On July 13, 1932, at the Ministry of Commerce's monthly work meeting, Minister Li Chenggang listened carefully to the summary of data for the first half of the year.

"...We applied textile technology introduced from Japan to our own equipment, finally producing cotton yarn of quality surpassing that of France. Fabrics made from this yarn have received a good response in the French market. Although our fabrics have begun to sell in France, French acceptance of our ready-made garments remains very low... In terms of metal products, at this stage, only sales of multi-speed bicycles and the 'Type 28' agricultural bicycles have been successful in France, with annual sales volume for both exceeding 30,000 units... Traditional advantage items such as porcelain and silk are performing well... Tea sales achieved huge success after we opened direct-sale stores... Pharmaceutical sales are very successful..."

The data on the long list was summarized into a report for the Minister. Li Chenggang scanned it and basically understood the situation. In the aggregated data, for the first six months of 1932, China exported goods worth 2.9 billion to France, mostly light industrial products. Imports from France amounted to 4.1 billion Francs, mostly bulk commodities and heavy industrial products. The deficit was as high as 1.2 billion Francs, or approximately 20 million Pounds.

Looking purely at the data, only half the time had passed. The annual deficit could potentially reach 2.5 billion Francs. For China's current GDP of 120 billion Chinese Yuan—roughly 120 billion Francs—this did not seem like a large figure. But if this situation was not reversed, it would inevitably become a major issue.

However, at the State Council work meeting the next day, the Ministry of Commerce didn't mention this at all. Minister Li Chenggang quietly listened to the Minister of Finance's report. "GDP reached 70.4 billion Yuan in the first half of the year, exceeding the plan. Repayment of French loans begins this year. Due to this excess, we do not plan to increase taxes or issue bonds in the second half of the year..."

These reports had to be made public. Seeing these numbers, the private financial press immediately got excited. Various editors began to write articles around these figures. On July 16, the headlines of several private newspapers were *China Begins to Fall into Debt Crisis*.

These newspapers were not fabricating things; the data they cited was official data released by the state. Starting in 1932, the 20 billion Francs borrowed from France had to be repaid over 10 years, at 2 billion Francs per year. The trade deficit with France was 1.2 billion Francs in the first half; multiplied by two, the full year might reach 2.5 billion. For just France alone, the deficit would be 2.0 + 2.5 = 4.5 billion Francs.

For example, the Asian edition of *The Times* did a simple calculation: China now has a population of about 500 million, so on average, every Chinese person loses 9 Francs per year.

Those concerned with this news were concentrated in the cities. Having read many foreign newspapers over the years, and with Chinese officials having written some commentary articles on this, Chinese readers had a concept: the Asian editions of various national newspapers served their motherlands, not truly China. Furthermore, the relationship between Britain and France was no secret to current Chinese readers. People reading these newspapers understood that the current exchange rate between the Chinese Yuan and the Franc was roughly 1:1. Even if every Chinese person bought 9 Francs worth of goods annually, it wouldn't impact life for current Chinese people. The British newspapers wrote this to incite Chinese public aversion to French goods.

There was no lack of pro-British elements in China, and many of them were in the press. For various purposes, the articles written by this group somewhat echoed British views. The number of educated people in China had exploded, and many readers among them, while not pro-British, had begun to care about national affairs. After seeing this news, their emotions were inevitably affected.

By August, the Security Bureau discovered some fake news. For example, that 1 Franc exchanged for 10 Chinese Yuan. The Security Bureau immediately reported this, and Minister of Propaganda Li Runshi soon received the transferred file. Li Runshi thought for a moment and understood where the problem lay. He immediately requested official newspapers to publish introductory articles with "China's Exchange Rate and International Rates" as the propaganda point.

He Rui did not say anything after learning of this news, but he greatly appreciated Li Runshi's quick reaction. He Rui ordered the Security Bureau to investigate which channels these fake rumors were released from.

At the end of August, a report was delivered to He Rui. According to intelligence collected at this stage, the fake news that the exchange rate between the Franc and RMB was 1:10 was not released by pro-British figures, nor by pro-French figures. The likely source was some Chinese radicals with low cultural quality.

The Chinese public currently did not like foreign countries. It had only been eight years since He Rui unified China in 1924. From 1840 to 1924, 84 years had passed. The humiliation accumulated over 84 years could not possibly disappear completely in eight years. And those radicals were fierce nationalists, with political stances similar to radicals in foreign countries. They all high-profilely praised the Chinese nation, believing China to be the most excellent nation in the world, with the duty and responsibility to rule the world.

