CHINA WEEKLY PRESENTATION 2 December, 1947

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01082A000100010043-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: December 12, 2016
• Document Release Date: May 23, 2001
• Sequence Number: 43
• Publication Date: December 2, 1947
• Content Type: PERRPT

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NEMUZFRESENTATION 4-'et-
2 Dec ember,1947
During the peatweek, the Chinese civil ear was narked by a lull in all
theaters, but worsening conditions were reflected on the economic front. Black
market foreign exchange rates, on 28 November, touched a new high of 150,000 to
U$ $1, a rise of more than 50 percent since 15 November. However, this inflation-
ary wave has now showed a merked subsidence0'ellich may be attributed to a series
reportedly adopted
of drastic anti-inflationerT, neaeures enmeeneed-by the National Government, as
well an a report that the eldest son of Chiang Kai-shek has been appointed to
lead the fielbt against the black narket in Shanghai.
Domestic politic, were narked by China's first
ions, to choose
members of a Nations' Assembly, which in turn is to elect the Fresident of a new
constitutional government, to be inaugurated on 25 December. The results have not
been announced officially, but it is apparent that the Kuomintang will receive the
largest representation, with smaller numbers of seats being parcelled out to the
two minority parties and Plindependente. The general conduct of the entirely in-
experienced electorate was so disappointing thet elections for the Legislative Tien,
scheduled for 21-23 December, have been postponed for a month
In China's foreign relations, there were two indication, in the preparations
for pending peace treaties, of Soviet attention to Chinese sensitivity: (1) While
rejecting China's ceieromise proposal to hold an 11-nation conference to coneider
the Japanese peace treaty, the USSR suggested that a preliminary conference in
January of the Foreign Ministers of the US, the U3SR, the Ut? and Chine be h
laSgatj (2) At the London Conference of Foreign Ministers, Molotov proposed that
the conference to draft the German peace treaty should include China as well as
Ger CID neighbors and the states which took part in the ceelmon fight.
State Dept. declassification & release ins
on file
DOCUMENT NO.
Fr)
o; r
NEVI DATE:
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1947
"independents it ?
T
n re
d out to tho
h?
VC
In lianohurla? where CM prospects
the airlift of
capital
rtc
chat
61-R1AL orki t
h was conducted on
the A
scheduled for 21
(b) that the CNA
if no donbt
dorod
A CNA claim that tIvy have reopened
147 dee not include the railroad as
till holds Kungchuling andMinted,' east of Chnntch'uno
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Liu Po-sheng is moving North
br
th
polioy toward the Turki na
nt
idorthg tui
This
by the latter last summer
do
ussione
Northwest who advoeatoo a
Cue of these Turki
231ovs
ve the w4.
broken off
EXTERNAL (Mr, WT1ONAL 'TIONS)
Signifieabt events in the field of China's external affaire for the
(1)
h was passed
WAWA% 9IMIN2MITR*07
USin the jort'.
ly vote to partition
ebtleven-nat/
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to conalder the Japans pea
considering the
ho
h took
01082A00010001004372
suggesting a pre1irinery
of the. US., USSR, UK and China to
a of the fig Four Foreign
black market exchange rate
rAte ompanying the f
and had ilitary news touthed elf thc present in:
bastca3. due to the
the common f
as
(4) An attic
Ad
_d
the rise
oo with the
f Communists in Central
ytille4toOpartfum Moo NW el4
possible
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could eai3r *orlowbair and load to a
by 2
1947, wit
Aseets On basis of figures
d US 4aUare holdings of the
2$1 million as of
4 es
end star
ti! the
ets woubi bo exhausted in
082A0001000 ?-I
no as to
pro
5fl6
th since 11.4 Day
adviser to the Chinese
de
5
on of this rate of decline in
at this rate it is estimated that official *melange
' 94e,pGibi1 before April
U3 Aidt
1JS$60 million as stop-
request inc sion oI aid to China in the ei
af Congress with an official statement that a
'with the economic-political crisis
an Increasing number of Chinese officia
active considera
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ITMJCA
%Or r AWL, wr Ila dk IA. r.a.
