INTELLIGENCE HIGHLIGHTS NO. 57 22 June - 28 June 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100020004-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 12, 2016
• Document Release Date: June 13, 2001
• Sequence Number: 4
• Publication Date: June 28, 1949
• Content Type: PERRPT

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FIR EAST/PACIFIC BRANCH
OFFICE ON REPORTS AND ESTIMATES
CEN RA INTELLIGENCE ACENCT
NOTICE; This document is a working p o-par , NOT
asi Wioial CIA issuance, and has not raceasswily
been ooordinaled with other ORE produoing ocm--
ponents? It represents current thinking by one
group of espeo~a1iste in CIA and Is desrri[sed for
use by others engaged on similar or overlapping
studies. The opinions expressed herein; my be
revised before final and of'f'ioial publication.
It is intended solely for the I fornnntion of the
addressee and not for further disssemi.ne:tion.
el ASS! n ?,E)
C;HiS.fdiii.;.7
tJE.:XT REVIEW DATF-'
AUTH: HR 7 O2 372044
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OFFICE OF REPORTS AND ESTIMATES, CIA
FAR EAST/'ACIFIC BRANCH
INTELLIGENCE HIGHLIGHTS NO. 57
22 June - 28 June 1949
SECTION 1. SUMMARY OF FAR EAST TRENDS AND DEVELOPMENTS
While French and Indochinese reaction to the US statement in
support of Vietnam has been mostly favorable, as was expected, the
lack of response from other Asian areas reflects the general doubt
felt regarding 'both Frenoh intentions and Bao Dais chances of
success (p. 2).
Japanese Communist strategy appears to be increasingly aggressive
and the JCP4s autumn "offensive" may well be marked by violence (p. 3).
The arrest of alleged Communist-sympathizers among Republican
Assemblymen in Korea is expected to result in a test of President
Rhee's strength when the Assembly reconvenes on 1 July (p. 4).
The National Government's "blockade" of Shanghai threatens that
major Chinese port with industrial paralysis (p. 5). Meanwhile labor
agitation among the employees of foreign firms in that city appears
to be without the support ?f-Communist administration authorities (p.6).
Recent Burmese Government moves towards better relations with the
West have received the acquiescence, if not hearty aptroval, of the
Socialists who constitute a majority in Parliament (p. 6).
Progressive steps towards a solution of the problems in Indonesia
seem to be continuing smoothly, with Republican restoration to Jog-
jakarta as the next move scheduled (p. 9).
1e Australian Labor Government is facing a major political and
economic crisis as a result of a severe mid-winter coal shortage,
capped this week by a strike on the part of 24,000 miners (p. 9).
The marginal notations used in succeeding sections of this Weekly
("A", "B", "C") Indicate the importance of the items in B/FE opinion
with "A" representing the most ir'portant.
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SECTI(}?l II. DEVELOPME!flS IN SPECIFIED AREAS
GF RAL
Reaction to the US statement on Vietnam---The Departnent of State's 21
June press release approving the new unified state of Vietnam recently
,.stablished by Emperor Rao Dai has received little support or publicity
outside of France and Indochina. In both Hanoi and Saigon, favorable
full covvrare v ms givens with the exception of one anti-US French journal
in Saigon. French High Commissioner Pi~gnon stated in response that "it
is comforting for us to know that this great country understands our
reasons and intentions." The influential editor of "Echo du Vietnam",,
himself apparently slated for a Bao Dai cabinet post, deduced that the
US approval meant recognition of the future government, support of Viet-
nam's admission to the UN? and a favorable future attitude towards the
exchange of ambassadors between the US and Vietnam. The editor predicts
a brilliant and prosperous future for a unified and "independent"
Vietnam, "over whose cradle the US leans with friendly sympathy-." Rao
Dai's spokesman, Prince Run Loo, expressed thanks to the US Goverreinent
for the interest shown in the new unified state and indicated that Tlao
Dai found real enoourarenent in the support frc the US. As yet there
has been no oormnent on the statement from the Ho Chi Minh-controlled
areas of Vietnam...
The statement was given wide press publicity in Paris, where it was
interpreted as not only favoring Rao Dai against Ho Chi Minh but as the
first US endorsement of French policy in Indochina in four years.
In contrast to this favorable reception in both Indochina and Paris,
issuance of the US statement attracted practically no attention in Great
Britain, where only the Manchester Guardian carried a short news dispatch
from Washington. There has been no editorial comment on the subject and
the news section of the Foreign Office has issued no statement of arj kind.
