One
Secular Trends of Rice Prices in the Yangzi Delta, 1638–1935

Yeh-chien Wang

In an agrarian society like Qing China, grains are the most important commodities in domestic trade, and food consumption makes up more than half of the average household budget.^[1] Grain prices are therefore the leading indicator in the market; the direction and the magnitude of their movement generally reflect conditions of inflation, deflation, or crises of major proportion. Moreover, persistent changes in grain prices relative to prices of other commodities give rise to a process of income redistribution affecting the welfare of virtually all groups of people and eventually the social and political stability of a country. As such, a clear knowledge of the trends of grain prices will provide not only a key to understanding the state of economy and society but also a basis for further research in real wages, the standard of living, and many other areas once data on other economic indicators are uncovered.

Empirical studies in price history for imperial China are still in their infancy because of scarcity of data,^[2] but the gradual opening of archival resources in both Beijing and Taibei offers us rich mines for historical exploration. What I am attempting to do in this paper is to delineate broadly the secular trends of the prices of rice, the single most important staple food of the Chinese people, in the Yangzi Delta for three centuries prior to World War II and to suggest some tentative explanations for the trends observed.

The Yangzi Delta is chosen as the focus of observation for two main reasons. First, price data for the area are more abundant and, by and large, of better quality than price data for other areas. I am thus able to construct a price series extending over three centuries. Second, because of its economic centrality, prices in the area reflected conditions of demand and supply in the national, not just regional, market. In late imperial China most of the long-distance trade used the waterways, of which the Yangzi River, the Grand Canal, and the sea route along the coast were by far the most important. Linking the eastern coast with the interior, the Yangzi River flows through China's most productive regions. Together with its tributaries and connecting lakes it provided the most efficient network of inland transportation. The Grand Canal joined the capital region to the resource-rich South, while the sea route tied together all of the coastal provinces from Hainan Island to the Liaodong Peninsula. Only the northwestern region and the southwestern corner of the empire remained relatively isolated. Before the Opium War (1840–42) there were, according to one study, more than 200,000 junks plying these waterways and other smaller rivers with a total carrying capacity amounting to 4–5 million tons.^[3] Strategically situated at the focal point where the three principal arteries converged, the Yangazi Delta thus became the hub of interregional trade (see Map 1.1).

In addition to the advantage it possessed in geographic position, the industrial structure of the delta further enhanced its economic significance. It was, on the one hand, the center of the textile industry. On the other hand, its agriculture was unable to produce sufficient food to feed its inhabitants because it had the highest density of population in the country and much of its cultivated acreage was occupied by cash crops, such as cotton and mulberries.^[4] These structural features of the delta economy gave rise to a

[Full Size]

Map 1.1.
Grain Trade Routes in Qing China.

growing two-way traffic in which cotton cloth and silk, the staple products of the delta, were distributed to the rest of the country while surplus food from inland and the newly developed areas came to the delta for local consumption or for transshipment to other areas where food was also in short supply. In the latter part of the eighteenth century the annual volume of long-distance trade in rice down the Yangzi River to the delta was probably between 15 million and 20 million shi , of which 5–6 million was transshipped to North China and the southeast coast (including 3 million shi as grain tribute to the capital). In addition, around 15 million shi of soybeans, bean products, and a variety of grains and fruits was transported from Manchuria and North China to the delta via the coastal waters and the Grand Canal. Beyond this, grain trade across provincial borders in the rest of the country was, quantitatively speaking, insignificant.^[5] It must be noted, furthermore, that grains and textiles formed an overwhelming proportion of commercial cargoes carried across provinces. Before the middle of the nineteenth century, those two categories, as estimated by Wu Chengming, accounted for 42 and 31 percent, respectively, of the total value of the seven major commodities that entered interregional trade.^[6] As the principal supplier of textiles to, and the consumer of most of the surplus food from, other parts of the country, the delta inevitably assumed the central role in the domestic market.

