WEEKLY SUMMARY NUMBER 48

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A002200010001-5
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: December 27, 2016
• Document Release Date: March 19, 2013
• Sequence Number: 1
• Publication Date: April 29, 1949
• Content Type: REPORT

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WEEKLY SUMMARY
Number 4 8
2 9 APR 1949
CENTRAL. INTELLIGENCE AGENCY
UfiN TO DES .CORDS
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Class. TO: 73
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1. This publication contains current intelligence exclusively
and therefore has not been coordinated with the intelli-
gence organizations of the departments of State, Army,
Navy, and Air Force.
2. This copy may be either retained, or destroyed by burning
in accordance with applicable security regulations, or
returned to the Central Intelligence Agency.
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.
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C O N T E N T S
Page
HIGHLIGHTS ....................... 1
ASPECTS OF EAST WEST CONFLICT .......... 2
WESTERN EUROPE ................ 5
EASTERN EUROPE ................ 9
NEAR EAST - AFRICA .............11
FAR EAST .........................14
WESTERN HEMISPHERE ........... 17
ARTICLE
Communist Ability to Rule Yangtze Valley ..... 19
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H I G H L I G H T S.
Whether or not the Berlin blockade is lifted as a
result of the Jessup-Malik talks, the action of the USSR in
publicizing the negotiations at this time reflects the Krem-
lin's desire to regain the initiative in the struggle for Ger-
many. By taking some step to ease East-West tension, the
USSR probably hopes that it can halt the steady progress of
western consolidation (see page 6). If the lifting of the
blockade and four-power discussions on Germany are the
product of the current talks, the Soviet aims in such four-
power discussions will be to lay the groundwork for achiev-
ing ultimate control over all Germany or, as a minimum,
to obtain a `Xneutral'F Germany which will deny the western
powers exclusive control over west Germany.
While the East-West struggle was chiefly centered
last week on the possible lifting of the Berlin blockade, it
was also going on over several peripheral issues, among
which was the continuing effort of the West to organize an
effective anti-Communist international labor movement
(see page 2). The USSR is attempting to counteract the
western effort by strengthening its relations with non-Com-
munist and labor groups outside the Soviet orbit, principally
through the Communist-led WFTU.
The position of the Chinese Nationalists. has continued
to crumble during the past week, despite a general desire
among National Government leaders to continue resistance
to the Communists (see page 15). The already limited ability
of the Nationalists to resist has been further decreased by
the failure of Acting President Li Tsung-jen to reach an
understanding with Chiang Kai-shek and by extreme weakness
of the Nationalist armed forces.
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ASPECTS OF EAST - WEST CONFLICT
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While the struggle between East and West was being
highlighted this week by the Jessup-Malik talks on lifting the
Berlin blockade and the Communist victories in China, it was
also being carried on over peripheral, yet important, issues.
This phase of the struggle centered chiefly on: (1) Western
efforts to organize an effective anti-Communist international
labor movement and to bring about Western European unity;
and (2) Soviet moves to counteract these efforts.
World Labor The decision of the British Trades Union Con-
gress (TUC) to call a June meeting at Geneva
of western trade union delegates is an important step toward
the eventual formation of a new anti-Communist international
labor movement. The decision followed further attempts by US
and British labor leaders to resolve their differences and the
demand from the Brussels small power labor conference for
prompt organization of the new international. Although no agree-
ment has yet been reached on basic differences between US and
British labor leaders (the relationship of the CIO and AFL In
a new federation remains a critical point), the formation of a
federation capable of competing on equal terms with The C ommu -
nist-led WFTU for control of world labor may be hastened by:
(1) the TUC agreement not to insist that former WFTU Assistant
Secretary Schevenels head the new organization; and (2) the desire
of the big-power unions to regain the initiative from the small-
nation unions in promoting the federation.
European Council The substantial progress toward Western
European unity already made in the econo-
mic and military. fields will soon be matched in the political
field as a result of the large measure of agreement on the pro-
posed Council of Europe reached this week between the Brussels
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Pact powers, Italy, Ireland, and the Scandinavian countries.
Voting procedures and the advisability of admitting Greece
and Turkey are apparently the only major unresolved prob-
lems. The foreign ministers of the prospective member
nations plan to meet in London on 3 May to sign the agreement
establishing the council.
