INTELLIGENCE HIGHLIGHTS NO. 28 WEEK OF 17 NOVEMBER - 23 NOVEMBER 1948

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100020033-2
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 12, 2016
• Document Release Date: May 23, 2001
• Sequence Number: 33
• Publication Date: November 23, 1948
• Content Type: PERRPT

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OFFICE OF REPORTS AND ESTIMATES, CIA
1AR.EAST/PACIFIC BRAWN
INTELLIGENCE HIGHLIGHTS. 110. 28
WEEK OF 17 NOVEMBER - 23 NOVEMBER 1948
SECTION I. SUMMARY OF FAR EAST TRENDS AND DEVELOPMENTS
? Financial assistance from the US is expected to be a primary issue at
the 4th spas Session (page 3 )0
The Philippine Government has adopted a policy which bars the entrance
of refugee Chinese nationals (page 3 ).
A tentative US-Australian resolution recognising the Republic of Korea
as the "lawful government" has been drafted for UN consideration (page 4).
New Zealand and Fiji reach financial agreement on a joint defense plan
(Page 4 )0
Early banking reform sought by Japanese to assist in trade revival
(page 5 ). Recent maneuvers in the Japanese Diet have resulted in increased
cynicism among Japanese regarding acceptance of democratic practices (page
6 ). MaoArthur's technique of conspltation with Allied representatives
relative to the Tokyo Trial decisions may prevent Soviet propaganda from
claiming the death sentences are the responsibility of the capitalist nations
(Pege 5 )0 '
Impelled by increasing fear of an invasion from North Korea President
)Rhee has appealed to President Truman for further military support (page 8 )0
The Chinese Communists have stepped up their Central China drive (page
?7 ). The National Government's dependence on US aid has been underlined
in recent appeals (page 7). In attempting to strengthen their international
position, the Communists have asserted their unity with the USSR while
simultaneously observing generally correct relations with US officials (page
8 ). A revolt may occur in Taiwan in the event of Ranking's fall (page 9 )0
4.11.1.1?MIN........??????????..1?1
NOTEr In suooeeding sections of this Meekly, the following marginal
notations are used:
(1) "A"? "et or "C" -.importance in B/PE"s opinion, of the
item, with "A" representing the most important ones.
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SUMMARY (oontinued)
The Phibul regime in Siam is racing difficulties vie4ovis Its
Wafter,: and eivilian support (page 10).
' In Indochina the Prendh have had limited mammas in their full
RImiliboary offensive. Meanwhile it Paris Gaulle reoemmedds stronger
Frew& ',antra in Indodhina (tag e 10)4
. Another amnesty' proolamation maybe presented to the Philippine
Cairene (Page 33).
The reconvening in Indonesia of the Bandoeng Conference ofiwin.
Republican has coincided with a continuation of direot Dutoh-Republioan
negotiations (page LOD
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SECTION II. DEVELOPMENTS IN SPECIFIED AREAS
GENERAL
Assistance from DS ex oted.to be rime issue at the 4th ECAFE session ? for
The United Nations Economic Commission for Asia and the Far East will
open its fourth session at Lapstome NSW, Australia on 29 November. About
100 delegates and alternates will b: present and will again undertake to
outline a program for deism recovery. At previous conferences the delegates
placed greater emphasis upon political issues arising from thelr particular
political experiences than upon the consideration of economic projeots
essential to Asian recovery and the meetings produced little except an ex-
change of views?
Without exception, the countries of the ECAFE region oontinue to envision
substantial US monetary aid both in recovery and for speeding their modern-
isation programs. Their interest in ECAFE centers largely around this
objective and to each of their representatives the question of US assistance
will remain the primary issue. It is anticipated that the US will be asked
to participate in economic missions to explore ECAFE projects appearing to
have immediate recovery value and particularly those where US financial
participation is desired.
