OFFICE OF REPORTS AND ESTIMATES CIA FAR EAST/PACIFIC BRANCH

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400060006-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: November 16, 2016
• Document Release Date: September 28, 1998
• Sequence Number: 6
• Publication Date: June 2, 1948
• Content Type: REPORT

Approved For Release '$'I: (NAA JM 02V090i4*DDUW%&"
FAR EAST/PACIFIC BRANCH
INT] LLIGENCE EICIHLICHTS NO. 3
;JEEP. OF 25 MAY - 31 MAY 1948
SECTION I. SUI.II.iARY OF FAR EAST TRT DS AND D17,VRLOPflENTS
The significance of the shift in the high command of the Soviet
Forces in North Korea remains uncertain since there is no indic^.tion as
to whether this change is a routine change of station or a prelude to
a shift in Soviet policy in Korea (page 3),
A new cabinet finally has been formed at Nanking with the most
significant change being, the return of General Ho Yin;-chin to the post of
Minister of Defense, However, political conditions in Nationalist China
remain unstable, as indicated in student unrest, currently manifest in
demonstrations ciritical of US policy toward Japan (page 5).
A Soviet economic offensive in Southeast Asia, to Hatch their propa-
ganda and political offensive in that area, appears to be developing in
view of reported trade proposals made by the no ly? opened Soviet legation
in Bangkok (page Z).
The announcement by the USSI: of an agreersent to establish relations
between the Kremlin and the Republic of Indonesia has jeopardized further
the achievement of a political sattlement in Indonesia and may result in
the Netherlands Government, at least temporarily, suspending ne;rotiations.
(page 7).
NOTE: In succeeding sections of this Weekly, the following marginal
notations are used:
(I) An asterisk (*) -- To indicate that all or part of an
item is based solely upon information from State's
.A "S/S distribution" series.
(2) "A", "B", or "C" -- Importance, in B/'E's opinion, of
the item, with "A" representing the most important ones.
DOCUMENT NO.
~HANGE IN CLASS. Ln
Approved For Release 2000/05/23: CIA-RDPZY-TTUWAOOO#OW60.00GMrCFD TO: 1,4Qff
NEXT REVIEW DATE:
f~IIT!1: !- __
V-v1 Vx
 Approved For Release 2000/05/23 : C
USSR attaching notable priority to trade with Southeast Asia "A"
A Soviet,eoonomic offensive in Southeast Asia to match their propa?
Banda and political offensive in that area has become increasingly apparent
since the opening in "'arch of a Soviet legation in Bangkok. A commercial
organization, the "Exporthleb", attached to the Soviet mission has already
made specific offers of industrial items (coal, coke, steel plates and
bars, cement, and chemicals) in exchange for rice, rubber, teak, agri-
cultural oils, eta, The trade proposals include quotations which in some
oases underbid the US and UK and in others are on items which are rot
available from the US and UK. The Soviets have gone so far as to Indicate
that in a short time they will be able to offer piece goods in large
quantities. iiihile the character of these proposals would indicate that
a determined economic offensive is just beginning a few commercial trans-
actions have laready been completed, including shipments of rubber from
Malaya and a recently delivered cargo of cement to the Philippines. The
Soviets apparently are quite aware that their propaganda and political
offensives, if successful, must be accompanied by some tangible economic
benefits, and are attaching a notable priority to Southeast Asia, This
may be due to part to the Soviet desire to obstruct the proposed US
program for the utilization of Japan?s economic capacities.
Approved For Release 2000/05/23: CIA-RDP7 00400060006-6
GNP-
 Approved For Release0/05/23: C
25X6A
KOREA
Lt. Gen. Korotkov, Commanding. Gener 1 of Soviet Forces in forth
an have 1been rep3.aced by Lt. Cen. ..orkulov and Gal. i uznotzov. one
significance of the move is still uncertain and there is no indication
Approved For Release 2000/05/23: CIA-RDP79- 00400QXDQ6 - !r.r
 Approved For Release 2000/05/24L00060006-6
as to whether this change is a routine change of station or that it is
a prelude to a shift in policy. Although it is possible that Gens.
Korotov and Shanin are returning to ,, oscow to receive new instructions
there are only evidences of routine Soviet troop movements and reductions
in North Rorea and no clear indicat:.i.on that the USSR is matting prepartons
for inmediate withdrawal. It is to be noted,, also that for the .'irrt?
time in many months the Soviet cor.,g,,nd has displayed unusual courtesy
in their personal dealings with US personnel in North Korea.
Approved For Release 2000/05/23 : CIA-RDP79-01090A000400060006-6
 Approved For Release 2000/05/23 : CIA-RDP79-0109OA000400060006-6
S:ECRST
ewe
C NA
;jgnqs1! fi sits opposition policy fig JAM has been gaining "A"
momentum in recent weeks, centering in Shanghai and spreading to Peiping.
A mass demonstration scheduled in the former city for 30 May was tempo-
rarily postponed, but Shanghai municipal authorities are alerted for any
demonstrations which might erupt into violence. The Chinese students, who
have actively expressed their opposition to certain National Government
policies through riots and demonstrations in recent months, now appear to
be focussing their traditional anti-foreign sentiment toward the US
Japan policy. The growing student anti-American feeling gains added
significance from the fact that most, criticism of US policy in Japan until
now has come primarily from the press, while the National Government has
outwardly,and officially supported this US policy. Though it is generally
recognized that the current anti-American move is in reality being exploited
by Communist and other dissident elements and aimed at discrediting and
embarrassing the Government, there is danger that this movement might mark
a portentious step in the development of an attitude of suspicion and
antagonism towards American policies.
