Chapter 54 Legal currency reform: the fuse of Japan's war of aggression against China

The "four big families" kept fighting because of the uneven distribution of spoils, but the silver trend in the market continued to spread. After the national government imposed a silver export tax, silver smuggling became increasingly rampant.It was only then that Chiang Kai-shek recognized the U.S. silver policy and aimed directly at China.China adopts the silver standard, but the pricing power of silver is firmly held by the Americans.The skyrocketing price of silver triggered a serious economic crisis, forcing Chiang Kai-shek to consider reforming the currency system. At this time, the United States, Britain, and Japan had already launched a fierce contest to seize control of China's currency.

Japan invaded and occupied Northeast China and was expanding its influence in North China.In the "Tianyu Statement", Japan stated that it has "special responsibilities" towards East Asia and China, and that other countries are not allowed to interfere in China's affairs without Japan's consent. China has become Japan's big meal.The UK has the largest investment and the largest commercial interests in China. How can the British Empire swallow this breath in the face of the aggressiveness of Japan, the former "little brother of the rivers and lakes"?It's just that Nazi Germany in Europe is putting more and more pressure on the British Empire, and it intends to clean up Japan, but it is obviously not strong enough.

The only one that has the strength, motivation, and means to deal with Japan is the United States, and the United States is also the one that Japan is most worried about, most afraid of, and most helpless.The United States controls Japan's oil and steel lifelines. As long as its hands are tightened, Japan will immediately have difficulty breathing.The main reason why the United States does not make a move is that it wants to sit on the mountain and watch the tigers fight.On the one hand, I hope to use the hands of Germany to remove the biggest obstacles on the road to hegemony, Britain and the Soviet Union. At the same time, I don’t want to be a villain.On the other hand, it is hoped that Japan will fall into the quagmire of China, greatly consume Japan's strength, and finally give it a fatal blow.By that time, looking around the world's major powers, Britain, France, Germany, Japan and the Soviet Union have all suffered heavy losses, who else can challenge the United States?

The national government, suffocated by the economic recession, had no choice but to express to the United States that it was willing to sell the United States for silver and abandon the silver standard, but the attitude of the Americans was quite cold on the surface, and they were waiting for a better opportunity to bargain.The Nationalist government went to ask HSBC and Standard Chartered Bank for loans to China. Song Ziwen presided over the foreign debt and proposed a loan of 20 million pounds to HSBC. Under the urging of the British financial circles who advocated a "positive" foreign policy towards China, the UK agreed. "Conditional" loans to China.In this round of competition, the United States is more sophisticated than the United Kingdom.

The British government ordered George, the acting commercial counselor of the British embassy in China, to convey the British conditions to Kong Xiangxi and Song Ziwen: loans are available, but China's future legal currency must be separated from the silver standard and linked to the pound exchange rate. At the same time, Britain suggested that Japan, the United States, France and other countries jointly hold an international financial conference to discuss "collective assistance" to the Chinese government. [13] Britain understands that without the participation of the United States and Japan, I am afraid that these two will secretly plot murderous hands and destroy the beauty of the British Empire. After binding, everyone should hold a show together.On this issue, the British are obviously too naive.

Although France expressed its willingness to cooperate with the United Kingdom, this is because France has to rely on the support of the United Kingdom in the face of Nazi Germany, which vowed revenge.But Japan categorically rejected this initiative, while the United States adopted a "wait and see attitude."The United States was afraid that if the United Kingdom dominated China's currency reform, it would control China's finances, and finally decided not to send representatives to the meeting for discussion.The United Kingdom saw that no one was cheering, so it announced that it would send Liz Ross, the government's chief financial adviser, to visit China to "provide suggestions" for China's currency reform. 【14】Roth hoped to go to the United States to "combine" before departure, but the U.S. government refused to invite him to stay in Washington, so he had to go to Japan.Ross went to Japan hoping to promote the cooperation between Britain and Japan. During the talks with Japanese Foreign Minister Hirota, he proposed that if "Manchukuo" could pay tariffs to the national government, then Britain could mediate from it and let the national government recognize "Manchukuo".And if the Manchuria issue is resolved, the dispute between Japan and China on the North China issue will be resolved.If Manchurian tariffs are added to the national government's tariffs, then the national government's loan guarantee capacity will also be strengthened accordingly, which will stabilize China's currency and effectively protect the trade between Britain and Japan with China. Isn't this a result that everyone benefits from? ?If the currency system reform is successful, trade will develop accordingly, and Japan will be the country that will benefit the most.