In India, the press gave very little attention to the statement and so far
the Indian Government has made no coment,
The Burmese, Thai, and Philippine Governments have thus far expressed
no opinion on the question of M. support for Rao Dai. While this cautious
t.ttitude by Far Eastern countries was anticipated, the general lack of
approval for the ITS position obviously does not improve Bao Dai's chances
for success. This international reaction is an indication of the wide-
spread lack of faith in both French intentions and the Rao Dai experiment.
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Communist policy now favors violence--Japan Communist Party (JCP) s trade; ,
based on the concept of "peaceful revolution" since the 1947 party contgre33,
appears to have been altered recently in favor of violence. A recent
Politburo directive stated "All struggles are now meaningless -unless they
are struggles against the rep .me in power." "Each struggle," said the
directive, "will emphasize that the choice is between a democratic people's
government (in other words, seizure of power by the people) and annihilation."
In the light of this directive, statements during the last fortnight;
by two JCP loaders are of interest, 1IOZAKA Sanso, second-ranking Japanese
Communist, has expressed confidence that the Yoshida Cabinet will collapse
this surer'ie.r because of intensified labor offensives and economic difficulties,
while JCP Secretary-General T-OK'TDA Kyraichi has demanded Communist participa-
tion in the "democratic" coalition Cabinet that he claims will succeed the
Yoshida government?
JCP efforts to entice the Socialists into "democratic racial front"
action has not been successful to date except under isolated and local
conditions. Although the mass firings, provided for by the US economic
stabilization program, may put the Socialists between the upper and nether
millstones of Government policy and Lahor-JCP pressure and force Socialist
action parallel to the JCP, the "democratic" coalition government, envi-
sioned by 1'OKUDA, is by no means an immediate prospect.
It may be expected that coming Communist. "struggle" activities will
entail considerably more violence than has been the case during the lest
18-20 months, It is anticipated, however, that the JCP will not push its
autumn "offensive" to such extents as to risk strong suppressive action by
Occupation forces. The JCP's demand for an "early" peace treaty, with its
implied evacuation. of US Occupation forces, may therefore be considered
from two viewpoints. Besides having; wide popular appeal, since most
Japanese believe that a peace treaty is a magic panacea for all present
national ills, such an action would remove the major obstaclo to JCP
violence.
Exports in Serious Slump--A 5O drop in new export contracts since April
Is causing serious concern in Japan. At a time when the effects of eco-
nomic retrenchment as a result of the US-sponsored nine-point economic
rohahilitation program are already severe, the implications of reduced
forei_r,n trade are extensive.
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Various factors are contributing to the slump. The establishment
of a single exchange rate last April caused many foreigp buyers either
to cancel contracts or to "wait and see", in the hope that prices of
Tapanese exports favored by the exchange rate would be reduced. Japanese
manufacturers who were not favored by the now rate, in turn, have fouused
their attentions to domestic rather than export markets. Depressed world
prices, recent import restrictions by dollar-short countries, unsettled
political conditions in southeast Asia, rumors of sterling devaluation
and increased competition from the reviving ERP countries are also con-
tributing factors.
Japan's fiscal 1949-50 export goal is set at $611 million. Exports
un+ie:' much more favorable conditions during the last fiscal year came to
rot.ghly $400 million. Hence, unless external political and economic con-
ditions improve, Japan is destined to face even more stringent austerity
than had been anticipated as a result of the ITS rehabilitation program.
Decreased foreign trade, together with increased unemployment and weakeiied
recovery prospects will provide additional sources of insecurity and dis-
content in Japan which the JCP can exploit in the autumn "offensive".
KOREA
Vice-ohairit n of National Assembl '+rr ested-- tim Yak Soo, vioe -Chairman
of the Republic's National. Assembly was arrested by Seoul police on 25
June. With his arrest,it appears that the round-up of Assemblymen allegedly
cooperating with the Communists has been completed for the time. being.
President Rhee contends that the police have evidence linking Kim Yak Soo
and his followers with northern Korean Communist agents and he says the
arrests were necessary to nip Comunist plots in the bud. Assembliflnen
may feel, however, that Rhee is simply attempting to break Kim's organized
Assembly opposition to the Government, which has developed sufficient
strength to threaten Rhee's power seriously.
The arrest of 10 Assemblymen, including the vice-speaker, within a
period of a few weeks can be expected to precipitate another severe crisis
in Assembly-Executive relations. The first test will come when the Assembly
convenes for a spacial session on 1 July. If Rhee is able to convince the
Assembly that he has a real case against Kim Yak Soo, the inevitable motion
to release the arrested men for the duration of the special session may be
defeated, allowing Rhee to emerge in a strong position, with much of his
effective opposition silenced. If Rhee loses on this first test, however,
the Assembly may then proceed to take drastic notion to curtail the Presi-
dent's powers.
