As the war situation worsened, so did the economy. The introduction of the grain tax in kind in 1942 had worsened the situation for the peasants, but had at least succeeded in lessening the effects of inflation on food prices for the army. However, inflation soon began to take hold again. Part of the cause was the Japanese-influenced dilution of the currency, and Arthur Young, whose sympathies were entirely with Nationalist China, fully acknowledged a variety of other reasons, including scarcity of goods, the refugee crisis, and the reduction in the labor force because of recruitment to the
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