China’s “Wall Street Era”: Silver, Trade, and Upheaval in the Nineteenth Century
- Mark Lafond, RA
- Mar 1, 2024
- 6 min read
Updated: Oct 9
Brief History of the Empire of Silver
Why Silver Ruled
In the nineteenth century, silver underwrote China’s fiscal capacity, lubricated long-distance commerce, and served as the reference unit for large, interregional accounts. Because the Qing tax system and elite commerce indexed value to silver, shocks to bullion supply or price rippled through markets, governance, and diplomacy. Unlike statutory gold standards elsewhere, China’s silver regime rested on custom, settlement practice, and the institutions that mediated taels, foreign dollars, and copper cash. In this sense, China’s “Wall Street era” was not a skyscrapered boulevard but a sprawling network of bankers’ tables, assay offices, and treaty-port firms that handled bullion, bills, and exchange. [1]
A Dual-Metal World: Taels, Copper Cash, and Everyday Life
For centuries, China’s economy functioned through a practical division of monetary labor: silver taels for high-value, long-distance, or fiscal transactions; copper cash for petty exchange. This bimetallic ecology balanced precision with accessibility. Silver denominated land taxes and wholesale trade; copper linked village markets to towns.
The system’s smooth working depended on two things: the reliability of silver inflows (or domestic remonetization of foreign coin) and predictable rates between silver and copper. When silver was plentiful and exchange relationships stable, regional markets synchronized; when bullion was scarce or exchange broke down, the burden fell on farmers, small merchants, and officials trying to meet obligations marked in taels even as local incomes were earned in cash. [1][5]
Opium, War, and the “Silver Drain”
By the 1820s–1830s, British merchants, facing chronic tea-for-silver deficits, expanded Indian opium sales in China. Settlement in silver inverted the traditional flow, drawing bullion out through Canton and later treaty ports.
Commissioner Lin Zexu’s crackdown precipitated the First Opium War (1839–1842), culminating in the Treaty of Nanjing’s indemnities, port openings, and tariff conventions, each a structural claim on China’s fiscal base. The Second Opium War and the Treaty of Tianjin (1858) widened the channels. The result was not a single sustained drain in one direction across the century, but a pattern of sharp episodes in which bullion outflows tightened domestic credit, destabilized silver–copper exchange, and multiplied the costs of governing an empire the size of a continent. [2][3][4][8][15]
Civil War and Monetary Shock: The Taiping Rebellion
The Taiping Rebellion (1850–1864) not only ravaged provinces but also disrupted financial logistics. With canals severed and river traffic threatened, transporting silver securely became more difficult and costly.
Agricultural collapse and population displacement reduced tax remittances in taels, while emergency levies strained already fractured markets. The fiscal arithmetic was punishing: obligations fixed in silver against shrinking, volatile revenues in mixed media. Even as some regions recovered, the combined legacy of war and indemnities persisted in arrears, discount rates, and exchange uncertainty, feeding a longer “Daoguang depression” narrative in economic history. [5][6]
The Silver Standard and Foreign Trade: Five Effects
1) Stability for Settlement
For wholesale trade and public finance, a silver anchor, expressed in taels or widely accepted foreign dollars—reduced long-distance transaction risk. Merchant houses and native banks arbitraged between units and maintained customs that made predictable settlement possible despite the absence of a uniform national coin. [1][7]
2) Merchant Preference for Silver
Foreign traders preferred bullion or Mexican dollars because these instruments cleared easily in Asian circuits. As treaty-port commerce ballooned, specialized intermediaries—assayers, shipping firms, exchange brokers—grew around the bullion business, and silver’s monetary role deepened. [7]
3) Silver as a Traded Commodity
Because silver was both money and merchandise, houses arbitraged origin, fineness, and form. Flows linked Hong Kong and Shanghai to Calcutta, London, and San Francisco; coin and bar shipments synchronized with tea, silk, and opium cycles. [7]
4) Global Price Transmission.
When Europe and Japan pivoted to gold and India altered silver coinage policies, relative silver prices shifted against China’s anchor, worsening the terms on which China traded and settled. Steamships, railways, and the telegraph accelerated these transmissions. [9][10]
5) Episodic Trade Imbalances and Drains.
Indemnities and opium-era deficits punctured domestic liquidity at critical junctures, stressing public finance and widening the gap between copper-based livelihoods and silver-denominated obligations. [2][3][4][7][9][10][2]
Diaspora, Remittances, and Silver Circuits
As shocks multiplied, war, famine, market collapses, Chinese migrants sought wages in Southeast Asia and North America, where silver and gold coin economies paid in hard currency. Remittances, routed through draft networks or shipped as coin, became lifelines for home districts.
These flows formed a monetary safety net and a channel of global integration: households in Guangdong or Fujian balanced their consumption and tax burdens with dollars earned in Singapore, San Francisco, or the Straits Settlements. Yet the same global integration exposed families to bullion volatility and exchange risk: a spike in silver’s global price, a shipping interruption, or a local crackdown on remittance brokers could sever income precisely when need was greatest. [11][3][4]
Treaty Ports as Financial Laboratories
Treaty ports did not merely displace sovereignty; they incubated new financial techniques. Maritime Customs revenue (under foreign administration) became a pledged stream for indemnities and loans, embedding China’s fiscal policy within international credit markets. Chinese and foreign banks experimented with note issuance, deposits, and discounting; mint projects attempted to rationalize coinage and standardize units, especially the shift from weight-based taels to coin-based dollars in some jurisdictions.
