Different Market, Same Map. Regional Currency Markets

The political underpinnings of market boundaries become clear when we turn to the currency market. Like all of China, Shandong used numerous silver, copper, brass, and paper currencies during this period, with no fixed exchange rates between them.^[19] In most of China, silver and silver-denominated paper were increasingly dominant,^[20] but in Shandong copper remained important; consequently, so did the copper-silver market.

According to a 1933 study, copper was used for agricultural sales in five of 12 Shandong places surveyed and was the only currency farmers received in four locations. Farmers made at least some purchases with copper in eight of 13 locations. People often received loans in copper but, except in one place, had to repay in silver.^[21] Prices for large items were generally quoted in silver, and taxes were always set in silver.^[22]

In a unified provincial capital market, silver-copper exchange rates in different counties should have converged or at least followed parallel paths. In fact, however, exchange rates varied wildly from county to county, and trends were often far from parallel. Shanghai rates may be considered "national" prices, though Tianjin, Beijing, and Hankou rates did not always exactly track Shanghai's.^[23] Prices in Yantai and other North Coast ports closely tracked Shanghai rates,^[24] confirming this area's membership in a national, or perhaps littoral, economy. However, inland areas are another story.

Even within the Heartland, there were significant differences between some nearby counties, such as Jinan and Taian. In the early 1920s rates in Linqing and Qingping, two adjacent Heartland counties, diverged by as

[17] For a brief survey of Shandong geography in English, see Esherick, Boxers , pp. 11–20; for greater detail, see Hou Renzhi, ed., Xu tianxia junguo libingshu, Shandong zhi bu (Beijing, 1940), pp. 137–216.

[18] Zhongguo Jiaotongbu, Jiaotong Shi Weiyuanhui, Jiaotong shi (1937), pp. 3531–35.

[19] Li Guijin, "Qingmo bizhi gaige ji qi shibai yuanyin de qiantan," in Jingji shi , 1984, no. 2, pp. 129–30, has a brief summary of the late Qing situation; by 1919, the North-China Herald (hereafter NCH ), Oct. 18, 1919: 172, had counted 115 new kinds of coinage since 1912 and untold varieties of paper.

[20] Leonard Hsu, Silver and Prices in China (Shanghai, 1935), pp. 68, 75.

[21] Ibid., pp. 68, 75.

[22] Ibid., p. 75; SSZ , pp. 260–61.

[23] See, e.g., Tongji yuebao , Dec. 1929: 25; Dec. 1930: 52.

[24] Hsu, Silver and Prices , p. 85; Chintao Shubigun Minseibu Tetsudobu, Tohoku Santo (Bokkai Santo engan shoko Iken Chifu kan toshi) chosa hokokusho (Chosa Shiryo no. 17; Qingdao, 1919) pp. 54 (Yangjiagou), 148 (Ye County), 252 (Longkou), 286 (Huang County), 317 (Penglai).

much as 33 percent. However, after 1926 the difference hovered between 0 percent and 7 percent, only slightly above the cost of shipping copper coins between the two places.^[25] Except for in Jinan, rates within the Heartland rarely differed by more than 20 percent, and sharply opposed trends do not last long.

Moreover, until 1927, trends in the Heartland (again, excepting Jinan) were similar to those in Shanghai and Yantai. After that, however, littoral rates leveled off, while those in the Shandong Heartland kept climbing. By 1933–34 silver cost about 75 percent more copper in Qingping and Linqing (the only Heartland rates available for those years) than in Shanghai.^[26] In most ways, North China was less chaotic after the spring of 1928. However, since it was governments and their allies that kept the currency market divided, it is logical that with increased political stability, littoral and Heartland rates would diverge.

Evidence is scant, but it appears that the Shandong government's growing strength after 1927 allowed it to reclaim some North Coast areas, causing rates there to diverge from Shanghai's and resemble the Heartland's. A July, 1928 quotation from Longkou, a small North Coast port, is very close to rates in Jinan, Jiaozhou, Linqing, and Qingping but 27 percent above those in Shanghai.^[27] However, Yantai, the largest North Coast port, escaped government control and stayed part of the littoral economy. Even three years after Japan seized Manchuria, illegal silver shipments from Yantai to Manchuria affected the local money supply enough to force the government to print more notes; this arbitrage kept the difference in silver-copper rates between Yantai and Dalian down to 8 percent,^[28] far less than the North Coast—Heartland difference. Provincial state making expanded the Heartland zone, but there were limits.

The most dramatic differences, however, are between Heartland and Southwest rates. My most complete set of exchange-rate data is for Jining, the commercial center of the Southwest;^[29] those data resemble nothing for the North Coast or Heartland. Jining silver prices were ordinary in 1904 but

[25] Sources and calculations are in Pomeranz, "Making of a Hinterland," chap. 1, n. 40, and app. C.

[26] Xuxiu Qingping xianzhi (1936), jingji : 25a–b; Linqing xianzhi (1934), jingji : pp. 22b–24a. The Shanghai data were created using the annual index numbers for copper and silver yuan exchange rates in Shanghai from Tongji yuebao , Dec. 1930, p. 51, and prices for selected dates in Hsu, Silver and Prices , p. 85 (for the dates at which the two series both have data, the rates coincide perfectly).

[27] Quotation from Chinese Economic Bulletin 13, no. 3 (July 21, 1928), in Records of Former German and Japanese Embassies and Consulates, 1890–1945 (hereafter Records ), reel 5, p. 4618834.

[28] Quotation from Qingdao Times , Dec. 7, 1934, in Records , reel 5, p. 4619093.

[29] The Jining data may be found in Hai Shan, pp. 48–78. Sources for the other conversion rates appear in Pomeranz, "Making of a Hinterland," app. C.

then soared. By 1909, Jining silver commanded 40 percent more copper than in Jinan and 60 percent more than in Shanghai. By 1914, it was roughly double the price in both Taian (Heartland) and Shanghai; by 1921, almost triple; in 1929, almost six times Linqing and Qingping rates and about eight times the Shanghai rate; and in 1933, roughly double Qingping and triple Shanghai rates.^[30]

Transport costs cannot explain these differences, since Jining was only 100 kilometers by rail from Heartland Taian. Nor can information problems. Currency markets in late Qing Jinan, Wei County, and Yantai generated publicly available daily prices; the same was true in early Republican Jining.^[31] By this time, other commercial information regularly reached even fairly remote counties by telegraph. All the pieces were in place for lucrative arbitrage.