Chinese hyperinflation

Chinese hyperinflation
Part of the Chinese civil war and the Second Sino-Japanese war
Preparing to pay wages in the 1940s China
DateLate 1930s to early 1950s
LocationMainland China
(Extended to Taiwan in 1945)
Cause

The Chinese hyperinflation was the extreme inflation that emerged in China during the late 1930s,[1] extended to Taiwan after the Japanese surrender in 1945, and concluded in the early 1950s.[2]

In the 1935 currency reform, the Nationalist government of China abandoned the traditional silver standard, in response to deflation caused by rising silver prices, and introduced its own paper currency, the Chinese National Currency (CNC).[1] However, this currency was issued without sufficient credit or reserve backing. The Nationalist government's reliance on deficit spending led to unchecked monetary expansion, resulting in rapid currency depreciation. This situation was aggravated by the financial burden of the Second Sino-Japanese War and the subsequent Chinese Civil War.[3] To control the price hike, the government tried to introduce a new currency, namely the Chinese gold yuan (GY) in 1948,[4] along with price and wage controls, which proved infeasible due to extensive corruption and administrative failures.

The hyperinflation eroded popular support for Nationalists across China, contributing to the collapse of the Republic of China on Mainland.[5] In contrast, the Communists' ability to control it, aided their rise to power on Mainland China.[6] On Taiwan, the Nationalists eventually restored financial stability using the Chinese gold they took to the island during their retreat from the mainland[7] and American financial support.[8]

  1. ^ a b Habegger, Jay (1988-09-01). "Origins of the Chinese Hyperinflation". Foundation for Economic Education. Archived from the original on 2024-06-13. Retrieved 2024-11-15.
  2. ^ Cite error: The named reference :10 was invoked but never defined (see the help page).
  3. ^ Babcock, J. M.; Makinen, G. E. (1975). "The Chinese Hyperinflation Reexamined". Journal of Political Economy. 83 (6): 1259–1267. doi:10.1086/260394. ISSN 0022-3808. JSTOR 1830861. Archived from the original on 2024-05-05. Retrieved 2024-11-15.
  4. ^ Ebeling, Richard M. (2020-07-05). "The Great Chinese Inflation: Inflation Undermined Popular Support Against Communism". Foundation for Economic Education. Archived from the original on 2024-05-28. Retrieved 2024-11-15.
  5. ^ Reed, Lawrence W. (2022-05-11). "What China's Hyperinflation in the 1940s Can Teach Americans". Foundation for Economic Education.
  6. ^ Cite error: The named reference :17 was invoked but never defined (see the help page).
  7. ^ Cite error: The named reference :11 was invoked but never defined (see the help page).
  8. ^ Cite error: The named reference :9 was invoked but never defined (see the help page).