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The history of China's note issue

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The history of China's note issue

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Content The History of China's Hote Issue A Thesis Presented to the Department of Economics University of Southern California In Partial fulfillment of the Requirements for the Degree of Master of Arts Sy Ching-ying WU May 20, 1949. UMI Number: EP44693 All rights reserved INFORMATION TO ALL U SERS T he quality of this reproduction is d ep en d en t upon the quality of the copy subm itted. In the unlikely event that the author did not sen d a com plete m anuscript and th ere a re m issing pag es, th e s e will be noted. Also, if material had to be rem oved, a note will indicate the deletion. UMI E P44693 Published by P roQ uest LLC (2014). Copyright in th e D issertation held by the Author. Dissertation Publishing Microform Edition © P roQ uest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United S ta te s C ode P roQ uest LLC. 789 E ast Eisenhow er Parkw ay P.O. Box 1346 Ann Arbor, Ml 4 8 1 0 6 -1 3 4 6 This thesis, written by ............ XltljJQ&raciJng. S f f l L ................ under the guidance of hl.s.... Faculty Committee, and approved by all its members, has been presented to and accepted by the Council on Graduate Study and Research in partial fulfill ment of the requirements for the degree of Master of Arts Dean Date Juae—- 1 - 9 4 - 9 - Faculty Com m ittee _ ' Chairman (g.f^ L TABLE OF CONTENTS CHAPTER PAGE I THE ORIGIN AND EARLY DEVELOPMENT OF NOTE ISSUE IN CHINA 1 The origin X Animal skin ...••••.••••••••••»» 2 The Flying Money ...... •••••• 2 Note issue in the Sung Dynasty • •••••••••• 3 Note issue in the Yuan Dynasty • •••••••••. 7 Note issue in the Ming Dynasty • ••.••..••« 8 Note issue in the Manchu Dynasty .......... 9 U NOTE ISSUE BY OFFICIAL MONEY EXCHANGES............ 11 The origin . . • • • •••••...•• U Supervision of note issue 12 The decline of note issue by the Official Money Exchanges • •••••*••••«•••. 15 III NOTE ISSUE BY COMMERCIAL BANKS .............. 17 Foreign banks • 17 Note issue by commercial banks • •••••••••• 19 Transfer of the right of note issue to the Central Bank of China .............. 22 IV NOTE ISSUE BY PROVINCIAL BAMS............ 25 Note issue between 1912 and 1937 25 Note issue since the Sino-Japanese War ...•••• 27 CHAPTER PAGE Note issue by Kwantung Provincial Bank • ••••••• 29 Reasons for the complications- of note issue in the provinces • 32 V NOTE ISSUE BY THE CENTRAL BANK................ 33 The organization of the Central Bank .•••••••• 33 The organization of the Issue Department ........ 34 Various types of notes issued • ••••••••••• 35 The issuing reserve . .......... 37 The printing and engraving of notes «...••••• 33 The collection of damaged notes ....•«••*•• 39 VI LEGAL TENDER NOTE POLICY * . . * .................. 41 Causes for the adoption of the “legal tender note policy” 42 Emergency Decree of November 3, 1935 .•••••.*• 49 Supplementary measure of enforcement ...*..... 52 Currency Reserve Board •••*.••.••••.... 53 The first six months after the Reform • *.....• 55 Conclusion *• ......... 53 VH THE CENTRALIZATION OF NOTE ISSUE........... 60 English background .... 60 Reasons generally accepted for the centralization of note issue ............. 63 Developments of centralized issue in China ...••• 64 CHAPTER PAGE Commercial banks .•••••••••••••••••• 65 Provincial banks ................... 66 The regulations of June 20, 1942 ........... 6? Problems arising from the enforcement of the regulations ..••••••••••••••••• 68 Till CHINA'S ECONOMIC AND FINANCIAL CRISIS DURING AND AFTER THE SINO-JAPANESE WAR........ 71 Political dissensions and civil war ...*••••• 71 Agriculture ....... ...... 74 Agricultural production ........ 75 Agricultural prices and farmers* purchasing power .••.•••••••••••••»• 85 Land reform by the Chinese Communists ...... 87 Industry ••.... ............ ......... 93 War time industries • •«•••...••.«•• 93 Post-war industries 99 Foreign exchange and trade •••••••••••••• 104 Public finance ...••••••••••«•••••• 120 The government budget 120 Note issue ..... ••••••• 123 Monetary reform ........ 125 Conclusion .......... . . ♦ 132 PREFACE Following the adoption of the "fapi“ or . ‘ ‘ legal tender note1 * policy in 1935, China was able for a time to maintain a status of economic stability* All silver dollars in circulation were with drawn by the Government and concentrated in the national treasury, serving as a reserve for issuance. Paper money, which became the sole legal tender throughout the country, could no longer be re deemed in precious coins. Its value was kept at an adequate level by means of proper management. For two and half years after 1935, China*s finances were safely guarded and her program of economic reconstruction vigorously pushed forward. It was not until 1937 that China began her fatal policy of inflation which was necessitated by a war of self-defense against Japanese aggression* Nevertheless, through eight long years of struggle, inflation, though it lowered the income of the people, played an important part in saving the na tion from extinction. Then came the atomic bomb in August 1945, which was soon followed by the unconditional surrender of Japan. Unfortunately, while other countries are making efforts in rehabi litation, China is beset with war, war of a domestic nature. Bank notes are printed in and out the country in great speed. The largest denomination jumped from one hundred before the war to one hundred thousand in December 1947, and to five million in July 194&* The livelihood of the people is more seriously threatened than ever be fore. The Central Bank of China has been described as nothing more than a printing machine. No plan to restrict note issue has materi alized, although the "gold yuan" was issued late in August 1948 to displace the "fapi" in circulation. The purpose of this thesis is to summarize the history of China's note issue and to point out her economic and financial problems grow ing out of her post-war note issue policy. The author hopes that this little volume will interest those who are deeply concerned with China's finances-. C. Y.WU CHAPTER I THE ORIGIN AND EARLY" DEVELOPMENT OF NOTE ISSUE IN CHINA The origin* The economic activity of mankind can be traced back to 3*000 B.C.* At the time when the Great Pyramid was built, the Egyptians had already attained a developed civilization. But Egypt did not become a commercial country until the rise of the new kingdom when commerce gradually assumed importance. From that time on, communication around the Mediterranean was greatly facili tated. Spices and myrrh were imported into Egypt; cloth, wheat and implements of war were among the exports. Nevertheless, commercial transactions were made through the barter system. Coins were not yet used. In China, however, as early as the 27th century B.C., Huangti (the yellow emperor) adopted metal as means of exchange. He set up five standard values, pearls and precious stones being the highest, gold the next, and coins the lowest. In the early part of the Chou Dynasty(1122-249 B.C.), a medium of exchange known as lee Poo^ was used. On it were explicitly written the date of issuance, the value it represented and the ad dress of the person who issued itThis kind of money today would be called credit money. Its value ways derived from the credit of Lee in Chinese means a group of families of the size of a village; Poo means cloth. Lee Poo put together means a medium of exchange made of cloth to be circulated among the people. ^ T.Y. lee, History of China*s Note Issue, p. 1# 2 the person who issued it. Animal skin. Besides Lee Poo, ancient Chinese used animal skin as a medium of exchange. During the "Period of Spring and Autumn" (722-481 B.C i) in the Chou Dynasty, cows were used as money. When a transaction was made, the buyer would bring his cow to the market, and the seller was bound to employ someone to take pare of the cow. Because of the inconveniencies thus incurred, people preferred to take the skin of the cow rather than the cow itself as money. The name of the buyer was marked on the skin so as to guarantee its accep tability. It was similar in nature to Lee Poo* In the Han Dynasty(206 B.C.-220 A.D.), the skin of deer was once adopted as a means of payment .3 The quantity of such money could not be easily manipulated in response to market demand owing to the scarcity of deer. Moreover, because'>of great varieties in quality, it failed to serve satisfactorily as the standard of value. So deer skin soon disappeared from the market and was replaced with cloth. The Flying Money. During the Tang Dynasty(6l@-9Q7 A*D.), com merce, both domestic and overseas was rapidly developed. like the Crusaders in the West, the Chinese army, penetrating into what is the modern Western China, opened the route for trade. The merchants, 3 T.F. Chiang, The Paper Money, p. 209. 3 in going through high mountains, had to bring along ■with them large quantities of metal coins, mostly made of iron and bronze, which proved a burden to them and in times of disorder induced robbery* The Flying Money was then devised in 806 A.D. to facilitate trade between cities separated by mountains and rivers .4 It was a certi ficate issued by large stores or public institutions at one place to be redeemed into coins against their branches or other business es tablishments at another with which they had connections. Before starting on his journey, the trader would pay to the issuing insti tution a proper amount of metallic coins for the purchase of a certi ficate which was redeemable at the place of destination, usually the provincial capital. It was very much like the bank draft of today* The only difference was that the Flying Money could be used only once and was non-transferable. Furthermore, since it could be re deemed at many designated stores, it might be properly described as a travelling check. Mote Issue in the Sung D.ynasty(960-1279 A.D.)* During the early years of Sung, Convenient Money(pien ch*ien) was issued.^ like the Flying Money it resembled a kind of banking facility of fered to the merchants. It first appeared at the time when the Sung Dynasty was established. Merchants coming to the capital were 4 Ibid.. p. 210* 5 W.P. Wei, The Currency Problem In China, p. 19# 4 permitted to exchange specie at the Government Treasury for the pien- ch*ien, paying in cash on demand at the provincial treasuries* The pien-ch*ien, though -useful in trading, did not serve as currency in its strict sense. Within the cities, iron coins remained the only type of money used. According to historical records, a large coin would weigh some 12.50 gm., and that of middle size 6.50 gm..^ It was extremely inconvenient for the people to carry coins of that sort even for daily transactions. To solve the difficulty, six teen of the richest families jointly raised funds for the issuance of chiao-tze, or Evidence.7 Evidence was redeemable at any time and at designated places. But owing to the poor quality of the paper and the crude method of printing, its circulation was limited to a period of three years. At the end of the three year period, it was to be either redeemed into cash or renewed into a new bill representing the same value. It is to be noted that the highest amount of notes in circulation at no time exceeded 2,940,000 kuan - each nominally 1,000 cash.** Under such a system, merchants were greatly benefited. But before long, the rich families declined in power and wealth, and the redemption of Evidence became questionable. People began to doubt its value and refused to accept it. The Government then found 6 T.Y. Lee, op. cit., p. 3* 7 The Worth China Herald, The China Year Book, p. 447* ® Ibid.. p. 447* it necessary to prohibit individuals from issuing Evidence and took the matter into its own hands. In the first year of Tien-sheng(1023 A.D.), an office known as chiao-tze wo or Evidence Office was established in Yichow, a city in the Szechwan province to take charge of matters concerning the Evidence issue. The duration of Evidence and the amount issued for each period were minutely prescribed. Before long, the Evidence of the 24th period was issued before the expiration of the 23rd* That the Circulation of Evidence of two different periods at the same time means inflation is quite understandable. At last, the Govern ment had to abolish the Evidence in Szechwan owing to the rapid fall in its value; and in place of it a different kind of note known as ch’ien-ying was issued in that province. Ch'ien-ying was unredeema ble and the issuing of it therefore constituted a source of revenue to the Government* In 117& A.D., the value of ch’ien-ying dropped to less than bp% of its face value, and the duration was extended from three to ten years.9 Mr. W.P. Wei, in his “Currency Problem in China” gave a brief but vivid description concerning the issue of kuan-tze and hai-tze besides chiao-tze issue In 1131 the kuan-tze or frontier bills were issued through payment of the troops stationed on the frontiers. 9 T.Y. lee, op* cit*, p. 3. 10 W.P. Wei, op. cit., p. 23* 6 These bills were forced into circulation and were heavily dis counted. The failure of the kuna-tze led to a reorganization of the paper currency and to a new variety with new devices. The hui-tze, one of the best known of the government paper currencies, was invented in 1159* The hui-tze replaced whatever paper there was then in circulation. It was in four denominations, 500, 300, 200 cash and the usual one-kuan note (1,000 cash)• Public dues . were payable in these notes at par value. It was decreed that in the receipt of public dues and in public disbursements one-half must be paid in specie and the other half in paper, except in those places remote from the main waterways where taxes and tributes might all be receivable in the hui-tze. The application of this decree was extended to all business transactions. The government manufactured the paper for the currency notes. These notes were stamped with the Treasury seal before they were put into circulation. The Treasury seal gave the notes the character of fiat money. The issue of paper currency was a government monopoly and forging notes was punishable according to the law of forging state documents* When the paper currency became excessive, occasional con versions were made. The method of triennial redemption of old notes by a new series was followed. Aside from the hui-tze just described there were several local issues under different nautes and devices. Towards the close of the Southern Sung Dynasty( 1127- 1279 A.D.) when the finance of the state were in dire strait the paper currency on account of excessive issue was in a state of rapid decline. When the value of the paper became low, a greater quantity had to be issued and forced into circulation in order to get the needed amount of supplies. In 1263 a last effort was made to revive the paper currency and the kuan-tze was again resorted to. It was issued in exchange for the hui-tze. There were both silver and copper kuan-tze. But meanwhile the Mongols had already conquered the Chin dominions and in 1279 the Southern Sung Dynasty came to an end. i Ho thing important can be said about the Chin note. The only thing worth mentioning here is that the duration of the Chin notes 7 was seven years instead of three years for the chiao-tze and ten years for the ch*ien-ying in the Sung Dynasty. At the expiration of the seven year period, the notes were either to be renewed or paid in cash. In consequence of heavy military expenditure, the Chin notes were greatly inflated, and their value depreciated accordingly* Mote issue in the Yuan Dynasty(1279-1367 A.D.). The Yuan took cautious measures in the matter of issuing notes which proved to be successful. The Government itself monopolized the note issue. Mot only were the nature, denomination, the uses, the extent of circulation, and the amount issued were specifically made known to the public, but sufficient funds were also appropriated by the Government as reserves for the issue. Officers were appointed in large cities in special charge of note issue. The circulation of hard coins was partially suspended and the use of paper was greatly extended. It could be used for payment of taxes and no time limit was set up for the duration of the notes. Though notes were over-issued on account of tremendous mili tary expenses, the Government made new issues whenever the notes in circulation depreciated to a certain degree, and thus keeping the value of paper money from dropping too low. It is not exaggerating to say that even as early as thirteenth century, the financers in China already knew how to manage the mechanism of a sound paper currency. 8 Note issue in the Ming Dynasty(1368-1644 A.D.). The Ming Dynasty adopted coinage as the basis of its monetary system. Copper coins were the main type of money in circulation. But due to the scarcity of copper on the one hand and the increasing demand for money on the other, forfeited coins devised by profit-seeking mer chants began to circulate. It was not until 1375 A.D.(eighth year of Haon Wo) that the Government resorted to the issuing of tai ming prao ch'iao (precious notes of great Ming). Denominations of 100, 200, 300, 400, 500 and 1,000 cash were issued. Before long, notes were used at a discount. Though the Government prompted forcible measures aiming at monetary reforms, such as the issuing of new style notes, the appropriation of funds by the Ministry of Finance to serve as reserve, the collection of damaged notes from the mar ket, the restriction of the circulation of metal coins, and the compulsory use of paper notes for the payment of taxes, still it failed to maintain the value of the notes due to the practice of inflation. In 1394 A.D.(twenty seventh year of Haon Wo) because of the ra pid depreciation of paper money, the Government ordered the Ministry of Finance to withdraw all the coins circulating in the market with in half a month. Any one who held, vised, or minted coins was sub ject to punishmentThe fapi policy of 1935 which prohibited the H T.Y. lee, op. cit., p. 9 9 circulation of silver coins presented a feature quite similar to that embodied in the Ming regulations. Note issue in the 1-h.nchu D.ynast,v(1644-1911 A .D•) • When the Manchu established their rule in China in the seventeenth century, they apprehended the danger of excessive issuing of paper notes, and consequently a system of hard money was resorted to. It was not until the eighth year of the reign of Emperor Shun-shih(l652 A.D.) that paper notes were issued. The quantity of notes issued was however restricted and a period of ten years was fixed, at the expiration of which the notes were to be retired by the Government. In fact this was done within eight years. For the one hundred and ninety years that followed(1660-1850 A.D.), paper money was out of use in China. During the period of the Taiping Re be llion(1850-1364 A.D.), large amounts of paper notes were issued to meet the demands of war. They rapidly depreciated and were soon worth next to no thing. As before the Government repudiated these notes. After the Opium War in 1842, the Chinese were forced to open their doors for foreign trade, and the English people were given the privilege of establishing banks in treaty ports. The Shanghai branch of the Chartered Bank of India, Australia and China first came into existence in 1857* Seven years later, the Hongkong and Shanghai Banking Corporation was established by a group of merchants 10 and shipping men.-^ Notes issued by these banks were widely used in such cities as Shanghai and Hongkong* During the years between I860 and 1870 a number of foreign banks opened branches in Shanghai, among which were the Comptoir National d‘Exeompte de Paris, the Central Bank of West India and some German banking houses. Most of these banks, however, withdrew from the market later on. This early development suffered a setback during the succeeding years and until 1891 no new foreign banking institution came into business. This was a period of complete British monopoly in foreign trade and foreign exchange. Toward the end of the Manchu Dynasty(it ended in 1911 A.D.), Chinese began to establish commercial banks themselves among which may be mentioned the Commercial Bank of China (1897), the National Commercial Bank(1907) and Sae Ming Commercial and Savings Bank (1909). The notes issued by the same were rapidly circulated within the country, thus laying the foundation for a modern system of note issue in China. 12 Frank M. Tamagna, Banking and Finance in China, p. 24* CHAPTER II NOTE ISSUE BY OFFICIAL MONEY EXCHANGE 11 The origin* As is well known to the historians, the Manchu regime toward the middle of the nineteenth century began to expose itself to foreign aggression. The Treaty of Nanking of 184& A.D.^ gave rise to a strong sentiment of national patriotism against Bri tish imperialism and also a sense of dissatisfaction on the part of the people against the regime in power. The political corruption together with an extremely heavy burden imposed upon the farmers created a situation so tumultuous and critical as to be dangerous enough to threaten the existence of the Manchu Government. Early in 1850 A.D., a revolutionary force under the flag of Taiping Tin Kou(Peaceful and Heavenly Kingdom) originated in a small vil lage in the southwest province of Kwangsi swept through Central China and established a new kingdom at Nanking. In order to meet the increased demand of military expenditures, the l-fenchu Government resorted to the issuance of unredeemable paper money. Official Bill(or Silver Bill) and Precious Note (or Coin Bill) were the two main types of notes forced into circulation. The monetary policy of the Government was quite discouraging. Not only was the paper greatly inflated but its circulation was at the same time restricted* It was decreed that only half of the taxes 1 This was the Treaty signed after the famous “Opium War”. 12 could be paid in paper, the rest must be in specie. Hot infrequently did the local authorities refuse to accept the paper at all. Being much embarrassed by the monetary situation, the Government shifted the right of issue to a group of merchants in Peiking who, by making a handsome contribution to the Government, was authorized to establish Official Money Exchanges with the-right to issue notes. Before long, these Money Exchanges, in co-operation with the local officers, went to a race of printing the paper. It was recorded that the notes were inflated to such an extent that they depreciated to only 3% of the specie value. Supervision of note issue. The issue of notes by the Money Exchanges led to the paralyzation of the nation's economy. Hotes were inflated almost without a limit. The Government then began to realize the necessity of restricting note issue by individuals. In June 1909 a set of "Regulations concerning the Circulation of Hotes" was promulgated requiring all the Mmey Exchanges to withdraw their notes outstanding within five years. But since the major in come of these Money Exchanges was derived from note issue, the en forcement of the Regulations would naturally end their business oper ations. Seeing that the Government was inefficient and corrupt, the Money Exchanges kept on printing notes inspite of the Regulations. It was not until the years of the Republic(1912) that note issue 2 T.Y. Lae, op. cit., p. 12. was actually restricted. “Regulations concerning the Official Money Exchange Supervisors “ were promulgated on December 23rd, 1913• The amended Regulations were promulgated on April 3rd, the next year.3 The essentials of the two regulations are summarized as follows; 1. The Minister of Finance was given the power to appoint Official Money Exchange Supervisors. 2. The Supervisors could at any time inquire and examine the books and vaults of the respective Money Exchanges. 3* The printing plates and chops as well as unissued notes of the Money Exchanges would be sealed up and kept in custody in the hands of the Supervisors. Mo further use could be made without the authorization of the Ministry. The “law Restricting Note Issue*1 of June 1915, and the “Revised law1 * of June 27, 1920 made still stricter regulations ;4 1. Legal process of note issue; The issuing of new notes in tended to substitute old and damaged notes withdrawn from the market would be subject to the investigation of the Monetary Bureau. More over, such new notes were to be printed by the printing office de signated by the monetary authority. Only after the old and damaged notes were handed over to the Bureau were the Money Exchanges be able to draw new notes for circulation. 14 2. The definition of paper money: Article I of the law of 1920 gave a definition of paper money which read that MAny printed or written instrument indicating a fixed amount of cash, and capable of being redeemed into silver bullion or silver and copper coins by any person at any time is paper money1 1 * 3. Regulations governing Money Exchanges newly established: Money Exchanges established after the promulgation of the Law of 1915 were prohibited to issue notes. 4. limiting Money Exchanges for further issuance: Money Ex changes established before the promulgation of the Law of 1915 were deprived of their right for further issuance; i.e., the amount of notes issued could not exceed that prevailing at the time of the promulgation of the Law. 5. The withdrawal of notes in circulation: Money Exchanges chartered with a definite period of business operation were re quired to withdraw all the notes outstanding at the expiration of the period. Those chartered with an indefinite period of business operation were subject to the same obligation to withdraw their notes according to governmental regulations. 