FOR many years following the disappearance of the old Manchu Empire in 1911 the growth of any real central authority in China was impeded by the country's lack of fiscal resources. The successive governments in Peking were unable to finance the essential services of the state properly, and were weak and ineffective. But the National Government which was set up at Nanking in 1927 succeeded to a remarkable degree in developing an adequate financial system. This fact -- added to the vigor, leadership and wide appeal of the Nationalist movement -- enabled that Government to make rapid progress in rehabilitating China. And in the future, as in the past, we may be sure that finance will play a major part in shaping the course of events in China.
I. A DECADE OF PROGRESS, 1927-37
The attainment of tariff autonomy in 1928-30 tripled China's revenue from customs. This, together with the rehabilitation of the salt revenue administration and the development of a system of internal taxation on such things as tobacco, cotton yarn, flour, liquors and mineral products, increased the total revenue from customs and these other sources from $369,000,000 in 1929 to $618,000,000 (Chinese currency) in 1931. The needs of the new Government, however, were too urgent to be met wholly by developing tax revenues, a matter of months and years. It was equally important that the market for public loans should be developed, in order to obtain funds needed for defense against subversive movements and for internal economic reconstruction. This was facilitated by the growth of the Government's revenues and by the rise of modern banks, notably at Shanghai, which was becoming one of the world's great financial centers. Although there were deficits every year from 1927 to 1937, it was possible to keep them within manageable limits. Even though the budget had not been balanced by 1937, when the present conflict broke out, substantial equilibrium was by then in sight.
A reform of the currency was an essential prerequisite to real progress. In 1929 the Kemmerer Commission stated that
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