INTELLIGENCE HIGHLIGHTS NO. 49 20 April - 26 April 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100020012-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 12, 2016
• Document Release Date: June 13, 2001
• Sequence Number: 12
• Publication Date: April 26, 1949
• Content Type: PERRPT

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COPY O,_ _
FAR EAST/PACIFIC Bf11NC i
OFFICE OF RhPORTS AND h.'MMIITL
CEP21 AL INTELLIGENCE AGENCY
WORKING PAPER
NOTICEr This document is a working paper; NOT
an official pit. issuance# and has not necessarily
been coordinated with other ORE producing com-
por.;ents. It represents current thinking by one
group of specialists in CIA and in designed for
use by others engaged on s irrli) ar or overlapping
studies:, The opinions expressed herein may be
revised before final and official publication.
It is intended solely for the information of the
addressee and not for f-art1 eti dissominatiorx~
NO CHANGE
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NEXT fEVIEL DZ i L:
AUTH: HF
DAT ~~ EVIEWER: 372044
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OFFICE OF REPORTS AM ESTIMATES, CTA
FAR !,AST 'ACI 'IC ?xxRA! H
INTEE',IGE1CE RIG$lXGfT. NO * 49
2i? April - 26 April 1949
Bx-era for Be
s ivq n ng return,, meanwhile,, has inspired o e ns . to acoeeptanoe of
SECTION I, SM2WT OF FAR EAST TREM)S AND MML T8
A dispute between extreme and moderate factions has amused a. split In
the leftist Japan Farmers Union (p. 2). Establishment of a single exuhange
gate for the yen this week pr~esen. aaany Japanese induetrior. squarely with
tit problem of rationalization or collapse (p0 2).
Reorganization of Toreeaes Ydnistry of Defense has resnited in s
;)oat for Japanese-trained Major Gen. Chai (p, 3). Meanwhile,, Govern ent
collections of esumer grain face legislative opposition (p? 3),,
Vietnam unity by the newly elected Coohinohina Assembly (p;- 4).
A new plan for the raising of additional Goverrmsr?,t forces from the
border peoples of Burma seems to offer- little hope for resl;nred order (pa 5)
While preliminary discussions between the Dutch and. '^ publicans at
Batav+a still leave complex problems unsolved, the atmosphere is not hostile
e.nd both sides agree. that delay in settlement is dangerous (po 6).
The Chinese Communists have met little opposition to their renewed
offensive and the long-awaited crossing of the fangtse has brought them
control not only of Nanldng but of most of the eastern Yangtse valley (p0 6).
Yxhile the now advances have resulted in at least temporary volidari ty in
the badly-sbaken Nationalist ranks there is reaeon to believe that the
Comuaiets, despite serious econtsmio problems, wrIll bring temporary peace
avd prosperity to the newly "iiberaated" area (p. 8?9)
("A'e a "B'e or "C5)indicate the importance of the items in BAS opinion
with "A." representing $he nost important,,
The marg no pans rave n suoesee ng socr canes of 6 also
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James Farmers Union split-"As a result of conflict during preparatory m?wet-
ings, the long-delayed convention of the leftist Japan Farmers Union, (JFU),
which began on 22 April, has been split into two camps - Comwunist and
Farmer-Laborite delegates on the left and left-wing Socialists on the right,
The division came when minority rightist members of the left-controlled JFU
Central Com?iittee walked out after being overruled in their opposition to
Leftist delegates whose qualifications they had challenged.
Although JFU Chairman KURODA Hisao, Farmer-Laborite boss, will attempt
a na3utral course, departure of the predominently Socialist members of the
JFU through this right-wing bolt can be expected to result in the develop-
sent of a definite pro-Communist union orientation, particularly since
Fa.rrrer-Iab+rite policies are susceptible to Communist exploitation. Depart-
ure of the left-wing Socialists further implies an end to Socialist attempts
to maintain ties with KURODA's group, themselves former extr?eme left-wing
Socialists. Unless the self-exiled rightists can reach an agreement with
the National Farmers Union, organized by former right-wing Socialist leader,
HIRA.NO Rikizo, they may establish still a third farmers' union,
Sin_tle F rip rate set--A further step in the shock treatment of Japan's
economy occurred with SCAP establishment of a single exchange rate of Yell
360 to the Jotlar on 25 April. Replacement of the cumbersome mu? tiple-
exchange rate I-)y the new single rate will force many marginal Industries to
rationalize or expire. Hardest hit evil.'be rasp silk producers, who have
been operating at a loss despite indirect subsidization throalgh an exchange
rate of 420 Yen to the dollar. The shipbuilding industry may be forced to
close down 30% of its yards while staple food importers rill need a direct
subsidy of a reported 32 billion yen to continue the present- level of im-
ports.