FAR EAST/PACIFIC BRANCH ,:prooedure No. 42-48*
'-tliated 14 May 1948.
APMfgefiefifttaftL2alligarttE1811RPrifiC9198PMNIW?43-2
-*Filed Intelligenee Contro1--
0 Operations
SECTION I. SUMMARY OF FAR EAST TRENDS AND DEVELOPMENTS
The North Korean electric power cut-off of lit May will have an
eMbaressing, although not crippling, effect upon South Korea. The Soviet-
controlled North Koreans have the capability of aggravating this situation
by cutting off water supplies across the border. Future moves affecting ?
power and water supply will continue to be guided by the Soviet objective
of forcing US withdrawal from Korea.
In China, opposition to Chiang Kai-shek is increasing at a time when
the National Government Aiiiff_IMounting military efforts by the Chinese
Communists and growing economic deterioration. Chiang shows no disposition
to take effective measures, and apparently is trying to counter his opposi-
tion by reliance upon old, trusted, but incompetent, political figures.
The Philippine Government is curr4-ntlyettempting to reach a political
settlement with dissident groups; if successful, such attempts would mate-
rially increase stability in the Philippines.
A new anti4hiibUl movement, led by high Army and Navy officers, is
reportedly developing in Siam, but is not yet believed powerful enough to
threaten the Government.
011/401;e0$6,
NOTE: In succeeding sections of thi
tions are used:
?
6104.)Aleotetet. ,
Weekly, the foil owing marginal note-
(1) An asterisk (*) ? To indicate that all or part of an
item is based solely upon information from State' e "Vs' -
distribution" series.
(2) "A", "B", or "C" Importance, in B/FE's opinion, of .
the item, with "AP representing the most important ones..
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ECTION II. DEVELOPMENTS IN SPECIFIED AREAS
7>GENERAL
Sale of Japanese rollin , stook to Europe discouraged
The US Political Adviser in Tokyo has replied to the State Depart. "Cr'
ment Is request for his comments on the possibility of Japanese rolling
stock manufacturing 'capacity being used for European needs if Japan is
capable of producing equipment for a standard 'guage railroad (See 13/FE,
Weekly of 4 - 10 )Say.) The Adviser states that Japan has the capacity
to produce such equipment,.but that it is .not feasible for Japan to
export any appreciable quantities during the next fifteen months because
(1) Japan itself is currently vary short of rolling stook at a time
when it faces heavy transportation needs, and (2) during the .next year,
Japan will be unable to produce more than about one-half of the 10,000
freight oars actually needed domestically because of its lack of raw
materials, snob as pig iron or iron ore, manganese ore, magnesia clinker,
coal, and possibly some types of lumber. In addition, Japan has a
tentative commitment to the USSR for 310 freight oars,
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thy* JAPAN
Outcast leader ossible Communist convert. !!ATSUMOTO Jiichiro,
widely recognize as e ea ? er o e CITOTIfeasts ), and vice-
president of the House of Councillors, is reportedly becoming a
Japanese Communist Party (JCP) convert. Although the new Constitution
legally removes the discrimination to which the Eta have been subject
for centuries and they now have political equality, it would be naive
to expect the age-old sooial and economic discrimination to have been
completely discarded. !LATSUMOTO, himself an outcast for the past two
and a half decades, has been the recognized champion of the downtrodden
Eta in their struggles for equality.
In the April 1A7 general elections YAT3U"OTO gained a seat in the
Upper House as a Social Democrat and the Eta as a class voted the Social
Demecratic ticket. If he becomes a Communist, making a public avowal
of his conversion and requesting his people to follow, most of the Eta
would probably transfer their ballots? to the JCP. The Japanese Govern-
ment estimates Eta numbers at one million while they themselves claim
three million. The JCP polled approximately one million votes in the
April 1947 general election arid, since the addition of the Eta to their
ranks would be invaluable, the JCP has reportedly been making consistent
efforts to convert VATSUMOTO to their doctrines.
KOREA
Loss of North Korean power is causing hardship but not chaos in
SouthIorea aE 0:_esent. The stoppai-e will. i immediately impair
operation of South Korea's most essential services, but a sharp decrease
in already low industrial production will be inevitable. Plans are in
effect which will permit continuance of essential services and industries
through August but these involve partial reliance upon-stand-by thermal
plants previously idle because of high operational expenses and lack of
an adequate quantity and quality of coal. Yoreover, the stepping-up
of hydro-electric generation involved in these plans can be effected
only during the summer months when rain will give the additional necessary
water supply. A severe rationing program and careful use of limited
coal stocks will permit South Korea to supply 60(f. of its current needs
of approximately 100,000 kw. in June. After July bituminous coal imports
of 20,000 metric tons per month will be required to maintain the pro-
duction of 607 of requirements. The anticipated summer rains will raise
the figure to 80-90% during July and August. It is to be noted, however,
that Chong P ong, a hydro-electric plant now producing about 18,000 kw.
and which is now undergoing repairs in order to step-up its generation,
cannot be depended upon in the present emergency since it uses water
from north of the 38th parallel which can be turned off by the North
Koreans. North Korea also has the capability of cutting off water used
for irrigation purposes in South Korea with a resultant adverse effect
on South Korean agricultural areas adjacent to the 38th parallel.
There is nothing to compel the Soviet authorities to restore the
1/410, power supply to South Korea. However, propaganda considerations could
induce them to make the cut-off only temporary. If the power supply is
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restored, therefore, it will probably be accompanied by repeated.
explanations that, the cut-off was directed only against the US
occupation authorities and that sympathy with the plight of their
suffering countrymen prompted the North Koreans to reverse their
decision. It is apparent that the Kremlin is determined to take
maximum advantage of the power situation as part of its presently-
indicated campaign to assure that US withdrawal from Korea will be
accomplished under the most embarrassing and chaotic circumstances.
The path will then be open for rapid North Korean conquest and con-
solidation of the South. Adoption of an "all-Korean" Constitution by
the. North Korean People's Council on 29 April marked the completion
of preparations for eventual annexation of South Korea. The presence
of US occupation forces is now the only factor frustrating implementa-
tion of Soviet plans to dominate all of Korea.
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&wail%
CHINA
Increagiing D323221a19.11 Ciaug KelAtItt
There seems to be no prospect that Chiang Kai-shek will introduce any "A"
reforms that might improve China's present critical situation and regain
popular support for the National Government. The complexion of the National
Government appears to be unchanged by the governmental reorganization now
taking place. Bather than introducing into the Government liberal person".
alities inclined toward positive action, Chiang Kai-shek is apparently at-
tempting to balance the opposition 'voiced through LI Tsung-jen's election
to the Vice4*residency by maintaining in the top government positions
political figures upon whom he has relied in the past, despite their ineffec-
tive records.
The position of Vice-President has little constitutional power and
Chiang will probably try to keep Li Tsung-jen from assuming any authority.
Li, however, is following his progressive political campaign by the formu-
lation of a reform program. Li's political advisor has indicated that if
Chiang refuses to accept the plan, Li will force the Generalissimo into the
background and take over the leadership of the Government. Li's movement
appears to be gathering strength and a program for positive reform would
undoubtedly command popular support.
Marshal Li Chi-shen's Kuomintang Revolutionary Committee now operating
in Hong Kong also gives indications of being an effective source of opposi-
tion. This group is reported: to have definite plans for overthrowing the
Generalissimo and negotiating with the Communists for peace. Marshal Li
reasons that any government responsible for ending civil strife would be
assured immense popular support and that peace is necessary to stabilize
the country and prevent the spread of Communism. It is rumored that Li Chi-
shen's group is associated with the movement centering around Li Tsungjen.
Their combined forces might be able to force Chiang's withdrawal, which
they both desire, since, as long as Chiang shows no indications of taking
effective measures to handle the present crisis, the demand for new leader-
ship will increase. However, in any political upheaval the process of
disintegration will probably be accelerated at first and the initial advan=
tages will therefore accrue to the Chinese Communists.
