Financial Warfare in Revolutionary China, 1949–1950: Chen Yun, Nan Hanchen, and the People's Bank

R e s e a r c h N o te Financial Warfare in Revolutionary China, 1 9 4 9 -1 9 5 0 : C h e n Y u n , Nan Hanchen, and th e P e o p le 's B a n k b y G r e g L e w is The virulence and longevity of China's inflation between 1937 and 1949 inspired three excellent English-language monographs which thoroughly examined Nationalistgovernmentpolicies and technical aspects of the inflation. The authors of these· studies each· experienced the inflation firsthand. Economist Arthur Young, author of China 'sWartime Finance andlnjlation, 1937-1945,1 served as a financial advisor to the. Nationalists for almost twenty years .•Chang Kia-ngau, who .wrote The Inflationary Spiral,2 worked as· head of both the Bank of China and the Central Bank of China. Economist Chou Shun-hsiu, also an economist at the Central Bank of.China, wrote The Chinese Inflation, 1937-1949.3 .These three. former officials identified common elements contributing to the inflation, including rampant speculation and hoarding, but offered little insight about Nationalist policy-makers or the numerous entrepreneurs who remained in China after 1949 and made conquering inflation a daunting task.4 Until recently, a similar void has existed regarding scholarship on the individuals and organizations inthe People's Republic of China (PRC) who ended the financialchaos. Recently published materials confirm the key role of Chen Yun and the Central Financial Administration in formulating and directing antiinflationary policies which resulted in a comparatively stable and productive PRC marketplace from mid-1950.s However, equally important to successful implementation and execution of this multi-faceted program was the People' Bank of China,. its charismatic leader Nan Hanchen, and a host of consultantadvisors to the ban1e Although the contribution of the People's Bank to the fight against inflation is generally known, the innovative and flexible policies advocated by >NanHanchenaIld his subordinates are not.6 This note will examine challenges confronting the new regime in the form of several horrendous price rises and currency, production, and distribution failures identified by the above-mentioned authors, and·the economic as well as political muscle Beijing flexed in response en route to gaining the people's confidence . Under the Deng Xiaoping-inspired rubric, "seek truth from facts" (shishi qiushi), a fresh characterization of this period has occurred in the last decade in Twentieth-Century China, Vol. 29, No.1 (November, 2003): 105-119 106 Twentieth-Century China China. Chinese scholars still problematically cast entrepreneurs in a negative light as major contributors to inflation due to their speculative activity and hoarding (when in fact it could be argued that these actions occurred as a result of the broken economy) . Not surprisingly, scholars still also view the multiple-round struggle waged by Chen Yun against these Tianjin and Shanghai capitalists from late 1949 on as a key to conquering inflation. At the same time, however, scholars now substantially agree that the tools used in this fight included utilization of market forces, sophisticated data, and "expert" analysis by Nan Hanchen and his People's Bank. Further, according to these recent studies Communist ideological orthodoxy was not a major constraint upon a leadership convinced that the new regime's "historical fate" would hinge on the outcome of this "financial war."? The most dramatic new primary source probing inflation and economic recovery is the multi-volume series from the Chinese Academy of Social Sciences (CASS), Zhonghua renmin gonghe guo jingji dang'an ziliaoxuanbian, 1949-1952 nian [Selected economic archival records of the People's Republic of China, 1949-1952].8 Separate volumes are included for "Foreign Trade," "In.dustry and Commerce, " "Agricultural Economic Structures," "Fundamental Building Investment and Building Trade," "Labor Wages and Benefits," "Agricultural Industry," and "Synthesis." Each volume in this series includes hundreds of documents (many of them reproduced in full, others in in excerpted form) assembled from an extraordinary variety of sources.9 Each volume includes document author(s), locator numbers, relevant tables, a chronology of important events, and additional useful information about the archival cataloguing ·and recording system. Even allowing for the influence of post-1978 economic reforms on the research interests and selectivity...