FAR EAST/PACIFIC DIVISION OFFICE OF REPORTS AND ESTIMATES CENTRAL INTELLIGENCE AGENCY WEEKLY INTELLIGENCE HIGHLIGHTS NO. 99

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000500040001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 19, 2016
• Document Release Date: July 7, 2005
• Sequence Number: 1
• Publication Date: May 9, 1950
• Content Type: PERRPT

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FAR F M7'?AL IF IC DIVISION
OFFICE OF REPORTS AND ESTIMATES
CE14TttAL INTELLIG.E i-UCE AGE;NCX
rYEEKLY INTELLIGENCE HIGHLIGHTS
'o. 9 9
DATE: MAY 9
AUT H
' OAT REVIEWER:
NEXT REVIEW DATE:
CLASS, CHANGED TO: TS
.
This document is a working paper, not an official issuance, since
it has not necessarily been coordinated with and reviewed by other
components of ORE. It represents the formulative thinking of one
group of analysts in ORE and is designed to provide the medium
for transmitting their informal views to other intelligence analysts
of the US Government who are working on similar or overlapping
problem. It is intended for the use of the addressee alone, and
not for further dissemination.
NO CHANGE IN CLASS
i-
COPY NO. Yg
1950 DOCUMENT NO
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S E C R E T
OFFICE OF REPORTS AND ESTIMATES, CIA
FAR EAST/PACIFIC DIVISION
INTELLIGENCE HIGHLIGHTS NO. 99
3 MAY to 9 MAY 1930
SECTION 1. SUM} ARY OF FAR EAST ThJ DS AND DEVELOPMENTS
Forthcoming Japanese elections for 132 seats in the Diet's Upper
House probably will see some losses on the part of YUSHIDA' a Liberal
Party, scattered gains for opposition parties.. and a slight rise, if
any, in Communist holdings (p. 2)0
The Chinese Communist tendency to play down "Sino-.Soviet Friend-
ship", which was underscored on May Day, is believed to be in defer-
ence to Chinese nationalist sensibilities (p. 3). Meanwhile, anti.-
inflationary gains on the Chinese economic acorn are expected to be
only temporary (p. 3).
The newly-announced Huu cabinet in Vietnam reflects increased
prominence for the Cochinchinese "autonomists", while the elimination
of two under-secretariats may reduce the degree of Vietnamese partici-
pation in US economic activities (p. 4)a
Although USI threats of military action against the Amboinese se-
cessionists are probably hollow, establishment of a "provisional block-
ade" of the Southern Moluccas even if only partially successful --
may result in the withdrawal of local support from Ambon's militants
(p. 5).
President Quirino has returned to Manila after a protracted stay
at Baguio, in an attempt to mend political fences: on balance, it is
believed that the general dissatisfaction with his administration will
continue to grow In strength (p. 5).
NEWS NOTES
Three Asian conferences... Hai an's iron ore...Recruiting for Man-
churian industry..."State of preparedness" in Thailand.
The marginal notations used in succeeding sections of this Weekly
(nA", ''B", or "C") indicate the importance of the items in D/FE opinion
with "A" representing the most important.
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SECTION II. DEVELOPMENTS IN SPECIFIED AREAS
JAPAN
Upper House election campaitn--Japan's political machines opened their
campaigns for the 4 June Diet Upper House elections last week, with the
start of the rigidly limited thirty-day period during which election-
eering is legal. A total of 125 Upper House seats -- half the number
which were filled in the general elections of 1947 -- are up again this
June, together with seven vacancies. Some of these will be filled by
constituencies, while others will be filled from the nation at large.
In view of the paramountcy of the Diet's Lower House, this Upper House
election will be of interest more as an indication of public confidence
in Premier YOSHIDA's majority Liberal Party and as a test of present
sentiment toward Japan's other parties than as a critical test of
strength.
With 35 of their 60 Upper House seats coming up for reelection,
YC iHIDA's Liberals are facing some internal restiveness, due to dissa-
tisfaction with YC6HIDA's one-man rule of the Party and to factionalism
between old-line politicians and one-time bureaucrats. Externally, the
Liberals will be dogged by opposition charges of responsibility for such
unpopular but Occupation-required legislation as the 1950 balanced bud-
get, the Local Tax bill, and other matters which reflect the Laodge aus-
terity line. The opposition will also attempt to connect the Liberals
with scandals now under investigation. The Liberal Party stands to
lose some seats unless the public can be persuaded that the Occupation
is to blame for these unpopular measures and that no other party could
do better under the circumstances.