The tenor as. Chiang Kai?shek's recent appointments is indicated in the "C"
naming of an old reliable, Marshal Ku Chur.tung, to be Chief of Staff, eucceed-
ing General Chen Chong. Marshal Ku? who has been Chief of the Army Ground
Forces and concurrently commander of the Advance Headquarters at Hsuchau,
is considered one of the most incompetent generals in the Nationalist Army.
General Yu Han-mou, another of the Generalissimo's trusted bat hardly
qualified reliables, succeeds Ku.
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The zit= az Genera/. Isa_klcia, new Soviet Ambassador to China, has nr
aroused speculationeas to whether the USSR will now adopt a more positive
policy than hitherto in Chinese affairs. There has been no Soviet Ambassador
at Nanking since last June. General Roschin may renew talks with Chinese
officials regarding a compromise settlement of the civil conflict, and it is
possible that hi may offer Soviet mediation. In addition it is.likely that
Roschin will undertake mediation of the current impasse in Sinkiang, and
that this will be accepted by General Chang Chile-chung, top Chinese official
in that province. No real progress has been made toward solving the dead-
lock in Sinkiang through the exchange of notes during the past eight months
between Gen. Chang Chile-chung and the Ili Group. As minimum conditions for
a resumption of negotiations, the Chinese demand return of Ili leaders to
Tihwa; the Ili Group demands dismissal of Masud Sabri as provincial Governor.
Neither side will agree to the condition demanded by the other. So far, the
exchange of notes has resulted only in keeping the situation open to dis-
cussion, and in forestalling resumption of large-scale warfare. Soviet
mediation will probably result in further Chinese concessions to the
Group.
Finely/a/ Position /ef..j...tsmuut, China. There appears to be little hope
within the government of arresting the deteriorating economy in the visible
future. Among factors for this growing realization area (1) effective US
aid is still months off, (2) prices are advancing much faster (almost
doubled during the past month) than the note issue, (7) government revenues
are said to be only 40% of expenditures, which now amount to CN $24 trillion
monthly; first half 1948 budget of CN $96 trillion is already exceeded, and
(4) the discrepancy between the "open" and black-market exchange rates is
ruinous to the export trade.
25X1X
25X1X serious concern over the general economic and firms,.
cial position of the government, and is considerably pessimistic over the
US aid program in relation thereto, He said; (1) foreign exchange is com-
pletely exhausted except for working balances, and the Central Bank has
been borrowing exchange from the Bank of China the past six weeks, (2)
April note issue increased 405 over March, while the budgetary situation
is "completely out of hand", and (3) the ineptitude, indifference, fear,
and general low morale in high government circles have become much worse
in the past three months.
Getsemirm?
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SIBIll
25X1X
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PTIILIPPINES
"%uirino Government attempts to solve law and order_problem. The new "A"
luiriiiii?acrilin-CM?st on, in a dramatic effort to establish its power and
prestige, has reversed the stern policy of the Poxes administration toward
dissident groups. The Government is currently negotiating for the surrender-
of Luis Taruc, leader of the Hukbalahap, and his followorepand has peepared
an amnesty proclamation which the Philippine Congress reportedly is prepared
to accept. Although neither the terms of the surrender nor the provisions
of the amnesty are yet known and although serious obstacles could easily
develop, the negotiations thus far represent a significant achievement.
If a surrender is negotiated which will effectively reduce the number of
firearms in circulation and if a reasonable amnesty is issued, substantial
progress toward stability in the Philippines can be anticipated.
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4.8?11
SECTION III. DIGEST OF IMPORTANT STUDIXS AND ESTIMATES
Economic Importance of Manchuria
Manchuria is almost unique among the areas of the Asiastic mainland "B"
in that, under existing conditions of technology and population density,
it possesses a oapacity to produce more than it oonsumes for current
purposes that is, a capacity to oreate capital. In addition, Manchuria
possesses an industrial plant which, despite Soviet removals, war destruo..
tion and deterioration, is valued at approximately us 2.5 billion. Under
favorable circumstances this plant could be increased to US :36.6 billion
within a decade, or four times as large as the total industrial plant in
China proper in 1936, and half the size of Japan's 1936 industrial plant.
