PROBABLE DEVELOPMENTS IN TAIWAN THROUGH MID-1956

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A004400010001-3
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 27, 2016
• Document Release Date: January 4, 2013
• Sequence Number: 1
• Publication Date: September 14, 1954
• Content Type: NIE

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14 September 1954
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 43-54
PROBABLE DEVELOPMENTS IN TAIWAN
THROUGH MID -1956
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
INTELLIGENCE ADVISORY COMMITTEE
on 14 September 1954. Concurring were the Special Assistant,
Intelligence, Department of State; the Assistant Chief of Staff,
G-2, Department of the Army; the Director of Naval Intelli-
gence; the Director of Intelligence, USAF; the Deputy Director
for Intelligence, The Joint Staff. The Atomic Energy Com-
mission Representative to the IAC, and the Assistant to the
Director, Federal Bureau of Investigation, abstained, the
subject being outside of their jurisdiction.DOCUV.P.NT NO
NO CHAN2E: IN CLASS.
41111KDECLASSIFIEO
CLASS. CHANGED TO: TS S C
NEXT REVIEW DATE:
AUTH: HF3
DATE: ,5" //cV/i? ( REVIEWEI?P 47;1'
COI'Y NO 1
ASSISTANT DIRECTOR ONE
WNW
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CENTRAL INTELLIGENCE AGENCY
DISSEMINATION NOTICE
1. This estimate was disseminated by the Central Intelligence Agency. This copy
is for the information and use of the recipient indicated on the front cover and of per-
sons under his jurisdiction on a need to know basis. Additional essential dissemination
may be authorized by the following officials within their respective departments:
a. Special Assistant to the Secretary for Intelligence, for the Department of
State
b. Assistant Chief. of Staff, G-2, for the Department of the Army
c. Director of Naval Intelligence, for the Department of the Navy
d. Director of Intelligence, USAF, for the Department of the Air Force
e. Deputy Director for Intelligence, Joint Staff, for the Joint Staff
f. Director of Intelligence, AEC, for the Atomic Energy Commission
g. Assistant to the Director, FBI, for the Federal Bureau of Investigation
h. Assistant Director for Collection and Dissemination, CIA, for any other De-
partment or Agency
2. This copy may be retained, or destroyed by burning in accordance with appli-
cable security regulations, or returned to the Central Intelligence Agency by arrange-
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3. When an estimate is disseminated overseas, the overseas recipients may retain
it for a period not in excess of one year. At the end of this period, the estimate should
either be destroyed, returned to the forwarding agency, or permission should be re-
quested of the forwarding agency to retain it in accordance with IAC-D-69/2, 22
June 1953.
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
DISTRIBUTION:
White House
National Security Council
Department of State
Department of Defense
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Atomic Energy Commission
Federal Bureau of Investigation
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tIMININICF
PROBABLE DEVELOPMENTS IN TAIWAN THROUGH MID-1956
THE PROBLEM
To estimate probable developments with respect to the strength, stability, effec-
tiveness, and policies of the National Government of the Republic of China through
mid-1956.
ASSUMPTION
That US policy with respect to the National Government of the Republic of China
and the scope and nature of US aid programs remain substantially unchanged dur-
ing the period of this estimate.
CONCLUSIONS
1. The future fortunes of the Chinese Na-
tional Government will be determined to
a very large extent by US policy, and will
depend increasingly upon the scale and
character of US aid and support.
2. Should US aid continue at approxi-
mately present levels, the prospects of the
National Government for maintaining
domestic stability between now and mid-
1956 appear good. Communist influence
and subversion will probably continue to
be vigorously suppressed, although spo-
radic cases of Communist infiltration and
of defections may occur, particularly as
time passes and there is growing disillu-
sionment over prospects of a return to
the mainland. Nationalist leadership will
probably not succeed in creating any new
and dynamic political program.
?
3. Although there will be some improve-
ments, the fundamental economic weak-
nesses of Taiwan will probably become
more acute by mid-1956. Because of a
rising population and a leveling off of
current expansion of industrial and agri-
cultural production, Nationalist China by
mid-1956 will probably be more dependent
than at present upon US economic aid for
its continued existence.
4. A return to the mainland will continue
to be the central objective of the National
Government and the focus of its foreign
and domestic policies. The National
Government will continue to believe that
US support for such a return will not be
likely unless and until other circum-
stances impel the US to engage Commu-
nist China or the Communist bloc in a
major war. Nationalist leadership will
almost certainly not become reconciled to
an insular future, nor will it concentrate
principally on the development of Tai-
wan.
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5. The National Government will con-
tinue to seek long-range US commit-
ments. It probably will be generally re-
sponsive to US advice on economic and
administrative matters, but will continue
to ignore or circumvent certain types of
military changes suggested by the US.
6. The Chinese Nationalist armed forces
remain an important source of non-Com-
munist military strength in the Far East.
During the period of this estimate their
combat capabilities will appreciably im-
prove. However, they will remain greatly
outweighed by those of Soviet-aided Com-
munist China. Outside logistic, air, and
naval support will continue to be required
to defend Taiwan or the Pescadores
against full-scale Communist invasion.
