PROBABLE DEVELOPMENTS IN CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00269R000300040003-1
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 33
• Document Creation Date: December 14, 2016
• Document Release Date: June 6, 2003
• Sequence Number: 3
• Publication Date: June 16, 1949
• Content Type: REPORT

Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
COPY NO.
SECRET
162
PROBABLE DEVELOPMENTS
IN CHINA
ORE 45-49
Published 16 June 1949
CENTRAL INTELLIGENCE AGENCY
Approved For Release 2003/06/20 : CIA-RDP861300269R0003000401f3CIR E
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
WARNING
This document contains information affecting the na-
tional defense of the United States within the meaning
of the Espionage Act, 50 U.S.C., 31 and 32, as aMended.
Its transmission or the revelation of its contents :in any
manner to an unauthorized person is prohibited by law.
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20 : CajciEltDRi00269R000300040003-1
DISSEMINATION NOTICE
1. This copy of this publication is for the information and use of the recipient
designated on the front cover and of individuals under the jurisdiction of the recipient's
office who require the information for the performance of their official duties. Further
dissemination elsewhere in the department to other offices which require the informa-
tion for the performance of official duties may be authorized by the following:
a. Special Assistant to the Secretary of State for Research and Intelligence, for
the Department of State
b. Director of Intelligence, GS, USA, for the Department of the Army
c. Chief, Naval Intelligence, for the Department of the Navy
d. Director of Intelligence, USAF, for the Department of the Air Force
e. Director of Security and Intelligence, AEC, for the Atomic Energy Com-
mission
f. Deputy Director for Intelligence, Joint Staff, for the Joint Staff
g. Assistant Director for Collection and Dissemination, CIA, for any other
Department or Agency
2. This copy may be either retained or destroyed by burning in accordance with
applicable security regulations, or returned to the Central Intelligence Agency by
arrangement with the Office of Collection and Dissemination, CIA.
DISTRIBUTION:
Office of the President
National Security Council
National Security Resources Board
Department of State
Office of Secretary of Defense
Department of the Army
Department of the Navy
Department of the Air Force
State-Army-Navy-Air Force Coordinating Committee
Joint Chiefs of Staff
Atomic Energy Commission
Research and Development Board
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/206 EffiT86B00269R000300040003-1
PROBABLE DEVELOPMENTS IN CHINA
Table of Contents
Page
SUMMARY 1
1. Imminent Problems for the US Arising out of Developments in China 3
a. Possible Incidents 3
b. Taiwan 3
c. Western Possessions of Hong Kong and Macao 4
d. US Aid to anti-Communist Groups 5
e. Communist Need for Foreign Trade 5
f. The Communist Desire for International Recognition 6
g. Chinese Communist Influences throughout the Far East
2. Political Situation 8
a. Communist China 8
(1) Extension of Control 8
(2) Transfer of Political Authority 8
(3) Foreign Relations 9
b. Nationalist China 11
3. Military Situation 13
a. General Strategy 13
b. Communist Armed Forces 13
c. Anti-Communist Armed Forces 15
d. Present and Future Operations 16
4. Economic Situation 17
a. Nationalist China 17
b. Communist China 18
(1) Internal Problems 18
(2) External Problems 19
ENCLOSURE A 21
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
CONFIDENTIAL
75
12C
135
ris,ning?
S Z E
\ (2, Cheng-ti
K'ang- g
CHINA
COMMUNIST?CONTROLLED AREAS
23 MAY 1949
V
Area controlled 20 April 1949
Area gained 20 April-23 May
Area of Guerrilla Actrviiv
Communist Drive
300
300
sum. wk..
o 100 500
CONFIDENTIAL
N A N
K'un-rniTig
..., ,,1
Chungkn ',.....
j-L...? )
?
. __,,-'-''''''' tV"-?" ?.....i
.-? L,.....?) 5
.----.4 r,-..
IIKWEICHow-s..
1 ?Kueilang
1 1 ? 1
L
a A z
The , 1 boundlnes shoe.
do ',or mots., boorbeorel 0.. *0
bounden. reco9nued by the U. 5. Govern...
11282 Map Branch, CIA, 6 49
CONFIDENTIAL
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20 ELARTF86B00269R000300040003-1
PROBABLE DEVELOPMENTS IN CHINA
SUMMARY
Introductory Note: The purpose of the follow-
ing discussion is to present probable develop-
ments in China which will affect US interests
during the next six to twelve months.
1. Communist military forces are capable
during the summer months of 1949 of destroy-
ing all semblance of unity in the National Gov-
ernment of China; and before the year is out,
the Communists will have formed a central
government which will seek international rec-
ognition.
2. The US cannot reverse or significantly
check this course of events, nor is there any
prospect that the Soviet orientation of the
Chinese Communists can be altered in the im-
mediate future. However, during the coming
months, developments in China will raise a
number of problems on which the US may
either take action advancing, or avoid action
compromising, its interests in China and else-
where. Chief among these are the formation
of a Communist central government claiming
international recognition, Communist aims
regarding Taiwan and Hong Kong, the Com-
munist need for foreign trade, and US aid to
anti-Communist groups in China. In addi-
tion, US interests probably will be affected ad-
versely by the expansion of Communist influ-
ence throughout the Far East, particularly if
a Chinese Communist regime gains seats on
the Far Eastern Commission and the Allied
Council for Japan, and acquires China's
claims regarding a future Japanese peace
treaty.
3. The government to be organized by the
Chinese Communists will be proclaimed as a
"coalition," but actually will be a Communist
dictatorship. In foreign affairs the Commu-
nists during the coming months will continue
to be solidly aligned with the USSR. The new
regime will honor the Sino-Soviet Treaty of
1945 and its attitude in international relations
will be governed by the Moscow line. It will
probably maintain an unfriendly attitude to-
ward the US in particular and all other gov-
ernments that impede the world Communist
movement, as well as denounce China's exist-
ing international agreements with those gov-
ernments.
4. Communist armed forces, now decisively
superior to the Nationalists, will continue their
program of area-by-area acquisition. They
are capable of eliminating all effective military
resistance in the south, southwest, and north-
west by the end of 1950.
5. The Chinese Communists will probably
not be faced with serious food shortages dur-
ing the next year. Some progress will be
made in reviving transportation and industry,
and the Communists will have a relatively
stable currency. The Communists' principal
economic problem in the coming months will
be that of acquiring petroleum, machinery,
and perhaps cotton. There is little prospect
of substantial Soviet aid, and domestic re-
sources must be supplemented by these essen-
tial imports. Therefore, China's economic re-
covery during the next year will probably de-
pend on active Western trade and close ties
with occupied Japan.
Note: The intelligence organizations of the Departments of Army, Navy, and the Air Force
have concurred in this report; for a dissent of the Intelligence Organization of the
Department of State, see Enclosure A, p. 21. This report contains information avail-
able to CIA as of 2 June 1949.
SECRET 1
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20s:EA,IFf'86B00269R000300040003-1
PROBABLE DEVELOPMENTS IN 'CHINA
Introductory Note: The purpose of the follow-
ing discussion is to present probable develop-
ments in China which will affect US interests
during the next six to twelve months.
1. Imminent Problems for the US Arising out
of Developments in China.
The Chinese Communist armies have the ca-
pability, during the summer months of 1949,
of completing their campaign in the Yangtze
Valley, from the eastern border of Szechwan
to the sea, and of dislodging the Nationalists
from Canton and other ports on the southeast
coast during this same period. Their military
operations in this period will destroy all sem-
blance of unity in the present National Gov-
ernment, the remnants of which will seek ref-
uge in Taiwan, southwest and northwest
China, or in flight abroad. In late summer or
early autumn, the Chinese Communist Party
will convoke a Political Consultative Confer-
ence to form and proclaim a Communist-con-
trolled government for all China before the
end of 1949. At that time, Communist China
will contain more than half of China's people,
and, if not more than half of China's territory,
at least the larger part of its most productive
areas. The Communist Government then will
seek recognition as the national government
of China.
The US cannot reverse the course of the Chi-
nese civil conflict nor induce the Chinese Com-
munists to modify their intention to establish
a Communist dictatorship over China. Also,
there is no prospect that the US can alter the
Soviet orientation of the Chinese Communists
in the immediate future. During the next few
months, however, there will be a number of
developments in China affecting US interests
such as: (1) possible incidents involving US
armed forces, officials, and nationals; (2)
sharpening of the Communist-Nationalist
struggle for Taiwan, where US strategic inter-
ests are involved; (3) Chinese Communist de-
signs on Hong Kong and Macao; (4) US aid
to anti-Communist groups in China; (5) the
Communist need for foreign trade; (6) the es-
tablishment of a Communist central regime
seeking international recognition, and; (7)
the expansion of Chinese Communist influence
throughout the Far East.
It is known that the leaders of the Chinese
Communists desire international recognition
for their regime, and that they also desire
commercial relations with the West and with
Japan. These facts may permit the US, in
the course of the next several months, either
to take action advancing or to avoid action
compromising certain of its interests in China
and elsewhere in the Far East.
a. Possible Incidents.
In firing upon British warships in the
Yangtze, the Communists demonstrated that
they are prepared to risk reprisals in order to
substantiate their promise to protect China
from "imperialist aggression." The Chinese
Communist Party (CCP) undoubtedly gained
face within China and elsewhere in Asia by
this action, and it is possible that the Commu-
nists will again take advantage of any oppor-
tunities which arise for military action against
foreign armed forces. The opportunities for
local incidents involving foreign officials and
nationals have become much more numerous
with the CCP occupation of major cities?as
suggested by the forced entry of the US Am-
bassador's residence by Communist soldiers
during their occupation of Nanking. Inci-
dents involving the mistreatment of foreign
nationals and the destruction or seizure of
foreign property are likely. If the Communist
regime should request, and be refused recogni-
tion, it is highly probable that such incidents
will multiply, with CCP connivance. If the
US should extend further support to the Na-
tionalists, such incidents can reach serious
proportions.
b. Taiwan.
There is no doubt that the CCP desires to
extend its control over the island of Taiwan,
E
Approved For Release 2003/06/20S:CTRA-E 3
D86B00269R000300040003-1
4
Approved For Release 20QA08/f1A-RDP861300269R000300040003-1
where Chiang Kai-shek is preparing for a last
stand, hoping to survive until reinforced by
the US at the outbreak of a world conflict
which he believes inevitable. The Commu-
nist-Nationalist contest for control of the
Island will become more sharply drawn in the
near future, when Chiang Kai-shek and his
Nationalist followers will be forced to estab-
lish headquarters there.
The CCP is not capable, at the present time,
of successfully undertaking an amphibious
operation against Taiwan. In the next few
months, however, the CCP will not only ac-
quire the mainland coastal ports and shipping
to make such an operation possible but also
will be able to infiltrate the island, attempt to
subvert Nationalist officials there, and exploit
the widespread native resentment of Nation-
alist rule. These developments will improve
CCP chances of taking control of Taiwan.