Manchuria is of little direct economic importance to the US in terms
of future trade possibilities, However, in terms of the future balance of
power in northeast Asia, Manohuria is of somewhat greater importance to
the US. Given a friendly China in control of Manchuria, US capital could
utilize the eoonomio potential of that area to develop China into an
industrial power. On the other hand, Communist control of Manchuria would
complicate the problem of economic recovery in Japan and provide the USSR
with a trade weapon that could be used for political purposes in Asia.
In addition, the USSR mould acquire Manchuria's large agricultural surpluses,
useful to the development of Eastern Siberia. It is considered unlikely,
however, that the USSR could or would in the short-term future realize
upon the Manchurian potential for industrial development.
)440'44I/
(Th conomic Importance of Manchuria to the
DePE7-77TE-TOIR Report No. 4160,
23 January 1948. CONFIDENTIAL -US Officials
only. Distributed in April 1948.)
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OFFICE OF REPORTS ArD ESTLteTES0 CIALC
FAR 7;ASTAACIFIC BRATOFte5C-15---
f41?
e
OTELLIGENCE HIGHLIGHTS WEEK 0E 30 DECEMBER - 5
1,4094//,
GENERAL [Rule on Government - government: Capital letter if refer to
-.-----
specific regime, small letterif a type of government is
Japan Peace Treat involve d0
--"--MirFo7i7r^,o-v,irmient replied to the Chinese note of December 5 on
the Japaneee peace coeference_ta interpretine the Potsdam An-Pe-tient as
REVIATIONSrealing It lemdetory net the CIL) oreoere 4reaty and :Iv maintaining
o punctiatitke position Lbut the Toscow Arreeeent of 1945 especially stiPulatee
necessary. that the Far Eastern commission will omeern itself with the settle-.
CFM, FEC, ment of territorial questions, one of the important constituents of any
USSR, etc peace settlement with japan. Concession to the other netiono which
are OK.0 fought Real-est Jargon is allowed in ti,e oroposal that tl.ee- might work on
subcommittees and an informational consulta%ive conforeecceraraneeo Error by
political parties have been spending, a dispropertionete amoUf7MOrlyIntell.
and vocal power in discussing the Japanese eecce tocaey, Until recently,Control.
political leaders have, net only been expecting an early peace treaty bet
also hoping that Japan might be permitted to be present at the peace table.
The political strategy appears to be that the Cabinet Timing the treaty
will then be able to claim Allied support for its domestic policies.
(However, the intransigence of the USSR and the position taken by China
make the feasibility of a peace treatyIn the near future highly question-
able.)
(ktisz
vsawskarapc--t
Control of UK occupation forces in Japan
-----7Tra-live 1 January-I-94S contra-Or the UK occupation force in Japan
was tested in the Australian Governront and Australian service chiefs. The
Chiefs of Staff 000mittee, composed of representatives from the British,
New Zealand, and Indian forces, will be dissolved, according to Acting
Minister for Defense Drekeford.
Possible l'eeltralior labor ban on arms to China
e us ra /n V-.aterside ',Inion 38 considering, the imposition of
a ban on loading of arms for the Chinene rationalist GovernmentQ
NOTE: As rule of thumb, any item involving 2 or more FAR EAST countries
should be sent to Intelligenoe Control for incorporation into
GENERAL section.
amacarammon
NW ? 401... ???
tho Far awt, Like Alrope, unite in the creation of a CoHinform.
aeports fror, UationLliet circles aeeert that Com:mist leaden;
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Lin Ilea and Li Ii-un have cloned neotiations vdth the USSR for exchane
of Soviet arms for Nanchurian commodities.
