Spring 2007, Volume 17, No. 1
Book Review: China Upside Down: Currency, Society, and Ideologies, 1808-1856 (Harvard University Asia Center, 2006)
Georgia A. Mickey
Lin Man-houng's rich and complex monograph, focuses on the silver-copper coin crisis that shook the Chinese economy during the first half of the nineteenth century. Lin divides her topic into three interrelated sections: (1) the silver-copper coin crisis itself and its aftermath, (2) cultural traditions available to Qing scholars and officials in the debates over the crisis, and (3) competing visions for resolving the crisis. Lin's objectives are to provide a more nuanced analysis of China's fluctuating silver flows during the nineteenth century, to demonstrate the variety and flexibility that traditional statecraft thought provided for analyzing the silver-copper coin crisis, and to show that competing economic policies grew out of economic factors and not out of fixed ideological positions.
China's silver-copper coin crisis occurred when the Qing state's international balance of payments reversed direction from positive to negative in the early nineteenth century. The accepted explanation for this change is that silver stopped flowing into China when Great Britain—China's primary trade partner—began substituting Indian opium for the silver that British traders had previously used to purchase Chinese tea, silk, and other commodities. Lin argues that although Britain's importing of opium into China played an important role in causing the silver-copper coin crisis, other factors were equally—if not more—significant in reversing the silver inflow. In addition to British opium, Lin identifies three other factors that caused China's silver supply to fluctuate in the nineteenth century. First, she argues that when the price of silver in China fell to levels that corresponded to world silver prices as a result of China's dwindling silver supplies, foreign traders lost an incentive to trade with China, because they could no longer take advantage of the earlier favorable silver price differential (107). Second, the early part of the nineteenth-century saw a sluggish world market for Chinese tea and silk, which also decreased Chinese exports (106). The third factor, which helps explain the first two factors, was the sharp decline in world silver supplies from 1810 to 1830, caused by the Napoleonic wars and the South American wars of independence (108). It was this shortage of world silver supplies that prompted Britain to use Indian opium to obtain Chinese tea and silk.
Lin's analysis shows that the global economy during the first half of the nineteenth century affected Chinese people far more than scholars have recognized. Paying taxes and participating in domestic long-distance trade, for example, required individuals to exchange copper-coin earnings into silver. When silver appreciated more than two and a half times against copper coins, this meant that paying taxes and participating in domestic long-distance trade was more costly than before (2). Lin also points out China's increasing vulnerability to world silver supplies. She argues that beginning around 1775 China began to rely almost exclusively on Latin American silver, because by that time Japan had stopped exporting silver to China, and the output of silver from Burmese and Annamese mines was not even sufficient to supply Yunnan and Guangxi's silver needs (68).
Lin emphasizes the Qing state's lack of control over its money supply, which is one reason she criticizes Chinese scholars for using modern monetary policy in judging the Qing state. The state was responsible for minting and issuing copper coins, which were only a small fraction of China's total currencies circulating at this time, and for setting the weight of silver ingots (70). State expenditures were calculated at an "official" rate of exchange that equaled 1,000 copper coins per one liang of silver. Although the state controlled copper coins, private merchants determined the market rate of silver and the exchange rate between silver and copper coins based upon silver obtained through international trade. The state had no part in this process (56-7). In other words, there was little that the Qing state could have done to deal with the silver-copper coin crisis, which was the root of the all too apparent dynastic decline in the nineteenth century. Public anger against the rising price of silver which increased the costs of tax payments and other market transactions precipitated the many local revolts and protests of this period, including the Taiping Rebellion.
When Latin America's silver mines returned to full production in the middle of the nineteenth century, Lin argues that China's outflow of silver reversed itself once again, beginning around 1856. This net inflow of silver from 1856 to 1886 ($691 million) far exceeded the net silver outflow ($384 million) from 1816 to 1856 (274). Lin asserts that it was this net silver inflow in the middle of the nineteenth century that enabled the Qing state to increase commercial taxes, which were then used to crush the Taiping Rebellion and buy time for the beleaguered dynasty (116). Furthermore, although opium imports into China grew during the first half of the nineteenth century, because Britain was short of silver, opium imports after 1850 actually doubled when silver was flowing back into China (22). Thus the reversal of silver inflows that began in the 1810s could not have been due solely to increasing opium imports.
