INTELLIGENCE HIGHLIGHTS NO. 54 1 June - 7 June 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100020007-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 12, 2016
• Document Release Date: June 13, 2001
• Sequence Number: 7
• Publication Date: June 7, 1949
• Content Type: PERRPT

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COPY 110 1
FAR EAST/PACIFIC BRAhTCH
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE ACENCY
NOTICE z This document i3 a working per, NOT an
of i ial CIA issuance, a:tid has not necessarily
been coordinated with other ORE producing compon-
ents. It represents current thinking by one group
of specialists in CIA, and is designed for useby
others engaged on similar or overlapping studies.
The opinions expressed herein :gray be revised before
final and official publication. It is intended
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not for further dissemination.
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OFFICE OF REPORTS A17D ES TIMATES, CIA
FAR EAST/PACIFIC BRAT7C11
INTELLIGENCE HIGHLIGHTS NO. 54
1 June - 7 June 1949
SECiIOZT I. S11MARY OF FAR EAST TREZIDS A17D DEVELOPMENTS
A victory for the moderates at the recent Electrical Workers Union
convention indicates some advance in the struggle against Communist in-
fluence in Japanese trade unions (p. 2).
Although President Rhee has apparently called a halt to his propa-
ganda propTam to delay US troop withdrawal from Korea, he will have
difficulty restoring the confidence in the Republic destroyed during that
campaign (p. 2). Meanwhile, the national Assembly has asked the resigna-
tion of Rhee's cabinet for the second time within a week (p. 3)9
Communist units south of the Yangtze have paused in their push on
South China to await reinforcement. Although guerrilla groups deep in
the ITationalist rear will probably expand operations, no spectacular
advances on the main fronts are expected for a few weeks (p. 3). mean-
while, CCP tactics apparently call for the start of a propaganda campaign
regarding Hong Kong and the revival of foreign trade with Manchuria.
perhaps through the newly-opened port of Yinpkow (p. 4).
Recommendations for a revision of military strategy in Indochina,
hinged on a strong defense of the Sino-Tonkinese border, are to be for-
warded to France by General Revers, Army Chief of Staff (p. 5).
Legislation permitting the exploitation of Burmese natural resources
by foreign capital, to be introduced in the present session of Parliament,
may indicate a relaxation of the Government's strict socialism (pc, 6).
The question of whether the Republicans will be united or divided
upon their restoration to Jogjakarta may be decided at a meeting in Atjeh
this week between Premier Hatta and the Government-in-Exile (p. 8).
The marginal notations used in succeeding sections of this Weekly
("Ar, "B", or "C") indicate the importance of the items in B/F'E opinion
with "A" representing the most important.
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Moderates ca ture electrical workers-Tile struggle against Communist
influence in Japanese trade unions made a notable advance when Demo-
oratization League (Mindo) affiliates in DENSAN (the.All Japan Electric
Industry Workers Union, a major center of Communist Union strength)
were able to dominate last week's union convention. Not only was the
Mindo element able to secure control of the newly elected Central
Executive Committee and to wrest the leadership from Communists but
it aLsa won a majority on significant policy issues which developed
on the floor of the convention. Key Min-lo victories were the rejec-
tion of Communist-engineered regional strike tactics, defeat of a
Comm mnist--sponsored bid for Densan affiliation with the WFTO, and
adoption of a ban on political party dominance of union activities.
Mindc influence in the convention was not sufficient, however, to
secure adoption of a proposal for Densan secession from the Communist-
dominated National Council of Industrial Unions (NCIU) nor to prevent
adoption of leftist-sponsored wage revision demands. Although the
margin of Mindo superiority in the convention was at all points quite
limited, Mindo control of the Central Executive Committee ensures a
moderate Densan influence in the Japanese labor picture for the imme-
diate future,
Rhee halts troop retention ressure--During k&t May, officials of the "A"
oorean public approached officials in Seoul and Washington to state.
that the Republic desired a delay in the withdrawal of US troops? On
1 June, Chough Byung Ok, Korean observer at Lake Success, approached US
delegate Aust n with a request that withdrawal be delayed until July 1950.
Chough later cabled President Rhee asking for authority to negotiate the
issue in Washington. This week, however, President Rhee informed Ambas-
sador Mucoio that Chough had been instructed to refrain from pressing
for troop retention. Chough was informed that retention of a large US
military force in Korea did not "mean much" and that instead a statement
committing the US to "stand by" Korea would be more effective and preferable.
