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July 7, 2005
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May 9, 1950
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Approved $W~ Release FAR F M7'?AL IF IC DIVISION OFFICE OF REPORTS AND ESTIMATES CE14TttAL INTELLIG.E i-UCE AGE;NCX rYEEKLY INTELLIGENCE HIGHLIGHTS 'o. 9 9 DATE: MAY 9 AUT H ' OAT REVIEWER: NEXT REVIEW DATE: CLASS, CHANGED TO: TS . This document is a working paper, not an official issuance, since it has not necessarily been coordinated with and reviewed by other components of ORE. It represents the formulative thinking of one group of analysts in ORE and is designed to provide the medium for transmitting their informal views to other intelligence analysts of the US Government who are working on similar or overlapping problem. It is intended for the use of the addressee alone, and not for further dissemination. NO CHANGE IN CLASS i- COPY NO. Yg 1950 DOCUMENT NO 25X1 Approved For ReI a 2005/07/13 :CIA-RDP79-01090A000500040001-2 Approved Release 2005/07/13: CIA-RDP79-0A000500040001-2 S E C R E T OFFICE OF REPORTS AND ESTIMATES, CIA FAR EAST/PACIFIC DIVISION INTELLIGENCE HIGHLIGHTS NO. 99 3 MAY to 9 MAY 1930 SECTION 1. SUM} ARY OF FAR EAST ThJ DS AND DEVELOPMENTS Forthcoming Japanese elections for 132 seats in the Diet's Upper House probably will see some losses on the part of YUSHIDA' a Liberal Party, scattered gains for opposition parties.. and a slight rise, if any, in Communist holdings (p. 2)0 The Chinese Communist tendency to play down "Sino-.Soviet Friend- ship", which was underscored on May Day, is believed to be in defer- ence to Chinese nationalist sensibilities (p. 3). Meanwhile, anti.- inflationary gains on the Chinese economic acorn are expected to be only temporary (p. 3). The newly-announced Huu cabinet in Vietnam reflects increased prominence for the Cochinchinese "autonomists", while the elimination of two under-secretariats may reduce the degree of Vietnamese partici- pation in US economic activities (p. 4)a Although USI threats of military action against the Amboinese se- cessionists are probably hollow, establishment of a "provisional block- ade" of the Southern Moluccas even if only partially successful -- may result in the withdrawal of local support from Ambon's militants (p. 5). President Quirino has returned to Manila after a protracted stay at Baguio, in an attempt to mend political fences: on balance, it is believed that the general dissatisfaction with his administration will continue to grow In strength (p. 5). NEWS NOTES Three Asian conferences... Hai an's iron ore...Recruiting for Man- churian industry..."State of preparedness" in Thailand. The marginal notations used in succeeding sections of this Weekly (nA", ''B", or "C") indicate the importance of the items in D/FE opinion with "A" representing the most important. ,-V 11 Approved For Releas"*~79 01090A000500040001-2 Approveddr Release 2005/07/13 : CIA-RDP79-0d0A000500040001-2 S EC R E T SECTION II. DEVELOPMENTS IN SPECIFIED AREAS JAPAN Upper House election campaitn--Japan's political machines opened their campaigns for the 4 June Diet Upper House elections last week, with the start of the rigidly limited thirty-day period during which election- eering is legal. A total of 125 Upper House seats -- half the number which were filled in the general elections of 1947 -- are up again this June, together with seven vacancies. Some of these will be filled by constituencies, while others will be filled from the nation at large. In view of the paramountcy of the Diet's Lower House, this Upper House election will be of interest more as an indication of public confidence in Premier YOSHIDA's majority Liberal Party and as a test of present sentiment toward Japan's other parties than as a critical test of strength. With 35 of their 60 Upper House seats coming up for reelection, YC iHIDA's Liberals are facing some internal restiveness, due to dissa- tisfaction with YC6HIDA's one-man rule of the Party and to factionalism between old-line politicians and one-time bureaucrats. Externally, the Liberals will be dogged by opposition charges of responsibility for such unpopular but Occupation-required legislation as the 1950 balanced bud- get, the Local Tax bill, and other matters which reflect the Laodge aus- terity line. The opposition will also attempt to connect the Liberals with scandals now under investigation. The Liberal Party stands to lose some seats unless the public can be persuaded that the Occupation is to blame for these unpopular measures and that no other party could do better under the circumstances. The 70-seat RYOKUFUKAI, (Green Breeze Society) -? a group of con- servative independents who work closely with the Liberals -- has 29 seats coming up for reelection. The extent of the RYOKUFUKAI's success will depend in part on the reputation of individual candidates and the degree to which the public can be persuaded that they are not responsi- ble for unpopular legislation. The itYOKUFUKAI