INTELLIGENCE HIGHTLIGHTS NO. 35 12 JANUARY - 19 JANUARY 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100020026-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 9, 2016
• Document Release Date: February 16, 1999
• Sequence Number: 26
• Publication Date: January 19, 1949
• Content Type: PERRPT

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110TICS, This document is a working paper. ROT an
arraal CIA /*manceand has not neeessarily been
eeordinated with *the; ORE produoing components
It represents -currant thinking by one group of
specialists in CIL, and is designed for use by
attar* engaged on similar or overlapping studies.
The opinions expressed herein may be revised before
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for further dissemination?
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INTELLIGENCE HIGHLIGHTS NO. 86
12 JANUARY - 19 JANUARY 1949
25mTioN so SDMMARY OF FAR EAST TRENDS AND DETELOPMEHTS
In Korea, both the northern and southern regimes are in priority to
the expansion of their armed forces (page 4).
CHIANG Kai...shale tottering regime has lost North China and the fall
of Nanking and Shanghai appears likely in the near future (page 6).
Despite individual peace efforts on the part of many top politicians, no
unified peace front has developed in Nationaliet China (page 7), Meanwhile
the Government speeded up preparations to evacuate Nanking (page 7), as
top Communist MAD Tse-tung demanded unconditional surrender of CHIANG's
regime (page 6).
The Philippines delegate to the Pan-Asian Conferenoe on Indoneeia has
been instruoted to do his. best to prevent anti.mentern developments (page
Progress is reported in joint Malayan-Siamese plans to clear their
common frontier of guerrillas (page 11).
Front& negotiations with ex-Emperor Bao Dai have reaohed a ortie10.1
stage (page 10).
Indonesian Republioan officiale remain adamant regarding cooperation
with the Dutoh (page 11).
margin& notations used n suocee ng sect ons of s Wee y
("A% "8" or "C") indicate the importance of the items in ME opinion
with Ite representing the most important.
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SECTION II, DEVELOPMENTS IN SPECIFIED AREAS
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of indications point to an attempt to Luc:ream the North Korean military
forms both in strength and numbers. It is learned that recruiting quotas
for men and won in the 28-25 age group are to be set up and filled by
local People's Army county headquarters. Centers for the training of
new recruits are being established. Confirmation of the existenoe of an
armored regiment has been received.
It is significant that security measures are reported in regard to the
accelerated recruiting pram. Inductees are being careDilly screened
and only those in complete 6,74PWWwith,the government of the North
.Korean puppet state are atsitted to the ranks of the People's Army, It
Is highly peesitas that earlier recruits showed some evidence of dissatis-
faction and the screening system is designed to keep dissidents out Of the
expanding Amy.
The People's Army is currently estimated at 50,000 men. Any substan-
tial expanalon will fhrther drain the labor pool already seriously depleted
ty labor conscription, imprisonaenter the flight of refhgees and the
existing military force,
Soirreh Kamm SecturAv props ilqrsine slrengt4. Internal and external
threats to the security of the Republic have etimulated Army recruiting
aid. have caused an acceleration of training with new arms and equipment,
The former Constabulary, now officially the Korean Army, is aiming at a
strength of 0,000 men, (See DX Weekly #30) The addition of over
15,000 recruits since 24 November 1948, drawn principally from rightist
youth groups, has brought the Army's present numbers to approximately
62,500 men.
The ATM is being supplied with infantry and infantry support weapons,
up to and inehulire 105-mm howitzers. The formation of horse cavalry
units, needed to patrol the rugged terrain along the 38th Parallel, has
been delayed in order to concentrate on cannon and anti-tank companies
Which would be more essential in the event of defensive wag uta with
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um (Cont.)
the North Korean People's km.
kw expansion has been conditioned be political considerations, There
has been an attempt to draw recruits equally from all rightist youth groups.
Officer Fast:motions are appointments are made in terms of previous Zapanese
or Chinese military =peritonea ard the 4ndividua3.18 influence in various
political parties. If the effort at balance is succeasib1 and all grows
feel they are adequatelzr represented, the result may be a decrease in
existing internal political rivalries. It is moxie probable, however, that
the etruggle for political control of the Ar sy will continue to the detri?
ment of its unity and combat efficiency,
4.81MVP.=
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CHINA
Nationalists lose North China, fall of $snking and Shan hai
imminent. he alines? 'Communist foroes of Gen. LI Piao quietly
Valasession of the important North China city of Tientsin fbllawing
the capitulation of its defenders an 15 January. In connequence,
twelve additional Chinese Comnunist columns have been released which
may well be utilised to augment Peiping's present beseigers, thereby
enwuring the rapid success of an all-out attack against the city.