Lin notes that her conclusions about the silver-copper coin crisis come from new sources of trade data. Instead of relying on the records of the British East India Company (BEIC)—as other scholars have done—which only go up to 1833, she supplemented the BEIC data with the records of London maritime customs and other organizations for the period from 1833 to 1850. After 1850, her data relies on the records of the foreign-supervised Chinese Maritime Customs, which began to publish data and analyses in 1856. Furthermore, she identified that the Chinese Maritime Customs data prior to 1887 overestimated the value of imports and underestimated the value of exports, because customs officials had not used the standard method of calculating China's balance of payments. The standard method uses the FOB (free on board) price for the value of imports and the CIF (cargo, insurance, and freight) price for exports. Instead, Chinese Maritime Customs used market prices for both imports and exports After adjusting for this discrepancy, China's balance of payments from 1856 to 1886 were actually positive (94-5).
The silver-copper coin crisis was accompanied by a rise in statecraft writing. Lin characterizes the early nineteenth-century as the last period in which Chinese intellectuals had only traditional ideas for coping with economic problems (146). The conventional view of how Chinese scholars and officials understood and handled the silver-copper coin crisis is that there was a single, monolithic approach. Lin demonstrates that scholars such as Wei Yuan and officials such as Zeng Guofeng identified the decline in the domestic silver supply as the cause of the economic crisis in the first half of the nineteenth century. They were also aware when the silver outflow reversed in the 1850s. Furthermore, a "vivid competition of ideas" took place among officials and scholars on how to deal with the silver-copper coin crisis (17). There were a variety of conflicting opinions, which she classifies into two broad categories: those who favored an "accommodationist" approach and those who promoted state intervention. By an accommodationist approach, Lin means those scholars and officials who favored letting free markets continue to determine interest rates and exchange rates, which she finds similar to Friederich August von Hayek's free market economic theories. The interventionist approach she likens to John Maynard Keynes's theories of government intervention to mitigate adverse conditions resulting from recessions, depressions, and booms. The accommodationist approach, which was exemplified in such measures as hiring merchants to transport tribute grain on the high seas instead of using the Grand Canal, dominated state policy after 1820 and largely proved a failure. After 1850 and into the twentieth century, the Qing state applied the interventionists' solutions as exemplified by the Self-Strengthening Movement and the Qing court's New Policies (281).
Lin argues that the accommodationist and interventionist approaches rose out of the analysis of changing conditions and were not predicated by ideological concerns. She connects the debates over the silver-copper coin crisis to two different schools of statecraft, the Yanghu school (accommodationist) and the Tongcheng school (interventionist). Furthermore, Lin identifies the Yanghu school with New Text Confucianism and the Tongcheng School with Old Text Confucianism. She then proceeds to identify the discontinuities in these two broad positions during the nineteenth century that she correlates to net inflows and outflows of silver, thus showing that existing conditions were more influential in setting state policy than ideology. She also correlates the loss of revenues resulting from the Taiping Rebellion to the rise to prominence of the Tongcheng school in the latter part of the nineteenth century (270). These shifts in policy suggest how statecraft writing and the debates over the silver-copper coin crisis hardly represented a monolithic approach.
Lin Man-houng has written a fascinating and provocative monograph. One might quibble with her choice of China Upside Down for the title, since it does not illuminate her topic. The chapters on statecraft often appear to belong to a different monograph and do not always easily mesh with the analysis of the silver-copper coin crisis. Nevertheless, her revisionist approach is a welcome addition to our understanding of China's economy and monetary system in the nineteenth-century. Although Lin is not responsible for the monograph's index, it should be noted that it is annoyingly unhelpful, because the topics listed are far too broad.
Last Updated On: 5/25/07
