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Inflation in Eastern China during the Second Sino-Japanese War

Author

Listed:
  • Li, Michell

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

Abstract

Although the history of the Japanese invasion of China is well-known and well-taught in China, the history of the currency war between China and Japan during the time is far less known. From 1937-1945, China and Japan engaged in not only a military war but also a "currency war." Japan, in an attempt to generate funds for the war from the war itself and to overthrow the Chinese government, attacked China's currency, the fabi (meaning “legal tender”), by printing counterfeit fabi notes and establishing “puppet” banks in China to issue mass amounts of puppet currencies to displace the fabi. These counterfeit notes and puppet currencies quickly circulated into the economy and led to a period known as the Great Chinese Inflation. Both the Nationalists (the governing party) and the Communists immediately took different actions to control inflation and the influx of counterfeit notes. Inflation was widespread not only in Nationalist- and Communist-controlled areas, but also in Japanese-occupied areas of China.

Suggested Citation

  • Li, Michell, 2018. "Inflation in Eastern China during the Second Sino-Japanese War," Studies in Applied Economics 102, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    • Handle: RePEc:ris:jhisae:0102
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    More about this item

    Keywords

    China; hyperinflation; inflation; Second Sino-Japanese War; World War II;
    All these keywords.

    JEL classification:

    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East

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