6. Issuing reserve: The Money Exchanges had to keep 60% of specie reserve besides i+0% in governmental bonds against the notes issued. 7. Compilation of monthly report: The Money Exchanges had to 15 compile monthly reports describing the conditions of specie and se curity reserves, and semiannual statements of receipts and expenditures and of assets. All these reports and statements would be presented to the Monetary Bureau and the Ministry of Finance through local ( * , authorities or Supervisors, No, 2 obligated the Money Exchanges to accept the notes pre sented-for redemption and the issuance of unredeemable paper was therefore forbidden. No. 3 and 4 restricted the amount issued and checked further inflation. No. 5 and 6 were intended to eliminate the circulation of these notes altogether and were of a deflationary character* The decline of note issue by the Official Money Exchanges * With the birth of the Republic in 1912, a new policy regarding note issue was formulated. The Bank of China was authorized with the right to issue notes. The notes issued by the old and poorly or ganized Official Money Exchanges were gradually wiped out of cir culation. The decline of the Official Money Exchanges is attributable to several reasons* 1. The reserves kept by the Money Exchanges were insufficient for redemption* 2. The laws and Regulations of 1913, 1914, 1915 and 1920 govern ing the issuance of paper money greatly restricted the right to issue 16 notes by private individuals. Accounts and assets of the Money Ex changes including mainly the amount of notes issued and that of the reserves were subject to the investigation and supervision of the Supervisors. The notes previously issued were hence gradually withdrawn by the respective Money Exchanges • 3. The notes issued by the Money Exchanges were in the most part counted in terms of silver tael^ as the unit of account while the modern monetary unit in China is Yuan instead of tael. The Money Exchanges under these changing conditions could not but with draw their notes from circulation and a system of modem banking • bagan to dominate. 5 A former Chinese money of account, the value of a tael ( a little more than an ounce ) of silver. CHAPTER III NOTE ISSUE BY COMMERCIAL BANKS 17 Foreign banks. Since the end of the 1 1 Opium War”, Englishmen were given the privilege to establish banks in treaty ports. The Ghartered Bank of India, Australia & China and Hongkong & Shanghai Banking Corporation were and still are the two most important and popular English banks in China, Other foreign banks were soon afterwards established under the provision of the Mmost-favored nation” clause. At the beginning of the Sino-Japanese War in 1894 foreign institutions were legally restricted to the treaty ports and were prohibited from maintaining branches in the interior of the country. Laws and regulations of the Chinese authorities were not applicable in the case of British, American, Japanese, French, Belgian, Butch and Italian banks, which, owing to the special rights of extraterritoriality, were legally subject to the regulations of their own countries. The enforcement of Chinese laws and regulations with regard to the few foreign banks without extraterritorial right (German, Russian, and Sino-foreign banks registered under Chinese laws) was entrusted to the Chinese Special District Courts operating in the foreign-controlled areas by agreement between China and the Treaty Powers,1 1 Frank M, Taraagna, op. cit., p. 89*' 18 Descriptions given by Dr. Tamagna concerning the note issue by foreign banks are brief but representative,^ The silver stocks were kept by foreign banks both as general banking reserves and as special reserves against the note issues. The circulation of bank notes issued by the foreign banks was both general and legally unrestricted. For eign banknotes may be divided into two groups: bank notes is sued in territory under foreign sovereignty, and bank notes issued in Chinese territory. To the first type belonged the notes issued in Hongkong, Dairen and abroadj the second type consisted of the notes issued by the offices of foreign banks situated in China. Bank notes were issued in Hongkong by three banks, the Hongkong and Shanghai Banking Corporation, the Chartered Bank of India, Australia and China and the Mercantile Bank of India, Their total note issue in June 1937 amounted to HK#188.5 mil lion, of which about HK|30 million to HK|40 million was estimated to be in circulation in Southern China. A small amount of notes issued by the International Banking Corporation were in circu lation in Canton. Notes issued by the Banque de l*Indochine in French Indo-China and through its agencies in China circu lated in Yunnan and Kwangsi. The Yokohama Specie Bank used to maintain a silver note issue in yen from its office of Dairen, and these notes cir culated among Japanese in northern China along with those of the Bank of Chosen. Notes of the Bank of Taiwan circulated among Japanese residents in southern and northern China. Yen banknotes of the Bank of Japan appeared in circulation in Shang hai at the end of 1935, with little success. At the middle of 1935 some CN|3 million in foreign bank notes was in circulation in Shanghai and about CN$1.5 million in Tientsin. These had been issued by the Hongkong and Shanghai Banking Corporation, the Chartered Bank of India, Aus tralia and China, The Mercantile Bank of India, the Interna tional Banking Corporation, the Banque Beige pour 1'Etranger and, for very small amounts, by the American-Oriental Banking Corporation and the Deutsch-Asiatische Bank. Foreign bank notes were also in circulation in Hankow, in Changsha and in a few other cities with foreign bank offices. However, the circulation of foreign bank notes was noticeable only in 2 Ibid. s . , p. 106. 19 southern China and to a lesser extent in Tientsin. In general, in 1936-1937 the problem of foreign currency seemed to have lost its traditional importance. Mote issue by commercial banks. The history of the Chinese native bank began some forty years later. In the 22nd year of the reign of Emperor Kwan Hsu(lS97), Shen Hsuan Hwai, Minister of Com munications and Viceroy raised capital of 2,500,000 taels from the business groups for the establishment of the Commercial Bank of China in Shanghai. Ten years later the Chekiang Railway Go. esta blished the National Commercial Bank in Hanchow with a capital of 1,000,000 taels (later increased to 4,000,000 taels). These were the first two modern banks established by the Chinese themselves and both of them enjoyed the privilege to issue notes. After 1911, the number of modem banking institutions increased steadily. In 1914 the Young Brothers Banking Corporation was started in Chungking as a mixed native-modern institution. The Shanghai Commercial and Savings Bank opened for modest business in 1915, established the first Ghinese foreign exchange department in 1917, set up an independent savings department in 1922 and in 1923 started a travel department, which in 1927 was transformed into a subsidiary company, the China Travel Service. A number of commercial banks were established later which we are not to enumerate here. All these banks were authorised to issue banknotes. 20 Before 1933, notes were issued on the basis of the silver yuan coin minted according to the Regulations of 1914*3 On June 27, 1920, a , revised law was promulgated amending the Regulations of June 1915 governing the note issue Prior to the promulgation of this law, all native banks included the note issue in their organic law when they applied for charters from the Ministry. The result was that when charters were granted, the right of note issue was automatically extended to them. With the promulgation of the law, banks could no longer issue notes at their will. Every new issue must be subject to the examination of the monetary authority. As a legal process, the banks had to hand in their applications to the Monetary Bureau, declaring the amount to be issued and the purpose for issuing such notes. Only after the applications were duely approved, would the banks be able to en ter into contracts with the government-designated printing office. Specimen would be handed over to the Monetary Bureau for registra tion after the printing was done, likewise, printing plates and chops would be kept in the custody of the Bank Supervisors of the Ministry of Finance. Ho further use could be made of the same unless autho rized by the Ministry. Aside from these requirements, the banks were obligated under the provisions of the law to compile monthly 3 This silver yuan weighed 27 grams, and had a fineness of 88%* 4 G.S. Chang, China*s Monetary Systems. pp. 73-75* 21 reports of the amount of issue and that of the reserves as well as semiannual statement of receipt and expenditures and of assets of the bank to be presented to the Ministry of Finance. The ministry at the same time would appoint its own inspectors or other agencies to examine the necessary accounts of the banks related to note issue. New banks established after the promulgation of the law of 1920 were not permitted to issue notes at all. Banks chartered previously with the privilege to issue notes were henceforth prohibited from fm>* ther issuance. Though new notes could be issued, it is to be understood that they were used to substitute old and damaged notes withdrawn from the market. At the end of their business duration, these banks were under the obligation to retire their notes outstanding entirely. In case the banks were chartered with an indefinite period of business operation, they were required to withdraw their notes within certain period specified by the monetary authorities. According to Article 12 of the law of 1920, the right of issue of the commercial banks was to be cancelled in case of violation of either of the following stipulations. 1. When the amount of notes issued exceeded that approved by the Finance Ministry. 2. When a native bank failed to withdraw all the notes issued by it at the expiration of its business operations prescribed by the charter. 3. When a native bank chartered with an indefinite period of 22 business operations failed to withdraw all the notes within certain period specified by the Ministry of Finance and the Monetary Bureau* 4. When a native bank failed to observe the specific conditions regarding note issue as imposed upon it by the charter. 5* When a native bank failed to report the amount of notes issued and the reserve to the Ministry and the Bureau within six months after the promulgation of the present regulations. 6. When a native bank temporarily authorized with the right to issue failed to withdraw its notes in periods prescribed by the Ministry of Finance and the Monetary Bureau* 7. When a native bank rejected redemption. B. When a native bank failed to provide and maintain a pro per reserve. 9. When a native bank failed to observe the provisions of the charter regarding the reserves owing to special reasons and when such reasons were not reported to the Ministry and the Bureau for consideration and decision. Transfer of the right of note is site to the Central Bank of China* After the adoption of the ' ‘ legal tender note1 1 policy in 1935, note issue entered into a new stage. The right of issue of eight private banking institutions^ was shifted to the Central Bank of China, the ^ They were: China & South Seas Bank, Commercial Bank of China, Sze Ming Commercial & Savings Bank, Agricultural & Industrial Bank of China, Bank of Agriculture and Commerce, Manufacturer^ Bank of China, National Commercial Bank and land Bank of China* 23 Bank of China, and the Bank of Communications. In July, 1942 all the notes issued by the commercial banks were collected by the Central Bank of China, thus making possible the sys tem of centralized issuing* Since then, the Central Bank of China, the bank of all banks, is alone delegated with the authority to issue notes* For the reference of the readers, a table showing the bank notes in circulation from 1933 to 1935 , the year in which the »legal tender note* 1 policy was adopted, is given below* The table is self-expla natory. BANKNOTES IN CIRCUIATION, 1933-1935 6 Uaitj CN# Name of the banks 1933 1934 1935 I* Central and Chartered Banks 1. Central Bank of China 71,063,301 86,048,617 179,923,546 2. Bank of China 183,726,997 204,713,465 286,245,042 3. Bank of Communications 93.004.611 112,512,472 180, 825.650 Total 347.794.909 II* Provincial & Municipal Banks 4* Agricultural & Industrial Bank of Tsingtao 8 ,1 9 8 7 8 ,68 1 78,681 5. Canton Municipal Bank — 5,925,472 5,925,472 6. Chekiang Provincial Bank 1,352,458 3,473,313 3,493,822 7. Hunan Provincial Bank 3,276,517 6, 197,200 6,524,100 S. Hupeh Provincial Bank 4,111,400 6, 075,050 7,847,800 9. Kiangsu Bank — — 10* Kwangsi Bank 4,437,871 5,244,419 16, 776,412 1 1* Kwangtung Provincial Bank 31,399,726 3 1, 368,096 32,200,784 1 2. Nanchang City Bank 263,275 298,231 459,160 13. New Fu Tien Bank 23, 036,100 15,575,000 17,815,000 6 The Commercial Press, The Chinese Year Book* pp* 788-790* 24 14. Ninghsia Provincial Bank 850,000 2, 450,000 2, 450,000 15. Provincial Bank of Hunan 1,068,424 698,540 385,409 1 6, Provincial Bank of Hopei 2,963,849 4,799,452 3, 301,406 17. Provincial Bank of Shensi 1,841,136 2,612,893 4,833,819 18. Provincial Bank of Szechwan — - 587,486 — 19. Shantung Min Sheng Bank 1,713,000 2,060,000 2, 380,000 2 0. Shansi Provincial Bank 4,644,084 6,125,452 6,125,452 2 1. Sinkiang Provincial Bank — --- — 2 2. Yu Ming Bank of Kiangsi 426.568 634.865 788,370 Total 71,392,606 94,204,050 111.385.687 III. 23. Commercial & Savings Banks Commercial Bank of China 25,091,460 44,981,900 26,637,100 24. Commercial Guarantee Bank of Chihli 1, 484,400 2, 013,600 3,431,300 25. Dah Chung Bank 217,062 466,936 1,712,521 26. Four Banks Joint Treasury 36,871,837 40,254,300 7 2, 282,400 27. Fukien South Eastern Bank 255,000 332,500 ----- 28. Mei Feng Bank of Szechwan 1,045,691 537,491 925 29. National Commercial Bank 8,186,871 9,214,773 9,448,773 30. National Commercial & Savings Bank 16,144 14,285 31. Ningpo Commercial & Savings Bank 19,497,600 .18,310,300 19,200,800 Total 92.666,065 116.126,085 132,713,819 IV. 32. Agricultural & Industrial Banks Agricultural & Industrial Bank of China 10,224,767 12,225,547 8,344,382 33. Agricultural Bank of China 2,008,000 5,663,382 29,846,807 34. Bank of Agriculture & Commerce ------ 1, 813,000 2, 312,800 35. Kiangsu Farmers Bank —... — ... - — 36. National Industrial Bank of China 4 0,000,680 43,500,818 44,463,421 37. Northern Shensi Industrial Bank 534,540 954,091 1,293,354 Total 5247671,^7 64 ,156,83a 86,260,764 V. 38. Special Trade & Other Banks Frontier Bank 965,000 488,100 270,400 39. Land Bank of China 6,445,000 7,095,000 7,496,000 40. Reconstruction Bank of Kiangsi 134,400 152,194 — Total ZU&AS2 Grand Total 572, 165,967 685, 496,821 955,120/904 CHAPTER IV MOTE ISSUE BY PROVINCIAL BANKS 25 As early as 1853 which marked the third year of the reign of Emperor Hen Fong, the Board of Revenue of the Manchus, necessitated by the punitive expedition against the Taiping Rebels, issued two types of notes - the Silver and Coins notes, with the former in terms of taels and the latter counted in copper coins. As has been pointed out in the previous chapter, the excessive issue and the restricted use of the notes resulted in their devaluation. For a time the Govern ment seemed unable to meet its financial obligations. A group of mer chants in PeikLng, dominated by selfish and profit-seeking motives, made a voluntary contribution to the Government and received in re turn the privilege of establishing Official Money Exchanges with the right to issue notes. Note issue between 1912 and 1937* With the establishment of the Republic in 1912, these Money Exchanges were closed down one after another. In order to finance the local fiscal administration, the provincial banks, eighteen of them altogether, were established in Hangsi, Hunan, Anhwei, etc.-*- with capital ranging from 1 million to 10 million taels. These banks were chartered by the local - * • Up to 1936, there were eithteen provincial banks. In the provinces of Sikong, Kweichow and Kansu, newly established provin cial banks were authorized in 1940 to issue notes and were entrusted with local currency stabilization. 26 provincial Governments, which subscribed the total or a large share of the capital. They were usually the product of a transformation of the currency, or note issue, or minting bureaus of the provincial treasuries. During the chaotic years following 1916, provincial banks cams under the domination of warlords, who used them to issue “mili tary Rehabilitation1 ' or "Anti-Red Campaign" notes, with no backing behind them at all* After the establishment of the National Government in Nanking in 1927, the financial authorities, being aware of the fact that provincial paper notes constituted an obstacle to a unified national currency, promulgated a set of provisional regulationsAccording to these regulations, provincial banks could issue subsidiary notes only. In exceptional cases (such as to promote economic development in rural areas), Central Bank notes of or above one dollar denomi nation would be supplied by the Ministry of Finance. At the same time, in exchange for these notes, provincial banks had to furnish 60$ specie reserve and 40$ of security reserve in readily negotiated bonds to the Treasury. All notes above one dollar denomination al ready printed but not yet issued by the provincial banks would be reported and handed over to the Ministry and destroyed. Those al ready issued would be withdrawn within six months. Nevertheless, the Regulations also provided that provincial banks previously 2 "Regulations governing the establishment of provincial or local banks and the drawing or issuing of redeemable notes", pro mulgated in 1928. See T.Y. lee, op. cit., pp. 188-189. chartered by the Ministry of Finance still preserved the right to issue notes of or above one dollar denomination*3 Note issue since the Sino-Japanese War. Owing to difficulties in communication and transportation during the Japanese aggression in 1937, provincial banks continued enjoying the privilege of is suing one-dollar and subsidiary notes. This, in the view of the Finance Ministry, was to economize both money and material resources. Approval by the Ministry was however required, and printing was either done by the Central Trust or by provincial banks themselves under the supervision of the Central Trust. After printing, all notes were to be kept in custody in the Central Bank of the locality, to be drawn from it by the provincial bank only when proper reserve was handed over for exchange. In order to supplement our discussion, it would be desirable for us to mention the HRegulations governing the issue of dollar and subsidiary notes by provincial banks1 1 .4 Their essence is as follows: 1. Circulation of the notes issued by provincial and local banks would be limited to the area of their business activities. 2. Within three months after the promulgation of the rules, all provincial banks were required to present to the Ministry of 3 Article S of the Regulations. 4 The regulations were drafted by the Joint Board of the Four Banks and promulgated on May 11, 1940 by the Ministry. The Board was established since 1937 shortly after the outbreak of the Sino-Japanese Hostilities, and dissolved on Oct. 30, 1943. 23 finance statements showing the amount of notes issued and their re serves * 3* Provincial banks were required to hand over their original printing plates to the Central Trust and the printing of notes was to be undertaken by the latter. In case of difficulties in communi cation, the printing might be done locally under the supervision of the Central Trust. 4. After printing, provincial bank notes would be handed over to the Currency Reserve Board which would then designate a bank to keep the notes in custody. 5. After printing was done, the printing plates would be sub mitted to the Central Trust packed and sealed for custody and reports would also be made to the Finance Ministry. 6. Appropriate reserve would be handed in when notes were to be drawn for circulation. 7. The monetary reserve would consist of 40$ M gold, silver and legal tender notes5 and 60$ in warehouse receipts for marketable commodities, in Government, provincial and municipal bonds and in deposits with the Central Bank of China, the Bank of China, the Bank of Communications and the Central Trust of China. These rules were intended to regulate the issuing of notes by provincial banks. Had they proved successful, the “Regulations for Unified Issue” might not be formulated at such an early date as 1942. Note issue by Kwangtung Provincial Bank* The situation of note issue in Kwantung was in particular complicated. Owing to the poli tical environment in the province during the War of 1937, the notes issued by the Kwantung Provincial Bank became a football of specu lation. Their value oscillated sensitively in response to changing conditions in that province. At first the value of the Kwantung Provincial Bank note was fixed at CN$0.67 in 1936 and CN|0.70 in 1938. After the capture of Canton by the Japanese in 1939, the value of the note was further raised to CN#0.80. In spite of this, the people had no confidence in the local currency and busied themselves in changing local notes for national currency. Confronted with such a serious problem, the Joint Board of the Four Banks5 drafted a set of regulations in August 1940 which, after being approved by the Ministry of Finance, was immediately put into effect. Among other things it provided thatj 1. Beginning from the enforcement of the new regulations, the value of Kwantung provincial notes would be fixed at CN#0.70 worth of a national dollar. 2. All payments, both public and private, would be made at this ratio* Infraction of this rule was subject to punishment. 3 . All Kwantung provincial banknotes which had already been printed but not yet issued would be handed over to the branch of 5 The four Banks are the Central Bank of China, the Bank of China, the Bank of Communications and the Farmers' Bank* 30 Currency Reserve Board in Canton. Ho further issue could be made without the consent of the Ministry. 4» The branches of the Four Banks and of the Kwantung pro vincial Bank in Hongkong would only supply drafts to be redeemed into national currency in the free part of Kwantung province in exchange for the Kwantung provincial notes received. This was to prevent the Japanese from purchasing foreign currency with national currency through the use of Kwantung provincial notes. Soon after the promulgation of the above regulations the Joint Board, by the advice of President Chiang Kai-shek, drafted two sets of regulations which were put into effect after being approved by the Ministry of Finance. REGULATIONS PREVENTING ILLEGAL ACTION THROUGH6 THE USE OF KWANTUNG PROVINCIAL NOTES 1. A proclamation would be made by the Kwantung provincial government that "All transactions, both private and public, made within the provincial boundary of Kwantung must be paid in Kwantung provincial notes at a rate fixed by the National Government. Any one who refuses to accept the notes will be subject to punishment." 2. The Kwantung provincial government would also announce that no money exchange between provincial notes and other currencies (mainly the national currencies) could be made at a rate other than that fixed by the National Government. Violators were subject to 6 T.Y. lee, op. cit., p. 194* the punishment of law. 3 ■ The export of provincial notes was subject to the same regulation as in the case of national currencies. 4* Provincial notes could not be redeemed into national cur rency at the branches of the Four Banks and the Kwantung provincial Bank at Hongkong. 5. The said banks in Hongkong were to supply drafts to be re deemed into cash in free territories of Kwantung province against the provincial notes received. 6. The branches of the Four Banks in Kwantung had to make payments in provincial notes as long as they had such notes. REGULATIONS GOVERNING THE INTER-PROVINCIAL REMITTANCES? 1. Anyone who wanted to remit money from Kwantung to other provinces by using Kwantung provincial notes had to fill out an application stating the reasons and the use of the remitted sum to be examined by the branch office of Joint Board of the Four Banks in Kwantung province. 2. Remittances of Kwantung provincial notes from inland cities to coastal seaports were subject to the ' * Regulations restricting the remittances between seaports.1 * 3. Fees charged on the remittances of provincial notes were the same as in the case of national currencies. 