In a study on food supply in the delta in the eighteenth century, I selected for observation and analysis rice prices for 1738–89 in Suzhou and Hangzhou, the most flourishing prefectures in the delta and two principal prefectures in the Lower Yangzi Region, in conjunction with Quanzhou Prefecture of the Southeast Coast, Hanyang Prefecture of the Middle Yangzi Region, Huaian Prefecture in North China, and Guangdong Province in the Lingnan Region. My findings lend strong support to the proposition that the delta had economic centrality. First, prices show a remarkable degree of synchronized movement across all of the five macroregions linked by the three major waterways. Second, a Pearson correlation analysis of the deseasonalized, decycled, and detrended prices in these regions gives coefficients that are all positive, most of them of relatively high value (0.6 and over), and degrees of association between Suzhou and the rest that are the most pronounced. Although the data are far from complete and perfect, this survey of the grain trade nationwide and of grain price movements in a large part of the country does indicate the central position Suzhou occupied in the country's grain market.^[7]

Not only was Suzhou the national market for grain and textiles, it was also

the foremost emporium for many other commodities. In 1756, for example, Governor Gao Jin said in a memorial to the emperior that tung oil and black plums were produced in Huguang, white wax in Hunan and Guizhou, copper in Yunnan and Guangdong, coir fiber in Huguang, Jiangxi, and Zhejiang, and rattan in Guangdong. But all of these products were, he pointed out, shipped to Suzhou for distribution to other parts of the empire.^[8]

In Table 1.1, I have compiled an annual price series for the delta from 1638 through 1935 by combining four shorter series as follows: a Shanghai series for 1638–95, a series for Suzhou City (the capital city of Suzhou Prefecture) covering 1696–1740, a Suzhou Prefecture series for 1741–1910, and a Shanghai series for 1911–35. There are, however, a number of years for which price data are missing. In such cases, I have filled out the missing data by extrapolation (marked with an asterisk in the third column); for the years 1862–64, when Suzhou was occupied by the Taiping rebels, I have used Shanghai prices.

The core of these data is the 170-year-long Suzhou Prefecture series plus the preceding Suzhou City series. Combined, these two series cover the entire Qing period except for the beginning decades. The data for the Suzhou City series are obtained from reports of governors and imperial commissioners of silk works residing in the city. Since the city was then the largest grain market in the country, to which early Manchu emperors paid close attention, more price reports came from there than elsewhere in the country. But it was not until the establishment of a nationwide grain-price-reporting system in the late 1730s that reports became regularly required of local administrations. Under this system, provincial authorities throughout the country were required to submit to the throne monthly reports on prices of major grains in every prefecture under their jurisdiction.^[9] The Suzhou Prefecture series is based on these reports. My colleague and I have gathered 1,632 monthly reports for this period (1740–1910), of which 96 years are complete with 12 months of data, another 25 years with 11 months of data, and only 6 years without data at all (see column 3). Nonetheless, how reliable are these official data? Obviously we cannot proceed with our research unless we have some degree of confidence that they provide a good approximation of market prices.

For the present purpose of trend observation I shall employ two kinds of tests to evaluate the official data, first, to observe whether excessively high prices occur in, or are preceded by, years of major natural or man-made calamities in the area or other parts of the country and, second, to see whether the secular movements of prices as manifested in the official series

(Table continued on next page)

(Table continued on next page)

(Table continued on next page)

(Table continued on next page)

(Table continued on next page)

(Table continued on next page)

(Table continued on next page)

[Full Size]

Fig. 1.1.
Rice Prices in the Yangzi Delta, 1638–1935 (taels per shi )

are in line with those exhibited in other price series for the area that are derived from different and yet reputable sources. As indicated in Table 1.1 and Figure 1.1, rice prices peaked in 1756, 1786, 1814–15, and the early 1860s. In 1755 heavy flooding afflicted the Lower Yangzi and Huai River valleys, and in 1785 a dreadful drought blanketed the Lower and Middle Yangzi Valley, the North China Plain, and Manchuria. In 1814 the country was hit by both—flooding in Zhejiang, Fujian, and Jiangxi and drought in Jiangsu, Anhui, Henan, Sichuan, and Shanxi.^[10] Finally, it was at the height of the Taiping Rebellion (1850–64) that prices skyrocketed as never before in the Qing period.

In the fourth column of Table 1.1, I have assembled three more series of rice prices of shorter duration for Xiaoshan (a county in the neighborhood of Hangzhou), Changshu (a county in Suzhou Prefecture), and Shanghai. The Xiaoshan series for 1684–1802 is derived from the records of the Lai clan in the county; the Changshu series for 1836–1860 from casual notes of a local scholar; and the Shanghai series for 1862–1910 from the decennial reports of China's Maritime Customs. As shown in Figure 1.1, prices of these shorter series move mostly in step with those of the annual series. Moreover, the linear trends fitted respectively for the annual series and for the Xiaoshan series for a whole century (1684–1788) turn out to be virtually the same, that is, an increase at the rate of 0.0131 tael per year for the former series and 0.0136 for the latter. The same can be said of the annual series and the Maritime Customs series for the last three decades of the Qing period, with respective increases of 0.0848 and 0.0860 tael. There is, then, good reason to believe the general validity of official price data for the Qing so far as the secular trend is concerned.

