He was nominated as commander-in-chief of the 1st Army Group, fighting against the Japanese in his province. The Second Sino-Japanese War (1937–45) brought progress and modernization to
Yunnan, as the Nationalist government developed the province into a war base against the Japanese. Factories, universities and government agencies were transplanted there from the coastal regions, and fresh manpower, capital and ideas poured into the province. Industries were established and efforts made by the government to develop the resources of the region. The
Burma Road made Yunnan the corridor through which supplies flowed to Allied bases in all parts of China, and Kunming became a key U.S. Air Force base. A major advance by the Japanese Army along the upper
Salween River in 1942 was halted at
Huitongqiao, near
Tengchong, indicating the vital role that Yunnan played in the country’s defense. The campaign involved Chinese troops, assisted by American forces, crossing the upper Salween on 11 May 1944 in order to drive Japanese forces from Yunnan into northern Burma. On 11 May about 40,000 Chinese of the Chinese Expeditionary Force crossed the Salween initially and a further 60,000 arrived later. About 17,000–19,000 Chinese and 15,000 Japanese were killed in the resulting battle. There were more Chinese casualties because the Japanese had time to prepare their fortifications on the south side of the river. Long was among the Nationalist government insiders implicated in corruption during the 1942-1943 American Dollar Bond scandal. After the 1941 Japanese declaration of war against the United States and the United Kingdom, the two allies sought to support China in a concrete way despite logistical limitations following the loss of
British Burma. The two countries loaned significant amounts of money to the Nationalist government. The Nationalist government decided to use USD$200 million to absorb excess
fabi in an effort to curb inflation. In theory, Chinese purchasers would use fabi to buy bonds at the official exchange rate and be paid in dollars when the bonds were redeemed following victory over Japan. The American Dollar Bonds were issued on March 24, 1942. The public response was poor, with few bond sales. In October 1943,
H.H. Kung sent a secret memorandum to Chiang Kai-shek asking that the bond sales end. Subscriptions were closed on October 15, 1943 and a central bank official falsely announced that all bonds had been sold. Secretly, insiders then purchased the remaining bonds using currency acquired on the black market. The result was a windfall for Nationalist government insiders including Long, Kung, members of the
Soong family,
Wei Tao-ming, and others. (right) and General Long Yun (left) inspecting troops of the
Chinese Expeditionary Force, March 1944 == Post-war ==