The Chinese gold yuan (also known as golden round, golden yuan, among others) was a defunct legal tender currency of
China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
between August 1948 and 1949. It was a method used by the Republic of China government to accumulate gold from its citizens in preparation to relocate to Taiwan. It circulated in the country under the effective control of the
Government of the Republic of China
The Government of the Republic of China, is the national government of the Republic of China whose ''de facto'' territory currently consists of Taiwan, Penghu, Kinmen, Matsu and other island groups in the "free area". Governed by the De ...
known as
Taiwan Province
Taiwan Province (; Pha̍k-fa-sṳ, PFS: ''Thòi-vàn-sén'' or ''Thòi-vân-sén'') is a nominal Administrative divisions of Taiwan, administrative division of the Taiwan, Republic of China (ROC). Its definition has remained part of the Constit ...
,
R.O.C., which issued
paper money
A banknote—also called a bill (North American English), paper money, or simply a note—is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand.
Banknotes were originally issued ...
on August 19, 1948.
[ This currency was notorious for vicious ]inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
due to inadequate issuance preparation and failure to strictly enforce issuance limits. In the early days of the issuance of the Golden yuan, the government used executive actions to force the public to exchange gold
Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile met ...
, foreign currency
A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins.
A more general def ...
for the new currency. The legal exchange rate was 0.22217 grams of gold per gold yuan but it could not be honored.[ The sharply depreciating Fabi currency was at the rate of one golden yuan of the yen to ]Fabi
The history of Chinese currency spans more than 3000 years. Currency of some type has been used in China since the Neolithic age which can be traced back to between 3000 and 4500 years ago. Cowry shells are believed to have been the earliest ...
$3 million, and this rate was used for the compulsory collection of public gold, silver, and foreign currency.[ In particular, the economic losses suffered by the urban ]middle class
The middle class refers to a class of people in the middle of a social hierarchy, often defined by occupation, income, education, or social status. The term has historically been associated with modernity, capitalism and political debate. Commo ...
were so great that the ROC government lost its original most important supporters and was one of the reasons why the ROC government failed so quickly in the Chinese Civil War
The Chinese Civil War was fought between the Kuomintang-led government of the Republic of China and forces of the Chinese Communist Party, continuing intermittently since 1 August 1927 until 7 December 1949 with a Communist victory on m ...
.
After the failure of the issuance of the Golden Yuan, the government of the Republic of China immediately issued Silver Yuan, but it was soon rejected in circulation, and the Chinese golden yuan was recalled by Central People's Government
The State Council, constitutionally synonymous with the Central People's Government since 1954 (particularly in relation to local governments), is the chief administrative authority of the People's Republic of China. It is chaired by the p ...
with the RMB
The renminbi (; symbol: ¥; ISO code: CNY; abbreviation: RMB) is the official currency of the People's Republic of China and one of the world's most traded currencies, ranking as the fifth most traded currency in the world as of April 2022. ...
;[ the people's government announced from June 1949 to stop the circulation of the Golden Yuan, and its replacement for the modern-day yuan at a rate of 100,000 yuan to 1 yuan.]
Issue background
The purpose of the issuance of a new currency was to replace the original hyperinflated Fabi currency that was issued by the national government since 1935. During the Second Sino-Japanese War
The Second Sino-Japanese War (1937–1945) or War of Resistance (Chinese term) was a military conflict that was primarily waged between the Republic of China and the Empire of Japan. The war made up the Chinese theater of the wider Pacific Th ...
, Fabi currency was issued in large quantities due to increased fiscal expenditure. After the war, the number of Fabi currency issued by the National Government to pay for the huge military costs of the war against the Communists
Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, a so ...
increased rapidly from $556.9 billion at the time of the victory of the war to $604 trillion in August 1948, an increase of over a thousand times in less than three years.
In terms of the size of the currency supply, it consisted of $1.4 billion before the war. In early 1947, Fabi currency issues totaled 3.5 trillion, rising to over 10 trillion by July. With no real increase in government inventories gold
Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile met ...
, foreign currency
A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins.
A more general def ...