Soviet Reaction Meanwhile, the USSR Is seeking to offset
western unity by strengthening its contact
with non-Communist labor and intellectual groups outside the
Soviet orbit. The WFTU, which is already attempting to bring
western industrial workers into its trade departments, is also
trying to dissuade the Australian and Swedish national labor
organizations from joining the seven small. Western European
organisations which plan to withdraw from the federation in
June. The WFTU is not expected to be successful in these
efforts, however, and will probably not be able to retain any
small-power labor elements not already Communist-controlled
(such as the Australian Metal Workers and Waterside Workers).
Moreover, in the months to come, as it becomes more widely
recognized as a wholly Soviet-controlled instrument, the WFTU
will find it increasingly difficult to substantiate its claim to
represent world labor.
On the "peace and democracy" front, the USSR Is
attempting to promote Soviet objectives and maintain contacts
with ` intellectuals" In the non-Communist world by establish-
ing permanent National Peace Committees under the direction
of an international peace organition. The USSR has thus
created a propaganda mechanism similar to the "World Com-
mittee Against War and Fascism" established in 1932 by the
prewar Comintern. In addition to providing a means for extend-
ing Soviet influence beyond the narrow limits of the Communist
Parties, these peace committees may serve as a cover for
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clandestine Communist operations. Some of the western
delegates at the recent Paris Peace Congress stressed the
militant intentions of the new movement and emphasized
their determination to avoid war "even at the cost of revolt"
against their respective governments. Wherever feasible,
they apparently hope to organize the national and local com-
mittees for demonstrations, strikes, and even sabotage.
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Soviet Propaganda In a further effort to counteract the
effect of the Atlantic Pact and growing
political and economic unity in Western Europe, the USSR
is placing greater propaganda emphasis on Communist gains
in the Far East. By stressing that the Communist victories
in China will result in important changes in the world balance -
of-power, the USSR hopes to: (1) convince audiences at home
and in the colonial areas that Soviet power is invincible; and
(2) undermine western confidence in the ability of the West
to prevent further Soviet expansion. With fewer oppor-
tunities in Europe for propaganda exploitation, the USSR will
probably devote its propaganda efforts more and more to the
Far East and colonial areas. As part of this new emphasis,
Soviet propaganda will portray the USSR as the exclusive
champion of independence for the countries of southeast Asia
and of industrialization of all backward areas. Simultaneously,
Soviet propaganda will accuse the western powers of advocat-
ing the perpetuation of agricultural economies in Asia and will
portray the Truman point-four program as a device to exploit
the backward areas of the world and to keep them at the mercy
of the industrial West.
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WESTERN EUROPE
Italian Colonies British insistence on sole control over
Cyrenaica has sharply reduced the likeli-
hood that the current session of the GA will reach a compro-
mise solution establishing a five-power trusteeship for all
Libya. Sentiment had been tending toward such a solution as
a result of efforts by the key Arab and Latin American blocs
to agree on the terms of a US UK-French-Egyptian-Italian
trusteeship for Libya. If the UK continues to insist on a
separate Cyrenaican regime, however,any multilateral pro-
posal may well be limited to the remaining areas of Libya.
In the likely event that such a proposal proves unsatisfactory
to the pro-Italian bloc, the Assembly will .probably postpone
disposition of Libya until the September session. Because
of the increasing sentiment for a one-package solution to the
Italian colonies question, it is quite possible that the disposi-
tion of the other colonies would also be postponed.
Spanish Issue The lifting of the ban on diplomatic chiefs of
mission to Spain, as proposed by the Brazilian
delegation, will probably not be approved at the current session
of the General Assembly. Western European opposition to the
proposal has been- strengthened by the US decision to abstain from
voting, and Brazil and the co-sponsors of the proposal will
probably be unable to muster the necessary two-thirds majority
for its approval. Brazil may well decide to withdraw the pro-
posal rather than see it defeated by combined opposition from
Western Europe, the US, the UK, Canada, Australia, China, the
Philippines, the Soviet bloc, and some Latin American states.
