PROSPECTS FOR THE GOVERNMENT OF THE REPUBLIC OF CHINA

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• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 06077388
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• Document Creation Date: March 8, 2023
• Document Release Date: July 30, 2019
• Case Number: F-2017-01898
• Publication Date: June 20, 1961

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NIE 43-6 1
20 June 1961
1.0
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 43-61
(Supersedes N I E 43-59)
PROSPECTS FOR THE GOVERNMENT
OF THE REPUBLIC OF CHINA
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in. by the
UNITED STATES INTELLIGENCE BOARD
on 20 June 1961. Concurring were The Director of Intelli-
gence and Research, Department of State; the Assistant Chief
of Staff for Intelligence, Department of the Army; the Assist-
ant Chief of Naval Operations (Intelligence), Department of
the Navy; the Assistant Chief of Staff, Intelligence, USAF;
the Director for Intelligence, Joint Staff; the Assistant to the
Secretary of Defense, Special Operations; and the Director of
the National Security Agency. The Atomic Energy Commis-
sion Representative to the USIB, and the Assistant Director,
Federal Bureau of Investigation, abstained, the subject being
outside of their jurisdiction.
1
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TABLE OF CONTENTS
Page
THE PROBLEM 1
CONCLUSIONS 1
DISCUSSION 3
I. INTRODUCTION
3
II. INTERNATIONAL PROBLEMS
3
A. The GRC's Threatened International Position
3
1. The battle for the UN Seat
3
2. Two Chinas
4
B. Uncertainty Concerning US Support
4
C. The Unfinished Civil War
4
1. Chinese Communist Positions and Intentions
4
2. Chinese Nationalist Positions and Intentions
5
III. GRC REACTIONS TO ITS CHANGING INTERNATIONAL
STATUS
6
IV. DOMESTIC PROBLEMS
7
A. Political
7
B. Economic Problems
8
V. CONTINGENCIES
8
A. GRC Reactions to Major Shifts in US Policy
8
B. Detonation of a Nuclear Device by the Chinese Com-
munists
10
C. The Death of Chiang Kai-shek
10
APPENDIX A: Military
11
APPENDIX B: Political Tables
15
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PROSPECTS FOR THE GOVERNMENT OF THE
REPUBLIC OF CHINA
THE PROBLEM
To estimate the prospects for the Government of the Republic of China (GRC)
over the next two or three years, with particular reference to its international position.
CONCLUSIONS
t4t,
1. The GRC is likely to be faced this year
with the abandonment or failure of the
UN moratorium on discussion of the ques-
tion of Chinese representation. It does
not necessarily follow, however, that Pei-
ping would replace the GRC or achieve
any representation in the UN this year.
Many countries are moving towards a
preference for a two-Chinas formula.
Both Taipei and Peiping have rejected
such a formula and each has stated that
it will not accept dual representation. If
any Chinese Communist membership in
the UN appeared imminent to the GRC,
the latter would threaten to withdraw.
If Communist China achieved member-
ship in both the General Assembly and
the Security Council, we believe the GRC
would withdraw from the UN. In less
drastic cases however, the GRC might not
carry out the threat to withdraw, if only
to attempt to prevent Peiping's actually
filling a proffered seat. (Paras. 12-15,
27)
2. The GRC's principal objective will con-
tinue to be to regain control of the main-
land. The GRC leaders believe that now
is a good time to agitate the question of
taking probing actions against the main-
land in order to capitalize on the economic
distress and other sources of discontent
there. Although we doubt that they
would commit forces to such a mission in
the face of specific US objections, the pos-
sibility cannot be ruled out that they
might, without consulting us, undertake
airdrops or raids at any time. (Para. 25)
3. Most GRC leaders now believe that
their best chance of regaining the main-
land would come in the wake of a war
between the US and Communist China.
We believe, however, that there is only a
remote chance of their trying to provoke
such a war. (Para. 23)
4. Politically conscious Taiwanese are
generally opposed to GRC rule of Taiwan,
but inadequate leadership and organiza-
tion minimize their threat to the regime.
GRC security forces are almost certainly
more than adequate to cope with any do-
mestic troubles. Mainlander-Taiwanese
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relations will almost certainly come under
increasing strain. (Paras. 30-33)
5. With the help of large-scale US aid,
the GRC has made substantial economic
progress, and economic development has
acquired momentum. Some negative
factors such as growing unemployment,
an extremely rapid population growth,
and a recent decline in productive invest-
ment threaten this trend. Whether suf-
ficient economic growth can be main-
tained over the long run depends largely
on the course of US policy and aid and on
the ability and willingness of the leader-
ship to adapt to the requirements of pro-
longed existence on Taiwan. (Paras.
34-38)
6. Over the next few years the GRC will
probably suffer setbacks, particularly
those growing out of the enhanced inter-
national position of Peiping. The ability
of the GRC to ride out these next few
years will depend largely upon the man-
ner and pace at which the setbacks come
and in considerable degree upon the role
of the US. We believe that, as long as
US economic support and military protec-
tion are assured, the GRC can survive
these setbacks and can adjust, however
reluctantly, to a gradual series of changes.
(Para. 28)
7. If the GRC leaders were faced with a
major change in US policy such as a US
decision to use the extreme pressures that
would be necessary to force the evacua-
tion of the offshore islands, advocacy of
the acceptance of a two-Chinas formula,
or formal recognition of Communist
China, the bitterness and psychological
shock would be profound, whatever guar-
antees or explanations the US might give.
Some mainlanders on Taiwan would seek
accommodation with the Communists, or
advocate precipitating a war with Com-
munist China, or seek refuge elsewhere
in the Free World; however, we believe
that most would resign themselves to
making the best of a future on Taiwan.
The surviving government would prob-
ably be less disciplined and more corrupt
and less stable than the present one; Com-
munist subversion would probably become
a problem. However, given continued US
aid and protection, Taiwan would prob-
ably continue as a part of the Free World.
(Paras. 39-46)
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I. INTRODUCTION
8. The goal of the leaders of the Government
of the Republic of China (GRC) is to re-
establish their rule over all China, as epito-
mized in the slogan "back to the mainland."
According to the official rationale, the GRC
still represents the will of the people of all
China and is still the legal government of all
China. The GRC justifies the existence of
two governments on Taiwan, national and
provincial, by the argument that the GRC is
but temporarily confined to the island and will
eventually regain its control of the mainland.