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Kim Koo Assassinated--The former President of the Provisional Korean "C"
Government in China. Kim Koo, an almost legendary figure in Korea for
his acts of terrorism against the Japanese, was shot to death in his
home in Seoul on 26 June. It appears that Kim was assassinated by a
member of his own Korean Independence Party, one Lieutenant An Duhi.
The motive is obscure, but the killing probably arose from differences
of opinion within Kim Koo's own following as to the proper policy to-
ward unification and support of the Republic of Korea.
Kim Koo, who alienated much of his popular following through sus?-
peoted complicity in the assassination of rightist politician Chang
Duk Soo in December 1947, lost additional support from close followers
by his refusal to support the government of the Republic of Korea. Kim
had maintained that the establishment of the Republic only served to
prolong the division of Korea. Even after the fiasco of his trip to
the northern puppet capital of Pyongyang in the spring of 1948, he main-
tained that unification must be achieved by sincere consulation of leaders
from north and south. It is possible that Kim dreamed of a militarj coup,
using his followers in the Republic's Army to gain power in the south as
a preliminary step toward unification, and that his killing was the result
of Lt. An's objection to such an attempt.
Kim*s assassination could result in violent reprisals against members
of the Republic's government if there were any hint that Rhee or other
officials were implicated. The "national funeral" ordered by the Cabinet
for Kim may be the occasion. for some demonstrations against the government.
It anperrs, however, that Rhee is in the clear and, in the long run, Kim's
death may serve to unify the Republic further in its stand arainst ^ommunist
pressure.
CHI 14A
Shan hai faces paralis--As a result of Nationalist naval and air activity, "A"
as ass well as a rumor that the entrance to the Yangtze River had been mined.,
foreign shipping activities in Shanghai have come to a virtual halt. The
Nationalists, observing that "hysteria" over the alleged mining had effect-
ively closed the port of Shanghai, evidently stumbled on a legally "correct"
method of strangling Shanghai without instituting an of U cial blockade.
The Canton Government announced all ports from Foochow north to Manchuria
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would he "temporarily closed" to foreign air and sea traffice.
While the "rationalists are incapable of effectively blockading
the entire "closed" area, their naval and air forces are adequate
for limited patrol action and probably will be able to isolate 3han;*hai.,
effectively, Few foreign vessels are likely to risk the danger of
entering the port under threat of Nationalist attack and the Communists
themselves possess few vessels canahle of running the "blockade." Six
American ships already have dropned Shanghai as a port of call and all
forein vessels in port left before Canton's arnounced closure deadline.,
Except for some avaricious Horgg Yong; shippers who will run blockades
for anyone, as well as a few small Communist vessels, the port of Shanghai
nroba'hly will remain closed for some tire.
Although the Communists can supply Shanghai with enough food for its
6,000,000 people, an effective blockade of the port will seriously reduce
the output of the city's industries Zvi thhin a month. Shanghai's fuel
impor as---normally 125,000 tons of coal and 35,000 tons of fuel oil per
month--will be suspended except for an inadequate trickle of inland coal.
This will force utilities to curtail their services or close down.
Chemicals,, rubber, metal and other raw materials vital to Shanghai's
industries, moreover, are not available for domestic sourceao It is
probable therefore, that Shanghai will be economically paralyzed by a
continued blockade.
Forei firm employees aritate--Labor agitation, directed at several
.reign irns, has been evident in Shanghai scene since the Communist
takeover. A dispute involving Caltex appears typical. After locking
the front doors of the building, Chinese employees marched up and down
the office corridors while the executives barricaded themselves in their
offices. By the end of the day, the company yielded to substantially
all the workers' demands.
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careful not to interfere with the teaching of technical subjects needed
for rehabilitation of industry and agriculture. Officials of the Amer-
ican missionary-supported Peiping Union Medical College, for example,
have expressed satisfaction regarding their relations with Peiping
authorities. In Shanghai, while liberal arts and business students are
under pressure to join the People's Liberation Army. medical., scientific,
engineering and agricultural students, in contrast. are urc?=d to "inten-
sify their studies."
Shift towards West okayed by _So, Burmese Government's recent
decision tom relax its extreme socialist prop-,ram and seek closer relations
with the West has nor been approved by the Socialist-dominated Parliament.