32 Doubtless these rules were made with good intentions, but re sults were not as satisfactory as then imagined* Nevertheless, as inflation continued to take its course, the right to issue subsidiary notes was practically cancelled* Reasons for the complications of note issue in the provinces» Note issue in Kwantung as described above represents a general si tuation which prevailed in the majority if not'all of the provinces. For the existence of such a situation the following reasons may be mentioned in particular* The first was the excessive issue on the part of provincial banks, although a fixed amount of reserve was required* The second was the fact that the provinces were somewhat out of control of the central Government. The governors were and still are in the great majority of cases military men and therefore unruly* Not infrequently the orders of the Central Government were defied* Third was the inability of the provincial governments to balance their own budgets, and a subsidy from the central Government was not a usual thing. Fourth, was: the imposition of additional financial burdens on the provinces. Not only was the province required to look after its own affairs but as the war went on with the Japanese, it was also asked to share the burdens with the Central Government. 33 CHAPTER V HOTS ISSUE BY THE CENTRAL BANK With the establishment of the National Government at Nanking in 1927, the Central Bank of China was organized the next year under the “Central Bank Charter1 1 passed by the State Council on October 6, 1928. A sum of CN|20,000,000 was appropriated by the Ministry of Finance as the initial capital of the Central Bank which began to operate in Shanghai in November the same year.l The organization of the Central Bank. According to the Charter of 1928, the Central Bank is organized bn the'basis of three separate but parallel organs; namely, the Board*of Directors,2 the Supervisory Committee^ and the Executive Organ, headed by one Governor and two Deputy Governors. The duties or powers of the Board of Directors are^ (1) to formulate the business policy of the Bank, (2) to decide the amount 1 Edwind H.N. Ding, The Central Bank of China, p. 131* ^ F.M. Tamagna, op. cit., p. 122. The Board consisted of nine directors, appointed by the National Government for a term of three years, but eligible for reappointment; three of them were chosen as representatives of industrial, commercial and banking interests. Five directors were designated as managing directors. From among the directors the National Government selected and appointed a gover nor and a deputy governor. ^ Ibid.. p. 122. The Supervisory Committee consisted of seven members, appointed by the National Government on two year terms and representing industrial, commercial and banking interests and the Auditing Office of the Government. 4 Article 14 of the Gentral Bank Charter. 34 of notes to be issued, (3) to make adequate allocation of reserve funds, (4) to examine and approve the budget and financial state ments of the Bank, (5) to draft rules and regulations of the Bank, (6) to establish and abolish agencies and branches, (7) to deter mine increases in the amount of capital and (8) to study the po licies recommended by the Governor* The duties of the Supervisory Committee are-* (1) to audit the account of the Bank, (2) to examine the reserves, and (3) to exa mine and audit the budget and the financial statements of the Bank. The Governor, in consultation “ with the Deputy-Govemors, has the power to enforce the policies decided upon by the Board of Directors and to make all administrative decisions regarding busi ness operations. The organization of the Issue Department. The Issue Department was organized under the Organic law of the Department. Article II stipulates that "The Governor has the power to appoint one General Manager and one or more General Assistant Managers of the Department of Issue with the consent of the Board of Directors.*^ Prior to 1942, the Department consisted of four devisions: (1) a correspondence division, responsible for correspondence and 5 Article 15 of the Central Bank Charter. ^ T.X. lee, op. cit.,- p. 40. miscellaneous affairs, (2) an accounting division, responsible for the compilation of various types of statements of receipts and ex penditures, (3) a banknote division, responsible for the printing, alloeatihg, transporting, storing and destructing of banknotes, and (4) a cashier division, responsible for the receipt and payment as well as keeping in custody cash, reserves and the like.? Moreover, the Issue Department has the power to establish branches of its own at such places as circumstances warrant. Up to 1943> two such branches have been established; one in Chungking and the other in Kungming* On July 1, 1942 when the right of note issue was centralized in the hands of the Central Bank of China, three new divisions were added to the already mentioned four. They were a division of allo cation, responsible for calculating, allocating, and transporting the banknotes to other public institutions spreading all over the country; a division of arranging old and damaged notes; and a divi sion of storage, keeping in custody the reserves for issuance. The banknote division was transformed into a printing and engraving division, responsible solely for printing notes. Various types of notes issued. The Charter of 1928 empowered the Central Bank to issue banknotes of one, five, ten, fifty and 36 hundred dollar denominations besides subsidiary notes of ten cent, twenty cent and fifty cent denominations. After the Japanese aggres sion in 1937» notes of one cent and five cent were also issued though only circulating for a very short period* In addition to the notes mentioned above, a different kind of note known as Custom Gold Unit was issued* As early as January 5» 1929, the National Government, confronted with the fact that the value of silver was decreasing rapidly in terms of gold, created the Custom Gold Unit to be used by importers and exporters in the pay ment of taxes. Each unit represented 0.601866 gm. of fine gold as an equivalent to US$0.40 and to US|0.67725 after the devaluation of the Dollar on January 31st, 1934. In 1942, the Government increased the value of CGU to 0.888671 gm. of fine gold as an equivalent to one US dollar.® However, with the depreciation of paper notes in the course of inflation, its value was fixed at a ratio of 20:1 in terms of national currency. It bagan to circulate along with national currency and was no longer demanded by the traders. And in the years '"since 1946 when inflation was more and more depended upon by the Government as a main source of revenue, it was even used as a device in the issuing of large denominations to make people less conscious of the extent inflation has gone. For instance, when CGU5>000 was issued in December 1947, it meant that the largest denomination had gone up to 100,000 in terms of national currency, though the highest ^ Ibid., p. 43# denomination of national currency at the time was only 10,OCX). The issuing reserve. The Central Bank Charter of 1920 requires 60% of specie reserve and bO% of security reserve against the notes issued. It defines specie to be gold and silver and security to be governmental bonds and short-term commercial papers. Article 23 of the Law of Central Bank promulgated on May 23rd, 1935 makes some moderate changes in the meaning of security. It divides security reserve into three categories; 1. Bonds and negotiable instruments issued by the Government or guaranteed by the same upon issuance. 2. Checks and drafts drawn on demand against the outstanding banks both within and without the country. 3. Short-term commercial papers with the following qualifications 1) acceptances against native banks, commercial drafts and promisory notes, 2) the above mentioned commercial papers are qualified only when production, transportation, and sales of goods are involved, 3) the above mentioned papers are valid only within six months from the date of their receipt by the Central Bank, 4) the above men tioned papers must be accepted by at least two outstanding stores, and by one store when the value of the goods concerned exceeds the face value of the draft by 25%, 5) bill of lading or warehouse receipt must be attached to the above mentioned papers. Later on Ifey 12, 1936, as political strain between Japan and 38 China was intensified, the Chinese Government declared foreign ex change to be included in the item of specie reserve with a view to making the operations of the monetary mechanism more flexible and the prosecution of the war more effective. After the outbreak of the war in 1937> the Central Bank of China failed to keep a 100$ reserve against the notes outstanding. In fact, all the specie reserves and foreign exchanges were used by the Government to balance international payments more or less in the form of an equilization fund; and the paper notes began to be on a solely managed basis. The printing and engraving of notes. During the war against Japan and in the years since then, the Issue Department has been relied upon to supply banknotes at the demand of the Government. After estimations as to the magnitude of the governmental deficit have been made by the Ministry of Finance, the Issue Department by consulting with the Ministry, is responsible for drafting a detailed plan describing minutely matters concerning the notes to be printed; such as the name of the printing institution, denomination, design, size, amount of notes to be printed, and the like. After the draft is carefully studied and finally approved by the Ministry with or without modifications, a contract is to be drawn between the printing company and the Issue Department. Before the War, notes were largely printed abroad and mainly 39 by Thomas De La Rue Company of England. However, during the second World War, the Issue Department began to have the notes printed by- American banknote Company, since De La Rue Company, being bombed by German air force, could no longer maintain its regular level of pro duction* The printed but unissued notes were first shipped to Hongkong across the pacific from Hew York then transported by plane to Chung king, the war time capital of China* The shipment of banknotes was greatly discouraged after the out break of Pacific Hostilities between the United States and Japan. From then on, notes were mainly printed domestically though printing materials, facilities and technologies were inferior to those pre viously applied. With the surrender of Japan in 1945* Shanghai was again opened to allied vessels and new contracts for printing notes were again drawn between the Issue Department and the foreign printing institu tions. Up to date, Waterlow & Sons Ltd. and Thomas De La Rue Go. of Britain and American Banknote Co* and Security Banknote Co. of the United States are the four main foreign firms printing notes for China. Among the domestic printing companies may be mentioned Chung Hwa Rook Co., Dah YLh Co., Dah Tung Co. and Chung Yang Co.. The collection of damaged notes. Under the metallic standard, a deviation between the legal or standard weight and the actual 40 weight of the coins is tolerated. However, if the weight of the coins goes under the legal limit, the Central Bank is under the obligation to collect these coins and have them minted again. The same is true with paper money. Notes that are worn out or damaged are to be re tired and destroyed by the Central Bank. The task of collecting notes was quite a tremendous one during these years of inflation. Not only notes that were damaged but those of small denominations also were to be retired. Agents were esta blished by branches of the Central Bank at various localities res ponsible for the withdrawal of damaged notes. All the notes thus collected were to be concentrated in the Issue Department b'f the Central Bank to be classified according to denominations and issuing institutions and then sealed up waiting to be destroyed at the appro val of the Governor of the Central Bank. 41 CHAPTER VI LEGAL TENDER NOTE POLICY The years after the establishment of the National Government in Nanking in 1927 were years of economic prosperity in China. This was mainly due to a mild currency inflation brought about by a fall in the price of silver. Owing to her agricultural production and an economic status of semi-self-sufficiency for a large portion of her population, China was less effected by the world’s depression than were the economically important countries. But forces from outside were too strong for her to withstand, which finally led to the adop tion of the ’ ’ legal tender note policy”. In a brief period of less than a decade before 1936, China’s domestic prices and income structures were compelled to undergo two successive readjustments to the changing prices of silver, first in an upward direction between 1926 and 1931 when the price of silver declined by 33.8 per cent in New York and 49-7 per cent in London and later in a downward direction since 1932.^ As long as China was on the silver standard, the fluctuations in the price of silver would always prove very disturbing to the normal function ing of her economic system. Being indebted to the depreciation of silver, China enjoyed a brief period of prosperity in the first two years of the world depression. The wholesale prices under-went a remarkable and almost 1 VI.Y. Ian, The New Monetary System of China, p. 11. a continuous advance in the country. It amount to 22.5% for North China and 26.7% for Shanghai China has thus been able to immune to the waves of the world depression from the other side of the Pacific during the first two years of that world-wide economic crisis* Causes for the adoption of the 1 1 legal tender note policy0 * In 1929 the world began to sink into the great depression which was to bring not only wholesale departure from gold standards but also ra pid price declines, ruinous reductions of both money and real national incomes, widespread bankruptcies, along iihes of unemployed, and a general social and economic discontent that played an essential role in precipitating World War II. Great Britain quit the gold standard in the fall of 1931 and devaluated her currency. In February 1935 the sterling’s depreciation had exceeded 40$. The United States was by no means slow in doing the same thing. In April 1933, she gave up the gold standard and the American dollar was depreciated by 40.94$ January the next year. An ounce of fine gold was to be pur chased by the US Treasury at the statutory price of US#35,00 instead of the old price of U3|20.67. No less than thirty countries joined hands in the game of inflation and devaluation, and Chinese silver prices abroad rose considerably, much to the detriment of China. The exchange value of the Chinese dollar has increased steadily in terms of the sterling, the rupee and the yen from 1931 to 1935 and, 43 finally of the American dollar from 1933 to 1935* The extent to which the Chinese dollar was appreciated will be shown in the following table • WEIGHTED MONTHLY INDEX NUMBERS OF THE3 RATES OF FOREIGN EXCHANGE IN SHANGHAI 1931 - 1935 (1931 = 100) 1931 1932 1933 1934 1935 January 99*7 125.7 128.5 171.5 180.9 February 99.8 131.4 129.8 173.7 192.7 i&rch 99*7 129 .8 131.6 173.7 202.9 April 98.0 118.7 130.7 172.6 204.0 May 97*3 117.6 141.6 163.9 217.6 June 90*8 117*2 145.3 166.1 208.0 July 96.5 120*2 150.6 171.3 199.6 August 93*6 131.6 150.6 177.4 187.5 September 95.1 133.8 156.2 179.8 199.2 October 105.8 136.2 156.7 182.9 199.6 November m . i 142.3 164.1 170.6 — December 121.5 134.6 164.8 173.9 — Annual Aver* 100.0 128.3 145.9 173.1 199.2 Among all the factors that brought about the monetary reform of 1935 in China, the silver purchase acts , of the United States played a most important part in effecting China's monetary policies. That to encourage exports to China and other silver-using na tions was one of the reasons for the United States Government to 3 Ibid.. p. 15. This index is based on the T.T. rates on London, New York, Yokohama and Bombay in which currencies the great bulk of China's foreign trade is conducted and weighted by the res pective values of the total trade of imports and exports of these countries which amounted for the ten years 1926 to 1935 to more than 50% of the total foreign trade of China* 44 purchase silver and raise the price of silver thereof may be seen in the following paragraph by Whipple Crawford :4 In 1930 Senator Pittman was chairman of a subcommittee of the Senate Foreign Relations Committee which was appointed under a resolution to investigate and report upon the depres sion of United States trade and commerce with China. The findings were to the effect that the decrease in exports of the United States to China was due to the fall in the price of silver and the consequent fall in the exchange value of silver money of the Orient with American gold standard money. It was contended in the subcommittee^ report that the people of China could not afford to buy American products because of the low exchange value of their money with American money. ..... In the summer of 1931 Senator Pittman visited China on behalf of the subcommittee of the Senate Foreign Relations Committee. He returned from that trip even more insistent that the price of silver could be increased as a means of promoting export trade with China. Thus the United States silver purchase acts, though aiming mainly at maintaining the price of silver, were in some way or other attempting to foster export trade of the United States. During the depression years, United States silver miners suf fered a loss comparable to that of the farmers. In addition to the promotion of foreign trade, the silver purchase acts had two import ant effects upon domestic economy. In the first place, they served as an inflationary measure through the issuance of silver certifi cates with the silver purchased behind them. In the second place, they were used as a device to subsidize the domestic and to certain 4 Whipple Crawford, Monetary Management Under The Mew Deal. pp. 63-64* 45 extent, foreign silver mining interests. Section 45 of the Thomas Amendment Act of May 12, 1933 authorized the President, for a period of six months, to accept silver, at a maximum price of 50 cents per ounce, from foreign governments in payment of principal or interest due on their indebtedness to the United States Government, and required issuance of silver certifi cates against any silver so acquired. ^ In July 1933» Senator Pittman, then a delegate to the London Econo mic Conference, persuaded a number of silver-using countries and silver-producing countries to agree to measure raising the price of silver. The big holders of the metal - China, India, and Spain - agreed not to dispose of it beyond certain limit. The producing countries, on the other hand, agreed to absorb from their domestic production 35 million ounces a year for four years. The President of the United States ratified the London Silver Agreement on De cember 21, 1933* and ordered the purchase of the entire domestic production of silver at 64*64 cents an ounce. This priee was about 50 per cent above that previously prevailing. Proponents of silver, still dissatisfied, pushed through the Silver Purchase Act in June 19, 1934* The Law declared it to be the policy of the United States to increase the silver production of the monetary bullion stocks, ultimately to one fourth, as compared 5 Payments on account of amounts so due, June 15, 1933> totalled approximately eleven million dollars. 46 with three-fourth gold, or to buy silver until its open market price reached a certain point per ounce equal to the existing monetary va lue (US$1.2929 per ounce). The Treasury was directed to purchase silver to that end, but at a price not to exceed 50 cents per fine ounce (the approximate market price just then prevailing) for silver situated in continental United States on May 1, 1934* A Treasury order of June 28, 1934 subjected exportation of silver to licence. Issuance of silver certificates against silver received from foreign governments on their debts had been begun on January 13, 1934, and the Gold Reserve Act of January 30, 1934 had authorized issuance of such certificates against other silver held by the Treasury. All these silver purchase acts succeeded in bringing up the price of silver both within and without the United States. The most significant consequence of the acts was the abandonment of the silver standard by China, which for years had been the greatest source of demand for silver in the world. It had been estimated that between July 1, 1934 and October 15, 1934 the outflow of silver from China amounted to more than CH$200,000,000. 6 As a result of rapid out-rushing of silver from China, the money situation became tight and commodity prices fell considerably. Mean while, inflation and devaluation of currencies on the part of foreign 6 T.Y. lee, op. cit., p. 70* 47 powers encouraged their exports and reduced their imports. The rise of the value of silver in China, on the contrary, weakened her abili ty to export and thereby resulted in an unfavorable balance of trade. The Chinese Government undertook to protest against United States* policy of purchasing silver on the ground that such policy caused monetary and financial disturbances in China and that the subsequent fall in commodity prices endangered the development of China*s industry and trade. Seeing that the United States Government made no change in her policy, the Chinese Government ordered on October 14, 1934 the application of an export duty and equilization charge on exports of silver effective the following day. Such a measure was not regarded as a fundamental solution of the nation's monetary problem. The currency situation after imposition of these restrictions remained unsatisfactory. Changes in the foreign value of silver had so long exercised influence on the value in China that this connection could not be readily broken, and rising value abroad tended to increase value in China, even with these restrictive measures enforced. Furthermore, while exportation through legitimate channels of silver was curbed, there was no effective means of preventing smuggling due to the difficulties arising out of the existence of extrater ritoriality and foreign concessions. When the situation appeared to be most critical, the Government undertook a measure which paved 48 the way for fundamental reform of the currency system. This was the reorganization of the Bank of China and the Bank of Communications. The Government appropriated CN$15,000,000 in the Bank of China, in creasing its capital to CN$40,000,000 of which the Government held 50$. Also there was an additional government subscription of CN$ 10.000.000 to the Bank of Communications. Its capital thus was raised to CN$20,000,000 of which 60$ was held by the Government. This measure was taken principally to enhance coordination between the Central Bank of China and these two banking institutions and proved to be of great value to the Government later in dealing with various financial and currency problems. The Government finally ordered on November 3» 1935> a funda mental change of the currency system in line with world develop ments and with developments within China. The contents of the Emergency Decree of November 3 will be related a little later. At the same time, negotiations were completed for the sale of 50.000.000 ounces of silver to the United States Treasury at the then prevailing world price of silver, which was about 65 cents an ounce. The silver was shipped in December 1935 and in January 1936. Cki May 18, 1936, an agreement was reached between the Chinese Government, represented by Mr* K.P. Chen, general manager of the Shanghai Commercial and Savings Bank, and the United States Government, represented by the Secretary of Treasury, Mr. Henry Morgenthau, where by the United States of America was to purchase from the Chinese Government substantial amounts of silver, said later to amount to 50, 000,000 ounces. In July 1937* upon the second visit to Washington of Dr. H.H. Kung, then Chinese Minister of Finance, further agreement was con cluded with the American authorities for Sino-American monetary cooperation. These arrangements provided: 1. Sale of Chinese surplus silver to America. 2. Purchase of a substantial amount of gold from America by China with a view to augmenting the Chinese Government's gold re serve. 3. Increased credit facilities made available to the Central Bank of China for currency stabilization purposes. Between November 1935 and June 1937 the total recorded export of silver from China amounted to CN$33& million, probably all of which was for the account of the government banks.7 The silver imported into the United States from China between December 1935 and July 1937 amounted to USf75*6 million, which, at the rate of US$29.75 to CN$100, gives an import value equivalent to CN|5254 million.® Emergency Decree of November 3, 19^5. To safeguard China's economic interests and to protect her currency, an emergency decree was proclaimed on November 3rd, 1935* the contents of which are given 7 F.M. Tamagna, op. cit., p. 145* 50 below; With the abandonment of the gold standard in recent years by many leading nations, and the rapid rise in the world price of silver, our currency has become seriously- affected, resulted in severe internal deflation, with grow ing unemployment, widespread bankruptcies, flight of capi tal abroad, fall in government revenues, and an adverse ba lance of payments. For the three and half months commenc ing July 1934, exports of silver amounted to more than 200 million dollars (Chinese), and it was evident that un less immediate measures were taken, the country would be drained of its silver stock. Accordingly, on October 15, 1934, the Government imposed a duty and an equalization charge on the export of silver, which by checking the rise in the exchange rate and the exodus of silver through le gitimate channels, averted an immediate calamity. It was, however, clear at the outset that while the measure adopted could only be temporarily effective, it was not a fundamental solution. During the past year numerous petitions were received urging the Government to devise appropriate remedies. Recently, internal deflation became even more severe, and the business depression more acute, If continued, conditions would become intolerable. In order to conserve the currency reserves of the country and effect a stable monetary and banking reform and to prevent a financial catastrophe, the Government, following the precedents of many countries in recent years, has decreed, as follows; 1. As from November 4, 1935, the bank notes issued by the Central Bank of China, the Bank of China, and the Bank of Communications shall be full legal tender. Pay ment of taxes and discharge of all public and private obligations shall be effected by legal tender notes. No use of silver dollars or bullion for currency purposes shall be permitted; and, in order to prevent smuggling of silver, any contravention of this provision shall be punishable by confiscation of the whole amount of silver seized. Any individual found in illegal possession of sil ver with intention to smuggle it shall be punishable in accordance with the law governing acts of treason against the state. 