The Communist-controlled regime certainly
will assert sovereignty over Taiwan, and the
leaders of Taiwanese native groups in time
may support them in that claim. While civil
disorders on Taiwan will probably not be suffi-
ciently serious to wrest the island from Na-
tionalist control, any insurrection which de-
velops on Taiwan is likely to further the pur-
poses of the CCP. There is a prospect of
lengthy propaganda warfare, with increas-
ingly successful subversion of Nationalist offi-
cials and armed forces, and increasingly dam-
aging civil disorders, which may set the stage
for Communist military occupation.
US economic and military aid, short of
armed intervention, would probably not sig-
nificantly assist the Nationalists in holding
Taiwan, any more than such aid has helped
the Nationalist cause on the mainland of
China. Taiwan's economic problem is prin-
cipally that of Nationalist inefficiency in man-
agement, not deficiency in resources; and ex-
tensive stocks of military equipment are al-
ready stored on the island. Furthermore,
such an aid program would make it difficult,
If not impossible, to establish normal diplo-
matic and consular relationships with the
Communists, in the event that the US should
decide on a policy of recognition of a central
government established by the Communists
on the mainland.
c. Western Possessions of Hong Kong and
Macao.
Although Hong Kong, under British con-
trol, offers Communist China certain advan-
tages in foreign trade, nationalistic sentiment
will almost certainly impel the CCP to press
for the return of this colony, as well as Por-
tuguese Macao. The British Government,
determined to defend Hong Kong against a
possible Communist military assault, is dis-
patching considerable reinforcements to the
colony, thus reducing its capability to meet
military commitments in Europe and else-
where and to maintain a strategic reserve in
Great Britain. In addition, the UK is seek-
ing at least moral support from the US for its
Hong Kong defense plans. However, Com-
munist military action against Hong Kong
and Macao, while possible, is not likely. It is
more probable that one of the early acts of the
Communist regime will be that of initiating
discussions with the British and Portuguese
governments in regard to the transfer of au-
thority in Hong Kong and Macao. If the UK
and Portugal should withhold de facto recog-
nition from the Communist Government, or in
some other manner refuse to enter into such
negotiations, the CCP will retaliate. The
CCP, which presumably does not fear Portu-
gal, may choose to exert military pressure on
Macao, as well as to work through the Com-
munist underground. In Hong Kong, rather
than taking military action, the CCP will
propably choose to operate through the strong
Communist underground, which already con-
stitutes a serious threat to the colony and
which will become increasingly active. The
Communists could cripple Hong Kong by
fomenting strikes in transportation and com-
munication facilities, could restrict or cut off
food supplies from the Chinese mainland,
could sabotage water supplies, could resort to
unrestricted piracy against shipping, and
could create an exchange rate between the
currencies of Hong Kong and Communist
China to weaken the economy of Hong Kong.
The eventual return of Hong Kong to China,
thereby depriving the UK (and indirectly the
US) of a valuable but vulnerable Far Eastern
naval base, appears probable, but not within
the calendar year of 1949.
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20 6iI8M861300269R000300040003-1
d. US Aid to Anti-Communist Groups.
The US is the best available source for the
small arms, artillery and ammunition desired
by the remaining anti-Communist forces, and
it may be anticipated that such forces, indi-
vidually or in the name of the National Gov-
ernment, will appeal to the US to supply such
materiel. However, major anti-Communist
forces controlled by Chiang Kai-shek, Chang
Chun, and the Moslem leaders of the north-
west, Ma Pu-fang and Ma Hung-kuei, even
now are located either off the mainland or in
the peripheral areas of China. In addition,
there is some doubt as to whether any of those
forces, except those of the two Mas, could
usefully employ further US aid. Chiang's
forces on Taiwan already have extensive mili-
tary and economic resources. Chang Chun's
forces in Szechwan do not need economic aid.
Moreover, it is improbable that military aid
to these forces can prevent the Communists
from extending their control over Szechwan
at any time they choose to do so.
The Mas of the Northwest (the provinces
of Ningsia, Kansu, and Tsinghai) with the
advantages of forbidding terrain, excellent
organization, and hardy troops, are in the
strongest defensive position of any of the re-
maining anti-Communist forces in China.
Moreover, on the basis of past performance,
the Mas, as compared with other anti-Com-
munist groups, would make the most effective
use of any aid which they might be given.
However, their bases in the provinces of
Tsinghai and Ninghsia are the most difficult
to reach with US aid, which probably would
have to be transported by air. The Northwest
area is self-sufficient in food, and may hold
out for several years even without US aid,
either because the Communists will be reluc-
tant to attack or will favor its development as
a buffer against the expansion of the USSR
into China through Sinkiang.
Overt US aid to anti-Communist forces in
China would compromise the maintenance of
normal diplomatic and commercial relations
with the Communist-controlled regime, in the
event that the US should choose to follow a
policy of recognizing such a regime. Further-
more, US military aid to any anti-Communist
forces other than the Mas, might well go the
5
way of the bulk of US aid supplied to the
Nationalists in the past?to the Communists.
Aid of the type and proportions extended
hitherto to the National Government, at
best, could delay but will fail to prevent the
extension of Communist rule through all
China.
A further consideration is the continuation
of US aid to Nationalist China, as provided
for in the China Aid Program. With Na-
tionalist-held areas soon to be limited to Tai-
wan and the western provinces of China, it
will be difficult to justify the US program on
humanitarian grounds as aid to the Chinese
people as a whole. Thus the US would be-
come increasingly vulnerable to Communist
propaganda, attacking the US aid program as
designed solely to bolster and prolong resist-
ance on the part of anti-Communist remnants.
e. Communist Need for Foreign Trade.
Communist import requirements provide
the US with a possible weapon against Com-
munist China. Depriving the Communists
of essential imports would retard the rehabili-
tation of China and increase the economic
difficulties that will confront the CCP. Some
essential imports, chiefly petroleum products
and items of capital equipment, can be ob-
tained in quantity only from the US or UK.
The USSR, without some sacrifices in its do-
mestic economy, will be unable to supply many
kinds of equipment, will provide inferior
goods in other cases, and will probably make
heavy demands on China in exchange for its
assistance.
The controls to be used would probably not
be effective if they were so severe as to be in
fact an embargo. It is doubtful if the US
could arrange for concerted support for an
embargo among the Western Powers, and the
Communists would gain sympathy and sup-
port within China by representing an embargo
as "imperialist" persecution. Limited export
controls on selected commodities such as pe-
troleum and capital goods probably would be
acceptable to the UK, which has the largest
economic interests of any Western Power in
China, and would probably serve US purposes
just as well as a complete embargo.
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
6
Approved For Release 20gVeR,i,CIA-RDP861300269R000300040003-1
On the other hand, there are advantages the
US may gain from free trade with Communist
China. Quid pro quo concessions, such as
regularization of the position of US consulates
in Communist-held areas of China, might be
obtained. The promotion of commerce be-
tween Communist China and Japan, further-
more, in addition to being valuable to China,
would significantly assist Japan economically
and thereby reduce the drain of US support of
the Japanese economy.
f. The Communist Desire for International
Recognition.
The Communist-controlled regime will seek
international recognition as the National Gov-
ernment of China as soon as it is formed and
proclaimed?an event which will probably oc-
cur near the end of 1949. The attitude of this
regime toward the US will be unfriendly, if
not frankly and actively hostile. For the pur-
poses of this discussion, it is assumed that the
US, when confronted with the Communist
regime's request for recognition, will pursue
one of three courses: (1) non-recognition, i.e.,
neither de facto nor de jure recognition for an
indefinite period; or (2) immediate de jure
recognition, which the Communists presuma-
bly desire; or (3) delayed de jure recognition,
e.g., early de facto recognition, but a delay of
several months to a year or more in according
de jure recognition. The consequences of
each of these three courses of action are esti-
mated briefly below.
Obviously, the international act of granting
or withholding recognition would not effect
any genuine change in the ideological hostil-
ity of the CCP toward the non-Communist
world. So long as the Chinese Communists
regard the USSR as the leader of world Com-
munism, and the USSR regards the US as its
principal enemy, the conduct of the CCP
toward the US will continue to be governed
by the international Communist line, as pro-
mulgated by the USSR.
(1) Non-Recognition.
For the US to refuse recognition to a Com-
munist China would entail a number of un-
favorable consequences. There is no prospect
that the Nationalists can be restored to au-
thority over any large part of China; the Na-
tionalist leaders, their authority progressively
restricted to their place of refuge, are doomed
to exile or extinction. In addition, it is im-
probable that many foreign governments will
withhold for a prolonged period recognition
of the Communist regime in China; thus, the
official representatives and private citizens of
governments withholding recognition would
find themselves at a disadvantage as com-
pared with the nationals of governments ex-
tending recognition. Moreover, the Com-
munist regime, strengthened by recognition
by one or more major powers, would claim
seats in the UN, other international organiza-
tions, and on the Far Eastern Council, and
would be supported in its claim by members
of such bodies. It is further probable that
the Communist regime, if the US were to with-
hold recognition, would in turn refuse to reg-
ularize the position of US consulates in China,
and would even force them out of China.
(2) Immediate De Jure Recognition.
Immediate de jure recognition of the Com-
munist regime, which almost certainly is the
CCP's objective, would avoid certain of the
adverse consequences of non-recognition. The
CCP presumably would be opposed to any in-
ternational relations short of full de jure rec-
ognition, because mere de facto recognition
would permit the Western Powers openly to
support anti-Communist elements in China,
and because de facto recognition has been as-
sociated in Chinese eyes with the 1911-27
period of warlordism. Immediate recogni-
tion, however, would not alter the basic hos-
tility of the CCP toward the US, and might
even encourage the Chinese Communists in
their arrogant and intransigent attitude
toward the US and toward other powers which
followed the US lead, perhaps to the extent
that they would follow the Soviet lead in
restricting the number and location of US
consular offices, particularly in Manchuria.
In addition, immediate recognition would
probably not cause the Communists to with-
draw their threat to repudiate existing Sino-
US treaties, or to refrain from obstructing US
policies on international issues such as the
Japanese peace settlement.
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/2(katEF'861300269R000300040003-1
(3) Delayed Recognition.
Should the US delay, for a period of several
months to a year or more, in according de jure
recognition to the Communist regime in
China, some of the disadvantages of both
non-recognition and immediate recognition
might be obviated. Since the Communists
are interested in obtaining de jure recognition
as soon as possible, they might be inclined to
discuss, and to reach some prior understand-
ing with the US regarding present and future
treaties and the number and location of US
consular offices in China. This period would
also afford other Western governments an op-
portunity to bring political and economic pres-
sure on the Communist regime. Concerted
action by Atlantic Pact powers, which have
indicated a desire to maintain a common
front, can be anticipated if the delay in ac-
cording de jure recognition is not prolonged
to the point where it would become inimicable
to their interests. Through the period of a
common front, however, there would always
be the risk that other governments, seeking
special advantage by early action, would pro-
ceed unilaterally to extend de jure recogni-
tion. The Communists can be expected to
follow, and probably to improve upon, the
traditional Chinese diplomatic practice of
playing one power against another.
g. Chinese Communist Influence through-
out the Far East.