, such huge issuances led to the extreme inflation. In the beginning, some paper mills were profiting from the use of low-denomination Fabi currency resource recovery
Resource recovery is using wastes as an input material to create valuable products as new outputs. The aim is to reduce the amount of waste generated, thereby reducing the need for landfill space, and optimising the values created from waste. Resou ...
as raw material for paper making. Song Ziwen, when he was in Executive charge of the Yuan, tried to stabilize the Fabi currency with a financial
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
policy of selling inventory gold to buy back the Fabi currency. But it was fruitless because the Fabi currency kept being issued massively, so it couldn't be fully backed by gold.
After the constitutional election in May 1948, Weng Wen-ho became Executive Yuan Head and Wang Yun-five was appointed Minister of Finance and began planning for monetary reform. At the same time, Chiang Chiang may mean:
* a Chinese surname (蔣), alternatively spelt Jiang
** Chiang Kai-shek, former leader of the Republic of China
* Chi'ang, variant spelling of the ancient Qiang (historical people) (羌)
* Chi'ang, variant spelling of the modern ...
arranged for Yu Hongjun, former Minister of Finance and former president of the Central Bank
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union,
and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...
, to also draw up a proposal for currency reform. The drafting team, led by central bank experts organized by Yu Hongjun, believes that the Fabi currency can be maintained for some time without fundamental reform, and will collapse faster if fundamental reform is carried out.
The program elaborated by Yu's team focused mainly on the increase and improvement of fiscal
Fiscal usually refers to government finance. In this context, it may refer to:
Economics
* Fiscal policy, use of government expenditure to influence economic development
* Fiscal policy debate
* Fiscal adjustment, a reduction in the government ...
revenues, proposing to use this special currency for all tax payments and foreign trade remittances without depreciating along with the Fabi currency, following the example of the 1937 tariffs levied by customs
Customs is an authority or agency in a country responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country. Traditionally, customs ...
, which would increase the proportion of fiscal revenues to fiscal expenditures from more than 10 to 40 or 50 percent. The government's efforts to improve the economy and the economy of the country were not satisfactory, but Chiang was not satisfied with this and thought that it could not collect the country's gold, silver, and private foreign exchange
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
reserves to cope with the difficult situation. At the meeting, Executive Yuan President Weng Wenhao, Foreign Minister -- and Central Bank President Yu Hongjun agreed.
In addition to the attendees, Chiang only approached Zhang Jiajiajie, the former general manager of Bank of China
The Bank of China (BOC; ) is a Chinese majority state-owned commercial bank headquartered in Beijing and the fourth largest bank in the world.
The Bank of China was founded in 1912 by the Republican government as China's central bank, repl ...
, who had just resigned as president of the Central Bank, and Weng Wenhao
Weng Wenhao (; 26 July 1889 – 27 January 1971) was a Chinese geologist and politician. He was one of the earliest modern Chinese geologists, and is regarded as the founder of modern Chinese geology and the father of modern Chinese oil industry ...
, who informed U.S. Ambassador to China Stu Redden a few days before the reform was to take place.
Later Issue
On August 19, 1948, the Chinese Kuomintang
The Kuomintang (KMT), also referred to as the Guomindang (GMD), the Nationalist Party of China (NPC) or the Chinese Nationalist Party (CNP), is a major political party in the Republic of China, initially on the Chinese mainland and in Tai ...
convened a Central Political Conference to approve the currency reform proposal put forward by Weng Wenho, Wang Yunwu
Wang Yun-wu (; ; July 9, 1888 – August 14, 1979)http://m.blog.sina.com.tw/87951/article.php?pbgid=87951&entryid=644078 was an influential Chinese publisher, politician scholar of history and political science; He also invented the ''Shih Chi ...
. Weng Wen-hao held a meeting of the Executive Council that afternoon to discuss and approve the currency reform proposal. According to the Temporary Provisions against the Communist Rebellion
The Temporary Provisions Effective During the Period of National Mobilization for Suppression of the Communist Rebellion were provisions of the Constitution of the Republic of China effective from 1948 to 1991 and amended four times by the Centr ...
adopted by the First Session of the First National Assembly, Chiang issued a "Financial and Economic Emergency Disposition Order" on August 19, issuing Golden Yuan Bills while stopping the issuance of Fabi
The history of Chinese currency spans more than 3000 years. Currency of some type has been used in China since the Neolithic age which can be traced back to between 3000 and 4500 years ago. Cowry shells are believed to have been the earliest ...
; and placing economic control supervisors. Chiang made a speech calling on his compatriots to follow the decree and embrace the new currency system for the benefit of the nation.[ It also announced the "Golden Yuan Issuance Law", the main contents of which are.
At the same time, ]Chiang Chiang may mean:
* a Chinese surname (蔣), alternatively spelt Jiang
** Chiang Kai-shek, former leader of the Republic of China
* Chi'ang, variant spelling of the ancient Qiang (historical people) (羌)
* Chi'ang, variant spelling of the modern ...
sent economic supervisors to the major cities to oversee the issuance of golden yuan. Among them, Shanghai
Shanghai (; , , Standard Mandarin pronunciation: ) is one of the four direct-administered municipalities of the People's Republic of China (PRC). The city is located on the southern estuary of the Yangtze River, with the Huangpu River flow ...
, as the nation's financial hub, was Chiang Ching-kuo
Chiang Ching-kuo (27 April 1910 – 13 January 1988) was a politician of the Republic of China after its retreat to Taiwan. The eldest and only biological son of former president Chiang Kai-shek, he held numerous posts in the government ...
as deputy supervisor (took office on August 23, and left on November 6), and the current supervisor was Central Bank President Yu Hongjun, who had actual control over Shanghai's economic situation.
On November 16, 1948, the president of the Central Bank, Yu Hongjun, reported to Chiang Kai-shek the results of the redemption of 1,663,000 taels of gold, 8,937,000 yuan of silver (i.e. silver ingots), 2,438,000 yuan of silver, 4,775,000 yuan of U.S. banknotes, and 8,735,000 yuan of Hong Kong dollars, making a total of US$190 million.
According to the Measures for the Administration of Foreign Exchange Registration of the People of the Republic of China, foreign exchange assets of the people (including natural persons, legal persons, and other associations) deposited abroad shall be declared and registered with the Central Bank or other designated banks before 1 December. The Shanghai Banking Association agreed to raise the full $10 million in accordance with the strengths of each. On 6 September 1948, at the Prime Minister's Memorial Week held at the Central Party Department of the Kuomintang, Chiang Chung-cheng rebuked these leading figures of commercial banks in Shanghai for not complying with the decree to register all their foreign exchange assets (estimated at US$300 million) with the Central Bank, and for wanting to raise US$10 million as a perfunctory measure, and still, as in the past 20 or 30 years, they only loved money, knew only themselves, did not know the people's livelihood, flouted the decree and disregarded the righteousness of the people. According to a report published in the Grand Gazette on 16 August 1948, comparing the pre-war living index, food prices rose 3.9 million times in the first half of August, housing prices rose 770,000 times, clothing prices rose 6.52 million times, and the newspaper that day circled a text message in the form of a lacy news item: "Big pie doughnuts, 100,000 yuan each."
At the same time, the government of the Republic of China tried to freeze prices by decree, forcing merchants to supply goods at pre-August 19 prices and prohibiting price hikes or hoarding. And the capitalists were forced, though unwillingly, to convert some of their assets into gold notes under pressure from the government. In Shanghai, Chiang Ching-kuo
Chiang Ching-kuo (27 April 1910 – 13 January 1988) was a politician of the Republic of China after its retreat to Taiwan. The eldest and only biological son of former president Chiang Kai-shek, he held numerous posts in the government ...
imprisoned some capitalists who did not follow political orders and shot them to death as a warning to others. And Du Yueh-Sheng's son Du Weiping was also imprisoned for hoarding. Chiang Ching-kuo's severe "tiger hunting" in Shanghai
Shanghai (; , , Standard Mandarin pronunciation: ) is one of the four direct-administered municipalities of the People's Republic of China (PRC). The city is located on the southern estuary of the Yangtze River, with the Huangpu River flow ...
had slightly gained the people's confidence in the Golden Round.
Collapse
With the loss of the Civil War, the Golden yuan collapsed at an extremely rapid rate, and events changed almost in days to the end of the market prices even increased several times a day, the currency almost became scrap paper but bartered for supplies.
