Chinese Oil and American Money: Local Economy and International Aid in Chongqing

Chongqing (Chungking), an inland city in southwest Sichuan (Szechwan) Province, was a major producer of tung oil, a tree oil used for staining and waterproofing wood. Tung oil was one of the biggest export products from China since the First World War. After 1937, when the Japanese invaded Shanghai and central China, cutting off Chinese exports of tung oil along the Yangtze River, no one was affected more than its largest importers: American companies and the United States government.

Bound by the Neutrality Act to avoid giving direct military aid to the Chinese, the United States Congress engineered a bill exchanging monetary loans for tung oil sold by a government-controlled Chinese corporation, the Fu Hsing (or Foo Hsing) Company, from Chongqing. By executing the Acquisition and Distribution of Tung Oil Policy through the Fu Hsing Company, the Nationalist Party government (Guomindang or Kuomintang) controlled the tung oil trade as a military resource for supporting the army and infrastructural development during World War II. Fifteen years later, the Chinese Communist Party modeled the state acquisition and distribution policy of grain and other commodities after the Korean War on that policy’s success.

Previous scholarship has only examined the Tung Oil Agreement within the context of America’s changing Far East foreign policy before the war with Japan. Instead, by using Chinese county-level archives, this paper examines the effects of this aid program on the local Chinese economy and argues the arrangement resulted in policies and practices that shaped inland China’s economic development into the Communist era.