may succeed in breaking about even. Because of their opposition status, which permits them to capital- ize on unpopular legislation, the People's Democrats and the Socialists stand to gain in the election. The People's Democrats (an amalgamation of the Democrats, People's Cooperatives and the New Political Council) will have the wider field of support, while the success of the newly reorganized Socialists will depend upon winning the vote of non-Commu- nist labor, Approved For Release 2005/07/13 : CIA-RDP79-01090A000500040001-2 Approved Fchakelease 2005/07/13 : CIA-RDP79-010000500040001-2 SECRET Only 3 of the 5 Communist Upper House seats come up for reelection. The Communists have nonetheless nominated 45 candidates and have announ- ced their support of 5 "party friends" as well. ohile unemployment and current depressed economic conditions play Into Communist hands, these factors probably will be offset by the retrogression in popularity which the party has suffered since last summer as a result of the publicly- revealed Japanese Communist subservience to the USSR, the charges that Japanese Communists have delayed POW repatriation, and the factionalism within the Party. chile it seems highly unlikely, in consequence, that the Communists will duplicate their success of 1949, when they received nearly 10% of the popular vote, thmp could, however, gain a few Upper House seats. -CHIN Sino-Soviet friendehi ince the return of Chairman MAO Tse-tung from "B" toscow, Chinese Communist leaders have largely avoided public discussion of the Sino-.Soviet alliance. Even in his May Day address, for instance, LIU Shao-ch'i, generally regarded as the most rabid Stalinist of the CCP leaders, listed the Sino-Soviet treaty in last place among the factors favoring China's reconstruction, and did not mention, in his list of the Party's "present duties," the development of Sino-Soviet amity. This apparent Chinese negligence is in striking contrast to the practice of Eastern European satellite leaders, who declare their gra- titude and fidelity to the USSR on every conceivable occasion. The com- parative restraint of the Chinese, however, does not in itself indicate that Chairman MAO and his lieutenants are altering their Stalinist ori- entation. It is believed that the CCP is following this policy not be- cause of disillusion among the Party leadership with the fruits of So- viet "friendship", but out of deference to the forces of Chinese nation- alism. Temporary inflation check--In recent weeks, Communist propaganda has "B" called attention to improved economic stability in China. Independent evidence supporting these assertions includes a decline in the price of rice in Shanghai (off slightly during March and April) and a 15% drop in the Parity Deposit Unit (a commodity index based on the prices of rice, coal, cotton cloth, and edible oils) A similar reversal in price movements occurred last summer, when rice dropped from PBU 60,000 to PBBN 36,OOicpe rhpic etdurein u~~rand September. By November 1949, P , pC' former levels and had risen to new highs by February 1950. It is eex- pected that the present downward movement will similarly spend and the inflationary trend revive once more. Approved For Release 2005O/13a: CIA-RDP79-01090A000500040001-2 Approved For case 2005/07/13 : CIA-RDP79-010900500040001-2 SECftET -4- Although the Communists point with pride to their presumed success in arresting inflation, the present levels of depression and unemploy- ment in China have been more important factors in holding prices down than has Communist skill in currency management. Although the Commu- nists are continuing to cover the larger part of their deficit by resort to the printing press, the resultant inflationary pressure has been off- set in past months by a decline in buying power attendant to the severe depressions An additional deflationary force in past months has been the unco--promising Victory Bond drive, which has withdrawn some money from circulation and has forced businessman to liquidate stocks in or-, der to meet their assigned bond quotas. Although the business depression and the Victory Bond drive have been temporary deflationary forces, the increase in the amount of cur- rency in circulation has continued to increase the inflationary poten- tial. Following the end of the Nationalist blockade and with a return of trade to Shanghai and other cities, this increased potential will once more be translated into rising prices. For the remainder of 1.950, at least, continued inflation is expected to be one of the Communists' major economic problems. IWOCHINA Hauls cabinet--The new cabinet announced by Vietnamese Premier Tram Van Huu involves no drastic personnel changes. Like his predecessor and political rival, Nguyen Phan Long, Huu will hold the Foreign Affairs portfolio in addition to the premiership. The Ministry of Defense, for- merly held by a member of the Tonkin-based Dai Viet party, will go to the Commander-in-Chief of the military forces of the