How Chiang spirited China’s gold away from the Reds
As the PLA closed in on Shanghai, the KMT leader shipped millions in gold and silver out of the mainland in an operation only now coming to light
06 June 2010
In the early hours of December 2, 1948, a British journalist looked out of his window at the Peace Hotel in Shanghai. In the dark outside, he saw men with long poles carrying heavy boxes from the Bank of China across the Bund and loading them onto a customs vessel at the quay.
Soldiers had sealed off the Bund and stood with loaded rifles at every corner. What George Vine saw – and reported to his paper in London that night – was the start of a critical episode of the country’s civil war: Chiang Kai-shek’s transfer of the country’s gold, silver and foreign exchange from the mainland to Taiwan.
Over the next 12 months, Chiang moved by sea and air millions of taels of gold, a treasure trove that became the reserves for the New Taiwan dollar and made possible the island’s recovery from war and high inflation and its remarkable economic success in the decades to follow.
For Beijing, it was an unforgivable theft of assets that belonged to the nation. For the Kuomintang, it was a legitimate decision by the national president to save them from falling into the hands of a rebel army. Without the money, the Nationalist government would probably have not survived in Taiwan.
A new book, The Archives of Gold, has provided a rare, detailed account of the operation. The author is Dr Wu Sing-yung, a professor of radiological sciences and medicine at the University of California at Irvine and the son of the man who masterminded the operation.
His father, lieutenant general Wu Song-ching, head of the finance and budget department of the KMT government, was entrusted by Chiang with moving the gold; he was in charge of the military budget for 15 years. From 1946 until a week before his death in 1991, he kept a daily diary.
He did not speak about his work to his family. After his death, his wife gave the diary to their son, who discovered for the first time the critical role his father had played in saving the Nationalist government.
That first shipment went on a customs vessel, the Hai Xing, which sailed to Keelung in north Taiwan, escorted by a naval vessel, the Mei Cheng. In April 1949, the captain took the Mei Cheng to the Communist side, one of 90 Nationalist naval ships to defect during the year.
This highlighted to Chiang the risks of moving such a precious cargo; those carrying it might join the Communist side or keep it for themselves. He could entrust the operation only to his most loyal allies.
The second shipment, consisting of 151 boxes containing 900,000 taels of gold and a large quantity of silver, was loaded onto two naval vessels at the Bund in the early hours of January 20, 1949. As with the first, the military sealed off the area and guarded it with loaded weapons.
The two ships went to Xiamen, where the goods were stored in an underground vault of the Bank of China on the island of Gulangyu. In August, when the People’s Liberation Army was attacking Fuzhou, naval ships carried it to Taipei, where it was put in the vaults of the Taiwan Finance Bureau in Hsinyi Road.
On February 7, a civilian plane carried 120,000 taels of gold from the central bank in Nanjing to Taipei. The news was leaked to a Hong Kong newspaper, making Chiang fear that his rivals in the government would block the shipments. So he ordered his personal pilot to fly the remaining 480,000 taels within the next two days.
Angry over the transfer, a senior inspector within the central bank began to collect material on it and plan a strike within the bank to stop further shipments. On May 12, he was arrested by Nationalist agents in the bank’s office on the Bund. Five days later, just a week before the People’s Liberation Army captured Shanghai, he was strangled.
The city was in chaos as the PLA approached. Wu was ordered to move most of the remaining money from Shanghai. From May 18, nearly 200,000 taels of gold and 1.2 million silver dollars were loaded onto a ship. An uprising at a port on the route meant the journey to Taiwan took two weeks, instead of two days. In August, two further shipments to Taiwan were made, totalling 200,000 taels of gold.
Chiang wanted to keep the movement of the gold and money secret, not only from the Communists but people within his own government. “The movement of the gold was entirely controlled by one person, Chiang Kai-shek,” Wu said. “Even the finance minister had no power to transfer it. Chiang conveyed his orders verbally, leaving no written record. Only he and my father knew about the movements.”
Chiang wanted the money not only from Shanghai and Nanjing but other major cities. On November 29, Wu and the deputy defence minister were given the responsibility of moving 600,000 silver dollars from Chongqing to Chengdu. It was a perilous assignment: the PLA was close to the city and the roads were blocked with thousands of refugees.
They set off with eight large trucks at 1am on November 30, with the sound of gunfire ringing in their ears. En route, some of the trucks disappeared – taken by a local warlord who needed money to pay his troops. After a journey of five days, Wu and the rest of the trucks finally reached Chengdu airport, where Chiang was waiting.
December 7 was Wu’s final day on the mainland; the plane was so crowded that he could take no luggage. He had to leave 50,000 taels of gold behind; who took them is unclear. For one more week, the air force transported from Taiwan gold and silver to troops in Hainan and other islands still held by the Nationalists. Then the war was finally lost.
The importance of the money soon became clear. On June 15, 1949, the Bank of Taiwan issued the New Taiwan dollar, to replace the old Taiwan dollar at a ratio of one to 40,000. The reserve that backed the first issue of NT$200 million was 800,000 taels of gold and US$10 million brought from Shanghai.
The stability of the new currency ended the severe inflation that had plagued the island ever since Japanese forces handed it back to China in 1945. The gold, silver and foreign exchange were vital for the first few years after Chiang and his government arrived on the island.
The 3.5 million taels of gold left after the end of the civil war were equivalent to US$50 for every one of Taiwan’s eight million inhabitants at that time. They helped Chiang resettle the more than 1.5 million soldiers and civilians who arrived with him, the vast majority bringing only the clothes they wore and the luggage they could carry.
Chiang Ching-kuo, son of Chiang Kai-shek and president after his death, wrote in his diary: “if we have not had this gold in the early period of moving the government to Taiwan, it is unimaginable what would have happened. How would we have the stability of today?”
In January 1950, US president Harry Truman announced that the United States would not become involved in a war in the Taiwan Strait; the US stopped giving aid to the Nationalist government.
But Truman reversed this position after the Korean war broke out in June 1950 and sent the Seventh Fleet into the straits to protect Taiwan, to contain the threat of communism in Asia.
From 1950 to 1965, the US provided US$1.5 billion in economic aid and US$2.4 billion in military aid to Taiwan. The aid included consumer goods and industrial raw materials, which the government could sell to raise revenue. In 1952, the wholesale price index rose by only 3.4 per cent and the threat of hyperinflation was over.
By 1965, Taiwan had established a solid economic base, on its way to becoming an “Asian tiger”.
With so much secrecy and lack of written records, it is hard to know the exact amount of treasure shipped to Taiwan. Wu estimates the amount of gold taken in 1949 at four million taels. Whatever the figure, it was critical to the survival of Chiang Kai-shek’s government and its future prosperity – and, for Beijing, the theft of the century.