The Harm of Silver Act to China's Economy

1929- 1933 the worldwide great depression was a global event, which made the world economy and society experience phoenix nirvana. The Great Depression had a great influence on China, which was an important factor of rural collapse, industrial depression, real estate depression and financial panic in China.

Before 1935, China was a silver-based country.

Since the middle of19th century, major countries in the world have gradually adopted the gold standard, which has led to a continuous increase in the supply of silver and a downward spiral in the price of silver. For a long time before the Great Depression, the low exchange rate caused by the devaluation of silver (the devaluation of local currency is equivalent to the current devaluation of RMB) promoted the export of China based on silver and the industrialization development of the Yangtze River Delta.

However, by 193 1, due to the influence of the Great Depression, countries all over the world gave up the gold standard one after another.

193 1 year, Britain took the lead in giving up the gold standard. At this time, all the major capitalist countries in the world began to give up the gold standard. 1934, the implementation of the American Silver Purchase Act led to a sharp rise in the price of silver.

On the one hand, the rising price of silver (the appreciation of local currency is equivalent to the current appreciation of RMB) leads to the lack of competitiveness of China's commodity exports, the small-scale peasant economy is on the verge of bankruptcy, and the urban export industry is depressed. A large amount of silver flowed out, gradually forming a trade deficit.

On the other hand, a large amount of funds withdrew from the industrial economy and poured into banks and Shanghai property market, which led to the obvious prosperity of real estate and financial industry. With the sharp drop in asset prices, bank credit supported by apparent prosperity has fallen into the black hole of asset bubble, and the collapse of Shanghai real estate has severely impacted the fragile financial market.

In the 1920s and 1930s, the trend of expensive silver became more and more obvious. At that time, China implemented the silver standard (although China implemented the silver standard, before 1933 abolished the two yuan on April 6, silver and silver were used together, and banks around the country also minted and issued silver coins of different colors, and there was still a proportion between these two kinds of silver coins. For example, Tianjin's 100 is equal to Shanghai's 106 (see Data on Currency History of the Republic of China), and the domestic circulation and accumulation of silver is very large. For example, in 193 1 year, the total amount of silver coins in circulation in the Republic of China was estimated to be170.7 billion yuan, of which about 80 million yuan was minted by foreign countries (No.2, Volume 16 of Bank of Shanghai Weekly, see No.2,/kloc-0, Information on Currency History of the Republic of China). ), 1933, Yin Bao registered and summarized the bank's silver reserves at that time as1462,000, of which the British-owned HSBC had the largest silver reserves, about 36,000,000, while China Bank, the largest bank in China at that time, had a silver reserve of less than 20,000,000 (see No.65433, Volume II of Monetary History of the Republic of China, for the archives of the Ministry of Finance of the Republic of China). )。 At that time, there were many discussions about this phenomenon in China, including concerns about shrinking wealth and increasing foreign debt burden. For example, the Bureau of Industry and Information Technology of the Ministry of Industry and Information Technology pointed out that "China is the only country that uses silver in the world today, and the decline in silver price has a wide relationship with the whole national economy", "China is a debtor country, and the decline in silver price has a great impact on the national finance" and "the decline in silver price has caused huge intangible losses to China's national wealth. In theory, it is also an inevitable destination "(silver price fluctuation report of the Administration for Industry and Commerce of the Ministry of Industry and Commerce, 1930, see page 106 of the second series of Currency History of the Republic of China. )。

However, for China at that time, silver was not an ordinary commodity, but a monetary standard. The rise and fall of silver prices cannot be regarded as ordinary commodities, but also from the perspective of monetary value. In the early years of the Great Depression, the silver standard was indeed a blessing for China, because the countries that traded with China at that time basically implemented the gold standard, and the price levels of these countries, including the silver price, fell sharply after the Great Depression of 1929 (for example, from 1926 to 193 1, new york and. ), which is equivalent to China's currency devaluation, China has implemented a foreign exchange system similar to floating exchange rate. For example, in 1929, China's 1 dollar silver coin was equivalent to 36 cents in the foreign exchange market. In the following two years, the international silver price in terms of gold value fell by 40%, while China's 1 dollar silver coin was only 2 1 cent, while the wholesale price index in the United States only fell by 26% in the same period. Therefore, the price of China's export commodities calculated in China's national currency (namely silver coins) will not fall. On the contrary, it may rise (note that the price calculated by gold will fall), and the price of imported goods will rise. Therefore, although China's exports also declined at that time, the decline was less than that of imports and less than that of the world's total exports (see Friedman (1992)). )。 Therefore, in 1930 and 193 1 year, China had a balance of payments surplus, and in 193 1 year, China imported 45.45 million taels of silver (according to China Customs: Yearbook of Chinese and Foreign Trade Statistics, see ". ), while other countries in the world are experiencing severe deflation, China is experiencing moderate inflation.