Chiang Kai-shek, in his annual "State of the !;ation" athress on
31 becember 1947, described the present Communist menace as coming "as
much from without as from within". He declared that the main Hed forces
must be annihilated 1:ithin a year, out admitted it woula take years to
clean up Communist remnants.
pxternal Affairs
the Chinese 4mbascactor in ;.losco. opposed a collective diplomatic
corps protest over the new ruble exchak'e rate, .and refused, au Lean of the
Corps, to call a meeting uith a view to.:are t;Lkirk; such el protest to the
USL,A. The Oritish Ambassador then agreed to take the initiative anu was
assured of support from the US Lmbassy.
Lioacow's recent radio blast al:-inst the _uceintang and the new
Chinese Constitution. represented the strongest attack yet made on the Chi-
nese Government by an official Loscou orn, and, according to some sources
in Nanking, reflects e change in tactics toward China on the part of the
Soviet Government. Hitherto the Soviet-controlled press in China hs main-
tained neutrality in comment on the Chinese civil 1;ars while the radio and
press within Aussian borders has refrained from openly siding tith the
Chinese Coeuunists or directly attacking the Generalissimo.
The Soviet Consul at keipine has denied the report by the Chief
of Stuff of the_Generalissimols Teipinir headLluarters alleging Soviet'
military aid -to the Chinese Commnists. The Consul also repudiated the
recent story of a Soviet-Chinese Communist agreement for. military aid,
and used the occasion to emphasize that the ustu recognizes only the,
Chinese altional Government. ?
Meneral notet ON $26,400 billion; US $296,000,000; "1"rom ON $84,000
Economic?LI? 90,000n
'Finance 7,:inister O.K. Yui, in a report to the Resident Committee
at the keopleis folitical Council on 3 January, stated that the national
Government budgetary deficit at the el30,of the year 1947 uus 26,400 'billion
Chinese dollars (or approximately =72960000,000 at the official "open
durket" exchange rate). He pointed out that China's forcien trade position
allowed some improvement in 1947 over previous years,'bnt the unfavorable
balance of last year amounted to 4,270 hillion Chinese dollars.
Currency. The US dollar on the ShaOlui black market reuained
fairly steady the past tm ;:eeks, Uth money continuing tight in face of
the deraanu for lunar i:e;: Year settiements. The 13L rate Was CN 152,000 on
2 January compared with 135,000 of a month ago. The "open" selling rate
Ms increased on 30 Lecember from CN 84,000 to 90,C00._.?
.1 rices. The general cost of living index for Lecember 1947
reached 66,200 eomparedith the basic year 1936, ad increase of 22.-i!, over
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November. For the period of 24 to 29 Loceratxx inclusive at:Increase of
uz-c, reported in zenerhl index of .Jholesale prices of basic co:::;ioditiee,
4th food and building Laterials raking the greatest gain.
Fcreign Traee. Aeiorts from rankint: on 27 December reseal that
the Jtate Council has a.proveu a teasure to increase iL4ort duties by 5t.)
effective 1 January, or all cormodities except cotton, rice., :heat flour,.
caeoline, kerosene., ane diesel oil. This is another round in increasing
buck:Aar; revenue, which, if trends -continue, will be offset by increased
expenditures because of rising prices.
,Budget. The _State Council is reportee to be studying a CN 90
trilr-on budget for the Arst half of 1948; a huge sum compared Ath the
CN (.3 trillion sot up l'or the 1947 budget.
Views On itenorde Conditions by Forel nidnister Lr. -ang Shih-chieh.
Jr..i.ng reports that the Cabinet feels pray a stab> 'zee currency can im-
e:bove the economic sittv-tion; that militarv expenditures cannot Le reduced
dne that increased taLes are ineffective al_linst constantly depreciating
currency. lie aLrocs that ctuu:lization of the currency alone v?ould be in,
sufficlent, and must be accompanied by ade,uate improvements and reforms
in other fields. Cnticernirc US aid to China, Dr, tang has raised no ob-
jection to the inciasion of those reservations included in aid plans now
in elfect or being prepared for ..L.urope. L,:eneral unstable
ourrvncy zald infiLtion are results, no the basic cause of China's present
VP' ecosomic K?, nrEAD estimates, believes, ete. "' for all
division opinions."
