Evening star., 1934-06-10
CHINARETARDED BY NEED
OF CASH AND CONFIDENCE
Desire of People to Stop Civil War and
Turn to Reconstruction Throughout
Nation-Light Industries Cain.

while internal stability and the full
measure of desirable uniflcation have
not been attained, the elements of
both exist as they have not existed
hitherto A few years ago the bricks
out of which any national structure
must be built we're rot available or
we're crumbling. Now, with stabil-
ization in the provinces, the bricks at
least are there And in the provinces
generally, whatever the original source
of authority of the different governors,
most of them are now turning their
attention from new military ambitions
to active efforts Of economic recon-
Struction.
On the whole, then, the political
situation shows Improvement. Eco
nomically, however, the last three
years have witnessed a serious de-
terioration. This is partly due to the
cumulative results of two previous
decades of civil war partly to the
new strain and shocks to confidence
involved by the Japanese conflict.
However, it also is largely due to the
changed value of silver, China'S cur
rency. in relation to the currencies OF
the other countries with which she
chiefly trades
China practically escaped the ef-
fects of the world depression during
its first two years. She continued to
suffer from her own chronic troubles,
but from the Autumn OF 1929 to that
of 1881 she enjoyed period of what.
by her own modest standards, was
comparative prosperity. The main
cause of this was certainly that while
almost all other countries were SUI
fering from currency def1ation-that
is, from the fact that their prices Gin
their national gold currencies) we're
falling-Chinese prices were rising.
and her export prices nevertheless re-
manned on favorable competitive
terms because silver was falling in
relation to gold.
Changes in Money Values
This happy immunity was ended
when the pound sterling and with 1t
the yen and the rupee, left gold and
deprecated substantially in Septem
Der, 1881. Since then silver. and
therefore the Chinese dollar. has been
appreciating in terms of these cur
rencies. and her internal prices have
been falling. To those misled by the
arguments of silver advocates, urging
that dearer silver would benefit
China or increase her purchasing
power, I recommend study of the
actual economic record of China dur
ing these last four years.
At the present time the interior of
China is being starved of capital,
partly because little or no foreign
money is coming into the country
partly because lack of confidence is
taking the country's own limited saw
ings to the. unproductiye security of
bank deposits at Shanghai. Real i'm
provement can come only when cap
ital flows back from Shanghai to the
interior and from the outside world
into China. For this the first condi-
tion is the re-establishment of con-
fldence; the second, as regards for
eign capital, is that the railway situa-
tion should be dealt with. Techni-
caily. this is a soluble problem: there
certainly is great scope for produc-
tive railway expansion and for eco
nomic development based upon it,
1t is encouraging. indeed, that in
spite of all the adverse factors which
have been noted, there has been
continuous development in China of
lighter industries. which now make
a great variety of articles-furniture
domestic appliances. ct cetera-for
which China formerly depended upon
foreign supplies or, more commonly
had to dc without. In addition,
there has been much activity. not all
we'll directed, but representing a real
effort and considerable promise for
the future, in economic reconstruc-
tion-the making of roads. govern
mental assistance to farmers in i'm
proving their yield by selecting better
seed, etc.
1t is in these directions that we
must seek the signs of progress and
development. The congestion of
population will continue to make the
individual farmers margin of pro-
duction beyond the needs OF his own
family a small one; and the limita-
ton in his purchasing power so i'm
posed will restrict the range OF both
China's industrialization and her
ability to buy from abroad. Never
theless, moderate increase in this
margin is certainly possibsf: and
even a modest increase, multiplied by
the numbers of her people. would
represent substantial addition to
the sum total of human happiness
and no inconsiderable addition to the
general trade of the world