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

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400060005-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: November 16, 2016
• Document Release Date: September 28, 1998
• Sequence Number: 5
• Publication Date: May 24, 1948
• Content Type: REPORT

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FAR EAST /PACIFIC BRA=
?-'E FIIGIiJGHTS-'-=K OF 18 MAY - 24 ?.MAY 1948
TON I. 114-1 .ARrr -3-r* FAR 1:.?,ST TR} flDS AND DEVELGE'I s'T''S
25X 6A
1 n the c uki }! n*ean elections of 10 Nay, neiti l.r of the tsvo extreme
= ti at gro a s--Rh,i Sm tiIa National Society anI the Hankooks--won a
?ri tom, a& the ba i snce of power is hold temporarily by the smller
t' at pow. i s. The H nkoos^x have the capability x' undermining and
it g ?-thee ; r pren=:at dominant position in any fut*v e political crisis
Chiang 4171-shek?s inability to ountrol the Kuozdntang effectively has
hut = demonst rt ted by the serious in Ira-party struggle over the naming of a
4v,w premier. This atrturgle, invvolvi.rg key figures 'capon whom Chiang has
*i1ied for yusrs, a o>tars to be a serious challenge to his position of
mitLeership (page 41,
J n ?renal- Indoor-ins, Ho Chi Minh is expected to launch a campaign of
~:??i ? a and~ arr? terrir in response to the fora ttcn a::.' a new Frenoh-sponsored
nom ?ovo rr: w nt viler CenF ral Xua'a (page 6) ?
A D`itoh nova o .y-pass the Indonesian Renubli3 is'evident in a "Federal
'? }r f.erenoe" a# i.ne convened i. ~ -catch-held Java on 27 " ,ay, apparently without
.pt-blio represento ::ion (pag- 6) * As reported in V vi CIA Daily Summary of
:- T,ay, Outo4 reew-,r,ion of "police action" in the near future is much more
,j.--0 ,able than is a ieaoeful onalusian of Dutch-Reua`Ylio Dolitioal agreement.
In the Ptilinptnee, pea:>eful settlement; of the law and order problem has,
, ,er: rendered less Likely b,!- the open insistence b.y ?aruo,' Hukbalaha Bader,
t-he Huk-i have :`ue right to bear arms (page ?)*DOCUMENT NO. _--
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F; t In su-+ceedin= i a tion. of this .'ieekly, the fe) lowing marginal
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= iatrt u .on" Ecriesa
'.. ". o. `"C" -?. importer, in I)/Mtn opinion, of
11-ho most important ones.
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 25X6A
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KOREA
Neither the Hankooks nor Rhea Syngmanss National Society, the two major
rig tis roups, secure a ma?o ty in e a elections n Souta` orea.
A oug so-ca a in -pen ens o a plurality 07-8-6-R-8, a more realis-
tic break-down of the election results indicates that the Hankooks and the
Rhea machine will have about equal strength with the balance of power held,
at least temporarily, by the smaller political parties. Kim Koo's Korean
Independence Party is the largest of these lesser groups. If Kim, despite
his attendance at the Pyongyang conference, still has authority in his
party, he may be able to utilize to his own advantage the stalemate of
the major groupso
Rhea, who derives his strength from his extensive political machine,
was expected to wain a generous plurality of seats. However, his present
parity with the Hankooks is dependent on the precarious support of ambi-
tious General Lee Chung Chun?s Dai Dong Youth Party, Moreover, it is
possible that in their long-standing contest with Rhea for political
supremacy, the wealthy Hankooks have been able to infiltrate and capture
some parts of Rhee's machine at the lower levels. For'the present, how-
ever, the two groups will maintain an uneasy coalition with the Hankooks
supporting Rhee for president. Rhea will attempt to get himself elected
as a "strong" president on the "American" pattern while the fankooks will
struggle for the adoption of the "French" system with Kin Sung Soo as
premier, Although Rhea may be successful in this initial struggle, should
his egocentricity produce an eventual political crisis (e.g. frustration
of any future US aid program), the more astute and flexible Hankooks will
have an excellent chance of seizing real control of the government,,leav?
ing the obdurate Rhea in a osi of
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IAL
Stxi ggle i Yip Kuomintang
Chiang Kai-shek's difficulty in forming a new cabinet for China has no
revealed a serious struggle within the inner circle of the Kuomintang.
Apparently Chiang no longer has unchalleMed control over the Party and his
inability to se17 on the support ofoertain key Farty leaders from whom he has
drawn his strength in the past is a more dangerous threat to Chiang?s position
than that prevented by any liberal opposition under Li Tsuung~-jen,
The present struggle has stemmed from the Legislative Yuan which is con-
trolled by the conservative CC Clique and must approve the appointment and
actions of the now president of the Executive Yuan. The more likely candidates
for the position,. Chang Chun, Ho Ying-chin and T. V. Soong, were all reluctant
to accept the position since they doubted their ability to command a majority
in the legislature. The appointment of Wong Wen-hao to this position, which
was approved by a large majority of the Legislative Yuan on 24 May, was only
a compromise and has not solved Party differences.