7. Nationalist China's international posi-
tion will continue gradually to deterio-
rate. A few foreign states will probably
recognize the Chinese Communist regime
during the period of this estimate, and
Nationalist China's right to membership
in international bodies, including the UN,
will come under increasingly serious
challenge. In the face of a deteriorating
international position and unimproved
prospects for return to the mainland, the
National Government's task of maintain-
ing its own morale and that of its armed
forces and the former mainlanders on
Taiwan will become increasingly difficult.
8. Heavy Communist pressure against
Taiwan, including threats and military
demonstrations, will almost certainly oc-
cur, as a means of dividing the US and
other non-Communist states, furnishing
the Peiping regime with a means of at-
tracting additional domestic support,
and, primarily, testing US intentions
and discouraging long-range US commit-
ments to the National Government. We
believe that the Chinese Communists will
not invade Taiwan or the Pescadores in
force, because they probably believe that
such actions would lead to war with the
US, and that over the long run they can
further their objectives with respect to
the Chinese Nationalists by means not in-
volving war. However, if the Chinese
Communists should come to believe in the
course of their tests of US intentions or
otherwise that the US would not in fact
defend Taiwan and the Pescadores, they
would probably attempt to take over Tai-
wan by force.
9. Twelve million overseas Chinese are
one of the few sources from which the
Chinese Nationalists might draw addi-
tional support. However, little signifi-
cantly increased support from among the
overseas Chinese will be forthcoming dur-
ing the period of this estimate, largely
because of the probable relative power of
Communist China and Nationalist China
during this period.
10. If, beyond the period of this estimate,
the adverse trends described above are
not reversed, the strength and interna-
tional position of the Republic of China
will probably deteriorate, even assuming
a continuation of US support at approxi-
mately present levels.
4142611017r
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=CM,
DISCUSSION
I. PRESENT SITUATION
11. In many respects, the National Govern-
ment of the Republic of China is an anomaly.
It continues to exist only because of US sup-
port. Its present degree of political stability,
economic well-being, and international stat-
ure is chiefly due not to its own strength and
effort, but to the fact that the US defends it,
provides it with economic support, and sus-
tains it in the world's councils.
12. The National Government continues to be
acknowledged by a majority of the states of
the world as the legal government of China,
yet it controls only a few islands and its in-
ternational position is being eroded by the
growing power of Communist China. Na-
tionalist China is an armed camp, maintain-
ing a disproportionately large military estab-
lishment and focusing its resources and its
purpose on an invasion of the continent.
Yet its economy is incapable of supporting
this military establishment, and its armed
forces are not capable by themselves of under-
taking the desired invasion or even success-
fully defending the territories they now hold.
There is no immediately visible prospect that
its hope for an early return to the mainland
will materialize; meanwhile its armed forces
grow older day by day. It is supported by
the US, yet the US has not to date under-
written its long-range aspirations. It is
staunchly anti-Communist, yet it is an im-
portant source of dissension in the non-Com-
munist world.
13. The National Government is superimposed
upon a native Taiwanese population from
which its interests often diverge, and which
outnumbers the mainlanders eight million to
two million. The National Government
claims to speak for the Chinese people every-
where, yet its leadership and political pro-
grams have not attracted significant support
from among mainland or overseas Chinese,
and the Taiwanese, themselves of Chinese de-
scent, have no effective voice in the determi-
nation of national policies.
14. Within the context of these considerations
and due in large measure to US aid and ad-
vice, certain improvements on Taiwan have
been achieved. Taiwan's economy, though
weak, is in better condition than at any time
since 1949. Improvements have been made
in political stability, administrative efficiency,
and Chinese-Taiwanese relations. Nationalist
China is making generally effective use of US
military aid, and steady improvement is being
made in the capabilities of its armed forces.
Most importantly, Nationalist China's con-
tinued existence constitutes , a constant mili-
tary threat to Communist China, and contests
the Peiping regime's claims to legitimacy.
Nationalist China's Objectives and
Strategy
15. Nationalist China's primary objective is to
return to the mainland and recover power
from the Chinese Communist regime. Na-
tionalist leaders feel that to renounce this ob-
jective would be to accept as final and ab-
solute the destruction of Chinese society and
culture by alien and barbarian forces. This
objective underlies all of Nationalist China's
policy considerations and behavior, General-
issimo Chiang Kai-shek is himself dedicated
to this aim, and it is held in greater or lesser
measure by all members of the National Gov-
ernment. However, though continuing to call
for an early invasion, Chiang and his govern-
ment probably consider that US support for
a return to the mainland is not likely unless
and until other circumstances impel the US
to engage Communist China or the Commu-
nist bloc in a major war.
16. Until such time as an invasion of the
mainland can be realized, the principal inter-
im objectives governing the domestic and for-
eign policies of Nationalist China appear
to be: to preserve its existence and its identity
as the legal government of China; to develop a
Chinese state on Taiwan which will become an
increasingly strong and attractive anti-Com-
munist base; to stimulate and participate in
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collective defense pact arrangements in Asia,
and to obtain a long-term and binding com-
mitment of US support.
17. Chiang and the Chinese Government have
long held that the mainland was lost largely
because US support was withdrawn from
them. They have been dissatisfied with what
they believe to be a too restricted mission for
the US/MAAG on Taiwan, and too limited US
commitments to Taiwan. Over the last year
these dissatisfactions on the part of the Chi-
nese Government, as it has witnessed Asian
developments, have almost certainly created
a sense of uncertainty as to ultimate US in-
tentions with respect to Taiwan. In the Chi-
nese view, the US should give more concrete
evidence of long-term support for China than
it has done thus far, i.e., it should conclude
a mutual defense pact.