51 2. Bank notes of issuing banks, other than the Cen tral Bank of China, the Bank of China, and the Bank of Communications, whose issue had been previously authorized by the Ministry of Finance, shall remain in circulation, but the total outstanding banknotes of each bank shall not exceed the amount in circulation on November 3, 1935* The outstanding bank notes of these banks shall be gradually retired and exchanged for Central Bank of China banknotes within a period to be determined by the Ministry of Finance. All reserves held against the outstanding banknotes, to gether with unissued or retired notes of these banks, shall be handed over at once to the Currency Reserve Board. Notes previously authorized and in process of printing shall also be handed over to the said Board upon taking delivery by the Banks. 3. A Currency Reserve Board shall be formed to control the issue and retirement of legal tender banknotes, and to keep custody of reserves against outstanding banknotes. Regulations governing the said Board shall be separately enacted and promulgated. 4. As from November 4, 1935» banks, firms, and all private and public institutions and individuals holding standard silver dollars, other silver dollars, or silver bullion, shall hand over the same to the Currency Reserve Board or banks designated by the Board in exchange for legal tender notes, at face value in the case of standard silver dollars and other silver dollars which conform to the terms of precious monetary legislation of the Government, and in accordance with the net silver content in the case of sil ver bullion or other forms of silver. 5. All contractual obligations expressed in terms of silver shall be discharged by the payment of legal tender notes in the nominal amount due. 6. For the purpose of keeping the exchange value of the Chinese dollar stable at its present level, the Central Bank of China, the Bank of China, and the Bank of Communi cations shall buy and sell foreign exchange in unlimited quantities. 52 Supplementary measure of enforcement. For the enforcement of the Emergency Decree, supplementary measures were adopted and put into force, which stipulated that: 1. All banks(both modern and native), shops, business houses, public organizations, and individuals throughout the country, having in their possession silver coins, mint bars, . raw silver, silver ingots, silver bullion, and all other forms of silver and/or silver articles, shall turn them over to the nearest local exchange office in exchange for legal tender notes (fapi) within three months, beginning frcaa November 4 of the 24th year of the Republic(1935), with the exemptions enumerated below: (1) Silver absolutely indis pensable as raw material for industrial, artistic or other lawful purposes, the use of which has been authorized by the Government in accordance with the Regulations governing the use of silver in the manufacture of silver articles, (2) Ancient coins, rare coins, or ancient silver relics having cultural value, (3) Silver utensils and ornaments manufactured and in possession of owners, prior to the pro mulgation of these Regulations * 2* The offices for the exchange of legal tender notes consist of the following: (1) The Central Bank of China, the Bank of China, and the Bank of Communications, their branches and authorized agents, (2) Banks(modern and native), pawnshops, post offices, railway offices, steam ship offices, telegraph offices, and other public organs or organizations authorized by the above-mentioned three Banks; i.e., the Central Bank of China, the Bank of China, and the Bank of Communications, (3) Offices for the col lection of national local revenue throughout the country, (4) The district (Hsien) Governments. 3* When exchanged for legal tender notes, all silver articles, other than silver coins or mint bars in current circulation, shall be evaluated on the basis of the degree of their fineness. 4. In districts where no legal tender notes are in circulation persons in possession of silver dollars, silver bars, raw silver, silver ingots, silver bullion or other forms of silver and/or other silver articles shall have them exchanged for legal tender notes in the offices stipulated in Section 2, 3, and 4 of Article 2. 53 5* The offices enumerated in Sections 2, 3, and 4 of Article 2, after receiving silver dollars, silver bars, raw ailver, silver ingots, silver bullion, or other forms of silver and/or other silver articles(in exchange for legal tender notes), shall immediately turn them over to the near est branches or authorized agent of any one of the.three Banks, i.e., the Central Bank of China, the Bank of China and the Bank of Communications, in exchange for legal-tender notes. Hoarding, concealing or using the above-mentioned silver for other purposes shall be construed as criminal acts . 6. Acts of extortion by threat, committed during the period of exchange (of legal tender notes for silver) against persons in possession of silver dollars, silver bars, raw silver, silver ingots, silver bullion or other forms of silver and/or other silver articles, shall be construed as acts of obtaining goods of value under false pretenses. 7. In the exchange of silver dollars in current cir culation for legal tender notes, no difference whatsoever shall be permissible; i.e., the exchange shall be dollar for dollar. In case of violation of this provision, in accordance with the degree of the offense committed, the legal tender notes and silver dollars involved, shall be confiscated. Persons receiving, purchasing or exchanging silver coins or silver articles at a premium with or without intent to smuggle the same shall be dealt with in accordance with Article 2 and 5 of the Provisional Regulations govern ing Interference with the National Currency. S. These regulations, having been referred by this Ministry to the Executive Yuan and circulated, shall be observed, by all persons and organizations, and shall be in effect from the date of promulgation. Currency Reserve Board. It is to be noted that soon after the inauguration of the legal tender note policy a Currency Reserve Board was organized which was entrusted with the duty of keeping in custody the specie reserve of commercial banks. That Board however had only a short duration, for its function was transferred to the 54 Central Bank of China in September 1942. The organization and function of such an institution may be of interest to us and they may be found in the regulations governing its organization as quoted below: Article 1, The Currency Reserve Board is specially created by the Ministry of Finance for the purpose of centralizing the issue and consolidating the credit of legal tender notes* Branches shall be established in the various commercial centers at the discretion of the Board. Article 2. In accordance with the order of the Govern ment, the Board shall have custody of the reserves against legal tender notes, and shall control the issue and retire ment of such notes. Article 3* The Board shall be composed of the follow ing members: (1) Five representatives appointed by the Ministry of Finance, (2) Two representatives each appointed by the Central Bank of China, the Bank of China, and the Bank of Communications, (3) Two representatives appointed by the Bankers* Association, (4) Two representatives appointed by the Native Bankers* Guild, (5) Two representatives appointed by the Chamber of Commerce, (6) Five representatives of other banks of issue, specially designated by the Ministry of Finance. Article 4* The Governor of the Central Bank of China shall be ex officio Chairman of the Board and the Board shall elect a Standing Committee of five to seven of its members for the execution of routine work. Article 5- The Board may invite leading financiers, both Chinese and foreign, to serve as advisers. Article 6. The Board shan designate the Central Bank, the Bank of China, and the Bank of Communications as deposi tories for the Custody of the reserve funds. The apportion ment of the funds to be deposited in each shall be determined by the Soar’ d and reported to the Ministry of Finance for record. Article 7. The Board shall inspect the reserve deposi tories once a month and announce to the public the amounts of note issue, as well as the kinds and amounts of the reserves, and shall report to the Ministry of finance for record. 55 Article 8. The Board is authorized to employ a staff in order to carry on its work. Article 9* The Board may draw up its rules and regu lations, subject to the approval by the Ministry of Finance. Article 10. These regulations shall become effective from the date of promulgation thereof. The first six months after the Reform. The monetary authority had been quite successful in maintaining the rate of exchange at a constant level immediately after the Reform. During the week begin ning November k, the Ghinese dollar in Shanghai was quoted at ls-2gd without any variation. Throughout the succeeding weeks, at fluctuated between the narrow range of (between ls-2^d and ls-2^d). The rates on New York have also been stable. Contrasted with the pre ceding period (1931-1935) of violent exchange fluctuations, the pre vailing stability of exchange was indeed highly commendable. WEEKLY AVERAGE RATE OF EXCHANGE ON LONDON AND NEW YORK SINCE NOVEMBER, 1935 9 Week ended Y.T. on London T.T. on New York (pence per CN$) (US# per CN#100) Nov. 9 (1935) 14.50 14.39 14.38 14.42 14.44 14.39 14.38 14.38 14.38 14.41 29.74 29.60 29.51 29.68 29.64 29.54 29.50 29.50 29.50 29.64 16 23 30 Dec. 7 14 21 23 Jan. 4 (1936) 11 9 W.Y. Iin, op. cit., p. 132. 56 Jan. Feb. March April May June 18 14.43 29.82 25 14.38 29.65 1 14.38 29.95 8 14.38 29.97 15 14.38 29.93 22 14.38 29.95 29 14.44 29.95 7 14.39 29.91 14 14.38 29.88 21 14.44 29.88 28 14.44 29.87 4 14.44 29.85 11 14.44 * 29.84 18 14.44 29.77 25 14*44 29.77 2 14.44 29.75 9 14.40 29.76 16 14*40 29.73 23 14.40 29.75 30 14.40 29.75 6 14.40 29.86 Equally significant, was the increase in export after the Reform. A table showing monthly changes in China1 s imports and exports is given below* VALUE OF CHINESE IMPORTS AND EXPORTS AND THEIR RESPECTIVE MONTHLY PERCENTAGE CHANGES.10 October 1935 to April 1936 (In CN$1,000,000) Date Value of Monthly Value of Monthly net imports changes in % net exports change in % 1935 Oct. 61.2 — - 48.4 — Nov* 72.4 18.3 60.2 24.4 Dec. 65.2 -10.0 7 0 .6 17.1 1936 Jan. 61.0 - 6.6 70.7 0.1 Feb. 63.2 3.7 46.4 -34.5 l&r. 79.2 25.2 48.2 3*9 Apr. 86.8 9.6 54.8 13.8 The general increase in the value of exports in the first two months after the reform was to a large extent attributable to the greater rise in their prices and to a strong demand abroad for some of Chinese exports, particularly oil seeds and vegetable oils. Since February, however, when the exchange was believed to have been definitely stabilized at the level prevailing at the time of the Reform, the effect of depreciated exchange upon the movements of international trade seemed to have come to an end. On the whole the international and domestic consequences of the Reform had been gratifying. Notwithstanding of the sudden decline 58 in the price of silver following the withdrawal of US purchase of silver in the world market, the exchange rate was remarkably sta bilized. As far as can be ascertained from available statistics, exports were encouraged and imports reduced resulting in a great improvement in the adverse balance of trade, although this state of affairs lasted only for a short period of twenty months. The currency policy pursued after November 3, 1935 by the Government was directed toward introducing a mixed monetary stand ard, based upon a reserve of 25 per cent in silver, 35 per cent in foreign exchange and the balance in Government bonds; the foreign exchange rate were fixed according to the London-New York cross rate. With the liquidation of silver, the foreign exchange re serve became increasingly important than the metal reserve, and changes in silver prices were likely to have no significance upon the total reserve. Conclusion. The Monetary Reform marked a most radical and significant change in the Chinese monetary history. For more than two thousand years, China had rested on a metallic standard. Though paper notes were issued sporadically during each dynasty, they were at first supposed to be redeemed into specie and only circulated along with metals which had remained the basic money. The Reform of 1935 repudiated entirely the use of metals as basic money. It was brought about by the world's economic crisis 59 in 1929 and necessitated by the monetary developments in other countries. Though it is said that the abandonment of silver standard in China was attributable to the IB silver purchase policies, it can not be denied that the extreme fluctuations of the price of silver in the worlds market did not allow China to maintain a silver currency either. At the same time, the co-operation of Great Bri tain and the Itoited States with China after the proclamation of the Befora made countless contribution to its success. Great Britain co-operated through the monetary reform of Hongkong and by enforcing upon British nationals in China restrictions in accordance with the Chinese monetary laws. The United States likewise made adjust ments in her silver policy by suspending silver purchases from the world market at the end of 1935 and thereby stabilizing the price of silver and discouraging smuggling silver out of China. Mean while, new purchases of silver by the l&iited States Government were made by direct agreements with the National Government of China, rather than in the open market. It is not exaggerated to say that without the freindly assistance of Great Britain and the United States, the monetary Beform could hardly be successful. CHAPTER VII THE CENTRALIZATION OF NOTE ISSUE 60 English background* Before entering into any analysis of the centralization of note issue in China, we shall make a brief survey of the early monetary development of the Bank of England so as to bring forth a better understanding of the nature and process of cen tralizing issue. Early in 1697, the Bank of England was authorized with the right to issue notes. In 1326, it was empowered with the privilege of monopolizing the note issue in an area within sixty miles from London. In the early 1330', the British Government found that the gold reserve of the Bank of England was far short of the paper notes outstanding. A run for redemption upon the savings banks alone might in a month stop the wheels of the Government. It was to this peril- that Lord Althorp, the then Chancellor of the Exchequer re commended his bill. The bill enacted that the bank-paper would be legal tender for payment of all stuns above five pounds, leaving it in the power of any person to get money for notes, by taking it in sums of five pounds at a time; but not otherwise; and this obs tacle would, he hoped, diminish the force of any future run upon the banks. However, it was not until the enactment of the Peel Act of 61 1844, that a system of centralized issue was founded. This act, in fact, tied down henceforward the paper money of all bankers to the narrowest limitations possible, and thus prevented over-issue. It caused all banks that issued their own promisory notes, to give in an average of their circulation for the three preceding years. The Bank of England on the contrary, was allowed to issue notes to the amount 6f. debt owing her by the Government, etc, etc., to the extent in all of fourteen millions. In addition to this, she was also permitted to issue two millions* worth of bank post-bills, for the convenience of remitters. All her issues of paper, beyond this, were to be based on bullion and speciej meaning thereby, that for every note issued beyond the ^14,000,000, she was to have 100$ of coins and bullions in her coffers. The salient points of the Act are listed below.^- 1. The organization of the %nk would be on the basis of two major department, namely, the banking and issue departments. The accounting of the Issue Department would be independent from that of the Bank. 2. The o^l4,000,000 worth of negotiable instrument of the Bank together with the specie of the Banking Department were transferred to the custody of the Issue Department at the order of the Governor of the Bank on August 31st, 1844, serving as the reserve for issuance. 1 Dunbar, The Theory and History of Banking, p. 138* 62 3* Motes issued against the negotiable instruments were to be limited to <^14,OCX),000. Further issuance had to be backed by hundred per cent of specie reserves. 4- Notes issued by the Bank of England could be redeemed at any time into metal coins. 5. The price of gold was set at^3“17-i0Sjy an ounce. 6. The Bank was obliged to pay the British Government o^flSO,000 200,000 after 1861) annually in return for the privilege enjoyed in issuing notes. 7. Other banks previously authorized with the privilege to issue notes still preserved the right to issue; however, the amount of notes issued could not exceed the average amount of issue within two weeks before April 27, 1844. 8. In compliance with the Order in Council, these banks could transfer two thirds of their issuing capacity to the Bank of England whenever their right to issue notes was cancelled by the Government. 9. The Bank of England was required to prepare statements regarding note issue to be disclosed every week. 10. The amount of notes issued and that of the reserve of the Bank of England were subject to examination by the governmental officers. At the time when the Peel Act was put into effect, issuing banks totalled 279. In 1914, they were reduced to 14- After the 63 World War I in 1920, the Bank of England was finally crowned with the sole privilege to issue notes. Reasons generally accepted for the centralization of note issue, 1. Control of banking credit: Under the central banking sys tem like that existing in the United States, the central bank will be able, though only to some extent, to control credit expansion and contraction through open market operation, rediscounting rate, reserve rate and note issue. This control will be impossible under the multiple system where the quantity of money is not subject to the control of the central bank. 2. The smooth handling of financial policies* All the finan cial policies are centered on two purposes, namely, the betterment of the. livelihood of the people during time of peace and the exe cution of the war when the nation employs force against outside aggression. The central bank can make loans to enterprisers at very low interest rates to encourage production in time of depres sion, change rediscounting rate at levels deemed necessary for the adjustments of money market, and centralize specie reserve for spe cified purposes, especially during time of war, 3* Economy and efficiency in note issue: In matters regarding note issue, such as the printing, distributing, delivering, appro priating and storage of notes, it is often argued that great economy and efficiency will be attained if they are handled by one single body. 64 4. Good credit under a single issue systems By experience in the past, one becomes acquainted with the fact that under a multiple system where a number of banks are authorized to issue notes, there always arises a question of the ability and willingness of these banks to redeem their notes outstanding. The 19th century wildcat banknotes in the United States afford us a good example. The is suing banks were so numerous that one could hardly distinguish '•honest money1 1 from “bad money**. And when notorious banks were forced to close down on account of over-issue and depreciation of their notes, the holders of such notes would incur losses which they could avoid if there were a single or a centralized issue system. However, when the matter of note issue is taken over by the central bank, such handicaps disappear. The central bank, by making public their financial reports including the amount of notes issued and that of the reserve, will be able to win the confidence of the people. Developments of centralized issue in China. During the nine teenth century, there prevailed in China a multiple system of note issue. Official Money Exchanges and Chartered Banks were all given the privilege to issue notes. To be sure, every kind of note had its own area of circulation. In the years immediately afber the revolution in 1912, there were five different types of issuig ins titutions; namely, Official Money Exchanges, Commercial Banks, Foreign Banks (or banks established by foreigners), Provincial Banks 65 and Government Banks. The Ministry of Finance during the first few years of the Republic, while, busying with the collecting of taxes for military and administrative purposes, did not pay much attention to the defects of the system of multiple issue. Every bank applying for a charter in which was stated the right to issue notes was au thorized without difficulty. With the excessive issue by the Offi cial Money Exchanges, the government began to take measures limiting the issue of paper notes. The **Regulations concerning the Official Money Exchange Supervisors1 * of December 23rd, 1913 which put strict restrictions on the note issue by Official Money Exchanges, 1 1 The law Restricting Note Issue1 * of June 1915, and 1 1 The Revised Law** of June 1920 which obligated the Official Money Exchanges to withdraw their notes, forced these Exchanges to give up the privilege enjoyed by them for more than three quarters of a century. During the first decade of the Republic, the notes issued by the foreign banks dominated. They were especially preferred by the foreign merchants who at that time controlled China’s foreign trade, nevertheless, with the establishment of the Chinese commercial banks and the rise of national conscience among the Chinese people, they were gradually displaced with the notes issued by these commercial banks. Their circulation was confined to a very limited areas. Commercial banks. The regulations and laws of 1913, 1915 and 1920 served as well in restricting the note issue by commercial 66 banks. Not only were the banks prohibited from further issuance, they were also required to withdraw their outstanding notes within a definite period. The law of November 3rd, 1935 stated that all bank notes issued by the chartered banks other than the three Government Banks (the Central Bank of China, the Bank of China and the Bank of Communications) were still permitted to circulate. The amount of such notes however, was limited as not to exceed that pre vailing on November 3rd, 1935* The Ministry of Finance was empowered to fix a definite period for all these banks to withdraw their notes and in place of which the Central Bank notes would be issued. All the banks established after tie promulgation of the law would no longer be given the right to issue notes. After July 1942, the power to issue notes was centralized in the Central Bank of China. Even the notes (issued and unissued) of the other two Government Banks ( the Bank of China and the Bank of Communications) were also transferred to the Central Bank of China, thereby, completing the task of centralized issue. Provincial banks. During the early years of the Republic, the provincial governments took note issue as a means to meet the vast provincial expenditures. The provincial banks usually supplied notes at whatever amounts the governors requested irrespective whether there were enough reserves to back up such issuance. In December 1935» "the Central Bank of China deliberately 67 worked out a measure aimed at restricting the note issue by the provincial banks. Before it was put into effect, came the Japanese invasion in July 1937* The Government, in view of the difficulty in transportation, granted the provincial banks the right to issue sub sidiary notes temporarily. The amount and use of the notes to be issued were subject to the examination of the Ministry of Finance. Not only that, the printing was to be done by the Central Trust of the localities instead of the agents of the provincial banks. The printed notes were to be kept by the branches of the Central Bank of China to be drawn by the provincial banks only when due amount of reserves were handed over for exchange. With the rapid depreciation of the national currency soon afterwards, the issue of subsidiary notes by the provincial banks lost its significance altogether* The Regulation of June 20* 1942. The Joint Board of the Four Banks, after taking deliberate considerations, drafted the HRegu lations for Unified Issue” early in May 1942. The Draft was passed by the Executive Yuan and made public on June 20, 1942. The essen tials of this Regulation are given below. 