Chapter 80 "Strategic Materials" and the Trade War

Just as Nanhanchen used salt as a "trade strategic weapon" in the Shaanxi-Gansu-Ningxia border region, the Shandong base area industrial and commercial bureaus used sea salt and peanut oil, two strategic materials that were rich in the base area and urgently needed in the enemy-occupied areas, as the main weapons in the trade struggle. In the past, the government did not have a unified organization to manage sea salt, and it was resold by salt merchants, exploiting producers and consumers at both ends. In addition, the government's high salt tax led to tax evasion and tax resistance by salt farmers, which caused great conflicts.After the sea salt was monopolized by the Bureau of Industry and Commerce, the salt merchants who exploited in the middle were driven away, and the salt shops of the Bureau of Industry and Commerce purchased it uniformly.The Bureau of Industry and Commerce formulated a special sales strategy. The closer to the enemy-occupied area, the higher the salt price. In the area bordering the enemy-occupied area, the salt price increased by 50%.The design of this tiered salt price is quite ingenious. It not only ensures that the salt price in the core area of ​​the base area is low, which is beneficial to the daily life of the people, but also greatly increases the cost of obtaining table salt in the enemy-occupied area, thereby increasing the income of the base area as much as possible.

Peanut oil is a necessity in the Shanghai market. After the acquisition by the Industrial and Commercial Bureau, it was sold to Shanghai as a private business, and it was exchanged for industrial supplies needed by the base area, including paper equipment for printing banknotes and military supplies.The Japanese army in Shanghai knew the source of peanut oil well, but because of the needs of the Shanghai market, they had to secretly protect it. Due to the favorable trade policy adopted by the Industrial and Commercial Bureau and the monopoly of strategic materials, the foreign trade of the base area exceeded by a large amount, thus effectively guaranteeing the exchange of various commodities urgently needed by the base area.In this way, the Bureau of Industry and Commerce can control the currency value and price of Beihai coins with ease, and actively support the currency struggle.

Whoever controls the strategic materials controls the currency settlement rights of trade.When the legal currency is stable, the legal currency is used for settlement, and after the legal currency depreciates, the counterfeit currency is used for settlement. After the counterfeit currency depreciates, the limited material transactions in the base area must be completed with Beihai currency, so that merchants in enemy-occupied areas have to hold a certain amount of Beihai currency. I also realized that the Beihai currency is more stable and stable than the currency in the enemy-occupied area, so I am happy to hold it. In this way, the Beihai currency went deep into the enemy-occupied area and took root.The Shandong base area has discovered that Beihai currency is used as the "foreign exchange reserve" of the enemy-occupied area, which will be able to effectively mobilize the resources of the enemy-occupied area for our own use. This is a disguised "seigniorage" benefit, which is in line with the US dollar international currency strategy The designs are nearly synchronized.

If the older generation of currency and trade masters were still alive today, they would not hesitate to use the core strategic materials under China's control (such as rare earth resources) as the basis to strike a beautiful financial combination.Want to use Chinese rare earths?Yes, but the condition is that RMB must be used for trade settlement, thereby increasing the demand for RMB international reserves and accelerating the process of RMB internationalization. Through currency and trade practices, the Shandong base area has shifted from a defensive war of boycotting legal currency and protecting materials to a strategic counter-offensive of expanding the circulation domain of Beihai currency and arbitrage purchase of materials in enemy-occupied areas, which greatly improved the combat capability of the base area's currency war and served as a base for the base area. Fiscal revenue has made a great contribution, making the Shandong base area the most affluent among the liberated areas, and laying a solid material foundation for the victory of the War of Resistance Against Japan and the War of Liberation.

In the early days of the Liberation War, Bo Yibo met Xue Muqiao at a financial work conference and said that the Kuomintang sent 700,000 troops to attack Shandong, and the main force of the New Fourth Army moved to Shandong, and Shandong had a heavy burden.How many full-time military and political personnel does Shandong have to bear?Xue Muqiao asked Bo Yibo to estimate, Bo Yibo guessed that there were about 700,000 people, Xue Muqiao smiled and replied that there were 900,000 people!Bo Yibo was very surprised when he heard this. He didn't expect the financial strength of the Shandong base area to be so strong. 【11】

Xue Muqiao accumulated valuable experience in currency issuance in his Shandong base area, which provided an important basis for the independent issuance of RMB from gold and silver a few years later. In 1948, the CCP began to discuss the RMB issuance policy, and Xue Muqiao's views on currency independence were greatly questioned.Many economists who came to Yan'an at that time believed that the base area had no gold and silver reserves and could not get the support of strong currencies such as the US dollar and the British pound. If the connection with the legal currency was severed, it would be impossible to maintain price stability.

Xue Muqiao used the experience of the Shandong base to prove that the value of currency is fundamentally determined by the purchasing power of currency, and it can completely get rid of the relationship with gold, silver and foreign exchange.More importantly, once a connection occurs, the economy of the base area will be easily affected by the enemy. "In some areas (such as Central China), although the legal currency has not been suspended in the past few years, they have constantly changed the exchange rate between the local currency and the legal currency due to the continuous depreciation of the legal currency, so as to maintain the relative stability of the currency value and price of the currency. But in Shandong and Shanxi, Hebei, Shandong and Henan won the currency struggle, banned the French currency, and established an independent local currency market.”【12】

At the end of 1948, on the basis of summarizing the experience of currency struggles in various base areas in the past, the CCP began to issue a unified currency—RMB.The RMB does not stipulate the gold content, and declares that it has no relationship with gold and silver. The exchange rate is mainly determined by the actual purchasing power of the currency. At that time, the Kuomintang took away all the gold and silver in the national treasury. If the renminbi was linked to gold and silver, the purchase of gold and silver would increase currency issuance, and prices would rise. Similar situations had already occurred during the currency system reform of the Nationalist government.As a result, the Communist Party froze the pricing of gold and silver at the same time as the RMB was issued, making it lower than the rate of price rise and lower than the international price of gold and silver.This was the beginning of China's gold and silver control policy for decades to come.

More importantly, the Communist Party has learned the lessons of the Ming and Qing Dynasties and the Kuomintang government that lost their monetary sovereignty because they could not control the supply of silver. They did not link with gold and silver and foreign exchange, and got rid of the Western powers with strong gold and silver reserves. and political control. The RMB was issued independently from gold and silver. This was a realistic choice for China to get rid of the currency control of Western powers at that time, and it reflected the important principle of seeking truth from facts.Today, when the renminbi is tied to the U.S. dollar, the U.S. dollar has to depreciate for a long time due to the heavy debt burden. When facing the loss of the world currency status, if the U.S. dollar chooses to re-link to gold in the "improved version of the gold standard" in the future, to Strengthening the credit of the US dollar, because China's gold reserves are seriously low, the strategic situation of the RMB will be very unfavorable.

Whether the renminbi will be pegged to the US dollar in the future or whether it will independently create a new currency issuance model will be a major strategic issue.