The CCP has indicated its interest in unit-
ing one billion Orientals in a Communist Asia.
To this end, the CCP industriously propagates
the view that Communism is inevitable in
Asia, and that only the Communists are the
champions of Asian "independence." The
prestige of Communism will increase enor-
mously as the CCP extends its control over
all of China.
(1) Japan and Korea.
The CCP has stated that China and Japan
"can and should establish close friendship"
and has warned that Japan must conclude a
peace treaty with a Communist-controlled
government of China. The CCP is attempt-
ing to open trade with Japan, and the Jap-
anese Communist Party echoes the CCP line
that only "democratic" forces can successfully
7
conduct commercial and political relations
with China. In Korea, the CCP's successes
have contributed greatly to the confidence of
the North Korean regime and to the feeling of
defeatism in the Republic of Korea. Through
its relationship with North Korean leaders, the
CCP is capable of providing significant mili-
tary and economic aid to North Korea. The
opportunity of South Korean leaders to offset
the development of such an adverse trend has
largely passed and it now appears that South
Korea can do little to forestall such a develop-
ment. Recognition by the Western Powers
of the CCP's regime would be to the advantage
of Communist China both politically and eco-
nomically, insofar as it permitted trade be-
tween China and Japan. De jure recognition
would give the Chinese Communists further
opportunity to claim seats on the Far Eastern
Commission and on the Allied Council for
Japan, as well as weaken further the position
of the Korean Republic's government.
(2) Southeast Asia.
The CCP is extending its influence through-
out Southeast Asia by identifying itself with
native independence movements, by denounc-
ing "reactionary" colonial governments, by
threatening "fascist" non-colonial govern-
ments, and by promising protection to over-
seas Chinese communities. De facto recog-
nition of the Communist regime by the West-
ern Powers would tend to increase the politi-
cal and economic influence of the CCP in
Southeast Asia. To withhold de jure recogni-
tion would make the CCP's work in Southeast
Asia somewhat more difficult, but the govern-
ments and the Chinese overseas communities
in that area would pay little heed to such a
legalism. The Chinese communities will tend
to orient themselves toward the CCP as it ac-
quires control of China although there may
be significant resistance elements among the
overseas Chinese. Likewise the governments
in Southeast Asia will adjust themselves to
these new circumstances, whether for accom-
modation or resistance. The CCP will prob-
ably not employ military force to gain its ob-
jectives in Southeast Asia and it has no sig-
nificant economic resources with which to
maneuver. Its success in China, however, will
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
8
Approved For Release 200W632EIA-RDP861300269R000300040003-1
permit strong and unremitting political pres-
sure on Southeast Asia.
2. Political Situation.
a. Communist China.
(1) Extension of Control.
(a) Present Extent of Communist China.
Communist China now is divided into six ad-
ministrative areas: (1) Northeast China, hav-
ing an Administrative Council but as yet no
"People's Government"; (2) Inner Mongolia
with an Inner Mongolian Autonomous Gov-
ernment; (3) North China (Hopeh, southeast
corner of Chahar, eastern Shansi, western
Shantung) having a North China People's
Government; (4) Central Plains (Honan, most
of Anhuei, northeast corner of Hupeh) with a
Central Plains People's Government; (5) East
China (Kiangsu and eastern Shantung) with
as yet no People's Government; (6) Northwest
China (western Shansi, eastern Shensi, east-
ern Suiyuan, eastern tips of Kansu and Ning-
sia) with as yet no People's Government. The
Communists do not yet have a central gov-
ernment, so that whatever centralized control
there is, is exercised by the Central Commit-
tee of the Chinese Communist Party, at pres-
ent located in Peiping.
(b) Intended Extent of Communist China.
In its New Year's Message for 1949, the CCP
stated that its armies would cross the Yangtze
in 1949 and that the Party would convoke a
Political Consultative Conference to form
and proclaim a Communist-controlled gov-
ernment. Without pretending that this gov-
ernment would actually control all China by
the end of 1949, the CCP statement strongly
implied that the new regime would nonethe-
less seek recognition as the national govern-
ment. Subsequent statements have reiter-
ated that it is the CCP's firm intention to
extend its control over all China and to de-
stroy all significant political and military op-
position. The CCP has announced that, in
the interest of preserving the manpower and
material resources of the nation, it prefers to
negotiate a peaceful transfer of military and
political power wherever possible; but that the
Communist armies are prepared to effect such
transfer of power by military force where Na-
tionalist leaders and forces refuse to cooper-
ate in a peaceful transfer of power.
(c) Lack of Popular Resistance. The re-
sumption of the military offensive by the Com-
munist armies has forced the CCP to offer the
war-weary people of China some justification
for this action. Before and during the April
peace negotiations in Peiping, the CCP re-
peatedly accused the Nationalists of insin-
cerity, at the same time claiming that the
people of China did not desire an uneasy
truce with the Yangtze as a boundary-line.
In their order to continue the drive into South
China, Chairman Mao Tse-tung and Com-
mander Chu Teh again accused the National-
ists of negotiating only to gain time for a
comeback designed "to destroy the revolu-
tion." Although no amount of propaganda
can persuade the people of China that the
Communists are everything they pretend to
be, the bulk of the people in Nationalist China
are probably not dismayed by the prospect of
a change of government, and may even wel-
come the prospect of Communist rule, believ-
ing that it will bring a greater degree of
security and a lesser degree of exploitation.
(2) Transfer of Political Authority.
(a) A New Central Government. Because
the CCP has not formed or proclaimed a cen-
tral government asserting authority over all
of China, decisions on the question of inter-
national recognition of such a government
thus far have been postponed. Diplomatic
officials in Nanking and consular officials else-
where in Communist China are regarded by
the local Communist authorities as private
citizens rather than as the representatives of
their governments. This situation is likely to
continue until the proclamation of a Com-
munist-controlled government, at which time
the question of de facto recognition will arise.
For the next few months, the CCP will be
absorbing large numbers of lower and middle
echelon National Government personnel?by
far the greater part of these officials stay on
the job?thus avoiding a complete break in
continuity with the old order. The CCP prob-
ably will take the stand that, if foreign powers
wish to continue operations in China, either
through official representatives or as private
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20 il8tH.661300269R000300040003-1
citizens, they must give at least de facto recog-
nition to the regime.
(b) The "Coalition" Pattern. The CCP
has promised to convoke a Political Consulta-
tive Conference in 1949 to form and proclaim
a "coalition" government. The Kuomintang
as a Party will be excluded from this new
"coalition." The CCP has frankly stated that
the intended "coalition" government will be
"under the firm leadership of the CCP." The
concept of "coalition" derives from the larger
concept of Chairman Mao's "new democracy,"
the name given to the transitional stage from
today's "capitalist" society to the later "so-
cialist" society. In structure, the "coalition"
will include three major blocs: (1) the CCP;
(2) non-Communist "democratic parties"
which follow the CCP line, such as the Demo-
cratic League and the Kuomintang Revolu-
tionary Committee and; (3) "democratic ele-
ments," occupational and functional groups
which invariably support the CCP's position.
While this government will permit some de-
gree of popular participation in the election
of representative bodies, all real power will be
concentrated in the CCP, whose function it is
to "guide" the backward masses.
(c) Political Consultative Conference. The
Political Consultative Conference will be the
medium for creating a new constitutional sys-
tem and for obtaining some degree of domes-
tic sanction for the new regime, just as the
Political Consultative Conference held in 1946
was a symbol of potential National unity.
The Chinese Communist Party will convoke
this Conference in its own name and in the
name of minority parties and functional
groups which follow the Communist line, prob-
ably in the late summer or early autumn of
1949, after they have consolidated their con-
trol of the Yangtze valley. It is not known
whether the Conference will consist of a few
dozen or several hundred persons; in either
case, the Communists will control it firmly.
The Conference will either draft and ratify a
constitution, or, possibly working through a
committee established for that purpose, draft
a constitution and set a date for elections to
a "constitutional convention." In the latter
event, promulgation of the constitution and
formal establishment of a constitutional gov-
9
ernment would be delayed until 1950. In any
case, the Conference will simply be a rubber-
stamp congress summoned to approve in the
name of "the people" policies predetermined
by the Communists while its constitution, for-
mally providing for various rights, will, in
fact, bestow no rights which the Communists
cannot take away.
(d) Domestic Sanction for the New Order.
In order to gain domestic sanction for the
Communist-controlled regime, the CCP, in
conjunction with the Political Consultative
Conference, will probably exploit the alleged
affinities of Communist doctrine and practice
with the theories of Sun Yat-sen, generally
regarded within China as the "father" of the
Republic. The CCP claims that Sun's famous
Three People's Principles?"nationalism, de-
mocracy, livelihood"?have been more closely
followed by the Communists than by the Kuo-
mintang. It points to Sun's advocacy, in the
1920's, of "alliance with the Soviet Union, alli-
ance with the Communists, alliance with the
workers and peasants." The CCP may also
cite the 1924-27 period, when the Communists
were admitted to the Kuomintang by Sun
himself, and insist that only the CCP has truly
carried out the terms of Sun's will by ushering
in the constitutional stage of government
which he demanded. The CCP will by no
means deify Sun Yat-sen, but his tradition
can be very useful in smoothing the Party's
path.
(3) Foreign Relations.
(a) Sino-Asian.
(i) Japan and Korea. The CCP, in a
broadcast attempting to influence the Jap-
anese elections of January 1949, stated that
China and Japan "can and should establish
close friendship," and pointed out that Japan
must conclude a peace treaty with a Com-
munist-controlled government of China and
establish economic and political relations with
it. More recently, the CCP has been attempt-
ing to open trade with Japan. There is little
doubt that China will exert economic pressure
and political influence on both Japan and
Korea, possibly with a view to subordinating
those countries to itself in a Communist Asia.
The CCP maintains close relations with Corn-
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
10 Approved For Release 20gEQ6in;rCIA-RDP861300269R000300040003-1
munist leaders in Japan and Korea, and there
is reason to believe that at least some of those
leaders are oriented as much toward Com-
munist China as toward the USSR.
(ii) Southeast Asia. In recent months,
the CCP: (1) has told the Indonesian Repub-
lican leaders that they cannot succeed with-
out Communist leadership; (2) has denounced
the British and French governments for their
activities in China, Malaya, and Indochina;
and (3) has threatened retaliation against
the "fascist" governments of the Philippines
and Siam for "persecuting" overseas Chinese.
Assistance to revolutionary movements
throughout Southeast Asia, pressure upon the
colonial governments concerned, and influ-
ence within overseas Chinese communities will
certainly increase as the CCP extends its con-
trol throughout China and obtains interna-
tional recognition of its "coalition" govern-
ment. However, the extension of CCP influ-
ence in southeast Asia will not be unopposed,
because of the deep-seated fear of "Chinese
imperialism" in these countries.
(b) Sino-Soviet. Chinese Communist rela-
tions with the USSR should continue to be
extremely cordial. In major policy state-
ments of the past year, the CCP has endorsed
the Cominform's denunciation of Tito, called
upon "revolutionary forces" throughout the
world to unite under Soviet leadership against
"American imperialism" and promised that
China will be the ally of the USSR in any
West-provoked war. The CCP's tactical pro-
cedures have found orthodox justification in
Lenin's and Stalin's expositions of the princi-
ples governing "colonial" revolutions, and the
CCP is now bringing its policies more nearly
into accord with those of more "advanced"
revolutions. There are points of potential
conflict between the USSR and the CCP?such
as possible Soviet inability to assist in China's
industrialization, Soviet designs in China's
border regions, the CCP's intentions toward
Communist movements in Asia, and the gen-
eral issue of subservience to Moscow?but
none of these issues seems likely to cause
serious friction in the near future. The
"coalition" government will certainly give the
USSR preferential status in China, perhaps
by expanding the Sino-Soviet Treaty of
1945?which the CCP has repeatedly en-
dorsed?to provide for a high degree of mili-
tary and economic integration between the
USSR and China's border regions. For the
present, CCP leadership appears genuinely to
feel that China's best interests will be served
by close Sino-Soviet cooperation.
(c) Sino-US.
(i) "Traitorous" Treaties. The CCP posi-
tion, in regard to treaties concluded by the
National Government since early 1946, has
been that such treaties were concluded with-
out the knowledge and consent of the par-
ties?among them the CCP?participating in
the Political Consultative Conference of 1946,
and that the CCP therefore does not recognize
their validity and "absolutely will not bear
any obligation" for them. The CCP has
stated that "all those (treaties and agree-
ments) detrimental to the Chinese people and
nation, especially those which sell out na-
tional rights, should be abrogated, revised or
reconcluded, according to the circumstances."
The Sino-Soviet Treaty of 1945 has been spe-
cifically excluded by the CCP from those trea-
ties which "sell out national rights." The
Sino-US treaties which the CCP regards as
"traitorous" are those which provide for eco-
nomic and military aid to the National Gov-
ernment and the stationing of US armed
forces in China. The CCP view appears to be
that, first, the post-1946 Sino-American trea-
ties are "traitorous" simply because they were
concluded with the US, the principal enemy
of world Communism, and, second, that US
economic and military aid to the National
Government was employed principally in the
struggle against the Communists. In addi-
tion, the CCP has indicated its intention of
repudiating the existing Sino-US "Treaty of
Friendship, Commerce and Navigation"
(1948), on the grounds that this agreement
is an instrument of US "imperialism" in
China. In order to develop trade with the
US, however, the CCP may come to see the
desirability of negotiating a new agreement
of this nature.
(ii) The US as an Enemy. As the CCP has
proclaimed the USSR as China's principal
friend, the US has been portrayed with equal
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20s:ELARRH86B00269R000300040003-1
fervor as China's outstanding enemy. The
CCP has represented the US as the leader and
supporter of all "imperialist" and "reaction-
ary" forces in the world, as forcing "traitor-
ous" treaties upon China in exchange for
financing the Nationalists in the civil conflict,
as directing the military operations of the Na-
tionalists and encouraging them to reject the
Communist-dictated "peace agreement," and
as plotting with forces inside and outside
China to destroy the CCP and keep the Orient
in permanent slavery.
While the CCP has understandable grounds
for resenting the US contribution to the Na-
tionalists' military operations, the CCP's pres-
ent anti-Americanism is primarily dictated by
the opposite CCP and US positions regarding
the USSR and world Communism. US official
representatives and private citizens in Com-
munist China, although not subjected to
physical violence, have been restricted in their
movements and in the discharge of their con-
sular, commercial, or educational functions,
while the CCP is exploiting the US loss of
prestige in China and enhancing its own pres-
tige by an intransigent attitude toward the
Western Powers. The "coalition" govern-
ment will presumably invite US recognition
and attempt to conclude commercial treaties
with the US but the CCP can be expected to
give aggressive support to Soviet and satellite
diplomacy, to continue its vigorous and irre-
sponsible anti-American propaganda, to bring
pressure upon the US to withdraw its assist-
ance to Nationalist remnants on Taiwan and
to make the work of US diplomatic missions
difficult. At present, there is little chance of
orienting the CCP away from the USSR.
(d) Other Foreign Relations. The CCP
has adopted an attitude toward foreign gov-
ernments hostile in proportion to the degree
that those governments are impeding the
world Communist movement, regardless of
whether such governments have or have not
supported the Nationalists in the Chinese civil
conflict. The fact that the UK has been of
service to the CCP, in affording sanctuary
and an operating base to CCP leaders in Hong
Kong, did not restrain Communist forces from
11
firing upon British warships in the Yangtze.
Neither will it prevent the CCP from demand-
ing the return of Hong Kong to China nor
will it obviate the possibility of giving support
to terrorist bands operating against the
British in Malaya.
The CCP undoubtedly intends to deprive
Portugal of the colony of Macao, by negotia-
tions, if possible, but by military action if
necessary. The French Government has been
denounced by the CCP for encouraging US
"imperialism" in China and for its actions in
Indochina. The Netherlands Government
has been similarly castigated by the CCP in
regard to Indonesia. All other Atlantic Pact
states have been the targets of CCP propa-
ganda abuse, both for joining the Pact and for
other "reactionary" activities. India, which
is probably recognized by the CCP as its prin-
cipal rival for leadership in Asia, is charac-
terized as remaining under the influence of
British "imperialism."
Representatives of the Commonwealth
countries and of a number of European gov-
ernments in China have expressed a desire to
become accredited to the Communist regime
soon after it is proclaimed. These representa-
tives would like to regularize their status by
early recognition of the Communists in order
to protect and perhaps expand their present
interests in China. They have not regarded
the prospect of applying economic sanctions to
China with favor and they apparently antici-
pate profitable commercial relations with the
new regime in varying degrees. At the same
time, the governments of most Common-
wealth and Atlantic Pact nations have ad-
mitted the desirability of maintaining a united
front on the question of recognition.
b. Nationalist China.
Nationalist China is virtually bankrupt and
the National Government is in its death-
throes. The process of disintegration and
fragmentation is so far advanced as to render
almost impossible the establishment of a
functioning government or even a loosely or-
ganized coalition capable of offering resistance
to the Communists.
The National Government no longer func-
tions as an organized administration even on
Approved For Release 2003/06/263:ESAWD86B00269R000300040003-1
12 Approved For Release 2003H/ROE:flA-RDP861300269R000300040003-1
a regional basis. Since Chiang Kai-shek's re-
tirement from the presidency in January, there
has been little evidence of leadership or cen-
tral direction of the Government. (Acting
President Li Tsung-j en has little power and his
effectiveness has been little greater than that
of a well-meaning warlord.) The Executive
Yuan has accomplished little for months; even
the basic ministries are limping along ineffec-
tually. The Legislative, Control and Judicial
Yuan in Canton are rump organs with slight
Influence. Political power is largely in the
hands of provincial or regional bodies. Tax-
ation and other basic governmental functions
are localized.
The Nationalist split into factions headed
by Chiang and Li has hastened the process of
disintegration and fragmentation. Although
Chiang retired as President without resigning,
he has continued to control armies, military
and financial resources, the secret police, the
party agencies, and many leading officials.
Acting President Li nominally heads the Gov-
ernment, but, in his weakness and frustration,
has done little else than conduct the abortive
peace negotiations which ended on 20 April.
The struggle between Li and Chiang is so in-
tense that any significant rapprochement or
compromise appears improbable. Li controls
Kwangsi and has the support of Pai Chung-
hsi, various southern warlords, and many
peace-seeking officials. He will probably con-
tinue his nominal leadership of the Canton
Government until Communist military pres-
sure compels Nationalist leaders to seek refuge
elsewhere, at which time Li will probably try
to maintain a government in Southwest China.
Chiang Kai-shek controls Taiwan and ad-
jacent areas on the southeast coast, and has
a diminishing influence in the southwestern
provinces. Chiang has been transferring Na-
tionalist resources systematically to Taiwan,
which is being prepared as the final refuge to
which many Nationalist officials in Canton will
flee when the city is threatened by the Com-
munists. Large numbers of refugees from
mainland China are already in Taiwan and the
provincial administration is headed by
Chiang's appointee, General Chen Cheng. Al-
though Nationalist rule is increasingly un-
popular with the oppressed, unorganized na-
tive population, the Nationalists probably will
be able to maintain a regional regime in Tai-
wan for at least the remainder of the year
1949. The major threat to their position will
come from mainland Communist forces rather
than from the local people.
As in the recent past, the National Govern-
ment's foreign relations during coming months
will be dominated by issues concerning the US
and the USSR. Nationalist China has de-
pended greatly on US economic and military
aid, which still continues in diminishing quan-
tities, although no future US military commit-
ments are in prospect. Despite repeated fail-
ures to obtain additional aid, the National
Government and Nationalist regional regime
will continue their appeals to the US and claim
that such aid will be used to resist the Com-
munists.
In Taiwan, the Nationalists have an impor-
tant bargaining point. Aware of US interest
in that island, they will present themselves as a
means and perhaps the sole means of prevent-
ing its communization, and will offer various
Inducements and assurances in return for US
aid and US moral support for a regional Chi-
nese regime. They will also argue the legality
of such a Chinese administration despite the
fact that Taiwan's status has not been formal-
ized by conclusion of a peace treaty with
Japan.
The National Government will strive to keep
Its international status despite its growing
weakness. Depending chiefly on what future
Communist policies may be, that status might
not be seriously challenged for several months
and foreign recognition of the National Gov-
ernment will probably continue so long as it
stays in Canton.
Chiang Kai-shek and other Nationalist lead-
ers are embittered toward the USSR, which
they feel is at least partly responsible for their
misfortunes. The idea of appealing to the
UN has been seriously considered in National-
ist circles and the matter may be brought up
again before the Nationalists lose their inter-
national status. If made, this maneuver would
be accompanied by denunciation of the Sino-
Soviet Treaty of 1945, governing the status of
Manchuria and Outer Mongolia.
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20 l8M6B00269R000300040003-1
While such antagonistic measures might be
directed against the USSR on the one hand,
the National Government might at the same
time effect an apparent rapprochement with
the Soviet Union and conclude agreements in-
volving further concessions, particularly in
Sinkiang and the Northwest provinces.
In its last stages of existence, Nationalist
China may turn its wrath against the US.