1. From July 1st, 1942 on, the matter of note issue would be handled by the Central Bank of China alone. 2. The other three Government Banks (the Bank of China, the Bank of Communications and the Farmers* Bank) were required to 68 compile detailed reports regarding the amount of notes issued and the volume of reserve to be submitted to the Ministry of Finance and Joint Board for examination. 3. All the unissued notes of the three Banks together with their printing contracts would be taken over by the Central Bank of China. 4. All the reserves held by the three Banks against the notes issued before June 30, 1942, would be transferred to the Central Bank of China not later than July 31st, 1942. The Central Bank of China however, by taking over the reserves from the above said banks would be under the obligation to pay the three Banks interest for the 40$ of security reserve it would hereafter hold in its custody at a weekly rate of *5$ for a period of three years, i.e., from July 1st, 1942 to June 31st, 194$. The payment of interest would be made semiannually. 5. The three Banks, when in need of funds for making loans would be able to borrow necessary amounts from the Central Bank provided adequate securities were being furnished. Problems arising from the enforcement of the Regulations. With the promulgation of the Regulation, numerous problems arose which hampered the enforcement of the Regulations. They will be sketched here in brief. 1. The Regulations limited the right to issue notes to the 69 Central Bank of China only. However, owing to the difficulties in cancelling out the right granted to Provincial Banks as described in Chapter I?, a compromise was reached which allowed the Provin- i cial Banks tovissue subsidiary notes during the time of war against Japan. 2. Prior to the promulgation of the Regulation of June 20, 1942, the reserves of the respective issuing banks were kept in the branch vaults as well as in the headquarters. And in areas occupied by the Japanese, these reserves were always robbed by the invading troops with the result that the book value of the reserves far exceeded their actual amounts. However, under the new Regulations, all the reserves would be transferred to the Central Bank; and the issuing banks were required to make up such differences suffered during the war. 3. It is to be noticed that almost through all the years of war against Japan, the Government adopted a policy of making loans to domestic industries at a very low interest rate in order to in crease the volume of production. Such loans were granted by the Joint Board but drawn against the Government Banks. Now since the three Government Banks were no longer permitted to issue notes, they bagan to seek another way of obtaining funds through mutual co-oper ation. They agreed to borrow funds from each other whenever they failed to pay their customers. In case the three banks were all in bad need of cash, the Central Bank of China would be responsible to 70 furnish, them with the funds. 4* At the time of the promulgation of the Regulations, the Central Bank of China could only supply its notes at an amount enough to cover regular demand but insufficient to displace all the outstanding notes issued by the three Government Banks. As a transitional step, the notes issued by the three Banks were allowed to circulate with the desire on the part of the monetary authority to withdraw them within ten years after the end of the war against Japan. In fact, as money depreciated almost to nothing, notes issued by the three banks were practically wiped out from circulation. 5. During the Mar, even the notes issued by the Central Bank of China differed widely in denomination, design, size, color and quality of the paper and printing material. This is due largely to the lack of adequate and uniform printing and engraving facilities and to the difficulties in transportation and risks involved. It seems that the uniformity of Central Bank notes can only be accom plished after peace is attained. 71 CHAPTER VIII CHINA'S ECONOMIC AND FINANCIAL CRISIS DURING AND AFTER WORID WAR II Political dissensions and civil war. In the preceding chap ters a brief sketch of note issue in China has been made showing incidentally that up to July 1937 Ghina had successfully maintained an economic stability. It is the purpose of this chapter to des cribe how during the Ghino-Japanese War from 1937 to 1945 and the few years succeeding it, a period of about twelve years altogether, Ghina has resorted to the disastrous policy of inflation, inflation almost without a limit. The war against Japan was, of course, un avoidable , because it was a war of self-defense and resistance against aggression, without which China*s very existence might have been questionable. But matters in China have drifted from bad to worse especially since V-J Day. Instead of peace and rehabilitation there is civil war which covers an extensive part of China's terri tory. The worst feature of it is the fact that the Communists, who intended to overthrow the existing Government by military force, are occupying the richest part of China, namely, Pfenchuria and North Ghina plain. It is true that both the Nationalist and Communist Parties arrived at a peaceful settlement through the good offices and mediation of the American President's Special Envoy in the per son of George C. Marshall, but the two conflicting parties stand 72 wide apart in their views which are "irreconcilable” It is this domestic war that played great havoc upon the Chinese nation from the standpoint of both human lives and property. Indeed it is not too much to say that civil war in China is on the one hand a stumbling block to all efforts of national reconstruction - econo mic, social and political, and on the other has created a situation which is not far from total collapse* Although a constitution was adopted by the National Congress in December 1946, and put into effect in December 1947> the Commu nists refused to send their delegates to that organ of supreme au thority. To them twenty years (1928 - ) of Kuomingtang (Nationalist Party) rule means dictatorship, contrary to the political aspira tions of the Chinese people. With the Communists staying outside of the Government, it is impossible for the National Government to extend its power to all areas now under Communist jurisdiction. With the total defeat suffered by the Nationalists north of Yantze River during the second half of 1943 and with the unwilling ness to fight on the part of the Nationalist troops, it seems most likely that the Nationalists will be forced to make peace with the In the Spring of 1946, the two parties agreed to talk peace through the mediation of General G.C. J&rshall. A Political Con sultative Council was organized, participated by the Nationalist Party, the Communist Party, non-partisans as well as other small political parties, such as the Democratic League and so on. Owing to the different views insisted upon by the two major Parties, the PPC was broken up and the last hope for a coalition government vanished into the thin air. 73 Communists on terms next to unconditional surrender. At this moment, I can only say that whether China will turn Communistic, or remain Nationalistic (there is very little hope), the main difficulties en countered during war times will still exist and tend to threaten the livelihood of the people even if the civil war may be brought to an end as is expected. The military expenditure will be displaced with rehabilitation expenditure, expenditure for the reorganization of troops, and so forth. Inflation, as I can see it, will consti tute the main source of trouble in the coming days. AGRICULTURE 74 During all these years of war beginning from 1937, fanners as a class are least effected by inflation* As the Chinese farming families constitute more than three fourth of the total population, it is quite clear that a large portion of the rural inhabitants re main in a state of partial self-sufficiency. They buy very little from outside and retain a major part of their products for their own consumption. Though they suffer from direct devastation as every Chinese does, they have still maintained a Regular scale of food production through all the years of war. In 1941, the power to levy taxes on farming land was shifted from the local to central government. At the same time, such taxes began to be levied in kind. It was an emergency measure dur ing time of war and exerted no harm on agricultural production. In 1946, the Ministry of Finance decided that the revenue derived from this special source be divided among local, provincial and central governments on the basis of 50, 20 and 30 per cent respectively. However, all the taxes in the form of products thus levied were to be purchased by the central Government. In fact, the power to levy taxes still rests with the central Government except that the local and provincial governments are entitled to a due amount of money to run the administrative bodies. The next few paragraphs will be devoted to a brief description of agricultural production since the 75 outbreak of the war in 1937* Agricultural production. It is worth while to quote a state ment made by former Minister of Food Mr. Hsu Kan in 1945 that "the importation of rice and wheat was never due to insufficient supply of domestic food, but proved on the other hand that there was al ways a surplus in the interior," In support of his view, Minister Hsu advanced three arguments *2 1. Inadequate means of inland transportation retarded the free flow of food from producing areas to such coastal ports as Canton, Shanghai and Tientsin which, being accessible to foreign ports by sea route, used to resort to foreign food, usually cheaper and more easily transported. 2. Imported rice and wheat used to be exempted from import duties, thus encouraging importers to dump the Chinese market, 3. The quality of domestic farm products was far from being uniform. They could not find a ready market and the dealers in clined to carry on transactions in imported food having a standard ized quality. His statement may be supplemented by the fact that during the years of war against Japan, China" depended solely on domestic pro duction with all the sea ports virtually under Japanese control. However, in 1946, nineteen provinces suffered natural catastrophes 2 The Chung Hwa Book Co., China Year Book, 7th issue 1944-45, p. 756. 76 which brought thirty million of people under a state of famine and distress. Up to the harvest time of 1947* China faced a shortage of 3*600,OCX) tons of rice and 2,000,000 tons of wheat2 The food sup ply from the United Nations Relief and Rehabilitation, helped some but did not solve the whole problem. According to the estimates of National Agricultural Research Bureau that taking 1931-1937 as the prewar standard, crop production registered an increase of six per cent in 1936, ten per cent in 1939* and two per cent in 1940, but it showed a decrease of four per cent in 1941 and two per cent each in 1942 and 1943. An in crease of eight per cent was registered in 1944.^ The increases after the V-J Day were 2.5 per cent for 1946 and 3*5 per cent for 1947.5 As the National Agricultural Research Bureau has been engaging in agricultural research work for years and its statistics are con sidered to be highly reliable, we may reach the conclusion that food shortage does not constitute a serious problem in China It is to be noted that the flood in Kwangtung did not worsen the situation much since Kwantung used to depend largely on food 3 H.C. Jfeng, 1 1 Prospect of Chinese Economic Development of 1946*', Industrial and Commercial World. Vol. II, No. 6 & 7 com bined, p. 4* 4 China's Ministry of Information, China Handbook, 1937-45* p« 433* 5 H.D. Fong, "Chinese Economy after V-J Day", The Economic Critic, Vol. II, No. 14, pp. 3-4* 77 coming from outside. The difficulty in inland transportation bet ween the provinces leads Kwantung to import food from foreign coun tries . This difficulty in transportation may well be explained by the differences in the price of rice in various cities within the country. In August 1947, price of rice was CN$400,000 per picul in Shanghai (each picul equal approximately to one twentieth of a metric ton), CN$270,000 in Wuhu, CNf75,Q0G in Wuchang and CN$16,000 in Yuankiang. Prices in Shanghai was the highest, being 25 times higher than that prevailing in Yuankiang. If transportation is restored to its pre-war status, famine and disorder may be prevented or at least reduced to be of a local and li _ temporary character. For justifying Minister Hsu's argument, a series of table will be given showing howChina had successfully maintained a pre-war level of crop production since 1937. Table I gives us a vivid view of 1931-1937 average. Column I includes twenty two provinces out of a total of twenty eight (Sikiang, Sinkiang, Jo hoi-and Man churia were excluded owing to their particular political situation). Column II only covers fifteen provinces which were free from Ja panese occupation during the war of 1937* 6 C.G. Yi, "Problem of Increasing Food Production", Economic Critic. Vol. II, No. 20, p. 4. 78 TABLE I CROP PRODUCTION IN CHINA 7 1931-1937 AVERAGES (In 1,000 piculs) In 22 In 15 Crops Provinces Provinces Winter crops Wheat 434,858 169,160 Barley 157,427 83,553 Field peas 63,805 41,295 Broad beans 60,360 44,120 Rapeseeds 49,460 36,642 Oats 17,612 2,961 Summer crops Rice 911,918 726,315 Glutinous rice 89,370 62,806 Kaoliang 140,319 32,506 Millet 132,971 25,137 proso millet 31,606 10,069 Corn 129,948 59,527 Soy beans 121,855 39,518 Sweet potatoes 370,504 216,049 Cotton 16,185 4,831 Peanuts 54,788 19,956 Sesame 17,016 6,911 Tobacco 12,994 9,277 Source: The National Agricultural Research Bureau. 7 The twenty two provinces were : Chahar, Suiyuan, Ningsia, • Chinghai, Kansu, Shensi, Shansi, Hopei, Shangtung, Kiangsu, Anhwei, Honan, Hupeh, Szechwan, Yunnan, Kweichow, Hunan, Kiangsi, Chekiang, Fukien, Kwangtung and Kwangsi. The fifteen provinces were: Ningsia, Kansu, Shensi, Honan, Hupeh, Szechwan, Yunnan, Kweichow, Hunan, Kiangsi, Chekiang, Fukien, Kwangtung, Kwangsi and Chinghai. China’s Ministry of Information, China Handbook. 1937-1945, p* 433* 79 CHAPTER II CROP PRODUCTION IN 15 FREE 8 PROVINCES IN CHINA Winter crops 1931-37 Average 1938 1939 1940 1941 1942 1943 1944 Wheat 100 120 117 119 98 124 118 147 Barley 100 108 110 103 88 107 97 111 Field peas 100 106 114 104 91 102 92 106 Broad beans 100 108 119 108 95 108 99 111 Rapeseeds 100 98 118 132 125 120 132 136 Oats 100 105 114 103 97 104 98 98 Weighted average 100 111 116 115 99 115 111 129 Summer crops Rice 100 103 105 85 89 87 84 93 Glutinous rice 100 94 90 69 65 59 53 55 Kaoliang 100 105 106 96 91 74 86 84 Millet 100 95 95 84 82 59 71 69 Proso millet 100 92 96 86 100 95 112 93 Com 100 118 120 113 112 98 109 113 Soy beans 100 92 95 98 88 74 84 83 Sweet potatoes 100 128 115 119 128 112 134 140 Cotton 100 97 121 126 111 94 117 106 Peanuts 100 110 112 114 114 101 107 109 Sesame 100 79 116 119 106 70 98 102 Tobacco 100 96 106 111 92 82 89 90 Weighted average fleighted average (winter & summer 100 103 106 93 94 86 90 94 crops) 100 106 HO 102 96 98 98 108 Source: The National Agricultural Research Bureau. From the above table, we shall note that during war time, there was a decrease in the production of rice, glutinous rice, koaliang, 8 China's Ministry of Information, China Handbook. 1937-45, p. 435• millet and soy beans which was however compensated by a marked in crease in wheat and sweet potatoes. Early at the beginning of the war, the Chinese Government under took measures to encourage food production with a view to achieving self-sufficiency. The methods employed were: ^ 1* The increase of rice production: a) Turning glutinous rice fields into ordinary rice planting, b) Extension of improved rice varieties, c) Extension of rice crops that can be planted twice a year, d) Extension of rice crops that give two crops from one planting, e) Extension of drought-resistant crops. 2. The increase of wheat production: a) Utilization of fal low fields in summer, b) Reclamation of waste land, c) Extension of improved wheat varieties. 3. Insect and desease control: a) Prevention of rice borer, b) Prevention of wheat smuts, c) Prevention of damage to miscel laneous crops, d) Prevention of damage to store houses. 4. Use of fertilizers: a) Use of bone meal, b) Use of human manure, c) Use of green manure. 5. Improvement in irrigation systems: a) Repair of water re servoirs and dykes, b) Construction of new canals. 6. Protection of farm animals; a) Prevention of cattle plague, b) Raising more cattle. 81 Efforts made in encouraging rice production were not quite successful. Instead, there was rather a decline in the production of rice. The reason for this is that the growing of rice needs much more labor than any other crop; and though it is said that China has a tremendous supply of man power, that during war time she too suf fered a sharp decline in farming labor. In order to produce enough food to feed the population, the farmers went to grow sweet potatoes which need little care and contain as much nutrition as rice or wheat that by 1944 its production had been increased by 40$. After V-J Day, food production was again estimated on the ba sis of twenty two provinces. Figures for 1946 and 1947 may be seen in the following table. TABIE III CROP PRODUCTION FOR 1946 and 1947 10 (In 1,000 piculs) Crops Compared with Compared with production production prewar 7 year in 1947 in 1946, 4 - or- production, + or- Rice Wheat Koaliang Millet Com Barley Soy beans Sweet potatoes 905,155 492,850 98,374 132,257 150,131 138,088 94*512 487,687 412,310 425,088 -15,097 -22,790 - 2,663 412,141 + 5,456 -10,694 - 6,763 + 57,992 - 41,945 - 714 4 20,183 - 19,339 - 27,343 4117,183 Sources The National Agricultural Research Bureau. ^ C.Y.W. ifeng, “China's Food Production in 19471 1 , The China Weekly Review. Vol. 108, No. 6, p. 175* The table shows a definite increase in the volume of wheat and sweet potatoes and a decrease in loaliang. On the whole, China*s food production, to the surprise of many students, had been consi derably increased since 1937* The famine in China after the end of the war with Japan has not been as serious as is believed, fti the contrary, food imported from foreign countries was greatly decreased* Figures showing imported food for 1946 and 1947 are given below. TABLE IV 1946-47 BICE, WHEAT AMD FLOUR IMPORTS 11 (in 1,000 piculs) Compared with Compared with Compared with Imports imports in 1946 prewar 7 year prewar largest in 1947 4 -or - average imports annual imports + or - + or - Rice Wheat Flour 2 2,349 2,356 +2,040 - 75 +1,490 -11,552 -10,644 — 96 .20,129(1932) .22,771(1931) • 9,541(1929) The figures shown above constituted only a small percentage of the total domestic production and China would not be much worse without it. The 1948 rice crop of Ghina is estimated at 2,360 million bu- shels(37»2 million short tons milled), the largest since 1939, and k% above the production of 1947* The production of cotton suffered marked decline during the period. Before the outbreak of the Pacific Hostilities in December 1941, the production of cotton in once Japanese occupied area fell from 457,000 metric tons (1936) to 202,000 metric tons (1941) - a decrease of 56$. However, this sharp decline was partially compen sated after “Pearl Harbor1 * when importation of cotton became impossible. Domestic producers were greatly encouraged under a rapidly rising price and production of cotton was increased to 300,000 metric tons in 1942. But as a result of Japanese purchase of cotton at a controlled price, the volume of production again shrinked until 1945 it has reached a low level of 129,000 metric tons, only 2B% of 1936 standard* 13 The production of cotton during war time in free territory is shown in table II. Situation was much better there. Taking Ghina as a whole, cotton production after V-J Day tended to restore to its 1936 level ($49,000 metric tons). While the pro duction of 1945 counts only 30$ of the prewar level, that of 1946 and 1947 shows a definite increase, counting 44$ and 65$ respectively. ^ 12 . HRice Production in China Increased in Recent Years1 *, China Economist. Vol. 4, No. 11, p. 191* 13 h.D. Fong, “China’s Economy After V-J Day”, The Economic Critic. Vol. II, No. 14, p* 4* 84 The cotton production for the year of 1947 is shown in table V. TABLE V COTTON PRODUCTION IN 1947 15 Acreage Cotton Provinces planted production ( 1,000 shi-mow) ( 1,000 piculs) Hopei 5,339,000 1,430,000 Shensi 660,000 178,000 Honan 4, 310,000 1, 160,000 Shansi 3, 020,000 900,000 Hunan 1, 170,000 430,000 Anhwei 952,000 231,000 Kiangsu 6,828,000 1,920,000 Chekiang 1,520,000 452,000 Szechwan 3,447,000 607,000 Liaoning 960,000 240,000 Kiangsi 277,000 82,000 Hupeh 7, 185,000 2, 411,000 Shangtung , J li&22«200 1.060.000 31*97^.000 1 1, 101,000 The production of tung oil or wood oil of 1947, according to a report of the China Vegetable Oil Co., was estimated to be approxi mately 51,000 metric tons and the average production for the three succeeding years beginning from 1946 could not be expected to exceed 50% of prewar level, i.e., 60,000 metric tons. The production of tea in 1946 as reported by the National Agri cultural Research Bureau fell to a surprisingly low level of 66,000 C.C. Ching, ‘ 'China’s Cotton Production1 1 , Industrial and Commercial World. Vol. II, No. 6 & 7 combined, pp. 26-27* 85 metric tons per annum, constituting only 18% of prewar production.*^ Agricultural prices and farmers' purchasing power. In 1940, the Government at Chungking started on a large scale, the purchase of food stuff to be stored up for military purposes. Agricultural prices be gan to soar above the general price level for a period of two years. The relation between general price level and agricultural prices is indicated as below. table; vi INDEX OF GENERAL PRICES AND AGRICULTURAL PRICES IN CHUNGKING OF S2ECHWAN PROVINCE 1937 = 100 Price index of General Year agri. products index price 1940 Jan.-June 210 242 July-Dee• 686 665 19a Jan.-June 1,485 1,381 July-Dee. 2,780 2,495 1942 Jan.-June 3,895 3,706 July-Dee. 4,826 5,175 Another table showing the farmers* purchasing power in Sze chwan province is given below. H.D. Fong, op. cit., p. 4. ^ C.G. Yi, op. cit., p. 4. 86 TABLE VII INDEX NUMBERS OF PRICES RECEIVED AND PAID BY 13 FARMERS AND THE INDEX NUMBERS OF PURCHASING POSERS OF FARMERS IN SZECHWAN, CHINA Price index of Price index of Purchasing Year commodities sold commodities purchased power 1933 67 77 87 1934 71 79 90 1935 71 84 84 1936 87 93 94 1937 (=100) 100 100 100 1938 98 119 82 1939 118 176 67 1940 480 549 88 1941 1,656 1,5U 108 1942 3,995 3,371 119 1943 11,000 12,765 86 1944 37,745 A2,993 88 1945 111,671 158,948 70 ^ Economic and Statistical Review. Vol. VII, No, 1. p. 61. June 1947, Department of Economic Research, Farmers* Bank of China. The commodities purchased and sold by the farmers were: Commodities sold: Farm products: wheat, barley, peas, rice, rough rice, com, kaoliang, soybeans, broad beans, sesame, repeseed, sweet potatoes, cotton, groundnuts, tobacco, hemp. livestock products: pigs, goats, sheep, hen, eggs. Commodities purchased: Consumption goods: wheat flour, lard, blue native sheetings, white shirting, bean oil, tea oil, sesame oil, salt, brown sugar, tea, matches. Production goods: water buffalo, cattle, human manure, rapeseed cake, sesame cake gypsum, plow share, hoe, digging hook, sickle, wrought iron. The index numbers of the purchasing power of farmers a re the ratios of price index of commodities sold and purchased. 87 It is to be noted that in 1941 and early part of 1942, the index of agricultural products exceeded the general price index. The ex cess was accompanied by a rise in the farmers' purchasing power* The farmers* purchasing power as indicated in the table at no time fell below (fl% of 1937 level. Through all these years of war, Chinese farmers are still much better off than office workers, college pro fessors, school teachers, and the majority of government employees or officers. land reform by the Chinese communists * Latest statistics on agricultural production in Communist controlled area are not avi- lable at hand, But by observing the rapid growth of Communist Party in China, it is safe to say that the land policies adopted by the Ghinese Communists did to some extent promote agricultural production and better the livelihood of the farming population. Qa September 13, 1947> & set of Land Measures was passed by the Chinese Communist authorities. Translated into English, the Measures read: ^ Article 1, Abolishing the feudalistic and semi-feudalis- tic land system, and replacing it with one which permits the tiller to have his own land. Article 2. Divesting all landlords of their land rights or .properties. Article 3* Divesting all temples, ancestral worship houses, schools, public organs and other groups of their land rights or properties. 19 ________, “Communist Land Policy1 1 , China Economist. Vol. 4, No. 11, p. 190. 