The 70-seat RYOKUFUKAI, (Green Breeze Society) -? a group of con-
servative independents who work closely with the Liberals -- has 29
seats coming up for reelection. The extent of the RYOKUFUKAI's success
will depend in part on the reputation of individual candidates and the
degree to which the public can be persuaded that they are not responsi-
ble for unpopular legislation. The itYOKUFUKAI may succeed in breaking
about even.
Because of their opposition status, which permits them to capital-
ize on unpopular legislation, the People's Democrats and the Socialists
stand to gain in the election. The People's Democrats (an amalgamation
of the Democrats, People's Cooperatives and the New Political Council)
will have the wider field of support, while the success of the newly
reorganized Socialists will depend upon winning the vote of non-Commu-
nist labor,
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Only 3 of the 5 Communist Upper House seats come up for reelection.
The Communists have nonetheless nominated 45 candidates and have announ-
ced their support of 5 "party friends" as well. ohile unemployment and
current depressed economic conditions play Into Communist hands, these
factors probably will be offset by the retrogression in popularity which
the party has suffered since last summer as a result of the publicly-
revealed Japanese Communist subservience to the USSR, the charges that
Japanese Communists have delayed POW repatriation, and the factionalism
within the Party. chile it seems highly unlikely, in consequence, that
the Communists will duplicate their success of 1949, when they received
nearly 10% of the popular vote, thmp could, however, gain a few Upper
House seats.
-CHIN
Sino-Soviet friendehi ince the return of Chairman MAO Tse-tung from "B"
toscow, Chinese Communist leaders have largely avoided public discussion
of the Sino-.Soviet alliance. Even in his May Day address, for instance,
LIU Shao-ch'i, generally regarded as the most rabid Stalinist of the CCP
leaders, listed the Sino-Soviet treaty in last place among the factors
favoring China's reconstruction, and did not mention, in his list of the
Party's "present duties," the development of Sino-Soviet amity.
This apparent Chinese negligence is in striking contrast to the
practice of Eastern European satellite leaders, who declare their gra-
titude and fidelity to the USSR on every conceivable occasion. The com-
parative restraint of the Chinese, however, does not in itself indicate
that Chairman MAO and his lieutenants are altering their Stalinist ori-
entation. It is believed that the CCP is following this policy not be-
cause of disillusion among the Party leadership with the fruits of So-
viet "friendship", but out of deference to the forces of Chinese nation-
alism.
Temporary inflation check--In recent weeks, Communist propaganda has "B"
called attention to improved economic stability in China. Independent
evidence supporting these assertions includes a decline in the price of
rice in Shanghai (off slightly during March and April) and a 15% drop
in the Parity Deposit Unit (a commodity index based on the prices of
rice, coal, cotton cloth, and edible oils)
A similar reversal in price movements occurred last summer, when
rice dropped from PBU 60,000 to PBBN 36,OOicpe rhpic etdurein u~~rand
September. By November 1949, P , pC'
former levels and had risen to new highs by February 1950. It is eex-
pected that the present downward movement will similarly spend
and the inflationary trend revive once more.
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Although the Communists point with pride to their presumed success
in arresting inflation, the present levels of depression and unemploy-
ment in China have been more important factors in holding prices down
than has Communist skill in currency management. Although the Commu-
nists are continuing to cover the larger part of their deficit by resort
to the printing press, the resultant inflationary pressure has been off-
set in past months by a decline in buying power attendant to the severe
depressions An additional deflationary force in past months has been
the unco--promising Victory Bond drive, which has withdrawn some money
from circulation and has forced businessman to liquidate stocks in or-,
der to meet their assigned bond quotas.
Although the business depression and the Victory Bond drive have
been temporary deflationary forces, the increase in the amount of cur-
rency in circulation has continued to increase the inflationary poten-
tial. Following the end of the Nationalist blockade and with a return
of trade to Shanghai and other cities, this increased potential will
once more be translated into rising prices. For the remainder of 1.950,
at least, continued inflation is expected to be one of the Communists'
major economic problems.