The Government-sponsored Minerals Bill (w1dch i.s designed to encourage
the influx of foreign capital) was passed by Parliament with only rela-
tively minor and reasonable amendments. In addition, the Socialists did
not reject the Government's recommendation that Burma enter into mutually
beneficial treaties with countries having "common interests," although
they advocated following a "middle path" and warned against" binding Burma
to any power bloc. In order to calm Socialist apprehensions. the Govern-
ment gave its assurance that party leaders would be consulted on all major
issues and that no treaty would be concluded without parliamentary consent.
It is quite likely that this guarantee is acceptable to the Socialists at least for the present.
The mild Socialist reaction is an encouraging indication that no
serious breach between the Burmese Government and Parliament has developed
and that none is imminent. Continued Socialist support in Parliament,
however, will be dependent upon the maintenance of the Government's spirit
of compromise and Its circumspection in advancing and imples:iertting the new
policy.
NF:'dtS NO TE
Dissatisfaction among the Shan and Kachin ethnic minorities is becoming
inareasing y e ent,- Shan members of Parliament are absent from the cur-
rent session in Rangoon and are holding a meeting of their own at Taunggyi,
capital of the Shan States. The Kaohins desire the retirn of Kaohin mili-
tary personnel in the Burmese Army from southern Burma to guard the Yunnan
border, while Shan leaders are seeking; arms for their persona]. armies not
only for border defense duty but also to repel incursions by Burmese Com-
munists and the PVO.
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IAA
Implementation of Batavia agreement progresses favorably.-At a formal
meeting under the auspices of the UN Commission for Indonesia on 22
June, all parties to the Indonesian dispute expressed satisfaction
over the outcome of the preliminary negotiations just ooneluded at
Batavia and tangible results of Dutch acquiescence to restoration of
the Republican Government to the Jogjakarta Residency are already
apparent.
Evacuation of all civilians desiring to leave the Republican capital
was completed early in June and Dutch troop withdrawals, begun on 24
June, are expected to be aoripleted by the end of the month. Republican
officials are preparing to return to Jogja during the first week in July,
and the Republican Cabinet and Parliament will review commitments already
made by the Republican Delegation at Batavia and approved by Premier
Matta,. Final decisions by the Republican Government regarding a "cease-,
fire" order and other related matters are expected to be reached alout
20 July.
During the next few weeks, therefore;, Republican officials will be
.faced with the problem of consolidating popular political support and
of restoring law and order in their territory. If these tasks are
successfully executed, Republicans, Federalists and representatives of
the UN Commission for Indonesia will proceed to The Hague to attend a
Netherlands-sponsored round table conference at which they will con-
sider plans for the transfer of Netherlands sovereignty to a federated
United States of Indonesia.
Military observers in the field are optimistic over Republican
ability to restore and maintain law and order. They feel that the
majority of army units, including groups of fanatic Moslems in the
Residenoy,will ob3y military orders issued by the Sultan of Jogja-
karta. Cooperation between Republican and Dutch forces in carrying
out the cease-fire order will be more difficult, but President Sukarno
has expressed corcf'idenoe that he will be able to control the TNI
throughout Savor and Sumatra.
AUS TRALI I&
Labor Government faces coal strike crisis-Australia's chronic coal
deficiency, p presently at a famine level, has become a critical problem
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as a result of the strike of 24,000 coal miners for higher wages and
shorter hours on 27 Juno. A complex combination of factors lies
behind the Australian coal problem. One basic cause is the reluctance
of Australian miners to increase or maintain adequate production
through their traditional fear of losing bargaining strength through
the accumulation of coal surpluses. Unsatisfactory working conditions
and Communist-inspired slow-downs, together with recent floods, have
also combined to retard coal productior. The mid-winter strike, while
the miners' demands were in the process of arbitration, has presented
the Labor Government with a major crisis.
Thousands in industries dependent on coal are already out of work
and it is likely that unemployment will increase as the Australian
economy, in which coal is virtually the only source of power, becomes
paralyzed. Internal transportation has slowed down and state govern-
ments have been forced to institute industrial and domestic electricity
and fuel rationing. The Labor Government, thus faced with a major
political and economic problem in an election year, insists that the
miners should return to work and await the outcome of Federal arbitra-
tion. To prevent sympathetic support of the miners by other trade
unions, the Attorney General plans to introduce legislation prohibiting
contributions from union funds. Should the Labor Government's insist-
ence on arbitration fail and the general paralysis of Australian industry
and commerce continue, the attendant loss of prestige in an election
year is likely to have serious repercussions.
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