In Nationalist thinking, the US is largely re-
sponsible for the Yalta agreement, and the US
postwar policy of mediation in the civil war
and intermittent limited assistance have fa-
cilitated the Communist triumph. Such feel-
ings will be intensified if the US rejects further
appeals for aid and evidences interest in recog-
nizing a future Communist-dominated Chi-
nese Government.
3. Military Situation.
a. General Strategy.
The objective of the Chinese Communist
forces is the elimination of all anti-Communist
armed resistance in China. To attain this ob-
jective the Chinese Communist Party has em-
ployed the strategy of using military force as
'4.1?Y a medium of realizing their political objectives.
Communist control over the remainder of
China will be accomplished by means of an
area-by-area program of military acquisition,
dictated to a large degree by the state of their
political preparedness for administering these
areas.
The remaining Nationalist or anti-Com-
munist forces have now adopted the strategy
of avoiding decisive military action, while at
the same time attempting to deny territory to
the Chinese Communists as long as possible.
b. Communist Armed Forces.
The Chinese Communist Forces possess suffi-
cient wealth in material and manpower to
overcome all anti-Communist remnants in
China. Having already eliminated the ma-
jority of the best Nationalist armies, the CCP
is now in the process of consolidating its recent
virtually unopposed military conquest of the
Yangtze valley. In consequence, Communist
armies, free to accelerate their movements to
the south and the west, appear to be headed
toward Kwangtung. As elsewhere, however,
the speed and magnitude of this operation
13
probably will be limited in some degree by the
abilities of the CCP political organization to
assume the additional administrative respon-
sibilities.
Recent CCF victories have brought with
them the new responsibility of protecting com-
munications, urban life, and industry. Conse-
quently a considerable portion of CCF must be
utilized to garrison "liberated" areas and
maintain lines of communication.
(1) Strength and Disposition of Communist
Ground Forces.
The Communist regular forces comprised of
the field forces and Military District troops
now total approximately 2,017,000 (see Table,
p. 14), thus giving the CCF a decisive nu-
merical superiority over the Nationalists in
combat strength. These regular forces, par-
ticularly the field forces, are characterized by
good leadership, good equipment, high morale
and discipline, as well as excellence in intelli-
gence and the employment of propaganda.
In addition to the regulars, there are irregular
forces, known as the People's Militia, generally
local in character and function, totalling per-
haps 2,000,000. Such forces, on occasion in
the past, have supplemented the regulars dur-
ing a campaign. In the future, they will
probably be occupied largely with the task of
policing CCP areas. A third potential source
of manpower comes from Nationalist troops
which have fallen into Communist hands. Of
these, approximately 90,000 have been inte-
grated into the CCF. Communist regulars
will also be greatly assisted in their drive
south by dissidents, bandits, and irregular
Communist bands, already in control of wide
rural stretches in the southern provinces.
(2) Air Force.
The Chinese Communist Air Force made its
first public appearance during 1949 May Day
celebrations in the Mukden area. Both B-25
and F-51 type aircraft participated in the air
parade. The Communists are known to have
obtained by defection or capture at least 38
operational aircraft including bombers, fight-
ers, transports, and trainers. The actual
number of pilot defections is believed to be
substantially greater than the 20 known cases
although the Communist claim of 2,000 is con-
8 R7
Approved For Release 2003/06/20:Ea-11;86B00269R000300040003-1
14 Approved For Release 20R08/A:riCIA-RDP861300269R000300040003-1
ORGANIZATION OF CHINESE COMMUNIST FORCES, 25 MAY 1949
REGULAR FORCES
New Unit Designation
Old Unit Designation
Commander
Strength
Areas
1st Field Army
Northwest People's
Peng Teh-huai
158,000
Shensi-Shansi
Liberation Army
2nd Field Army
Central Plains People's
Liu Po-cheng
321,000
Yangtze and
Liberation Army
South China
3rd Field Army
East China People's
Chen Yl
400,000
Yangtze
Liberation Army
4th Field Army
Northeast People's
Lin Piao
720,000
Yangtze and
Liberation Army
North China
5th Field Army
North China People's
Nieh Jung-chen
383,000
North China
Liberation Army
Undesignated Regulars
In South China
35,000
South China
Regular Forces Total
2,017,000
IRREGULAR FORCES: The People's Militia
2,000,000
CAPTURED NATIONALIST TROOPS: Only the approximately 90,000 troops in the units enumerated above have
been included in CCF strength. Remainder are not yet believed to have been integrated into the CCF
order of battle.
Note: The total regulars includes an estimated 636,600 Military District Troops and former Nationalist
troops of the ex-Nationalist 38th, 59th, 60th and 77th Armies, and 84th and 110th Divisions with an aggre-
gate total of approximately 90,000 troops.
sidered to be greatly exaggerated. There is
no evidence that Soviet aircraft observed in
CCP areas of Manchuria have been there in
any but a transient capacity. No Communist
aircraft have been used in the combat areas
and lack of aviation fuel will drastically limit
the CCP capability for air operations.
(3) Navy.
The CCP has acquired by defection and cap-
ture upwards of 63 Nationalist naval vessels.
The following is a breakdown, as to types, that
may be operational in Communist hands as of
31 May 1949:
3 Destroyer escorts (DE)
1 Mine-sweeper (AM)
7 Gunboats (PG)
1 Repair Ship, light (ARL)
1 Icebreaker (AGB)
1 Landing Ship, medium (LSM)
1 Landing Craft, Infantry (LCI)
17 Landing barges
17 Armed motorboats
14 Small patrol boats
For the most part, crews of the foregoing craft
and those of other naval craft which have been
disabled or destroyed are available to the Com-
munists. These craft, plus merchant ship-
ping which may be captured or otherwise ac-
quired, will provide the Communists with a
growing capability for short over-water opera-
tions.
(4) Logistics.
The CCF, hitherto almost solely dependent
on animal transport, makeshift machine-shop
arsenals, and captured Nationalist stores for
logistic support, has now overcome this earlier
handicap. In addition to substantial Japa-
nese stockpiles turned over to them in Man-
churia during 1945-46, the CCF, having cap-
tured tremendous Nationalist stocks which
were largely US-supplied?now enjoys superi-
ority in materiel over the Nationalists. In
addition, the CCF has acquired most of the in-
dustrial centers of North and Central China?
including the Mukden arsenal, which alone
produced some 60-70 percent of the total Na-
tionalist ordnance output. This and other in-
stallations taken over by the CCF can supply
all the materiel needed for future mainland
operations. In place of horse-cart methods of
supply, the Communists now control and are
rapidly rehabilitating most of China's rail and
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20g Ebeyff 86 B00269 R000300040003-1
water transport net. A north-south rail line
from Manchuria to the Yangtze has already
been opened.
c. Anti-Communist Armed Forces.
The Chinese Nationalist armed forces, al-
though defeated by the Communists and lack-
ing cohesive command structure at present,
were not beaten by the sheer force of arms.
Very few major battles, such as those witnes-
sed in World War II, were fought. From the
resumption of Nationalist-Communist hostili-
ties in May 1946 until September 1948, the
Chinese Communists employed guerrilla tac-
tics of hit, ruin and run, with resultant minor
but effective actions. In September 1948, the
Chinese Communists stormed Nationalist Tsi-
nan, where, much to the Communists' sur-
prise, key Nationalist defections brought about
by the disintegration of local? troop morale led
to the collapse of government resistance. The
debacle at Tsinan established the pattern for
subsequent defections; from September 1948
to May 1949, a rising wave of mass defections,
sell-outs, and general unwillingness to fight
swept through the Nationalist armed forces.
The defeat of the Chinese Nationalist Army,
therefore, can be attributed basically to in-
ternal decay. Although the strategic error of
over-extension of forces contributed in part,
the basic reasons for Nationalist defeat were,
and continue to be: (1) army politics, which
kept militarily incompetent officers in posi-
tions of high command; (2) the personal com-
mand of all combat areas exercised by Chiang
Kai-shek, which prevented independent tacti-
cal action by field commanders; (3) accelerat-
ing economic decay, which resulted in inade-
quate pay, food, clothing, and equipment for
the troops; and (4) graft and corruption,
practiced by senior officers at the expense of
their troops.
In consequence of these conditions, Nation-
alist morale disintegrated from top to bottom
and Nationalist forces lost the all-important
"will to fight." Nationalist armed forces, to-
day, have ceased to be an organized, cohesive
and centrally directed military machine. They
now exist as a group of widely scattered, dis-
organized, and uncoordinated regional anti-
Communist "warlord" forces.
15
(1) Strength and Disposition of Nationalist
Ground Forces.
The strength of the remaining anti-Commu-
nist armies in China totals approximately 720,-
000 regular combat troops. In addition, there
are some 500,000 service troops dispersed
throughout the remaining areas of National-
ist operation (see Table, p. 16).
The "combat" forces listed in the accom-
panying table include a high percentage of
poorly trained and ill-equipped provincial
levies. Not included are an undetermined
number of local (Peace Preservation Corps)
troops.
At present, there are basically four separate
centers of potential anti-Communist resistance
in China. These are: (1) the southeast (in-
cluding Taiwan) directly under Chiang Kai-
shek?approximate strength, 300,000; (2) the
southern provinces of Kwangtung and Kwang-
si, under Li Tsung-jen and Pai Chung-hsi--ap-
proximate strength, 200,000 plus; (3) the
southwest, under Chang Chun (possibly in-
cluding the troops of Hu Tsung-nan) ?ap-
proximate strength 225,000; and (4) the north-
west, under Ma Pu-fang and Ma Hung-kwei?
approximate strength, 100,000.
(2) Air Force.
The Nationalist Air Force has from 85,000-
100,000 men and approximately 1000 aircraft,
of which 600 are reportedly operational. The
potential of the CAF has also been reduced by
losses through defection and capture. Five-
sixths of the CAF's total of 1,000 aircraft have
been transferred to Taiwan. Because of
maintenance difficulties and operational ac-
cidents only 35 percent of the operational air-
craft are effective. The morale of the air
forces, although somewhat higher than the
ground forces due to differences in pay scales,
is still very low. Consequently, CCP propa-
ganda has found and continues to find a re-
ceptive audience in the ranks of the air force.
(3) Navy.
The Nationalist Navy, lately weakened by
the loss of upwards of 63 craft (of which at
least a light cruiser, destroyer escort, and a
gunboat have been destroyed or disabled) has
approximately 150 ships, not including harbor
craft, and about 30,000 men. Navy morale, as
E
Approved For Release 2003/06/20S:CVE'861300269R000300040003-1
16 Approved For Release 20WEIE,/kOiacIA-RDP861300269R000300040003-1
ORGANIZATION OF ANTI-COMMUNIST FORCES, 25 MAY 1949
Commander
Strength
Tang En-po
250,000
*
Pal Chung-hsi
150,000
Hu Tsung-nan
175,000
Ma Pu-fang 1
Ma Hung-Kweif
120,000
Chang Chun
40,000
Hsueh Yueh
50,000
Chen Cheng
30,000
**
Liu An-chi
30,000
Total Combat Forces
845,000
Service and Micellaneous
Troops
500,000
Total
1,345,000
Loyalty
Chiang Kai-shek
Li Tsung-j en
Chiang Kai-shek
Self
Chiang Kai-shek
Undetermined
Chiang Kai-shek
Chiang Kai-shek
Present Area
Unknown *
Hunan, Kwangsi
South Shensi
Northwest
Taiwan
Kwantung
Taiwan
Tsingtao
Future (?)
