To Save the Hair & Skin

"If the skin is gone," said Chiang Kai-shek last week, quoting from an old proverb, "the hair will have nothing to grow on ... At a time like this, when rampant Communist rebels are confronting the nation with a serious crisis, the people, the government and the state will share the same consequences, be they good or bad."

Bold Effort. For eight days the Gimo had pondered, on the cool heights of Kuling, what he might do to save China from deepening disaster. Last week he flew back to sweltering Nanking with his answer--a program of fiscal reform to combat runaway inflation. China would have a new dollar, called the gold yuan, backed by $200 million worth of gold and silver and U.S. dollars. The fantastically depreciated old Chinese dollars must be traded in, at the rate of 12 million old for one new. The government pledged itself not to print more than 2 billion of the new yuans, and to back them up by a stern clean-up of speculators, hoarders and black marketeers.

One top U.S. economic expert in China saw the program as a bold, brave effort to pull the nation out of its desperate economic slough. But the issue of new currency would have to be backed by honest and efficient execution of the rest of the government's promised fiscal reform, which would hit many of China's privileged where it hurt.

Reluctant Givers. Recently the government asked China's wealthy to donate $1,000,000 (U.S.) for the relief of war refugees. The "special relief levy" met with a chilly response from such men as Tu Yueh-sheng, Shanghai's richest and most powerful citizen, who sits on the boards of 44 business enterprises and eight benevolent associations. Tu, who got his start as the Al Capone of the city's underworld, didn't want to give anything at first. After Shanghai's Mayor K. C. Wu threatened to publish the names of wealthy nongivers, Tu pledged $2,000. Most other "givers" were even more niggardly. Last week, after 5 1/2 months of wheedling and pressure, less than half the modest target amount was in.

Would the government really force privileged big shots to hand over their hoards of gold and U.S. dollars? Would China devise and enforce an efficient tax system? Would the government resist the temptation to pay its bills by grinding out more & more notes on the printing presses? Would it freeze prices and wages?

On the first day of the new currency issue, Shanghai merchants jacked prices up 20%. If they got away with that, other price rises would follow and the new currency might become as worthless as the old. Best sign that that would not happen was a flow of gold bars into the government's coffers as hoarders gave them up to purchase the new money.

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