ABSTRACTWith economic reforms, the control of financial resources becomes important as a means of securing property rights. Both China and the former Soviet Union, in their transition from a centrally‐planned economy, have faced problems of a weakened center which, either completely or on occasions, has lost control of the money creation process. This paper analyses the attempts of provinces and republics to vary the money supply with the objective of acquiring physical resources at the cost of the other provinces (republics), while balancing the costs of potential inflation. Equilibrium outcomes are found to depend on the provinces' (republics') preferences about the growth in real absorption and the rate of inflation, on the growth of national output, and on the relative size of their economie