The collapse of the Japanese Empire in the aftermath of World War II left a power vacuum in maritime East Asia. The United States recognised this opportunity to shape the emerging Cold War and the geopolitical landscape of the western Pacific rim. Despite the lack of consensus among decision-makers in Washington, on-site naval commanders could effectively influence the US strategy in the region. The US Navy selected Chiang Kai-shek’s Nationalist China as a local partner to assume responsibility for guarding the western Pacific rim. This decision was based not only on Chiang’s good relationship with the US Navy, which allowed it to enter China’s territorial waters and ports, but also on the belief that a pro-US Chinese navy could help secure America’s naval dominance in the region. With US military and financial support, Chiang successfully rebuilt a modern Nationalist navy. However, the ongoing power struggle between the Nationalists and the Communists made the situation unpredictable in maritime East Asia.

Was the Cold War inevitable, and who is responsible for its outbreak? This chapter argues that, as the Second World War neared its end, Joseph Stalin was shopping for a great bargain with the Allies, in keeping with Russia's realpolitik tradition. While the details of Stalin's vision remain blurry, evidence from internal Soviet deliberations in 1944–45 points to a broadly imperial, nineteenth-century, conceptualization of the Soviet role in Europe. Stalin sought both power and legitimacy, and understood that the Americans could endorse or reject his postwar claims. He could and did measure his appetites in pursuit of legitimate gains—those that had Washington’s imprimatur. Despite his efforts to achieve legitimacy at Yalta, Stalin’s hopes for a Soviet–American agreement to divide the world soon began to run aground, largely owing to his own rapacity and bad faith.

This section focuses on a set of occupied countries whose internal conflicts during and/or immediately after occupation rose to a level of violence that can be described as civil war. Although each of these clashes featured particular characteristics arising from local conditions, participants were usually acutely aware of their connection to the continental and global theaters of warfare as well as to analogous internal conflicts in other occupied countries. One can therefore speak of a sort of archipelago of loosely analogous, temporally overlapping (though not necessarily synchronous), and at least indirectly interconnected civil wars fought across a wide array of lands amidst the overarching global conflict. Indeed, this archipelago extended well beyond Europe, as will be seen in the discussion of the Chinese case.

Why did the Nationalist government collapse? Chiang Kai-shek had a style of government that maximized his power by creating competing agencies which vied for power. Ultimately, nothing could get done without the personal attention of Chiang. He had little understanding of finance and simply demanded that banknotes be made available to pay for his military. The history of Chiang’s rise to power was impacted by the warlord era, which made the size of one’s army key.So he consistently rejected advice from foreign advisers to reduce the size of his military and improve conditions for soldiers. Low morale in the underpaid army led to defections. The collapse of the Chiang government reveals the perils of having too much authority in the hands of one individual.

The chapter offers a general introduction to the Ichigo campaign, particularly with reference to its economic impact. Launched late in the war when Japan’s position in the Pacific was deteriorating, it was the largest military campaign ever undertaken by the Japanese Imperial Army. The armies of Chiang Kai-shek performed very poorly, often just melting away. There was general pessimism about the war in China even as the Allies did well elsewhere.

The campaign had a calamitous economic impact on Free China. Food supplies were cut off. Hyperinflation continued to have a devastating impact on the lives of Chinese. There were struggles in maintaining the exchange rate of fabi and the beginnings of conflict with the United States over this issue. US treasury secretary Morgenthau became angry with Chiang. A second dispute over the sale of gold in China supplied by the United States created tension between Morgenthau and T. V. Soong who represented Chiang in Washington.

This chapter looks at the two men, T. V. Soong and H. H. Kung, who dominated financial positions from 1928 until the collapse of the Nationalist regime on the mainland. Both had personal ties to Chiang through his wife Madame Chiang Kai-shek (Song Mei-ling). A bitter rivalry developed between them that impacted the entire coterie of financial and banking officials. On a related issue, it examines the prevalence of American education among financial officials and its impact on ties to America, particularly in the Soong family. This chapter uses the papers of Lauchlin Currie, a key aide to Roosevelt, who made several trips to China on his behalf. The chapter closes with an examination of the way in which the two men have been portrayed in writings about the Chiang Kai-shek era, suggesting some reevaluation is needed.

This chapter examines the scandal associated with the American Dollar Bond issue and the resignation of H. H. Kung

The introduction establishes the background to the hyperinflation crisis and outlines the major issues explored in the manuscript. It begins with the creation of the fabi currency in 1935 and argues that it was set up to fail because there were few checks on expanding note issue.

It examine the currency war that erupted after the fall of Shanghai and the establishment of Japanese client regimes in Beijing and Nanjing. Each of the latter had separate currencies that were rivals with fabi.

