A novel end to the big inflation in China in 1950

The Chinese inflation of 1949-1950 was fueled by large budget deficits but was ended in March 1950 before significant deficit reduction occurred. We d iscuss the fiscal strains that gave rise to this inflation and consider the role played by early Communist market-based anti-inflationary measures suc h as the 'economic warfare' against speculators conducted by the government 's state trading companies. While later monetary and fiscal tightening sust ained the stabilization achieved in March - at considerable cost to the rea l economy - the Chinese experience seems to confirm that there is more to i nflation stabilization than fiscal balance alone.