quasi.religious Cao Dai sect. The most significant weakness of the new cabinet is its failure to include any but one of the prominent Catholics and fence- sitters when Huu is known to have urged to participate. Of the nine ministerial posts, six are held by Cochinchinese, a distribution of power which suggests that Premier Huu has been influenced by the long-standing demands of certain wealthy French and Gochinchinese interests for a more or less autonomous Cochinchina within the State of Vietnam. This suggestion is strengthened by Huu's abolishment of the Ministry of the Interior on the ground that such governmental functions can be adequately discharged by the individual governors of Tonkin, Annam, and Cochinchina. Huu's elimination of the under-secretariats of Agriculture and Health would appear to be unfortunate from the standpoint of fuller Vietnamese participation in the application of anticipated US economic aid in these fields. Approved For Release 2005/07/13 : CIA-RDP79-01090A000500040001-2 Approved I p Release 2005/07/13 : CIA-RDP79-01990A000500040001-2 SECRET INDONESIA Blockade of the "Republic of South Moluccas"-Following an apparent fail- ure to end the Auboineese secessionist movement by negotiation, the USI has ordered the enforcement of a "provisional blockade" of the rebel "Republic of the South Moluccas". If this measure is not effective in ending, the dispute, U3I authorities further threaten to land troops on Ambon - the rebel administrative center and the only significant area of the self-announced "independent" stater The USI threat of force against Ambon is believed to be no more than a gesture, since the 386 sq. miles of Ambon could be quite strongly defended. Of greater though as yet undetermined significance in the imposition of the USI's blockade. Although a complete curtailment of Ambon's imports would work severe hardship on the inhabitants of the island, who depend heavily on imported rice and other products, such a rigid blockade Is probably beyond the USI's capabilities, Even a par- tial blockade, however, may induce the local population to withdraw its none-too-firm support of Ambon's militant eecessionieta. PHILIPPINES Opposition to guirino cont --?Congressional opposition to President Quirina has continued unabated, and there is little evidence of azy "element of strength" in the President's political position, Quirino, who until recently has remained in the Sumner capital at Baguio, has been forced to return to Manila in an attempt to repair the wide breach which has developed between himself and Liberal Party leaders. In the face of strong Congressional dissatisfaction with his ad- ministration, Quirino has asked for approval of legislation which would grant him broad emergency powers. These powers -u allegedly justified by unsettled world conditions - would enable Quirino to take over indus- trial establishments, suppress subversive activities, prohibit strikes and lockouts, regulate prices and requisition public services when Congress was w4 in session. Meanwhile, Vice President Lopez continues to make speeches calling for strong leadership in social reforms, and a Senate investigation of a "massacre" by Constabulary forces I adds fuel to the fires of public discontent. Approved For Release 2005/07/13 : CIA-RDP79-01090A000500040001-2 25X1 25X1 Approved For FN ase 2005/07/13 : CIA-RDP79-01090A 500040001-2 SECRET -6- 25X1 Although Quirino has also invited rival Nacionaliata leaders to asset with him, in order to discuss cooperation with the administration, it in not likely that such cooperation can be achieved without substanti.at. Liberal concessions to Nacionalleta political, appetites, MiS MOTES Three Asian aonfeggpols are scheduled for the remainder of UV,, A Commonwealth Consultative Committee will convene on 15 may at Sydney, to discuss recommendations for economic and teahnicai assistance to South Asia and to consider approaches to governments outside the Commonwealth "with a view to enlisting their collaboration." On 16 May, the sixth session of SCAFE will be held in Bangkok, A Soviet walk-out over the question of Chinese representation has already oacurrad in a preliminary committee meeting on 9 May, and the USSR will probably not participate in ECAFE'o regular session. Finally, on 26 May, President Quirico will convene his conference on a projected Asian union at Baguio, The capture of Hainan by the-China ee Communista presents Japan's steel industry with the loss of one of its cheapest and best sources of iron ore. During 1949, Hainan supplied 346,000 tons of Japan's total imported 1,518,000 toms of ore. The Japanese Government's 199D program calls for importation of l.? million tons of ore, a quantity which is only potentially available from other Par Eastern sources., Thus, al- though the Chinese Communists ni:ll not be able to use Hainan ore as a means of exerting much trade pressure, both Hainan's present stockpiles and future production will be available to the Com uni.ats as barter for Japanese matu>