Fukien, Taiwan
Kwangsi
Szechwan
Northwest
Taiwan
Kwantung
Taiwan
Taiwan (?)
Note: * Subject to revision when Nationalist withdrawal from Shanghai is clarified--last estimate of
strength in Shanghai was 100,000. The other troops under Tang (150,000) are withdrawing southward
from Nanking-Shanghai area.
** Number could be augmented by Nationalist withdrawals from the mainland.
in the other services, is extremely low and
Communist infiltration of the navy continues.
(4) Logistics.
The Nationalist field forces have been de-
pleted in numbers and deprived of the larger
part of their weapons, transportation, and
equipment. Their central supply organiza-
tion is now defunct and, more important, their
central supply base, from which unit materiel
replacements had previously been obtained, is
now non-existent. The Nationalist field com-
manders find themselves facing logistics simi-
lar to those encountered by Communist field
commanders a year ago. The Nationalists
must now depend largely upon their own pri-
vate resources and ingenuity for logistic sup-
port. The anti-Communist forces, largely
confined to marginal regions, will hold only
two areas which can presently contribute sub-
stantial logistic support. These are Szech-
wan, with some 13 major arsenals as well as
rich agricultural resources, and Taiwan.
Taiwan, which produces an agricultural sur-
plus, has lately received US military aid ship-
ments as well as arsenal installations trans-
ferred from the lower Yangtze Valley.
The northwest, in contrast, requires air
supply, and the entire sweep of southern
China is incapable of supporting large armies
and broad-scale military operations over an
extended period. Long-term resistance in
these areas, therefore, would require a steady
flow of supplies, both military and economic,
from outside China. Communication in the
south and southwest can be kept open only
so long as the loyalty of the people in those
areas is retained.
d. Present and Future Operations.
The objective of the latest Chinese Commu-
nist offensive, begun on 20 April, is to secure
the lower Yangtze Valley from Szechwan to the
sea and at the same time drive a wedge deep
into south China in order to separate the forces
of Pal Chung-hsi and Li Tsung-j en in Kwangsi
from those of Chiang Kai-shek in the south-
east. The southern drive on Canton and Foo-
chow, additionally, will accelerate fragmenta-
tion of the Nationalist Government by forcing
further flight to Taiwan or Chungking or pos-
sibly to both.
The primary Communist objective probably
will be realized by the end of August. At no
time from now on can the Nationalists be ex-
pected to put up more than token resistance,
since their first concern will be withdrawal of
their remaining troops intact to Taiwan and
the more remote areas of the southwest. By
the end of 1949, in consequence, the Chinese
Communists probably will exercise military
control over all of mainland China from Man-
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/0612,gi8ffP861300269R000300040003-1
churia south to Kwangtung and from the
eastern border of Szechwan to the sea.
(1) Communist Military Problems.
Although the Communist forces have all
the advantages at present, when they move
to eliminate the last areas of resistance they
will face certain entirely new problems. The
Communist armies will be moving into ex-
tremely rough mountainous terrain in their
drive to the southwest and the northwest. In
order to support their occupation armies ade-
quately, they must of necessity greatly extend
their lines of supply and communication into
these food-deficit areas. Although Commu-
nist forces will be greatly assisted by dissi-
dents, bandits, and irregular CCP bands in
the south and southwest provinces, they will,
particularly in the northwest, be moving into
a great expanse of territory where the local
populace is either actively or potentially hos-
tile. The expanding Communist armies will
also face the problem of how to feed, clothe,
indoctrinate, and otherwise dispose of captured
or defected anti-Communist forces.
The acquisition of Taiwan is another prob-
lem for the CCP: The Communist armies have
no amphibious experience or training. At
present, they lack the requisite shipping to
undertake an assault on Taiwan. The lack
of amphibious experience, moreover, may force
the CCP to be satisfied with the much slower
political methods of underground action to
accomplish their conquest of the island.
Perhaps the largest problem facing the CCP
lies in preventing the military machine from
outrunning their abilities for political con-
solidation. To halt their victorious armies
would not only belie CCP propaganda but
would probably shake troop morale from top
to bottom. Over-all success, therefore, de-
pends upon the maintenance of a very delicate
balance between CCP military acquisitions and
political preparedness.
(2) Nationalist Problems.
Problems currently facing the remaining
Nationalist Armed Forces appear to be insur-
mountable. The present centrifugal tendency
in Nationalist China is a recreation of condi-
tions once almost nation-wide, which the sur-
viving warlords understand well, but which
17
makes central planning and control virtually
impossible. The remaining Nationalist troops
are desperately in need of re-equipping, re-
training, re-vitalizing, and re-organizing under
a competent and effective central command.
It appears unlikely that these basic National-
ist needs will be fulfilled. Consequently, anti-
Communist forces in China when threatened
by the Communist armies, must further with-
draw, capitulate, or be annihilated.
(3) Estimate of Capabilities.
(a) Nationalist. Remaining Nationalists or
anti-Communist forces cannot, in the foresee-
able future, effectively resist the Communist
military machine. Even if it were possible to
cure existing military ills by means of outside
assistance, superficial reforms would be ineffec-
tual unless the ailment is also treated?the
troops must be re-instilled with the will to
fight. , This can only be accomplished by pay-
ing the troops in accordance with the cost of
living, by feeding and clothing them properly
and, above all, by giving them something to
fight for. This obviously is impossible under
present conditions. The CCP, therefore, can
and probably will eradicate any and all re-
gional anti-Communist armed resistance
whenever it chooses to do so.
(b) Communist. The CCP is currently
capable of launching simultaneous operations
to the south, southwest, and northwest and
eliminating all effective military resistance by
the end of 1950. However, in view of Com-
munist logistic and morale problems which un-
doubtedly would result from too fast a take-
over, the CCP will probably continue its me-
thodical area-by-area conquest and it may be
2 to 3 years before the final liquidation of all
anti-Communist resistance in China. The
south and southwest will probably be the first
two entries on the CCP military time-table and
the coup de grace reserved for the Mas in the
Northwest.
4. Economic Situation.
a. Nationalist China.
The economic activities of the National
Government in Canton and of each provincial
government (except Taiwan and Szechwan)
are largely confined to the search for sufficient
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
18 Approved For Release 20CIA-RDP861300269R000300040003-1
revenue to maintain their military and politi-
cal power. Economic and commercial paral-
ysis throughout most of non-Communist
China has pauperized both the National and
most provincial governments.
The financial position of the National Gov-
ernment at Canton is desperate. It has suf-
fered from a serious decrease in revenue be-
cause of its inability to collect taxes, the wide-
spread repudiation of the national currency,
and the virtual elimination of customs duties.
In addition, State-owned industries and en-
terprises have largely ceased to operate and
the profits of many remaining plants are no
longer available to any but local political ad-
ministrations. Reserves of gold and silver
still under Canton's control are very limited
and most provincial governments are reported
to be in a similarly serious fiscal situation.
While most of non-Communist China is im-
poverished, Szechwan and Taiwan are excep-
tions. Both areas possess a relatively sound
economy. Other important Nationalist as-
sets are a considerable amount of coastal and
ocean shipping and the gold bullion in Tai-
wan.
b. Communist China.
(1) Internal Problems.
(a) Economic Objectives. The first eco-
nomic objectives of the Communists will be:
(1) the acquisition of all assets owned by the
National Government and "bureaucratic cap-
italists"; (2) the preservation of govern-
mental financial and commercial institutions;
and (3) obtaining the support of productive
elements of society. The Nationalist assets
least accessible to the Communists are the
three million-odd ounces of gold controlled by
Chiang Kai-shek, the overseas assets and
holdings of the Government and its "war crim-
inal" officials, private holdings and the million
tons of shipping now in Nationalist hands.
It is unlikely that an appreciable amount of
industrial plant will be removed to Nationalist
areas, and the Communists should inherit Na-
tionalist industries largely intact.
(b) Food Problems. While the possibility
exists that the Communists may not be able
to overcome the war's disruption of marketing
facilities in a short time and that Manchurian
surpluses may be pre-empted by the USSR,
no starvation is expected in Communist areas
before the June harvests, except in some
flooded or war-desolated localities.
Although the coastal cities long have im-
ported rice, grains and vegetable oils, because
of the high costs of transport from inland
areas of production to coastal consumption
centers, there is probably enough food in the
Yangtze Valley to supply these cities, if the
CCP can solve the problems of collection and
distribution.
(c) Development of Transportatiorn, and In-
dustry. That some progress in industrial re-
construction has begun is indicated by repprts
from Manchuria, Tsinan, Peiping, Tientsin,
and many towns in North China which show
that the reopening of industries and railroad
reconstruction in liberated towns is a high-
priority task. Shortages of raw material,
power, and skilled labor will continue to limit
Communist development of industry after
control over Central China is consolidated
but, with the exception of petroleum and pos-
sibly cotton which must be imported, there
will be sufficient resources to run most exist-
ing industry at a high level of capacity.
The need for petroleum in Central China
will decrease as coal becomes available in
larger quantities and as such large oil con-
sumers as power companies are reconverted
to coal. Domestic collection of cotton for
textiles, China's chief industry, will be large
and, together with present stocks in Shang-
hai, should be nearly adequate for this year's
needs. Rehabilitated railroads, together with
captured junks and barges on the Yangtze
River and its tributaries, should provide ade-
quate internal transportation for essential
marketing purposes.
(d) Gaining Support of Productive Ele-
ments. The CCP will try to gain the active
support of productive elements in the middle
classes who may not yet be entirely convinced
of the bountiful life which is promised under
the Communist order. The Communists have
declared that taxes must not be confiscatory,
that governmental enterprises harmful to pri-
vate enterprises shall not be permitted, that
workers must not demand excessively high
wages, and generally that all means will be
utilized to encourage private industrial pro-
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/2%:al-tIR861300269R000300040003-1
duction. While these promises have largely
remained unfulfilled, they have gained wide
support for the CCP among Shanghai and
Nanking businessmen. Among the middle
classes, those most actively wooed by the Com-
munists are the technicians. They are of-
fered high pay (in Mukden reportedly twice
that of government officials) and the chance
to be leaders in China's reconstruction. The
CCP has apparently gained the support of re-
sponsible technical and managerial groups in
other Communist areas in China and may do
so in Central China as well.