However, the Oonmuniste, not wishing to pay the price of such a blitz
operation or to jeopardize their popular front appeal, probably will
not attack the historic city. but tighten their stranglehold instead
and force FU Tso-yi to make a "deal. flee, or surrender. Therefore,
Peiping's capitulation ean be expected within the next two to three
weeks.
After Peiping falls, the Communists will have at least eighteen
additional columns for further employment elsewhere. The next likely
course of Communist action north of the Yangtze appears to be an
operation against ill-defended Tsingtao. The capture of Tsingtaowould
virtually ensure the early fall of Taiyuan in Shansi, since Taiyuan's
major supply route is via air from Teingtao. After Taiyuan falls, the
small forces of HU Tsuag-nan at Sian could be dealt with succeesfully
by Communists moving south from YEN Bsi-shan's former domain.
In Central China the Nationalist's battle has been lost. The
Goverment is withdrawing its second-rate, hopelessly outnumbered
forces to a defense line along the Yangtze River generally extending
from Hankow to Shanghai. Meanwhile. the Communist forces of Gene.
CHEN Yl and LIU Po-cheng are regrouping and preparing tocrozs tho Yaagtze.
This operation will probably be in the form of a three-pronged envelop-
ment with one force moving southeast along the Tientein-Pukou Railroad
toward Pukou and Nanking. Another force would move down the Grand
Canal and croak the river between Nanking and Shanghai, thence turning
west toward Nanking. The third force would more south from the Pangfou
sector and cross the river in the vicinity of Wuhu, thence turning
east toward Nanking.
In the Hankow sector, RAI Chung-hi will continue to be success-
fully contained by Communist forces to the north of his position. When
Nanking falls Shanghai and Hankow cannot be far behind as PAI will
be forced to make a deal or withdraw southward when attacked by a
major force. It now appears likely that the Communists will OCCUpy
Nanking, Shanghai and all territory north of the Yangtze and east of the
Yellow river, with the possible exception of Taiyuan and Sian, by March.
Nationalist losses through combat casualty, capture, or defection
during the past six months have been slightly over one million men,
their remaining combat strength is now estimated at approximately
400,000. On the other handithe Communist armies totalling over 1,500,000
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men.of increasing efficiency and drunk with victory are capable of
driving virtually unopposed, through south Chiza to Canton by spring
thereby forcing CHLANG's remnant Government to withdraw to Taiwan.
National Government preparations to more from Nankin G in the near "A*
future have become increasingly apparent. Canton is the probable
ultigate destination for most units. The Communists delay in pressing
an towards the capital has gieen the Nationalists the opportunity to
effect a more or less orderly withdrawal of the Government, in contradiction
to earlier estimates that the flight would be completely disorganized
and confueeda Plans for the removal of the archiees of various ministries
have been made and personnel, excepting key men, are reportedly being
given the opportunity to resign or to be evacueted from Nanking.
Preparations are also being made for adequate housing cf the Diplomatic
Corps in Canton. This more or less orderly withdrawal of the National
Government will make it more difficult for any accredited foreign
missions to refuse to accompany the Government to a provisional capital.
At the same time, the removal of the archives and the dispersion of
trained personnel will keep the Communists from taking over an intact
administrative organization in Nanking and subetantially increase their
administrative difficulties*
The lack of any organised peace front becomes apparent as more and "C"
more elements in Nationalist China try to bargain with the Communists
for their personal security. Peace overtures on a group and individual basis;
rather than on a governmental level, have increased since the Communists
refueed CHIANG Kai-shek's bid for peace at his own price. FU Tso-yi
in North China has been engaged in peace talks with the Communists on
a regional basis. LI Tsung-jen, who had formerly sent emissaries to
the Communists in Hong Kong? is now reported to have sent two representativea
to meet with the Communists at Shihohiachuang. PAI Chung-hsi, who
oontinues to urge the Generalissimo to seek peace, is reported to be
prepared to negotiate a truce with the Communists in cooperation with
other regional leaders in the Southwest. At the same time, local groups
such as the Shanghai City Council are also attempting to take the initiatiee
for peace. All these efforts, however, are apparently being checked by
a small group around CHIANG. including HU Shih. This clique continues
to urge CHIANG to hold out through the coming year, counting on the
outbreak of a Soviet-American war to renew US assistance to the National
Government.
Implementation of the National Government's plan to use Taiwan
as an aati-Communist base is stimulating native Taiwanese reeentment
against Chinese rule. Recent reports indicate a continued influx of
Nationalist military and civilian personnel as well as the transfer
of governmental units to Taiwan. Governor CHEN Cheng reportedly will
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be appointed soon as director of a. Communist-suppression campaign in
Southeast China, Taiwan included. In their frustration over conditions
of Rationalist military rule, native groups may soon mainifest their
resentment of ccutinued US aid to the National Government, for examplee
the recent visit of US zuval vessels to Taiwan to unload US ammunition
for the Nationalist Army.
