The China of Chiang K'ai-Shek: A Political Study. Paul Myron Anthony Linebarger
Ch'ên Li-fu, whose brother, Ch'ên Kuo-fu, is head of the (Kuomintang) Central Political Institute. Together they stand at the Right center of the Kuomintang, exerting enormous influence on the Party and on the country. Both have been very close to the Generalissimo, and took a large share in revitalization of the Kuomintang before and during the war.
The two Commissions serve important needs. The Commission on Overseas Chinese Affairs (Ch'iao-wu Wei-yüan-hui) is the informal Chinese equivalent of a colonial office. The Commission looks after the welfare of the overseas settlements of the Chinese, fostering language schools, hospitals and the like. It acts through Chinese community associations, rarely through official channels. Practices of hyphenated citizenship, so offensive to one Western nationality when undertaken by another, are unobtrusive and necessary in the case of the Chinese. With the outside states putting Chinese in a special economic, legal, and political category—through immigration laws, administrative practice, and extra-governmental pressure including lynching—the individual Chinese who deracinates himself is indeed a lost soul. Few Chinese worry about overseas Chinese irredentas. The Commission fosters no putsches and mobilizes no fifth columns, but does help to keep Chinese, whatever their nationalities, still Chinese.
The Commission on Mongolian and Tibetan Affairs (Mêng Tsang Wei-yüan-hui) is the supreme agency for the dependencies. It has a record of considerable success in fostering a good-neighbor policy toward the half-autonomous dominions of Chinese Turkestan (Sinkiang, also called Chinese Central Asia),[16] Tibet, and Inner Mongolia. Outer Mongolia is under indirect Soviet control, and Eastern Inner Mongolia under the Japanese. The Chinese have utilized every device of courtesy and diplomacy in retaining their precarious grip on these areas. The Commission includes dominion members.
The Economic Ministries
The Ministries dealing in economic matters bear the ultimate burden of resistance. Upon their success depend China's tools of war. If artillery, aircraft, machine-guns, munitions, food, clothing and other necessities are not available to the central armies, the opportunity for counter-attack may come and go, and China be lost—not through the power of her enemy, but through her own weakness. Unless economic mobilization succeeds, the guerrilla warfare in the occupied area will be frustrated, since its purpose is merely to prepare for a révanche from Free China; history affords few examples of guerrillas defeating mass armies, fighting positionally, without the intervention of other mass armies.
The Ministry of Finance (Ts'ai-chêng Pu) is the leader of the Economic Ministries. Headed by H. H. K'ung, successor to the celebrated T. V. Soong, it has performed fiscal miracles in maintaining the credit of the National Government. Chief among its accomplishments has been the institution, within the past decade, of a managed currency on the gold-exchange standard. Specie had been the immemorial medium of exchange, and Chinese experience with paper money—from the earliest times to the present—had been unfortunate. Starting with the 1860's, China had undergone one paper-money inflation after another. Governmental currency was frequently a receipt for silver on deposit, in which case it amounted to no more than a commodity warehouse certificate, thereby subject to discount for transportation charges, and fluctuating meanwhile with the world price of silver; otherwise it was fiat money, guaranteed by stranglers' cords and long knives. Fractional coins passed by metallic weight; the shifts in the price of copper in New York and London determined the number of pennies which farmers received for their silver dollars, even on the threshold of Tibet.
By putting private bank notes, both Chinese and foreign, out of circulation, systematizing note issuance to four government banks and a limited number of carefully supervised provincial agencies, the National Government made the change with far less difficulty than anyone, even optimists, dared to hope. Until the outbreak of war subsidiary coinage was copper and aluminum; this has been replaced by fractional paper, circulating decimally without discount for exchange into larger bills. Simple peasants, who used to hide a slug of silver in their fields, now conceal a Bank of China, Bank of Communications, Central Bank of China, or Farmers' Bank of China fa pi (legal tender) note in roofs or walls.
Other noteworthy reforms include the standardization of levies in the provinces, now proceeding to some degree, and the imposition of direct taxes, a revolutionary step for China. Income and inheritance taxes, previously thought to be uncollectible in a pre-modern area such as China's hinterland, are yielding substantial sums. War borrowing is done almost entirely through domestic loans. These are issued in the form of patriotic contribution bonds, and are available in denominations as low as Ch. Nat. $5.00 (about 28 U. S. cents). Further support has come in the form of American, British, and Soviet fiscal aid, and—until the outbreak of the European war—additional credits, both private and intergovernmental, from continental Europe. The Ministry has moved with a financial prudence which promises to maintain China's domestic and foreign credit for further years of war.
The Ministry has engaged in direct conflict with the enemy through bank-note rivalry. Throughout the occupied area, National Government currency is in conflict with the issuances of the Japanese army and the pro-Japanese governments. The Chungking policy has been to hold back the invasion currencies, on the assumption that continued circulation of the national currency maintains a continued popular stake in the government. Many guerrilla leaders believe that the occupied areas should use nothing of value to the Japanese, and therefore encourage the issuance of local emergency currency.
Under the Ministry of Finance, numerous efforts have been made to keep foreign trade alive. With war-time pressure on transportation facilities, foreign trade has become a virtual monopoly of the government; few major transactions are made by wholly private interests, since in addition to monopolizing the highways, government-owned corporations also have access to differentials in foreign exchange (which often mark the difference between great profits and none). In the matter of the governmentalized Sino-American trade, correlated with the American credits, the Foo Shing Corporation (export) and the Universal Trading Corporation (import) control the current both ways. The Ministries of Communications and of Economic Affairs also have a share in this state-capitalist business.[17]
Subdivisions in the Ministry of Finance include sections for customs, salt gabelle, internal revenue, general taxation, public loans, currency, national treasury, accounting, and general affairs. Efforts are now in progress to consolidate all intragovernmental fiscal services, so that the budget shall cover the entire government, and separate agencies will no longer be able to make half-controlled collections and disbursements.
The Ministry of Economic Affairs (Ching-chi Pu) is in general responsible for the industrialization of an area half the size of Europe with well over two hundred million inhabitants. No non-industrial state can defeat an industrial state unless it has access to the industrial resources of third parties. The Chinese, realizing this, have launched a modernization process unparalleled in modern history. The two greatest migrations of the twentieth century have occurred, most probably, in China: the first the settlement of Manchuria, and the second the flight to the West. In each case more than twenty million persons have been involved. The Ministry of Economic Affairs has transformed this rout into a pioneering advance. Refugees have been taught to bring their tools with them; when they had no tools their skills have been sought out and utilized. As the national armies and government retreated up the Yangtze and inward, they brought along the personnel of a modern economic system, and set an industrial society down in a world technologically backward.
West-China modernization will probably be the most durable economic consequence of the war. Cities near the edge of Tibet have underground electric power and automatic telephone systems. Primitive salt-drying areas have been modernized; in one instance, steel pipe being lacking, bamboo pipelines, plastered and cemented for reinforcement, run cross-country. Filthy, tax-ridden, vicious little cities which had been the haunts of opium-sotted militarists are now given the double blessing of fair government and a business boom. (The author felt, when he returned to America in September 1940,