The Japanese were very angry, Ross actually played with himself like a three-year-old child! "Manchuria" has long been in his pocket, and Ross wants to use Japan's lost Manchuria tariffs to help Britain sell favors to Chiang Kai-shek?It just doesn't make sense!What is even more exasperating is that Ross actually exchanged the small favors of small trade for the huge benefits of Japan giving up control of China's currency issuance?The Japanese were outraged. In the end, Japan and the United States did not cooperate, and Britain had to fight by itself.Ross arrived in China in September 1935 as a senior adviser, saying that one of his "important duties" in China was to investigate whether it was feasible to manage currency in China.

He conducted the "study" with Patsy of the HM Treasury and Rollis of ABN Amro.As expected, and contrary to Japanese perceptions at the time, they came to the conclusion that it was "pretty feasible". "Research" found that although the transportation of silver in North China was "disturbed", a large amount of silver had been concentrated in the National Government Banks in Shanghai and Nanjing. Therefore, the currency management system was implemented, and there was enough silver to maintain the stability of the foreign exchange market, thereby ensuring the currency. Stablize.Therefore, the United Kingdom believes that it can provide loans to China and promote currency reform.

Later, according to the memory of Dai Mingli, director of the Coin Department, he was ordered to rush from Nanjing to Shanghai to participate in the drafting of the currency system reform announcement.The main content of the plan is to translate the English draft into Chinese. The translation of the sixth article of the plan is always inappropriate. Song Ziwen finally said: "Just make it clear that the Central Bank, Bank of China, and Bank of Communications can buy and sell foreign exchange without restrictions. There is no need to say more about the rest.” In fact, the “technical content” of this sentence is quite high, which shows that Chiang Kai-shek also hopes to maximize the benefits in the process of balancing the countries.The drafting of the Ministry of Finance’s announcement on currency system reform was completed at midnight, and the staff rushed to Kong Xiangxi’s residence, and Kong Xiangxi signed it and issued it overnight. [15] It is a pity that the most important currency reform documents of the dignified Nanjing National Government were all drafted by the British. How can such a government have the possibility of currency independence?

On November 4, 1935, the national government announced the legal currency policy, stipulating that the banknotes issued by the Central Bank, Bank of China, and Bank of Communications were "legal currency", that is, they had unlimited legal repayment ability.The circulation of silver dollars in the market is prohibited, and the silver and silver dollars stored by various financial institutions and private individuals are restricted to be accepted by the central bank.Kong Xiangxi and Liz Ross finally determined the exchange rate of the French currency to the British pound after many "secret planning".