Producers that will continue to enjoy profits under the new exchange
rate are the metal. (machine tools and rolling stock), chemical and light
industries (watches, cameras, and bicycles). The single rata, long expected
by Japanese business and government circles, not only will aid in lor.g-range
reestablishment of foreign trade on a sound basis but also will be useful
in forcing a desirable rationalization of the Japanese :internal economy.
ann
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Defense Ministry reorganized--President Rhee has signed an executive order
abolishing tie positions of ice Minister of National. Defense and the Su-
preme Chief of Staff. A Joint Chiefs of Staff organization is to be sub-
stituted and Army and Navy Chiefs of Staff will report -directly to the De-
fense Minister. Although Defense Minister Shin sta' es the move is designed
to :simplify Ministry operations, it also permits assignments to the field
of superfluous officers now at Defense Headquarters. Fu Cher" the action
enables Rhee to effect quietly a long desired removal of the former Supreme
Chief of Staff, Chat Byung Duk, a -member of the aggressive Japanese-trained
Arm;,-.- cfficer clique. Ma j . Gen. Chat will be given the ordnance commar.- ., a
poS .ion in line with his Japanese Army experience.
NEWS NOTES
Grain collection--The National Assembly has passed a measure which
suspends the present grain purchase law until 31 October 1949 and estab-
lishes a free market in rice. Penalties are provided for hoarding or pro-
fiteering. Although President Rhee probably will veto this bill, the Assem-
bly will continue to oppose any form of government rice collection. A sue-
easeful summer grain collection, therefore, appears extremely doubtful
Failure to collect sum Lr grains will further. aggravate the government ea
shaky food position and impair the effectiveness of ECA'1s capital develop-
ment program.
Troop withdrawal--On 18 April President Rhee announced that discussions
were underway between the Republic of Korea and the US to establish a date
for withdrawal of US forces from southern Korea. To date, the northern
Korean pro} anda outlet, Radio Pyongyang, has not commented directly upon
Rhea's announcerment, although nearly every broadcast beamed to the south
continues to call for concerted Korean efforts to drive U5 forces out of
the country. It is probable that Radio Pyongyang is awaiting instructions
from Moscow on what new line is to be taken in the light of FRh.ee 9 s an-
nouncement. It is to be expected that the Commu.~aist puppet regime will take
complete credit for having forced th8 eventual. US withdrawal and will ' jubi-
lantly announce that Korea,, through ommunist efforts, has been brought one
step closer to "unification."
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Current status of Bao Dal plan --Following a favorable 55 to 6 vote by the "B"
Cosh. n china csrritorial Assembly on a motion recommending unification of
Cochinchina with Tonkin and Annasm, former Annami to emperor?Bao Dai left
France for Indochina, expecting to arrive there on 28 April, The motion
includes a.recommendation to the French Assembly that the present. colonial
status of Cochinchina should be abrogated and Cochinchina joined to the
"associated state of Vietnam" Also included was a special paragraph pro-
viding for the invalidation of the proposed unification in case of any
change in the status of Vietnam within the French'Union, Thus, in the
event the other states become Communist--dominated, a Rio Chi '!inh - Bao Dal
rapprochement is effected, or Vietnam withdraws from the French Union,
Cochinchina has reserved for itself the opportunity to secede from Vietnam
and become a full.-fledged associated state of the French Union independent
of its two neighbors. Many Vietnamese members of the Territorial Assembly
objected to this provision and contended that it would cloud the clear
declaration of unity and offer an avenue of escape to die-hard opponents
of federation.. 'However,, President Xuan of the Provisional Central Govern-
ment and Bao Dais a cabinet chief, Buu Loc.., both indicated accceptar a of
the entire motion on behalf of the former emperor and their influence
effected the final.passage.
