OFFICE OF REPORTS AND ESTIMATES, CIA FAR EAST/PACIFIC BRANCH

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400060004-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 8
• Document Creation Date: November 16, 2016
• Document Release Date: March 20, 2000
• Sequence Number: 4
• Publication Date: May 19, 1948
• Content Type: REPORT

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FAR EAST/PACIFIC BRANCH
INTELLIGENCE HIGHLIGHTS-WEEK OF 11 MAY - 17 MAT 1948
SECTION I. SUMMARY OF FAR EAST TRENDS AND DEVELOPMENTS
The North Korean electric power cut-off of 14 May will have an
embarassing, although not crippling, effect upon South Korea. The Soviet-
controlled North Koreans have the capability of aggravating this situation
by cutting off water supplies across the border. Future moves affecting
power and water supply will continue tp be guided by the Soviet objective
of forcing US withdrawal from Korea.
In China, opposition to Chiang Kai-shek is increasing at a time when
the National Government fa6e-fi`,mounting military efforts by the Chinese
Communists and growing economic deterioration. Chiang shows no disposition
to take effective measures, and apparently is trying to counter his opposi-
tion by reliance upon old, trusted, but incompetent, political figures.
The Philippine Government is currently attempting to reach a political
settlement with dissident groups; if successf-7.1., such attsmpts would mate-
rially increase stability in the Philippines.
A new anti-Phi7bul movement,, led by high Array and Navy officers, is
reportedly developing in Siam, but is not yet believed powerful enough to
threaten the Government.
State Dept. declassification & release instructions on file
DOCUMENT NO. _ _
NO CHANGE IN CLASS H -~-~
! I DECLASSIFIED
CLASS. CHANGED TO: 13 S COI)f
NEx r f EVIE w DATE: Q
DATq.
REViEWEft 372044
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In succeeding sections of this Weekly, the following marginal nota-
tions are used:
(1)
Mgr 19 1
I*I3 (2)
An asterisk (*) m...= To indicate that all or part of an
item is based solely upon information from State's "S/S
distribution" series.
"A", "B", or "C" - Importance, in B/FEe; opinion, of
the item, with "A" representing the most important ones.
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Loss of North Korean power is causing hardship but not chaos in
South urea at present. The stoppa ge wa not, i^~!nediate yy rsFa_ i'
operation of SouthKorea's most essential services, but a sharp decrease
in already low industrial production will be inevitable. Plans are in
effect which will permit continuance of essential services and industries
through August but these involve partial reliance upon stand-by therial
plants previously idle because of high operational expenses and lack of
an adequate quantity and quality of coal. ~7oreover, the stepping-up
of hydro-electric generation involved in these plans can be effected
only during the summer months when rain will give the additional necessary
water supply. A severe rationing program and careful use of, limited
coal stocks will permit South Korea to supply 60` of its current needs
of approximately 100,000 kw. in June. After July bituminous coal imports
of 20,000 metric tons per month will be required to maintain the pro-
duction of 607 of requirements. The anticipated summer rains will raise
the figure to 80-90% during July and August. It is to be noted, however,
that Chong P ong, a hydro-electric plant now producing about 18,000 Pau.
and which is now undergoing repairs in order to step-up its ;eneration,
cannot be depended upon in the present emergency since it uses water
from north of the 38th parallel which can be turned off- by the North
Koreans. North Korea also has the capability of cutting off water used
for irrigation purposes in South Korea with a resultant adverse effect
on South Korean, agricultural areas adjacent to the 38th parallel.
There is nothing; to ccmpel the Soviet authorities to restore the
power supply to South Korea. However, propaganda considerations could
induce them to make the cut-off only temporary. If the power supply is
"An
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restored, therefore, it will probably be accompanied by repeated
explanations that the cut-off was directed only against the US
occupation authorities and that sympathy with the plight of their
suffering countrymen prompted the North Koreans to reverse their
decision. Tt is apparent that the Kremlin is determined to take
maximum advantage of the power situation as part of its presently-
indicated campaign to assure that US withdrawal from Korea will be
accomplished under the most embarrassing and chaotic circumstances.
The path will then be open for rapid North Korean conquest and con-
solidation of the South. Adoption of,an "all Korean" Constitution by
the North Korean People's Council on 29 April marked the completion
of preparations for eventual annexation of South Korea. The presence
of US occupation forces is now the only factor frustrating implementa-
tion of Soviet plans to dominate all of Korea.
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Incr!Aang ~shek
c}nrQsitiog ~ ~ ~
There seems to be no prospect that Chiang Kai-shek will introduce any
reforms that might improve China?s present critical situation a1&d regain
popular support for the National Government. The complexion of the National
Government appears to be unchanged by the governmental reorganization now
taking place. Rather than introducing into the Government liberal person-
alities. inclined toward positive action, Chiang Kai-shek is apparently at-
tempting to balance the opposition voiced through Li Tsung-fen's election
to the Vice-Presidency by maintaining in the top government positions
political figures upon whom he has relied in the past, despite their ineffec-
tive records.
The position of Vice-President has little constitutional power and
Chiang will probably try to keep Li Tsung-jen from assuming any authority.
Li. however, is following his progressive political campaign by the formu-
lation of a reform program. Ws political advisor has indicated that if
Chiang refuses to accept the plan, Li will force the Generalissimo into the
background and take over the leadership of the Government. We movement
appears to be gathering strength and a program for positive reform would
undoubtedly command popular support.
Marshal Li Chi-shen's Kuomintang Revolutionary Committee now operating
in Hong Kong also gives indications of being an effective source of opposi-
tion. This group is reported to have definite plans for overthrowing the
Generalissimo and negotiating with the Communists for peace. Marshal Li
reasons that any government responsible for ending civil strife would be
assured immense popular support and. that peace is necessary to stabilize
the country and prevent the spread of Communism. It is rumored that Li Chi-
shen's group is associated with the movement centering around Li Tsang-jen.
Their combined forces might be able to force Chiang's withdrawal, which
they both desire, since, as long as Chian; shows no indications of taking
effective measures to handle the presdnt crisis, the demand for new leader-
ship will increase. However, in any political upheaval the process of
disintegration will probably be accelerated at first and the initial advan-
tages will therefore accrue to the Chinese Communists.
jhe tenor 2f C_hjang Kai-ehek's recent nointments is indicated in the "C"
naming of an old reliable, Marshal Ku Chu tong, to be Chief of Staff, succeed-
ing General Chen Chang. Marshal Ku, who has been Chief of the Army Ground
Forces and concurrently commander of the Advance Headquarters at Hsuchou,
is considered one of the most incompetent generals in the Nationalist Army.
General Vu Han-mou, another of the Generalissimo's trusted but hardly
qualified reliables, succeeds Ku.
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)be- re p tuz of 4 neral ? sch ,new soviet Prnbassador to China, has "'B"
aroused speculation as to whether the USSR will now adopt a more 'positive
policy than hitherto in Chinese affairs. There has been no Soviet Ambassador
at :banking since last June. General Roschin may renew talks with Chinese
officials regarding a compromise settlement of the civil conflict, and it is
possible that he may offer Soviet mediation. In addition it is likely that
Roschin will undertake mediation of the current impasse in Sinkiang, and
that this will be accepted by General Chang Chih-chung, top Chinese official
in that province. No real progress has been made toward solving the dead-
lock in Sinkiang through the exchange of notes during the past eight months
between Gen. Chang Chih-chung and the Ill Group, As minimum conditions for
a resumption of negotiations, the Chinese demand return of Ili :,leaders to
Tihua; the Ili Group demands dismissal of 4esud Sabri as provincial Governor.
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