From this day on, China's legal currency has become a vassal of foreign currencies. In the "monetary consensus" reached between Chiang Kai-shek and the United Kingdom, HSBC was a key factor.When the silver wave broke out in China, only HSBC had the strength to maintain Shanghai's market. Its pivotal position in China's financial market and its huge capital strength made the author of "History of HSBC" sigh: "HSBC can make a big country It is unbelievable that the currency has remained stable for most of the year.” [16] After the reform of the currency system, in accordance with the imperial edict, HSBC took the lead in transferring tens of millions of silver dollars in storage to the National Government’s The central bank, in exchange for China's legal currency paper currency, banks such as Standard Chartered immediately agreed to hand over silver unconditionally, and at the same time expressed their support for currency reform. [17] The British Minister to China issued a notice to the British expatriates, saying: "Any British legal person or individual residing in China who repays all or part of the debt with cash shall be regarded as illegal." The national government obtained about 300 million yuan in silver, and the Nanjing government then shipped a large amount of silver to London for sale and exchanged it for British pounds to store in the UK as a reserve to maintain the stability of the legal currency.Initially, the national government deposited about 25 million pounds in fiat currency reserves in the Bank of England. The sterling of legal currency has greatly stimulated Japan's nerves.Britain openly challenges Japan's sphere of influence. The sterling of the French currency means that the alliance between China and Britain has been completely locked at the currency level, and the break between Japan and the United Kingdom will be inevitable.At the same time, Japan began to step up its invasion and expansion of North China.Now that the yenization of legal currency has come to naught, if it is not soft, it will be hard. In order to appease the anger of the Japanese side, Chiang Kai-shek had to come up with an "account".On the same day that the Ministry of Finance announced the reform of the currency system, the Executive Yuan of the National Government officially agreed to Yuan Liang's "voluntary" resignation from the post of mayor of Beiping City, and at the same time abolished the branch of the Beiping Military Commission.Both of these things were requests from the Japanese troops stationed in North China to Chinese officials in North China.Chiang Kai-shek adopted a low profile and met the Japanese request, hoping to ease the pressure on the Japanese side.But Japan did not buy it. The Kwantung Army and the Japanese Garrison Army in North China believed that the implementation of currency reform would dry up the North China economy, and Britain would control the entire China economically.This prompted Major General Doihara to put forward the policy: "Let North China be economically separated from the Nanjing regime." At the same time, Isoya, the military attache of the Japanese embassy in China, issued a statement categorically refusing to transport cash from North China to the south and opposing the reform of the currency system. 【18】The Ministry of Foreign Affairs of Japan issued a speech, accusing the spearhead of this currency reform to be directed at Japan.Japan instigated ronin and hooligans in Beiping to buy goods in foreign currency in the market. If the store offered change in French currency, they would forcibly refuse it by claiming that it could not be cashed.This back and forth has caused various firms to no longer dare to accept legal tender.For a time, people in North China panicked.When the Anti-Japanese War broke out, Japan simply began to do it by itself, "DIY" the counterfeit legal currency, reversed the fake legal currency and exchanged it for foreign exchange, and then purchased supplies. Japan's counterfeit currency was printed by Yamamoto Kenzo of the Japanese Army General Staff.This person dreamed of making counterfeit money when he was young, and finally realized his boyhood "dream of counterfeit money" on the national government's legal currency.At first, Yamamoto selected the 5-yuan legal currency and printed hundreds of thousands of yuan. However, when the batch of counterfeit currency was shipped to China, there was a "bad news". This 5-yuan legal currency had been invalidated in China. This operation failed miserably. It is estimated that he was too excited at the time and did not inquire clearly beforehand. Later, he finally succeeded in counterfeiting the low-value counterfeit banknotes of the Farmers Bank of China and purchased a large amount of materials from China. During World War II, the German Navy intercepted an American merchant ship in the Pacific Ocean, and seized the half-finished French currency of 1 billion yuan printed by the American Mint Company for the Bank of Communications of China, which only lacked numbers and symbols.After buying these semi-finished products, Japan finally mastered all the secrets of printing legal currency. Japan has produced as much as 4 billion yuan of fake legal currency. Chiang Kai-shek tried to check and balance Japan by winning over Britain and the United States, and set up a national defense design committee to study China's currency system reform, and included the issue of China's currency system reform into "national defense design".This shows that in the process of considering the legal currency reform plan, Chiang Kai-shek had already had the intention of getting closer to Britain and the United States and guarding against Japan. It was in the struggle for control of China's currency that the Japanese, who had lost consecutively, were "disappointed" and accelerated the all-out war of aggression against China.It can be said that the reform of legal currency became the fuse of Japan's war of aggression against China!