For the last dozen years of the eighteenth century, however, the annual series and the Xiaoshan series diverge significantly from each other (see Fig. 1.1). I suspect that something went wrong with the price reports from Suzhou Prefecture for those years because they show a sudden and drastic decrease in the extent of price fluctuations compared with any period before or after. On the other hand, not only for Suzhou but also for many other prefectures in and out of Jiangsu, the movement of prices represents a V-shape between the mid-1780s and the early years of the nineteenth century and the trough in the Suzhou series appears to be among the deepest. I cannot at the moment give a satisfactory explanation for the divergence between the two series for this short period. Perhaps a real picture will emerge with the discovery of new data.

Of all the data in the annual series, those for 1911–35 are unquestionably

[Full Size]

Fig. 1.2.
Thirty-one-Year Moving Average of Rice Prices in the Yangzi Delta, 1638–1935 (taels per shi )

the most solid because they are compiled on the basis of price quotations in the Shen Bao and Xinwen Bao , two widely read newspapers in prewar Shanghai. The most rudimentary data are those for the seventeenth century, which are derived from random notes left by two contemporary local scholars. These notes do not have price entries for every year, and price data therein lack statistical uniformity in terms of product and date. Nonetheless, prices recorded by one scholar are highly consistent with those by the other. Moreover, virtually all peak prices noted by either of them coincide with years of calamities or come immediately afterward. All in all, while the quality of the four sets of data that form the annual series is uneven, the data are good enough to be taken as a general indicator of price trends in the market.

To better observe the broad trends of prices, I have, as did W. G. Hoskins for wheat prices in England, smoothed the annual series by using 31-year moving averages.^[11] The results are rendered in column 5 of Table 1.1 and plotted in ratio scale in Figure 1.2. The smoothed averages fit the original series rather well. In view of the probable defects of the series for the last dozen years of the eighteenth century, which may have exerted an undue influence over the projection of the price trend, the shallow trough in the mid-1780s may well be nothing more than a statistical illusion. I have therefore smoothed it out freehand with a broken line. So modified, the figure shows prices to have moved in two broad swings over the three centuries. Beginning in the 1640s, the first swing headed steeply downward, reaching bottom in the early 1680s, then changed direction, rising at a modest rate for over a century to its peak around 1820. Then came the second swing. Prices descended gradually through the early 1850s and, after experiencing drastic fluctuations caused by the Taiping Rebellion and its aftermath in the third quarter of the nineteenth century, shot up in the early 1880s and kept rising through the 1920s.

As pointed out before, prices moved generally in a synchronized fashion in the Yangzi Delta and most other regions. Indeed, we can find few exceptions to the long inflationary trend in the eighteenth century, the slight downturn in the second quarter of the nineteenth century, and the half-century upswing before the Great Depression.^[12] It may be worth noting that while broad trends in grain prices are also recognizable in premodern Europe, the turning points are much less uniform from one region to another. There were the well-observed Price Revolution in the sixteenth century, the fall of prices in the seventeenth, renewed inflation in the eighteenth. Nonetheless, the sixteenth-century inflationary period drew to an end between 1590 and 1600 in the south but between 1620 and 1640 in the north; and the seventeenth-

century deflationary period reached its nadir in the 1690s in Würzburg and Vienna but not until the 1730s and 1740s in England.

More interesting is the contrast in regional price differentials between the two continents. In the last half of the fifteenth century the western Mediterranean region led Europe with the highest prices, eastern Europe stood at the other end, and the northern and Atlantic regions fell in between. The ratio of wheat prices then was about 6 or 7 to 1 between the two extremes. A century later the gap was narrowed to 4 to 1 because of the growth of the grain trade on the Baltic, which brought more and more Polish wheat to the Mediterranean region. Even more remarkable was the development of the Atlantic trade in the next one and a half centuries. By 1700 the north (England, France, the Low Countries) had taken the economic leadership from the Mediterranean and turned itself into the region of expensive wheat. By the middle of the eighteenth century prices in most regions had, by and large, merged into one another, with a somewhat higher level in the north.^[13] Europe thus became a highly integrated economy before the advent of the Industrial Revolution.

