Viewing page 39 of 131

This transcription has been completed. Contact us with corrections.

-3-

War and China's Reconstruction [[strikethrough]]s[[/strikethrough]]
Problems

Unfortunately, a prosperous and well-developed China, while it will economically benefit all nations of the world, particularly Japan, did not fit into the calculations of the Japanese militarists. In July-August, 1937, Japan started the present undeclared war of aggression on China.

From the economic standpoint, China's losses during the early stages of the war were tremendous. As you know, severe battles were fought in the lower Yangtze regious which were by and large the industrial centers of China. There was wholesale destruction of industrial plants, and as the war extended along the lines of the main railways, more and more capital equipment was in one way or another ruined. There was naturally the complete dislocation of trade, coupled with the loss to the Chinese Government of the receipt of Maritime Customs Revenue and other types of internal taxes. Added to these difficulties was the general nervousness in the financial markets which gave rise to large scale flight of capital and inevitably banking and currency crises. At the same time, the social problems created by the hostilities were the most complicated.

To China of a generation ago, the situation might have meant an immediate collapse in the face of the invasion. But to an awakened and modern China of 1937, it was a challenge to her determination of re-building the country. The challenge was accepted, and today we are in the thirty-second month of the war of resistance.

It was recognized from the beginning that China's hope lay in the economic aspect of the war rather than in its military aspect. The program of reconstruction, mapped out before the war, was to be "rushed into execution", so to speak, with of course the necessary modifications to suit