The large Soviet delegation is expected to be particularly active. At
the previous meetings, Asian members joined the USSR in opposition to the
Western Powers and were successful in inducing the less experieneed delegates
from countries such as New Zealand, to aide with them on issues which were
more political than economic. Other controversial issues postponed from
previous sessions and awaiting action include the seating of representatives
from the Republic of Indonesia and Vietnam, and SCAPIe plan detailing Japanos
future contribution to reconstruction and the development of the ECAPE region?
It is also expected that the China situation will precipitate other debates
which will be exploited by the USSR delegation?
124112 ilp.:_tes'polioy barseChi s
The Philippine Cabinet has barred admission to all refugees from China
except te nationals of those countries with whiot the Philippine Republic
has negotiated treaties of amity. These include only tho US, France, Italy,
Spain, and China excluding the United Xingdom end the Netherlands. However,
in the case of China refugees will be United to the present immigration
quota of 500 persons annually--a policy which is tantamount to a refusal to
admit Chinese refugees. According to the Cabinet decision, US nationals will
be allowed to remain in the Philippines for the duration of the emergency
but must agree to leave thereafter at their own expense. It is quite likely
that the Philippine policy is based largely upon the belief that admission
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RET
MURAL (continued)
of large numbers of refugees, particularly Chinese nationals, mould
faoilitate the entry of subversive elements mould increase their economic
hold in the Philippines and would aggravate the current housing and food
shortage.
Resolution in recognising Republic of Korea as "lawful rovernment" drafted
Australian initiative has resulted in the drafting of a tenative joint
DS-Australian resolution which recognises the Republic of Korea as a "lawful
government" having effective control and jurisdiction in South Korea and
as based on a "valid expression of the free will of the electorate in that
part of Korea." The draft resolution also provides for a new UN Commission
which is to work toward Korean unification, Nhile the recognition to be
granted the Republics of Korea is more limited than the US and China have
wished, the achievement of a compromise resolution should effectively fore.
stall any Soviet attempt to capitalise on dissatisfaction with the South
Korean regime expressed by many smaller 'powers inoluding Australia. The
USSR had probably hoped to prevent UN sanction of the new government by
offering an ostensibly conciliatory proposal for a North-South federation.
Nevertheless, the Soviets are expeated to continue in their effort to secure
a hearing for delegates from North Korea.
New Zoland and Fiji reach financial agreement on defense plan
Representatives of New Zealand and the Crown Colony of Fiji have reached
an agreement on the financial aspects of a defense plan worked out last
June between the New Zealand Chiefs of Staff and the Governor of Fiji. Under
the June agreement, Fiji's missions were determined to bel (1) provision
of a safe anchorage for shipping at Suva* (2) provision of air bases for
reconnaissance and defense.
?Bn
The recent financial agreement provides that New Zealand will bear the
expense of air defense and that Fiji will set aside $6000000 annually, of
which $400,000 will be for the maintenance and training of ground and naval
forces and $2000000 Will be for payment on Fiji's wartime debt to New Zealand.
The authorities in Fiji desire to build up a small but well-trained ground
force as rapidly as possible as a means of maintaining internal security.
Any internal threat stems largely from the growing Indian population in the
Colony, which now totals some 120,000 as compared with 117,000 Fijians and
40600 Europeans, and which is politically restive and resentful of its
minority representation in the local Government
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arlik
Jammu, desire early bqnkine reform, Notwithstanding the recommendations
of several US Government agencies that Japanese banking reform be delayed,
the Japanese generally are now anxious to effect promptly all changes in
banking laws considered feasible to supplement efforts at stabilisation of
various other segments of their economy. The Japanese appear especially
interested in strengthening their banks which participate in foreign trade
and related services to the extent that they may become less reliant upon
Government guarantees and Bank of japan loans. They have in mind an
active role by these banks in an early return of Japanese foreign trade to
a strictly commercial basis.
Pplitical maneuvers promote public cynicism. Recent maneuvers in the
Japanese Diet have resulted in increased cynicism among Japanese regard-
ing acceptance of institutions and practices of representative government
which have been key points in the Occupation's delocratisation: program.
Lacking majority control of the Diet, Premier YOSHIDA has been attempting
to limit the business of the current extraordinary session of the Diet to
passage of SCAP-requested legislation and to dissolve the Diet and eall
for elections which if held reasonably soon would strengthen his party's
position in the Diet. In an attempt to damage 70SHIDA's present popularity,
the opposition parties have demanded that he commit himself on government
policy before dissolution. Leading the attack against dissolution has
been the Socialist Party which had been loudest in demanding dissolution
prior to the collapse of the ASHIDA Cabinet. The Socialists, claiming to
have the support of SCAP's Government Section, raised objections to
dissolution on the alleged constitutional grounds that the Premier must
obtain the Diet's consent for its dissolution. The question appears now
to have been resolved in YOSHIDA's favor by an announcement from the
legal Section GHQ, SNP.
In the past week Japanese editorials have been particularly critical
of the opposition parties' dependance on parliamentary tactics rather than
on political principles. The editors admonish political leaders in Japan
to avoid giving the impression that international confidence cannot yet
be placed in Japan's democratic development.
MacArOur reviews, Toky9 Trial sentences, On 12 November The International
Military Tribunal for the Far East passed sentence on the 25 accused
involved in the Tokyo Trials., General MacArthur requested the members of
the Allied Council and heads of the Allied Missions to ?commit* on 22
November with him, Which consultation would be given consideration in
MacArthur's review of the sentences. At this meeting the heads of missions
are believed to have followed the lead of their respective judges on the
Tribunal.
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atal (Cont.)
It is understood that when the Tribunal voted for the seven death
penalties the USSR judge refrained from demanding the death sentence,
presumably an the grounds that capital punishment has been abolished in
the Soviet Union. It is possible that future USSR propaganda intended to
place the onus for the death sentences on the *capitalist* countries,
Since the Soviet Allied Council Member has advised the press that:he did
not ask MacArthur for any Change in the sentences, thereby further committ-
ing the USSR to support the Tribunal judgment, Soviet propaganda guns have
been spiked, at least.partially, by MaoArthur's technique of consulting
with Allied representatives.
Agali -
Ahee appeals for further 1112 Oil. The South Korean Government, fe4d with
the visible evidence of a reduction of US troop strength in Korea fears
that the DS may be undertaking complete troop withdrawal. The Government
does not believe that their own defense forces are presently adequate to
withstand the threatened attack from North Korea. The result is a spread-
ing conviction that Communist domination is inevitable and the development
of an atiosphere of fear and defeatism which may produce a large scale
opportunist movement for *coalition" with the North Korean regime,
In an attempt to bolster public morale and to increase the prospects
for survival of his government, President Rhos appealed to President
Truman on 19 November for the indefinite postponement of US troop with-
drawal and the immediate establishment of an American Military and Naval
mission to assist in further training of the Korean. defense forces. The
demand for the retention of US troops was also expressed in a resolution of
the Korean National Assembly requesting UN approval for continued main-
tenance of US troops in Korea. Rhee and the Assembly will continue to
press for some statement committing the US to either retain tactical troops
in Korea or to otherwise guarantee the territorial integrity of the
Republic of Korea.
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CHINA
The Communists have stepped up their Central China drive, only a "A"
few days after the Nationalists claimed they had broken the back of the
Communist attaokowith a "major victory" along the Grand Canal east of
Hsuchou. The Nationalist 7th Army Group and several additional
divisions were destroyed in this major victory," and subsequent Nationalist
attempts to reopen the Hsuchou-Nanking Railway were firmly opposed
by the Communists and halted. The main effort in the latest Communist
drive, in which 11 columns are participating, is from the southeast
and east where the principal Nationalist defense forces are in danger
of being encircled and out off from the garrison in Hauchou. In
addition Nationalists in the Pangfou and the Mengoheng areas are in
danger of being separately encircled. Should the encirclement of
these Nationalist pockets of resistance be quickly achieved, the Govern-
ment units involved will probably choose capitulation rather than annihi-
lation, with the resultant collapse of the defense complex north of
Nanking.
