Economic history of China (1912–1949)
During the Nanjing decade (1927–1937), China advanced in a number of industrial sectors, in particular those related to the military, in an effort to catch up with the west and prepare for war with Japan.
[2]: 18 The collapse of central authority caused the economic contraction that was in place during final Qing decades to speed up, and was only reversed after China reunified in 1927 under the rule of Nationalist Generalissimo Chiang Kai-shek.
By 1931 however, the effects of the Great Depression began to badly impact the Chinese economy, a problem compounded further by Japan's invasion and occupation of Manchuria in the same year.
Key exports included glue, tea, silk, sugar cane, tobacco, cotton, corn and peanuts.
[9] This increased competition caused massive declines in Chinese agricultural prices (which were cheaper) and thus the income of rural farmers.
The Communist Party undertook a radical program of land redistribution which destroyed the landlord-dominated political economy which had previously existed within the areas the CSR governed.
Some 1.5 billion of investment was present in China by the beginning of the 20th century, with Russia, the United Kingdom and Germany being the largest investors.
[7]: 96 This undervaluation made inflation worse as Chinese who formerly lived under the regime rushed to hoard goods rather than exchange for fabi which in turn drove price increases.
[7]: 96 Ultimately, the unrealistic exchange rate impoverished those who had lived under the Wang Jingwei regime and made economic revival of the area more difficult.
Most of the prosperous east coast was quickly conquered by the Japanese, who imposed a brutal occupation on the civilian population, carrying out numerous atrocities such as the Rape of Nanjing in 1937 and random massacres of whole villages.
[7]: 6 The ROC government's tried unsuccessfully to curb inflation with the introduction of new currencies and failed attempts in both 1942 and 1943 to institute a general price freeze.
[17]: 73 The efforts at price controls failed because China's agricultural economy was very concentrated, industry was declining, and exchange rates collapsing.
[17]: 73 The result was that suppliers did not ration at stable prices, shopkeepers used their supplies for speculation, and “[e]ven productive enterprises turned from new output to speculating on stocks, while disinvestment and capital flight further undermined the production capacities.”[17]: 73 The economic situation further worsened as China became increasingly isolated once Japan occupied British Burma and French Indochina.
The result was a windfall for Nationalist government insiders including Kung, the Soong family, Wei Daoming, Long Yun, and others.
Nationalist forces applied a "scorched earth" policy in response to the invasion; destroying the productive capacity of areas they had to abandon in the face Japanese military advances.
[20] When Japan surrendered in August 1945, the KMT government was able to recover most of the economic centers lost in Second Sino-Japanese War without subjecting them to further destruction.
Initially Manchuria, which Japan had transformed into the greatest industrial center in the Far East, had escaped any large scale destruction until the Soviet invasion in the final week of the war.
The Red Army rapidly overran Japanese forces, commencing a 3-month occupation defined by systemic campaign of looting and destruction.
Soviet Premier Josef Stalin ordered all equipment, moveable parts, tools and even material wealth plundered from private homes, shipped back to the USSR, what could not be pillaged was to be destroyed.
Manchuria had been stripped of virtually all heavy machinery and was left without even electricity as the Soviets had dismantled or destroyed all power plants, even removing the turbines from dams.
[7]: 22 The loss of more manufacturing, particularly in conjunction with Japanese occupation of major grain production areas, further weakened the Nationalist economy.
[7]: 7, 85 His focus on controlling northeast China in particular required major logistical and administrative expenses without raising commensurate revenue.
[7]: 131 The Nationalist government continued to face high expenses and low revenue,[17]: 71 printing currency in an effort to make up for the difference.
In addition, the communists' promise to redistribute land gained them support among the massive long suffering rural population.
[17]: 70 As the KMT fled, it stripped China of liquid assets including gold, silver, and the country's dollar reserves.
[24] By the time the KMT was defeated, commerce had been destroyed, the national currency rendered valueless, and the economy was based on barter.
[24] Despite years of planning, no KMT offensive to retake the Chinese mainland would ever materialize, with the ROC existing in permanent exile on the island.
[25] There have been two major competing interpretations (traditionalist vs revisionist) among scholars who have studied China's economy in the late Qing and Republican period.
[26]: 33–35 The traditionalists (mainly historians like Lloyd Eastman, Joseph Esherick and others) view China's economic performance from the early 19th to the middle 20th century as abysmal.
[citation needed] The revisionists (mainly economists like Thomas Rawski, Loren Brandt and others) view the traditional economy as mostly successful with slow but steady growth in GDP per capita after the late 19th century.