Perhaps even more significant than the Inclusion of the "withdrawal"
provision 'aws a rider petitioning Bao Dal for a special status for Cochin-
china allowing separate assemblies and a "special institution" wherein
French residents might voice their opinion on economic matters. Although
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T M TUNA (continued)
the proceedings of the Assembly seed to indicate a surprising amoutat
of Francs -Vietnamese cooperation and better control by moderate French
elements over the extreme colonialists, it appears that. tthe spec lull pro-
vision and the petition provide definite leverage for certain French ele-
ments in C oc hinchina and a real danger to the effective .nif'i.cation of
Vietnams
Meanwhile,, former emperor Bao Dai must remain inact?.ve In Indochina
until the French Parliament reconvenes on 17 Play and con ideers approval
ti: i the new status of Cochinehina. The former emperor is expected :z hold
a.nversations with political leaders and lay the groundwork for hi?, -c^ rern=-
;dent, but he has repeatedly stated that his regime cannot function until
the French Assembly has approved unification of the three Kysa Although,
Bao Dai is reportedly encouraged by the vote of the Territorial Asaembiy,
his efforts to create a workable goverment will be tiara, aed by the protest
demonstrations and increased guerrilla action which can Its expected as
retaliation from Ho Chi Minhes forces
BURMA
Government plans frontier force-The Burmese Government, in a new plan to
restore peace and stability, has proposed the raising of ton-additional
Aram battalions composed of frontier peoples, mostly Kac l i as, in the hope
that this fresh force would check the deterioration of t.. e military situa-
tiona Although Prime 'sinister Thakin Nu stated that India and Pakistan
have agreed to provide the necessary material, he has reoao ste d additional
military aid from the T13,
If the Burmese Government had developed such 'a force several months
ago, instead of devoting Its efforts to the raising of ineffective and
ill-disciplined police levies, the action would have beer more effective,
Ten such frontier battalions, if properly organized and led, could not
only have been effectively employed against Communist and 170 insurgents,
but their activities would have been less likely to antagonize the Karens
and precipitate` the Karen revolts Apparent optimism over, the present
scheme, however, is believed to be unwarranted for several reasons. First,
it is extremely doubtful if 7--8,000 more troops will be tifficient to do
the job presently at hand. Second, although I.i.a and Pakistan are app
arent-
ly making an initial. contribution to equip this force, continued impor4a
of foreign materiel will be-necessary to maintain it, and such imports are
by no means assured. Third, the entire venture is being planned independent-
ly by the Burmese tear Office, without the aid and advice of the British
Military Mission, so that if the errvis.i.oned frontier force actually urges,
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Bt~A (continued)
in all likelihood it will be poorly trained and organized,, Fourth,; it
is questionable how long a predominantly Kachin force will remain loyal
to a Burman Gomerrment, The Kachins presently in the Ariy have shown
little enthusiasm for fighting the Karens and some Kachin troops have
even deserted to-the Karen insurgents. It is further reported that the
Kachins as a whole are dissatisfied with conditions in Durma and it is
not entirely certain that they would leave their hills' for a prolonged
period to engage in a struggle not of their own making?
T' TD(' NNESIA
Hatta - Van Roi jen discussions.--Republican Premier Hatta arrived in
Batavia from Pangka Is`l ar n 24 April in order to hold informal dis-
cussions with Van Roijen, head o4 the Netherlands Delegation, Pre-
liminary reports indicate that Hatta and Van Roijen have made much
progress toward an understanding of each other's position. Current
difficulties center around Hatta's unwillan ess to consent to a bind.-
ing agreement on (1) a cease-fire order, (2 Republican participation
at a Hague roundtable conference, and (3) troop withdrawals envisaged
in the January 1949 Security Council's Resolution, Van Roijen, hooey.
ever, is willing to approach his government on the possibility of accept-
ing Hatta' s perm canal assurances if they are formalized through the U7,1
Commission for Indonesia? while Van Roijen would make no promises to
Hatta on Republican restoration throughout the whole Jogjakarta Residency,
he will consider withdrawal' of Dutch troops from the city and its immediate
environs as an initial step. The Dutch Delegate is also willing to assure
Hatta that no more now Federalist states will be carved out of former
Republican territory.
