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US pressure on China: Silver flows, deflation, and the 1934 Shanghai credit crunch


  • Burdekin, Richard C.K.


US pressure for Chinese currency appreciation in the face of a weakening dollar was initially resisted in the post-2003 period. No such option was available in the 1930s, however, when dollar weakness was accompanied by silver purchases that automatically drove up the value of China's old silver-based currency. New empirical evidence suggests a significant link between the policy-induced driving up of US silver prices and Chinese exchange rate appreciation and price deflation. Moreover, the reversal of the silver flow into Shanghai as large-scale US purchases began in 1934 appears to have been met by a credit crunch in that city--as evidenced by bank failures, and real estate and stock market declines. The silver flow from the interior to Shanghai had previously insulated the financial center from the credit shortages faced elsewhere in China after deflation first emerged in 1932-1933.

Suggested Citation

  • Burdekin, Richard C.K., 2008. "US pressure on China: Silver flows, deflation, and the 1934 Shanghai credit crunch," China Economic Review, Elsevier, vol. 19(2), pages 170-182, June.
  • Handle: RePEc:eee:chieco:v:19:y:2008:i:2:p:170-182

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    References listed on IDEAS

    1. Friedman, Milton, 1992. "Franklin D. Roosevelt, Silver, and China," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 62-83, February.
    2. Rawski, Thomas G, 1993. "Milton Friedman, Silver, and China," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 755-758, August.
    3. Cheng-chung Lai & Joshua Jr-Shiang Gau, 2003. "The Chinese silver standard economy and the 1929 Great Depression," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 43(2), pages 155-168, July.
    4. Brandt, Loren & Sargent, Thomas J., 1989. "Interpreting new evidence about China and U.S. silver purchases," Journal of Monetary Economics, Elsevier, vol. 23(1), pages 31-51, January.
    5. Richard C. K. Burdekin & Marc D. Weidenmier, 2001. "Inflation Is Always and Everywhere a Monetary Phenomenon: Richmond vs. Houston in 1864," American Economic Review, American Economic Association, vol. 91(5), pages 1621-1630, December.
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    Cited by:

    1. Richard C.K. Burdekin & Kris James Mitchener & Marc D. Weidenmier, 2012. "Irving Fisher and Price‐Level Targeting in Austria: Was Silver the Answer?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(4), pages 733-750, June.
    2. Ho, Tai-kuang & Lai, Cheng-chung, 2013. "Silver fetters? The rise and fall of the Chinese price level 1928–34," Explorations in Economic History, Elsevier, vol. 50(3), pages 446-462.

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