A great part of the military disturbances in modern China can be regarded as both the cause and the effect of agrarian evils, and some of the struggles as peasant rebellions in modern guise, carrying on the immemorial farmer-infantry tradition. Another part is traceable to the impact of the Western economy on China. It was Western economic activity that gave most compelling proof of the fact that the Westerners had encircled China and were compressing it from a world in its own right into a nation. The military intervention of Western powers in China not only caused much of the ideological reaction and forced a reorganization of the government, but also provided deadly evidence of the superiority of Western fighting. Western economy helped to bring the confusion which meant war in China; and Western economy itself waged war.
Sun Yat-sen saw China's unfortunate position as a whole, and in his programs there may be discerned three separate demands, for (1) a national economic revolution, (2) an industrial revolution, and (3) a social revolution.[26] Since the Chinese could no longer function as a self-contained world economically, and scorn foreign trade as a magnanimous concession to the outer barbarians,[27] the Chinese would have to develop an economic system conforming to national patterns in the society and in thought. They must relate their economy to their independence and defense, if they were to survive. In the first place, they could not afford to remain the only free market of the world, subject to exploitation and haphazard development. It would be necessary for them to establish governmental controls over economic matters and protect their national livelihood. Secondly, they had to work toward a complete transformation of their technological system and meet Western productive practices, if they were to claim a competitive position; this involved an industrial revolution. Thirdly, they had to correct the abuses inherited from their forefathers. Simultaneously they would have to construct an economic system not only modern but equitable, if they wished to avoid the horrors of early capitalism and the tragedy of the industrialist class war. This would require a social revolution.
At the time that Sun Yat-sen formulated his ideas (1924), none of the three revolutions was making any progress. The Chinese did not constitute a nation in fact; they had even lost the old unity of the Confucian society. The tuchüns opposed Chinese nationalism by preventing the development of any one authority able to monopolize force, and by acting as agents of, or in alliance with, foreign powers. Thus they helped to make China something not far from a quasi colony under pooled control of all the industrial capitalist nations. The Nationalists and Communists were able to join forces on this issue of a class war of nations, both believing in the independence of China. The Nationalists, however, saw China's most direct approach toward national unity in the development of a national economic system, with a reasonable military independence of imports and the economic devices current throughout the world as instruments of national policy. The Communists did not agree that such an economy, national in form, would have much meaning unless it were grounded upon a peasant-proletarian regime. Nor did they feel that change from imperialist to native capitalism would constitute an advance in itself.
After the schism, the Nationalists devoted themselves to the national-economic and industrial revolutions, while the Communists stressed the social revolution, particularly the land problem. The Nationalists were able to secure tariff autonomy for China, and thereupon entered upon a policy of protective tariffs and other mechanisms designed to make China a reasonably self-sufficient nation. At the same time they pushed hard toward the industrial revolution, in developing highways, railroads, airways, and radio, and in creating the economic controls required for modern government—standard weights, measures, currency, civil law, and fiscal uniformity.
T. V. Soong (Sung Tzŭ-wên), a veteran minister of finance, stands out as the organizer of the modern Chinese economy. Veritable miracles were performed in the development of national credit; after 1928 the National Government adopted the policy—as remote as a mirage to its predecessors—of floating all government loans within the country and making the Chinese government independent of Japanese and Western financiers. The only loans of any importance contracted abroad were taken up with other governments. Financial independence was a great step toward the realization of the Nationalist ideals, but it may be questioned whether the loss of financial allies was a price to be paid without hesitation in a capitalist world. Had the Chinese had more bonds in the Western capital markets, or larger debts to the American or British governments, they might have elicited greater international support in repelling the Japanese invasion in 1931.
The crowning point in the economic achievements of the National Government at Nanking was the successful institution of a managed currency. China had dealt with currency merely as a convenient form for specie, and the Chinese were accustomed to regard a dollar as worth only the amount of metal in it. When the National Government placed the currency on a national basis, it drew together the whole financial structure of China by one gigantic move, and placed finance in a position of greater unity and dependence upon government than ever before. Together with the financial reforms, the Nationalists organized a legal system providing a minimum foundation of law and order. The codification of laws, the revamping of the judiciary, the clarification of policies by legal formulation—all these contributed to China's emergent nationhood.
The economic program accorded with considerations partly Hamiltonian, partly state-socialist. The economy had first of all to be organized and integrated in national terms, and later to be revised so as to ensure social justice. The Nationalists were convinced that a policy of immediate land reform would lead to internal disharmony and frustrate the very purposes for which the revolution of 1926-1927 had been launched. The Communists, on the other hand, succeeded in keeping the agrarian issue from being forgotten and forced the Nationalists to better the lot of the peasant. In the meantime, China's boom in physical development and the unification of the commercial, financial, productive, and legal systems began to startle observers.
As a result, China was able to build national armies in direct ratio with the invigoration of her national economic system. The war machine of the National Government, under the care and leadership of Generalissimo Chiang K'ai-shek, became the most powerful in China. The central government's military power in turn speeded up the pace of general unification. There was thus a remarkable interaction of forces tending toward national integration. From 1932 to 1937, between the first and second major phases of the Japanese invasion, progress was rapid—stimulated, perhaps, by the external menace.
The two greatest dangers to the Nationalist policy of military and economic unification were (1) the dismal condition of the Chinese proletariat, as yet small but constantly growing, and (2) the vested interests of the industrial powers. Had China's growth been less rapid, the foreigners might have withdrawn slowly and found compensation in Chinese commerce for their losses in direct ownership in China. There was one power, however, to which Chinese unification was a living and increasing threat. The rising military-economic power of the Chinese was incompatible with the position which Japanese leaders visualized as part of the manifest destiny of their country. The Japanese might have tolerated the tuchün system for decades had the tuchüns been able to establish orderly regional governments; or they might have aided a reactionary Chinese regime which asked for survival only. The appearance of a genuine republic in the Far East was a menace to Japan; if that republic was bound by sheer physical proportions to overshadow Japan, the unification and modernization of China had to be averted at all costs.
Nevertheless, China's development, even apart from the hindrances of war, cannot be regarded as possessing the same potentialities as did American growth during the past century. China, from all indications available to date, is an area much poorer in natural resources than is the United States; she does not offer comparable opportunities for the heavy industries. The steel, coal, oil, and water power necessary for large-scale industrialization are by no means negligible, but not sufficient to make possible the rise of another America. The far future may change man's dependence upon currently utilized resources and facilitate greater strides in China's technological advancement. Meanwhile, she can look forward to decades of measurable development through exploiting raw materials already available, if political conditions permit.