18. To this end, the National Government is
currently endeavoring to be included in
regional security system in the Far East. It
strongly fears that any system excluding Na-
tionalist China would compete with Taiwan
for US military aid.
19. The 12 million overseas Chinese are one
of the few sources from which the Chinese
Nationalists might draw additional support.
However, Nationalist China's efforts to gain
increased support from among them have thus
far met with only indifferent results. Con-
siderable revulsion against Communist China
has occurred among the overseas Chinese in
recent years, but this increased anti-Commu-
nist sentiment has not to date resulted in any
equivalent or even substantial growth in sup-
port for the Nationalist cause. Many over-
seas Chinese are disillusioned with Commu-
nist China, yet they continue to view the
National Government as defeated and dis-
credited, as not offering any significantly new
and attractive political program, and as very
unlikely to re-establish itself on the continent.
The overseas Chinese are watching the for-
tunes of Taipei and Peiping, and for the most
part have not as yet overtly committed them-
selves to either camp.
20. Chinese Nationalist prospects for gaining
support in the international field have been
4
adversely affected by world trends and events
of the past year. In particular, the growth
in Chinese Communist power and prestige and
the growing sentiment in Asia and Europe for
dealing with the Peiping regime have served
still further to isolate the National Govern-
ment.
Internal Situation
21. The Nationalist leaders continue to focus
their energies upon a return to the mainland,
and accordingly consider that their military
and political policies should be designed not
to achieve the greatest immediate efficiency or
to attract wide popular support, but to pre-
pare for eventual extension of Nationalist con-
trol to all China. They also realize that Na-
tionalist China's own capabilities are too
modest to accomplish a return to the main-
land and that US support and participation
will be necessary, but they are uncertain as to
whether the US intends ultimately to under-
write such an undertaking, and in addition
are uncertain as to what role the US desires
Nationalist China to play in Asia in the mean-
time. As a result, Taipei appears to be meet-
ing its many problems by such compromises
and interim policies as it considers best de-
signed to satisfy present requirements, with-
out sacrificing future possibilities.
,22. Political Situation. The Chinese national
constitution, adopted in 1946, provides for a
representative republican government. In
theory, the highest government body is the
popularly elected, 3,000-member National As-
sembly. This body does not legislate but
meets at least once every six years to elect
the President and Vice President. It also has
the power to amend the constitution. In
practice, the National Assembly has served
as a rubberstamp for the Nationalist Party
leadership. Normal functions of government
are vested by the constitution in the five
councils or Yuan (Legislative, Executive, Ju-
dicial, Control, and Examination) which com-
prise the Central Government.
23. However, Nationalist China is in essence
a one-party state; authority is centralized in
the hands of a few, and ultimate political
power resides in the hands of the leader of
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the Kuomintang Party and head of the gov-
ernment, Chiang Kai-shek. He continues to
dominate Nationalist China through his legal
authority, his prestige, and the personal loy-
alty of key personages in the government.
24. The Generalissimo dominates the political
scene not so much through direct fiat as
through indirection and the skillful balancing
of personalities and cliques within the gov-
ernment. His traditional and skillful prac-
tice of divide-and-rule is probably responsi-
ble in large measure for Taiwan's present
degree of political stability. At the same time
Chiang's methods are largely responsible for
such continuing Nationalist shortcomings as
the retention of incompetents in high posi-
tions, a general failure to delegate authority
to subordinate political and military officials,
and factionalism within the ruling circles.
25. The struggle among traditional mainland
factions for political influence has persisted,
but political rivalry centers at present chiefly
around Vice President Ch'en Ch'eng and the
Generalissimo's Moscow-educated elder son,
Chiang Ching-kuo. The power of these two
figures is believed to be approximately equal
at the present time. Chiang Kai-shek has
thus far appeared to keep the influence of
his son and of Ch'en in balance.
26. Antipathy is not strong at present between
the native Taiwanese and the Chinese main-
landers on Taiwan. Earlier native bitterness
has abated, owing in part to the improvement
of Nationalist administration, some increase
In Taiwanese participation in local govern-
ment, and a general lack of sympathy among
the native islanders for Communist China.
However, Taiwanese resentments remain. In
short, the native islanders tolerate the Na-
tional Government and wish it every success
in its efforts to return to the mainland.
27. Within the foregoing limitations, the
National Government has made administra-
tive and political advances on Taiwan. Com-
munist activity and influence have been re-
duced to negligible proportions. With US
assistance and advice, there has been some
degree of progress in expanding public serv-
ices, improving educational opportunities,
simplifying government structure, expanding
local self-government, and lessening corrup-
tion. Police actions have grown less arbi-
trary, and court procedures have slowly im-
proved. The Kuomintang Party has cleansed
itself of many unreliable elements, has broad-
ened its popular base, and has become more
responsive to public opinion. Some freedom
of expression is permitted, provided it is cir-
cumspect in its treatment of fundamental
policies and key officials.
