The Program of American Economic Aid
The economic and financial assistance given to China by the United States during World War II, beginning with the lend-lease assistance of 1941 has been outlined in chapter I. The problem of additional assistance has been noted in other intervening chapters, especially in chapter VI. The aid in money and supplies given in support of the military efforts of the Chinese Government has been described in chapter VII. This chapter continues the account of economic and financial assistance rendered during 1947, 1948, and the first months of 1949. Before this assistance is described, however, it will be helpful to present a brief survey of the economic situation in China in 1947.
Fundamental in the situation which caused the United States Government to press for comprehensive reforms was the increasingly serious economic situation during the first half of 1947. Mention has previously been made of the accelerating pace of inflation which was occasioned primarily by the financing of large Government budgetary deficits with new currency notes. The domestic price level in China had risen steadily throughout the war with Japan. This process had continued without any real check through 1946. Indeed, the rate of price increases had far outstripped the rate at which new currency was being issued, a signal that public confidence in the monetary unit had fallen significantly.
This continuing depreciation in the value of the Chinese currency was of course a matter of concern to the responsible officials of the National Government. Through 1946 and into 1947, the Government sought to maintain control of the inflationary process by open market sales of gold from official reserves. This provided opportunities, of which advantage reputedly was taken frequently, for collusion