Transportation: Railroads. According to recent information the
raily situation China worsens in the face of continued Communist offensives.
Heti4een 50 and 64: of all rail lines are now disrupted. The lines which
have consistently remained open are the Shanghai-Nankin7. line, the Canton-
Hank= and the line in Communist territory from Lanchouli to Suifenho in
Lumhuria. The railvay from Tientsin to Chinhuangtao was open on -2 January
after having been almost constantly inoperable since 1. December, but further
tweaks are expected. In most cases ties are burned aria rails are removed
which Lakes repair almost impossible. No double-trackeu lines are consis-
tently in service in China since rails from one line have been removed to
rear the other.
?vs.
UNR.?.it Fis4 Catches, The Government appears reluctant to inter-
vene in the Shanzhai fish market dispute over UnIti-ZArs efforts to increase
catches L.nd bring pricce uown in opposition to the fish monopoly who wish
to reduce catches ane keep irices up. The question is just how far 'All
the Goverment go in bucking the powerful .vested fishing interests.
(Re Fai. 7alekly 22 December 1947).
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The Siamese provisional government last week proclaimed the repeal.
by Royal decree, of the emergency powers held by the Army since 20 Nov 47.
These emergency Dowers had enabled the military to make legal house
searches and arrests in order to insure the preservation of peace and order
and to forestall possible counter-coup activities. The announced reasons
for the repeal of these Dowers were that the present regime is now free
from attack, that Peace and order is established, and that the Police Force
is oapable of handlina, the present situation,
li aranch feels that this proclamation was issued probably for
either or both of two objectives: (a) to remove nrounds for opposition
obaages that the Army has too much power and is in a position to control
the eleotions at the end of January, and (b) to win foreign recognition
by creating an aura of responsibility and tranquility about Siam and the
present regime. If the latter objective is achieved, the opposition
groups, in attempting to stage a forceful comeback, would be placed in the
role of rebelling against a stable and duly recognized aernment. As the
situation exists at present, a ruccessful return to Dower ,y the opposition
would negate the question of recognition since foreign recotnition of the
Thamrong Government continues.
BURMA
Burma became a sovereign independent republio,known as the Union of
Burma, on 4 January at the precise moment ordained by certain Buddhist
astrologers, after some disagreement, to be the most auspicious for
Burma's future. Burma enters into independence with the most honest
Olvernment in its history, enjoying the support and assistance of the UK,
hut nevertheless beset with several dif4vit problems. The major problem
is the establishment of a strong centravernment and effective admin-
istration under a constitutions-the provisions of -which permit the formation
of almost any type ofayernment. The realization of anything approaching
goodC4vernment dependseto a large degree, upon the continued internal
cohesion of the Anti-Fascist League, the dominant political organization in
Burma. Friction within the AFL has been reported on several occasions since
Aung San's death, and its disintegration would lead to chaos throughout the
oountryn The development of effective administration is handicapped by the
shortage of qualified administrators which will continue as long as Burma's
. educational system continues to deteriorate. Lawlessness is still rampant
and unchecked in various parts of the country, often instigated by dissident
personalities and political factions - notably the Communists. Minorities,
both foreign and indigenous, pose another serious problem. Although most
of these ethnic groups have made an uneasy truce with the predominantly
Burmese Government and have accepted the constitution, tension continues,
C: particularly among the Karens.
N
>Suggest "with the Government (which is predominantly Burmese)I,
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BURKA
lesonomioally, the oountry has made slam but steady nrogress towards
rehabilitation, except in areas most affected by lawlessness, and is
new almost able to pay its own uay wath receipts received largely from
the export of rice. The Government's polimavareedly, leftist, is the
socialization of land and industry. Despite considerable talk of drastio
measures, it appears that sooialization will be carried out gradually,
locally, and by the payment of oompeesation for exproprieted property.