The Golden yuan had no cash provision and no restrictions on issuance, resulting in a total failure.[ The failure of the Golden yuan was doomed in the first place. Since the total amount of Fabi currency issued at the time of its withdrawal from circulation was 663 trillion yuan, the total amount of Fabi currency issued was only 200 million yuan in gold notes with 3 million yuan of Fabi currency combined with 1 yuan of gold notes. The gold notes were set to be issued at the beginning of 2 billion yuan, which is equivalent to creating an inflation equivalent to 10 times the final Fabi currency at once.
]Military
A military, also known collectively as armed forces, is a heavily armed, highly organized force primarily intended for warfare. It is typically authorized and maintained by a sovereign state, with its members identifiable by their distinct ...
, Political
Politics (from , ) is the set of activities that are associated with making decisions in groups, or other forms of power relations among individuals, such as the distribution of resources or status. The branch of social science that studies ...
, Economic
An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...
and Diplomatic
Diplomatics (in American English, and in most anglophone countries), or diplomatic (in British English), is a scholarly discipline centred on the critical analysis of documents: especially, historical documents. It focuses on the conventions, p ...
were reversed, and in April and May 1949, Nanjing
Nanjing (; , Mandarin pronunciation: ), alternately romanized as Nanking, is the capital of Jiangsu province of the People's Republic of China. It is a sub-provincial city, a megacity, and the second largest city in the East China region. T ...
and Shanghai
Shanghai (; , , Standard Mandarin pronunciation: ) is one of the four direct-administered municipalities of the People's Republic of China (PRC). The city is located on the southern estuary of the Yangtze River, with the Huangpu River flow ...
were successively overrun by the Chinese People's Liberation Army
The People's Liberation Army (PLA) is the principal military force of the People's Republic of China and the armed wing of the Chinese Communist Party (CCP). The PLA consists of five service branches: the Ground Force, Navy, Air Force, ...
, and Communist Party
A communist party is a political party that seeks to realize the socio-economic goals of communism. The term ''communist party'' was popularized by the title of ''The Manifesto of the Communist Party'' (1848) by Karl Marx and Friedrich Engels. A ...
announced the cessation of the circulation of gold vouchers from June. The R.O.C. government has continued to issue Golden Yuan notes after moving to Guangzhou
Guangzhou (, ; ; or ; ), also known as Canton () and alternatively romanized as Kwongchow or Kwangchow, is the capital and largest city of Guangdong province in southern China. Located on the Pearl River about north-northwest of Hong Kon ...
, and Xinjiang and other regions have continued to issue them, but their value is close to that of waste paper, for example, Xinjiang
Xinjiang, SASM/GNC: ''Xinjang''; zh, c=, p=Xīnjiāng; formerly romanized as Sinkiang (, ), officially the Xinjiang Uygur Autonomous Region (XUAR), is an autonomous region of the People's Republic of China (PRC), located in the northwest ...
banks have issued single high-denomination notes of $6 billion.
Denominations
In 1946, the Republic of China
Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the northeast ...
government experimentally commissioned the British Thomas de Narro Banknote Printing Company to print 10 cents (10 cents) and 20 cents (20 cents) in two small denominations, and in August 1948, five types of banknotes - 50 cents, 10 cents, 20 cents, 50 cents and 100 cents - were issued. The ROC Central Printing Office printed 50-cent and 10-yuan notes, while the Central Printing Office and China Book Office were ordered to issue two plates of each denomination, and the ROC government commissioned the British Walt's Road Company to print several gold circulars, but they were issued in very small numbers and circulated only in Shanghai
Shanghai (; , , Standard Mandarin pronunciation: ) is one of the four direct-administered municipalities of the People's Republic of China (PRC). The city is located on the southern estuary of the Yangtze River, with the Huangpu River flow ...
