Leadership Style and Financial Rivalry in Nationalist China

Parks M. Coble's book The Collapse of Nationalist China: How Chiang Kai-shek Lost China's Civil War (Cambridge UP, 2023) revisits one of the most stunning political collapses of the twentieth century. When Japan surrendered in September 1945, Chiang Kai-shek seemed triumphant—one of the Big Four Allied leaders of the war and head of a government firmly allied with the United States. Yet less than four years later he would be forced into a humiliating exile in Taiwan. It has long been recognized that hyperinflation was a critical factor in this collapse. As revenues plummeted during the war against Japan, Chiang’s government simply printed currency to cover its debts resulting in rapid inflation. When World War II ended it was assumed that with eastern China returned, ports opened, and financial support from the U.S. assured, the currency could be stabilized. But in fact, Chiang was obsessed with defeating the communists and the printing presses accelerated the production of banknotes which rapidly lost value.

Why didn’t the nationalist government tackle the issue of hyperinflation before it was too late? The fundamental flaw of the Chiang government was that he centralized all authority in his own hands and established overlapping and competing agencies. This approach fostered bureaucratic infighting which he alone could resolve. In the financial realm the competing elements were within his wife’s family, her brother T. V. Soong (Song Ziwen) and brother-in-law H. H Kung (Kong Xiangxi). The new archival records reveal a bitter and often very petty rivalry between the two men that started in the 1930s and continued even after they were in exile in the United States after 1949.

The tragedy for China was that both men ultimately bent to Chiang’s wishes to provide money and suppressed any effort to alter the policy. T. V. Soong especially recognized the dangers of the inflationary policy, but his ambition and jealousy of his brother-in-law led him to cave when under pressure to produce more currency. Records in the Hoover Archives show how little understanding Chiang had of finance and how little interest he had dealing with it. The structure of the Chiang government meant that almost nothing could be done without sustained attention from the leader. Thus in 1947 when the collapse of the fabi (legal tender) currency was imminent, Chiang waited a year before authorizing a replacement currency, the disastrous gold yuan. My study suggests that the most important factor in the collapse of the Chiang government was its organization as an authoritarian system designed for control but ineffective at getting things done.

Parks M. Coble is the James L. Sellers Professor of History at the University of Nebraska-Lincoln.

Dong Wang is collection editor of Asian Studies books at Lived Places Publishing (New York & the UK), H-Diplo review editor, incoming visiting fellow at Freie Universität Berlin, research associate at Harvard Fairbank Center (since 2002), a member of the Royal Institute of International Affairs, director of the Wellington Koo Institute for Modern China in World History (Germany & USA), and an elected Fellow of the Royal Asiatic Society of Great Britain and Ireland.

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