Too Smart to Fight

"The House ofPeers throughout the war Did nothing in particular And did it very well!"

--Lord Mount Ararat in lolanthe

So well did the Chinese Government do nothing in particular throughout 1932--resisting even the temptation to go to war with Japan--that last week China's budget sensationally balanced for the first time in 21 years.

Not stupid sluggishness but an astute, courageous policy of Government inaction on a nation-wide scale produced this magnificent result. When Chinese district generals and provincial governors clashed in their provinces the Government, instead of expensively asserting its authority, let them fight out their quarrels of the moment and let each winner keep the provincial revenues. Not the least amazing feature of Finance Minister Dr. T. V. Soong's balanced budget last week was the fact that under the heading Income from Provincial Revenues he was obliged to set down nil.

The sum of $12,000,000, spent by

China's heroic eigth Route Army on its desperate and hopeless defense of Shanghai (TIME, March 14 et ante), was contributed not by the Government but by terror-stricken Shanghai bankers and merchants and patriotic Chinese abroad--a clear budgetary saving of $12,000,000. As Dr. Soong said stubbornly, three months after the Shanghai Incident: "At present the most important thing for China is to restore her financial stability. We must go on living within our income for a year. We have done it for five months. The Chinese financial situation is better now than that of any South American country!"

This was no empty claim since the Chinese Government, despite its sacrifice of the provincial revenues, still held and holds the main source of Chinese income, the Maritime Customs, a source beyond the reach of squabbling inland war lords. Moreover China's bonds are mostly payable in English pounds and sterling has slipped steadily during 1932--thus making it easier for China to pay interest.

Last week at the final 1932 caucus of the Government's "People's Party" or Kuomintang (TIME, Dec. 26), Dr. Soong, who graduated from Harvard in 1915, presented his historic, balanced budget with this laconic, Bostonian statement: "Gentlemen, the proof of the pudding is in the eating! . . . Our credit is enhanced, our bonds are selling 20% higher than last year. . . . The striking progress thus achieved offsets all hostile propaganda that China is in chaos with a tottering Government."

Lest the Kuomintang cheer up too much and start a spending orgy, Dr. Soong spoke ominously of "facing an apparent deficit for 1933 of $40,000,000." By the most extreme economy, which he called "cutting Government expenses to a skeleton," Dr. Soong hopes but does not predict that China's budget may be made to balance next year at about $700,000,000.

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