28. Economic. Situation. Owing to wartime
and postwar dislocations, Taiwan no longer
has a viable economy. Between 1895 and
1940 the Japanese integrated the Taiwanese
economy with that of Japan and raised the
productivity of the island in selected economic
sectors to a high level through large-scale in-
vestment programs. This process of eco-
nomic expansion was interrupted between
1940 and 1945 as a result of wartime destruc-
tion and military priorities. Since 1945, eco-
nomic development of the island has been
largely neglected because of the National Gov-
ernment's preoccupation with political and
military affairs. At the same time, the pop-
ulation, which had doubled between 1895 and
1940, increased by 75 percent between 1940
and 1954, partly because of a high annual
natural increase, and partly because of an
influx of two million mainland Chinese.
With little rise in total output during this
latter period, per capita output has declined
sharply, and resistance by the Taiwanese pop-
ulation to reductions in the standard of living
has greatly limited the margin of total output
which can be mobilized for nonconsumption
purposes. Gross investment has been little
more than adequate for replacement capital
and clearly insufficient to arrest the long-
term decline in productivity.
29. Taiwan's economy is basically agrarian,
with nearly 60 percent of the population en-
gaged in agriculture, while only about five
percent are engaged in industry. About two
million acres are under cultivation of which
62 percent is irrigated, and the farm land is
close to its cultivable and irrigable limits.
The prospects for agricultural expansion are
therefore limited and lie primarily in the de-
velopment of more intensive techniques of
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cultivation. Undeveloped resources outside
of agriculture are also limited. The sparsely
inhabited, mountainous interior contains
some potential timber and grazing resources,
and the waters around Taiwan contain excel-
lent untapped fishing resources. Known mln-
eral resources are meager, although coal pro-
duction meets the island's current needs and
could be expanded to support a growth in
industry. Water power potential is consid-
erable, and Formosa could greatly expand its
hydroelectric facilities. The development of
any of these resources, however, would require
heavy initial investments.
30. The National Government has not seri-
ously attacked its long-term economic prob-
lems, partly because of its preoccupation with
immediate problems and partly because of its
unwillingness to accept the prospect of a long
exile on Taiwan. There has been no real at-
tempt to institute a program of economic
expansion whether by state or private in-
terest. Government enterprises, which ac-
count for two-thirds of all activity in industry,
mining, and transport, have in many in-
stances operated at a loss, even though subsi-
dized by the government, because these enter-
prises have padded their payrolls to provide
employment for mainland refugees. More-
over, they have not developed uniform and
reliable accounting techniques which would
establish standards of efficiency and produc-
tivity. The government itself has failed to
maintain reliable and comprehensive com-
pilations of resource data on which to base
a sound program of economic expansion.
Domestic private investors have received no
real encouragement, while foreign private in-
vestment has been limited by legal provisions,
which discriminate against and severely re-
strict the activities of foreign firms. More-
over, in its efforts to control inflationary pres-
sures the government has followed financial
policies which have tended to decrease pro-
duction. Export industries have been ham-
pered by the government's maintenance of an
artificially high exchange rate. The prices of
farm products have also been held at an arti-
ficially low level in order to limit the rise in
6
the urban cost of living and to hold down raw
material costs. These policies have discour-
aged investment in agriculture and have re-
duced farm marketing. Increased farm con-
sumption of rice is mainly responsible for the
current low level of export surpluses despite
record crops.'
31. In spite of these shortcomings, the eco-
nomic situation, with US assistance,2 has sub-
stantially improved, as compared with the
chaos of 1949. Between 1949 and 1953 indus-
trial output increased from 74 percent to 140
percent of the 1941 level, while agricultural
output rose from less than 80 percent to 93
percent of the 1935-1939 level. Effective
budgetary controls have halted the growth in
government expenditures and permitted a re-
duction of budgetary deficits, even though
government receipts exclusive of US aid did
not rise in real terms between 1950 and 1953.
With the diversion of the increased output to
consumption and the reduction of budgetary
deficits, inflationary pressures have been
eased. Recent Nationalist foreign investment
legislation, and pending legislation reducing
business income taxes may increase produc-
tion and stimulate foreign and domestic capi-
tal investment in industrial undertakings on
Taiwan.
2 Exports
1938
1950
1951
1952
1953
(f.o.b.) Million
US$
130
93
93
120
130
Sugar
54
74
50
70
90
Rice
IP
36
3
15
23
11
Tea
3
3
7
6
'7
Imports
(c.i.f.)
If
//
104
132
151
222
199
US-
financed
nonmili-
tary aid
goods ?
Pf
I/
19
61
92
83
Trade
balance
"
26
?39
?58
?102
?69
Foreign exchange earnings, January-May 1954,
were five percent below earnings in the corre-
sponding period of 1953.
2Deliveries of US aid goods, exclusive of military
supplies, in 1953 totalled US $83 million, amount-
ing to 38 percent of Taiwan's receipts of goods
and services from abroad, and, if converted at the
average black market foreign exchange rate,
equalling 62 percent of the net revenues of all
levels of government.
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Military Situation
32. Army. The present total strength of the
Nationalist ground forces is 422,000, organ-
ized as follows:
Ministry of National Defense
(H. Q. Staff)
Combined Service Force (a separate
service for logistical support)
Combat Forces
eight corps (24 infantry divs.)
armored units (2 armored divs.)
fortress commands
officer combat regiments
in training
Defense Command H. Q.
GHQ troops
280,000
23,000
4,000
15,000
15,000
4,000
4,000
32,000
45,000
345,000
TOTAL 422,000
However, about 17 percent of the above com-
bat forces are unfit for duty, thus leaving
about 285,000 effective combat troops.