In North China, there were indications that a major Communist
effort might possibly be undertaken in the area east of Peiping. FU
Tso-yi, Nationalist Commander, may stay in the Peiping-Tientsin area
for at least one major engagement, prior to being forced to withdraw
into Suiyuan.
The National Government's dependence on prospects of greater US
aid has been evidenced in recent appeals by CA1ANG Kai-shek to President
'ruman and also by public statements of Ambassador KOO and Madame
CHIANG. The absence of any new US pledge of support for CHIANG has -
served to prolong the oabinet crisis occasioned by the resignation early
this month of Premier WONG Wen-hao. Certain prominent leaders,
including CHANG Chun and HU Shih, have refused to take the premiership
unless greater US aid commitments are forthcoming. Moreover, despite
CH1ANG's continuing opposition to peace negotiations with the Communists,
an increasing number of high Nationalist official:3am maneuvering to
bring about such action. While leaders such as CHANG Chih-ohung continue
to favor a peace based on the principle of coalition government, another
croup which includes Vice President LI Tsung-jen hopes to reach a
compromise which might provide for a non-Communist administration in
the area south of the Yangtze. Although both groups probably have
oontacted Communist representatives, neither apparently has ascertained
probable Communist terms. In their frustration over CHIANG'a veto of
their proposals, some leaders would welcome US assistance in trying
to force his retirement.
aBe
China may protest Soviet actions to the UN Security Council, seeking us"
a resolution which would, at most, find Soviet actions a "threat to peace,"
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or, at least, call upon all nations to refrain from obstructing the
lational-.Government or assisting this Chinese Communists. The possibility
of such enaction has been suggested by acrimonious exchanges between
VISHINSO and Dr. T. F. TSIANG, Chinese UN delegate. Staab an appeal
-might gain wider public recognition of the international
character of the Chinese civil conflict and public, sympathy for the
National Governasat's position, but China would find it extremely
diffioult to substantiate its charges. Soviet actions in Manohuria,
stile obviously obstructive, nevertheless adhered to-the letter of the
Sinoi4oviet Treaty; the USSR permitted. the Chinese Communists to 'capture'
large stooks of Japanese materiel; in addition, the USSR probably has
trained personnel and supplied advisers, but there is no proof of
such Soviet activity or of direct material aid. While the Soviets
undoubtedly rigged the plebiscite by which Outer Mongolia became 'inde-
pendent.' the Chinese Government consented to the plebiscite, and the
various border Incidents since that time have been of minor significance.
No Security Council resolution could affect the progresi of the Chinese
'civil war. A Chinese appeal to the Security Council might even back-
fire, as the USSR could argue that US aid to China must cease while the
? appeal is being examined. If the US were to support a Chinese appeal,
.the US position vis-a-vis a future Communist-dominated government of
.China might be compromised.
Chinese Communists attempt to strengthen their international position.
The Chinese Communists have recently reasserted their unity with the
USSR, and have adopted a position which is both firm and correct toward
the US. .The Communist radio has declared that "no agreement between
the Kuomintang and any foreign government can either preserve the ?
.rule of the Kuomintang or protect the interests of the foreign govern-
ment concerned." Anther, that "any military or economic aid to the
Kuomintang" will be regarded as "an act of hostility against the Chinese
Nation," and, "if the US should dispatch its armed forces for either
all-out or partial protection of the Kuonintang....the consequences -
would .have to be borne bj the US.? The statement declares that the
-Communists "are willing to establish equal, friendly relations with
all foreign countries,.. .and. to protect the interests of all nationals
of foreign countries." In Mukden, the only teat case to date, the
Communists have closed down the US Consulate's radio, but otherwise
they have been fairly agreeable and have evidenced a desire fpr limited
'cooperation. It appears that the Communists will not abase themselves
to gain US favor, but that they realise the advantages of diplomatic
rolations.-.4t is possible that the Communists, by behaving correctly -
toward the US, aim at avoiding total subservience to the USSR.
Communist rehabilitation of Mukden makes progress. Since taking
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aoSse
over MUkden? the Communists have proceeded as follows: order was
quickly restored, with strict police control to prevent looting; food
was made available at effectively controlled prices; an 'educational
programmes instituted to acquaint the peoplewith Communism; public
utilities were restored, and major industries returned to production.
The resumption of normal rail traffic is now a major Communist under-
taking. The Communists are finding it necessary to utilize Nationalist
administrative and technical personnel under the leadership of Communist
workers. The rehabilitation and administrati'm of the large areas now
coming under Communist control is a tremendous job, and the Communists
say have considerable difficulty in handling the problems thwywill
have tolkoe. Rowever, the methods which they are now employinga re
quickly gaining for them the support of the people, who have long been
the victims of Nationalist economic deterioration and governmental
inefficiency.
Taiwan's independence from China is the early revolutionary goal
of the Formosan League for Re-emancipation, a non-Communist underground
organization which has headquarters in Hong Kong. League leaders
assert that a revolt will be launched when Nanking falls and that it
will have organized popular support. Since Nationalist officials
plan to use Taiwan as a refuge and as a potentially important war
base, they have attempted unsu.coessfully to influence League activities.
League leaders also have rejected Chinese Communist bids for cooperation.
In seeking US good will and potential economic and military aid, they
have stressed their non-Communist, pro-American program and the important
role which an independent Taiwan night have in the non-Communist Far
East. Although the League's capabilities appear limited when judged
by its known leadership, organizational strength, and material resources,
Taiwaneae dislike of talinese rule and rapid weakening of the National
Government may render formidable a well-timed revolt.
The long-standing_deadlook in Sinkiang between Chinese officials
and pro-Soviet Ili dissidents may be resolved through an understanding
between the USSR and CHANG Chih-ohung, top Chinese official for North-
west China. Developments during the past six weeks indicate a more
conciliatory attitude on both sides, and suggest that a comprehensive
settlement may be drawing near. In view of the imminent collapse of
the National Government, and of CHIANG Kai-shek's rejection of CHANG
Chih-chung's suggestion for negotiations with the Communists, the latter
may turn to carve out a domain for himself in Chinw's Northwest, and
thus may enter into an arrangement with the Soviets for sharing in the
benefits of Sinkianz. The Soviets, for their part, might well under-
take to reconcile the Ili Group with CHANG Chih-chung, in exchange for
Chinese acoeptance of their terms for renewal of the Sino-Soviet Airline,
and other economic concessions in Sinkiang. This would assure them a
friendly neighbor in Sinkiang, and facilitate eventual consulidation of
Soviet control over the entire province.
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faces difficul es vis-a-v its "B"
on to he unau or zed use
ease iiinistr7 foreign exchange ftmds may praupt Premier Phibul to
rid his regime of the corrupt and unpopular Army Deputy Commander Luang
Each. The special committee appointed to investigate Luang Nachos activ-
ities has found that a prima facie ease exists. Following this development,
Prettier Phibul informed-t&?press that the case has been assigned to police
investigation the character of which depends, in large measure upon the
attitude of Police Deputy Director-General Phao. Mile Luang ke.ch and
Genera Phao have been close frieols and leading figures in the xvling
tery clique, recent reports would indicate the development of a growing
antagonism between them. Although the expression., of strong disapproval
of Luang Null probably have given Premier Phibul serious cause to reassess
his position vis-a-vis the military. and civilian elements supporting him,
available information does not Indicate that Premier Phibul has yet developed
sufficient alternative military and financial resources to replace those
which Luang Kach has prodded.
INDOCHINA
h have limited Emcees in fall military campaign. The French "B"
5m iar'y offensive", which was launcheA early In Novemi.er in the Hanoi
area, has resulted in the extension of French control through the capture
of two important provincial capitals northwest of Hanoi. Viet Tri, which
fell on 7 November to airborne troops, is located at the juncture of the Red
and Black Rivers and was an important center for Viet Minh river commmications.
From the French stan:Ipoint, it appears that the occupation of this key point
may result in an improvement in the security of river traffic.
