Civil Reform
At the beginning of the 1920s Zhang transformed Manchuria from an unimportant frontier region to one of the most prosperous parts of China. He had inherited a financially weak provincial government, e.g. in 1917 Fengtian faced ten outstanding loans from foreign-controlled consortia and banks totaling over 12 million yuan. Zhang chose Wang Yongjiang, who had served as head of a regional tax office, for the task of solving Fengtian's financial problems. He was named Director of the Bureau of Finance.
A number of currencies were circulating in the province, as was the custom in China, and the paper notes issued by the provincial government had experienced a steady depreciation in value. Wang decided to switch to a silver standard and set the initial value of the new silver yuan equal to the Japanese gold yen, which was accepted throughout Korea and Manchuria. Much to the surprise of the Chinese the new currency even gained in value against the gold yen, although Japanese businessmen claimed that it was not backed up by sufficient silver reserves. Wang then used the newly gained credibility to introduce another note, the Fengtian dollar, which was not convertible into silver anymore. But it was accepted by the government for the payment of taxes, a sign that the government had faith in its own currency.
Next Wang turned to the chaotic tax collecting system. Because of his former job he was well acquainted with the abuses of the system and introduced a number of controls. The provincial government had also invested government funds in various enterprises, many of which were poorly managed. Wang ordered a total review of government sponsored firms. Since 1918 the revenues rose steadily, by 1921 all outstanding loans had been repaid and there was even a budget surplus. Wang was rewarded by being appointed as Civil Governor of Fengtian province while remaining Director of the Bureau of Finance. Zhang retained the title of Military Governor of Fengtian. Still, more than two thirds of the budget were allocated to the military.
Read more about this topic: Zhang Zuolin
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