OFFICE OF REPORTS AND ESTIMATES,CIA FAR EAST/PACIFIC BRANCH INTELLIGENCE HIGHLIGHTS NO. 64 17 AUGUST TO 23 AUGUST 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000500030020-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 9, 2016
• Document Release Date: January 26, 1999
• Sequence Number: 20
• Publication Date: August 23, 1949
• Content Type: PERRPT

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FA 7 EAST/PACIFIC BRANCH
orricE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE AGENCY
XRKING PAPER
AEKEY INTELLIGENCE HIGHLIGHTS
NO?._64
DATE*
--23_ August_ 2949.. .
NOTICE This document is a working paper, not an official CIA
issulinoe,,, It has been co?ordinated within. ORE, but
not with the IAC Agencies. It represents current
thinkinr 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 8 Editor
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OFFICE OF REPOPAS AND ESTIMATES, CIA
FAR EAST 'ACIFIO BRANCH
INTELLIGENCE HIGHLIGHTS NO. 64
17 AUGUST to 23 AUGUST 1949
SECTION I. SUMMARY OF FAR EAST TRENDS AND DEVELOPMENIS
Korean Republic Coast Guard vessels have been raiding northern
waters in reoent seeks and have oaptured a number of puppet fishing
boats (p. 2).
The steady Communist military advanoe in China has oontinued
uneheoked in the northwest and southeast, although delaye have
occurred in central China (p. 2).
Burmese Foreign Minister E Maung hem returned from his visit to
the UK and the US and the reaults of his journey, while unspootacular,
may well mean the cementing of stronger bonds with the West (p. 4).
The Dutoh-Indoneeian Round Table Conferenoe is aoheduled to begin
at The Hague this meek. Successful negotiations are contingent upon ,
effective maintenanoe of the soeace-fire" agreement in indonegia (p. 5).
Philippine President Quirinois junket to the US apparently has eo
bolstered his politioal prestige that he has ?ailed a apecial seesion
of Oongreas, the firet eince his hasty adjournment of that rebellious
bed./ last May (p.
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The marginal notations used in succeeding seotions of this Weekly
or ?C$1 indicate the importance of the items in BAE opinion.
with "A" representing the most importante
,ONIFOLENTIALI
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SECTION II. DEVELOPMENTS IN SPECIFIED AREAS
KOREA
L-22111122ELNamraids north--Several aggressive forays into northern ere
Korean waters we7.7)--"GrWiTsouthern Korean personnel during the period
5-19 August. The first two expeditions used fishing vessels manned by
Coast Guard crews in civilian olothes, together with members of rightist
youth groups. A later raid, however, wae reported to have been carried
out by 6 regular vessels of the Republic's Coast Guard. At leact 4
northern Korean oommeroial fishing vessels and one armed craft were
captured in the raids and brought into the southern port of Inchon,
The ostensible purpose of the forays was to recapture a small Coast
Guard oabin oruiser whose orewhad defected to the north recently. It
is more probable that the major Republican consideration is to use the
captured vessels to build up a propaganda picture of "defections" to
the Republic in an attempt to counter the loss of prestige oocaaioned
by Renublioan defections to the north.
CHINA
Military scene--The Communist military advance in China last xeek con- "A"
tinued successfully in the northeest, slowed somewhat on the south-
central front and maintained its recent pace along the southeast coast.
In remote Fansu, where the two rabidly anti?t-iornmunist MA s had been
expected to put up stiff resistance, tho vanguard of Communist PENG
Teh-huails forces reached the outskirts of Lanchow, the provincial
capital, apparently without encountering any real opposition. MA Pu-
fang, commander of the largest foroe in the area, is reported to have
ordered a withdrawal of his troops to positions nearer the capital city
of Sining in his home province of Tsinghai. MA Hune-kuei, the other
Moslem guardian of the Northwest, is reported to have advised CHIAM
Kai-shek that his forces are reduced to 12 rounds of ammenition per
man. CHIANG's reply - that MA should fight on until down to six rounds
per man and then revert to ruerrilla tactics - indioates that the
Nationalist leader has written-off the JAs Lanchaw, left to the de-
fense of nondescript local garrison forces, oan be expected to fall
into Communist hands shortly,
Local Communist setbacks in central China are confirmed by "reliable
independent sources". In the vicinity of Leiyang, on the Canton-Hengyang
railway, Communist LIN Piao's forces were thrown baok. An entire Communist
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army is reported "lost" in righting around Yungfeng, to the northwest
of Hengyang. Although these local reverses will have a temporary
effect at best, they are evidence that the advance against Nationalist
PA/ Chung-hsi is not progressing as rapidly as might be expected.
While LIN Piao's forces continue to contain PAI and force him back into
Kwangsi, it seems probable that the main Communist thrust on Canton will
be made by LIU Po-ohengts troops, who have taken Tayu near the Kwangtung
border and threaten to moves on against the key rail city of Kukong.
Along the Fukien coast, meanwhile, the Communists have followed the
cartare of Foochow, the provincial capital and a major port opposite
Tailian, with a move down the coastal highway towards the port of Amoy.
Scene of Foochow's Nationalist defense forces are retreating ahead of
the Communists towards Amoy while others were evacuated, either to
Taiwan itsnlf, or to the coastal Pingten islands. In view of the leek
of effective resistance in the southeast, it is probable that the Com-
munists will gain control of all the Chinese mainland area opposite
CHIANG's Taiwan stronghold in the near future.
