The book "Eagle Dragon Alliance:America's Relations with China in World War II" ( Wesley Bagby,University of Delaware Press, 1992) states on P. 49 "General Ho Ying-Chin said that China was self-sufficient in the production of rifles, machine guns, antitank guns, and trench mortars, and even produced a few light artillery pieces."
The next paragraph says that the government was afraid of spending money, because increased production might raise inflation. Further, it was estimated (by Sun Fo) that China's wartime indusry produced far less than it could have, only about 10-20 per cent.
I don't know quite what to make of that. Was the economy that shattered?