Review: Empire of Silver: A New Monetary History of China

Empire of Silver: A New Monetary History of China by Jin Xu
My rating: 5 of 5 stars

At first I thought this book would basically be an economic history of China. Then it seemed like it was one of those books overly emphasizing one single item throughout history (c.f. Salt, Cod, etc.). It turned out to be a combination of the two. Silver really did overly influence China's trajectory, especially during the late Qing dynasty. 

I found the story of Zhong Gongquan, Song Hanzhang and the Bank of China to be amazing. I hope someone makes a short movie of this entire incident or something. When Yuan Shikai declared himself emperor, government finances were in tatters. So the government defaulted, and said its banknotes would no longer be accepted. Zhang and Song, after initially panicking, got together and "they made an astonishing decision, which was to categorically refuse to execute the order in hopes of gaining the public's understanding and support". 

Basically they said the government had no control over their monetary policy and they would continue to accept the banknotes. They were then worried Beijing would just fire them, so they asked the international shareholders to sue them personally (!!), so that they would be held responsible regardless. 

Then they opened the bank, and there was a run, but it was mostly people with small notes. They remained open Saturday afternoon and Sunday (usually bank holidays), and all this quelled the panic. Then they were pretty much out of money, but other banks (HSBC and Yokohama) loaned them enough to cover the overdraft, and so they survived.  (pp 259-261)

Another interesting point was the take on the opium wars, and how they just precipitated what was already inevitable. Since China refused to engage in "trade", but only in "tribute", it didn't enter into any treatise, but still let the foreigners buy Chinese products. The emperor said China already had everything it needed, so there was no need to trade. Except that actually China did need Silver, which it received from trade. When the trade in silver dried up, chaos ensued. 

Some  of my notes:

"Let’s shift the scene back to 1262, when the two poles of world civilization, Venice in the West and the Southern Song in the East, both faced the specter of war, and funding for these wars hung by a thread.  Almost simultaneously, the authorities of both places came up with plans to deal with their emergencies, both involving the most advanced financial innovations of that time.  The Southern Song’s Jia Sidao raised military funding by using the steadily devaluing huizi to buy up public land the strip the populace of wealth.  Venice took a different road: Its parliament authorized the government to mortgage its tax revenue, and when a fiscal deficit developed, the administration issued government bonds paying interest of 5 percent.  In retrospect, Venice’s financial innovation summoned the magic power of public debt as capital and effectively led Europe into an era of financial revolution.  As for china, the excessively issued huizi did not regain the favor of the market; rather, public discontent and unrest threw open the door for invasion by the Mongolians."

(p. 34)

Yap Island, and the trade in rocks 

Keynes and Friedman, who probably never agreed on anything when it comes to economics, "each paid tribute to the monetary concepts of the Yap islanders" (David Hume: 'humanity has endowed gold and silver with imagined value'). 

(pp. 43-44) 

Isaac Newton served as warden of the Royal Mint for 28 years, during which time England moved over to the gold standard. He came up with a gold-silver exchange rate which was not perfect, even "excessively high", but it created a "chain effect and gave rise to surprising consequences that developed in England's favor" (p. 60)

Chinese tend not to see the Song as a successful dynasty and "reading Song history is a tearful process" (p. 69), but achievements of the Song are highly praised overseas. 

It boasted the "greatest economic accomplishments of China's imperial dynasties (p. 74)

It is considered the "world's first maritime empire" (p. 76)

Population and per capita income both increased by over 200 percent. (p. 76)

Song dynasty's economic prosperity "not only exceeded that of the Tang dynasty.., but was a time in Chinese history when per capita income briefly surpassed that of Europe" (p. 77)

In terms of per capita income... it rose to $464 at the end of the Northern Song and then continued to rise to $585 in the last part of the Southern Song. Its economic scale far exceeded Europe's and placed it first in the world. China did not achieve this income level again until the 1980s." (p. 208)

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