The chapter presents the overall thesis of the study and the sources which have made it possible. New material gives an inside look at the decision-making process of the Chiang Kai-shek government. The most important has been the archives at the Hoover Institution at Stanford and material in Taiwan. The study particularly benefited from eight academic conferences at Fudan University in Shanghai.

The year begins with emergency control policies designed to curb accelerating inflation. The government halts sale of gold. Political attacks on T. V. Soong become strong, especially in the Legislative Yuan. Soong resigned as head of the Executive Yuan in March 1947. Most of the reform policies adopted earlier in the year are then abandoned.

Political attacks on “bureaucratic capitalism” follow, with foreign businessmen joining the attack, as well as criticism of the “holy family” enterprises, those connected to the Soong and Kung families. Attacks on both accuse them of corruption, charges they try to refute.

Getting Chiang Kai-shek’s attention is a problem. Little can be done without an endorsement by Chiang. But he has little knowledge or interest in financial issues. His focus is on military matters. Foreign exchange woes worsen.

Chapter 6: 1948: The Collapse of Fabi and the Gold Yuan Disaster

Keywords: fabi, gold yuan, collapse of fabi, hyperinflation, Guangdong, Jiang Jingguo, reign of terror, collapse of the gold yuan, Soongs in exile

Joseph Stilwell’s career and campaigns in China present a counterexample to Samuel Griffith and unconventional war. Sunzi was essentialized into the Chinese way of fighting and used to encapsulate the problems facing Stilwell and excuse his inability to do more. One of the central messages of Barbara Tuchman’s account of Stilwell in China was that he accomplished what he did despite ferocious resistance from Chiang Kai-shek and the GMD. He was heroic because he achieved anything at all, defeating the Japanese Army at Myitkyina and building an impossible road through Burma. Yet Stilwell’s mission, like the American engagement with China more generally, was a failure. America could not overcome the reality of China under Chiang Kai-shek. China was “lost” to the Communists, who were also Chinese. Mao Zedong won by using Sunzi, but Chiang Kai-shek lost by using Sunzi. Chiang did not produce military writings validated by victory like Mao.

Chapter 3 analyzes how the Kuomintang (KMT) significantly reformed itself, including by bringing corruption under control, after its loss of the Chinese mainland and retreat to Taiwan in 1949. Corruption was rampant in China under KMT rule, despite intermittent efforts at reform, and contributed to the Nationalist regime’s delegitimization and defeat in the Chinese Civil War. Yet, soon after arriving in Taiwan, Chiang Kai-shek led the party in a major restructuring and cleanup, the KMT Reconstruction (1950–52), that curbed organizational dysfunction and corruption and essentially re-founded the regime. I argue that this reform was successful because, while the motivation to reduce corruption had already existed at the top, only after the KMT’s challenging postwar transition did the winning combination of motivation, discretionary power, and state capacity come together. In addition, this chapter analyzes Chiang Ching-kuo’s leadership of the Governmental Rejuvenation (1969–72), which among other things helped reverse a rising trend of bureaucratic corruption. Corruption would only become widespread again in Taiwan after the onset of democratization in the late 1980s.

East Asian religions are marked by diffuse spirituality and close ties to the state (e.g. Confucianism). When the state was weak, however, independent sects gained an appeal, which created a niche for Christianity. On the other hand, a resurgent state brought repression of these groups. Early modern Japan is the most vivid example, but also in China at the same time in milder form. The Taiping rebellion is a nineteenth-century example. Missionary incursion sparked resistance (the Boxer rebellion) but also acculturation (Western education). Japanese nationalism coopted Christianity through WW II, but its appeal has been limited since. Korea exemplifies how persecution of Christianity, first by its Confucian monarchs, then by the Japanese and then the communists, only strengthened its appeal.

Chapter 2 focuses on the critical role played by Chinese Comintern delegate Wang Ming in the birth of the second Communist–Nationalist “United Front” of 1937 following the outbreak of the second Sino-Japanese War. It begins with a summary of the first months of the war, with the capture of Peking and Shanghai, and soon the Nationalist capital of Nanjing. This is followed by a summary of the situation for socialism in Germany, Spain, and the Soviet Union, providing context for Soviet support of the Chinese in their war against Japan. Wang’s meeting with Mao Zedong in the Communist Party (CCP) wartime base of Yan’an is discussed, with an overview of his arguments for uniting with KMT forces under Chiang Kai-shek, before turning to a discussion of Wang’s meeting with the Nationalist leader in Wuhan. Zhou Enlai’s appointment to vice director of the Political Department is discussed as a way of pulling Communists into Chiang’s government without recognizing them as equals. In contrast, evidence of Wang’s relative success in developing a political platform around which all anti-Japanese groups could unite in Wuhan is presented. Finally, the eventual abandonment of Wuhan under the orders of Chiang is discussed, and the conflict between Mao and Wang is explored in light of later purges.