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Civil Air Transport The "liberal" British interpretation
of US-UK air policy designed to contain
Satellite air activities, together with a tendency by Western
European nations to make the exchange of air rights part of
their general trade negotiations with Satellite countries, may
soon necessitate a thorough reassessment of the US -UK. air
policy agreement. For example, against known US desires,
the UK recently expressed its willingness to grant the Polish
airline the right to overfly the British Zone of occupied Ger-
many,, provided the Poles grant full and immediate reciproci;cy
to the Belgian airline. The Belgians hope that implementation
of the projected agreement with the Polish airline will facilitate
the signing of the pending Belgian-Polish trade agreement on
favorable terms. Similarly, Dutch unwillingness to block a
special flight to Amsterdam by the Hungarian airline was
closely tied to the Netherland s desire to avoid any action
which might disturb its trade relations with Hungary. A Danish-
Polish exchange of air rights in 1948, likewise, was a factor in
the successful conclusion of the present trade agreement be -
tween those two countries. A situation similar to that in West-
ern Europe has arisen in the eastern Mediterranean where
Greece and Turkey, determined- not to impair their trade rela -
tions with Czechoslovakia, have failed to respond to US urgings
that present Czechoslovak air services at Athens and Istanbul
be terminated.
GERMANY
Soviet Overtures Regardless of the outcome of the Jessup-
Malik talks on the lifting of the Berlin
blockade, the Soviet action in publicizing the negotiations
at this time reflects the Kremlin's desire to regain the initia-
tive in the struggle for Germany. Confronted with the
failure of the blockade and the early establishment of a west
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GERMANY
German government, the Kremlin probably hopes that by
taking some step to relax East-West tension, it can halt
further western consolidation. In Germany, the USSR may
hope to delay formation of a west German state by raising
once again the possibility of a unified Germany. In Europe,
the USSR may hope that a show of Soviet conciliation will
lessen the feeling of urgency for military preparedness and
so delay,or at least weaken,the Military Aid Program. If
the USSR does lift the blockade and enters into four-power
discussions on the German question, the maximum Soviet
aim in Germany will be the establishment of a regime which
will grant the Soviet Union opportunities for ultimate control
over the entire country. The minimum Soviet aim will be a
"neutral" Germany which will prevent west Germany from
being exclusively under western power control. If either of
these aims should prove unobtainable and if the Kremlin
should conclude that a settlement would threaten Soviet con-
trol over east Germany, the USSR might then abandon its
"unity" theme and establish an east German state under
exclusive Soviet domination.
Western Government If the Jessup-Malik talks result in
the lifting of the Berlin blockade, the
effect on the preparations for the creation of a government
in western Germany would be negligible. In western Germany,
the draft constitution is scheduled to undergo final readings
in a plenary session of the Bonn Council on May 11-14. The
draft will then go to the western military governors for ap-
proval. Reaction at Bonn to the TASS release on the talks on
raising the blockade has been general skepticism of Soviet
sincerity. Moreover, previous rumors that the blockade might
be lifted, by arousing fears that a settlement of German issues
through the CEM would be at the expense of western Germany
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GERMMY
and by creating a sense of urgency on the part of those Germans
who still wanted to bargain with the West for better terms, may
have contributed to some extent to successful action on the con-
stitution. Difficulties may arise, however, in ratification of the
constitution by the western state diets, particularly in Bavaria.
These difficulties would stem primarily from long-standing
disagreements between German political parties, rather than
from reaction to the possible lifting of the blockade.
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EASTERN EUROPE
SOVIET UNION
Israeli Relations Increasing Communist attacks on Zionism
and the Israeli Government, although placing
a strain on Israeli-Soviet relations, are unlikely to change either
the Kremlin's external policy toward Israel or Israel's generally
neutral position between East and West. In recent months, the
Communist parties in the Soviet orbit, the US, and even in Israel
have reverted to traditional Communist opposition to Zionist
nationalism and Soviet propaganda has begun to condemn the
"bourgeois~5 nature of the new Israeli Government. The Satel-
lite states, apparently reluctant to lose large segments of their
skilled and educated citizens, have drastically reduced emigra-
tion to Israel, thereby discouraging Israeli hopes of fulfilling
its immigration requirements. Within the Soviet Union, the
current anti-Jewish campaign seems to have been inspired in
part by the frowth of pro-Zionist sentiment among Soviet Jews
after Israel s emergence as an independent state. These attacks,
however, rather than representing a fundamental change in
Kremlin external policy toward Israel, appear to stem primarily
from internal Soviet considerations. For, so long as support
of Israel will serve to weaken US-UK influence in the Near East,
the USSR will continue to aid Israel on a diplomatic level and
in the UN. Nonetheless, because Zionism is basically incompati-
ble with Communism and any non-Communist government is
automatically suspect, the USSR feels forced to attack the present
Israeli Government and to eliminate all Zionist influence within
the Soviet orbit.