33. The army's effectiveness is impaired by a
failure of the highest command echelons to
delegate authority and by a political officer
system which interferes with command func-
tions but has not resulted in infusing a great
amount of political zeal in the army. The
MAAG is attempting to overcome these prob-
lems through a gradual reorganization of
army forces, instruction in US military staff
methods, and new agreements designed to
modify the functions and operation of the
political officers. The MAAG's task in this
respect is difficult, however, for these proposed
changes impinge upon certain of President
Chiang's most strongly held desires: to main-
tain a tight grip on the army command, not
to delegate authority, and to maintain a
political officer system outside of the normal
chain of command charged with the duties
of political indoctrination, surveillance, and
enforcing loyalty to himself.
34. The army is also hampered by an ineffec-
tive logistical organization which at present
would be unable to provide continuing sup-
port to the fighting units if there were an
invasion of Taiwan. The reorganization now
in process includes measures designed to take
control of supplies in the field away from the
Combined Service Forces, long the most inept
branch of the military establishment, and give
it to the army commanders. MAAG is also
attempting to overcome another major prob-
lem, that of static and unsound Nationalist
concepts for the defense of Taiwan.
35. An increasingly important problem facing
the Nationalist Army is that of manpower.
There is a continuing personnel shortage in
combat units, even though almost 35,000 Chi-
nese troops from Korea, Indochina, and
Burma have been integrated into the army
in the past year. Because the Nationalists
have created an army force base larger than
they can maintain under their present man-
power system, most combat units are greatly
understrength. The army is essentially
static, with little influx of young men, and
little or no present provision for enlistments
or conscription.
36. The principal reservoir of manpower is the
native Taiwanese population. Twelve to four-
teen thousand Taiwanese were drafted in 1951
and served for two years, but no further incre-
ments were conscripted. Instead, a short-
term reserve training program was instituted.
To date, some 70,000 young men, about 85
percent of whom are Taiwanese, have been
given this four months' training. The Tai-
wanese youths have demonstrated a willing-
ness to serve and an aptitude for certain tech-
nical duties. However, their training has
been largely superficial, and very few have
been absorbed into the regular forces or de-
veloped as NCO's. The National Govern-
ment's reluctance to make fuller military use
of Taiwanese manpower is probably due to a
number of factors: a certain distrust of the
native populations; unwillingness to attempt
to finance more than the total manpower
presently carried on the military establish-
ment rolls; reluctance, for political and mili-
tary reasons, to retire overage, disabled or
ineffective personnel and thus make room for
Taiwanese youth; and uncertainty as to the
NatiOnalist military and political future.
Thus, while the National Government con-
tinues its present manpower policies, the at-
trition of age goes on unchecked.
37. Despite the foregoing limitations, prog-
ress is being achieved in raising the level of
combat efficiency of the Nationalist Army.
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Leadership at the lower levels is improving
steadily. Units up to and including regi-
mental size are well organized and generally
well trained. All infantry units have com-
pleted exercises at regimental level; some have
received training at division level; and a few
have had amphibious, mountain, or other
specialized training. The troops are well-
equipped with small arms (excepting car-
bines) and crew-served weapons, and are
capable of using them effectively. Troop
morale is considered satisfactory. Based on
status of personnel, equipment, training, and
quality of leadership, MAAG rates infantry
units at approximately 50 percent combat
effective.
38. Navy. The personnel strength of the Na-
tionalist naval establishment totals about
42,920:
Navy
officers 7,325
1,900
enlisted men 20,600
12,000
of whom
are afloat
of whom
are afloat
27,925
Marine Corps (organized in two brigades
and a security regiment) 14,995
officers 1,895
enlisted men 13,100
TOTAL 42,920
The navy includes three destroyers (two ex-
US, one ex-Japanese) , six destroyer escorts,
and 38 other patrol-type vessels, nine mine
vessels, 35 amphibious vessels, and 18 auxil-
iaries ? all of which are active. There is no
naval air arm, nor is there any indication that
one will be created in the near future.
39. The navy's operating forces do not carry
out their assignments effectively, shipboard
maintenance is neglected, and the Nationalist
naval planners continue to ignore the im-
portance of practical training, particularly un-
derway training. With the exception of the
destroyer types, the navy's general state of
training is fair to poor by USN standards.
Most importantly, the Nationalist Navy's ef-
fectiveness has been impaired by poor leader-
ship. Nationalist personnel policies with re-
spect to the navy have resulted in the promo-
tion of incompetents and the frequent
by-passing of the chain of command. As a
result, the lack of responsibility and authority
hamstrings the navy at all levels, and morale
is only fair.
40. Nevertheless, improvements in the navy's
efficiency have been made. The navy is pres-
ently superior in number, and in quality and
type of ships, to the Chinese Communist Navy.
It also has certain capabilities .such as ocean
patrol and surface interception, not possessed
by the Chinese Communist Navy.3 It has dis-
played a somewhat increased combat aggres-
siveness in recent small encounters with the
Chinese Communists. The development and
training of the Marine Corps has progressed
satisfactorily, and some units are now suitable
for use as assault troops. The recent appoint-
ment of a new, capable naval chief may signal
a Nationalist determination to remedy some
of the main defects of the naval establishment.
41. Air Force. The personnel strength of the
Nationalist Air Force is 69,000 officers and
men, including 11,580 personnel of the AAA
Command which is manned by army troops,
though assigned to and under the operational
control of the air force. The air force has
825 aircraft, approximately 385 of which are
combat types; of these types, 92 are jet air-
craft (84 F-84G's, and 8 T-33's) .
42. The equipment, morale, and leadership of
the Nationalist Air Force are probably all su-
perior to those of the Nationalist Army or
Navy, and it suffers from fewer of the problems
that beset its sister services. The F-84
equipped fighter-bomber group is still in a
training status but does have some combat
value. The remaining groups, equipped with
piston engine aircraft, are on the average ap-
proximately 45 percent combat effective.
43. Although the Nationalist Air Force is the
strongest air force of any non-Communist East
Asian 'country, it is far weaker than the Chi-
SECRET
The possible recent acquisition by the Chinese
Communist Navy of two-three Soviet long-range
submarines, now at Tsingtao, would introduce a
new problem for the Nationalist Navy, whose
ASW capability is estimated to be poor to fair.
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SECRET
nese Communist Air Force. Except for one
group recently equipped with jet fighter-
bombers, Nationalist aircraft are largely ob-
solescent. Inadequate or obsolescent equip-
ment is also responsible, in part, for poor com-
munications, inadequate early-warning capa-
bilities, and for .low proficiency in night and
instrument flying.
44. Guerrilla Forces. There are several thou-
sand Nationalist guerrillas on the offshore
islands, the majority of whom are US-trained
and equipped. At present, organized guerrilla
groups on the China mainland are few, small,
and generally unimportant in spite of some
minor local successes.
45. Over-all Military Capabilities. Despite the
gradual increases which have taken place in
the combat capabilities of Nationalist ground,
air, and naval forces over the past several
years, Nationalist capabilities are far out-
weighed by those of Communist China. If the
Nationalists chose to defend the offshore is-
lands, they could probably make Communist
assaults on these islands costly, but they prob-
ably could not, unassisted, hold them if the
Chinese Communists were willing to commit
the ground, air, and naval forces that they
have available.4 Without outside logistical,
naval, and air support, the Nationalists would
almost certainly not be able to defend Taiwan
against large-scale Communist air attacks or
invasion.
46. Offensively, the Nationalists presently
have the capability to interdict a part of the
coastal traffic through the Formosa Straits;
seize unescorted merchant vessels in the Lu-
zon Straits; commit aircraft in tactical bom-
bardment, amphibious support, airlift, and
paradrop missions; conduct guerrilla raids;
and conduct periodic raids with regular troops
against the coastal provinces in up to regi-
mental strength. They are not presently cap-
able of attempting an invasion of the main-
land without considerable outside logistic, air,
and naval support.
4 See paragraph 7 of SNIE 100-4-54, "The Situa-
tion with Respect to Certain Islands off the
Coast of Mainland China," dated 4 September
1954.
9
II. PROBABLE DEVELOPMENTS
47. The future fortunes of the Chinese Na-
tional Government will be determined to a
very large extent by US policy, and will de-
pend increasingly upon the scale and charac-
ter of US aid and support. The National Gov-
ernment's ability to defend Taiwan against
attack and to maintain domestic stability will
be contingent upon a continued flow of US
military and economic aid, and its ability to
maintain its international position, including
its place in the UN, will depend largely on US
diplomatic support. Withdrawal or consider-
able reduction of US support would jeopardize
the National Government.
48. Should US aid continue at approximately
present levels, the prospects of the National
Government for maintaining domestic stabili-
ty over the short term between now and mid-
1956 appear good. However, the continued
focusing of primary governmental efforts on
military defense and expansion will probably
detract from the government's ability to rem-
edy basic economic weaknesses and create a
self-sufficient economic base. Consequently,
during the period of this estimate, serious eco-
nomic weaknesses will remain. Moreover, the
international position of the National Govern-
ment will- continue gradually to deteriorate.
In the face of a deteriorating international
position and unimproved prospects for return
to the mainland, the National Government's
task of maintaining its own morale and that
of its armed forces and the former main-
landers on Taiwan will become increasingly
difficult.
Fcireign Affairs
49. During the period of this estimate, a few
foreign states now recognizing the National
Government will probably recognize the Peip-
ing regime, making it increasingly difficult
for the National Government to maintain its
claim as the legal government of China. Its
right to membership in international bodies,
including the UN, will come under increasing-
ly serious challenge during the period of this
estimate, possibly to the point where Peiping
can gain the support of the majority of UN
members for the seating of its delegation in
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' SECRET
the General Assembly. The Chinese Nation-
alists, however, will still be able to exercise
their veto over any expulsion move in the
Security Council.
50. Nationalist China's security and interna-
tional standing will continue to be menaced
by Communist China. Peiping holds that
Nationalist occupation of Taiwan is an in-
fringement of Chinese Communist sovereign-
ty; and that the Communist revolution cannot
be completed in China until Taiwan has been
"liberated" and the National Government de-
posed. At the present time, external Commu-
nist pressure against the National Govern-
ment has intensified. The means employed
include propaganda, diplomatic effort, threats,
and military demonstrations. This pressure
will almost certainly continue as a means of
dividing the US and other non-Communist
states, furnishing the Peiping regime with a
means of attracting additional domestic sup-
port, and, primarily, testing US intentions and
discouraging long-range US commitments to
the National Government. We believe that
the Chinese Communists will not invade Tai-
wan or the Pescadores in force, because they
probably believe that such actions would lead
to war with the US, and that over the long
run they can further their objectives with
respect to the Chinese Nationalists by means
not involving war. However, if the Chinese
Communists should come to believe in the
course of their tests of US intentions or other-
wise that the US would not in fact defend
Taiwan and the Pescadores, they would prob-
ably attempt to take over Taiwan by force.
51. A return to the mainland will continue to
be the central objective of the National Gov-
ernment and the focus of its foreign and do-
mestic policies, despite Nationalist apprecia-
tion that the chances of an early return are
remote. However, during the period of this
estimate, Nationalist leadership will almost
certainly not become reconciled to an insular
future, nor will it concentrate principally on
the development of Taiwan. It will continue
to concentrate its efforts on military matters,
hoping to return to the mainland in the wake
of a future US-Communist Chinese war.
10
52. Because of its basic dependence on US aid,
the National Government will continue to be
oriented toward the US throughout the period
of this estimate. Taipei will continue to seek
additional US commitments, in particular the
conclusion of a mutual security pact and the
extension of US defense commitments to in-
clude the Nationalist-held offshore islands.
The National Government will consider that
Taiwan's strategic importance to the US has
increased as a result of recent developments
concerning Indochina. It will attempt to use
Taiwan's strategic importance as a lever with
which to gain increased US aid and commit-
ments, especially if the non-Communist posi-
tion in the Far East suffers further setbacks
during the period of this estimate.
53. As long as the US does not reduce materi-
ally its present commitments to Taiwan, the
Government of Nationalist China will prob-
ably not undertake major military or diplo-
matic moves without US endorsement and
assurances of support. However, it will retain
a considerable capability for independent ac-
tion and will stubbornly resist such US sugges-
tions as it considers prejudicial to its inter-
ests. It will continue to respond to US advice
about as at present, i.e., it will generally re-
spond on economic and administrative mat-
ters, but will tend to ignore or circumvent
certain types of military changes suggested
by the US.
54. Nationalist China will probably wish to be
included in any regional security system or-
ganized by the US in the Far East. While
attempting to maintain friendly relations with
Japan, the Nationalists will begrudge any US
support to Japan which appears to them to
divert aid from Taiwan. They will also re-
main apprehensive of the possible ascendency
of Japanese leadership among non-Communist
countries in Asia or of any significant im-
provement in the relations between Japan
and Communist China.
55. Little significantly increased support of
the National Government from among the
overseas Chinese will be forthcoming during
the period of this estimate, largely because of
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foglICZUkiri 11
the probable relative power of Communist
China and Nationalist China during this
period.
56. If the National Government should come
to believe during the period of this estimate
that US support were being withdrawn or
greatly reduced, it would probably consider
that its interests and those of the US were
becoming increasingly divergent. This might
be reflected in more intemperate behavior, and
could conceivably cause Taipei to take steps
in the hope of involving the US and Commu-
nist China in full-scale war.
Domestic Development
57. The general political picture during the
period under consideration will probably re-
main fairly static. The National Government
will continue to give its military programs
dominant consideration, thus detracting from
its ability to remedy basic economic weak-
nesses and to create a self-supporting eco-
nomic base. Although some shifts in gov-
ernmental personnel may occur, the central
government leadership will probably continue
to be drawn from the group of Kuomintang
leaders who have been prominent since 1949.
Politically the government will be handi-
capped by the narrow range of policy choices
and the predispositions of its leaders. While
personal rivalries may persist, efforts will be
made to present an outward display of unity
and solidarity, and intraparty factions are
unlikely to become a serious threat to party
unity or governmental stability.
58. The National Government will almost cer-
tainly be able to maintain political stability
on Taiwan. Existing political controls are
sufficiently strong to maintain order and se-
curity. Communist influence and subversion
will probably continue to be vigorously sup-
pressed, although sporadic cases of Commu-
nist infiltration and of defections may occur,
particularly as time passes and there is grow-
ing disillusionment over prospects of a return
to the mainland. Serious friction will prob-
ably not develop between the government and
the local Taiwanese population, and some im-
provement in relations may occur.
59. During the period of this estimate the Na-
tional Government will almost certainly con-
tinue to operate within the framework of the
present constitution. Elective processes may
be further extended, but will probably not be
carried to the point where the top posts in
the provincial government become elective.
Further efforts may be made to include Tai-
wanese in government, at least at the local
level, but it is doubtful that they will gain
real influence at the national level. While
progress toward a more democratic ,form of
government may be made, Nationalist China
will probably remain in essence a one-party
state, with power concentrated in the Kuo-
mintang elite, and authority flowing down-
ward through party channels. Nationalist
leadership will probably not succeed in creat-
ing any new and dynamic political program.
60. President Chiang Kai-shek will remain
the dominant figure in party and government
affairs because of his prestige, his legal au-
thority, and his skillful employment of divide-
and-rule tactics. Should the presidency be-
come vacant during the period of this
estimate, we believe that Ch'en Ch'eng, who,
As Vice President, is next in line of successioli
under the constitution, would come to power.
This transfer of power would probably be
achieved with an outward show of order, but
there would almost certainly be considerable
maneuvering for power behind the scenes, and
personal rivalries among Nationalist leaders
would in general become more acute. Chiang
Ching-kuo would remain a very powerful fig-
ure, but would probably play essentially a
waiting game, expecting ultimately to gain
supreme power.
