To Xie Juezai¹
(August 6, 1941)

Comrade Juezai:

Recently I have been very interested in studying the problem of finance and
economy in the border regions. Although my understanding is still not very deep,
I feel that the law governing it, or its determining rule, seems to rest on two simple
points, namely, (a) developing the economy, and (b) a balance of imports and
exports. First is to develop a mainly private and partly public economy in the
various fields such as agriculture, salt production, industry, animal husbandry, and
commerce, and then to export to outside of the border more than 30 million yuan
worth of products in exchange for bringing in 30 million yuan of necessities, so as
to balance exports and imports or strive for a considerably favorable balance of
trade. If these two things were accomplished, all problems would be solved. In
turn, the key with regard to these two things lies in the management of grain and
salt production. If grain production can be increased by 200,000 or 300,000 dan,
and 300,000 to 400,000 pack animal loads of salt can be transported outside the
borders, the two problems would basically be solved.
If we evaluate our work in relation to these two points, it follows that:
1. The fact that this year's investment of 8 million yuan is limited to public
enterprises alone and does not cover any loans to private agriculture or to cooperatives is nothing other than an expedient for the transitional period. From now on,
investments in public enterprise must be stopped, and investments in private enterprise must be initiated. In other words, advance large loans to farmers and cooperatives, as well as to herdsmen and private merchants at the same time, for the purpose
of increasing grain production, increasing the number of livestock, and achieving
relatively prosperous commerce. If 3 or 4 million yuan can be invested in agriculture, in addition to the government's mobilization for a spring cultivation and autumn harvest campaign, and the grain yield is increased by 200,000 to 300,000
yuan, then collecting taxes on 200,000 dan of grain and 10 million jin of hay will

Our source for this letter is Mao Zedong shuxin xuanji, pp. 176-79, where it is reproduced
from the manuscript.
2. Salt is the only means or the primary means of achieving a balance between
imports and exports. As long as 300,000 pack animal loads of salt a year can be
exported in exchange for 30 million yuan worth of cotton and cloth (calculated at
a hundred French francs per pack animal load), then imports and exports could be
considered balanced, as according to what the bank tells me, imports of cotton and
cloth to the border areas amount to only 30 million yuan a year. If 400,000 pack
animal loads could be exported, aside from bringing in 30 million yuan worth of
cotton and cloth, there would be 10 million yuan in cash coming in, which would
be even better. As for collecting 6 to 8 million yuan in salt taxes to make up part of
the financial deficit, this is only its secondary advantage; the first advantage of salt
is in solving the problem of balancing imports and exports. Once the import and
export problem is solved, the two major problems of price of goods and value of
currency are solved. Viewed in this light, this year's salt policy, of official supervision and the populace trading, not only gives little cause for criticism but is,
rather, entirely appropriate. Although it is in no way certain that 300,000 or 400,000
pack animal loads can be sold, there is indeed no other way to solve the import and
export problem, and as a consequence no other way but this to solve the two major
problems of price of goods and value of currency. Therefore, the basic orientation
underlying this policy is altogether legitimate. Because a policy of completely
free trade cannot be implemented with regard to salt this year. The reasons are the
high price of grain and of hay, as well as Guomindang restrictions. This year is
different from last year, so there is no other way to be able to export 300,000 or
400,000 pack animal loads of salt except by official supervision and the populace
trading (a semicoercive measure).
I have not yet been favored with a reply to my previous letter from the Venerable Lin,² so perhaps the issues I raised in it were not proper or to the point. But

my humble intention was simply to see that this problem is solved in a rational
manner so as to serve the purpose of unifying our determination and unifying our
actions. The disunity of the past several months has been truly detrimental in the
extreme. But unity rests first of all on a consensus with regard to the basic orientation for financial and economic construction. For this reason, I put forward the
foregoing arguments as they came to my mind on reflection, so as to invite criticism and guidance from you and the Venerable Lin. If you and the Venerable Lin
feel there are errors, I beg you to be frank and direct in correcting them one by one,
so that a consensus may be reached. The Politburo held a meeting yesterday at
which I was entrusted to call a meeting of the comrades concerned in order to find
a solution to this problem. I think it would be best to have discussions with individuals first, and then hold the meeting. What is your opinion?
Respectfully wishing you the very best!

Mao Zedong

--- Notes

1. Xie Juezai (1884-1971), a native of Ningxiang in Hunan, was then serving as deputy
secretary of the Chinese Communist Party Central Committee's Northwest Bureau, Party
and League secretary for the Shaanxi-Gansu-Ningxia Border Region government, and general secretary of the Shaanxi-Gansu-Ningxia Border Region government.
not affect the livelihood of the people, and it might even be possible to export tens
of thousands of dan of grain to Sui[de xian] and Yu[lin xian]. If animal husbandry
can be made to grow and commerce is developed to a considerable extent, then a
tax on sheep bringing in 2 or 3 million yuan per year and a tax on commerce
amounting to 7 or 8 million yuan a year would not incur resentment from the
people, and our financial problems basically would have been solved. The reason
attention was paid only to investment in public enterprise and we were unable to
take care of private sector investment this year is that there was the extenuating
circumstance of depending on public enterprises to help cope with an emergency.
But the adverse effects thus produced were contending with the people for profits
(monopoly) and failure to solve the larger problem. This orientation certainly cannot be continued next year. Investment in the salt enterprise alone should be continued next year, and only the necessary portions in other publicly run enterprises
in agriculture, industry, and commerce should continue.

2. Refers to Lin Boqu, then serving as chairman of the Shaanxi-Gansu-Ningxia Border
Region government.