It is essential therefore that the AFL, whloh sponsors the current
Government, maintain its present unity ad integrity at least for the
meat tee years, if Burma is to acoome an eeonomioally and politioally
stable nation responsible for its internal tranqpility azd international
reputation.
AUSTRALIA
11551505a
PLC negotiations with Government. The PS Foreign Liquid-
datiainiaiiioni---repeesentatve? eydneye hanqported that the Australian
Covernment roquests imeediete occupancy and use of US Navy
re-ditties In the anun area. A representiltive or the Gommonmealth Govern-
,..4..pe..;ts the puremne rri,11,to be a teeen fiture without regard for
gizatO investme. The Ful r,..r.,*eseutative reports further that he
that might 1.eer losuoaesiful in obtaie_r.7 ^averablc: Australian reeetion to a one-.
oonfuse quiolibeeoe: deal ihvoliiniE Culn=,4rwta eritise Lend-Lease surplus
uninformed TheC,----c, gny such deal Lb a
reader. Lesol to the US and han ..nde-sted that it is prepared tc exert auy 40-ant;
necessary to settle an its own terms. Zurrently the Ceeetralia7Deceeeueeet
has indicated an intention to withdraw any interest in Taanus if terms are
not accepted, in which case it may publicly cite the "unreasonable" US
demands as making its plans for !leans impossible., ahilo reoognizing the
political advantage of acceding to their request regarding Menus, the PLC
representative has recommended that a price be set on a take-iteoreleave-
it basis.
Goodwill mission to India. At the request of the Indian 0:merle/re-et,
Australia is sending a imamo good-will missioa to India
expeoted to arrive in January. Its function is to report on scientific
developments in Australia and the application of solenee to natural resource'',
It is probable that the use of atomic energy will be one of the topics of
dismission. The importance of the mission is indicated by the oaliber of men
composing'it? most of whom are leaders in the fields of Physics, Industrial
Chemistry, Agricultural research, and Electrical angineering.
Economics. An interesting effect of the dollar shortage is the impetus
givei-TE-raitialials export trade and manufacturing industry Increased
production at lower costs is necessary to enable Australia to compete in
the dollar market. he Government is considering restrictions on home
consumption in order to take advantage of export opportunities.
*to-
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6?Dellalirem
AUSTRALIA
XXXXICEXXX
Domestic prisms are expected to rise somewhat in 1948. The 40
hour pork meek, (instituted 1 January), the abolition of federal
subsidies, and tho rise in overseas prices are contributing factors.
NEW ZEALAND.
?f-4411f474-4744
lIilitei7. Plana for the postsvair ?ores envisar-e maintenance
of five aqua( one comprising 4,000 regular eLsficters cd nen together
Isith 2,000 now.regular personnel b Total cost when the l'orce is fully
established is estimated at 4,600,000 pounds a year, Tile plan has been
approved by the Defense Council and enabling legislation is now being
prepared.
PHILIPPINES
r_vpz?q.14..vution 01-0 t4..1)r,0 ul..4r-7.,f cons izpor-
tces in viov of tinuoe: rei:ortc or i.oesible jor clieturnces in
the ihiliu.iness s *ueon the ro:.xtivLtion of t,l)e i?i1jFire ConstL-
bulxy on 1. JLtsuir: ochoduleti :Corner Chief c.?.:1 the !filitLry
i?olioo CccrLd, Gctra. J.3iLr1Oez-...L.A.L.neec,,z its h. :hilo
it
is not nova consii.oreci that CLct,:ne&L 1:111 1au iiivolvoci in Lny
overt 1:10V0 the LtiL,inaitnzi,5.0n it 11.1.t; .0etin
&trek:, icolinis of r..utuLl dictruc,t. olt tee .1-T051th:zit itaxas
and C4anco.:-.... Thc eiti-Ltion tort6e to ireeiLe:t CJility ?
to c.e:A. orfoctivo17 -.-_-Ith Vic irolaiou of L.:.;; ric orcier tic vthen
Cicsiciont elente continuo to threen LnO recult
in
if tin i_.crEenm:l. In both the Cont.iuL.19 and
Ard Ferece.
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