperor. Although this latter suggestion is contrary to
the US position that initial backing should derive from neighboring countries,
the Consul General believes that prior action by the US might encourage
Vietnam's neighbors to imitate the example. Until concrete achievements
are reported by the Commission for the Application of the 8 March Accords,
however, such a development is not likely. Furthermore, diplomatic arrange-
ments have been assigned a lower priority on the Commission's agenda for
discussion than questions of justice and security. In any case, the sub-
committees which have been appointed to make recommendations to the
Commission are not expected to report for at least three months,
These delays in implementation of the accords, in conjunction with
the fact that the 21 June statement by the US (which welcomed with reserve
the formation of the unified at-ate of Vietnam) has lost much of its effect,
indicate that further championship of Bao Oat at this time by the U5 before
final conventions have been signed by both contracting parties may cause
the opposite of the desired effect, i.e., a further distrust by neighboring
SEA countries of the Bao Dal experiment.
Approved For Release 2000/08/29 :W RDP79-01090A000500030016-7
 9pproved For Release 2000/_08/29 : CIA-RDP79-0109OA00050003000116-7
MtAI.AAA
Aid for Malaga's rubber- Successful implementation of a recently-stated "B"
US policy to open to natural rubber a wide market in the US will have a
favorable effect on the stability 6.f Malaya. Because Malaya's economy
is largely based on her rubber industry such a development will do much
to ensure the continued economic well-being of the country, will counter-
act the spread of terrorism, and will help to reduce political dissension
among those who otherwise, in the face of an expanding US synthetic program.,
might find their livelihood threateneda is a result, the UK's ability to
maintain control of this vital area, and Malaya's orientation toward the
rest, will be considerably strengthened,
?fiILIPPINk,S
Election, ssib.i.l.ities-Althou gh Philippine presidential elections are or~.s
cheduled within less than two months, no one of the three candidates has
a sufficient edge on his rivals so that observers may definitely predict
the likelihood of his victory, President Elpidio Quirino, the candidate
of one faction of the Liberal Party, currently appears to be in the lead
and can count as supporting factors his control of the Administration and
favorable popular reaction to his United States visit. The latter, how-
ever, may prove of transient value4 The rival Liberal candidate, lose
Avelino, is least likely to win the election but may contribute to
Quirino's defeat by carrying a sizable Liberal vote. This possibility
was increased by the 9 September decision of the Electoral Commission
allocating the Avelino wing one of the two election inspectors reserved
by law to the majority party. The minority party gets the third inspec--
tor,. The chances of Nacionali.sta candidate Jose P. Laurel continue to
be very good although an Avelino source has reported that an Avelino-
Quirino rapprochement is still possible should it appear necessary to
defeat Laurel.
Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030016-7
 25X1X4
Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030016-7
Next 1 Page(s) In Document Exempt
Approved For Release 2000/08/29 : CIA-RDP79-0109OA000500030016-7