Although the problems still confronting the two parties are celex,
current discussions at Batavia mark a decided improvement in Dutch-Repub-
lican relations, Van Roijen and Hatta agree that delay In settlement of
the Indonesian problem will benefit only Camunist and extremist elements.,
and both appear to be sincere in their desire to restore stability to the
area,
Communists occupy Nankin? most of eastern Yangtze valley--0n 20
April, immediately following Nationalist rejection of Communist surrender
terms, the Red armies, in compliance with MAO Tze-tung?s and CHU Teh"s
directive of the same day ("bravely to advancea.ddestroy the reactionary
forces, ..liberate the people of the, whole country" ), effected their long-
acme
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awaited crossing of the Yangtze river. Faced with only paper opposition,
and aided by pro arranged and voluntary defections at key points, the
Communists rapidly fanned out from initial bridgeheads ne::r Wuhu and..
Kiangyin, to the west and east of Nanking.
On 23 April,Red forces crossed the river from P kow and took over
Nanking. Thus the capital of the Republic of China for over 20 years
was unceremoniously and completely abandoned to the Communists. Iron-
ically, the actual occupation of Nanking was accomplished by an ex-
Nationalist unit under U Hua?wen, who had "gone over" at Tsinan some
7 months earlier.
Meanwhile, the principle Communist field forces, together with
guerrillas, were moving down the railroad toward Shanghai and croe,--
';ountry toward the Chekiang-Kia.ngsi rail line,, The former force
reportedly took Soochow and is now 15 kilometers northwest of Shar.;hai,
Other reports indicate that the Commmunists have already occupied Kashing,
on the HangehowoShanghai railway; if there, this deprives Nationalist
troops in refugee-slogged Shanghai of their last overland route of retreat.
In the five days since the outset of '.;his lightning Communist drive,
there has been no opposition from the fleeing National. + its w'ho Seem
far too intent upon getting safely into Shanghai or behind their now
defense line to offer any present resistance. This line is anchored
on liangchow and follows the Chientang River west.
Widespread and vocal opposition of Shanghai's populace to making
that city the scene of bitter fighting plus the low combat efficiency
and moralecf the garrison, coupled wi'th dearth of ";hard money" pay
for the troops make it extremely doubtful whether any effective resistance
can or will be offered there, despite loud assurances of the Military
that the city will be defended to the last man, The Communists may
not wish to take the city with its manifold problems irrLmediately,
being presently content with sealing off the Whargpoo River to prevent
a sea escape by TANG 4a-po and his forces. Rather than fight, TANG
(under the direction of CHIANG Kai-shek)can be expected to make every
effort to evacuate all the troops he can by land, sea, and air leaving
only local militia; those remaining cannot be expected to make any
effective last-ditch stand. It is highly doubtful whether the Nationalists
can or, will regroup their units in an attempt to stabilize a front slang
the Chientang River, but will probably continue to withdraw south toward
Canton or Taiwan.. Accordingly the question in the Hangc;how-Shanghai
sector is not whether the Communists can move into and easily occupy the
entire area, but whether the Communists can cut off TANG's forces and
prevent his escape south.
On to the west, in the Hankow sector;, fighting has not yet broken
out. Communist action to seal off this area is expected soon, such
an operation has long been anticipated by the government commander in
the sector, PAl Chung-hsi, who has been. gradually withdrawing from the
Hankow area for some time. The only other action was carried out at
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Taiyuan, where the city fell to the Communists after a S--hour assaults,
Taiyuan's loss very probably spells the early abandonment of Tsingtao,
which has now lost its chief strategic significance as a base of air
supply for the Shansi capital.
Feeble Nationalists show greater political cohesion.--Under pressure
Communist offensive, Nationalist leaders are inclining toward
of the new
greater political cooperation at least temporarily Acting President
LI Tsunga-jen's decision to reject the Communist surrender terms was
supported by various regional leaders and by the Kuomintang groups
ong committed to an "honorable peace" or continued resistance. Follow
o,,g LI's recent conference with CIHIANG Kai-shek in H&nkow, the National
'sovernment was able to announce a somewhat authoritative program fc-
a "fight to the end."
LI's prestige has suffered, however, not only because of his feilure
to make peace but also because CHIANG has declined to clarify his
position as "retired" President. The Acting President has announced
that he will accompany his ministers to Canton but unless he van obtain
full presidential authority without CHIANG's interference, he may with-
draw to Kwangsi province and .continue resistance on a regional basis.
Meanwhile, right-wing Kuomintang groups reportedly are preparing the
way politically for