During World War II, in the China-Burma-India theater, a Chinese combat unit was renowned internationally, and that was the New 38th Division. This unit was the main force that saved the British troops trapped by the Japanese in Yenangyaung oil fields, Burma. The New 38th was also the backbone of the New 1st Corps, the elite of the Chinese Army in India, which later played quite a crucial role in the counteroffensive of Burma.
Many felt extraordinarily interesting that the New 38th was originally a paramilitary unit specializing in anti-smuggling. The story went back to the early years after the founding of the Republic of China.
In late 1920s, the Ministry of Finance had trouble collecting enough salt tax, the main tax revenue used partly to pay for the indemnity by the humiliating treaty signed by Qing government after the Boxer Rebellion (1899-1901).
In 1930, Soong Tse-ven (1894-1971), the finance minister of China, proposed to Henry L. Stimson (1867-1950), US Secretary of the State, to retain part of her indemnity in China. Soong would use the money to form a tax police force for striking smugglers and guarding saltern, so China would be able to expedite her payment. Stimson agreed.
Thus, a 13000-strong Tax Police General Regiment was established in Shanghai in 1930. At first, it was composed of three regiments equipped with automatic rifles, machine guns, 60mm mortars, and short-distance radio sets, etc. Under American and German advisors, these regiments specialized in small unit tactics. Because it was affiliated to the Ministry of Finance, the men were better paid than those of regular army.
After the Shanghai incident of August 13, 1937, three more regiments were added along with a special-task battalion, an artillery battalion, an anti-aircraft artillery battalion, and a communication battalion.
In March 1938, the Tax Police General Regiment was reorganized as the National Revolutionary Army’s New 38th Division in Guizhou province, and its commander, General Sun Li-zen (1900-1990), was named the commander of this division.