Wong Wen-hao, an outstanding Chinese geologist, chairman of the National
Resources Commission and a follower of T. V. Soong, is considered an able and
honest administrator. Despite his association with the Political Science Group,
he has remained outside intra-party rivalries, but with no political following
of his own, he may be relied on for his loyalty to the Generalissimo rather
than for-any independence of action. His position will be difficult since he
will be subject to pressures from Chiang on one side and the Legislative Yuan
on the other.
C rre M ,liter Situation In Ghana
Widespread Communist offensives, anticipated for the month of May, have "A"
failed to develop and the Chinese military scene during the past week continued
to be permeated by a general attitude of expectancy. Military activity was
confined to the general North China area around Peiping and to the Central
China area northwest and west of Hankow and involved comparatively small
numbers of troops. In the latter area Communist units, reportedly irregulars,
captured Laohokou, Important Han River city, looting important stores of food
and materiel. One source describes recent Communist activity in west Honan
as a foraging expedition, necessitated by supply shortages in the Tapiehshan
area. According to this interpretation, the Communist timetable for the
crossing of the Yangtze River has been consequently disrupted.
As yet no broadscale fighting has broken out on the Manchurian front
where the main Communist regular troop strength is as yet uncommitted but is
moving westward to the Chinchou area. The Communists in North China have
been harrassing all railway communications leading out of Peiping, apparently
NIA".
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in preparation for the Manchurian offensive. Communist troops attacked the
western outskirts of Peiping, isolated Kalgan and Chengteh, continue to
threaten Tatung, and, following the capture of Linfen, now menace Yen Hsi?shan?s
stronghold at Taiyuan. These actions suggest that the Communists are presently
attempting to draw Fu Tsamyi into the mountains on the Hopei-Chahar=5uiyuan-
Shansi border in order to inflict as heavy losses as possible upon his troops
before bringing the battle into the coastal plains surrounding Peiping and
Tientsin. These Communist efforts will utilize only a fraction of available
Communist troops with the majority being reserved in western Liaoning for
action when the Nationalists begin to move troops to save North China.
Cog },, hg Shantune military and v 1 gm nistration is indicated by "B5
persistent rumors that the National Government is about to relieve Wang Tao-vu
of his military command (2nd Pacification area) and the governorship of
Shantung. One of the more able Government commanders, Wang has been actively
considering the establishment of an autonomous regime in the key province of
Shantung under his own leadership. Wang was reported to have been one of the
chief supporters of vice President Li Tsung-jsn. Li, incidently, has been
notably quiet since his election to the Vice-Presidency and apparently is
coming to the realization that his reforms will be difficult to implement
over the opposition of Chiang Kai-shek so long as the latter still controls
the Army, the Government finances, and the Party machine.
1Q?,i ssatisfagtion with S no=Soviet relations has found recent "C"
expression in the Ministry of Information?s publication, the Daily T .
Commenting on the newly arrived Soviet Ambassadors statement that the Sino-
Soviet Treaty was a manifestation of friendly feeling, the paper stated that
it could not agree with Soviet interpretation of the agreement; that China?s
position would be very different today if Manchuria had been handed over in
tact to the National Government; and that it would have been easy for the
Soviet Government to have honored the spirit of the Treaty by expressing its
abhorence of the armed (Communist) revolt against ;he Government of its
"friend and ally". The paper added, however, that the Ambassador?s arrival
provided the occasion "to clear up a number of misunderstandings and suspicions".
.A. new import regulation, the Central Bank Circular 131, has created "CW
consternation among China importers. This circular requires an importer to
1) deposit with the Central Bank, at the time of approval of the import
license, 50% of c.i.f. value of import, in local currency at prevailing official
open market rate of exchang, 2) deposit additional margin, as required, when-
ever the official rate is subsequently modified upward, and 3) settle final
foreign exchange, at the time of arrival of goods, at the official rate pre-
vailing at that date. The announced purpose of this circular is to reduce the
"exorbitant" profits hitherto possible to importers buying exchange at un-
realistic low official open market rates prevailing at time of .issuance of
licenses and disposing of their goods, upon arrival, at black market level
commodity prices. I majority of the import and banking concerns consider the
regulation unworkable and believe its enforcement will have serious reper-
cussions on the economy. The fact that the regulation was adopted seems to
have impressed observers and Chinese with the stringency of the National
Government?s foreign exchange position despite US commodity aid.
