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the changed conditions. Fundamentally, the problems were:

1. To protect and utilize the existing economic and financial resources at our command for meeting the urgent requirements of the war; and

2. To create and develop new economic and financial resources for improving the livelihood of the people and for strengthening the permanent defense of the country.

These were clearly defined problems. So, while our soldiers were being killed on the front lines, the machinery of reconstruction was put into operation in the hinterland. So, also, as our factories and homes were being destroyed in the eastern part of the country, we were building new and better ones in the havens of our interior.

Development of China's Interior

Generally, the term "China's Interior" means all the territory west of the provinces traversed by the Peiping-Hankow and Canton-Hankow railway lines. The territory is further divided into the Northwest comprising the provinces of Suiynan, Ninghsia, Kansu, Shensi, Chinghai and Sinkiang; and the Southwest including the provinces of Szechuan, Yunnan, Kweichow, Kwangsi and occasionally Sikong. The economy of the Northwest is basically agricultural, but the Southwest is rich in resources which are important and necessary for industrialization.  Together, the area of the Northwest and Southwest is as large as that of the provinces so far penetrated by the Japanese, and from the standpoint of defense, the location and topography of the interior provinces are far superior and more strategic.