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

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400060010-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: November 16, 2016
• Document Release Date: September 28, 1998
• Sequence Number: 10
• Publication Date: June 28, 1948
• Content Type: REPORT

ApprcjM : CIA-RDP79-01 A00
notations are used:
IETELLIGSRCS BIGBLIGH78 NO. 7
&K OF 22 JUNE ?? 28 JUNS 1948
Us efforts to "orank .un" the Japanese eoonoamy have begun with the
iussage of pertinent Congressional appropriations and the great of credits
', a IN big syndicate. These actions are primarily designed tz stim-
ulate the Javanese textile trade (page 3).
Anti-US and anti-government agitation in China my place in jeopardy
the US/China Treaty of Friendship, Commerce and Navigation. US-Sino
negotiations for a bilateral agreement on the China Aid Program are purr-
suing a tortuous oourse ' (page 4).
Conflicts appear to be developing between US economic interests in Siam
and the US sponsored recovery program for Japan (page 4).
25X6A
The United Nations Temporary Commission an Korea (UNTCOK) may refer the
question of formal recognition of the now Korean National Assembly to the
September meeting of the UN General Assembly. The US and China are attempt-
ing to secure early recognition of the regime by UNTCOK since such action
:auld serve to enhance the prestige of the now government (page 5)e
1%iile it appears that the fighting in the China civil oonfliot me not
on the grand scale reported by Nationalist spolmsamen and the press? the most
severe nationwide economic crisis yet to appear was not off by the announced
10 j a succeeds one this Week y-, the a owing
(1)
OFFICE OF REPORTS AND ESTIMATES, CIA
FAR EASTPACIFIC BRANCH
Double asterisk (**) - placed at beginning and end of
information based solely on "S/S distribution" series.,
(2) Single asterisk (*) to flag item oontnining "S/s_diatr-
bution" series.
`-'hi-U
Z Ch 2 _
w`SUx,
"A",'"B", or "C" -importance, in B/`E's opinion. of the
items, with "A" representing the most important ones`
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SUMURY (continued)
fall of leifeng. Discouraging mil taay, political and economic nom added
impatus to chaotic conditions an all com dity and exchange markets (page 6).
Although the Dutch reactions to the proposals of the US-Australian
Delegations are generally unfavorable the presentation of the proposals at
t is,t3me, as well as the postponement of US loans to the Netherlands Gov rn-
mentz appears to have forestalled the resumption of widespread armed clashes
between Dutch and Republican forces (page 8)0
Showdown on Burma's leftist amity program expected 1 July meeting (page 8).
9-0,7 TO - FS F
/ l
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C a K", "
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11. V?VEi MTS IN SPECIFIFU ARF,,A8
id
'h i1It-Aft z' "AMM ee
SO" steps Lace . been tam by- the 116 or US tutmoto is do naft of *AN
A W to ad to the rePnbilita um or the Jap*now "Ma)-'t (I) o tab
a by We t Caw"ss of & re. Xving fund of X60,000,%0 a vaai'ireab%& to the
izq La art" at tM Army for, fika psrohavo of r*12Wal Man In 1w 1 ftr pace +es..
o onasplod areas, (2) ibw appropriation by tbo U ' of a'
.COO,000 fued for Mover aatent. and relief in oe td am* (tt +gi;)* port
of *&Lob reaty be applied by the Secretary of the An W to eocamio r9habilitatjan
to Japan. Sores, and the RyakVuss and (3) the final aeaceoution of an an agreement
to provide Jsap. with $60,000 000 at credit against t1 Ooo .d Japan gzpart,,,
:wort Revolting Fund. (OJSIRF).
The $350,000,000 revolving fund legislation (not to be eoni''rsed with
OJIM) empowers the Secretary of tilt Array to issue nota.s for i*irc. irass by the
Socretary of the SowetuT of the Treasury* The proeoeds of those aolaoe are to be used by the
Y to purahan natural fibers (i.e. ootboaa, Drool, flax,
ueh ir) Coar processing in the occupied areas (chietlr Je~paa,). epees Mlle of
thr proassawd goods either in the dos.stio market of the oacupied areas or for
export, a sum equal to the amotnrt withdrawn fro a the r~evulvtng fund plus Later.,
eat wnuld be returned to the -fund in 136 dollars.
The GMIOA aRnoprtatiou pexntts the 3eoretarrot the Aray to ietermtns
bow reach soonoaaio rehabilitation aid should be afforded japans, flora, and and the
. . initial'request of Congress by the hem of that Army for
e aid 'g $180,0001000, brit it is estimated that probably no mare than -
1C0,0000000O it that muob, will be asailable, about 70 percent for Japan and
80 pereout for Uorea. However this asrount will be suppleewnial to the aob *1
relined' funde for Jeapan whioh will probably amount to about $4OO,0O0,O(4 a no
si tar to that spent for relief in Japeen In the Isst fiercej yeraatr.
