I finished Butterfly and Dragonfly two months ago. It links World War II with the Civil War and the Cold war, you can get a grand but elaborate view of the history of these years. This book reminds me of Autumn in the Heavenly Kingdom, both are foreign governments’ decisions affected Chinese history. In this post I want to focus on another side of the Chinese Civil War: currency.

You can view the KMT’s currencies and introduction at Central Bank of the Republic of China(Taiwan)’s virtual money museum. As for other banknotes please visit banknotes.com

China starts using silver ingots since Han dynasty. In 1934, Roosevelt approved the Silver Purchase Act due to the Great Depression. Then worldwide silver price rose and there was an outflow of China’s silver coins. So Chinese banks didn’t have enough silver reserves to exchange the currency notes, the national economic climate was on the brink of collapse. The government had to abandon the silver standard in September 1935, China and Hong Kong are the last to abandon the silver standard.

On November 4, 1935, the Kuomintang government declared that the Central Bank of China, the Bank of China and the Bank of Communications were authorized to issue Legal Tender note(法币). The Farmers Bank of China was added later. Silver coins would be nationalized, one Legal Tender yuan was equal to one silver coin. At first Legal Tender was exchangeable into British pound, then it was linked with U.S. dollar and British pound in 1936.

In 1938, Japanese issued its own notes and people were forced to exchange with Legal Tender in its controlled territories. Then they went to foreign banks in Shanghai to convert the Legal Tender into hard currencies. The Nationalist government received over ten million pounds and fifty million dollars loans from Britain and the U.S. separately to support its currency for a while. After 1940, the government canceled unlimited forex trading, then the depreciation of Legal Tender started.

The Nationalist government printed Legal Tender endlessly as a result of Sino-Japanese War and lack of US economic aid. The supply of Legal Tender from less than 1,400 million yuan in 1937 increased to 660 trillion yuan in August 1948. Chiang Kai-shek put his last hope on currency reform to replace Legal Tender with Gold Yuan notes.

Gold Yuan Notes

On 8 August 1948, the Nationalist government issued Gold Yun notes(金圆券). The government planned to issued 2 billion yuan, one Gold Yun was equivalent to three million yuan in Legal Tender, that’s about ten times of current notes. And they still printed notes endlessly like before. Furthermore, they also reduced the gold content of each yuan form 0.22217 gram to 0.044434 gram. So Gold Yuan soon became another Legal Tender. On 10 May 1949, Xinjiang Province Bank issued note each worth six billion yuan, it’s the largest denomination banknote and the only which has two different currency units in Chinese history. It was originally stated that private gold, silver, and foreign exchange must be exchanged before September 30, but the Ministry of Finance extended the deadline for two months on 1 October, that’s robbery! The KMT and the Gold Yuan lost people’s trust, no doubt. The reform led to panic buying, foods sold out immediately in KMT’s controlled big cities.

Meanwhile, the Communist Party gradually reversed the situation, they banned the Gold Yuan since June 1949. In May 1949, the KMT retreated to Guangzhou. They printed another waster paper: Silver Dollar Notes.


The People’s Bank of China issued the Renminbi in December 1948. In December 1953, the largest denomination of the first series of the Renminbi had risen to 50,000 yuan.