Monetary Policy of the Border Region
(August 17, 1938)
To Nie and Peng, with copy to Zhu and Peng:

The monetary policy of the border region should be formulated according to the following principles:

(1) The border region needs a relatively stable currency to sustain a protracted struggle against the Japanese invaders.

(2) The amount of paper money issued should not exceed the actual demand in the border region’s markets. At the same time, account should be taken of the possibility that the border region may expand or contract.

(3) The border region’s paper currency must have backing: first, goods, especially industrial products; second, puppet currency; third, legal tender.

(4) While the Japanese occupy cities and railway lines, we hold the countryside. The sources of industrial goods for the border region are in Japanese-occupied areas, and it is also in those areas that agricultural products from the border region can be sold. Therefore, the border region should adopt an appropriate foreign trade policy to support its monetary policy.

(5) Military expenditures in the border region are substantial, so fiscal and monetary policies should focus on securing future funding for the military.

(6) Before final victory in the War of Resistance, legal tender will undoubtedly continue to depreciate, and there is a possibility that it may gradually disappear from North China. Other local currencies will fall even more sharply, and puppet currency will also experience some degree of decline. Border
[1] Nie refers to Nie Rongzhen, who at that time served as Commander and Political Commissar of the Jinchaji Military Region of the Eighth Route Army. Peng refers to Peng Zhen, born in 1902 in Quwo County, Shanxi Province, who was then Head of the Organization Department of the Northern Bureau of the CPC Central Committee. Acting in his capacity as a representative of the Northern Bureau, he was regularly stationed in the Jinchaji Border Region to work alongside Nie Rongzhen in guiding the Party’s work in Jinchaji, east of the Pinghan Railway, and in the Beiping–Tianjin area.
[2] Zhu refers to Zhu De. Peng refers to Peng Dehuai, who at that time held the post of Deputy Commander-in-Chief of the Eighth Route Army.