Urban workers and the farmers may not be
as strenuously recruited, both because their
support is already assumed and because in-
creased rewards to the middle classes must
frequently be made at the expense of the
lower income groups. While continued lip
service will be paid to better living standards,
workers will be told that, as the "leading"
political group, they must carry the burden
of economic reconstruction and development.
Similarly, few promises, other than reduced
rents and interest rates, may be made to the
tenant farmers, since landlords have already
been promised that the country is too "back-
ward economically" for immediate drastic
land redistribution.
(e) Financial and Commercial Problems.
The CCP has shown considerable concern over
the establishment of internal financial sta-
bility and the resumption of domestic com-
merce. The lack of financial experts will seri-
ously hinder the Communists in the estab-
lishment of a stable and flexible currency
which will be adequate for the commercial
and industrial needs of North and Central
China. Conditioned by the recent National-
ist experience with paper currency, the Com-
munists in the immediate present may con-
tinue to rely on a less flexible exchange sys-
tem based on barter and tax payments in
grain and other commodities. To date, the
Communists have been sufficiently successful
in collecting agricultural output, which has
provided them with a substantial source of
revenue.
Although transportation and marketing
difficulties will hinder domestic trade, both
state and, to a lesser degree, private commerce
19
has been encouraged by the CCP's commer-
cial policy and probably will continue to be.
"Liberation" of the Yangtze Valley will prob-
ably yield to the Communists the huge col-
lection-and-sale apparatus of the Central
Trust and other National Government agen-
cies, thus reenforcing and firmly establishing
the Communist state trading base.
Further, CCP acquisition of the Yangtze re-
gion will be an important factor in curing
the present paralysis of internal commerce
by restoring the normal integration of the
Central and North China economies.
(2) External Problems.
(a) Requirements in Foreign Trade. Pe-
troleum, cotton, and the railroad, factory, and
power equipment needed for reconstruction
are the principal imports that the Commu-
nists will require during the next year. In-
adequate amounts of any of these items will
seriously hamper economic recovery. Fuel-
oil requirements can be met in part by the
substitution of coal, which should be avail-
able in quantity to the Communists. But
kerosene, gasoline, lubricants and other pe-
troleum products which have no substitutes
must be imported. Current Chinese con-
sumption, including aviation gasoline, is 15-20
million barrels annually and 10-12 million
barrels would probably be a minimum con-
tinuing annual requirement, with full utiliza-
tion of coal and with no increase in the level
of economic activity.
Reconstruction requirements for China are
enormous. A minimum reconstruction pro-
gram, calling for rebuilding China's prewar
industry and railroads and perhaps one-half
of Manchuria's peak industrial capacity,
would require imports of US $300-$500 million
in China and a similar amount in Manchuria.
The bulk of the expense would be for railroad
equipment; the remainder would largely be
textile, mining, and power machinery and
equipment. Reconstruction offers special dif-
ficulties to the Communists since substantial
credits or investments from the USSR are un-
likely and there are severe political obstacles
in the way of Western investments. In the
next few years, the Chinese Communists will
be confronted with the problem of paying for
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
20 Approved For Release 200i/Eirpt i1A-RDP86B00269R000300040003-1
their rehabilitation through their own efforts.
?(b) Trade with the USSR. Soviet domina-
tion of Manchuria will be a major factor in
directing the course of China's foreign trade
in the next year. The Soviet Union will con-
tinue to take most of Manchuria's grain and
soybean crops to meet the deficits of edible
oils throughout the USSR and of food in the
Soviet Far East. The total value of these im-
ports from Manchuria may well be in excess
of US $100 million annually, at world market
prices. In China Proper, the USSR does not
have the same dominant position with respect
to foreign trade that it enjoys in Manchuria.
The foreign trade of China Proper is more
likely to be directed to the non-Soviet coun-
tries because of the limited market in the
USSR for such important Chinese exports as
bristles, processed eggs, handicrafts, and coal.
The disadvantages to China of the Man-
churian trade with the USSR derive largely
from the cheap monopoly price that the So-
viets have been able to obtain on soybeans,
the chief Manchurian export. Through its
control of the Manchurian railroads and the
port of Dairen, the USSR has been able to
prevent the export of Manchurian products to
world markets. Necessarily, trade with the
Soviet Union on such unfavorable terms tends
to impair China's ability to finance her
essential import requirements. In China
Proper, the Communists will be freer to maxi-
mize their return by directing their exports
to whatever country offers the highest prices.
Exports to non-Soviet countries will provide
the Chinese directly with the means needed
to obtain essential imports, such as petroleum,
railroad equipment, electrical and other in-
dustrial machinery, and chemicals?products
which can be obtained from these countries
more readily than from the USSR.
(c) Trade with the US. The advantage of
CCP trade with the West and with Japan lies
in the character of China's import require-
ments and her export markets. These ad-
vantages particularly apply to US trade,
which, in the postwar period, has been the
largest of any country's with China.
The US would be a major source for petro-
leum, certain types of capital equipment, and
vehicles. If the US alone were excluded
from trade, Japan, the UK, and other West-
ern countries might fill a portion of China's
reconstruction needs but it is unlikely that
these countries can make sufficient capital
goods exports in the next year to satisfy all
of China's requirements.
Not only will China probably be forced to
depend on the US for essential imports, but
the market for many Chinese commodities,
such as handicrafts, tung oil, and animal
products is determined by US demand. Were
the US market eliminated, China's exports
would be reduced substantially, her export in-
dustries depressed, and her ability to pay for
needed imports greatly restricted. China's
chances for economic recovery in such circum-
stances would be small.
(d) Trade with Japan. Smaller transpor-
tation costs would permit Japan to outbid the
world market for many of China's exports.
In the case of China's export of such bulk
commodities as coal, iron ore, and salt, Japan
would be the only commercially important
feasible market. In return, Japan could sell
to China machinery and railroad equipment
which significantly would aid the CCP re-
habilitation program. Trade, profitable to
both countries, could in a few years total US
$3-400,000,000 annually, an amount which
would be a substantial portion of China's total
foreign trade.
Although Chinese antipathy toward the in-
dustrial revival of Japan is a political factor
militating against such large-scale trade, it is
very likely that the urgent economic consid-
erations of recovery will override such an ob-
jection. Indeed, the CCP's Ministry of Indus-
try and Commerce in Tientsin suggested re-
sumption of Japan trade in April and Premier
Yoshida has repeatedly declared that Japan
"will and must" trade with China. Japan's
market, as well as that of the US, is very im-
portant in the long run for the achievement
of Chinese economic independence and re-
covery.
Approved For Release 208%E/YOE:1A-RDP86B00269R000300040003-1
Approved For Release 2003/06/2%:RilIFF86B00269R000300040003-1
ENCLOSURE A
DISSENT OF THE INTELLIGENCE ORGANIZATION, DEPARTMENT OF STATE
The Intelligence organization of the Depart-
ment of State dissents from the subject report
on the grounds that it does not give adequate
treatment to the implications of the antic-
ipated desire of a Communist China for in-
ternational recognition. The treatment here-
in accorded this highly complex and technical
subject makes for an over-simplification which
is considered unsatisfactory in view of the im-
portant policy decisions inevitably involved in
the present Chinese situation.
SECRET 21
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
SECRET
Approved For Release 2003/06/20 : CIA-RDP8613002#.9eRgga99,90MANG OFFICE
3832-STATE-1949
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
S,EGRET
CENTRAL INTELLIGENCE AGENCY
- 41
INTELLIGENCE MEMORANDUM h00 300 28 June 1950
SUBJECT : The USSR and the Korean Invasion
The invasion of the Republic of Korea by the North Korean Army ra6 un-
doubtedly undertaken at Soviet direction and Soviet material support is
unquestionably being provided? The Soviet objective was the elimination of
the last remaining anti-Communist bridgehead an the mainland of northern
Asia, thereby undermining the position of the US and the Western Powers
throughout the Far East, By choosing Korea as the area of attack, the USSR
was able to challenge the US specifioally and test the firmness of US r,e--
sLotanoe to Comm:1st expnnnien,
North Korea has peed the capabilities for attacking South Korea
for some time, and the USSR hen probably been making plant) for such an antack
over since the withdrawal of U3 forces from Korea in 19490 This withdrawal
and subsevent US policy probably led the Kremlin to believe that the US hea
abandoned any intention of giving effective military support to South Korea
and that North Korean aggression could be undertaken with only a slight r':,sk
of US intervention? The USSR probably further estimated that, even in the
event of such intervention, it could readily disclaim or otherwise localize
the confliot0
The timing of the invasion was probably determined primarily by such
recent indications of increased US interest in the Far East as the develop-
ment of a policy for economic and military aid for Southeast Asia,
The prompt US reaction in ordering air and naval support of South Korea
has probably exceeded Soviet expectationso and the USSR is now faced with a
strong possibility of global war if it supports the North Korean invasicn
sufficiently to overcome coTbinod US and South Korean resistanoe, It is still
estimated that the USSR is not yet prepared to risk full-scale war with the
Western Powers? and it le expectedv therefore, that the USSR will seek to
lonalize the Korean conflict? The USSR can achieve this result by pnblialy
disclaiming any responsibility for the invasion and: (1) secretly ordering
a North Korean withdrawal to the 38th Parallel and cessatian of host%litle
(2) permitting the North Korean forces to be driven back to the 38th PenalaEl:
but probably caatinuing sufficient aid to maintain that position or (3) pro-
viding support to North Korea short of open participation by Soviet forces in
an attempt to perpetuate the civil war and maintain North Korean positions
not:1,h of the 38th Parallel? Pecause of the advantages of continuing civil
Notes This memorandum has not been coordinated with the intelligence organi-
zations of the Departments of State, Army, Navy and the Air Force
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
nOtta
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
b'EGLIV,;'
and military disorder in Korea, the USSR will probably adopt the third a,
ternative. In the probable event that this attempt proves impossible, the
situation might well develop into indecisive and intermittent hostilitiee
stabilized at approximately the 38th Parallel, Meanwhile, the USSR will
continue to provide substantial material aid to the North Koreans, includ-
ing irregulars recruited from Chinese Communists and Soviet forces,
Although the USSR has for some time been considering the advisabiliey
of aggressive moves in other areas of the world, there is no conclusive
(widen= to indicate the exact nature or timing of the moves being conte
plated Southeast Asia (particularly Indochina), Iran, Yugoslavia, Gree:m?
and Berlin offer the USSR the greatest opportunities for aggressive moves
or increased pressure, For exempla, there is continuing evidence of mil-leery
preparations in the Balkans aimed at either Yugoslavia or Greece and several
reports have indicated that the Korean invasion was designed, in part, a3
a diversionary action to cover an attack on Formosa,
In view of the vigorous US reaction to the Korean situation, howevee?
it is not likely that the USSR will instigate surprise moves in any of tease
areas until the Kremlin has had an opportunity to study the implications ol
this reaction, particularly as to its effects on the possibility of &Lobel
warfare in the event of Soviet-inspired outbreaks elsewhere, Neverthelesal,
Communist activity in the Far East and elsewhere will continue and will protawy
be intensified, but creator care will be taken to maintain the fiction that
it is "indigenous,"
Meanwhile, the USSR has reacted to the strong UN resolutions on the
North Korean invasion by branding all action taken thus far by the Security
Council as illegal and hence not binding, The attack itself indicated
continued Soviet indifference to ending the boycott of the UN and the tem-
per of naa-Soviet members of the UN will in turn make it far more difficult
for the USSR to return,
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
SECRE..
