A 'Trojan Horse' in Daoguang China?: Explaining the flows of silver (and opium) in and out of China
AbstractEconomic historians have offered several explanations for China’s cycles of silverisation and de-silverisation in the 18th and 19th centuries focusing either on exogenous supply shortages in world silver markets or an outflow of silver as a consequence of opium imports. This paper challenges both existing “supply-side” and “demand-side” explanations. Section two shows that the supply side change was not a decline in the quantity of silver but in the quality of imported silver coins after the 1820s. Section three shows that this led to a decline in demand because China did not perform as a classic bi-metallic system as usually assumed. Because China lacked monetary sovereignty, the Chinese adopted a foreign coin, the Spanish American peso as the preferred means of payment in some areas of southern China, and increasingly further into the interior. Section four presents evidence for the exchange rate premium of the Spanish American silver coin over other coins and, more importantly, over silver sycee in China after the 1790s. This allowed for large-scale arbitrage by means of acquiring silver sycee in China for export, while bringing coined silver to China. Underlying this sort of 'dollarization' in China was opium. Hence section five shows that opium imports did not trigger the outflow of silver. Instead the flight of silver in fact seems to be the cause for large opium imports.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 43987.
Date of creation: 20 Jan 2013
Date of revision:
Publication status: Published in LSE Economic History Department Working Papers 173.2013(2013): pp. 1-34
Monetary history of China; bimetallic system; 'dollarization'; silver trade; Opium imports; Daoguang depression;
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
- N00 - Economic History - - General - - - General
- N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-16 (All new papers)
- NEP-HIS-2013-02-16 (Business, Economic & Financial History)
- NEP-MON-2013-02-16 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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NBER Working Papers
11355, National Bureau of Economic Research, Inc.
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- Chris Feige & Jeffrey A. Miron, 2005. "The Opium Wars, Opium Legalization, and Opium Consumption in China," Harvard Institute of Economic Research Working Papers 2072, Harvard - Institute of Economic Research.
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