Rhee thus appears to have abandoned his attempt to postpone withdrawal
but he probably will continue to press the US for a strong defense commit-
ment. There are indications, however, that he will cease emphasis of the
vulnerability of the Republic to Communist aggression in future attempts to
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obtain such US assurances. Rhee is now endeavoring to restore the Korean
morale which was so badly shaken by his May propaganda campaign. It is
doubtful,. however, that he will be able to dispel completely the panic
that eax3paign generated and tension probably will continue in Seoul as
US txoops withdrawal proeyesser.
"B"
Cabinet shuffle fails to appease Assembly--An acute crisis in relations
between the administration and dtthe National Assembly threatens a .ample tm
breakdown of Assembly action on critical pending legislation. Executive-
A.ssenbly friction has been constant since the founding of the Republic but
it reached a new high on 7 June when, for the second time within a week,
the Assembly passed a resolution demanding the resignation of the entire
Rhee cabinet. The second resolution included a statement that the Assembly
would refuse to discuss the National Budget Bill and any other bills pre-
sented by the Government until the Assembly demand was accepted. A cabinet
shuffle following the first resolution, which effected the resignation of
the controversial Conuaeroe and Industry Minister, Louise Yim, and "sinister
of Justice Lee In. failed to placate Assembly members.
Assembly resentment over Rhee's arrest of three of the younger "pro-
gressives" during the May recess and indignation over illegal assessments
collected by a Rhee-appointed provincial governor precipitated the criticism.
The Assembly's first target was the home Ministry but the attack was soon
broadened to include the entire Executive Branch. This is not the first
time that the Assembly has censured the Executive Branch and attempted to
invade the President's constitutional perogatives and, in less critical
times, the Assembly might safely indulge in temporary ler-islative stoppages.
Although the issue may soon be resolved by compromise, a prolonged breakdown
at this critical period might lead Rhee to declare a state of emergency and
rule by decree.
Lull in the battle Major military activity in China has been suspended, "A17
as Communist units to the south of the Yangtze Valley pause to regroup
and await reinforcements from the north, The Nationalists continue to
withdraw their Yangtze forces to South China and Taiwan, where they hope
to continue resistance. They have evacuated Tsingtao, last Kuomintang
holding in North China, and that former US Navy anchorage has been occupied
by the Communists. The Communists also occupied Yulin on the Shensi-
Suiyuan border, but scored no significant advances in either southern Shensi
or in South-central China, where the forces of Chen Yi, following their
occupation of Shanghai, are reportedly moving southwestward along the
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Chekiang-Kiangsi railway, Liu Po-Cheng's main force is now, near Yungfeng
in central Kiangsi and Lin Piao"s troops are moving slowly southward along
the railway from Wuohang. Changsha, the only large Yangtze valley city
not now occupied by the Communists, has reportedly been abandoned by Pai
Chung-hsi and will probably fall shortly.
While the Communists are not now attempting to join battle with the
retreating Nationalists, they are almost certainly preparing for future
operations against south and southeast China, as well as Taiwan. Nation-
alist defensive forces in these areas have been increased by the successful
withdrawal of men and materiel from the Yangtze? Nevertheless, the Nation-
alists are not capable of withstanding a sustained offensive by Communist
regulars on the mainland. Even in their present conditions however, the
Nationalists can give Communist advance elements pause until strong regular
units have been brought into position for attack. During this period,
which will probably continue for several weeks and could conceivably last
several months, Communist guerrilla units will extend their operations in
Kwangtung and perhaps begin to harrass the approaches to Canton. The Com-
munists will also increase underground activities in all areas into which
they intend to move eventually, a program which has already met with reported
success on Taiwan.
Communist intentions regarding Hong Kon --The Chinese Cormtuniste are deter- "A"
mined to ON ong Kong and probably will succeed in their intent eventually,
although not during 1949. The advantages of foreign trade offered by a
stable Hong Kong under British rule will not outweigh the Communist national-
istic sentiment for retrocession of the Colony in the long rune Already there
are indications that the Communists are about to launch a Hong Kong propa-
ganda campaign. The Communists would prefer to take the Colony without
recourse to armed attack, and, following the conquest of South China,they
probably will initiate discussions with the UK for transfer of authority,
over the Colony, perhaps in connection with negotiations for recognition
of the new regime in China. Should negotiations prove tedious, the Com-
munists probably will apply various pressures tending to paralyze Hong Kong's
normal activities, such as strikes with the aid of the strong Communist
underground and sympathetic labor elements and sabotage of the critical
water supply? Although flushed with victory, the Communists would probably
risk a military attack to capture Hong Kong only as a last resort.
