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

by Rana Mitter

Government retreated from the east of the country. Instead, a new interport duty was established that taxed the movement of goods within China. Although a barrier to the free market, it proved a reasonably effective means of replacing a small proportion of the lost Customs revenue in the first two years of the war.28 The industrial economy of Nationalist China was also in a worrying state. Beginning in 1932, the government had concentrated on creating a “defense state,” involving central government control of new military-oriented enterprises such as steel production and the manufacture of machinery. However, the new industries had not yet been fully constructed when war broke out, and most of the factories that were transferred upriver to Sichuan were privately owned. The region had just 4 percent of China’s total electrical power-generation capacity; it held a similar tiny percentage of China’s industrial capital. Sichuan lacked the railways, modern steel production, and highways developed elsewhere in the country in the decade before the war broke out.29 This was therefore a pitifully small base on which to try to mobilize a wartime industrial economy. To make matters worse, the loss of eastern China meant that the best way that