During the Ming and Qing periods, large quantities of silver flowed into China through trade, initially from Japan and then from the New World. How dramatic was the influence of overseas silver on China’s economy? Recent department master’s graduate Junyi Jiang revisits the debate on foreign silver and its role in China between the sixteenth and eighteenth centuries.

Until the late twentieth century, western scholars tended to treat Europe as the motor of world trade. Since the late twentieth century, there has been a reevaluation of the relationship between China and the global economy that emphasizes China’s central position in the early modern silver trade.

A strain of the current literature in Chinese economic history focuses on the impact of the silver trade on China’s fiscal and monetary systems. During the Ming (1368-1644) and Qing (1644-1912) periods, large quantities of silver flowed into China through trade, initially from Japan and then from the New World. How dramatic was the influence of overseas silver on the Chinese economy? By my calculations the extant literature overestimates both the supply of silver in historical China and its uses in the economy. Consequently, the impact of silver on Chinese history is overstated. With silver in its proper place, economic historians have new opportunities to undertake a more comprehensive economic history of China.

First, the question of supply. From the perspective of silver supply, China’s silver intake estimated by different scholars is contradictory and often overestimated. Some say as much as 40 % of the world’s silver supply in the early modern period went to China. Most existing estimates were calculated from the perspective of the suppliers. Only a few scholars made estimations from records in China.

I calculated China’s silver stock from statistics of its silver exports. Given China’s long-lasting trade relations with Japan and the New World, I assume China maintained a balanced account of trade and all the exports were converted to silver. Accordingly, silver imports could be measured by China’s export value.

I used the annual growth rate of China’s 1867-1883 exports compiled in the Customs-Trade Report to estimate silver imports in 1800. Domestic production hardly changed from 1867 to 1883. Growth in silver exports 1867-1883 therefore had to come from silver imports. I then extrapolated the annual growth rate of silver exports from 1867-1883 backward to 1800 to arrive at an estimate of silver imports in 1800. Per my estimation, China imported 395.88 tons in 1800. (1)

I then calculated the average annual growth rate of silver exports between 1550 and 1800. Assuming that China’s exports began with 100,000 liang (3.77 tons) in 1550 and increased to 395.88 tons at an annual growth rate of 1.88 %, per my calculations 21,258 tons of foreign silver could have been accumulated in China by 1800, accounting for 20 % of the silver produced in the New World.

How did this silver affect Chinese society?

Scholars generally believe that the gold floral silver policy in 1436 and the Single Whip Fiscal Reform implemented by the Ming government in the sixteenth century – which changed the taxed medium of exchange from rice to silver – stimulated China’s demand for silver, leading to China’s fiscal silverization.

Whatever the goals of the policy, the actual amount of tax paid in silver was minimal from 1430 to 1520 compared with the tax paid in grain. And, once the proportion of tax paid in silver to cumulative silver imports is estimated, the amount of foreign silver paid as tax to the government was rather small between 1560 and 1640 (figure 1). Foreign silver tended to have limited impacts on fiscal silverization in the Ming era and only played a minor role in China’s great demand for silver.

This low proportion of silver tax might have been because little silver actually circulated in the Chinese economy. Monetary historians have often assumed silver was a dominant currency and that there was even a ‘silver standard’ in China. But in Ming-Qing China various non-standardised forms of silver, such as uncoined silver, silver fragments, and silver dollars, caused transaction costs to be high, and made silver an inefficient medium for market transactions. Since silver was not legal tender until the late nineteenth century, it entered the Chinese economy in the form of precious metals, playing an intermediary role as a commodity. Silver could hardly be considered a standard or principal currency.

Both the weak control of the authorities on silver and a more realistic calculation of silver circulation in the economy challenge the hypothesis of a ‘silver standard’ in China before the late Qing period. There is reasonable evidence to suggest that the literature overestimates silver circulation.

Most – 71 % – of the nation’s silver was held by the government, households, and pawnshops; it did not circulate. According to silver inventories, the Qing state only absorbed around 7.1% of the silver stock. Other research shows that around 5.6% of the silver stock was hoarded in households during the late Ming and Qing eras. Pawnshops kept most of the silver. A study of 72 pawnshops in Shanxhi showed the pawnshops to hold 14,000 liang on average. Given there were 23,139 pawnshops in 1812, we might estimate that about 56.8% of the total silver stock before 1800 was held in pawnshops – if the ratio remains stable. More work remains to be done on this front.

In conclusion, the popular belief that foreign silver had a significant impact on China’s fiscal and monetary system during the Ming and Qing periods seems overstated. By embracing this new perspective, economic historians are in a position to develop a more comprehensive and accurate understanding of the evolution of China’s economy and monetary system.

Notes:

(1) Fuding Liu, Yuru Wang, Jin Zhao, Zhongguo Jindaide Shichang Fayu Yu Jingji Zengzhang [A History of Economic Development in Early Modern China], Beijing, 1996: 295.

(2) Yongchang Zheng, Mingmo Qingchu De Yingui Qianjian Xianxiang Yuxiangguan Zhengzhi Jingji Sixiang [Expensive Silver vs. Cheap Bronze Coins and the related political and economic Views in Late Ming and early Qing], Taiwan, 1994: 83; Yamamura, and Kamiki, “Silver mines,” 350-2.