Lecture 11 Silver Outflows

Lecture 11 Silver Outflows - Silver Outflows(1820-1850 Last...

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Silver Outflows (1820-1850) Last class, we talk about China’s central position in the silver-based global economy in the 17 th and 18 th centuries. Massive silver inflows from first Japan and later the Americas (South America) were major driving forces for the development of market in late imperial China. Silver inflows not only led to monetization of the Chinese economy but also significantly changed the interactions between the society and the state, for example, to switch to taxation in silver. In the chapter of silver inflows, Lin Man-houng uses the term “ vulnerable empire” to describe late imperial China’s dependence upon foreign silver. But why is this dependence upon outside silver through exporting goods a sign of vulnerability or weakness of China? In this lecture, we will see the vulnerability was not caused by silver inflows, but by silver outflows. In order to better understand this vulnerability and China’s decline in the nineteenth century, we need to examine the monetary system in China in a bit more detail, and I want to show you how modern economic theory can provide us new interpretations of economic consequences of the Opium trade and the Opium war. Why was silver important to the Chinese economy in the late imperial time? As we know, there were two kinds of currency in China in this period. One is copper coin. The basic value-unit of copper coin was one wen , similar to one cent in today’s economy. Copper coins had one big disadvantage, copper is quite heavy, when you have large volumes of trade which demanded a large number of copper coins, it would be very difficult to transport or carry these copper coins with you. In contrast, silver is more valuable than copper, and silver is much lighter than copper. In addition, it is easy to cut and melt silver. This means that a private businessman could check the fitness or purity of silver received from commercial transactions. Silver thus became a standard medium for long-distance trade or wholesale trade for people in different regions in China. Transactions of small quantity, or daily transactions, were conducted in copper coins. We often call copper coins “small cash” or “small tender”. When silver was used as the currency by weight in China in the seventeenth and eighteenth centuries, both private businessmen and government had their means to test the weight and fitness of silver according to the physical features of silver. In this sense, late imperial Chinese governments did not exert its sovereign power in the use of silver as currency. Silver was used in late imperial China as a currency by weight, as silver ingots rather than as denominated silver coins. Foreign silver dollars entered into China were all denominated silver currency. Question:
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This note was uploaded on 12/28/2010 for the course SOCIAL SCI SOSC119 taught by Professor Wenkaihe during the Fall '10 term at HKUST.

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Lecture 11 Silver Outflows - Silver Outflows(1820-1850 Last...

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