Unify Financial and Economic Work on a National Scale

In the early days of the founding of the People's Republic of China, the Central People's Government took an important initiative to achieve a basic improvement in the country's financial and economic situation and consolidate the people's democratic dictatorship. In the early days of the founding of New China, the country was in great financial and economic difficulties.

The reasons for this were, on the one hand, the prolonged war caused by the reactionary KMT rule; on the other hand, because the War of Liberation was still going on, the expenses for supporting the war were huge; for the sake of social stability, the People's Government had "covering down" the 7.85 million military, political and religious personnel left behind by the old government as long as they do not resist the new order, which aggravated the financial burden; and in order to restore production and transportation, a large amount of money was also needed; at that time, the national financial work was still in a decentralized state, and the public grain and various taxes collected in the old Liberated Areas were mainly used for local expenditures, and there were no clear regulations and methods for the tasks to be handed over, and most areas basically did not have a formal taxation them. This difficult situation was made worse by the sabotage of unscrupulous capitalists.

In order to unify the country’s finance and economy, in January 1950, the state began issuing People's Victory Discounted Public Bonds, which accelerated the recovery of currency. From February 13 to 25, the Central People's Government held the First National Financial and Economic Conference in Beijing after the founding of New China. The Conference decided to save expenditure, consolidate revenue, and unify the management of the national financial and economic work in order to achieve a balance between state revenue and expenditure, supply and demand of materials and the financial price stability.

On March 3, the State Council of the Central People's Government promulgated the “Decisions on the Unification of the Financial and Economic Work of the State”, the main contents of which were:

Firstly, unifying the country’s financial revenue. To centralize the main part of the state's fiscal revenue to the central government, except for the local taxes approved for collection, all revenues obtained from agricultural taxes (public grain), custom duties, salt taxes, excise taxes and industrial and commercial taxes shall be assigned to the Ministry of Finance of the Central People's Government for unified dispatch and use.

Secondly, unifying the country’s material dispatch. The National Committee for Cleaning and Deployment of Warehouse Materials was established, stipulating that all warehouse materials would be dispatched and used rationally by the Finance and Economic Committee of the State Council for rational use. It was also decided that all material transfers of state-owned trade organs in all regions shall be under the unified command of the Ministry of Trade of the Central People's Government.

Thirdly, unifying the country’s cash management. The People's Bank of China was designated as the general agency for the dispatch of the state’s cash revenue, and it was stipulated that all cash from military and government organs and public enterprises shall be deposited in the state bank except for some recent uses. At the same time, it was stipulated that foreign exchange licensing price and dispatches shall be under the unified management of the People's Bank of China.

The CPC Central Committee also issued the “Instructions on Unifying State's Financial and Economic Work”, requiring Party committees at all levels to guarantee by all means the full implementation of “Decisions on the Unification of the Financial and Economic Work of the State”.

All levels of the governments should conscientiously implement the instructions of the Central Committee and the decisions of the State Council. The government organs took urgent action to tighten the compilation, clean up warehouses, strengthen taxation, promote public bonds and save expenditures; people all over the country responded positively to the government's call and enthusiastically paid public grain, taxes and subscribed to public bonds; all local organs reported to the central government every other days the figures of major taxes or public grain collections for the treasury, and the national fiscal revenue increased significantly. In terms of expenditure, the country’s compilation and supply standards were strictly unified, and the Ministry of Finance, in accordance with the actual income situation, spent within the limits of revenues and weighed the overall situation as far as possible to allocate funds so as to concentrate the necessary financial resources to solve the most urgent problems of that period. With the joint efforts of government organs at all levels and the people, the unification of financial and economic work soon achieved remarkable results.

In terms of fiscal revenue and expenditure, in the first and second quarters of 1950, the fiscal deficit once accounted for 43% and 40% of the total expenditure; after the implementation of financial and economic unification, the deficit fell to 9.8% and 6.4% respectively in the third and fourth quarters, with an annual revenue of 6.52 billion yuan and expenditure of 6.81 billion yuan, and the fiscal revenue and expenditure were close to balance in that year. At the same time, prices began to stabilize.

Unification of country’s finance and economy and the stabilization of prices was the first significant victory on the financial and economic front after the founding of New China, putting an end to the long-standing hyperinflation and soaring prices during the KMT rule, as well as ending the decades-long imbalance of fiscal revenue and expenditure in the old China, and creating favorable conditions for stabilizing people's lives and restoring and developing industrial and agricultural production. This proved that the CPC is not only strong militarily and politically, but also fully capable economically.

On April 29, 1950, Liu Shaoqi pointed out in his speech at the May 1 Labor Day Celebration that "Now the country's financial and economic work is unified, the country's fiscal revenue and expenditure is close to balance, and soon it will be completely balanced, and financial prices tend to stabilize. These are all for the interest of the overwhelming majority of the people in China.” Apart from the victory of the People's Liberation Army on the front line, this was the greatest work achieved by the Central People's Government for the people since its establishment. China did not have a unified financial economy throughout its history until that year.

The country's fiscal revenue and expenditure were not balanced in the past decades, and the reactionary government had to issue huge amounts of money and borrow huge amounts of domestic and foreign debts every year in order to survive. China's financial prices were not stable for twelve years, and the people must had to pay a huge amounts of money in inflationary losses. Nevertheless, the people's government made these major achievements in a short period of time before the end of the war, despite the fact that the war didn’t end and there were calamities and imperialist blockades. As Liu Shaoqi said: “This is something that can be achieved not by any reactionary government can do, but by a true people's government." The unification of the country’s financial management played a significant role in centralizing the national financial and material resources for the comprehensive recovery and development of the national economy, and thus it was begun to form a financial and economic management system based on centralization and unification.