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GREECE
Military Step-up The recent increase in the clashes between
guerrillas and national forces throughout
central and northern Greece, resulting partly from aggressive
probing on both sides, forebodes a considerable period of
intensified military activity. Although the recruiting and
supply potential of the guerrillas within Greece has lessened,
they have not lost the active friendship of any of their north-
ern neighbors. Tito is maintaining (at least publicly) a
correct Communist attitude toward the guerrilla movement.
Albania has been providing the guerrillas with their most
valuable support: reserves from Albania are still being brought
into the Vitsi-Grammos sector to counteract the fairly heavy
casualties suffered in the Grammos battle. There also appears
to have been a slight build-up of guerrilla strength near the
Bulgarian frontier of eastern Macedonia. It is possible that
the guerrillas may hope, by. virtue of their increased activity,
to gain greater logistical support from Bulgaria. If such aid
materializes, Greek anger may express itself in renewed-de-
mands for a larger army. The Greeks have. already expressed
hearty approval of a recent British suggestion that Greek
armed strength be increased. They may become convinced
that only with such an increase can the struggle be ended with
a minimum of bloodshed.
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NEAR EAST - AFRICA
PALESTINE
Peace Conference The Palestine peace conference now being
held at Lausanne between Israel and Egypt,
Lebanon, Transiordan, and Syria is not expected to produce
an early solution of outstanding problems. The main issues are:
(1) Israel's frontiers; (2) the Arab refugees; and (3) the future
status of Jerusalem. On the first issue, Israel will try to per-
suade the Arabs to accept approximately the present armistice
lines as legal frontiers. The Arabs, on the other hand, will
attempt to cut Israel back to the original partition boundaries
or, at least, to frontiers enclosing an equivalent amount of terri-
tory. Trans Jordan will demand a port an the Mediterranean and
a corridor leading to it. Syria will demand western Galilee,
and quite possibly eastern Galilee as well. Thas,agreement oft
this issue is unlikely unless great pressure is exerted an one
side or. the other. With respect to the Arab refugees, it is un-
likely that even the Arab governments themselves expect the
refugees to be repatriated in any significant numbers. Israel
will probably agree to permit the return of a token number and
then devise some formula for awarding compensation to the re-
mainder. The formula will be so designed as to provide a face-
saving device for the Arab governments (which have been de-
manding repatriation or compensation for the refugees) without
placing any undue financial burden on Israel. On the matter of
Jerusalem, the major difficulty will be for the contracting parties
to persuade the UN to accept, in lieu of the internationalization
which it recommended, the division of the city into Israeli and
Transjordan sectors. Even if agreement is reached on these
main issues, Israel and Its Arab neighbors probably will not
exchange diplomatic representatives or establish commercial
relations for a long time to come.
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INDIA -PAKISTAN
Tribal Dispute Tension between Afghanistan and Pakistan
over the border tribal issue seems to have
lessened within the last fortnight. The Pathan tribesmen
have not been particularly aroused by the agitation over their
status, and the somewhat calmer tone of Afghanistan's anti-
Pakistan press and radio propaganda suggests that the Afghans,
realizing their campaign is less successful than expected, may
be preparing for a peaceful retreat. They can hardly make
such a retreat gracefully, however, unless Pakistan publicly
Indicates that it does not intend to force the integration oo the
tribal areas into Pakistan. Thus far, Pakistan has gone no
further than to state its willingness to negotiate the question
of the tribal areas if Afghanistan halts its anti-Pakistan cam-
paign. Meanwhile, the UK and Iran have taken an active interest
in ending the controversy. The British Foreign Office is con-
sidering the possibility of calming the Afghans by helping them
sell their goods in sterling areas and. by holding out the hope of
a loan and of arms shipments. Iran, which has already urged
patience and conciliation on Pakistan, has Intimated that it may
offer its good offices in settling the dispute. Neither of these
steps, however, would offer an easy solution. The British can
hardly make arms shipments to Afghanistan except with Paki-
stan's assent, which is not likely to be forthcoming under
present circumstances. Iran's projected offer is unlikely to
be accepted,by Afghanistan because of the latter's suspicions
of Iran and their present difficulties over distribution of the
waters of the Helmand River.
Kashmir Problem The UN Commission for India and Pakistan
(UNCIP) has once again failed to get India
and Pakistan to agree on truce terms for Kashmir. UNCIP s
truce proposals of 15 April elicited a moderately favorable re-
sponse from Pakistan, which "accepted" them with reservations.
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INDIA -PAKISTAN
India's reply to UNCIP, however, completely ignored the
question of acceptance or rejection. Instead, India reiterated
its displeasure at the absence of references either to the dis-
arming and disbanding of the Azad forces or to India's re-
sponsibility for the security of Kashmir. The Indian press
continues to play up alleged cease -fire violations, and it
appears that the period of peace and quiet which set in after
the cease-fire is definitely over. Faced with increasing
criticism from both sides for its alleged weakness and
vacillation, UNCIP plans to present revised truce- proposals
by the end of April, this time urgently requesting that both
sides accept the terms immediately and unconditionally.
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FAR EAST
CHINA
Nationalist Weakness Although Nationalists,,generally, support
a policy of ce tinued resistance to the
Communist advance, there is little prospect tat the v ,rimm
Nationalist elements can unite to make that resistance effective.
In addition, to the extreme weakness of the Nationalist armed
forces, the failure thus far of Acting President Li TsFg-,jen
to reach an understanding with Chiang Kai-shek is further
fragmentizing the extremely limited Nationalist ability to resist.
Li has announced that he cannot continue in his present position
without full presidential authority and freedom from Chianng's
in.te ?ference. Unless these conditions are met:, .6i plains to re-
main . in Kwangsi Province and continue resistance on a regional
basis, Meantime, right-wing Kuomintang groups are reportedly
conspiring hopefully for Chiang's return to authority. Under
these circumstances, the Nationalist Government can be ex-
pected to assume more and more the character of a regional
regime and its claim for continued recognition by foreign
powers will become more tenuous.
Military S ituation The Chinese Communist forces that crossed
the Yangtze last week met no notable re -
sistance and, in some key points, were aided in, their advance
by pre -arranged defections of opposing Nationalist forces, The
Communists first fanned out from their 20 April bride eheads
east and west of Nanking and, as the -week ended, push ,,ad a third
column directly across the river at Pukow to seize the abandoned
Nationalist capital, Nanking. Ironically, the. captors of Nanking
were ex-Nationalist troops that bad "one overto the Commu-
nists some seven months ago at the fall of Tsina n,
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C7A.
This week, the two major Comm mist forces across
the river have moved east in a two-,-.w onged drive around Lake
Taihu: toward the . cho -Sian hai area. The northerii force
is reportedly 15 kilometers northwest of Shanghai and. the
sou rnn prong is nearing shing on the Hhanngcha - l an kF ,) i.
railway, Communist control of t ais rail line will deprive. the
Nationalist troops refugee -clogged ngha of their last
overland escape route.
Since the initial crossing, there appears to have been,
no real opposition to the lightning Coin, Communist dthre Nationalist
forces are continuing their withdrawal to the area south of
Hangehow and the Nationalist i h Command has announced
its intention to establish a second defense :line rni n.in from
Hiangch along the Chienfang River southwest to angc.han >
Effective resistance to a Communist attack on Shanghai.
Is unlikely in view of vocal, widespread opposition to making
that city the scene of fighting, the low combat efficiency of the
Nationalist n.rriscn, and the dear tlh of "hard money" pay for
the troops. instead of assaulting the city, the Communis
may be satisfied with sea ding off the Whangpoo River to prevent
a sea escape by Tang En-po annd his forces and T ng in turn
(under the direction a is Chiang Kai.-,shek).w#,ll probably make
evei, y effort to evacuate all the troops he can by land, .sea, and
air. With the capture of the Hanngehow . Sl a,nn ,i sector possible
whenever the, Communists desire, the major Communist objec-
tive is first to cut and then. to liquidate all. of Tangs forces
remaining in the sector.
To the west, in the Hanak sector, fighting has not yet
broken out. Press reports, hcmever. indicate that el emenAs of
Lin Plao's Man.chur.ian forces are now operating northwest of
Hank ow, possibly inn an effort to encircle and cut off l' ati.o ftst
forces in, this sector under Pal Chung-hsi. l has long anticipated
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CHINA
such an, operation and has been in the process of withdrawing
from the l3ankow area for some time. Other Communist forces
reportedly have crossed at Kiukiang, following Nationalist
evacuation, and are mmdng south toward Nanchang. The last
major Nationalist pocket behind Communist lines in North
China was also eliminated last week when Taiyuan fell to the
Communists after a five -hour assault. Taiyuan's loss very
probably spells the early abandonment of Tsingtao, which ha.:-.
now lost its chief strategic significance as a base of air supply
for the fallen Shansi capital.
INDOCHINA
Military Situation Although the recent. Viet Minh offensive
along the Chinese border of Tonkin failed,
the military scales can be tipped in favor of the French only
if further Viet Minh attacks do not materialize-and if French
reinforcements are received promptly. According to French
officials, their military position in Tonkin is perilous, although
not yet desperate. Colonel Souard, President.Auriol's personal
military representative who has been surveying the situation
in Indochina, is expected to recommend: (1) replacement of
top French officers in the area in order to correct the ineffec-
tive liaison between various French commands; and (2) pro-
curement of 40-50 fighting planes from the US. If Paris officials
remain unimpressed with the gravity of the French position
and fail to implement these expected recommendations, the
French may eventually be forced. to evacuate Tonkin.
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WESTERN HEM-1SP ERE
May-day De m.ons tions Communist May -day activities
in Latin America. are not likely
to get beyond control of the various local police forces, who
are normally ready for trouble on this date. In Montevideo
where the international Labor Organization is meeting, however,
Uruguayan Communists (who have been excluded from participa-
Lion in this conference) may put on a more vigorous demonstra,
tion than usual in order to impress the delegates and will cape-
talize, for propaganda purposes, on any repressive measures
the police take to maintain order.
ARGENTINA
Political Crisis Although substantial progress has been
made in recent weeks in revising Argentina's
foreign economic policy, the Government has failed utterly
its efforts to arrest inflation. at home and seems to he heading
toward a major political crisis. Since an early March showdown
with the army, when Peron apparently was able to gain the pres
ent. period of grace by promising. to correct the country's eco-
nomic ills, the Government has on successive .occas-lons been
forced to accede to inflationary labor demands, apparently being
unable to find a ny formula to resist them. Public denunciations
of labor, instead of curbing labor's demands for higher wages,
have actually contributed to the drop in Peronista strength in
recent provincial elections. At the same time, government con-
cessions to labor have roused the ire of the army, which has
charged Peron with: "indulgence' toward labor-, top army leaders
are'currently disaffected; and the colonels' clique, which brought
Peron to power, is reported to have taken an opposition stand to
the Government. Thus, heron, dependent on both labor and army
support for the continuance of his regime, has failed to satisfy
either group and is moving toward another political crisis.
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ECUADOR
Failing Economy Rapidly deteriorating economic conditions
in Ecuador present a. serious threat to the
Plaza regime. Factors accentuating the usual seasonal con-
striction of trade and credit are: (1) overextension of credit
and lack of credit resources; (2) business apathy, engendered
by the belief that lower prices and fewer exchange controls can
be expected; (3) further decline in textile sales; and (4) appre..
hension that world prices will decline on rice, cacao, and
coffee (Ecuador's principal exports). President Plaza, who
had attempted to inaugurate a long-range program to improve
the country's economy, has been forced by the present crisis
to institute short term measures which have not, however,
alleviated the economic situation to any appreciable extent.
Although the Communists are not an effective threat to the
stability of the administration, the Communist Party is taking
advantage of the economic situation and, by agitating labor and
promoting strikes, is following its policy of harassing and
discrediting the administration. The Communists, however,
are stopping short of precipitating the. actual overthrow of the
Government, in the fear that any change might bring the
rightists to power. Opposition political groups have been
checkmated by the common fear that the fall the present
administration would serve only to bring a rival group to
power. Two distinct subversive movements are evident in
the army, but these forces are so balanced that thus far they
have not felt able to challenge the Government. it is impossi-
ble, however, to predict the future position of the traditionally
opportunistic army, particularly in view of the deteriorating
economy; and there is no assurance that the present balance
among the political opposition forces will be maintained.