CENTRAL INTELLIGENCE AGENCY
INTELLIGENCE MENDRANDUNI NO. 302
SUBJECT: Consequences of the Koreen Incident
Execave RegistrY
527
,
8
July 1950
Soviei Pueoonce in Laellphing_the Northern Noreen it'mck.
A. Apart from immediate strategic advantages, the basic Soviet
vbjectives in launching the Northern Korean attack probably were to: (1)
test the strength of US commitments implicit in the policy of contain-
ment of Communist expansion; and (2) gain Political advantages for the
further expansion of Communism in both Asia and Europe by undermining
the confidence or non-Commenist states in the value of US support.
B. The Soviet eatiento of the reaction to the North Korene attach
was probably that: (1) UN action would be slow and cumbersome; (2) the
US would not intervene with its own forces; (3) South Korea would there-
fore collapse promptly, presenting the UN with a fait accompli; (4) the
episode would therefore be completely localized; and (5) the fighting could
be portrayed as US-instigated South Korean aggression and the North Korean
victory as a vic:;ory of Asiatic nationalism against Western colonialiam.
II. Probable Developments from the Korean incident.
There are at present four major alternative courses of action open
to the UCSR. They are not mutually exclusive courses of action. In
particular, it is estimated that the USSR is very likely to try to'prolveg
the fighting in Korea(a/ternativo "B" below) for the short run and then
within a few weeks or months, if conditions appear favorable to Soviet
leaders, shift to the more aggressive course of creating similar incidents
eleewhere (elternetive"C" below). The alternatives are examined not in
order of probability but in order of increasing risk of global war and
increasing expenditure of effort on the part of the USSR:
&tem:Q.7114._ The USSR may localize the Korean fighting, permitting
US forces to drive the North Koreans back to the 38th Paeallei and refrain
from ererting similar incidents elsewhere. In the meantime, the USSR
would remain uncommitted in Korea and would develop the propaganda thence
of US avression and imperialistic interference in domestic efails of cm
Asiatic nation.
Note: This memorandum has not been coordinated with the intelligence
organizations of the Departments of. State? Army, Navypand tho
111:3. Force.
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
?
Approved For Release 2003/0th&fbIA-RDP86B00269R000300040003-1
This alternative is the most cautious course for the USSR
to take Its adoption world indicate complete surprise at the US re-
notion to the Korean incident and would suggest strongly that the USSR
unvilling to ran even a manimum risk of provoking a global conflict
involving the US and the USSR.
2. US prestige and political influence mould be substantially
augmented, particularly with Western European allrias and other nations
aligned with the US,
3. Soviet prestige and influence mould be dameged* but there
mould be compensations in the form of secondary political gains that
mould accrue as a result of:
(a) promoting tho "peace campaign" and portraying the US
as military aggressor;
(b) exploiting the theme of Asian nationalism versus Western
imperialism;
(c) maintaining the North Korean and Chinese Coneunist threat
to South Korea as an emberraesment to devolopunnt of a conetractive US or
UN policy in Korea.
4. This alternative course of action is unlikely; Soviet advantages
would be secondary* comparatively long-range, and intangible, while Soviet
disadvantages would be immediate,
AlIppnative BA The USSRmay localize the 'i;orean fighting, still refrain
from creating similar incidents elsewhere* but in corder to prolong US
involvement in Korea* give increasing Material aYd to the Iforl.:41.
perhaps employing Chinese Commonlet troonsi either oovertly cr7 cr?ort1;y0
The USSR mould remain uncommitted in Korea and would develop the propagenn-
themes of US aggression and imperialistic interference in domestic affair
of an Asiatic nation.
10 This alternative is a moderately cautious course for the
USSR to teke. The USSR mould probably Consider that its adoption would
Involve only a slight risk of provoking t global nonflict involving the
113 and the UTSR6
2. ITS prestige would be seriously dameged if the USSR succeeded
In prolonging the incident in this may, Western European allies and other
nations aligned with the US mould question the immediate military velue of
US commitments even though expecting them to be honored,
3. Soviet prestige would be augmented if the fighting in Korea
were prolonged without an open Soviet commitment.
SECRET
Approved
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/204ZWIRDP861300269R000300040003-1
h. The USSR would obtain appreciable secondary, comparatively
long-range gains in political influence as a result of promoting the
"peace campaign" and portraying US as imperialistic Western aggressor
in Asia, unless successfully countered by a US "Truth" campaign0
5. Deep involvement of US military forces in Korea would seriously
limit US capabilities to support Similar commitments elsewhere. Moreover,
the Jestern European allies of the US would feel dangeroesly,exposed
for some time (even if the US began a partial mobilization for war),
6. The USSR probably will adopt this alternative course of
action at least for the short run, since there would be few Soviet
disadvantages or risks and the Soviet gains would be appreciable?
70 This alternative will appear especially attractive to the
USSR because at any time, if conditions appeared favorable to Soviet
leaders, the USSR could shift to the more ambitious program (alternative
"0", immediately below), in which alternative "B" would merely be a
first phase?
Alternative C, The USSR, while attempting to prolong the fighting in
Korea as in-aTternative "BP, may also attempt to disperse and perhaps
overstrain US military forces-in-readiness by creating a series of
incidents similar to the Korean affair, Without directly and openly
involving Soviet forces, such incidents could be created in Formosa,
Indochina, 3urmal Iran, Yugoslavia, and Greece, The effects of such
incidents could be aggravated by renewed pressure on Berlin and, possibly,
Vienna,
1, This alternative would be a comparatively aggressive course
for the USSR to take, Its adoption would indicate willingnoes to run
an appreciable risk of provoking a global conflict becaese of the possible
US reaction, The USSR could easily turn to this alternative at any
times, but it is not likely to turn to it until the USSR has fully analyzed
the implications of the US commitment in Korea?
2. Having employed its armed forces in support of its commitment
in Korea, the US will have to honor similar comaitments or lose most of
the advantagee of the policy of supporting the Korean comaj,trnent,,
3. The US does not have the military forces-in-readiness to
honor its commitments with US military forces and equipment in many
areas other than Korea (perhaps none) without a substantial increase fel
OS military forces and industrial productivity in the military field,
bringing about what would amount to at least a partial (as distinguished
from a general) mobilization for war?
-
SECRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/2-RDP86600269R000300040003-1
4. Deep involvement of US military forces in tha Far East or
T.Aar East would leave Western Europe even more dangerously exposed than
at present*
5. At some point further Korean-style incidents (requiring the
commitment of US forces to stabilize the situation) preoumebly would
force the US to adopt one of the following alternatives:
(a) revise the policy of general containment by limiting
US commitrents and by planning leo combat Soviet aegression only at those
selected points where existing US military strength would permit;
(I) begin partial military and industrial mobilization in
an attempt to enable the US to combat any further Soviet-sponsored
aggreseion anywnere in the world; or
(c) begin total mobilization to enable the US to threaten to
eeet any Soviet or Soviet-sponsored aggression with war against the USC,R,
e. The USSR probably will adopt alternative "C" sooner or later
if Soviet leaders do not estimate the risk of global war involved to be
substantial or are prepared for a global war if it develops.
7. If Soviet development of this alternative course of action
leads to a general US mobilization ,itappears at this time that the
USSR probably would in that event continue limited aggressions, accompanied
by the customary "peace" propaganda, discounting actual US initiation of
a general war and perhaps estimating that the political and economic
strains of mobilization would weaken or discredit the US and its foreign
policy% The USSR, however, may;
(a) desist from further aggression of the Korean type, fearing
a global war and taking mobilization as an indication of greater risk
than Soviet leaders had anticipated in choosing this course of action; or
(b) expecting US-initiated global war, attempt to seize the
initiative by immediately attacking the US (in effect turning to
alternative "Du, below)0
Alternative D. The USSR may consider US intervention in Norea either as
the irar?rso an inevitable global war or as justification for beginning
a global war for which it is prepared--in either case immediately attacking
the US and its allies.
,!JeZRET
Approved For Release 2003/06/20 : CIA-RDP86600269R000300040003-1
Approved For Release 2003/06/204-01ALRDP86B00269R000300040003-1
lo Nothing in the Korean situation as yet indicates that the
P:-1S1 would delibei-ately decide to employ Soviet forces in direct military
;action precipitating global waro Such a deciaion is unlikely if, as
now C-.:70'.1111B probable, Soviet leaders believe that:
(a) there are continuing opportunities to expand Soviet
influence by the comparatively cheap and safe meant. of Soviet-controlled
Communist revolutionary activity (including propaganda, sabotage, sub-
version, guerrilla warfare, and organized military action by local
Communist troops--as in Korea), which can be supported by Soviet diplomacy
and the mare threat of Soviet military strengthAn-readinees; and
(b) there is substantial risk involved for the USSR in the
global war that almost certainly wouldensue from direct military action
by Soviet forces:,
2. The USSR would appear to have little reason to be peeriaistic
about gains by methods short of global lux, particularly by adopt ng
the courses of action described in Alternatives "B" and "C" above.
3. The USSR is unlikely to choose the alternative of deliberately
provoking global war at this time in view of: (a) the general superiority
of the US and its allies in total power-potential; and (b) the fact that
the present Soviet atomic cepebility in insufficient to neutralize US
atomic retaliatory capabilities and to offset the generolly superior
power-potential of the US and its allies by interfering with the US military
and industrial mobilization?
III? Effects of a Failure of US Forces to Hold South Korea?
Ao The immediate consequences .of a failure to hold South Korea
mould be a damaging blow to U$ prestige with loss in political influence
greater than the loss that would have been incurred if the US had not
undertaken to support its moral commitment in South Korea?
130 The US would be confronted with a choice betw-,,, 41,1*rn Ileaesirable
alternatives: (1) accepting the loss of US prestigeper (2) attempting to
regain as much prestige as possible by committing substantial US
military resources in a difficult and costly invasion of an area
which is not of primary strategic importance to the over-all US
military position? In either case US foreign policy and military
capabilities mould be discredited at home and &roe&
Co If US forces were expelled from Korea, the USSR would probably
adopt alternative "C" as described above (Section II). It might be
tempted, however, to postpone further aggressive action elsewhere until
it had determined whether, as a result of the loss of world confidence
in the effectiveness of US aid, other areas might not be bought within
its sphere of influence through intimidation alone
- 5 -
Approved For Release 2003/06/20 i.,EAL.FP86B00269R000300040003-1