Dissident leadere,confer with Communists regarding provisional
government. LI Chi-shen, head of the Kuomintang RevolutioneVriniMittee,
as well as varioua Democratic League and other inor-group representatives
have left Kong Kong and Nationalist China recently, bound for Nanchuria9
of for Korth China where a meeting reportedly is to be held at
Shihohiachuang. These leader's, many of them intellectuals poesessed
of slight political strength or aptitude, apparently feel the time has
come to visit Communist areas and find out what their future role in
a non-Kuomintang, Communist-dominated provisional goverumentwill be.
Mile LI avowedly expects to be "president" and others hope to receive
posts at the national or local level, some of the visitors are chiefly
concerned with constitutional issues. From the Communist viewpoint,
their chief importance may be in furnishing some basis on paper for
claining establishment of a "coalition" provisional government.
Communists demand unconditional surrender of Nationalists. MAO
Tse-tung's official reply to CBIANG Kai-shek's New Year peace proposal
was a liat of demands which, if aceepted, would amount to the unconditional
surrender of the Nationalist regime. NAO's eight demands were: (1)
punishment of "war criminals" (at least 43 government leadere); (2)
abrogation of the Constitution (adopted in 1946 without Communist
participation); (3) abolition of the Kuomintang's "traditional insti-
tutions" (example: the tradition of dating events from 1911, the birth
of the Republic); (4) reorganization of the Nationalist Armies (pre-
sumably their elimination, or inclusion in Communist forces); (5) con-
fiscation of "bureauoratic capital" (a Communist phrase which means
all large holdings); (6) agrarian reform; (7) abrogation of "traitorous"
treaties; and (8) convocation of a political consultative conference,
excluding all "reactionary" (anti-Connunist) elements, and trans-
fer of all power from the Kuomintang to a "democratic coalition"
(Communist-controlled) government. There is no possibility that the
National Government, as presently constituted, will comply with the
demands. MOs reply, however, is not more rhetoric. Whether this or
any successor Nationalist regime complies or not, and whether the
Communist demands are to be realized through peace or war1 it is clear
that the Communists intend to carry out this proaramo
US Consulate in Tientsin may be isolated. The US Consulate-General
in Nukden has been isolated ainc e early November uten the Chinese
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Communist administration closed damn the Consulate's radio. A Co
monist spokesman in Hong Kong recently stated that the question of
oommunication with the= Consulate in Mukden "is part of the larger
question of the US attitude, toward the forthcoming Communist-controlled
government of China, and will "depend upon the course of US policy."
The U0 Consulate-General in Tientsin, as of the second day of
Conmunist occupation, retained the use of its radio and consular
personnel had complete freedom of movement, but the political officer
of the Comatunist forces told the Consul-General that "as the US
does not recognise the Communiet government, there could be no formal
official relationships*" While the Communist ofricer did state that
"infernal friendly discuseion" and presentation of grievances "would
be welcome at any time," it is quite ponsible that the Coneulate-
General in Tientsin will loee both the use of its radio and its freedom
of movementb and become as isolated as Mukden.
Arran ements for resum tion of Sinkian -Soviet trade, embodied
In a new ino oviet tra e pact, wil soon be put into effect, according
to a report from the US Consul in Tihwa. The fact that the USSR
has cooperated in trade arrangements on a goveramental level with
Sinkiang represents a major development in Soviet policy toward Sinkiang,
Since withdrawal from the province in 1943, the USSR has refueed to
conclude any commercial agreement on whatever terms with the Tihwa
Government. Resumption of trade at this time indicates Soviet approval
of the newly appointed Sinkiang Governor BURKHAN and will greatly
strengthen the pro-Soviet provincial coalition government which is
expected to result from BURKHAN's appointment*
In exchange for the renewal of Sinkiang-Soviet trado which is
vital to the saccess of any Sinkiang provincial regime, the Soviets
are reported to have secured Chineee acceptance of the Ashan zone
of northeast Sinkiang. Outright Soviet annexation of Ashen zone
would represent recognition of what has been a virtual fait accompli
for the past three years. Since early 1946, Ashan has been conpletely
Soviet-dominated and a mining expedition, guarded uy Soviet troops,
has been actively mining wolfram in that area.
Hong Kong begins direct trade with Chinese Communicts. According
to a late report, a Norwegian freigh-773-aari: departed from Hong
Kong bound for the South Manchurian port of Antung. Other reports
from Hong Kong indicate that a modest commerce with Manchuria, via
North Korea, has existed for several monthe. Chinese merohants in
Hong Kong have visited Manchuria, according to these reperts, in order
to make barter arrangements, since Manohurian and North Aoreau currency
is unacceptable in payment. Official figuree on imports from Korea
from September through November total NMI 20 million, as compared
with HK$ 14 million for the first 8 menthe of 1948, thus suggesting
that indirect trade -with Conmunist Manchuria has been gesing on for sone
time.
