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A 'Trojan Horse' in Daoguang China?: Explaining the flows of silver (and opium) in and out of China

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  • Irigoin, Alejandra

Abstract

Economic 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.

Suggested Citation

  • Irigoin, Alejandra, 2013. "A 'Trojan Horse' in Daoguang China?: Explaining the flows of silver (and opium) in and out of China," MPRA Paper 43987, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43987
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    File URL: https://mpra.ub.uni-muenchen.de/43987/1/MPRA_paper_43987.pdf
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    References listed on IDEAS

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    1. Chris Feige & Jeffrey Miron, 2008. "The opium wars, opium legalization and opium consumption in China," Applied Economics Letters, Taylor & Francis Journals, vol. 15(12), pages 911-913.
    2. Maria Alejandra Irigoin, 2009. "Gresham on horseback: the monetary roots of Spanish American political fragmentation in the nineteenth century -super-1," Economic History Review, Economic History Society, vol. 62(3), pages 551-575, August.
    3. Feige, Chris & Miron, Jeffrey A., 2008. "The Opium Wars, Opium Legalization and Opium Consumption in China," Scholarly Articles 11379703, Harvard University Department of Economics.
    4. Chen, Chau-nan, 1975. "Flexible Bimetallic Exchange Rates in China, 1650-1850: A Historical Example of Optimum Currency Areas," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 7(3), pages 359-376, August.
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    1. repec:bla:ozechr:v:57:y:2017:i:1:p:108-129 is not listed on IDEAS

    More about this item

    Keywords

    Monetary history of China; bimetallic system; 'dollarization'; silver trade; Opium imports; Daoguang depression;

    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

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