; In January 1949, 100-yuan Central Printing Office red plate notes and 500-yuan notes were issued, and in February the production and issuance of 1,000-yuan notes began gradually; in March 1949, 5,000-yuan notes were issued, followed by 10,000-yuan notes; in April, 50,000-yuan notes and 100,000-yuan notes; in May, 500,000-dollar notes and 1 million-dollar notes were issued, but the Shanghai
Shanghai (; , , Standard Mandarin pronunciation: ) is one of the four direct-administered municipalities of the People's Republic of China (PRC). The city is located on the southern estuary of the Yangtze River, with the Huangpu River flow ...
was immediately occupied by the PLA
PLA may refer to:
Organizations Politics and military
* People's Liberation Army, the armed forces of China and of the ruling Chinese Communist Party
* People's Liberation Army (disambiguation)
** Irish National Liberation Army, formerly called ...
and was not issued.
Impact
The rapid devaluation of the Gold yuan and the resulting hyperinflation stem from the government's fiscal and monetary policies. The Republic of China
Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the northeast ...
's government continued to maintain the war despite the financial constraints. The government deficit is paid for by printing money, causing sharp inflation. The government, unable to control the issuance of a common currency on its own, merely tries to maintain prices and currency values by executive orders that violate the laws of the market, eventually causing financial
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
chaos and market
Market is a term used to describe concepts such as:
*Market (economics), system in which parties engage in transactions according to supply and demand
*Market economy
*Marketplace, a physical marketplace or public market
Geography
*Märket, an ...
collapse.
The people most affected by the Gold yuan crisis were the lower middle class
The middle class refers to a class of people in the middle of a social hierarchy, often defined by occupation, income, education, or social status. The term has historically been associated with modernity, capitalism and political debate. Commo ...
in the city. They had no greater capital and resources to protect what little they had, nor were they as unproductive as the rural peasants or proletariat
The proletariat (; ) is the social class of wage-earners, those members of a society whose only possession of significant economic value is their labour power (their capacity to work). A member of such a class is a proletarian. Marxist philo ...
. In the early days of the issuance of the Gold yuan, or when forced, or out of trust in the government, to exchange the accumulated property for the Gold yuan, the greatest losses were suffered in the hyperinflation, and some people became destitute as a result. The Republic of China
Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the northeast ...
's government, despite the hundreds of millions of dollars of gold and silver foreign exchange
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
seized from the people through the issuance of the Golde Yuan notes, lost the trust and support of the most inclined class in the country: the urban people.
In 1948, the Nationalist Government had already suffered a series of military defeats, and the Gold Yuan storm had deprived the ROC government of all its remaining popular support and morale. Currency abuse was one of the reasons for the rapid collapse of the entire national government regime on the continent.
The Golden Yuan and Taiwan
At that time, the Taiwan Provincial Government
The Taiwan Provincial Government was the government that governed Taiwan Province of the Republic of China. Its functions have been transferred to the National Development Council and other ministries of the Executive Yuan.
History
At the ...
was ordered to transfer Taiwan Sugar's total assets of 120 million U.S. dollars
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
to the custodianship method under the Golden Yuan issue, and Taiwan Paper's total assets of 25 million U.S. dollars to 8 million U.S. dollars, thus further drawing Taiwan into the deteriorating economic situation of Mainland China
"Mainland China" is a geopolitical term defined as the territory governed by the People's Republic of China (including islands like Hainan or Chongming), excluding dependent territories of the PRC, and other territories within Greater China. ...
. And at that time, the exchange of the Golden Yuan for Taiwan Dollar $1,835 was also significantly overestimated, and the inflow of mainland China into Taiwan hedging brought Taiwan under severe vicious inflationary Inflationism is a heterodox economic, fiscal, or monetary policy, that predicts that a substantial level of inflation is harmless, desirable or even advantageous. Similarly, inflationist economists advocate for an inflationist policy.
Mainstream ec ...
pressure and worsened the economic situation In June 1949, Taiwan
Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the nort ...
reformed its monetary system and issued New Taiwan Dollar
The New Taiwan dollar (code: TWD; symbol: NT$, also abbreviated as NT) is the official currency of Taiwan. The New Taiwan dollar has been the currency of Taiwan since 1949, when it replaced the Old Taiwan dollar, at a rate of 40,000 old dollars ...
.[
]
See also
* Inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
* Hyperinflation
In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as t ...
References
{{Portal bar, Money, Numismatics, Taiwan
Currency
Modern obsolete currencies