He Rui, who had similar experiences in his youth, understood this group very well. Although their cognitive level was not high due to a lack of knowledge structure, they could not be discussed as a "hate-the-country party." Moreover, China's radicals were Chinese after all. Although they would loudly sing "Hungrily feasting on the flesh of the barbarians, laughingly drinking the blood of the Xiongnu" from *Man Jiang Hong*, Chinese radicals would not truly do so themselves. At least while the Chinese government was not a fascist government like that of the little mustache, they would never be that radical.

Although He Rui did not care, some comrades in the Central Committee had to care. At a central meeting, someone asked Li Runshi how to deal with the domestic talk about the 4.5 billion Franc annual deficit with France.

Li Runshi looked calm. "Regarding lies, we can conduct propaganda. This emotional concern is based on reality; the Propaganda Department does not believe we need to make any targeted response to the people's normal emotional reactions."

Hearing Li Runshi speak to this extent, the other ministers who asked questions did not continue. Because asking further would be equivalent to questioning whether the Minister of Propaganda was stating his personal will as the decision of the Propaganda Department. Questioning to that degree would be trying to force the Minister of Propaganda to step down, belonging to the realm of fierce political struggle. Although the current public sentiment made some ministers feel perhaps they shouldn't let it be, this was just personal opinion. In the current government which emphasized professionalism, they could only wait for things to develop further.

He Rui did not interject, because it was not appropriate to say anything at this time. The central meeting continued with work briefings. The Minister of Finance introduced the current financial problems, "...Since the conclusion of the Prime Minister-level meeting of the Asian Coal and Steel Community, Japan has begun to adjust its industrial chain. Based on current data, total steel demand for 1932 is around 18 million tons. Our country's steel production has reached 11.59 million tons, and Japan's steel production is about 5.41 million tons. Since a portion of steel demand can be released next year, the gap of nearly 1 million tons of steel will lead to an increase in steel prices this year. Currently, domestic inflation is appearing in various fields. Regarding views on controlling inflation, we hope the Central Bank can provide ideas for a solution."

After the Ministry of Finance finished speaking, the Governor of the Central Bank spoke. "According to the Central Bank's assessment, the inflation problem will continue for 2-4 years before production capacity is insufficient and the import process for bulk raw materials is optimized..."

Even though the central leaders were all quite self-possessed, they couldn't help but be a bit unable to endure at this point, and a stir went through the conference room.

He Rui, however, appreciated the Central Bank's current performance. In a modern country, the main work of the Ministry of Finance is to reduce unemployment by developing the economy, while the main work of the Central Bank is to control inflation by controlling currency issuance and circulation direction. If a country's economy develops at high speed while simultaneously being in a situation of low unemployment and low inflation, this stage will inevitably become a famous Golden Age in that country's history, and "good old days" that its nationals will miss later. The good old days are missed because such a situation rarely occurs.

Under normal circumstances, it would be this kind of situation where the Ministry of Finance and the Central Bank seem to be running in opposite directions, yet have to discuss with each other, compromise with each other, and each issue part of the policy, trying to seek a current optimal balance point between high growth, low unemployment, and low inflation.

That the current Central Committee could build to this extent meant that China had already entered a considerable degree of industrialization. He Rui was very satisfied with this. However, what He Rui was satisfied with were the construction achievements; the immediate problems had not been solved.

The Governor of the Central Bank explained the source of high inflation to the comrades of the Central Committee. China was currently in a process of rapid urbanization. The core cities in the economic circles planned by the central government were all experiencing a stage of rapid expansion in urban scale. The weak consumption power of the Chinese people at present was insufficient to buy houses in full, and China's urban planning did not accept the appearance of slums. Therefore, cities built large numbers of small apartments and provided loans for buying houses. This generated huge debts, which were manifested in the form of currency.

Enterprises and laborers participating in infrastructure construction all received large amounts of currency. Consumption generated by large amounts of currency directly pulled up prices. At this stage, China had borrowed huge foreign debts and invested them in the synthetic ammonia and internal combustion engine industries. These two industries promoted rural growth and the improvement of logistics and transportation capabilities. A considerable part of infrastructure construction was roads. With roads, logistics became even fiercer. This led to a greatly increased circulation volume of various commodities, which was different from the agricultural era economy. After huge demand was released, it directly led to price increases.

Moreover, huge market demand led to more private capital pouring into the production field. This caused the speed of price increases to increase a lot.

After introducing the recent data, the Governor of the Central Bank said very firmly, "At this stage, the Central Bank can only continue to release currency in response to demand. If we do not release so much currency for loans, it is very likely to lead to the bankruptcy of a huge number of enterprises."