Manchurian Foreign Trade-In the past two months the Chinese Communists "B"
have t ern steps ait.i at recovery in Manchuria, where stagnation of trade
has brought about a depressed economy. In late April the CCP press announced
a revision of Manchurian provincial boundaries, designed "better to suit the
needs of economic reconstruction." A subsequent reshuffle of the top financial.
and economic pose in the Northeast Administration included the appointment
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of CCP Politburo member KAO Kang as Director of the Northeast Finance
az.a Roonoriioe Commission, evidence of the importance which the CCP now
attaches to that poet. Reportedly, the CCP is organizing export mono-
polies for 1. ianohurian?bristles and talcum and the CCP radio announced
in 'ate May that the port of Yingkow had been opened to foreign shipping
"in order to develop Manchurian trade with foreign countries."
There is no evidence that these measures have been taken in order
to %eaken Soviet influence in 'Manchuria. The CCP in Manchuria has appar-
er.cly remained completely subservient to Soviet influence, and has been
careful not to criticize Soviet actions. Because of this subservience,
the iTSSR is likely to allow Dairen to be reopened to international ahippir_g
sometime before the conclusion of the Japanese Peace Treaty. When the
Soviet garrison withdraws from Dairen, effective organizations will remain:
behind to guarantee continued economic control. As insurance of continuer.
control, the USSR recently extended the boundary of the Port Arthur Naval
Base Area (which is to remain under Soviet control until 1975) at the
exper,se of the Dairen area (which is to come under eventual Chinese admin-
istrative control),
The Soviet reopening of Dairen, without which there is little prospect
for any recovery of Manchurian trade, will be made as a gesture designed to
consolidate CCP loyalty to the USSR. Soviet propaganda will represent the
withdrawal, which in any case aould be legally required after conclusion of
a Japanese Peace Treaty, as a voluntary renunciation of USSR rights.
Old warlord in new office--YEN Hsi-shanrs appointment as Premier reveals
the nearly total bankruptcy of Acting President LI Tsung.jenrs regirie.
Lira earlier nomination of KTMT elder CHU Chang was rejected by the Legis-
lative Yuan because of opposition from right-wing groups, and the subse-
gient appointment of YEN was made with great reluctance. A provincial
warlord with a dubious record of loyalty to the national Government, YEN
recently has been supported by the CC Clique and CJUATIG Kai-shek, with
whorl he reportedly has conferred on selection of a new cabinet. YEN's
appointment therefore marks a further lose of power for LI in his struggle
-.-with CHIANG. Although he has promised to cooperate with LI and to defend
southwest China, YEN and the majority of Nationalist officials probably
will seek sanctuary in Taiwan when Canton is threatened by the Communists,
However, should YMN support LI's plan to attempt to establish the capital
in Chungking, his action probably would reflect CHIANG's belief that only
a government located in mainland China could receive any international
support.
Plans for revised French stratvr-..The French Chief of Staff, General "A"
Revere, has decided to recommend that defense of the Sino.Tonkineae
border be considered the primary military objective in northern Indochina,
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In order to secure the border, Revers plans to concentrate forces on a
line from T.loncay to Langson (northeast Tonkin), as he considers that the
greatest threat from China exists on the Kwangsi-KWangtung frontier,
The accomplishment of this plan will require the depletion of French
garrisons in the Laokay region of northeast Tonkin, pending the arrival
of "approximately 30,000" reinfdree ents and replacements for he Tonkin
oampaa.gn. It is expected that at least the area of Baokan, due north
of Hanoi, will be abandoned to the Viet Minh. The balance of General
Revere plan. includes securing control of the triangular Red River delta
area (enclosed roughly by Namdinh, Viettri, and Honpay). This operation
may be attempted in the. autumn dry season (October-November) by the
for#.;es presently ::n Tonkin, exclusive of expected reinf oroe. ntseffor
ored
the corder area. However, the Red River oe.mpaign will
untie the defense of the northern frontier has been assured.
Meanwhile, the proposed French strategy will relegate Coohinchina
and Annam to secondary importance despite the relative insecurity of
these two areas, The new Vietnamese government and army will be expected
to ',olive these regions and eliminate resistance activity. For this pur-
pose, Vietr+.,nese forces will be equipoed only with small quantities of arms,,
It appears that General Revere' recommendations of a determined effort
to defend the Chinese frontier will receive serious consideration in Paris.
