Return to the Cage: Monetary Policy in China’s First Five-Year Plan

During China’s First Five-Year Plan (1953–1957), a state purchasing monopsony on grain injected sudden, concentrated spurts of cash into the rural economy. Grassroots cadres faced a new problem: peasants with too much cash burning a hole in their collectivized pocket were prone to “spontaneous capitalist tendencies,” including high-interest lending, hoarding, and black-market activity. By examining previously unused documents from the Wenzhou Party Committee, this study explores the role of “huilong”—the return flow of cash into the coffers of the People’s Bank of China—as a tool of local governance to mitigate such tendencies. Ultimately, the study shows that illicit economic activity was not merely a function of capitalist ideology but was a structural side effect of the planned economy itself. Regional authorities recognized this. Their attempts to curb capitalist behavior reflected a sophisticated appreciation of the perils of excess money and an almost monetarist policy prescription to counter them.