88 Article 4. Nullifying all loans contracted in rural districts before the land reform. Article 5. The farmers* assembly and its committee, the poor farmers' assembly and its committee, and repre sentatives of farmers* assemblies in various districts and their committees are the proper organs to enforce the land reform program. Article 6. With the exceptions stipulated in Article 9 a), all lands belonging to landlords and public function aries are to be taken over by the farmers* assembly in the district, and, together with all other lands, are to be equally divided among all the villagers irrespective of age or sex, undeh the principle of fair distribution. The lands thus equally distributed will henceforth belong to their respective holders. Article 7* The distribution of land will be effected Tilth each Hsien or village as a unit. For thinly popu lated areas, inoorder to facilitate cultivation, the dis tribution of land may be carried out with a unit smaller than a Hsien. Article 8. The properties of landlords taken over by the farmers' assembly, including domestic animals, farm ing tools, houses, food and other items, are to be dis tributed to poor fanners and those who lack such properties. The landlord, meanwhile, should also receive a share. The properties thus distributed will belong to their respective holders, so that the whole population in the village will be able to have production materials and be able to make a living. Article 9. Special land holdings and properties are to be dealt with as follows; a) Mounds, water conservancy sites, untended lands, orchards, pools and other divisible lands will be divided in the ordinary way. b) Big forests, water conservancy projects, mines, pastures, waste lands, lakes and other lands falling into this category will be controlled by the Government. c) Scenery and historical spots should be pro tected, and books, curios : and art objects that are of historical or educational value, after being taken over, should be handed over to the highest local authorities, 89 accompanied by an inventory. d) Ammunition and arms, and any surplus quan tities of money, supplies and food after meeting the requirements of the farmers, should also be handed over to the highest local authorities, accompanied by an inventory. Article 10. Particular problems encountered in the distribution of land should be handled as follows; a) Poor farmers with a family of one or two may, after due consideration by the farmers» assembly, receive allotments of land for two or three persons. b) Workers in villages and those engaged in free occupations, together with their families, will receive the same land allocations as farmers, but those whose occupation yields enough to maintain the whole or greater part of their living expenses will receive no allocation or a partial allocation of land to be decided by the farmers* assembly* c) Soldiers of the liberation army and members of the democratic government and other public organs, together with their families, will receive the same land allocation as farmers. d) Landlords and their families will receive the same land and property allocations as farmers. e) Family members (residing in villages) of Koumingtang officers and sildiers, KMT government officials, KMT members and other enemy officials will receive tha same land and property allocations as farmers. f) National traitors and war criminals will not be allotted land or properties. Their family members who reside in the villages and have not par ticipated in any criminal acts will receive the same allocations as farmers, provided they are willing to cultivate tha land themselves. Article 11. For the land thus distributed, the Govern ment Will issue land property certificates, and will acknow ledge the right of holders to buy or sell the land freely or to lease it under special terms. All land contracts signed before the promulgation of the land reform program are abrogated. Article 12. In order to insure the successful imple mentation of land reform, a people*s court will be formed to try and deal punishment to all violators of the Land 90 Measures. The people's court will be formed by the fanners * assembly and by representatives of the farmers who will be appointed by the Government. Article 13. Protecting all properties of industries and commerce. legal business transactions will not be in terfered with. Article 14. During the period of land reform, in order to maintain order and protect the properties of the people, the farmers* assembly or its committee should appoint responsible persons to take charge of the necessary procedures in taking over, registering and safe-keeping the properties. The farmers* assembly will also prevent da mages, losses, waste, corruption, as well as any actions detrimental to the principle of fair distribution, such as killing animals, felling trees, destroying farming tools, watgr conservancy works, buildings, crops and other supplies, stealing, forceful occupation, giving presents, hiding, scattering, trading, and so forth. Violators are to be brought before the people*s court. Article 15. In order to insure that all land reform measures benefit and are in accordance with the wishes of the majority of the people, the Government will see to it that the people's democratic rights are preserved. Farmers and their representatives will have every right to elect or change the staff in the Government and in the far mers* organs. Violators of the people's rights will be brought before the people’s court. Article 16. Those lands which had been equally dis tributed before the promulgation of these measures will not be redistributed if the farmers so wish. The measures were radical in their nature which denied the ins titution of private property, depriving the landowners of their land without any compensation. The result was a great unrest among the public. The landowners, having been deprived of their land, took with them their movable assets, and fled to the Government areas. 91 The Communist authorities recognized the situation, and in the pro visional plenary session of the Communist Central Executive Committee held in April 1943, passed a resolution to suspend temporarily the work of land reform in order to win the support of the middle class farmers. The general scheme relating to the suspension of the program 90 of land reform is as follows# * 1. Where land reform has already been carried out, the new situation shall be maintained* 2. Where land reform is being carried out, it shall be conti nued* 3* Where the reform is not yet initiated, and in all newly liberated areas, the reform program shall not be introduced. 4. In areas where the reform is not enforced, the Government shall undertake the supervision of work for the reduction of all land rental by 25%, and the suspension of the collection of rental in arrears, 5. All public land and land belonging to absentee owners shall continue to be dealt with in accordance with the reform program, and the families of soldiers and farmers without their own land shall be given such land for cultivation* 20________, “Economic News From Communist Areas”, China Economist, Vol. 4, No. 7, p. 120. 92 In fact, the Chinese Communists, so far as their economic policies are concerned, are not real Communists. Unlike the Russian Communists, they have not socialized the means of production on any large scale except in those taken over from the Japanese and the National Government. It is not to be neglected that they are what we call Opportunists, changing their policies whenever needed. At the present when they are pushing southward and begin to get into contact with the business class, they declare it to be their economic policy to protect and encourage domestic industries. They never overlook the fact that private initiative has been deteriorated after so many years of war and that capital needs to be accumulated which can hardly be done under a socialist order - a purely capitalist point of viewl Whether the Chinese Communists will apply Marxist doctrines in the economic system as same of their leaders had declared, it remains to be seen. 93 INDUSTRY War time industries. Prewar industrial development in China had been very slow, but since the beginning of the war in 1937, the Govern ment has paid much attention to its promotion and progress had been comparatively rapid. To give some idea of China*s prewar industrial development, a table showing the number of factories, their capi talization, the number of workers, and the amount of howse power, for the various kinds of industries, is given below. TAB IE VIII CHINA'S MANUFACTURING INDUSTRIES IN 1933 21 /Vot/Vc paaiex JCnJusbri&s Tlmbex Furniture. MekJturgiceJ F l n c J i l n e . t y a . n J Metafile; Mare. JnsbcuAients o ^ t j o m m u n f a a t i o r t Stane^l&mentfkci'cX.eisFi/iei-n unr& Construction materiA/ Xlatex and electsi<r~rupp)y cbemiaJs, Texhies C-jottinganJ n ttlrs. atenther and r a il ex' fctpexrAT*) p rin tin g Apparatuses ornaments , ntc.. M is eeJtd.ne.6its Total T t o . < s $ - j h c t E r i e s CChinese P e s t e r generatej bpste&m or , ' « Z e r - n C t l e e r m h u s t f t n I n J h - e pHC&xy c u n ' ) E l e e b c i ' p s K t e x " genezatkj in ~ t t w J J n c t o x y C K K > ) E l e c t r i c . pBmer S C y f J i c d by o t e d x f a , plant tHPl IS 1,115,175 490.00 577.50. 12 419,500 33.50 _ 276.00 33 2,690,750 1,350.00 300.00 372.00 306 16,549,708 5,272.83 2,707.30 5,528.97 55 19,004,411 8,534.40 4,586.60 2,627.73 112 29,184,299 33,304.83 18, 899.00 1,696.93 14 298,120 64.OO 3.37 120.25 14 32,613,625 32,685.00 22, 151.00 5,310.64 148 26, 326,882 4, 142.28 1,926.90 4,930.95 821 166, 828,298 103, 825.18 50, 169.81 75,876.87 141 6, 006,076 176.50 22.50 2,329.09 84 5,339,839 1,971.50 72.60 7,376.67 390 68, 380,190 25,234.33 2,867.65 24,644.57 234 27,877,461 8,502.17 2,105.24 6,709.42 26 812,300 73.00 — 223.17 27 2, 426,000 419.00 19.50 806.50 2,435 406,872,634 226,078.52 105,831.47 139,407.26 21 IS. D.K. lieu, China's Economic Stabilization and Re construction, 94 m ate M arkers female* ehrU -tot&l VoJt/e o f- p i'c tu c ts f chTti&r S ) 1,127 82 42 1,251 3,268,600.38 tu rn,'tarn* 1,130 300 473 1,903 1,519,554.79 /H eta./iurg’ /'ca / 1,821 399 2,220 4,755,154.00 fk}actiTnery a n d m-etsltecc 14,445 - 1,767 5,533 21,745 32,876,251.36 th & taim en ts oi-a^mmruieicntjan. 14,996 — 1,056 16,052 22,352,150.39 Stsne,C em ent,& r,cf<.earthere * >are,atc. 14,285 601 1,474 16,360 29,996,419*68 <fm rtrac.tian m a& iib/ 742 — 211 953 1,746,325.55 te r anj e le c tro su p p ly 1,381 — 39 1,420 13,166,607.56 Chem feats 12,873 12,871 1,975 27,719 49,693,859*28 T e x t i l e s , 84,767 187,947 29,758 302,472 483,585,167*89 cJotkmy an I a t t i r e . 5,184 8,889 1,158 15,231 27,425,346.67 < t $ n c ’ her ant ruit&r 6,373 7,912 230 14,515 30,530,805.41 tcxxtstujff-* 26,762 20,781 1,175 48,718 361,587,390.42 fc\pe-r pXin tin g ' 13,758 1,540 2,961 18,259 45,450,423.49 A p p a ra tu se sa tn a m e a ts, e t c . 1,870 153 268 2,291 2,684,496.31 M isce. Unn&aus 1,248 592 308 2,148 3,335,849*84 Total 202,762 243,435 47,060 493,257 1,113,974,413.02 The classification follows that of the International labor Office. In this table, the important province of Liaoning was left out, because it was in South Manchuria and had already been occupied by the Japanese. The statistics are also incomplete in other res pects. As the foreign factories in China at that time refused to supply any data to the survey, it was confined to Chinese factories alone. There was a lack of balance in the number of factories in the different industries. The light industries had some development, especially in the manufacture of textile and foodstuffs. They accounted for one half of the total number. On the other hand, factories in heavy and basic industries were very few. Although there were eight iron and steel mills in the area covered, only 95 five were in operation, the rest having been closed down. Of acid and soda factories there were only two of each kind in operation* There w$s not a single copper refinery, nor any plant for the re fining oil* The average size of the factories was also very small. This may be shown in various ways. Since the total capitalization of the 2,435 factories was only 406 millions in Chinese currency, it means that the average capitalization per factory was around CN|166,000 or US$50,000. Another indication of the size was the amount of motive power used. Although the factories employed only 507,300 horse-power, of which 139,4Q7 represented power supplied by electric power plants. The average amount for each factory was slightly over 200 horse power* There were only 493,257 workers in the 2,435 factories, averag ing 202 workers per factory. Since the war began in 1937, industrial development made rapid progress in Free China. Though the figures shown in the following table were not com parable to those of 1933, it is to be noted that the area covered was only Free China — that part of the country least industrialized before the war* 96 TABLE IX CHINESE MANUFACTURING INDUSTRIES IN FREE CHINA IN 1942 22 Svdusbxte-S hlo , JotAt of fo-eJorfeA* Slati- p r i i / e r& e s t f e r P f r s e enterprise dopn/ a t t j f O ' t / ' o n . / d o . o j - t o e r c k e c i A Xoti ye paxseffttP) AJd ter AnJ nJecfrr - S . u y>y dy 123 60 63 143,414,236 4,618 51,213.00 bdeto-llucgt'co/ r ' n c / a s f i ' i ' & s 155 44 111 302,319,526 17,404 9,659.00 f d e t a , f f < r c ~ wmc 160 7 153 23, 304,200 8,291 2, 064.00 ery 682 50 632 357,597,611 31,541 16,077.50 t/vcfxKs ymfdfnejy -T O p f a / i ' A A o e - i 98 23 75 93,044,850 7,197 8,561.50 ]7 n\i> er X e e ~ n s t p < / c t ~ < ° * \ Veoterml 49 4 45 5,668,362 1,839 582.00 kjooej,stave <end e o r f f i e r f y w 122 21 101 64,400,276 10,651 4,804.00 C-hesnrcA & 826 125 701 559,220,372 36,140 24,835.00 foods t u f f - S 360 32 328 83,435,600 11,447 9,705.00 tedr/es 788 245 543 290,508,705 93,265 15,452.50 C/e 7f7ng And o x t f t t - e 147 8 139 11,044-,040 9,241 160.25 C a < t ~ uiA 10 t t i a . f e s . 224 35 189 21,422,441 7,320 657.00 Mrsr^-tlane cuS 24 2 22 3,645,816 2,708 145.00 Total 3,758 656 3,102 1,959,026,035 241,662 143,915.75 If we compared Table IX with Table ¥111, we shall find that quite a few industries made rapid expansion during war time. The metallurgical industries in 1942 had a total of 155 factories, 17,404 workers and CN$302,319,526 of capitalization as compared with 33 factories, 2,220 workers and CN$2,690,750 of capitalization in 1933* Machinery and metallic ware industries in 1933 employed 21,745 workers and the number of factories totalled only 306; while in 1942 the factories had been increased to 842, employing a total of 39,832 workers. More important was the chemical industry which 22 Ibid., p. 19. in 1933 employed 27,719 workers and 4,930.95 horse power; in 1942 the number of workers was increased to 36,140 with a motive power of H.P. 24,835, about five times higher than that of 1933* During the war, Chinese industries suffered heavy losses. In the mining industries, it would be difficult to list all the losses by industry and equipment, but seme idea may be obtained by comparing the prewar with war time productions. Following are two tables show ing the volume of mining production before and during the war of 1937* TABIE X PRE-WAR MINERAL PRODUCTION IN CHINA 23 Unit - ton Minerals 1932 1933 1934 1935 1936 Coal Iron ore 18,490,971 18,585,271 20,493,342 14,938,000 15, 034,000 (Fe 35-60$) 1, 207,181 1,136,405 1,359,582 1,774,468 1,749,802 Pig iron 154,283 173,274 155,640 — — Steel Mineral oil 25,000 25,000 50,000 (barrels) Tungsten ore 2,251 3,187 2,633 3,000 2,000 (WO* 60$) Zinc ore 2,210 5,698 6,305 7,000 7,000 (Zn 36-42$) 10,584 10,565 33,299 10,000 10,000 Tin 7,253 8,538 8 ,004 9,000 11,000 Antimony regulus 11,410 11,112 33,615 14,000 13,000 Copper 440 483 471 — _ _ 23 Chinas Ministry of Information, China Handbook, p. 388. 98 TABLE XI MINERAL PRODUCTION IN FREE CHINA ^ Unit - metric ton Minerals 1942 1943 1944(jan Coal 6,154j846 ' 6, 230,640 3, 120,500 Pig iron 30,015 31,817 6,819 Steel 3,816 9,047 5,827 Tungsten 11,949 9,005 3,163 Gopper 1,288 1,264 659 Lead 97 93 73 Zinc 179 232 135 Tin 6,039 4,217 596 Mercury 162 114 54 Antimony 5,107 435 159 The two tables given above are not comparable since areas covered are different and that production data of “Free China" before 1937 are not available. But we shall note in Table X that with the exception of coal, t rings ten, antimony and tin, the mining production in China was almost negligible. Figures in Table XI show a further drop in production during the Sino-Japanese War. Within the three years beginning from 1942, production of pig iron dropped about 50$, that of tungsten 45%, of tin £0% and of antimony 94$. I doubt it if these production would be of any use to China at a time when ammunition industry became all the more important than ever before. Situations after the end of the War in 1945 did not improve much and will be dis cussed a little later. 24 Ibid.. p. 339. 99 Post-war(Sino-Japanese War) industries. As is indicated in the previous paragraphs, China’s industrial production was greatly en dangered since the outbreak of Sino-Japanese War, In spite of the removal of factories from the coastal cities to interior and the establishment of new ones in Free China, industrial output still fell far below the prewar level. This may well be explained by the reduction in the volume of motive power employed. It has been carefully surveyed that up to June 1947 "the power plant equipment of the whole country constituted only U8% of the pre-war level, with a generating capacity of 1,290,000 KW of which only 1,030,000 KW or 80% were utilized. 25 This reduction in motive pater and equipment was most cons picuous in Manchuria because of the removal of heavy equipment by Russian troops after the Japanese surrender in 1945* During the war the power capacity in Manchuria was 1,800,000 KW; that of 1946 was only 310,000 KW, showing a decrease of 82%. The power generated was simultaneously reduced from 4,500,000,000 to 900,000,000 -units or kilowatt-hours, indicating a decrease of 78%. During the first half of 1947 the generating capacity dropped down from 102,000,000 in January to 44,000,000 units in June. 26 Since the total retreat of Government troops from Manchuria in October 1943, the production has dropped to zero. 25 H.D. Fong, op. cit., p. 6. 26 IWd** p. 6. let us then turn our attention to the industrial output as affected by the reduction of electric power. In cotton textile industry post war China has a total of 4*470,000 spindles and 66,000 power looms of which 1,760,000 spindles and 38,000 power looms are enemy property taken over from the Japanese. In the year 1936-37 China's textile industry produced 2,200,000 bales of yarn (each bale equals 420 lbs.)« During the war, however, 600,000 spindles were destroyed with the re sult that the 1946 production amounted to only 1,320,000 bales, being 80% of the pre-war record. The production in Shanghai during the first half of 1947 totalled 520,000 bales. If the amount produced in other parts of the country during the same period did not fall below that of 1946, the total national production would be 870,000 bales, equi valent to about 80% of the pre-war level. ^ Some lines of industries were less affected by war because of their safe location. A few of them even made a little advance. The following table will present us a different picture in post war China's industrial production. TAB IE XII 28 Industries 1936 production 1946 production Flour Tobacco Cement Ifeiteh 62,000,000 bag 1, 090,000 trunk 310.000 metric tons 700.000 trunk 60,000,000 bag (49 lbs.) 1,200,000 trunk(50,000 bales) 350.000 metric tons 760.000 trunk(7,200 boxes) 101 la 1948, when military situation became more and more unfavorable to the Nationalists, enterprises began to contract their business, some of them moved their plants to safer places like Hongkong. It was reported that for the two months from May to June in 1948, a total of 18 factories moved to Hongkong, all textile mills and che mical works, with the equipment of the textile valued at l£>$i3Q,000,000* Moreover, since the currency reform of August 1948, the textile mills have been operating only four days out of each week, or 60$ of the actual productive capacity. The textile mills in Shanghai and those of the China Textile Reconstruction Co. worked only 57.8$ of the spin dles and 63% of the weaving looms. 29 Virtually, all the silk mills in the Kiangsu-Chekiang-Anhwei district, which numbered around one hundred, suspended their operations during 1948. Among the 109 cigarette factories in Shanghai, only four or five are still operating. All other industrial plants, in cluding dyeing and weaving, enamel, glass, rubber, machinery manu facturing and others have greatly reduced their operations. Unless the civil war can be brought to an end and economic and political stability established, the deterioration of the productive enterprises cannot be halted by the Nationalists or any other government. Mining production after the War, particularly in Manchuria and North China, has been considerably lowered. The essential products** 29 , ' ‘ Productive Enterprises in 1948% China Economist. Vol. 4, No. 6, p. 102. OnTverafty of Southern California Llbrel^ 102 of these mines consist of coal, petroleum, steel, iron, copper, lead, zinc, tungsten, antimony, tin and salt. The following table will show how China's mining industries were paralyzed during the War. TABIE XIII CHINA'S MINING INDUSTRIES IN 1946 30 Unit - metric ton Minerals Production Coal 17,200,000 Iron ore 15,000 Pig iron 31,000 Steel 17,000 Copper 1,000 lead 15 Zinc 11 Tungsten 2,200 Antimony 420 Tin 1,950 Salt 1,900,000 The reduction in mining production in post-war period as shown in the above table is due partly to the destructive military operations and partly due to the fact that most of the mining centers especially those in Manchuria and North China were under the Communist control and therefore not included in the table. A complete data covering all parts of China is not available at the present. By the end of 194B, the richest part of China had fallen to the Communists. Most of the greatest coal mines and steel mills 30 H.D. Fong, op. cit., p. 5* The production of coal covered whole China, including Manchuria and Formosa, while the rest of the mining products covered only China proper. 103 are situated in Manchuria and North China. The Anshan Steel and Iron Works and the Pengchi Coal and Iron Works in Manchuria and the Paichin- shan Steel and Iron Works in North China formed the nucleus of the me tallurgical industry in China, having a maximum capacity of producing between 3,000,000 and 4,000,000 tons of steel and iron yearly. They are now all operated by the Communists. likewise, the coal mines in Manchuria, the Tatung mines in Shansi, the Kailan, I-fengtoukou and Chang- chen mines in North China and the Hwainan and Hwatung mines in Central China have all changed hands, threatening the coal supply for the in dustries and shipping along the sea coast and South China. Crude oil refining is a new industry in China. Production of crude oil and other similar products in Kansu and Taiwan indicated an increase of 80% during the year of 1948, producing for the first nine months a total of 17,000,OCX) gallons of gasoline, 7,400,000 gal lons of kerosene and 4,300,000 gallons of diesel oil. The tungsten, antimony and tin production during the first nine months of 1948 amounted to 7,300, 2,400 and 1,100 tons respec tively. 31 The three year civil war has practically destroyed all the min ing and industrial installations taken over from the Japanese. It will take at least ten years to have these mining productions res tored to 1937 level. « “Productive Enterprises in 1948", China Economist. pp. 101-102. FOREIGN EXCHANGE AND TRADE 104 Before the Sino-Japanese War, China*s foreign trade was on its way to expansion. During the first two years of war, all important seaports were occupied by the Japanese troops, and foreign trade was almost reduced to nothing. With all her seaports being frozen, China could hardly buy any good from abroad, though she still ob tained a limited quantity of war supplies first through the Burma Road and then the Stillwell Road. Demand for foreign exchange by traders was reduced to a minumum since trade with the outside was practically impossible. Thus, we can realize why the official price of the American dollar in 1945 was only CN|20. Since the reopening of the port of Shanghai after V-J Day, foreign trade again resumed importance in China. We shall analyze here step by step, how the Government adopted different measures in an attempt to manage foreign trade under a condition of continuing soaring prices caused by the practice of inflation. Immediately after the war was won in 1945} the Chinese Govern ment stuck to a contractive monetary policy. T.V. Soong, the first post-war premier, directed the Central Bank of China to sell a tre mendous quantity of gold with a view to tinghting the money market and bringing the prices down. Early on 1-fe.rch 4, 1946, the United States dollar was fixed at a rate of 2,020:1. The Chinese dollar was then overvalued far above what it could buy. That a fixing rate 105 is too rigid and inprecticable can not be denied especially during times of economic instabilities. Within certain limit, fluctuations in exchange rate is, as generally recognized, most desirable to e- qualize supply of and demand for foreign exchange. Without this cer tain margin of fluctuations, disequilibrium will occur. This is why the Equilization Fund in England and Exchange Stabilization Fund in the United States were established. Now since the US dollar was tinder-valued, an increase in its demand was thereby created. Do mestic consumers or importers found it wise or profitable to import US goods if they could get the US dollar at the fixed rate of 2,020:1. Importation of foreign goods was greatly encouraged and exportation curtailed. The monetary authority, under the obligation to supply US dollar td importers, sought to impose limitations on importations through the increase in import duties, and the adoption of quota and licensing systems. As inflation continued to be in practice, domestic goods became dearer and foreign goods cheaper. Regulations were promulgated one after another to limit the supply of US dollar to importers. For eign exchange could then only be obtained freely at a black market rate which was much higher than the official rate. Though the Govern ment adjusted the rate to 3,350:1 in August 1946 and to 12,000:1 in February 1947, the situation did not get improved as long as the rate was «fixed, , , and subject to changes only after a long delay. For most of the time, foreign exchange were undervalued and demand for 106 it was ever increasing. According to figures given by Chinese Maritime Customs, exports from China for the year of 1946 totalled pN|412,000,000,000; imports into China was far much greater, amounting to CN$1,500,000,000,000. The tremendous excess of imports over exports reflected T.V. Soong's effort in encouraging import with a view to bringing domestic prices down. The following table will give a vivid view of China's foreign trade in 1946* TABLE XIV CHINA'S FCSEIGN TRADE IN 1946 32 Unit: CN#1,000,000 Import 10,753 16,264 43,082 93,326 90,773 138,868 111,565 137,469 245,893 229,334 227,226 156.606 Month Export Jan* 6,337 Feb. 4,544 Mar. 9,260 Apr. 7,490 Nhy 19,873 June 18,265 July 30,512 Aug. 60,424 Sept. 67,356 Oct. 41,805 Nov. 72,087 Dec. jzjt* m 412.106 1.501.159 If the table are converted into US dollar at the then prevailing official rate of exchange, the following figures are at hand* 32 . "China's Foreign Trade in 1948", Commercial Research. Vol. Ill, p. 37. 