The lack of organized resistance by the Viet ninh to this offensive is
still unexplained. It may be a sign of internal weakness or that they are
cancentrating forces elsewhere. However, Viet Minh military strategy may
be aimed at another over-extension of French Linea of comication, which
resulted in a failure of French objectives in the 1947 fall offensive. De-
spite this absence of formal resistance to French troops in the field, there
has been increased guerrilla and sabotage activity within Hanoi which the
French are unable to prevent and which minimizes the success of any organized
French operations.
De Gaulle recaumends strong French control in Indochina. The policy "B"
for /ndoclana which 1)eGaulle recaumended at a recent press conference appears
much less liberal than that contained in the proposals published last month
in an RN resolution. In stating that haste was unnecessary, he specified
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INDOCHIHA (continued)
that a French se;ation mast come about at some fixture time by negotiating
51haeitbscamepossible with anyone who was really representative in
Indochina, provided there was no question of dealing with enemies of
Prance.* De Gaulle also stated that the present arrangements wire only
proVisional and he considered it essential to return to the idea of free
and Independent states within an Indochinese federation, Which federation
in turn would be a medOer of the 'French Union. Such a plan would imply
French responsibility for defense of the area, for foreiga policy and for
wowed* control. This stand on the Franco-Vietnamese problem is a decided
retreat from the solution initiated by former High Commissioner Bollaert
and supported by present High Commissioner Pignon, and would probably result
in less cooperation from the Vietnamese.
PHILIPPINES
Second quk amnesty A be presented to Philippine Congress. Despite "Bn
the Government's current litany campaign against the Hukbalahap, there is
some indication that another aehesty proclamation will be presented for I
approval by! the Philippini Congress when it convenes next January. Interior
Secretary Sotero Baluyut? informed that some dissidents in Laguna Province
are reluctant to adrrender without assurance of protection, has indicated
that he may present the matter to President Quinine. Mile it is possible
that Quinine may again offer amnesty to the Huks, he will probably demand
that the fluke surrender their arms and seek assurance that another amnesty
proclamation will be acceptable to Congress and to the PhiliOpine public
which are now supporting the Government's anti-Huk campaign. Until Congress
convenes, however, present Constabulary operations against the fluke will
probably continue. Although both President nuirino and his Constabulary
Chief are optimistic, it is not expected that dissident resistance will be
eliminated in the near future.
,THDTMSTA
Reconvenin of Bandoen Conference coincides with continuation of "A"
direc new an negot one. e utch-sponsored Bandoeng Con-
ference of non-Republicait Indonesian Federalists reconvened on 19 Weveliber.
A high Vetherlands official told the Conference that the States-General had
? made it possible to introduce the interim government arrangements, providing
for a rnited States of Indonesia (tiST), before 1 January in compliance with
the wishes expressed by representatives at The Hague in October.
The Republic or Indonesia has again been invited to participate in the VS/.
The Dutch representative stated that he trusted that the Conference would be
Hfound milling,' to undertake any necessary consultations regarding changes
in the draft interim arrangement that the Republic might suggest, with the
proviso, of course, that such changes did not meet with any "essential
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INDeMEMA (continued)
objections* of the Conference or of the Netherlands Government.
rt is significant that the Bandoeng Conference was reconvened at the
seas time that a large, top-level Dutch delegation was being sent to
Indonesia to continue direct negotiations with the RePeblic. These develop-
mentally*, indicate that the Dutch are making a genuine effort to reach a
peacefhl settlement with the Republic, although it is unlikely that basic
Dutch *limy has been appreciably altered. The dispatch of an influential
delegation to the Republic, however, may be designed to create the impression
that the Dutch have done everything in their power to amicably settle their
differences with the Republic. Failure mad than appear to leave the Dutch
.with no alternative to resort to police action through the interim government.
The Bandoeng Conference may also be a further step, particularly if direct
negotiations fail, to develop the illusion that the trouble in Indoneeia is
purely indigenous factionalism with the Dutch merely acting as arbiters and
protectors of Dutch interests.
'
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