Out of this milieu emerged a cohort of Chinese financiers, often with Shanxi, Ningbo, or Shanghai networks, who learned to arbitrate silver grades, dollar varieties, and regional exchange rates with professional fluency. [3][4][13]
The Global Shift to Gold and China’s Dilemma
Beginning in the 1870s, major economies consolidated around gold. Germany’s post-1871 move, Britain’s continued gold leadership, India’s 1890s changes limiting free silver coinage, and Japan’s 1897 adoption of gold altered global relative prices.
For a silver-anchored China, this shift created asymmetric shocks: as silver depreciated against gold, China’s external prices adjusted in ways that could cheapen exports but complicate debts and indemnities set in gold-linked terms. Domestic exchange between silver and copper also became more volatile, further eroding confidence in the old order. Policymakers faced a trilemma: preserve the familiar silver anchor, stabilize external accounts, or modernize monetary institutions fast enough to manage both. [9][10][7]
Myths and the Real End of Silver in China
A frequent misconception places the end of China’s silver standard in the late Qing, sometimes even around 1890. In reality, the decisive break arrived four decades later.
On November 4, 1935, the Nationalist Government enacted the Currency Reform of 1935, which halted silver convertibility, nationalized silver reserves, centralized the issuance of banknotes in state-controlled banks, and introduced a new fiat currency called the fabi.
The immediate triggers for this reform were the significant silver outflows in 1934–1935 and the international price shock caused by U.S. silver-purchase legislation, which increased the global price of silver and drew bullion out of China. Thus, after centuries of a bullion-based monetary system, China transitioned to an era of centralized, fiat currency. [12][13][14]
Institutions, Not Just Metals
To reduce the story to “silver vs. gold” misses the institutional layer that made money credible. Merchant courts, guilds, and banks enforced contracts; assay offices attested quality; and customs schedules codified obligations in taels while permitting settlement in specified dollars. When these institutions failed, through war, corruption, or exogenous shocks, metal alone could not stabilize value.
Conversely, when institutions matured, treaty-port banks, standardized coinage, and later centralized note issuance, monetary confidence could rise even with less bullion behind it. This institutional perspective explains why 1935 succeeded where late-Qing reform efforts faltered: power to command balance sheets had finally been consolidated. [13][1][5]
Legacies for the Twentieth Century
China’s nineteenth-century monetary ordeals yielded three enduring legacies. First, they trained a generation of financiers who could operate within global capital circuits, skills that later underpinned Shanghai’s pre-war financial prominence. Second, they etched a policy memory: exchange-rate management is geopolitical, not merely technical. Third, they left a map of risk, of how commodity-money regimes amplify external shocks, that informed twentieth-century debates over central banking, currency areas, and capital controls. What looked like a “Wall Street era” of silver was, in retrospect, a hard apprenticeship in monetary modernity. [1][7][12]
Works Cited
[1] Ho, Tsz Leung. “Silver Fetters? The Rise and Fall of the Chinese Price Level in the 19th Century.” Explorations in Economic History, vol. 50, no. 4, 2013. ScienceDirect, https://www.sciencedirect.com/science/article/abs/pii/S0014498313000107.
[2] Asia Pacific Foundation of Canada. “The Opium Wars in China.” Asia Pacific Curriculum, n.d., https://asiapacificcurriculum.ca/learning-module/opium-wars-china.
[3] “Treaty of Nanking (Nanjing).” Encyclopaedia Britannica, n.d., https://www.britannica.com/event/Treaty-of-Nanjing.
[4] “Treaty of Nanking.” Visualizing Cultures (MIT), n.d., https://visualizingcultures.mit.edu/opium_wars_01/ow1_essay04.html.
[5] von Glahn, Richard. “Economic Depression and the Silver Question in Nineteenth-Century China.” An Economic History of China. Springer, 2017, https://link.springer.com/chapter/10.1007/978-981-10-4053-5_5.
[6] “Taiping Rebellion.” Wikipedia, n.d., https://en.wikipedia.org/wiki/Taiping_Rebellion.
[7] Mitchener, Kris James, and Hans-Joachim Voth. “Trading Silver for Gold: Nineteenth-Century Asian Exports and the Political Economy of Currency Unions.” CREI Working Paper, 2009, https://crei.cat/wp-content/uploads/users/working-papers/voth_trading_silver.pdf.
[8] National Army Museum (UK). “First China War (1839–1842).” Explore, n.d., https://www.nam.ac.uk/explore/first-china-war-1839-1842.
[9] “Gold Standard.” Wikipedia, n.d., https://en.wikipedia.org/wiki/Gold_standard.
[10] EH.Net (Economic History Association). Review of Evolution of the World Economy, Precious Metals and India, n.d., https://eh.net/book_reviews/evolution-of-the-world-economy-precious-metals-and-india/.
[11] U.S. Office of the Historian. “The First Opium War, the United States, and the Treaty of Wangxia (1844).” Milestones: 1830–1860, n.d., https://history.state.gov/milestones/1830-1860/china-1.
[12] “1935 Currency Reform.” Wikipedia, n.d., https://en.wikipedia.org/wiki/1935_currency_reform.
[13] Bank of China. “The Choice for the Silver Dollar in the Currency Reform (1932–1933).” Bank of China History, n.d., https://www.boc.cn/en/aboutboc/ab7/200809/t20080926_1601868.html.
[14] Hu, Jing. The Silver Standard in Prewar China: A Blessing or a Curse? Master’s thesis, Lund University, 2013, https://lup.lub.lu.se/luur/download?fileOId=3912795&func=downloadFile&recordOId=3912013.
[15] “Opium Wars.” Wikipedia, n.d., https://en.wikipedia.org/wiki/Opium_Wars.
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