Chapter 20 Tight money

The renminbi gained the right to speak in the market and solved the most urgent financial crisis of the new regime, but the negative effect of inflation is also obvious.If it is not handled properly, the Communist Party in Shanghai will fall into a quagmire similar to that of the National Government: by cracking down on speculation, it will establish the prestige of the new currency and solve the financial difficulties. Speculation is back. At least not from the end of the Silver Dollar War in June 1949, things were not looking good.The fiscal deficit is still expanding, and expenditures, including the purchase of a large amount of materials (mainly cotton), have no tendency to shrink at all. In the absence of tax sources, continuing to issue more currency is the only way out.According to Yang Zhongwen's statistics, from the end of 1948 to the end of August 1949, the currency issuance in the customs has increased from 18.5 billion yuan to 485.1 billion yuan, an increase of 25 times.He said, "The Central Finance Commission calculated the accounts at that time: it estimated that the fiscal deficit from August to December would be 670 billion yuan, and the purchase of cotton and other materials would cost about 400 billion yuan, a total of 1 trillion yuan. In addition to 100 million yuan, 800 billion yuan must be issued, that is, the amount of issuance must be tripled within 4 months. Under such circumstances, it is impossible to stop the rise in prices.”

Another problem that makes the new regime difficult is that before the Central Finance Committee held the first national financial and economic conference in Shanghai, the issuance of RMB was controlled by the central bureaus of the major regions, and objectively, each region had the urge to issue more banknotes.However, the bills issued by the major districts can walk on their own. They are often issued by the new districts and then go back to the old liberated districts, impacting prices in the old districts.After the liberation of Shanghai, the importance of the central dispatching capability has become more and more fully reflected.

What the Communist Party has to do now is to backhand, tighten money, and suck up hot money and positions that can be mobilized from the financial market.This requires a unified nationwide issuance of renminbi, and all revenues will be remitted to the central treasury, and all central ministries will collect and spend. There are two main channels for tightening monetary policy: one is to collect taxes, and the other is to issue public bonds. "We also require capitalists to pay workers wages on time to prevent them from suspending production and transferring funds to speculation. The State Council urgently passed the "Cash Management Measures", stipulating that state agencies, groups, and enterprises are only allowed to keep cash expenditures for three days. All money must be deposited in the People’s Bank of China. Cash payments are not allowed between public companies, only transfer payments are allowed, and deposits in private banks and banks are not allowed, and funds are not allowed to pass through banks for extracorporeal circulation. By the end of 1949, we had absorbed 8,000 100 million yuan in deposits basically sucked up the hot money in the society.” Ji Chaoding said in his recollection, “When the banknotes go out of the bank, they can be returned to the bank in the same month, and the speed of money return is greatly accelerated. It greatly reduces the number of currency issued and the circulation of currency in the market.”

The process of monetary tightening is accompanied by another round of speculative climax.Speculators hoarded in large quantities.Since October 15, in less than a month, the price of cotton yarn in Shanghai has risen by 3.8 times, and the price of cotton cloth has risen by 3.5 times, which has led to the rise of other prices and prices in other regions.However, "objectively speaking, the threat of this round of price rises has been greatly reduced. After about half a year of deployment by the central government, it has been in a state of high control over currency and materials, because liquidity has been greatly tightened in the dark, and the counterattack of speculators is actually fragile."Yang Zhongwen said, "During this period, the central government has frequently deployed materials in places such as North China and Shanghai. Shanghai has prepared 1.1 million pieces of cotton cloth and 28,000 pieces of cotton yarn."

The rest is when to "close the net".The action that was later called the "Battle of Rice Cotton" was in fact no longer confrontational at all, but full of punishment for speculators. On November 25, when market prices reached their peak, these state reserve materials began to be sold nationwide.Yang Zhongwen recalled: "When the market first opened, speculators in Shanghai saw that cotton yarn was sold, and rushed to buy it with all their funds. Social hot money was no longer abundant, and some people did not hesitate to borrow usury. At that time, loans in Shanghai even There is a phenomenon of calculating interest on a daily basis, which is called "daily demolition" by Shanghainese, which is rare in the world. Speculators calculate that the price of gauze has risen several times in a day based on their past experience. Changing hands can not only deal with daily demolition, but also make high profits. But they found that the state-owned flower gauze companies in Shanghai and other places kept selling gauze, and while selling, they lowered the price. In order to avoid losing all their money, speculators had to follow the market , sold the gauze in their hands, but the more they sold, the faster the market fell, and the price of gauze in Shanghai fell by half in one day. The government took the opportunity to buy a large amount of cotton yarn at a very low price. "

Zhang Lifan, son of Zhang Naiqi, a member of the Central Finance Committee and the first Minister of Grain in New China, recalled that Zhang Naiqi later admired Chen Yun's ability to control the situation with ease. "At first, my father repeatedly suggested to start early and put pressure on the market, but Chen Yun has been holding back. Facts have proved that Chen Yun chose the most accurate attack point based on the comparison between the amount of inflation and the amount of supplies. Take Wufubu as an example, November 13 The current market price is 126,000 yuan per piece, which has more than doubled compared with 55,000 yuan on October 31. That is to say, if the counterattack had been advanced half a month earlier, the ability of two pieces of cloth to absorb money back into the circulation would have been reduced. It won’t be worth the one half a month later.”

A month later, the Central Finance Commission followed suit and imposed punishment on grain speculators.When the hoarders have accumulated several months of rice sources and plan to make a fortune in the "red plate" of the grain market on the fifth day of the first lunar month, the central government has completed the Hangjiahu, Suzhou, Wuxi and Changzhou lines around Shanghai, Jiangsu, Zhejiang, Anhui, and the northeast , Central China, and Sichuan organized the deployment of the three lines of defense.Combined with these lines of defense, the government has about one billion catties of turnover grain, which is enough for Shanghai to survive for a year and a half.