In order to supply sufficient men and materiel, France must "scrape the
bottom of the barrel" in the French Zone of Germany and especially in North
Africa. Thus, troop reinforcements required for the execution of the Revers
plan may increase the French difficulties in meeting their commitments to
Western Union defense.
Government plane "softer" socialism--The Burmese Cabinet plans to present "B"
Parliament, Which convened on _7 June, with a draft "Union Piinoral Resources
Bill" permitting private foreign capital to participate in the developmenti.
of Burma's mineral resources at the discretion of the Government. This
proposed legislation contravenes the Burmese Constitution of 1948,which
explicitly provides that all resources shall be developed either by the
statc or by Burmese-controlled oopan:.ee specifically authorized by an
Act of Parli?vnent? The Cabinet's decir;ion to sponsor such a bill indicates
a conscious shift from striot state socialism towards closer coonerat'.on
with the West. Although the action is undoubtedly motivated in part by
opportunism, and perhaps a "nothing to lone""attitude, it nevertheless
reflects a growing appreciation by the Burmese Government of its inability
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to create a utopia through its own unaided efforts.
More important, the move may portend further changes of a similar
nature. In this respect, the US may be requested to extend assistance
to Burma either from public or private sources. US aid to Europe and
the President's Point IV program has so impressed the Burmese Government
that its Ministry of Planning is already reported to be contemplating
the utilization of US technical and scientific aid in preparing its
development plans. A further indication of the Burmese Government's
attftude is detected in a recent approach to the US wherein the Burmese
expressed a keen desire to participate in any joint effort of "like -
miaded" nations to frame a common policy towards the Chinese Communistc.
However, a reversal of past policy, by the Burmese will encounter con-
siderable opposition from the more extreme leftist elements presently
supporting the Government and sufficient Parliamentary support for the
proposed changes is not assured. Furt'the rmore, under existing conditions
of disorder, the chances of attracting foreign capital are slight.
Nevertheless, the new Burmese thinking,whioh im''lies the necessity for
international cooperation, somewhat brightens the prospect for easing
Burma's pressing political and economic problems..
Karen objectives--Although the military phase of the Karen-Burma struggle
i~attracted widespread attention, its political aspects have gone prac-
tically unnoticed. The Karens have proclaimed the establishment of a
senarate "state" in eastern Burma, and have announced an eleven-point
political program. This program demands a return to the "old" democracy,
which provides for freedom of elections, speech, worship, enterprise and
the right to own property. It envisions one law, fairly administered,
for all. The Karens also advocate financial reforms, a housing program,
increased imports and exports, encouragement of foreign capital and
increased participation in foreign trade, and the honoring of all foreign
commitments.
The significance of these statements is not necessarily related to the
problem of questionable Karen capabilities to maintain a separate state.
Rather, they are a fairly accurate reflection of Karen convictions and
aspirations., and as such, probably indicate the Karen position at any
future peace negotiations with the Burmese Government,
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I ND0?r;SI A
Division among the Re ublicans--The Republicans expect to be installed
in Jogjakarta by the end of June. In order to facilitate governmental
activities after restoration, Hatta and Sukarno have been conferring
with all principal Republican political leaders. Although the Republi-
cans were united in their support of Matta-Sukarno leadership during
the recent preliminary discussions with the Dutch, the reactions to the
agreement reached at T?atavia have indicated differences which rust be
reconciled before the Republic can operate successfully. The rightist
Masjoemi and Nationalist Parties have assented to the Sukarno-Matta
palicy pending developments arising out of future implementation. How-
ever, it is believed the Republican left-wing party, the Democratic
Front, will oppose the Batavia agreement as incorporating unnecessary
and undesirable concessions on the part of the Republic. The Socialist
Party has not yet formally criticized the agreement but it is reliably
reported that the party's leader. Sjahrir, personally feels that the
Republicans should have demanded broader and more specific Dutch cormit-
ments as to the Republic's position in the USI.
There have been persistent rumors that the emerge cy Republican
Government-in-Exile in Sumatra will not support the Batavia agreement
because it does not include Dutch recognition of Republican authority
over Java, Sumatra, and adjacent islands. Also, the Sumatran ;?roup
feels that the Republican Army should not be withdrawin from its present
positions until a permanent Indonesian Federal government has been
finally created.
In order to reconcile the differences that exist, Hatter recently
decided to visit the Premier of the emergency government, Sjafruddin,
at Atjeh. Accompanied by several other Republican leaders, Hatter left
Batavia on 5 June for a four-day conference with this leader. Success
or failure in forming; a cohesive unit from the several Republican factions
may depend on the outcome of the Atjeh meeting.
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