193 1 year, Britain, Japan and India abandoned the gold standard. Although the RMB is still depreciating against the US dollar, it has appreciated against the British pound, the Japanese yen and the rupee. The recession of the world economy began to affect China's economy, and China's balance of payments deteriorated sharply. 1932 was forced to export 7.35 million taels of silver to make up for the trade deficit, and the domestic price index began to decline. When the United States abandoned the gold standard in 1933, China's currency began to rise against the US dollar, from 19 cents in 1932 to 33 cents. China's foreign trade has further deteriorated, with the export of 1933 accounting for only 58% of 1930. The trade deficit continues to depend on net exports of precious metals such as gold and silver. When the world economy and trade began to recover, China's economy went into recession. 1934, the United States passed the Silver Purchase Act, and the price of silver rose rapidly, which made China's economy and trade worse and overwhelmed.

Before the currency reform in June 1935+0 1, China was still a country dominated by silver, and the purchase of American banks led to an increase in the price of silver, which immediately had the following three serious consequences for China: on the one hand, the rising currency seriously eroded the competitiveness of China's export products; on the other hand, domestic deflation and production decline seriously weakened the domestic purchasing power and consumption level, and China's imports. For example, in 1934, the export volume of raw silk, China's main export commodity, was only 2 1.8% of that in 1930, and the price of export products fell. Based on 1926, the price index of Shanghai's export products dropped to 72%, and the foreign trade volume was based on 1933 (about 65433). 1934 decreased to 80%, and 1935 decreased to 76%. Among them, the import dropped faster, to 77% and 68% respectively (Wang Xi quoted price (1992). )。 At the same time, China's domestic economy and production have also been seriously affected. A large number of industrial and commercial enterprises closed down. For example, in 1935, there were 1065 industrial and commercial enterprises closed down in Shanghai and 20 national banks closed down or closed down. At that time, the spinning industry, the largest industry in China, began to decrease by 60%. Due to the decrease in industrial demand for agricultural raw materials and the famine of that year, the agricultural output of 1934 was only 13 1 100 million yuan, which was 46% lower than that of 193 1 year (this data is based on the national income of China in Liu Dazhong,193). Brandt and Sargent (1989) quoted another set of data estimated by Evelyn Rawski and others. 1933 China's agricultural output was 166 billion yuan, only less than 193 1 500 million yuan, but this set of data was doubted by some scholars including Friedman. )。 Even some American enterprises operating in China were not spared the bankruptcy. The American silver policy did not increase the purchasing power of China and the trade between the United States and China as claimed by the Silver Group. On the contrary, this policy took away everything that little China had, and even the director of the Far East Department of the State Council admitted that "we are about to suck the blood of the people of China when we buy silver".

Finally, the American silver policy had an unpredictable impact on China. In the eyes of Americans, China, squeezed by many factors, such as the rising price of silver, the massive outflow of domestic silver, the intensification of deflation, and the decline in production, chose to abandon the silver standard and implement legal tender, thus thoroughly reforming the monetary system in China. Although many people at that time and now thought that this currency reform was the beginning of China's currency modernization, it made China embark on the road of hyperinflation in the future (milton friedman said: "If the United States did not raise the price of silver, China would give up the silver standard later, a few years later than what actually happened, and then carry out currency reform when the political and economic conditions were better. China's future path will change. Perhaps hyperinflation in China is inevitable in the end, but at least it can be postponed, so that the national government can win more time to recover from the trauma caused by the war. " )。

In the 1920s and 1930s, the international silver price fluctuated violently, which had a great impact on China's economy and politics. At that time, the national government had fully realized the harm of silver price fluctuation and was eager to stabilize the silver price. However, the US Congress still passed the Silver Purchase Act, which brought China's economy to the brink of collapse. Reminiscent of the situation on the eve of the Sino-Japanese total war at that time, the American Silver Purchase Act greatly weakened the economic foundation of China's anti-Japanese war, which obviously helped the Japanese, and even US Treasury Secretary morgenthau finally admitted that the American silver policy was in line with the Japanese intention. At that time, on the one hand, Japan smuggled a large amount of silver, profited by speculating between the silver price of 40.5 cents per ounce in China and the silver price of 65 cents per ounce in the world, used the huge sum of money accumulated by smuggling silver to build warships and stabilize the Japanese currency, and at the same time left China's silver in the north and finally plundered it (a typical example is the "Ping Jin Silver Incident" in which Japan plundered the financial property of the China government in North China). ), and in view of China's limited foreign exchange reserves, Japanese Zhengjinyin Bank made several surprise purchases of foreign exchange from China Bank during the three-month period of 1934,1and 12, which led to a sharp drop in China's foreign exchange reserves (only 35-40 million foreign exchange and gold reserves remained), and foreign exchange transactions in China were "not subject to".

When the United States buys silver, it is mainly to subsidize domestic silver producers. By the way, improving the purchasing power of China is also a reason for Senator Silver, but they never thought that the real winner was the Japanese. It is unfair to think that Americans intend to help the Japanese. In fact, at that time, the United States was very worried about Japan's military strength in the Far East and the control ability of the Japanese navy in the Pacific, hoping to give China some help to contain Japan. However, what Americans didn't expect was that Japan had strengthened its national strength by smuggling and plundering silver from China and selling it in London and other places, so Morgan Tao lamented: "If I am bought by Japan, then I have been earning my salary." As you can imagine, this consequence is also unexpected by Americans. Nowadays, the international economy and finance are more closely linked, and the outcome of the tit-for-tat policy game between the two countries may be unpredictable. The thing that "the snipe and the clam compete and the fisherman gains" may not happen again.