,e, Cow stn opened their lon eUeeted Manchariea offensive last "B"
week when they launched an attack upon Changchun, Isolated Nationalist
garrison in central Manchuria. The attack, largely diversionary, was under-
taken at the same time that additional Communist units were moving west-
ward to the Chinehou area, where'the main attacks are still expected.
Communist successes were reported in neighboring Jehol Province where they
occupied tunghua and Pingchuan, north and east, respectively, of the be-
leaguered provincial capitol Chengteh. In Shantung, Communist units under
Chen Ti are recrossing the Yellow River and have already out the Tsinann
Pukou railroad at Taian, while Lui Po. cheng?ea forces are apparently driving
eastward across the Peiping-Rankow railroad toward a rendezvous with Chen
in northeast Ronan.
A knees cabinet Ien formed by Premier Wong Wennhso "B"
with the approval of Chiang Kai-shek. The complexion of the cabinet remains
appreciably the same with the only significant changes the appointments of
General Ho Ying-chin as Minister of National Defense and Wang Tun-wu as
Minister of Finance. General Ho, another of the Generalissimovs old
reltables, served as Minister of War 1930-1944, and Chief of Staff 1937.1946.
However, he is not generally considered an especially competent military man
by foreign observers, although he is believed to wield a powerful influence
within the Nationalist Army. He replaces Pei Chung-hei, who supported
Li Teung-jen for Vice-President against the Generalissimo?s opposition.
Wang Yunnwu'e appointment is noteworthy since, as deputy premier under Chang
Ch n, he advocated the relaxing of foreign trade and exchange controls, a
policy rejected by Premier Chang.
,,~B91Q~`
Approved For. Release 2000/05/23 : CIA-RDP79-0109OA000400060006-6
 Approved For Release U60/05/23: CIA-RDP79 0004A0
wive r
1 he SQx ft N inn issued a statement on 629 May, denying
current rumors that Roschia, now Soviet Ambassador to China, would under-
take mediation in the. Chinese civil conflict.,
New or /`rat or :xchan .I~stem : 0. 1. Y1 , newly appointed. Governor
of the Central Bark., announced on 31 May the abolition of Circular 131 which
required importers to deposit a margin of 50%; of the value of the cargo with
the Central Bank when applying for an import license. Importers registered
st.renuaus objection to this reflation. (Re FE/P Meekly 18-24 May)
.im the same time Yui announced the adoption of an exchange link system,
effective immediately, under which exporters selling exchange to appointed
banks will receive exchange surrender certificates equal to the exchange sold.
In turn importers are required to by from expbrtere or brokers exchange
surrender certificates equal to the amount of the import license, Yui said
rice, wheat, flour, cotton and fertilizer imports will be excluded. from the
new system. The link system is not new to China, howl ver, its application
at this time indicates the seriousness of the short"
,a# of the goversument9s
foreign exchange holdings. The volune of general imports, vthich are chroni-
cally In excess of exports, will droa accordingly if dependent upon foreign
exchange derived mainly .from exports.
`r,re Tr e. Chinese Customs statistics reveal that both 3~4arcn imports
(US $32.3 million) and exports (US $17.0 million) were larger than those
reported for January and February, with an unfavorable ba ance also greater.
The ?.mport 'excess for the, first quarter. of 1048 stands at aa.voi t US $20 million.
Petroleum -products, valued at LIS $5..7' million continued in March as ;principal
C.bina, import, followed by machinery av,i+. tools. Piece- goods (US $2. C mil ,:i.on)
led exports, followed by hides and skins.
F c _h. The Yangtze river is approaching the danger level; some roads.
and farm lends in the Nanking area. are under water and Hankow is threatened.
Other areas reported flooded include Hengyang and Kweilin in south central
China, and ling; and Kukong in northern Kwangtung.
E.1
Approved For Release 2000/05/23 CIA-RDP79-0109OA006400060006-6
 Approved For Releas000/05/23
i"?tf7'c FSIAA
Announcement of T!3S13-a? epublie of Indonesian relations ieo C rc l zo GCC
ne ;otiati,ons,
The Soviet announcement that representatives of the
Indonesian Republic and the IjSrm agreed at Pra:iue on 22 May to establish
consular relations has Jeopardized further the possibility of reaching
a political settlement in Indonesia. Discussion of Pepublican relations
with the !!SSR comes at a Particularly awkward time since the question of
the "epubl.icts foreirn relations is a major point upon which little or
no progress has been made. It would appear that the republic through.
characteristic lack of coordination and the lack of communications with
its representatives overseas now faces the dilemma of Miether to affront
:western nations by accepting Soviet recotTition or to alienate its on
public opinion by disavowing reeopnttion at a time when .tt believes that
.he Dutch are preparing to dispose of the Republic by force. For .he
Netherlands it represents an opportunity to suspend negotiations on the
grounds that Republic-?TS,p. relations are contrary to the Renv:sue agree-
sent. The TIN Good Offices Cornrrry_ttee and particularly the t'S delegation -
is now faced with its most serious crisis in view of the probable failure,
under circumstances easily exploited by the tr"SR, to achieve a political
agreement.
SECTION III0 DIGEST OF I1:7PORTANT STUDIES AM STIrIATLS
No contributions,
ny~ma
Approved For Release 2000/05/23 : CIA-RDP79-01090A000400060006-6