107 Month TAB IE XV CHINA'S FOREIGN TRADE FOR 1946 33 Unit: US$1,000,000 >nth Exports Imports Jan. -fferch April-Aug. Sept.-Dec. 16 68 77 59 286 260 Total 161 605 T.V. Soong's effort toward the stabilization of prices faced its total collapse when all the Central Bank stocks of foreign ex changes and gold were nearly exhausted. His failure naturally ended his career as a premier* Before Soong's resignation, a ''/Revised Temporary Foreign Trade Regulations" was promulgated on November 17, 1946 which placed China's foreign trade on the basis of quota and licence systems. The im portation of goods was limited to some maximum quantities decided upon by the Import Board(reorganized into Export-Import Board after August 18, 1947)* Moreover, importation was made legal only when import licence was issued. The licensing and quota systems were considered as an ultimate way to balance international payment by limiting import to the volume of export or the equivalent (such as overseas remittances) and have been employed by the Chinese Govern ment since November 1946. Chang Chung succeeded Soong as premier in April 1947 • After 33 Ibid.. pp. 37-33. 108 four months* deliberate considerations, his cabinet finally pro claimed a set of new **Foreign Exchange Regulations*1. The full text of the Regulations are reproduced belowj TEMPORARY REGULATIONS WITH REGARD TO 34 FOREIGN EXCHANGE TRANSACTIONS I. Functions of the Central Bank of China. 1. The National Government, with a view to stabilizing the currency, promoting economic recovery and implementing the Inter national Monetary Fund Agreement, hereby temporarily authorizes and directs the Central Bank of China to exercise the following special functions with regard to foreign exchange transactions * a) To establish a Foreign Exchange Equilization Fund Committee to coordinate the supply and demand of foreign exchange* b) To designate certain banks as Appointed Banks to act on be half of the Central Bank of China to engage in foreign exchange transactions. c) To license persons to act as Brokers in For eign Exchange to engage in foreign exchange brokerage transac tions. d) To issue and execute the necessary regulations governing the Appointed Banks and the Brokers in Foreign Exchange* e) To control dealings in foreign currency securities. f) To regulate in accordance with the policy of the Government matters pertaining to the use and disposal of blocked property and property interest abroad of persons in China. II. Appointed Banks and Brokers in Foreign Exchange. 2. The Central Bank of China shall select, from among the banks duly registered with the Ministry of Finance, those which have a satisfactory record in foreign exchange dealings and are capable of acting within regulations, and shall appoint them to act as agents of the Gentral Bank of China in operating in for eign exchange transactions. Such banks shall be known as * * Appointed Banks'* and shall be granted the necessary license. 3. The Central Bank of China shall select certain quali fied brokers in foreign exchange who have a satisfactory record and are capable of acting within regulations and designate them as “brokers in Foreign Exchange'*. The said Brokers shall be 34 China Daily Tribune. August 18, 1947* Shanghai. 109 shall be granted the necessary license* 4. Only Appointed Banks may undertake foreign exchange tran sactions. Brokers in Foreign Exchange may only act 'within the scope of their licenses in introducing their clients to the Appointed Banks for foreign exchange transactions. 5. Regulations covering other.provisions governing the Appointed Banks and Brokers in Foreign Exchange shall be issued separately. Ill* Foreign Exchange Transactions * 6. The Central Bank of China may only buy and sell foreign exchange at the official rate for purposes authorized by the National Government. 7. The Foreign Exchange Equilization Fund Committee may adjust the open market rate of foreign exchange to meet market conditions. 8. Appointed Banks may buy foreign exchange at the open market rate arising from the following transactions. a) Exports or re-exports from China. An Appointed Bank, having bought or contracted to buy exchange arising therefrom, shall certify on a statement prepared by the exporter at time of shipment in a form prescribed by the Central Bank of China, that it has bought or contracted to buy the relative exchange: Provided however that such certificate shall not be required in the case of a shipment valued at less than US$25•— or equi valent value and not for commercial purposes. b) Remittances from abroad to China. c) Foreign exchange sold for expenditure in China. d) Other foreign exchange. 9. Appointed Banks may sell foreign exchange at the open market rate to the public only for the following purposes* a) To pay the cost in accordance with these regulations and rulings issued thereunder of imports approved by the Export Import Board other than those prescribed in Article 6 above. b) For legitimate personal requirements in accordance with these regulations and ruling issued thereunder. c) For other legitimate purposes authorized by the Executive Yuan. 10. The Appointed Banks shall settle their position in foreign exchange daily with the Foreign Exchange Equilization Fund Committee• 11. No person may buy foreign exchange from Appointed Banks for transaction prescribed in Article 9 without the necessary documentary authorization, 12. A person applying to an Appointed Bank for foreign exchange shall sign a certificate in the form prescribed by the Central Bank of China stating that he does not possess and has not made and will not make arrangements to acquire from any 110 other source the foreign exchange for which he applies. 13. In order to finance imports and exports under these Regulations, the Appointed Banks may, if necessary, do forward foreign exchange operations whose usance does not exceed-three months, and may apply to the Foreign Exchange Equilization Fund Committee for change-overs not exceeding 3 months. 14. Offices of Appointed Banks in places other than Shanghai Regulations but until further notice by the Central Bank of China any cover shall be obtained from their Shanghai Offices. 15. Any balances remaining in foreign currency accounts in banks as of the date of promulgation of these regulations shall be sold to the Foreign Exchange Equilization Fund Committee in accordance with Article 10. 16. No bank shall make any loan in Chinese National currency on the security of foreign exchange, unless authorized by the Central Bank of China. 17* No Appointed Banks or licensed brokers may deal in foreign currency securities unless specifically authorized by the Central Bank of China. 18. Appointed Banks may not engage in foreign exchange tran sactions for or in connection with export of Capital from China or speculative or arbitrary purposes whether for their own ac count or for the public. Appointed Banks prior to making a trans fer of foreign exchange shall exercise reasonable diligence to satisfy themselves that the transaction is bona-fide and in ac cordance with these regulations. 19. When an Appointed Bank has contracted to sell foreign exchange and the transaction giving rise thereto is cancelled in whole or in part, the purchaser shall be required to sell forthwith the entire amount of foreign exchange no longer re quired for the transaction, at the original rate of purchase. IV. Foreign Exchange Equilization Fund Committee. 20. The Central Bank of China shall establish a Foreign Exchange Equilization Fund Committee. 21. The foreign Exchange Equilization Fund Committee shall consist of three to five members to be appointed by the National Government, which shall also designate one of these members as Chairman. 22. The Foreign Exchange Equilization Fund Committee shall establish a Foreign Exchange Equilization Fund Account at the Central Bank of China. 23. The Foreign Exchange Equilization Fund Committee shall be authorized to borrow foreign exchange and Chinese National Currency from the Central Bank of China from time to time under terms to be agreed between the Central Bank of China and the Ill Foreign Exchange Equilization *und Committee. 24. The Foreign Exchange Equilization Fund Committee may notify any Appointed Bank or Banks to buy or sell foreign exchange on its behalf at the open market rate. 25 • The Foreign Exchange Equilization Fund Committee shall submit a weekly report to the Executive Yuan specifying in detail the actions taken with regard to the foreign exchage market, the amount of foreign exchange bought or sold, etc. It may make recommendations to the Executive Yuan regarding the for mulation and execution of foreign exchange and import and ex port policy. 26. The Foreign Exchange Equilization Fund Committee shall have access to all documents and files of the Central Bank of China and of the Export-Import Board relating to foreign exchange transactions. 27. The foreign Exchange Equilization Fund Committee in agreement with the Central Bank of China shall establish its own rules and regulations governing its foreign exchange transactions. V. Reports. 28. Appointed Banks shall report to the Central Bank of China in the form prescribed their position in foreign exchange as of the close of business on each day containing the follow ing particulars? VI. Definitions. a) The names of all buyers of foreign exchange, the amounts sold to each client together with the rates, the deliveries and the purpose of each salej b) The names of all sellers of foreign exchange, amounts bought from each client together with the rates, deliveries and origin or nature of the foreign ex change purchased: Provided however that items in the same currency involving amounts under US$500 or equivalent value thereof may be grouped in one amount without particulars. Appointed Banks shall state in each such report that to the best of their knowledge, all the foreign exchange transac tions listed therein are not contrary to the provisions of these regulations. 29. Brokers in foreign exchange shall keep in the form prescribed a complete record of daily foreign exchange tran sactions in which they are intermediaries and shall report to the Central Bank of Ghina in the prescribed form all details of such transactions containing name of client, amount, delivery, rate and purpose. 30. All records and accounts of the Appointed Banks and licensed brokers shall be open to inspection and examination by the duly authorized representative of the Central Bank of China. 112 31* a) The term foreign exchange as used in these regu lations includes without limitation any of the following payable in a foreign currency or country whether blocked, partly blocked or free: (1) Deposits and credits of all kinds with banks, in dividuals, business firms and other organizations; (2) Tele graphic transfers, demand, sight and time drafts, cheeks, tra vellers checks, notes maturing within one year or less, docu mentary bills of exchange, and other orders or promises to pay, letters of credit, bank and trade acceptances; (3) All other negotiable instruments maturing within one year or less, bonds, means of payment that are commonly dealt in by bankers, b) The term foreign currency securities as used in these re gulations includes without limitation any securities, including shares, stocks, bonds, debentures, expressed in a foreign cur rency or payable in a foreign country. VII. Penalties. 32. The Central Bank of China may temporarily suspend or cancel the licence to deal in foreign exchange of any Appointed Bank or Broker in Foreign Exchange who violates these regulations. The Ministry of Finance may be requested in accordance with law to impose a fine equivalent to not more than the amount of the underlying transaction. Cases involving criminal offence will be referred to the appropriate court for legal action. 33* Any non-Appointed Bank found engaging in foreign ex change transactions; shall be subject to confiscation of the foreign exchange involved, and the manager may receive a sentence of imprisonment of not more than five years. VIII. Miscellaneous. 34. The import and export of foreign currency notes is pro hibited without a licence from the Ministry of Finance: Provided however that a person may bring to or take from China for his personal use an amount not exceeding US$100 or equivalent value. 3$. The import or export of foreign currency securities is prohibited without a licence from the Ministry of Finance. 36* Foreign Exchange requirements of all Government Orga nizations shall also be governed by the above regulations. 37* The date of the announcement of these regulations is August 16th 1947 and they shall enter into force immediately. 113 The principal idea of the above regulations was to obtain an elastic rate of foreign exchange created by market demand and supply. However, the monetary authority, for fear of stimulating commodity prices, did not adjust the rate as often as was necessary. The consequence being that black market rate, was, for most of the time, higher than the ' ‘ open market rate” disclosed by the'Foreign Exchange Equilization Fund Committee day by day. At the end of December 1947, the black market price of IS dollar was 70% higher than the legal price. Exportation was in no way improved. And since importation through legal channel was more and more restricted, smuggling from Hongkong to South China was greatly increased. The following table will show how both exportation and importation suffered a decrease through the year of 1947» though temporary increase in ex port during the last two months will be marked. 114 TABLE XVI VOLUME OF FOREIGN TRADE 35 FOR THE YEAR OF 1947 In US|1,000,000 Import Month Import Export over Export Jan. 44 14 30 Fob. 38 12 26 Mar. 35 12 23 Apr. 42 17 25 M&y 43 34 9 June 44 22 22 July 59 19 40 Aug. 32 21 11 Sept. 26 7 19 Oct. 30 9 21 Nov. 29 27 2 Dec. -22 M2 28 222 nJL 223 The foreign trade during the fiscal year of 1948 showed a sharp decline compared with the previous years. According to figures released by the Chinese Maritime Customs, the total volume of China's foreign trade from January to June 1948 amounted to CN$71,660,837,675,000 of which CN$41,586,555,218,000 was imports, and CN|30,074,282,457,000 exports, resulting in an excess of im ports over exports by CNfll,512,272,761,000. ■ t y i e Government, unable to shoulder the responsibility of sup plying an adequate amount' of CS dollar to importers, announced on May 30, 1948 a set of New Exchange Regulations which introduced a linking system of import and export for the first time into China. 35 , MAn Economic Review of 1947”, The Economic Weekly. Vol. 6, No. 1, p. 8. The figures for the two months of November and December were taken from Economic Critic, Vol. 2, No. 20, p. 17- and concerted into US dollar by the author. 115 The Regulations Concerning the Exchange Surrender Certificate read:^ 1. Exporters on selling exchange to an Appointed Bank, either against Letter of Credit or a consignment will re ceive an Exchange Surrender Certificate equal to 100% of the exchange sold. In the case of a consignment, the Certificate will only be issued by an Appointed Bank when the exchange proceeds are actually realized and sold in cash to the Ap pointed Bank. The Certificate will only be issued if the sale of exchange is made within the time limits specified in the Central Bank of China Circular No. 85. 2. Importers holding licenses for the import of goods other than rice, wheat and flour, cotton and fertilizer, when applying for the purchase of exchange from an Appointed Bank will be required, in addition to the existing requirements, to surrender to the Appointed Bank Certificates equal in face value to the amount of their import license. 3. I’ he authorized holder of a Certificate may transfer his Certificate to a qualified holder of an import license or other person authorized to buy exchange from an Appointed Bank, for a consideration which is to be determined by agree ment between seller and buyer. 4. Certificates are transferable only by endorsement between Appointed Banks, exporters, importers and others authorized to purchase exchange from an Appointed Bank. Transfer to un-qualified persons invalidates the Certificate. 5. The validity of a Certificate for the purchase of exchange from an Appointed Bank shall not be more than se ven days. The validity date of a Certificate will in no circumstances be extended. 6. S.B. S. Circular No. 131 has been cancelled. According to this regulation, exporters, on selling exchange to an Appointed Bank at the rate disclosed by the Equilization Fund would receive an Exchange Surrender Certificate equal in value to ^ China Daily Tribune« May 31* 194&, Shanghai. 116 the exchange sold. On the other hand, importers and others entitled to buy exchange from an Appointed Bank would be required to deliver to an Appointed Bank Exchange Surrender Certificates equal in face value to the amount of their import license as a condition for the purchase of the required exchange. The Central Bank of China, on instructions from the Fund Committee would intervene in the market by selling and buying Certificates to prevent undue fluctuations in the price of Certificates. Actually there had been no open market for the trading of these Foreign Exchange Surrender Certificates, and the time limit for the disposal of these Certificates set at seven days at first and ex tended later to one month, as well as the allocation of import quotas, had made it possible for the Central Bank to manipulate the quotation of the Foreign Exchange Surrender Certificates, After this new set of Regulations came into force, both exports and imports shrank greatly. The rate of Surrender Certificates was not high enough to encourage export, while import was largely confined to the amount of export, (the importation of rice, wheat, flour, cotton and fertilizer was not subject to the Regulations) For the overseas remittances, the amount received increased from June’s US|677,000 to US$1,024,000 in July and further to US$1,761,000 in August, but the difference was still great when compared with the figures for the corresponding period of the previous year. • 117 The following table, expressed in terms of US dollars, will give us an idea of the changes in China*s trade for the year of 1948. TABLE XVII CHINA'S FOREIGN TRADE 37 IN 1948 (In US$1,000,000) Month Imports Exports Jan. 19.16 16.01 Feb. 14.10 12.41 Nar. 30.93 16.58 Apr. 24.19 16.33 Ifey 32.17 19.25 June 7.52 7.43 July 6 .3 0 11.21 Aug. 14.42 11.57 Sept. 18.55 21.13 Oct. 24.64 17.03 Nov. 10.00 26.00 Dec. 12.00 29.00 223.98 203.95 The excess of imports for January-Qctober period, from the above table, was around US$43,000,000. For the two months following, there was an excess of exports over imports. Taking 1948 as a whole, imports and exports totalled US$214,000,000 and US$204,000,000 res pectively. The figures showed that China for the first time since V-J Day came near to balancing her foreign trade. Overseas remittances to China also marked an increase during the second half of 1948. 37 China Economist. Vol. 4, No. 7, p. 113* 118 TABLE m i l CHINESE OVERSEAS REMITTANCES FOR 1948 38 Jan. Feb. Mar. Apr. my June July Aug. Sept. Oct. Nov. Dec. US|407,018 963.546 505,309 352.547 204,689 667,619 1,024,121 1, 761,322 11,397,912 USS22.051.242 1,977,490 982,453 1.807.216 Q ei August 19, 1948, the Government announced the currency reform program. One Gold Yuan was made equivalent to CNf>3,000,000, and four Gold Yuan to one USf. In other words, the exchange rate for the USf was acknowledged at CN$12,000,000 for USfl, while on August 19, the black market quotation was CNfll,500,000 and the quotation of the Foreign Exchange Surrender Certificate was CN|7,800,000. The new foreign exchange rate therefore was higher than the black market rate and surrender rates. This stimulated exports as well as overseas remittances. The lifting of ceiling prices on November 1st, witnessed a wave of soaring prices. Oi November 11, the Government announced a set of revised measures for the Gold Yuan, with the foreign exchange rate fixed at GY20 for US$1. later a stricter import-export linking system 3® China Economist. Vol. 4, No. 3, p. 47* 119 was introduced together with the Foreign Exchange Clearance Certi ficates. For overseas Chinese remittances also, a special foreign exchange rate was created beginning November 26 which was subject to change daily following the market quotations. On November 22, 1948, when the Foreign Exchange Clearance Cer tificates first began to be traded, the opening quotation was only GY25. By December 30, the rate had risen to GY100 for US$1. The foreign exchange rate for overseas remittances climbed up from Novem ber 20*s quotation of GT32 to GH10 for each US$ on December 30* The drastic increase in the quotation of the Foreign Exchange Clear ance Certificates was not due to the urgent demand from the importers, but mainly because these certificates offered an easy means for flight of capital to South China under the deteriorating military situation in both North and Central China. In fact, the firm trend in the quotations of the Foreign Exchange Clearance Certificates only reflected the rampancy of the speculative transactions on the '•Foreign exchange market”, and the sharp decline in imports and drastic increase in exports in Shanghai during the last two months of 1948 serve to show the abnormal trend of foreign trade in China* PUBLIC FINANCE 120 In 1945, the year in which victory was won over Japan, China*s budget was about 190 times larger than that of the fiscal year pre ceding the outbreak of war in 1937. Even after Japanese surrender, Government expenditure did not in any way show retrenchment. Open clash of arms with the Communists had been the main cause which accounts for the huge expenses of the Government. In spite of all efforts made to accelerate production, to open up new sources of revenue, to curb speculation and profiteering, there is as yet no panacea to cure China*s financial ill. The Government budget. China*s finance faced its most critical stage after 1946, when US$500> 000,000 of loan from the United States was used up under the administration of T.V. Soong. Under this to pic, we shall pay special attention to conditions during 1947* As a i*ule, the Government used to compile its budget at the then prevailing prices. The estimates were always a little larger than the previous year. For instance, the total expenditure for 1945 was CNfl,200,000,000,000 and the annual estimates for 1946 CN$1,500,000, 000,000. The actual expenditure in 1946 was CN$6,500,000,000,000 and the estimated budget for 1947 was CN$9>300,000,000,000* In 1946, the actual Government expenditure totalled CN$6,500,000, 000,000, while actual revenue was only CN$2,900,000,000,000, experienc ing a deficit of CN$3,600,000,000,000. 