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COMMUNIST ABILITY TO RULE YANGTZE VALLEY
With early military occupation of the Yan y ~ ae Valley
assured, the Chinese Communists will be confronted with the
complex problem of administering Chinas major industrial
region. They will probably be capable 'restoring law and
order, public utilities, transportation, and dustria.l produc-
tion to a considerable extent, but they will encounter difficulty
in creating a stable financial structure and in reviving a.de-
qua.te foreign trade.
-a.
The pr cipal industrial cities in the valley area
I ankow, ac ang, }ianyaang, Changsha, Nanchang, Nan ixng,
and Shanghai--have experienced a general breakdown in gov-
ernment, finances, and public utilities, Moreover, this densely
populated region is burdened by the influx of large numbers
of refugees. Following the capture of the major cities, it. will
probably be some month n before Communist policies or pro-,
visional decisions for government of these cities will be pro-
mulgated: this delay will further complicate the enormously
difficult task facing the too-few? inexperienced Communist
administrators in restor1. law and order and reviving econo-
mic activity.
On the other hand, initial Communist efforts will be
facilitated by several factors, The people in general will be
enthusiastic over the prospect of the unification of North and
Central. China for the first time in many years and the oppor -
tunity this afforded for the reopening of normal trade channels,.
Government employees at the working level. for the most, part
will remain at their posts. communications and transpor .-
tion facilities can be restored between the cities and the rural
areas and between the Yangtze area and North. China, prospects
for increased internal trade and productionn are gocdi. Food and
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cotton are plentiful in the rural areas; ample stockpiles of
coal exist In North China; raw materials are available for
delivery to Yangtze Valley industries; and the North China
markets for Yangtze industries will once again become
available.
Despite these favorable prospects for the restoration
of public utilities and the growth of internal trade, the Com-
munists will have difficulty in attaining a stable financial
structure and monetary system. Communist efforts to
industrialize the area at the expense of the rural areas will
meet with peasant resistance. Moreover, the Communists
will have difficulty in restoring foreign trade and thus pro-
curing the many imports essential for the full restoration of
economic activity.
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DISTRIBUTION
1......... The President
2,64....... Secretary of State
3,4........ Secretary of Defense
5......... Secretary of the Army
6......... Secretary of the Navy
7......... Secretary of the Air Force
8,70....... Chairman, National Security Resources Board
9,71....... Executive Secretary, National Security Council
10......... Assistant Secretary of the Navy for Air
11,69....... Chief of Staff, U.S.Army
12,13,14..... Chief of Naval Operations
15,16,17..... Chief of Staff, U.S. Air Force
18......... Director of Plans and Operations,General Staff,'Fu.S.A.rmy
19......... Deputy Chief of Staff (Operations) U.S.Air Force
20. ........ Deputy Chief of Naval Operations (Operations)
21......... Director of Plans and Operations, U.S. Air Force
22,23,24..... Special Assistant to Secretary of State for Research
and Intelligence
25,26,27,28,29, Director of Intelligence, General Staff, U.S. Army
30231
35,36,37,38,39,, Chief of Naval Intelligence
40,41,42,43,44.
45,46,47,48,49. Director of Intelligence, U.S. Air Force
50......... Director of Security and Intelligence,Atomic.Energy Comm.
51......... Executive Secretary, Military Liaison Committee,
Atomic Energy Commission
52,53,54,55,56. Chief,Acquisition & Distribution Division,OCD,Dept.State
57......... Director, Federal Bureau of Investigation
58......... Secretary, joint Chiefs of Staff
59......... Chief, Policy Planning Staff, Department of State
60.......... Secretary of State (Attention: Chief, Policy Reports Staff)
61......... Deputy Director, Joint Intelligence Group, joint Staff
62,63....... Secretary, joint Intelligence Group, Joint Staff
65......... US Air Force Representative on joint Strategic
Survey Committee
66,67....... Secretary, State Army-Navy Air Coordinating Committee
68......... Administrator, Economic Cooperation Administration
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r
U. S. GOVERNMENT PRINTING OFFICE
2631-S--1948
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