ODURUT
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40.
PHILIPPINES
mo dictates cautious li at Asian Conference. Philippine "A"
policy& he ew 14113 erence annary, carried out accord-
ing to the instructions of President Parini", will be cautious end de-
afened to dieceurage the formation of an anti-western bloc. It is probable
that Carlos P. Resale, the Philippine delegate, who has promoted the idea
of a Southeast Asia union for several years, will hold to the spirit if
not the letter of Quirincos instructions. Specifically, quirino is re.
parted to have instructed Romulo, (1) to promote the mutual interests of
Asiatic eountries within the framework of the UN (2) to avoid westing
racial bitterness between Asia and the "'est and (3) to organise with other
Asian countries for the helpful support of dependent peoples seeking:the
right of self-determination. President Onirino earlier had told US Charge
d'Affaires Lockett that although the Philippines sympathises with Indonesia,
the formation of an Asian bloc shoald be approached with caution and, if
formed, its activities ahead be wisely directed lest the East turn against
the Western Powers. He said he expected to instruct Roman to conduct him-
self quietly and to let other countries "carry the hall."
Ramnle will probably emerge as a prominent spokesman at the conference.
He is expected to take a strong stand in favor of a regional bloc which-can
exert pressure upon the UN, but he may also be depended upon to counter,
as much as he can, an anti-western inclinations of other delegates.
INDCCHINA
French-Vietnamese negotiations at decisive stage. The French negotia- "A"
tions with Baotal appear to be reaching a climax. A l3 January French
Cabinet meeting was held to formulate instructions for French High Comais-
stoner Pignon who intervieved the former Annamite emperor in Cannes on
16 January. Following this visit Bao Dai announced that he would study
the French Government's proposals for the conclusion of a France-Vietnamese
agreement. When told that his .prompt return to Vietnamese desired by the
French Government, Bao Dai reiterated that this move would depend upon
French satisfaction of Vietnamese aspirations. In this connection, General
Xuan, president of the Provisional Central Government in Vietnam, recently
stated that although the Vietnamese population "ardently" desires the ex-
emperor's return, such action is subordinate to the fulfillment of demands
far real independence. These demands continue to include Vietnamese con-
trol of the Army, foreign relations and finances, including establishment
of a new currency which will not be tied to the French franc. The French
Overseas Minister in contrast, has stated publicly that, although the new
Vietnamese state should have full internal sovereignty, there mast be a
amieraiihria
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INDCCHINA. (continued)
certain limitation imposed on external sovereignty "to assure the coherence
and efficacy of the French Union." It is apparent that 30 far as Bao Dai
is concerned, the decisive stage in negotiations has arrived. Mile the
French remain optimistic, there are no indications either in France or
Indochina that an agreement with Bao Dai can be reached which will in
any substantial way improve the shaky French position in Indochina.
SIAM
British and Siamese coo orate on control ol_inlagtaLt!Inds. Efforts
by the Bri sh ads strat on of aya to effect closer Siamese coopera-
tion in the control of Communists and bandits on the Malay-Siam border are
meeting with some saccess. A joint conference held last week in southern
Siam resulted in a nine-point agreement which established the basis for
=Change of information and maintenance of military liaison. In addition,
the Siamese have been invited to send a group of officers for jungle war-
fare training in Malaya. A subsequent conference has been scheduled to
25X6 discuss a Customs program for the common border.
INDONESIA
Dutch fail to win sue.ort of lead R,, blicanth Statements by
intern*. Repub an Premier Matta who was v sited on Bangka Island by
the Security Council's Good Offices Committee, confirm the Republic's
will to resist a settlement on Dutch terms, His stand, and that of other
officials, indicates that the present Republican policy of guerrilla
activity and noncooperation on a political level will be caitinued, For-
mer Premier Sjahrir, released from internment in Sumatra in order to con-
fer with the Dutch Prime !qnister visiting In Batavia, told Republican
colleagues that he had accepted the Dutch invitation only to obtain infor-
mation on the internal situation. A few non-RepUblican leaders, while un-
willing to oppose the Dutch openly, have agreed to use delaying tactics to
prevent the immediate establishment of an interim federal government. The
Premier of the pro-Dutch State of East Indonesia, who has the support of
Republican aympattizers in areas outside the Republic, is one of the leader;
in this movement.
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INDONESTA (continued)
The inability of the Dutch to MOM'S competent personnel with which
to staff an interim goverrvaent, together with an increase in the nuaber
and intensity of Republican guerrilla attacks on Dutch communications
and properties, will cause considerable internal pressure on the Dutch
at Batavia. taternel pressure will continue to be exerted by Far Eastern
countries at the New Delhi eonferenee, and, perhaps, by Security Council
action.
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