Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

How One Man Took China’s Gold

Commodities / Gold and Silver 2013 Sep 25, 2013 - 11:54 AM GMT

By: Jan_Skoyles

Commodities

Jan Skoyles writes: The story of China and their obsession with gold has been revived this year as monthly data shows the phenomenal volumes imported through Hong Kong and being traded on the Shanghai Gold Exchange.

However, given how much we gold commentators report on China’s inherent love for gold, it’s surprising that very few realise that less than one-hundred years ago the country lost thousands of years’ worth of reserves.


Whilst the 1930s saw the Shanghai Gold Business Exchange as one of the biggest gold centres in the Far East. China’s love for gold left them vulnerable to two separate accounts of looting. The first was in 1937 when Japan invaded China, thus helping themselves to 6,600 tonnes of gold from the then capital Nanking.

However we now turn our attention to a lesser reported looting. The gold that was smuggled out of China to Taiwan between 1948 and 1949 by the soon-to-be-ousted Nationalist party.

In 1948, President of the Kuomintang (KMT) government, Chiang Kai-shek was losing the civil war in north-east China against the Communists. He began planning a retreat to Taiwan and he intended to take the gold reserves with him.

The 1949 retreat of Chiang Kai-shek’s government to Taiwan is a key point in China’s recent history. Not only did it signal a dramatic change in the country’s political and social future but it also left the country with little gold bullion to support any sound money they might have wanted.

Estimates of how much was moved differ between sources, ranging from between 3 million – 5 million taels (113.6 tons – 115.2 tons). In The Archives of Gold published in 2010, Dr Wu Sing-yung, outlines how his father (head of finance for the KMT government) helped to mastermind the operation that saw over 4 million taels of gold be moved from Shanghai to Taiwan. One tael is 37.2 grams.

Central bank governor Yu Hung-chun and the head of finance were ordered by the President to transport the country’s gold from Shanghai to Taiwan.

Covert operation

The first of the gold was moved on December 1 1948, 2 million of the 4.6 million taels held by the Treasury were shipped on the Hai Xing to Keelung in northern Taiwan. The coast guard cutter was escorted by the Mei Ching, a naval vessel. (The Mei ching later defected to the Communist side highlighting the risk of transporting such precious cargo and making Chiang paranoid about who was involved).

By sheer luck a British journalist recorded these first gold reserves leaving Shanghai. When George Vine looked out of his fifth-floor office window he saw manual labourers padding in and out of the central bank, in single file, carrying two parcels on a bamboo pole. From there they walked their parcels up a gangplank onto a freighter that had been moored up outside the ‘Peace hotel’ (according to author William J. Gingles).

Realising the significance of what he was seeing, Sterling Seagrave writes (in The Soong Dynasty) that Vine telegraphed his London office with the not-so cryptic message of ‘all the gold in China was being carried out away in the traditional manner – coolies.’

Later Vine wrote, “I could hardly believe what I saw. Below was a file of coolies padding out of the bank. I could even make out their hats . . . and their uniforms of indigo tunic and short baggy trousers,” as they carried “the wrapped parcels of gold bullion on either end of their bamboo poles” to load onto a ship bound for Taiwan.

Many refused to believe that Chiang could order such a thing but the report by the British journalist still prompted a nationwide bank run.

Just 30 days later the same coast guard cutter used to transport the first 2 million taels, was used once again, this time to transport between 600,000 and 900,000 taels of gold (22-34 tons) and a large amount of silver.

Over the next twelve months the Nationalists moved millions of taels of gold, silver and foreign exchange by both air and sea to Taiwan.

Precious air-freight

Following the December shipments, more of the Treasury’s gold was transported by air. This was after Chiang had received official word that he had lost the mainland. Sources report that in February 1949, nine C-46 military planes each flew 14,600 pounds of gold (6.6 tons) to Songshan airport in Taipei.

The Captain who led the mission had no idea about his precious cargo until he was told by a central bank official who was waiting for him on his plane. The Captain and two other colleagues are both cited as recalling three separate missions similar to that described above. It is estimated that 667,902 ounces were smuggled out of Shanghai in this fashion.

The news of the first of these air-borne missions was leaked to a Hong Kong newspaper. In light of this Chiang ordered that the subsequent two gold transport missions take place in the immediate 48 hours following the first.

A well-kept secret

How did this go on for a year without anyone knowing? Dr. Wu writes that “the movement of gold was entirely controlled by one person, Chiang Kai-shek…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.’

What happened to the gold?

It is a widely held belief that China’s gold was used to establish the Taiwan we see today. Just six months after the gold operation began, the New Taiwan dollar was launched. It replaced the old Taiwan dollar at a ratio of one to 40,000. It is estimated that 800,000 taels of gold (and US$10 million brought from Shanghai) provided the stability to a country which had suffered hyperinflation since 1945.

The remainder of the gold is believed to have been used to resettle the 1.5 million soldiers and civilians who had fled from China, following Chiang.

The KMT have since confirmed that 2.27 million taels of gold were taken to Taiwan but dispute that this was used as the foundations of Taiwan. However, Chiang’s son, Chiang Ching-Kuo later wrote, ‘if we had 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?’

One wonders if the Chinese are now learning from their history. Following the theft of their gold the country became hostage to paper money. Whilst the government of today and the KMT are clearly at polar opposites, when it comes to the respect for gold and the strength it gives an economy, one wonders if they are so different after all.

Jan Skoyles contributes to the The Real Asset Co research desk. Jan has recently graduated with a First in International Business and Economics. In her final year she developed a keen interest in Austrian economics, Libertarianism and particularly precious metals.   The Real Asset Co. is a secure and efficient way to invest precious metals. Clients typically use our platform to build a long position and are using gold and silver bullion as a savings mechanism in the face on currency debasement and devaluations. The Real Asset Co. holds a distinctly Austrian world view and was launched to help savers and investors secure and protect their wealth and purchasing power.

© 2013 Copyright Jan Skoyles - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Jan Skoyles Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules