A trojan horse in Daoguang China? Explaining the flows of silver in and out of China

Written on board of US Steamer San Jacinto – anchored in Shanghai in October 1856 - a report to the New York Times on the “Progress of the Rebellion in China” indicated that the US government “was forced to buy the Carolus dollars at an increasing sacrifice in order to pay its high salaried officers, not for what they are bought, for a Carolus dollars count not more than a Mexican or American with the pursers of the US navy”. In Shanghai the coin was at 50% premium above of the Mexican coin or any other silver coin of equal weight in circulation. No reason was given for such wild appreciation other than “the prejudice of the Chinese” in favour of the old Spanish American coin. According to the source “one hundred Carolus could buy in any established commercial house in China 150 American dollar or other silver dollars (and) a hundred pound draft on the bank of England maybe had for 250 or 270 Carolus, and larger or smaller ones in the same ratio” at the time when 450 or more pesos were required elsewhere in Europe or America for a sterling. The reporter concluded that in no other place the famous coin was worth more than its standard value. That China had a problem with silver is well known to the economic and monetary history literature. In the last 20 years or so the silverization of China has been pivotal in the explanation of the Great Divergence and more traditionally has occupied the interest of economic historians of China and Asia since, probably it firstly occurred in the late 18th century. There is a wealth of studies on trade and monetary history of China, the Pacific Rim and globally which have emphasized the role of silver in the Middle Kingdom since the 16th century. A more traditional historiography has insisted on the de-silverization of China by mid-19th century, which some associate with the Daoguang Depression – provoked by the acute alteration in the exchange rate of copper cash to silver that characterized the period.