On 6 June, SOAP approved the formal agreement for a $80,000,000 credit by
00 beaktng interests to finaenoe shipeasat s of Us ootton to Japan. The credit
w111 be made against the fund oonsis of preo,ous matala 1st up last August
to fiaanea purchase of cotton in Japan es Flt Weekly 20-26 April 1948).
These actions have been taken to furnish Japan with sufficient working
eapttal to Oorank-up" its eooeiaeV sinter Japan has no otter means at present
to thanes the pureh ase of the requisite roar materials.
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GE (continued)
t -Chiaa treaties a n d e v e n t s
Thu US/'China Treaty'of Friendship, Coerce and Navigation signed at "C"
Ranking November 4, 1946, vzo approved for ratification June 2,194e by the US
Senate* The approval included a reservation regarding copyrights, and the
Naaking Embassy has been asked to ascertain if the Chinese Govern ant is
prepared to exchange ratifications of the Treaty, including the Boas
reservation. The US desires that this act be aooomplished by tho Chinese
Government Executive Branch rather than through the Legislative Y`aan. There
is a fear that, in view of t1 present anti-American and anti-goverrn.ant
agitation in Chirac, the whole Treaty may be placed in jeopardy, if referred
to the newly elected and independent minded Legislative Yuan.
The Sino--t$ negotiations for a bilateral agreement on the China Aid
Program, scheduled to be nigned on Juay 3, are pursuing a tortuous course,
with the DS trying to nail don the Chinese Government to specific controls
and underteldngs, and the Chinese Government'seeking to avoid ouch definite
25X6A ooam .trxenta as "undesirable and unnooessary."
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A decision concern' the formal recognition of the Koran "National
Asss.12xff an he avexxanent to err - May to
General Assejub3y GA ry he po ar'Y scion on. Korea OK)-
El Salvador and the Pnilippincz in .favor of granting official recognition
while Australia., Canada and India are opposed. The French representative,
who had apparently favored a -lippi.na proposed resolution granting for-
zal recognition, is now reported to have given indications that he will
abstain if the resolution is put to a vote* The Chinese goverment is
endeavouring to persuade the Indian government to chen?e its position
virile the US is making representations to the French Foreign Office. How-
ever, the Indian goverment has indicated that it prefers to wait for an
U;NGr1 decision, and if Syria should again participate in UT32TCOK activities,
its attitude would probably be unfavorable to recognition. Hence it is
possible that UNTCOK will be deadlocked on the question even if the 1;--e
delegate should support the resolution. If WITCOK continues to refuse to
grant more than tacit de facto recognition, the prestige of the Korean
Assembly and. the stabi"I ty 'Ute .s ture Korean Goverment will be fired.:
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Std
'?That *+6htin2 to the mess civil conflict was. not _ea the scale 50
In Nationalist pre esss ar their militarr e ckeeman -
attested to by a series of aerial flights over Chaagahna, Tmryans, and
Eaifeng which were made by both mbessy officials and civilian tra-ellere.
At the very time that the press was filled with reports of bitter fighting,
heavy casualties, extensive artillery barrages, and cities envolopsd in
flame, these eye witness accounts failed to reveal any fighting on the
reported sole and led one major news agency to make the not completely
granted observation that both sides fight harder on paper tan any-
where else. 'this may be at least partially the result of incorrect and
incomplete information received by supreme Nationalist hoed rters in
Wanking. Yield commanders evidently report all contacts with the enemy,
however minor, as major battles. Yurthermorq indications are that supreme
command orders receive only that degree of compliance which Nationalist
field commanders care to give them. The Comarunists, however, continue
to maintain their military ascendancy despite certain difficulties besetting
their continued expansion.
The most severe natjonrwide economic crisis vet to aymear was set off "As
by the announced fall of Kaifeng to the Communists. Discouraging military,
political and economic news added impetus to chaotic conditions prevailing
on all commodity and exchnngp markets. Shanghai went an a buying spree
last Saturday (26 Jute) as the Chinese dollar depreciated 100f2 in 48 hours
to CS $5,000,000 plus for US $1 on the blacknarket. Rice prices reacted
slower, but reached a reported new high of CIS $18,000,000 a picul on
Saturday- (26th). No single cause appears completely responsible for this
new decline. The following are cited as contributing factors: (1) growing
spread of Communist military strength in Central Chins, (2) dumping un-
limited printing press money in leading Commercial centers, (3) ineptitude
in all phases of the administration, (4) increasing inability of the
government to administer effective economic controls, and (5) rumors that
Chiang Kai-shek had been taken into custody at Sian.
The Shanrhsi Market.
08 $ 3aochane