121 In 1947 there ms an actual deficit of CM$27,000,000,000,000 from total expenditure of CN$4Q,000,000,000,000 and a total revenue of CN$13,000,000,000,000. This deficit was largely met by the note issue. Owing to the rapid depreciation of Chinese dollar, the Government found it necessary to prepare a budget for the first half of 1948 only. The expenditures estimated for the first six months of 1948 reached CN$96,000,000,000,000, being more than double that of the whole year of 1947. As for the second half of 1948, the estimated budget was CN|323,621,000,000,000 as ordinary expenditure and another CN$600,000,000,000,000 as extraordinary (military) expenditures. The total estimated budget for the entire year of 1948 was therefore CHU,000, 000,000,000,000 . For the first half of 1948, military expenditure was supposed to take 34.6$ of the total expenditure, amounting to CN|33,000,000, 000,000 as given in the budget. The next item was special subsidies to Government officials, amounting to CN$32,000,000,000,000, or 32.3$ of the total expenses. The remaining was allocated to the various ministries, such as Food, Communications, Education, and to payments of loans and debts. The estimated revenue for the first six months of 1948 was CN$58,000,000,000,000. The deficit as shown in the budget was CNf38,000,000,000,000. The actual expenditure for the same period reached CN$258,000, 000,000,000, about two and half times that of the estimates. Of the total, 60% was spent for military purposes; 7% or CN$18,000,000,000, 000 each was spent for food and as subsidies to the various provin cial and municipal governments and only 16$ was used for government administration. Actual revenue for the period was only CN$88,000,000,000,000 (CN$24,000,000,000,000 was borrowed) or 34.3$ of the actual expenditure for the period. The actual deficit therefore reached CN$170,000,000, 000, 000. The announced budget for the second half of 1948 was GN|923,000,000,000,000 of which CN|600,000,000,000,000 was extraordi nary expenses and CN$323,000,000,000,000 ordinary expenses. Out of this latter amount, CN$130,000,000,000,000 was also appropriated for military purposes. The estimated budget for the Ministry of Communi cation, for example, amounted to CN$5,338,000,000,000 of which the major share was devoted to the repair of railways wrecked by the fighting forces. The Education Ministry appropriations were CN$49,786,000,000,000, representing 15$ of the total expenditure as provided in the Consti tution. The actual percentage was much lower, if the extraordinary budget of CN$600,000,000,000,000 was taken into account. The deficit was largely met by note issue though the Government repeatedly announced that the budget would be balanced by the sale of Government property, including parts of the United States surplus sup plies purchased from the Foreign liquidation Commission and confiscated X 23 enemy and puppet property, plus proceeds of State enterprises, includ ing cotton mills formerly owned by the Japanese. Undoubtedly the actual expenditure for the second half of 1948 far exceeded that of the estimates. Although no avilable figures are at hand, we shall note that in the months of July and August 1948 alone, the Government spent CN|p774,000,000,000,000 which was almost the entire estimated budget for the whole six months. Total revenue during the two months was only CN$l62,000,000,0Q0,000 or about one fifth of the total expenditures. The expenditures for September and October were GY230,000,000 and GY650,000,000 or CN$2,640,000,000,000, 000 in all (each Gold Yuan equal to GK|3,000,000) • In the four months period the total expenditure reached CN$3,414,000,000,000,000, just short'of four times that of the original estimates for the six months period. Needless to say, the extreme large portion of the deficit was met by the printing of paper money. Note issue. Prior to the outbreak of Chino-Japanese hostilities, the amount of notes issued was estimated to be about CNfl,400,000,000• During the eight years of war, it went up to CN$1,000,000,000,000 in December 1945» At the end of 1946, it had been increased to CN$4,700,000,000,000* The price of commodities had gone up even faster as the velocity of the circulation of money was accelerated. For instance, the inflation index for the month of June 1947 was 1,000,000$ while price index was 3,439,200$ for the same month, taking 124 July 1937 as the basie month. The following table gives the note issue of the past ten years, which may serve as a good indication of the in flation as well as Government deficit in China. TABLE XIX NOTE ISSUE IN CHINA SINCE 1937 39 Year Notes issued Rate of inflation for each period June 1937 1, 400, 000,000 Dec. 1938 2,300,000,000 16U% Dec. 1939 4,200,000,000 162% Dec. 1940 7,800,000,000 166% Dec. 1941 15,000,000,000 192% Dec. 1942 24,000,000,000 160% Dec. 1943 75,000,000,000 312% Dec. 1944 190,000,000,000 253% Dec. 1945 1,039,000,000,000 5k6% Dec. 1946 4,700,000,000,000 k52% Oct* 1947 22,200,000,000,000 k!2% Jan. 1948 3 5, 000, 000, 000,000 151% Mar* 1948 70,000,000,000,000 200% Aug. 1948 600,000,000,000,000 857% Dec. 1948 60,000,000,000,000,000 or GY20,000,000,000 10,000% How far the Government had depended upon note Issue in ba lancing its budget may be seen in the magnitude of the deficit and the volume of notes inflated. From the figures given above, we shall ba able to compile a table comparing the magnitude of deficit and notes inflated. Though there is overlapping in time, the table will as well serve our purpose/ 29 , "Government Finance in 1948", China Economist. Vol. 4, No. 2, p. 35. 125 TABLE XX A COMPARISON OF GOVERNMENT DEFICIT AND NOTES INFLATED Unit: CN$1,000,000 Period Notes inflated Period Government deficit Jan. 1, 1946- Dec .31, 1946 Jan. 1, 1946- 3,661,000 Dec.31, 1946 3, 600,000 Jan. 1, 1947- Jan.31, 1946 Jan. 1, 1947- 30,300,000 Dec.31, 1947 27, 000,000 Feb. 1, 1946- Aug.31, 1946 565.000.000 Aug.31, 1946 596.961.000 Jan. 1, 1946- 762.000.000 812.000.000 By dividing the total amount of notes inflated during the period from January 1st, 1946 to August 31st, 1946 by the total Government deficit during the same period, we have before us about 74$ of the Government deficit which was met by inflation. The remaining part of the deficit was largely made up through the sale of Government property and bonds. Monetary Reform. The "Monetary Reform” had long been an import ant problem in China since V-J Day. In fact, the "Reform” in its essence implies an abandonment of the policy of inflation. A mere change in the name, form, and denomination of currencies will in no way remove the financial difficulties in China and elsewhere. The issue of Gold Yuan embodied in a mandate on emergency fi nancial and economic measures on August 20, 1946 explains clearly how 126 the so called "Money Reform" could only worsen the situation. We shall survey here the Reform in brief and comments will be made from time to time regarding Government's policies. On August 19, 1946, the President issued a mandate announcing 40 1. The issuance of a new currency to be called Gold Yuan. 2. The surrender by the people of all gold, silver coins, and foreign currencies. 3. The declaration by Chinese nationals of their assets in foreign countries and 4. The tighting of Government economic control. Gold Yuan notes, based on gold dollar (4*4434 miligram of fine gold) and backed by 100$ reserve, were to be issued immediately,and the "fapi" (national currency) and the Northeast (Manchuria) cir culation notes were to be withdrawn from circulation within a specified date. All gold, silver, silver coins, and foreign currencies possessed by the people would be surrendered to the Government within a speci fied date, and none would be allowed to keep any of them after that. Chinese nationals with assets in foreign countries had to declare within a specified date, and action would be taken against those who failed to comply with this ruling. To stabilize commodity prices and to balance the national budget W HSin Wen Pao. August 20, 1948, Shanghai. 127 and China’s international payments, economic control was to be tightened. Different measures were promulgated simultaneously, constituting part of the mandate itself: Gold Reserve Supervisory Commission: The Gold Yuan Notes Reserve Supervisory Commission provided for in the regulations go verning the issuance of Gold Yuan notes was formerly inaugurated in Shanghai. The Gold Yuan Note Reserve Supervisory Commission was em powered to conduct monthly inspections of the reserve of Gold Yuan notes. The Executive Yuan(cabinet) announced a set of measures for the transfer of all items designated as currency reserve to the Commission. The first portion of the reserve as listed in these measures comprised 2,767,173,587 ounces of gold estimated at US$96,851*075*54, 41,370,000 ounces of silver estimated at US$28,959,000, and US|74,109,924.46 of Government foreign exchange, totalling in value just short of US$200,000,000. The second portion, equivalent in value to US$300,000,000, com prised US$101,538,503.43 assets of the China Textile Reconstruction Company; US$74,283,809.06 of enemy assets; IS$43,000,000 assets of the Taiwan Sugar Industrial Company; US$71,642,379*34 assets of the Chipa Merchants Steam Navigation Company; US$8,000,000 assets of the Taiwan Industrial Company; and US$2,000,000 assets of the Shuiehin Paper Pulp Company. The China Textile Reconstruction Company 128 contributed 70$ and the China Merchants Steam Navigation Company- contributed 50$ of their assets to the currency reserve. Economic Control Commission: The Economic Control Commission was established under the Executive Yuan with authority to plan, su pervise and coordinate all Government activities designed to hold down commodity prices, to adjust supply and demand and slamp out hoarding and speculation. The Commission, headed by Premier Wong Wen-hao and composed of six members, sent high-ranking officials to Shanghai, Tientsin and Canton to strengthen economic control. Price Frozen: Premier Wong issued order to all governors and mayors to enforce vigorously the regulations freezing commodity price and wages at the August 19 levels. In case of serious violations, offenders would be dealt with by the special criminal tribunals and severely punished under the Na tional General Mobilization Act and the Criminal Code* Up to August 28, the Central Bank and other authorized banks in leading cities throughout China had received gold and silver bullion, silver dollars and foreign currencies to the value of about US|27,200,000, for which about GY108,600,000 was paid out. Commodity prices during the first month of the Reform in most of the cities have been maintained at their August 19 levels except for Canton, Changsha and Chengtu. The basic problem of the Reform as I can see it, lay in the 129 task of balancing the budget without injecting further paper money into the economy* In other words, it was a financial problem of how to cut down government expenses and to increase revenue. The Government, instead of making efforts toward these ends, merely attempted to tight economic control and freeze commodity prices. In September, the business in Shanghai began to shrink as a result of the price selling. The producers were greatly discouraged for further production, because by selling their products at the ceiling prices, they could from nowhere purchase the necessary ma terials at the same controlling prices. Businessmen chose to hoard the goods instead of selling them at such low prices. The supply of goods greatly decreased, and demand for them was ever increasing. If paper notes were not inflated, these phenomena might be temporary or at least less serious. But the Gold Yuan was inflated as soon as it first came into existence. By August 19, 1948, total issue of GN dollars was officially announced to be CN$600,000,000,000,000. Al though the maximum figure set for Gold Yuan issue was GY2,000,000,000, a total of GY956,752,494 was issued by the end of September. When con verted into CN dollars, the total issue reached GN$2,870,257,482,000,000 against that of 'CN|600,000,000,000,000 of total fapi issue on August 19, or an increase of almost five times of note issue in a short period of six weeks; Of the GY956,752,494, GY600,000,000 went for exchange 330 of gold, silver and foreign currencies, valued at US$150,000,000, another GY80,000,000 for the redemption of the old fapi and Horth- east Circulation notes and as payment to Chinese exporters for their foreign exchange earnings and as remittances to overseas Chinese. The remaining was spent by the Government. The inconsistencies in Government's policies were not difficult to see. On the one hand, commodity prices were controlled, being pegged at the level of August 19. On the other hand, notes continued to be poured into the market* Goods began to be so scarce that at a time all the inhabitants in Shanghai, neglecting whether they were poor or rich, had to line up for buying daily necessities at the legal or controlled prices. Such necessities (of which rice was the most important) were supplied by the municipalities. In other words, the Government attempted to stabilize prices by selling goods at control prices but in limited quantities. This policy finally proved to be a failure; first because the quantity of such goods sold was very limited and second because the Government was at the same time print ing more and more Gold Yuan notes to finance military operations. The Government at last announced a modified price control program which took effect on November 1st, 1948, replacing the rigid price policy of August 19. The new policy, designed to cure the economic ills caused by the drastic reform, lifted the August 19 price ceilings, providing at the same time adjustments in public utility charges and 131 the pay scales of Government employees and the working class. On November 11, the Government abandoned the controlling measures alto gether by revising the exchange rates, the gold and silver quotations, legalized once again the private possession of gold, silver and for eign exchange and again started the sale of gold and silver to the people by the Government Banks, The Money Reform was in fact nothing more than the issue of a new kind of note coupled with a bundle of economic control measures, aiming mainly at controlling prices through police power. Up to the end of February 1949, the black quotations for USf in Shanghai reached GY6,600, or more than one thousand times higher than that prevailed in August 1948 within a period of six months only. Since the Communist invasion from the north bank of the Yantze to the south, the Gold Yuan went to a total collapse that on May 3rd, 1949, the quotation of USf reached GY9,000,000. With myself staying in the United States and making this study, I can hardly imagine how the Chinese are making their daily transactions. Conclusion. By making a brief review of the history of note issue in China , the readers will probably note that since the first issue of paper currency in the early years of Sung Dynasty, the pro blem of inflation has ever since been a serious block to the develop ment of the Nation’s economy. With a very few exceptions, inflation has been led by military operations which forced the government to issue paper notes to finance the war. It has been in fact a kind of poll tax imposed upon the note holders regardless of their ability to pay. Notwithstanding the fact that paper notes were inflated during the critical stages of each dynasty, it is not to be forgotten that hard money had remained the nucleus of the medium of exchange. The circulation of the depreciated notes was practically confined to the payment of taxes, the trading between long distances, etc.. In handling their daily transactions, people have always preferred metal, mostly silver and copper. With the monetary reform in 1935 under which silver was repudiated as basic money, a wholly different picture was presented. Although a 100% of specie and security reserve were required for the issuance of fapi, during the war with Japan the Government could not but in flate the notes to finance her budget. That, at first, the Government was efficient and full of vigor may be evidenced by the fact that with out much help from outside, China stood alone in fighting Japan for the first few years of the War. It was after the War was won that corruption began to spread like plague. 133 T.V. Soong's economic policies during his tenure of premiership led the National Government to bankruptcies which drew millions of Chinese to the Communist side. Instead of making efforts to raise revenue from taxation, Soong largely relied upon note issue and for eign loans. For the year of 1946, the notes inflated exceeded the amount of government deficit. It wonder where all these ’ 'surplus notes" have gone. Again, importers and exporters like the Yantze Trading Co., the Fu Chung Co. and etc, made huge profit through their special relations with Soong and other top government officials. All these and other facts explain the inevitability of the fall of the National Government. It is now too late and also useless to mhke suggestions for the National Government at such time when the Communists are about to take over the whole country. Nevertheless, something will be said about the financial mistakes made by the Government in the past. One of the greatest errors has been the failure in reorganizing the system of taxation. It will be pointed out that all taxes, direct and indirect, especially the income taxes, have been counted on the basis of pre-war levels. For example, if one’s basic salary were CN$300, and the allowances from his employer were CN|1,000,000, the income tax from the CN|300 would contribute almost nothing to the Treasury. On the contrary, it constituted a financial burden for the Government to levy such taxes* The custom duties, which used to build up a large portion of Government revenue, have been converted 134 from foreign exchange and paid in CN$ at the official rates - rates much lower than the black market rates. Thus the less the revenue, the more notes the Government has to force into circulation j and as notes are more rapidly depreciated, still lesser income can be de rived from taxation. Surely the Government has been smart enough to notice this, but never has it tried to take measures to adjust such unfavorable con ditions. According to my own point of view, a tax levy based upon one's aetual income, the market price of the commodities concerned, or on the free market price of foreign exchanges must be introduced. If the Government is so incompetent as not be able even to do this, it is fair that it should be done away with. Still more will be said on the levy of property taxes. During these war years there has arisen a special class of War-profiteers, getting rich through their special relations with the Government. They could borrow funds from the Government Banks by paying practi cally no interest, hoard daily necessities by using these funds, re ceive subsidies on imports and etc.. For both finance and justice's sake, scholars and financial experts have raised in common a voice that an effective system of property taxes be put into operation* As a result, a conference participated in by the representatives from the national People's Political Council, the legislative Yuan and the National Economic Council was assembled in August 1947 for the 135 discussion and consideration of that particular question. No action however has ever been taken. The reason for this is quite simple. The largest property owners are either government high ranking offi cials or persons closely related to them. It was generally recognized that the properties of T.¥. Soong and H.H. Kung alone will support the Government for a considerable period. There is no wonder why the levy of property taxes had never been put into effect. It is this financial crisis that led to a total breakdown of Nationalist morale and finally to the success of the Communists. Once again in Chinese history the same thing has been repeated. The Koumingtang rule is apparently at its end, ended by its ineffi ciency and corruption, characterized by the practice of inflation. The Communist:-movement in China, on the other hand, is associated with a rise of farmers who had been for so many centuries the backbone of Chinese people. It is a revolution by the farmers for the demand of land, not to socialize land; a demand to make a living of their own, not to sacrifice their freedom to some supreme authorities. Ghina will be emancipated from feudal and bureaucratic systems but a Bolshevist order can hardly be tolerated in China. BIBLIOGRAPHY A. • BOOKS IN ENGLISH Crawford, Whipple, Monetary Management Under the New Deal. Washington D.C.s American Council on Public Affairs, 1940. Ding, Edwind H.N., The Central Bank of China. Los Angeles: University of Southern California, 1937* Donaldson, John, The Dollar. A Study Of The New Monetary System. New York: Oxford University Press, 1937. Doubleday, Thomas, A Financial. Monetary and Statistical History Of England. London: Effenghara Wilson, Royal Exchange, 1847* Dunbar, C.F., The Theory And History Of Banking. New York and London: G.P. Putnam’s Sons, 1922. Fearvearyear, A.E., The Found Sterling. London: Oxford University Press, 1931* Freyn, Hubert, Free China’s New Deal. New York: The MacMillan Company, 1943. Lieu, D.K., China’s Economic Stabilization and Re construction. New Brunswick: Rutgers University Press, 1948. Lin, W.Y., The New Monetary System Of China. Shanghai: Kelly & Walsh Ltd., 19357 Tamagna, Frank M., Banking And Finance In China. New York: Institute Of Pacific Relations, 1942. North China Herald, China Year Book. Shanghai, 1935* The China’s Ministry of Information, China Handbook. 1937-1945. New York: MacMillan Company. The Commercial Press, The Chinese Year Book. Shanghai, 1936-1937* United States Department Of Commerce, Monetary Use Of Silver In 1933. Washington: United States Government Printing Office, 1933. Wei, W.P., The Currency Problem In China. New York: Columbia University, 1934* B. BOOKS IN CHINESE Chang, C.S., China's Monetary System. Shanghai: The Commercial Press, 1935* Chians. T.F., The Paper Money. Shanghai: The Chung Hwa Book Company, 1936. Chinese Institute Of Economic Research, The Gold Yuan. Shanghai: The Chinese Publishing Company, 1948. Fong, H.D., Chinas War Time Commodity Prices And Production. Shanghai: The Commercial Press, 194&. lee, T.Y., History Of Chinas Note Issue. Chungking: Department Of Economic Research Of The Central Bank Of China, 1944. The Chung Hwa Book Company, China Year Book. 7th issue, 1944-1945. Shanghai. Wu, T.Y., Economics During Time Of Continuing Soaring Prices. Shanghai: The Commercial Press, 1947. C. ARTICLES IN ENGLISH Meng, C.Y.W., “China's Food Production In 19471 1* The China Weekly Review. Vol. 10S, No. 6, p. 175. , “Rice Production In China Increased In Recent Years1 1 . China Economist. Vol. 4, No. 11, p. 191. « “Communist Land Policy”, China Economist. Vol. 4, No. U, p. 190. , “Economic News From Communist Areas”, China Economist. Vol. 4, No. 7, p. 120. . ________, “Productive Enterprises In 1948“♦ China Economist. Vol. 4, No. 6, p. 102, ________, “Government Finance In 1948“, China Economist . Vol. 4, No. 2, p. 35* , “China’s Foreign Trade In 1943“• China Economist* Vol. 4, No. 7, p. 313* , . “China's Overseas Remittances In 1943". China Economist. Vol. 4, No. 3, p. 47. D. ARTICIES IN CHINESE Chiao, T.S., “An Analysis Of China's Foreign Trade For The First Half Of 1943". The Central Bank Monthly. Special Issue, 1943. p. 86* Ching, C.C., “China's Cotton Production". Industrial And Commercial World. Vol. II, No. 6 & 7 combined, p. 26. Fong, H.D., “China's Economy After V-J Day". The Economic Critic» Vol. II, No. H, pp. 3-4. Meng, H.C., “Prospect Of Chinese Economic Development Of 1943“. Industrial And Commercial World. Vol. II, No. 6 & 7 combined, p. 4. Yih, C.G., “Problem Of Increasing Food Production". Economic Critic. Vol. II, No. 20, p. 4. Wu, T.Y., “How To Improve Production During Time Of Continuing Soaring Prices". Economic Critic. Vol. II, No. 6, pp. 3-5. Wu, Y.L., “An Estimation Of Smuggling Between South China And Hongkong & Jfe.coa“. Economic Critic. Vol. II, No. 19, pp. 7-3-1. Yuan, Y.N., “The Inconsistencies In The Present Foreign Trade And Foreign Exchange Policies". Economic Critic. Vol. II, No. 10. pp. 3-4. , "China's Foreign Trade In 1946". Commercial Research. Vol. Ill, p. 37. _____ , “A Summary Of China's Economy For The Year Of 1947". The Economic Weekly. Vol. VI, No. 1, p. 8. E. NEWSPAPERS IN ENGLISH "Full Text Of Government New Economic Reform Plan". China Daily Tribune. August 13-17, 1947, Shanghai# "New Exchange Regulations". China Daily Tribune. May 31, 1948, Shanghai. "New Revised Foreign Trade Regulations". China Daily Tribune. August 19, 1947, Shanghai# "Second Inspection Report Of The Gold Yuan Note Issue Reserve Supervisory Commission". China Press. October 4, 1948, Shanghai. "Temporary Regulations With Regard To Foreign Exchange Transactions". China Daily Tribune. August 19, 1947, Shanghai. "Third Inspection Report Of The Gold Yuan Note Issue Reserve Supervisory Commission". China Press. November 2, 1948, Shanghai F. NEWSPAPERS IN CHINESE "After The Promulgation Of The New Foreign Exchange Regulations On August 19, 1947"• Ta Kung Pao, August 23, 1947, Shanghai. "The Budget For The Second Half Of 1948". Ta Kung Pao. August 18, 1948 "The Presidential Mandate". Hsin Wen Pao. August 20, 1948, Shanghai# Wnfwnsftv of Sowthem Cajffernta LAf*#

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University of Southern California Dissertations and Theses

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Asset Metadata

Creator Wu, Ching-ying (author)

Core Title The history of China's note issue

Degree Master of Arts

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag Economics, General,economics, history,OAI-PMH Harvest

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Garis, Roy L. (committee chair), Anderson, William H. (committee member), Phelps, Clyde William (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c20-437192

Unique identifier UC11264036

Identifier EP44693.pdf (filename),usctheses-c20-437192 (legacy record id)

Legacy Identifier EP44693.pdf

Dmrecord 437192

Document Type Thesis

Rights Wu, Ching-ying

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA