Witness to History by Paul Hoffmann

Author:Paul Hoffmann
Language: eng
Format: epub
Publisher: Earnshaw Books Ltd
Published: 2021-10-13T02:43:22+00:00

15

The Communist Storm Strikes:

August 1948—August 1949

I particularly remember my stay in Moganshan because it coincided with the revaluation of the Chinese currency which was accomplished by dividing the exchange rate by a factor of four million. This was a last ditch effort to stem the unbelievable rate of inflation. It had climbed to 12 million Chinese Yuan: 1 US dollar. The plan was to eventually return to the three to one exchange rate that was in effect at the time of the Japanese invasion in 1937. Due to the pressures of the war with the Japanese, the Chinese currency continued to weaken steadily, as more and more money was printed to support the conflict.

At the end of World War II, money was needed for reconstruction. The rate of inflation accelerated to a point only exceeded in Germany after the First World War. One contributing factor was the incredible corruption at all levels of the Chinese government. While no one ever openly accused Chiang, his brothers-in-law, the Kungs, were among the worst offenders. Then there was the Chinese practice of paying a general the salary for all the troops he claimed were under his command, rather than paying individual soldiers directly. Most of the generals would overstate how many soldiers they commanded. In addition, when the generals got the money, they used it to buy gold or US dollars on the black market, thereby driving up the exchange rate. A month or so later, they sold the US dollars and gold at the higher price and paid the soldiers in Chinese Yuan, pocketing the difference. The generals got very rich and the purchasing power of the soldiers decreased each month. The Nationalist soldiers were reported to have exchanged their arms for food with the Communists, who were steadily advancing towards Shanghai. After the Communists took over Shanghai, I saw the Communist soldiers carrying US arms. Were they captured or bought? Who knows? Probably both scenarios had occurred. No wonder the soldiers were unwilling to put forth a good fight for the Nationalist cause.

If one was paid in US dollars, or had access to the black market, you could make a profit. I was paid in US dollars and sold dollars only when I needed extra cash. I had overdraft privileges at Chase Bank and was able to write checks in Yuan to get cash, large bundles in denominations as high as one hundred thousand Yuan. When the bank called to cover the overdraft every two weeks or so, the dollar had risen substantially against the Yuan, and I was able to exchange enough dollars on the black market to cover my overdraft. If I remember correctly, the overdraft privilege was not less than one hundred million Yuan. By this method, I was able to reduce my expenses in US dollars substantially. The office, which collected most of its fees in US dollars, operated in the same way, only on a larger scale. I was in charge of dealing with the black market broker.

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