The efficiency of the Chinese silver standard, 1920-33

This study provides an alternative approach to analyze the linkage between the international trade and the domestic metal exchange rate in China during the 19th century. I employ a dataset spanned from 1825 to 1886 to examine the dynamic intra-and interrelationships between the domestic silver-copper ratios and the international trade in vector error correction methods. I obtain that a long-run relationship between the exports of tea and silk, the imports of opium, and the domestic silver-copper ratios existed in China. The silver-copper ratios Granger cause the imported opium, silver inflow and exported tea from China, but the international trade does not granger cause the silver-copper ratios. The impacts of impulse response function and variance decomposition are analyzed. The results suggest a more strong connection from the international trade and the domestic metal exchange rate than existent explorations. 2

Review of Asian and Pacific Studies, アジア太平洋研究, 18: 59-85., 1999

In the late-nineteenth century, silver depreciated rapidly against gold. Countries throughout the world stabilised their silver currencies against gold, often by adopting the gold standard. Governments of most Asian countries were slow to react. They had to weigh several facts. Silver currencies were widely used in their economies for their intrinsic rather than nominal values. The control of governments over the monetary economy was less effective compared to Europe and North America. Governments did not immediately have the gold reserves required to support the introduction of a gold standard. Still, the increasing integration of Asian economies into the world economy required stabilisation of silver currencies in order to further trade and investment. In the end, most governments in Asian countries did not adopt a gold standard, but rather a gold-exchange standard which used a fund stocked with gold-based foreign currencies to guarantee the value of the currencies of their countries in terms of gold. The article describes the stabilisation of silver currencies in eight Asian countries and explains why governments of most countries were relatively slow to take action. It also assesses in brief the question whether stabilisation indeed impacted on the development of foreign trade and furthered the inflow of foreign investment, as theoretical insights would suggest.

2015

Does the difference in capital market development between major advanced economies during the 18 th and 19 th centuries explain the subsequent divergence in their income levels? We employ a storage model to obtain regional interest rates from monthly grain price changes, and we compare the integration of capital markets in Britain and China. The first step is to validate the approach by showing that grain price-based interest rates match salient features of the 19 th century U.S. capital market. Our analysis using almost 20,000 new interest rates reveals that Britain's rates were lower than China's, even compared to China's more developed areas, although not by a large margin. The regional integration of capital markets in Britain was substantially higher than in China, however, indicating lower barriers to capital flows than in China. At distances above 200 kilometers regional interest rates in British regions are about three times as strongly correlated as interest rates in China. Our results show that while China appears not to have been as capitalscarce as generally presumed, it had a strong disadvantage relative to Britain in its ability to allocate capital to the location of efficient use. Overall these results suggest that capital market performance may have been an important reason behind the divergence in incomes across countries in the 18 th and 19 th century.

Economic History Review, 2007

In this paper we review evidence about the development of the Chinese capital markets over a crucial period in world market history, and place that development in the context of world financial markets at the time. Despite fundamental differences between China today and China 100 years ago, it is still important to consider the dangers of an imbalance between domestic and international investor markets, and the mismatch between domestic and foreign expectations about investor protection. The lessons of the last century suggest that China today should consider opening Chinese investor access to foreign capital markets in order to equilibrate the level of diversification between foreign and domestic investors. In addition, protection of domestic corporate investor rights is at least as important as protecting foreign investor rights.

The paper takes issue with the mainstream economic analysis of the enormous flow of silver into China in 1550-1820. First, I challenge the view that arbitrage between gold and silver in European trade with China was important except for one twenty-year spell. Next, I argue that had China imported gold, its history would have been much the same. I also dispute the idea that the persistence of the silver inflows from 1550 to 1820 implies any persistent disequilibrium, and I maintain that economic theory can easily accommodate the view that the inflow of silver into China sponsored growth in China.

2014

We ask whether the institutions introduced in Chinese Treaty Ports by Western powers from 1842 to 1943 had an impact on capital market development in China as evidenced by interest rates. We estimate annual interest rates for 205 prefectures throughout China over the years 1820-1911 by measuring carrying costs of grain. The key finding are: first, that interest rates in China rose during the 19th century, and were on the whole higher than they were in the 18th century. Second, difference-in-differences estimation shows that treaty port institutions lowered interest rates significantly, not only in the immediate vicinity of the treaty ports but more broadly. The magnitude of the decline was about 25%. 1 Hoover Institution, Stanford University, 434 Galvez, Stanford, CA 94304. Also affiliated with NBER and CEPR. Email: [email protected] 2 Hoover Institution, Stanford University, 434 Galvez, Stanford, CA 94304. Also affiliated with NBER and CEPR. Email: [email protected] ...

The Twelfth International Convention of Asia Scholars (ICAS 12), Asian Studies Series, Amsterdam University Press, 2022

With the background of foreign concessions in Shanghai, as a result of the Treaty of Nanjing and subsequent treaties between China and Western powers, the Shanghai Stock Exchange (1904-1941) was established by foreign businessmen (mostly British) in Shanghai. This foreign Shanghai Stock Exchange symbolises Western capitalisation in China and deserves the attention of economic historians to investigate its function in semicolonial Shanghai. However, due to constraints in available archives and difficulties in utilising multilingual research materials, the history of the foreign Shanghai Stock Exchange has been untold. Among the inchoate existing literature on stock exchanges in Shanghai, literature in Chinese lays focus on Chinese stock exchanges while literature in English dismisses the foreign stock exchange from the broad context of financial capitalism in China reflected locally in Shanghai. This paper aims to bridge the scholarship between Chinese and English on this topic and put forward the future direction to dig into this important but missing piece of economic history.

SSRN Electronic Journal, 2000

The Wharton Financial Institutions Center provides a multidisciplinary research approach to the problems and opportunities facing the financial services industry in its search for competitive excellence. The Center's research focuses on the issues related to managing risk at the firm level as well as ways to improve productivity and performance. The Center fosters the development of a community of faculty, visiting scholars and Ph.D. candidates whose research interests complement and support the mission of the Center. The Center works closely with industry executives and practitioners to ensure that its research is informed by the operating realities and competitive demands facing industry participants as they pursue competitive excellence. Copies of the working papers summarized here are available from the Center. If you would like to learn more about the Center or become a member of our research community, please let us know of your interest.

The Economic History Review, 2007

In this paper we review evidence about the development of the Chinese capital markets over a crucial period in world market history, and place that development in the context of world financial markets at the time. Despite fundamental differences between China today and China 100 years ago, it is still important to consider the dangers of an imbalance between domestic and international investor markets, and the mismatch between domestic and foreign expectations about investor protection. The lessons of the last century suggest that China today should consider opening Chinese investor access to foreign capital markets in order to equilibrate the level of diversification between foreign and domestic investors. In addition, protection of domestic corporate investor rights is at least as important as protecting foreign investor rights.

American Economic Review, 2002

Trade has been considered a condition for growth and development, a view that might have merits in explaining the rise of the Western world. I use a new data set from archival sources of eighteenth-century China to revisit this question. This analysis suggests previous studies of market integration, which attribute much growth to a reduction in transport costs, have overestimated these effects. I find the overall level of market integration in China was higher than previously thought, and, intertemporal effects are important substitutes for trade. Both factors reduce the importance of trade as a unique explanation for subsequent growth.