NEWS NOTES
ShalEhai inflation halted: New rice, entering the Shanghai market, is
causing a temporary downward trend in prices. Rice last week stood at
PEN 50,000 per picul (US$22), 18% lower than in early August. Since
waee costs in the city are based in large part on riot: pricee, the de-
cline has been reflected in a drop of the "parity deposit unit" by 22%
below the 1 August level. A firm Communist fiscal policy, in contrast
to past irresolute Nationalist efforts., may share credit with the rioe
harvest for driving prices down. The Communists have shown determina-
tion to avoid unlimited resort to printing press currency and their
efforts to reduce government expenses and inorease revenues have forced
the discharge of government workers and cet into the profits of private
business. Despite drastic measures, the present leveling of prices
probably constitutes no more than a temporary break in the inflationary
trend which results from the expenses of continuing civil war.
Communists_ begin population dispersal: A program of wide-scale "repa-
triation to the villages" has been instituted in the lower Yangtze valley.
Surplus populations in Nanking and Shanghai are to be dispersed into the
countryside of Anhwei and Kiangsu - 40,000 already have left Nanking and
000.010ferr
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300,000 have left Shanghai. According to an East China Bureau directive,
the action, which has been taken as a eounteremeasure to the Nationalist
blockade, does not propose any important removal of industrial faoilities
from Shanghai, On the contrary, the directive ntates that population
dispersion is designed to improve the cities' lot, "by reducing the
burden on (them) and inoreasing rural produotivity," rather than to
diminish the importanoe of urban areas.
BURMA
Foreign Minister's visit to West--The results of Burmeee Foreign Minister
E Maunes trip to the iffe-T?IdU-S--thus far have been largely inconclusive,
In London he was mainly interested in obtaining finanoial aesistanoe and
was told that the UK -was willing to resume disouseions for the extension
of a short-term Commonuealth loan, He also exhibited interest in the
exchange of intelligence information with the Britioh, especially regard-
ing the Sino-Burma and Indochina-Burma border areas, about whioh he haa
indioated considerable conoern. While in the US, E Maung maintained a
friendly but cautious and noncommittal attitude,. Conversations were of
a general nature and Maung neither made requeste for aid of any kind nor
committed himeelf in any way regarding future Burmese policy. While he
Indicated interest both in exehanging intellirenoe and in the possibility
of negotiating a treaty of friendship, commerce and navigation, he desired
to postpone detailed discussions until his return to the US as head of the
Burmese delegation to the UN General Assembly. Maung did, however, let
it be known that the Burmese Government was prepared to ease further its
present restriotive policies regarding private foreign investments.
Although there have been no firm developments. Maung 's trip cannot be
considered unsuooessful, Besides returning with modest tangible results
in the form of a prospective Commonwealth loan, he oan report progress in
attaining oloser relations with the West while at the same time avoiding
any auspicions of selling out to Anglo-American "oapitalisteimperialists,"
a consideration that may have aocounted for his reticenee while in the US.
Moreover, if he oan convinoe the Burmese Sooialists that neither the UX
nor the US harbors malicious designe on Burma and that both are in faot
sympathetic) to Burmese aspirations, further stereo to align Burma with
the West may be taken when he returns.
SECR
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INDONESIA
Pape meet hinges on cease-fire?The extremely complex problem of
implementing the Dutch-Republican cease-fire agreement in Indonesia
reeains the greatest threat to the success of the Round Table Con-
ference which opens in The Hague this est*, High Republican offi-
oiels flatly deny Dutch charges that "infiltration", i.e. Republican
troop movement, is part of a concerted plan to expand into Dutch-held
territory in disregard of the military truce. However, the Republic
has the difficult and nearly impossible task of attempting to control
all movements of scattered Republican regular and guerrilla troops
and Republicans will be blamed for disturbanoes fomented by dissident
Communists and fanatic Moslem armed bands as well. Moreover, Dutch
military commanders in Indonesia, who have long opposed any concilia-
tory policy toward the Republic and who very often disagree with or
dieregard Netherlands Government direotives, are pressuring Crown
Representative Lovink in Batavia for permission to take punitive
notion against alleged Republican truce violatora. Meanwhile, the
activities of UNCFI, in strengthening its military observer teams
in the field and in transmitting objective reports on the situation
to Th a Bagee, are the strongest deterrents to a renewal of widespread
hostilities which would inevitably week the conference.
PHILIPPINES
Quirino calls 5pecial session of Con sea-The decision by President
Quirino toconvene a speoii1Iscion'of Congress on 31 August appears
to be directly inspired by his improved positionjin the Philippine
presidential race as a result of his US visit. 2i Local press comment
on the junket has been highly favorable and Jose P. Laurel, Quirino's
chief rival in the November eleotions?ie reported to be much discouraged.
During the past week, one Senator from Laurel's Nacionalista Party and
one formerly supporting the Avelino clique have openly declared their
switch of allegiance to Quirino. The former Avelino man announced that
he had decided to back "America's friend." Quirino's call for a special
session indicates that he expecte other defeotione in the Senate, since
Congress was adjourned hastily last May when Quirine's forces lost
Senate control.
Notes 2../ See Section III for an Embassy Manila analysis of the three
presidential candidates.
40.0081
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