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ferrorima exy erted as result of formation of new Freench-snon cured
yo ve~nirient. A camas 4. of propar~a a a.ncd terror, instithted by
uo Chi ?'inh'ass Viet "inh government, is expected as a result of the
format .on of a new' 1rrench-sponsored Provisional Central f overnm int of
'Ti_etrmst under r'r+ nerai_ "' yen-van- wino ^eneral Yuan, a French citizen
end since loot, rctnbftr pre tdent of the irovisional government of
`011th l'ietr nm, on 20 ' Pi.y era "unti.ni_-nous1y chosen" to head the new
-overnment by deleantess from Tonkin, Annam, and Ccchinchina. The
'nrmat3_on of the Ynan povernment, which postpones a government under
he former t-nnamita ^ rnr, rao -jai, nevertheless has Pao Da.l's approval
'i rzrtb rmore Titan has nnnrnznced that he would sign an agreement witY
trench !h , Rcmrmi ssi. nner Pol _l alert, in fiao f a.i' s presence, on the day
rollowi p,, the mroclamntion of the rovernment on the "first lucky day of
the June moon." A French Foreign Office official stated that although
de to reeorrni_tion will. not now be granted, the Provisional rovernrient
Will have the status of an associated state in the French Ttnion? General
YPuan has pointed out that the evolution: of Vietnam will roroceed within
the legal framework of the French Constitution, reaching at sa.;r' future
date full maturity and dominion status. I'lot>.?o1thstand irg these ei orate
Mans, neither influential Vietnamese nationalists nor French officials
believe that the nee: government has much chance of survival.. The
trench, who because of domestic considerations in France are tlxnable at
the present to make any major change in -.olonial policy which will
involve the arantinp of more liberal concessions to the new prcvisional
government, realize how; nuickly met ''inh terrorism could jeopardise
the success of the Yuan regime and have redoubled their security
rsrecau'ions.
Dutch moves to bypass the Republic. An elaborate "Federal Con-- "A"
ferencelt to he attended by the heads of autonor?r,ua states and areas is
to he convened on 27 'lay at Pandoeng,in notch-held Java, by Lte governor
'eneral Van t'aok. This conference, to which the n.epublic of Indonesia
has apparently not been invited, represents a T)utch move to strengthen
its influence In the existing Provisional Federal r'overnraent. A 'Repub-
lican request to hold an "All Indonesia National Congress'' at Patavia from ?`ay
24 to 2.6 as a counterpoise to the randoerig conference has been prohibited
by the Netherlands Tndies r'-overnrnent on the grounds that all political
convictions will be adequately represented at Pandoeng? These moves
are projections of the basic difference between the Dutch and Republican
positions in regard to the Penublic' Fs status in an interim government.
The r'utch objective has been to transfer sovereignty to a United
I-tates of Tncioneaia in which the Republic would be in the mir._ority~
be Republic,which considers itself the champion of nationalise' for
all of Incionesiaa has insisted upon representation commensurate with its
i-ifluence and therefore has demanded a majority position in any federal
rovernment. The Pandoeng Conference is, further evidence that the
"entilrlic -nay be forced to enter an interim government and the United
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r,"~^fi "^T:~ (continued)
"tates of Indonesia on Netherlands terms or that it will, be try passed
entirely. If the renublic is by-passed the inevitable unrest would
enable the thatch to argue before the Iznited :rations Security Council
that such disturbances were .a civil conflict in which the Dutch vre ld
be obI.iaed to protect their Interests. The I's Delegation of the tT"?
"'ood Offices Committee takes a serious view of the Pandoen: conference
and in an effort to resolve the irc~rdnent deadlock?is prepared to offer
a comnro:is? nian which conterrmlates the establishment of a provisional
federal ro{rernment on the basis of general elections througl'out the
area without regard for the present state boundaries.
''PPTT YrrT
"ettler,:ent of law and order r ?oblem less likely in view of Tarue
letter. The eossj. I tv that the aw and Dreier nroblen in the t hilin-
nines will be settled ar'3cahly thr:atarh. surrender and the gra.nttnr of
amnesty is much less likely in vie?v of a letter which Luis Taruc,
supreme commander of the dissident Hukbalaha-, is reported to have sent
to an Associated Press corresrondent in answer to a series of questions.
Tn this letter ';aruc statec that he is still a member of the Philippine
Communist Panty, demands the ri-ht for I'uks to bear arms rerar1less.of
property or educational nualifications, and objects to various infr.intrye-
rients of T'hilipnine soverei -nty by the ''nited states,. The Ph .l.i-orir!e
"overnment's apparent answer to '"aruc's attitude has been the annointment
o?' r eneral Guillermo ^. Francisco (^hief of the Constahulari di,ring the
Jananese occupation) as technical assistant on pr.liee matters and the
annoiritment of '^eofil.o ^ison (pre-war Secretarv of the Interior and
r ecretarv of Justice in the laurel war-time nupnet CaMnet who was con-
victed of treason by the People's Court and later granted amnesty as a
result of a nrocl.ar,-ation by the late President ^oxas? as a technical
adviser to President *'uirino in charge of nrovincial and aunlcipal
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ORE 43-48
24 May 1948
AL,
II,
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