Forgotten Ally: China's World War II, 1937-1945

by Rana Mitter

Naturally, many observers, including Americans such as Peck and White, threw the Nationalists’ failures into starker relief by comparing them with Communist successes. Yet all was far from well in Yan’an. The Nationalists’ subsidy to the region had ended in 1939, and the blockade that replaced it made the economic situation much more difficult. The bad harvests in 1940 and 1941 that caused the disastrous famine in Henan also affected the ShaanGanNing area. Because the Nationalist currency (fabi) was no longer freely available there, the Communists had to issue their own currency for local use, saving the hard-to-obtain Nationalist fabi to import goods that could not be produced locally. The result was massive inflation, higher even than in the Nationalist areas. By 1944 prices that had increased 755 times since 1937 in Chongqing had increased 5,647 times in Yan’an. The economy of Mao’s base area was in danger of collapse.