IWOCHINA
Hauls cabinet--The new cabinet announced by Vietnamese Premier Tram Van
Huu involves no drastic personnel changes. Like his predecessor and
political rival, Nguyen Phan Long, Huu will hold the Foreign Affairs
portfolio in addition to the premiership. The Ministry of Defense, for-
merly held by a member of the Tonkin-based Dai Viet party, will go to
the Commander-in-Chief of the military forces of the quasi.religious
Cao Dai sect. The most significant weakness of the new cabinet is its
failure to include any but one of the prominent Catholics and fence-
sitters when Huu is known to have urged to participate.
Of the nine ministerial posts, six are held by Cochinchinese, a
distribution of power which suggests that Premier Huu has been influenced
by the long-standing demands of certain wealthy French and Gochinchinese
interests for a more or less autonomous Cochinchina within the State of
Vietnam. This suggestion is strengthened by Huu's abolishment of the
Ministry of the Interior on the ground that such governmental functions
can be adequately discharged by the individual governors of Tonkin,
Annam, and Cochinchina. Huu's elimination of the under-secretariats of
Agriculture and Health would appear to be unfortunate from the standpoint
of fuller Vietnamese participation in the application of anticipated US
economic aid in these fields.
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INDONESIA
Blockade of the "Republic of South Moluccas"-Following an apparent fail-
ure to end the Auboineese secessionist movement by negotiation, the USI
has ordered the enforcement of a "provisional blockade" of the rebel
"Republic of the South Moluccas". If this measure is not effective in
ending, the dispute, U3I authorities further threaten to land troops on
Ambon - the rebel administrative center and the only significant area
of the self-announced "independent" stater
The USI threat of force against Ambon is believed to be no more
than a gesture, since the 386 sq. miles of Ambon could be quite strongly
defended. Of greater though as yet undetermined significance in the
imposition of the USI's blockade. Although a complete curtailment of
Ambon's imports would work severe hardship on the inhabitants of the
island, who depend heavily on imported rice and other products, such a
rigid blockade Is probably beyond the USI's capabilities, Even a par-
tial blockade, however, may induce the local population to withdraw its
none-too-firm support of Ambon's militant eecessionieta.
PHILIPPINES
Opposition to guirino cont --?Congressional opposition to President
Quirina has continued unabated, and there is little evidence of azy
"element of strength" in the President's political position, Quirino,
who until recently has remained in the Sumner capital at Baguio, has
been forced to return to Manila in an attempt to repair the wide breach
which has developed between himself and Liberal Party leaders.
In the face of strong Congressional dissatisfaction with his ad-
ministration, Quirino has asked for approval of legislation which would
grant him broad emergency powers. These powers -u allegedly justified
by unsettled world conditions - would enable Quirino to take over indus-
trial establishments, suppress subversive activities, prohibit strikes
and lockouts, regulate prices and requisition public services when
Congress was w4 in session.
Meanwhile, Vice President Lopez continues to make speeches calling
for strong leadership in social reforms, and a Senate investigation of
a "massacre" by Constabulary forces
I
adds fuel to the fires of public discontent.
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25X1 Although Quirino
has also invited rival Nacionaliata leaders to asset with him, in order
to discuss cooperation with the administration, it in not likely that
such cooperation can be achieved without substanti.at. Liberal concessions
to Nacionalleta political, appetites,
MiS MOTES
Three Asian aonfeggpols are scheduled for the remainder of UV,, A
Commonwealth Consultative Committee will convene on 15 may at Sydney, to
discuss recommendations for economic and teahnicai assistance to South
Asia and to consider approaches to governments outside the Commonwealth
"with a view to enlisting their collaboration." On 16 May, the sixth
session of SCAFE will be held in Bangkok, A Soviet walk-out over the
question of Chinese representation has already oacurrad in a preliminary
committee meeting on 9 May, and the USSR will probably not participate
in ECAFE'o regular session. Finally, on 26 May, President Quirico will
convene his conference on a projected Asian union at Baguio,
The capture of Hainan by the-China ee Communista presents Japan's
steel industry with the loss of one of its cheapest and best sources of
iron ore. During 1949, Hainan supplied 346,000 tons of Japan's total
imported 1,518,000 toms of ore. The Japanese Government's 199D program
calls for importation of l.? million tons of ore, a quantity which is
only potentially available from other Par Eastern sources., Thus, al-
though the Chinese Communists ni:ll not be able to use Hainan ore as a
means of exerting much trade pressure, both Hainan's present stockpiles
and future production will be available to the Com uni.ats as barter for
Japanese matu>