61. Although some economic improvements
can be anticipated, the fundamental economic
weaknesses of Taiwan will probably become
more acute by mid-1956. Given a continua-
tion of the present level of US aid and the
current military commitments of the Chinese
Government, the present precarious economic
stability will be maintained, but there will be
no improvement in Taiwan's capabilities for
becoming economically self-supporting. The
population will probably expand by roughly
five percent, or half a million persons. At the
asAMisar
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same time the current expansion of industrial
production will level off, though probably re-
taining sufficient momentum to prevent any
substantial decline in living standards. How-
ever, expanded food requirements and a level-
ing off of agricultural output will probably
force a reduction in agricultural exports, ad-
versely affecting the foreign trade position.
By mid-1956 the National Government will
probably be more, rather than less, dependent
upon US economic aid for its continued
existence.
Military Affairs
62. Most of the serious problems presently
limiting the effectiveness of Nationalist armed
forces will remain. The Nationalists will
probably continue reluctant to make the basic
changes which are necessary to improve
present deficiencies in the command struc-
ture, in military personnel policies, or in the
concept of the utilization of forces in the de-
fense of Taiwan.
63. The Nationalists will probably continue
their present policies with respect to Tai-
wanese manpower. They will give Tai,wanese
youths a short reserve training course, but
will not absorb them into the regular armed
forces. These policies will not materially
arrest the attrition of age. There are enough
physically fit native Taiwanese of military age
who could substantially improve the effective-
ness of the armed forces for the defense of
Taiwan, since they probably would fight if the
island were invaded. However, Taiwanese
willingness to fight to recover the mainland
would be uncertain.
64. Scheduled training, reorganization of the
Nationalist military establishment and of
combat units, reorganization of the logistical
system, and receipt of programmed aid mate-
rial and equipment will result in appreciable
improvement in the combat capabilities of the
Chinese Nationalist forces. There will proba-
bly be gradual improvement in the materiel
condition and operational efficiency of the
Navy, and, ?with additional equipment and
improved logistic support, the Marine Corps
will increase its present capabilities. Two jet
fighter-bomber groups and one jet interceptor
12
group should be operational by mid-1956.
GCI and early-warning capabilities should
improve fairly rapidly over the next two years.
The Chinese Nationalist armed forces will re-
main an important source of non-Communist
military strength in the Far East.
65. However, Chinese Nationalist military
capabilities will remain greatly outweighed
by those of Soviet-aided Communist China
throughout the period of this estimate, even
though substantial improvements take place
in the Nationalist armed forces. Outside
logistic, air, and naval support will continue
to be required to defend Taiwan or the Pesca-
dores against Communist attack. Nationalist
strength will continue inadequate to, defend
the offshore islands against determined Com-
munist attacks. It is possible that the Na-
tionalists will develop the capability to con-
duct division-size raids against the mainland
within the period of this estimate. However,
any invasion effort in larger strength against
the mainland would continue to require out-
side logistic, air, and naval support.
Outlook Beyond Mid-1956
66. If, in the longer run, the adverse trends
described above are not reversed, the strength
and international position of the Republic of
China will probably deteriorate, even assum-
ing a continuation of US support at approxi-
mately present levels. If the present config-
uration of the cold war continues generally
unchanged, more of the governments of the
world will in time probably come to acknowl-
edge the Peiping regime as the legal govern-
ment of China, virtually isolating the Na-
tional Government diplomatically. This sit-
uation, coupled with a diminishing possibility
of return to the mainland, and with continu-
ing concentration by its leaders on military
affairs rather than domestic improvements,
will in time undermine Nationalist China's
morale, economy, and political stability.
Moreover, these trends of deterioration, for-
eign and domestic, will probably be acceler-
ated with the aging of the army, due to be-
come critical several years from now, and with
the eventual passing of Chiang Kai-shek and
other senior leaders who provide links with
liT
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13
the past and inspiration and hope for the to an aspirant for control of China, largely
future. Thus a greatly weakened Republic of discarded by the world, or to a modest republic
China will in time probably be reduced either of the island of Taiwan.
AniabReT
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SECRET
28
24
20
108
112 116
120 124 128
28
24
I
----?
2'
?
HAINAN
(Ch', ry ci
''''.v)
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a c'? g) ?f l'? 1?
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t
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pel
CHIN.MEN TAO 0s I.
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i i,;?7"2'
PESCADORES 41 CD ia-I i7 conventional airfies
on Taiwan, t in the
ISLANDS. a 0gug
T'aiman
co :Fso.ying
Kao?hsiu
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tl
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,
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CH IN A
SEA
,..) AMAIAI?GUNTO
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e
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? ?
MACAO ''
SOUTH
CHINA
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OKINAWA?GUNTO. .41?
. ?
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?? t-t ?A
is
? . soke
ik
TAIWAN AND
ADJACENT AREAS
CHINESE NATIONALISTS
(i) Naval base
? Naval patrol station
0 Available airfield (Jet)
WIJ?CH'IU us? Nationalist -controlled Island
CHINESE COMMUNISTS
t Naval base
0 Available airfield (Jet)
p Available airfield (Conventional)
DATA AS OF AUGUST, to5a
-- ---e.
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?
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PHILIPPINES
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LUZON ?
Railroad
???? International boundary
0 5.0 190 290 Miles
0 50 100 200 Kilometers
+101111.11i
112
116
120 124 128
13487 9.54
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,