The Inflationary Spiral: The Experience in China, 1939-1950

By Kia-Ngau Chang | Go to book overview
Save to active project

Chapter 6
Prewar Government Finance

Weakness of the Prewar Structure

The origin of China's wartime financial woes can be traced significantly to the country's prewar structure of public finance. As military expenditures in wartime inevitably increase the money supply if deficit financing prevails, the dual problem in war finance, given the military needs, is to avoid an oversupply of money in relation to the output of civilian commodities and services and to distribute the financial burden of the war equitably. While proper fiscal measures alone cannot accomplish these two objectives, they can nevertheless play a key role. Among the necessary conditions for successfully financing war without destroying economic stability are a rational pattern of expenditures, an equitable taxation system, and facilities for direct public borrowing. Unfortunately, none of these elements was present in China's prewar financial structure and none was provided subsequently. Specifically, the government's financial weakness lay in three distinct but related fields: the prewar pattern of government expenditures, reliance on indirect taxation, and mismanagement of the domestic bond market.

The finances of the central government of China were in deficit every year from the time of the founding of the Republic in 1911 to the outbreak of war with Japan in 1937. Until 1927 incessant internal strife produced chaos in government finances, and no budget could be drafted because revenues legally belonging to the central government were retained by local warlords. After the Nationalists came to power in 1927, the central government attempted to enforce its tax claims by direct central collection. In the decade before the outbreak of the


Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this page

Cited page

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited page

Bookmark this page
The Inflationary Spiral: The Experience in China, 1939-1950


Text size Smaller Larger
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen
/ 400

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?