The GRC leaders maintain that these con-
cepts are indispensable and that without them
Free China would lose all hope and sense of
purpose and would inevitably collapse.
9. Belief in the mission of a return to the
mainland is the prime source and the justi-
fication of the GRC's major national policies:
(a) the maintenance of a very large military
establishment; 1 (b) retention of the offshore
islands; and (c) opposition to any kind of
recognition of the Peiping regime including
the two-Chinas formula. GRC leaders even
rationalize the promotion of rapid industrial
development on Taiwan in terms of preparing
for return to the mainland.
10. The GRC, a government of Chinese main-
landers chosen by a National Assembly that
was elected on the mainland in 1948, actually
controls Taiwan, the Penghus, and the off-
shore islands.2 The Taiwanese, who com-
prise over 85 percent of the people actually
under GRC jurisdiction, participate in the
local and provincial governments but have
practically no voice in national affairs because,
according to GRC explanations, they consti-
tute only one of over 30 provinces of China.
The GRC maintains by far the world's highest
ratio of military forces to population.
2Its control also extends to two minute islands in
the South China Sea: Pratas (about 200 miles east-
southeast of Hong Kong) and Itu Abu (about 500
miles east of Saigon, in the Spratley group).
The Taiwanese, while regarding themselves as
Chinese in language and culture, look upon
the GRC as a semialien rule not of their own
choosing and inadequately responsive to their
interests.
11. For over a decade the US has guaranteed
the defense of Taiwan and supported the
GRC's economy, military establishment, and
international position. Thus sheltered, the
GRC has made considerable progress on
Taiwan. The political situation has been
stable, and the leadership dedicated and
energetic. The economy has grown, living
standards have risen, and corruption has de-
creased. The performance of the armed
forces has been spirited and effective. Now,
with changes in UN membership and in the
attitude of many countries, the GRC must
face more directly the realities of its inter-
national position.
II. INTERNATIONAL PROBLEMS
A. The GRC's Threatened International Position
12. The battle for the UN Seat. The GRC's
retention of the China seat in the General As-
sembly and the Security Council has in recent
years been due almost entirely to persistent
US diplomatic pressures to maintain a mora-
torium on consideration of the question of
Chinese representation. Adverse world re-
actions to outbursts of Chinese Communist
aggressiveness in Asia have facilitated this
effort. However, the 1960 General Assembly
vote was close 3 and since that time the UK,
Brazil, and a number of other states have
indicated that they are not likely to continue
support of a UN moratorium. We believe, a
moratorium motion in the next General As-
sembly would probably fail even if strongly
supported by the US.
13. It does not necessarily follow, of course,
that failure or abandonment of the morato-
See Appendix B, Table 1.
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rium would mean UN membership for Com-
munist China or the exclusion of the GRC.
Even if a majority of members support the
principle of UN membership for Communist
China, there are many potential obstacles,
both technical and substantive. Prominent
among the latter is a good chance that
Peiping would place unacceptable conditions
on membership. Many UN members would
favor continued GRC representation even if
Peiping were admitted.
14. Two Chinas. For an increasing number
of countries, a two-Chinas formula, i.e., ac-
ceptance of both an independent non-Com-
munist China on Taiwan and a Communist
China on the mainland, appears to be the best
way out of the present impasse if it could be
realized. The GRC remains bitterly opposed
to any such idea. Its leaders will almost cer-
tainly continue to claim that the GRC is the
legitimate government of China and that it
will eventually return to power on the
mainland.
15. Communist China is also dead set against
a two-Chinas concept. Peiping and Taipei
have each stated that as a matter of principle
it will not appear where the other is officially
represented. If Communist China continues
to refuse to send representatives to countries
or international organizations in which the
GRC has representation, the GRC is provided
with a possible means of impeding further ex-
pansion of Peiping's diplomatic relations and
blocking its admission to the UN. The GRC
needs only tacitly to accept a two-Chinas
situation to the extent of continuing to send
its representatives to nations and organiza-
tions which are willing to deal with both Com-
munist China and the GRC. Some GRC
officials have been cautiously advocating more
flexibility in diplomatic competition with
Peiping, but, we believe the top GRC leaders
will remain very strongly opposed to pursuing
any course of action which they considered
would prejudice their complete rejection of
any two-Chinas situation.
B. Uncertainty Concerning US Support
16. Nationalist leaders believe that the fate
of the GRC rests primarily on future US atti-
tudes and policies, and that if full US support
continues, the attitudes and actions of the
rest of the world will be of secondary impor-
tance. The pervading fear and overriding
concern of the GRC leaders is that the US
may now be drifting towards a two-Chinas
policy and also weakening in its resistance to
the expansion of international communism.
They have been particularly apprehensive
concerning what they believe to be a US
course of retreat in Laos, and consider that US
acceptance of a negotiated settlement there
would presage further US retreats in the Far
East. They also interpret the fall of Rhee
and Menderes as indicating a US unwilling-
ness to take firm action to stand by its true
friends.
17. Thus far the GRC's doubts about the US
have not grown to the point where they have
had a serious impact on GRC policy or US-
GRC relations. However, GRC uncertainty
on this score will almost certainly grow, and
we can expect increasing GRC pressures for a
more militant US attitude in Asia and in-
creased support for the GRC and its policies.4
C. The Unfinished Civil War
18. Chinese Communist Positions and Inten-
tions. The Chinese Communist regime has
steadfastly maintained that it is the legiti-
mate government of China, and that Taiwan,
the Penghus, and the offshore islands are
parts of its territory. Consequently, to Pei-
ping, the question of "liberating" Taiwan and
the other islands is purely an internal Chinese
affair. It maintains that the Chiang regime
has no rightful claim to be the government of
China, that continued recognition and sup-
port of his government by any foreign nation
is an invasion of China's sovereignty, and that
the Chinese People's Republic is free to use
any means it sees fit to "liberate those parts
4 A discussion of probable GRC reactions in the
contingency that major changes in US policy
actually do occur appears in paragraphs 39-45.
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of its territory" occupied by Chiang's "bandit
forces."
19. Communist China's past tactics toward
Taiwan and the offshore islands have fluc-
tuated widely from strong military pressures
to peaceful overtures to the Nationalist au-
thorities. Since its testing of US and GRC
resolve in the 1958 Taiwan Strait crisis,
Peiping has not stressed force with respect to
Taiwan and the offshore islands, but has
sought to undermine GRC morale and inter-
national position. Its propaganda and pri-
vate letter campaigns have been designed to
undermine GRC confidence in the US, exploit
the mainlanders' fear of being forever sepa-
rated from the motherland, and create an
atmosphere in which Communist triumph
and the absorption of Taiwan would be re-
garded as inevitable. Peiping has occasion-
ally tried to make accommodation with com-
munism palatable by such gestures as offering
to welcome Taiwan, under the nominal leader-
ship of Chiang Kai-shek, into the fold of the
People's Republic of China as an autonomous
region.
20. Peiping almost certainly has little ex-
pectation that such campaigns will succeed
in the near future but probably does have
high hopes for them over the long run. Its
leaders probably anticipate that trends in the
Bloc-US power relationship and in UN com-
position and attitudes will in time enhance
Peiping's stature and result in general ac-
ceptance of its claim to be the sole govern-
ment' of China. Peiping apparently believes
that as this happens, morale on Taiwan and
resistance to Chinese Communist pressures
and inducements will be effectively under-
mined. Furthermore, Peiping almost cer-
tainly believes that a military assault on
Taiwan and the Penghus would bring on
major hostilities with the US. For these rea-
sons we believe that Peiping will rely pri-
marily on nonmilitary pressures to eliminate
the GRC.
21. However, the Chinese Communists will
almost certainly not give up all use of force
in the Taiwan Strait. They will probably
step up military pressures from time to time
in the offshore island areas, to remind the
world that they have not accepted the status
quo, to probe GRC and US resolve, and to
advance broader cold war objectives. We be-
lieve, however, that they are unlikely to
launch an assault against the offshore is-
lands so long as they believe that this would
lead to major hostilities with the US. Should
a GRC withdrawal from the offshore islands
be undertaken, however, Peiping would almost
certainly initiate intensive propaganda action,
probably accompanied by military harass-
ment, to convince the world that such with-
drawal was the result of the pressure of
Peiping's military power and to take credit
for pushing the GRC off the islands despite
US support of the GRC.
22. The Soviet Union will continue to support
Peiping's objective of occupying Taiwan, but
it is determined to prevent the Chinese Com-
munists from drawing it into war with the US
in the Far East. Consequently, we believe
that the USSR will attempt to restrain the
Communist Chinese from actions which the
Soviets believed to involve serious risk of war
with the US. Despite the serious strains in
Sino-Soviet relations over the last year or so,
Soviet influence is likely to be effective in such
a case.
23. Chinese Nationalist Positions and Inten-
tions. The GRC's principal objective is, and
will continue to be to regain control of the
mainland. Most GRC leaders believe that
their best chance of returning to the main-
land would be in the wake of a war between
the US and Communist China. They also be-
lieve that the US, in the interests of the Free
World struggle against communism, should
at no point yield to Communist pressures in
order to avoid war. They believe that a show-
down is inevitable and that to postpone it only
enables the Peiping regime to strengthen its
military power and its controls over the
Chinese people. It is almost certain that
some GRC leaders have, at times, thought of
attempting to provoke a conflict with Com-
munist China under conditions which would
embroil the US. Although we do not believe
that the GRC leaders are likely to undertake
such a rash act, we cannot exclude it entirely
ittitESESas
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as a decision of ultimate despair and frustra-
tion.
24. The GRC attaches great political and psy-
chological importance to the offshore islands.
Nationalist leaders are convinced that the is-
lands must be held not only to assist the de-
fense of Taiwan, but more importantly to
maintain their claim to be a national gov-
ernment, to prevent a serious blow to morale,
and to preclude any further decline in the
prestige and international position of the
GRC. Determination to hold the islands is
dramatized in the fact that the GRC has
stationed there about one-third of its army
combat troops�the elite of these forces.5
The GRC could not itself hold the offshore is-
lands against determined attack, and the
army, navy, and air force losses that would
probably be entailed in an unsuccessful
defense of the islands would seriously reduce
the contribution the GRC could make to the
defense of Taiwan itself.
25. The hopes of GRC leaders have been
buoyed up by the acute economic difficulties
on the China mainland and by indications
that public discontent there is reaching sub-
stantial proportions. In their view, now is a
good time to agitate the question of taking
probing actions to capitalize on mainland dis-
content. They are fearful that as time goes
on Communist Chinese police powers will grow
to the point where no revolution will be pos-
sible. They have made extensive plans for
the initial use of special forces teams to ex-
ploit public dissatisfaction and to organize
resistance efforts which, they hope, could
ultimately lead to larger scale action and the
collapse of the Communist regime. We be-
lieve that they would not commit such forces
in the face of specific US objections. How-
ever, they might, without letting us know,
undertake airdrop or raiding activities against
the mainland at any time, particularly since
the GRC claims that paramilitary operations
are "political" and not subject to the US veto
on military operations against the mainland.
5The Nationalist army garrison in the Chinmen
(Quemoy) group numbers 69,000 troops, and in the
Matsus group, 21,000. See maps at the end of the
estimate.
III. GRC REACTIONS TO ITS CHANGING
INTERNATIONAL STATUS
26. As the Nationalist leaders see the GRC
world position slipping and the prospects for
continuance of the UN moratorium worsen-
ing, and as they are plagued with increasing
doubt as to the degree of US support, it be-
comes more difficult for them to maintain
their hope and sense of purpose. If the mora-
torium motion in the UN fails or is abandoned
this year, the morale of the GRC leaders will
suffer. They will view the disappearance of
the mechanism which has prevented discus-
sion of the GRC's status as the first step to-
wards ultimate representation of Communist
China in the UN.
27. Depending upon the nature and timing of
subsequent developments in the UN, the GRC
might at some point withdraw from the or-
ganization. We believe that if the Chinese
Communists achieved membership in both the
General Assembly and the Security Council,
the GRC would withdraw from the UN. It is
not possible to estimate with confidence GRC
moves in situations where the threat to its
UN position is less immediate or less clear.
The GRC will probably threaten to withdraw
on occasions when it believes it can thereby
influence the US to oppose a development
derogatory to the GRC's present position.
The likelihood of the GRC's carrying out such
a threat would depend not only on its view
of the seriousness of the issue in terms of its
prejudice to the GRC's basic policies, but also
on whether the GRC leaders felt that pride
and self respect called for such drastic action.
The GRC, even in circumstances which
seemed to threaten seriously its major
policies, might back away from its threats to
withdraw in order to preserve the advantages
which membership in the UN entails, par-
ticularly if the GRC thought that remaining
in the UN would cause Communist China to
refuse to fill a proffered seat.
28. The end of the moratorium will probably
be followed by other setbacks, including those
growing out of the enhanced international po-
sition of Peiping. The ability of the GRC to
ride out these next few years will depend
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largely on the manner and pace at which the
setbacks come and in considerable degree on
the role of the US. We believe that, as long as
US economic support and military protection
are assured, the GRC can survive these set-
backs and can adjust, however reluctantly, to
a gradual series of changes�the more abrupt
and concentrated, the greater will be the diffi-
culty of adjustment and the more serious the
consequences internally and in foreign rela-
tions.
IV. DOMESTIC PROBLEMS
A. Political
29. Popular support. The population of Tai-
wan can be divided into four groups: (a) the
several hundred mainlander leaders, who hold
all the principal positions in the govern-
ment, the armed forces, and the government-
run industries; (b) the one and a half mil-
lion other mainlanders; (c) the more than 10
million Taiwanese, who are of Chinese origin;
and (d) the 180,000 aborigines, who dwell in
remote areas of the mountains and are of
little political significance. Only the first of
these groups, the mainlanders who run the
country, are motivated by the official objec-
tives of return to the mainland. Most of the
remaining mainlanders, while subscribing to
this objective, have generally adjusted to the
realities of their situation on Taiwan. They
have no political or economic alternative to
supporting the GRC, but because of their
limited economic prospects and their family
ties to the mainland, this group is potentially
the most susceptible of the four groups to
Communist blandishments for some sort of
voluntary accommodation with Peiping.
30. Earlier GRC misrule of Taiwan and the
bloody suppression of a 1947 rebellion of the
Taiwanese embittered many who might other-
wise have developed a sense of identification
with the mainlanders and the GRC. Their
patriotic sentiments have been largely chan-
neled into a narrow Taiwanese nationalism.
They have no incentive to attempt to recover
a homeland that they do not consider theirs.
31. The GRC is acutely aware of these senti-
ments and has adopted a wide range of means
to deal with Taiwanese discontent. The land
reform program helped the mass of the
farmers. Favorable economic conditions and
a standard of living which has increased in
real terms over the years have also served to
alleviate popular dissatisfaction. On the
other hand, measures such as giving Taiwan-
ese more voice in local affairs and appoint-
ing them to one or two lesser cabinet posts
have helped little, and to a considerable ex-
tent the GRC's control rests on the quiet ap-
plication of force. Martial law and a multi-
plicity of security organs operating under
various degrees of secrecy enable the regime
to prevent or to break up undesirable develop-
ments.� In addition, the absence of leaders
with widespread popular support and the in-
ability of the present leaders to unite lessens
the Taiwanese threat to GRC domination.
32. There is little likelihood that the Taiwan-
ese will become susceptible to communism
during the period of this estimate. They do
not wish to share the wretched conditions of
life on the mainland, and certainly do not
care to exchange GRC rule for another, and
more ruthless, mainlander rule. Some Tai-
wanese, too, believe that the GRC, with all its
faults, provides them their best defense
against the Chinese Communists. Most of
them, however, feel that if they could be left
to their own devices, they could develop a
modestly prosperous and happy life on their
island and avoid being dragged into the travail
of Chinese affairs.
33. Mainlander-Taiwanese relations will al-
most certainly come under increasing strain
during the period of this estimate. The twin
necessities of replenishing GRC armed forces
The 1960 suppression of the incipient China Dem-
ocratic Party, a largely Taiwanese group, is a case
in point. When the Kuomintang had decided that
there was the possibility of a real opposition party
forming, it began to put pressure on the potential
leaders. Bribes or threats persuaded one to leave
the country, two were beaten by "unknown persons,"
several had their business licenses revoked or suf-
fered other economic pressures; and their most
important leader, Lei Chen, a mainlander, was
quickly convicted on questionable charges of harbor-
ing a Communist and sentenced to 10 years im-
prisonment.
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SECRET 8
strength and of maintaining mainlander dom-
inance of these forces will grow increasingly
incompatible. Already, over 75 percent of the
enlisted ranks are Taiwanese, but mainlanders
retain authority with 97 percent of the offi-
cers and 93 percent of the NCO's. The Tai-
wanese will probably increasingly resent the
GRC's domination of Taiwan and will demand
a larger voice in their fate. Increased restive-
ness on the part of the Taiwanese will prob-
ably stimulate the GRC to intensify its con-
trols which in turn will add to Taiwanese dis-
content.
B. Economic Problems
34. Over the past 10 years the economy of
Taiwan, with massive American assistance
has expanded rapidly. By 1960, industrial
production was 3.5 times the level of 1950. In
spite of a very high rate of population growth,
the per capita GNP increased at an average
rate of over 3.7 percent a year. At present
Taiwan is one of the most prosperous areas
in East Asia. Whether this relative prosperity
can be sustained, even with present levels of
US aid, depends upon the solution of several
growing economic problems.
35. One of the major problems facing the GRC
is the rapid growth of population. Taiwan's
annual rate of increase, 3.5 percent, is one of
the highest in the world. Food consumption
has outstripped food production, and in 1960
Taiwan, for the first time, became a net im-
porter of rice. The already intensive land
use on Taiwan limits the possibilities of ex-
panding production at the rate needed to re-
verse the trend toward a growing food deficit.
The rapid growth of the labor force is increas-
ing the problems of unemployment and under-
employment. Maintenance of a proportion-
ally huge military establishment places a
heavy burden on the economy even after large
US military aid.
36. To meet these problems, industrial pro-
duction must continue to grow rapidly. In-
dustry must provide jobs for the growing labor
force and provide exports to pay for the in-
1 949 the US has supplied the GRC more
than $3 billion in economic and military aid.
creasing food imports. During the past two
years the growth rate of industrial produc-
tion has been reassuring. It rose 13 percent
in 1959 and 15 percent in 1960. Industrial
exports in those two years more than made up
for the decline in agricultural exports. For-
eign exchange reserves rose by more than $19
million to a new high of $52.4 million in 1960.
37. A continuation of such rapid industrial
growth requires a continued high rate of in-
vestment in industry. There is, therefore,
some cause for concern in the fact that dur-
ing the past year or so there has been a sharp
drop in investment in productive enterprises.
Local investors seem to prefer to put their
money into other kinds of enterprises where
quicker profits can be found, and foreign in-
vestors tend to believe that areas other than
Taiwan offer greater economic return and
security. The tightening of credit which the
government imposed as an anti-inflationary
measure in 1960 appears to have reduced in-
dustrial investment and probably reduced the
rate of expansion in industrial output during
the difficult period ahead.
38. There is some economic unrest on Taiwan
today resulting from a variety of causes in-
cluding unemployment and some increase in
bankruptcy, but it is unlikely to become ex-
plosive during the period of this estimate.
Taiwan has valuable economic assets, the
greatest being a capable and energetic labor
force and, in many fields, an actual surplus
of technical and managerial skills. A mo-
mentum has been established, and it is pos-
sible for the economy of Taiwan to continue to
grow at a satisfactory rate. Whether it will
do so over the long run cannot be estimated
with any confidence, because the way the
economy develops depends so heavily upon the
nature and size of US economic and military
aid as well as upon GRC economic policy and
internal and external political developments.
V. CONTINGENCIES
A. GRC Reactions to Major Shifts in US Policy
39. The US has strong leverage with which
to influence GRC policy. The GRC has no
feasible alternative to continuing to depend
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on the US for maintenance of its military
strength, protection against attack, economic
aid, and diplomatic support. Without US aid
and support, its prospects would be dark in-
deed. For their part, GRC leaders believe
that there are strong inhibitions on the US
use of its leverage. They believe that the US
would not take measures which might lead to
a collapse or alienation of the GRC, since such
a result would face the US with what would
be, at best, a dangerously unstable condition
on Taiwan and would gravely damage the anti-
Communist position in Asia.
40. If the US should seek to persuade the GRC
to withdraw from the offshore islands, the
GRC would refuse, banking on US reluctance
to use its leverage. We believe that the GRC
leaders would eventually yield, but only when
they were convinced that the US would in
fact use whatever means were necessary to
force compliance�e.g., drastic curtailment of
economic, military and diplomatic support.
41. US insistence on forcing withdrawal from
the offshore islands or other major shifts in
US China policy which clearly rejected the
GRC rationale (for example, advocacy of the
representation of two Chinas in the UN or
formal recognition of Communist China)
would cause profound bitterness and psycho-
logical shock among the Nationalist leaders,
whatever guarantees or explanations the US
might give.
42. The courses of action open to GRC leaders
would all be highly repugnant to them. There
would be a very few, not including Chiang,
who would become so completely disillusioned
that they would seek to turn Taiwan over to
the Communists on the best terms they could
get. Whatever offers Peiping might make,
most Nationalist leaders would be hesitant to
place themselves at the mercy of the Chinese
Communists and would certainly be fearful of
reprisals from other GRC leaders and from
the Taiwanese if they attempted to hand Tai-
wan over to the Communists.
43. Some of the Nationalist leaders would be
tempted to attack the mainland or to bomb
major cities, seeking to embroil the US and
Communist China in a war. This would be
a desperate effort to achieve their objective of
returning to power on the mainland, or go
down fighting. Although we cannot rule out
such a "go for broke" effort, we believe it
highly unlikely that such a suicidal course
could be undertaken. The return-to-the-
mainland activists among the Nationalists are
a small minority of the mainlanders on Tai-
wan, and the Taiwanese would almost cer-
tainly oppose any such policy which would risk
their future chances for an independent and
non-Communist existence.
44. A number of Nationalist leaders have at
times threatened to "go it alone." By this
they presumably mean that they would seek
to maintain their position as best they
could by themselves without regard to the
US. Although it is conceivable that the GRC
might adopt such a course, we believe that the
threat to do so is primarily a pressure tactic.
45. Although we cannot exclude any of the
above possibilities as the GRC response, we
believe on balance that, even with a basic
change in US policy as posited above, most of
the Nationalists would, with much reluctance
and bitterness, conclude that they must re-
sign themselves to a future on Taiwan. A few
would leave Taiwan; a few would attempt to
defect to the mainland; and others would
simply withdraw from public life, disillusioned
and disgruntled. Chiang Kai-shek would
probably resign, in admission of the failure of
his life's effort, leaving the future to the
younger men.
46. The government, its purposes, and its poli-
cies would in time evolve so as to bear little
resemblance to those of the past. The leader-
ship would have to adjust to a greatly ex-
panded role in the government for the Tai-
wanese, and would have to pay more attention
to long-range problems of economic and politi-
cal development of Taiwan. The government
would be less disciplined, more corrupt, and
less stable; Communist subversion would prob-
ably become a problem. However, given US
guarantees and continued aid and assistance,
Taiwan would probably continue as part of
the Free World.
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B. Detonation of a Nuclear Device by the
Chinese Communists
47. The immediate GRC reaction would be one
of great concern at this dramatic step toward
increase in the power of the Communist
enemy. The GRC would suffer from the prob-
able increase in world pressures for the ad-
mission of Peiping to the UN, if that had not
already come to pass, and for Peiping's partici-
pation in disarmament negotiations. Com-
munist China's leaders might insist upon the
withdrawal of US protection of the GRC as
their price for entry into the UN and par-
ticipation in disarmament talks. The GRC,
meanwhile, would almost certainly urge the
US to provide it with nuclear weapons.
C. The Death of Chiang Kai-shek
48. The death of Chiang Kai-shek would re-
move the leader who has dominated and sus-
tained the Chinese Nationalists for a third of
a century. The immediate result would be
shock, uncertainty, and probably some lessen-
ing of governmental stability and effective-
ness. However, there would probably be an
orderly succession by the Vice President (at
present, Ch'en Ch'eng) as provided by the
Constitution. It is of course possible that
Chiang Ching-kuo, the Generalissimo's son,
who controls most of the intelligence and se-
curity forces of the GRC might challenge
the constitutional succession. Should his
father be removed from the scene in the near
future, he would probably be content not to
contest the Presidency but would work to
improve his already powerful position behind
the scenes. Whoever the next President may
be, he will probably attempt to continue
Chiang Kai-shek's general policies, but he
would not have the Generalissimo's prestige
and authority. It is likely that any successor
regime would in time adjust somewhat more
readily to the realities of the GRC's situation
and probable future.
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11
APPENDIX A
MILITARY
1. The GRC maintains a total military force
of over 615,000 men which makes its ratio of
armed forces to total population the highest
in the world. These forces are divided among
five commands:
Table 1
Distribution of Personnel
MND (Ministry of National Defense)
30,000
Army
427,700
Navy
859,800
Air Force
89,700
CSF (Combined Service Force)
8,000
In these commands all but about 6,000
MND and about 13,000 army forces are MAP-
supported.
2. Quantitatively the GRC combat forces are
much smaller than those of Communist
China. Qualitative comparisons are more
difficult to make. One of the few cases where
a direct comparison could be made occurred
in the 1958 Taiwan Strait crisis, in which the
GRC fighter pilots outperformed the Chinese
Communist fighters by a large margin. Naval
and ground forces did not meet directly, but
the troops on the Chinmen Island group
showed good stamina under prolonged heavy
bombardment and, after a hesitant start, the
navy showed up well in resupplying the islands
under fire. At present the morale of the
armed forces ranges from fair to good. The
best morale is found in the air force and
among the troops on the offshore islands.
3. Capabilities. The armed forces of the GRC
are inadequate to hold against a determined
Chinese Communist attack either the offshore
s Includes about 25,550 marines.
islands or Taiwan and the Penghus without
large-scale US naval and air support. They
are, however, very much larger than are
needed for internal security on the territory
held by the GRC. The GRC has the capabil-
ity of dropping approximately 3,000 troops on
the mainland and resupplying them to a
limited extent. It can conduct an amphibious
operation with a 4,000 to 5,000 man force
using GRC naval amphibious ships. With the
addition of merchant and fishing vessels a
larger force could be landed.
A. The Army
4. The 414,000-man regular army is organized
into 21 infantry divisions, 2 armored divisions,
an airborne regiment, 2 special forces groups,
and supporting elements. These forces are
combat ready, well-trained and equipped, and
have a substantial reserve and replacement
manpower pool. Taiwan-born soldiers con-
stitute over 75 percent of the enlisted ranks,9
and it is believed that they can be relied upon
to fight in defense of the offshore islands and
Taiwan. The army lacks the logistic capabil-
ity to maintain its armed forces or engage in
extended military operations without foreign
assistance. Steps are being taken to remedy
equipment shortages and personnel manage-
ment deficiencies.
5. Principal units of the 13,000 non-MAP-sup-
ported army forces of the GRC consist of the
Because nearly all of the NCO's and the large
officer corps are mainlanders, Taiwanese constitute
only about 35 percent of the total armed forces
personnel.
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7,000-man Anti-Communist National Salva-
tion Army (ACNSA) and a special forces group
of about 3,000; both are under the direct con-
trol of army GHQ and are integral parts of
the GRC forces. They are highly qualified
troops of mainland origin, with high esprit de
corps but not always amenable to strict mili-
tary discipline. For the most part, these
troops were former guerrillas from the coastal
provinces of China, who have been trained and
largely re-equipped to regular army standards.
Their principal weakness is inadequate logis-
tic capability for sustained operations. The
ACNSA provides the garrison for the minor
offshore islands of Wuchiu and Tungyin, while
the special forces group provides a capability
for limited special operations on the main-
land. In addition to the above, non-MAP
supported MND forces total above 6,000.
6. The three Garrison Regiments of the Tai-
wan Garrison General Headquarters (TGGH)
not included in army strength figures provide
a paramilitary force of 7,500 men, which also
does not receive MAP support. These troops,
generally of mainland origin, are physically
disqualified and overage regular army person-
nel equipped with light weapons. They are
used principally for security and garrison
duties, and have only a limited combat capa-
bility. The more than 3,000 irregular troops
recently returned from the Burma-Thailand-
Laos triangle will probably be absorbed into
the ACNSA, the special forces group, and
garrison regiments according to their physi-
cal and technical qualifications.
7. Offshore Islands. In the Taiwan Strait
area, the GRC has about 21,000 troops on the
Matsu Islands group and there are an esti-
mated 51,000 Chinese Communist ground
troops on the nearby mainland (the vicinity
of Foochow) . On the Chinmen Island group,
there are approximately 69,000 GRC troops
and the Communists have an estimated 98,000
ground troops nearby in the Amoy area. The
GRC garrisons on the Chinmens and the
Matsus are at about maximum feasible
strength; the Chinese Communists within 12
days could reinforce their troop strength in
the Amoy-Foochow area with the additional
forces already in the East China Military Dis-
trict (approximately 212,000 troops, including
3 airborne divisions, which total about 21,000
men) . Such redeployment possibly could be
accomplished without detection, but any
sizable concentration of amphibious craft
could be detected.
8. Chinese Communist artillery strength in
the Matsu-Chinmen areas totals about 850
pieces, as compared to 420 GRC pieces. Artil-
lery now on Chinmen and Matsu includes 240-
mm nuclear-capable howitzers. Recent im-
provements in fortifications and covered artil-
lery emplacements have increased the defen-
sive capability of both the Chinmen and Matsu
garrisons. Food, ammunition, and other sup-
plies in abundance are stockpiled on the major
offshore islands.
B. The Navy
9. The GRC Navy has a small fleet composed
of former US ships, the largest combat type
being destroyers. The total ship strength is
as follows:
Table 2
Destroyer (DD)
5
Escort Ship (DE)
5
Patrol Escort (PF)
2
Escort (PCE)
7
Submarine Chaser (PC)
16
Motor Gunboat (PGM)
2
Motor Torpedo Boat (PT)
6
Coastal Minelayer (MMC)
2
Fleet Minesweeper (MSF)
5
Coastal Minesweeper (MSC)
4
Amphibious Vessels
69
10. The size and composition of the navy en-
able it to carry out certain limited offensive
assignments, such as lifting and supporting
amphibious assault missions within a re-
stricted radius of Taiwan, shore bombardment,
reconnaissance and interdiction of shipping in
the Taiwan Strait, and mine warfare. The
navy is capable of providing logistical support
to the offshore islands and furnishing patrol
surveillance and destroyer gun-fire support.
The state of training of the navy is good.
Maintenance and repair of ships and equip-
ment in the recent past have been generally
substandard, but currently they are showing
significant improvement. Logistic practices
and facilities are adequate but supplies are
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dependent on continued US support. While
its antisubmarine warfare and minesweeping
capabilities are still limited, they are con-
tinually improving. Under US guidance and
support further augmentation and moderniza-
tion of the navy is taking place. The present
capabilities of the GRC Navy are not adequate
to meet the naval requirements for defense
against a determined Chinese Communist as-
sault on GRC-held territories.
11. The 25,550 man Marine Corps is organized
into a headquarters, a supporting establish-
ment, and the Fleet Marine Force. The oper-
ating forces consist of 1 division, 1 brigade,
and 1 LVT and 1 LVTA battalion, organized
and equipped under modified US Marine Corps
TO&E. The Marine Corps continues to have
the capability to execute amphibious opera-
tions involving the division and brigade
against light to moderate resistance, assuming
adequate naval and air support.
C. The Air Force
12. The Chinese Air Force (CAF) is the
strongest non-Communist Asian Air Force.
Its primary mission is the air defense of the
Taiwan area. Its secondary missions are: de-
struction of Communist Chinese installations
capable of launching offensive actions against
Taiwan; defense of the offshore islands; sup-
port of GRC Army and Navy operations; de-
struction of the Chinese Communist Navy;
and aerial reconnaissance.
13. The CAF has 12 fighter squadrons or-
ganized into four tactical fighter groups. The
one F-104 interceptor squadron is expected to
be operational during the summer of 1961.
The three F-100 fighter squadrons are ex-
pected to become fully retrained and combat
ready by the end of June. Crews for the
F-86D all-weather squadron are fully trained
13
and were placed on active alert status in
April 1961. Personnel strength totals 89,700,
including about 1,075 trained pilots.
14. The CAF's capability to conduct tactical
air operations is fair to good, proficiency vary-
ing from unit to unit. Tactical effectiveness
is handicapped by the number of obsolescent
F-86F fighter aircraft that are still in the in-
ventory. Capability for deep penetration re-
connaissance over the Chinese mainland is
limited to the single RB-57D. Lesser pene-
trations can be performed by the RF-101's
and by the RF-100's. The latter are presently
in storage. The RF-84F's are restricted to
oblique photography along the coast because
of their poor survival capability against MIG-
17 interception. Visual reconnaissance mis-
sions are flown twice daily over the Chinmen
areas by T-6's; every other day a C-46 con-
ducts a visual reconnaissance of the waters
northeast of Taiwan. The CAF has an excel-
lent daylight air defense capability for a
limited period of combat. With the acquisi-
tion of the F-86D's and the F-104's, the CAF
now has a limited all-weather defensive capa-
bility.
15. Radar coverage from Taiwan sites and
from Makung in the Penghu Islands is fairly
good; radars on the offshore islands of Matsus
and Chinmen have only a limited range and
heightfinding capability. The AAA battalions
are well trained, but they are equipped with
only a limited number of pieces that would be
effective against jet aircraft. Static air de-
fense of the Taipei area is bolstered by the
Nike-Hercules surface-to-air missile battalion
(52 missiles in 4 batteries) installed there.
This unit is controlled and operated by the
GRC Army.
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Table 3
INVENTORY OF AIRCRAFT BY CONFIGURATION AND ASSIGNMENT
CHINESE AIR FORCE, GRC
BASIC MODEL
CONFIGURATION DESIGNATION
INVENTORY IN TACTICAL
TOTAL UNITS ROLE ASSIGNED
Jet
Prop
Jet
Prop
Fighter
All weather
F-86D
18
18
Day
F-86F
304
271
F-100A
78
78
F-100F
9
9
F-104A
21
21
F-104B
4
4
Subtotal
434
401
Reconnaissance
RB-57D
1
1
RF-84F
17
17
RF-100A
4
in storage
RF-101A
4
4
Subtotal
26
22
A,SW
Land
PB4Y
1
Subtotal
1
Transport
C-46A
3
3
C-46D
84
82
C-47A
7
7
C-47B
18
18
C-54B
2
2
VIP
C-119G
16
16
H-19B
6
6
Air Rescue
Subtotal
136
134
Trainers
T-28A
24
T-33A
54
46
Subtotal
54
24
46
Miscellaneous
SA-16A
5
5
Air Rescue
Subtotal
5
5
TOTALS
514
166
469
139
TOTAL INVENTORY 680
TOTAL ASSIGNED TO TACTICAL UNITS 608
*stvg4ivir'
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vaTioriveliimE T 15
APPENDIX B
POLITICAL TABLES
Table 1
UN VOTE ON MORATORIUM ISSUE
Year
For
Against
Ab-
stentions
Vote
not re-
corded
Total Member-
ship at Time
of Vote
1951
37
11
4
8
60
1952
42
7
11
60
1953
44
10
2
60
1954
43
11
6
60
1955
42
12
6
60
1956
47
24
8
79
1957
48
27
6
81
1958
44
28
9
81
1959
44
29
9
82
1960
42
34
22
98
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Table 2
GRC and PRC International Position
Country
1. Afghanistan
2. Albania
Recognizes
PRC
PRC
UNGA Vote on Moratorium Issue
1957
1958
1959
1960
For Against
X
X
For Against
X
X
For Against
X
X
For Against
X
X
3. Argentina
GRC
X
X
X
X
4. Australia
GRC
X
X
X
X
5. Austria
Neither
X
Abstained
Abstained
Abstained
6. Belgium
GRC
X
X
X
X
7. Bolivia
GRC
X
X
X
X
8. Brazil
GRC
X
X
X
X
9. Bulgaria
PRC
X
X
X
X
10. Burma
PRC
X
X
X
X
11. Byelorussian SSR
No foreign
relations
outside UN
X
X
X
X
12. Cambodia
PRC
Abstained
X
X
X
13. Cameroun
GRC
Abstained
14. Canada
GRC
X
X
X
X
15. Central African Re-
public
Neither
Abstained
16. Ceylon
PRC
X
X
X
X
17. Chad
Neither
Abstained
18. Chile
GRC
X
X
X
X
19. China (GRC)
X
X
X
X
20. Colombia
GRC
X
X
X
X
21. Congo (Brazzaville)
GRC
Abstained
22. Congo (Leopoldville)
GRC
Not present
23. Costa Rica
GRC
X
X
X
X
24. Cuba
PRC
X
X
Abstained
X
25. Cyprus
GRC
Abstained
26. Czechoslovakia
PRC
X
X
X
X
27. Dahomey
Neither
Abstained
28. Denmark
PRC
X
X
X
X
29. Dominican Republic ..
GRC
X
X
X
X
30. Ecuador
GRC
X
X
X
X
31. El Salvador
GRC
X
X
X
X
32. Ethiopia
Neither
X
X
Abstained
X
33. Finland
PRC
X
X
X
X
34. France
GRC
X
X
X
X
35. Gabon
GRC
Abstained
36. Ghana
PRC
X
X
37. Greece
GRC
X
Abstained
X
X
38. Guatemala
GRC
X
X
X
X
39. Guinea
PRC
X
X
40. Haiti
GRC
X
X
X
X
41. Honduras
GRC
X
X
X
X
42. Hungary
PRC
X
X
X
X
43. Iceland
Neither
X
Abstained
Abstained
Abstained
44. India
PRC
X
X
X
X
45. Indonesia
PRC
X
X
X
X
46. Iran
GRC
X
X
X
X
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Table 2
GRC and PRC International Position
(Continued)
UNGA Vote on Moratorium Issue
1957 1958 1959 1960
Country Recognizes For Against For Against For Against For Against
47. Iraq PRC X X X X
48. Ireland Neither X X X X
49. Israel PRC Abstained Abstained Abstained Abstained
50. Ivory Coast Neither Abstained
51. Italy GRC X X � X X
52. Japan GRC X X X X
53. Jordan GRC X Abstained X X
54. Laos Unclear Abstained Abstained X Abstained
55. Lebanon GRC X X X X
56. Liberia GRC X X X X
57. Libya GRC X Abstained Abstained Abstained
58. Luxembourg GRC X X X X
59. Madagascar GRC Abstained
60. Malaya, Fed. of Neither X X X Abstained
61. Mali PRC X
62. Mexico GRC X X X X
63. Morocco PRC X X X X
64. Nepal PRC X X X X
65. Netherlands PRC X X X X
66. New Zealand GRC X X X X
67. Nicaragua GRC X X X X
68. Niger Neither Abstained
69. Nigeria Neither X
70. Norway PRC X X X X
71. Pakistan PRC X X X X
72. Panama GRC X X X X
73. Paraguay GRC X X X X
74. Peru GRC X X X X
75. Philippine Republic GRC X X X X
76. Poland PRC X X X X
77. Portugal GRC Abstained Abstained Abstained Abstained
78. Romania PRC X X X X
79. Saudi Arabia GRC Abstained Abstained Abstained Abstained
80. Senegal GRC X
81. Somalia PRC Abstained
82. Spain GRC X X X X
83. Sudan PRC X X X X
84. Sweden PRC X X X
85. Thailand GRC X X X X
86. Togo GRC Abstained
87. Tunisia Neither Abstained Abstained Abstained Abstained
88. Turkey GRC X X X X
89. Ukrainian SSR No foreign X X X X
relations
outside UN
90. Union of South Africa GRC Not voting X X X
91. USSR PRC X X X
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7"j;gigeltaLgir 18
Table 2
GRC and PRC International Position
(Continued)
UNGA Vote on Moratorium Issue
1957 1958 1959 1960
Country Recognizes For Against For Against For Against For Against
92. United Arab Republic PRC * X X X
93. United Kingdom PRC X X X X
94. United States GRC X X X X
95. Upper Volta Neither Abstained
96. Uruguay GRC X X X X
97. Venezuela GRC X X X X
98. Yemen PRC X X X X
99. Yugoslavia PRC X X X X
Recognized GRC 49
Recognized CPR 33
Recognized Neither 14
96
The UAR not yet created. Egypt and Syria voted separately against.
Table 3
Recognition by Countries Outside the UN
Recognizes
GRC PRC
Non-Communist Governments
West Germany Neither
South Korea X
Switzerland X
South Vietnam X
Mauretania X
Communist Regimes
East Germany X
North Korea X
North Vietnam X
Outer Mongolia X
Other
The "Provisional Government of the X
Algerian Republic"
Approved for Release: 2019/07/09 006077388
Approved for Release: 2019/07/09 006077388
er�SEC
Figure 1
EAST CHINA AND
TAIWAN
ARMY STRENGTHS
, I May 1961
COMMUNIST GRC
AMOY UNIT STRENGTH
UNIT STRENGTH
3147 Amiy 47.000
83rd Div, 28th Army 15,000
28th Army Arty Regt 1,000
Two Arty Bns 700
63rd AM Div 4.000
64th MA Div 2.600
5210 AAA Regt 1.500
3rd Arty Div 5.500
9th Arty DIY 5.500
ti9 Arty Div 5.509
iiii Arty Regt 1.500
80th Pub Sec Regt 2,000
84th Pub Sec Regt 2.000
Seamen Div (elrns) 4,000
TOTAL 97,800
FOOCHOW
UNIT STRENGTH
28th Army (-) 33,000
65th AAA Div 2,600
503rd AAA Regt 1,500
13th Pub Sec Div 7.000
Seamen Div (elms) 6.000
350th M Radar Regt 800
TOTAL 50,900
REINFORCEMENTS'
UNIT STRENGTH
15th Army 48.009
20th Army 48.000
47th Army 47,000
60th Army 48,000
1st Abn Div 7.000
2nd Abn Div 7.000
iiii On Div 7.000
TOTAL 212,000
'Within 12 days
SECRET
First Field Army 85.000
Second Field Army 66.000
Penghu Del Comd (PDC) 22.000
Chinmen Def Cornd DOC) 69.000
Matsu Del Comd MDC) 21,000
TOTAL 263,000
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FOOCHOW MILITARY REGION
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; HONG KONG
(U.K.)
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so
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JI'MA-TSU SHAN
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PENGHU
(PESCADORESte
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