Early eighteenth-century China was, on the whole, comparable with Europe in terms of market integration. As shown in Map 1.2, in South China, where most people lived and where rice was the staple food, the Yangzi Delta (Suzhou and Hangzhou) had the highest prices, that is, about 1.5 taels per shi , around 1740. Next came neighboring Anhui and the southeastern coast of Fujian and Guangdong, where rice prices stayed at 1.0 taels or somewhat higher. The third region was the vast food-producing area of Sichuan, Huguang, and Guangxi, where rice was sold at around 0.8–0.9 tael per shi , the cheapest of all. The ratio between the highest and the lowest prices is 2 to 1 in the South. North China produced little rice, and most people there ate wheat, millet, and kaoliang instead. Almost all of the rice that the well-to-do consumed in the North was shipped from the South; its price was therefore much higher than in the South. Should the North be added as the fourth region for observation, the ratio between the highest and the lowest prices would increase to 3 to 1 (note that rice prices in the North vary from 1.8 taels in Xi'an to 2.4 taels in Jinan and Chengde).^[14]

In the latter part of the nineteenth century, modern transportation, such as steamships and trains, was introduced into China. A narrowing of price

[Full Size]

Map 1.2.
Rice Prices of Selected Prefectures in China, 1738–1740 and 1909 (taels per shi ).

differentials is observable, though the degree of uniformity was much less pronounced than in Europe on the eve of its industrial takeoff. Although in the latter half of the nineteenth century the highest prices still prevailed in the North, much change had occurred in the South. The Yangzi Delta, still the country's center of economic gravity, was superseded by the two southern coastal provinces of Fujian and Guangdong as the region of dear rice because the Taiping Rebellion took a heavy toll of lives in the delta. In the interior, Sichuan and Hubei became overpopulated, raising the price of rice, while Hunan, Anhui, and Jiangxi remained an area with large amounts of food for export. The ratio of prices between the two extremes stood at 1.5 to 1 in the South in 1909, or 2.3 to 1 if the North is included; both ratios are lower than around 1740. What this brief survey of price history suggests is that, given the inexpensive network of water transportation that radiated from the Yangzi Delta, China had a more integrated economy than Europe did in most of the seventeenth century. However, the emergence of the North Atlantic economy moved Europe along at an accelerated pace. By the middle of the eighteenth century the position of the two continents had been unequivocally reversed.

Economic historians consider population and the quantity of money to be the prime factors affecting the secular trend in prices. In addition, some scholars note the causal relationship between climatic changes and food supply, which may produce a significant impact on prices. We may observe these relationships with prices by the use of the well-known equation of exchange

[Full Size]

where P stands for the price level, M for the stock of money, T for the volume of transactions, Y for real output, and V_t and V_y for transaction velocity and income velocity respectively. If T or Y increases with no change in the money stock or in velocity, P will decline. On the other hand, given T or Y , if MV_t or MV_y increases, P will rise.

What follows in this section is a historical review of the major variables—population, the stock of silver (the primary component of money for most of the period), and climate cycles—that, individually or in combination, may in large measure account for the two long price swings noted above. However, our present state of knowledge on any of the variables is so incomplete that most estimates are subject to a wide margin of error. Accordingly, any conclusions we may reach cannot but be tentative.

Population affects prices in a variety of ways. Malthusians have long stressed the imbalance between population growth and food supply. Since cultivated land cannot be expanded indefinitely, population growth will inevitably result in the decrease of per capita acreage. Increased input of labor and capital may raise the yields of land per hectare and thus compen-

sate for its shortage. Given the state of technology, however, the marginal productivity of land will eventually diminish. From then on, the food supply will not increase in proportion to population growth. Food prices cannot but rise; the level of general prices must rise too. On the other hand, not only does population increase mean more labor, but it may also contribute to capital formation and technological progress. At the same time, higher population density may stimulate an intensification of the marketing system, leading to crop specialization and division of labor and thereby raising agricultural productivity. Higher productivity means more abundant goods and services, which may in turn bring down the general level of prices.

Nonetheless, in a historical study of English population and prices Peter H. Lindert does find a strong correlation between the two prior to 1815, that is, before industrialization. Specifically, he observes that prices rose greatly in periods of rapid population growth (1526–1603 and 1760–1801) but climbed less or fell "in the period of less dramatic population increase between the early seventeenth century and the middle of the eighteenth." He offers two theories to explain how population growth affects prices. According to the first theory, rapid population growth may bring about a higher ratio of children to adults. With more children to support, a household generally has fewer savings. Lower savings relative to household income implies a greater demand for consumer goods and services relative to demand for money holdings, raising the price level. The second theory is what Lindert calls the "Goldstone variation." According to Jack A. Goldstone, population growth brings increased population density, urbanization, and specialization within agriculture. Monetized transactions will increase at the expense of production for home consumption. In an economy where the marketplace is underdeveloped, more frequent and smaller individual transactions should bring economies in the holding of cash, leading to a rise in the velocity of monetary circulation and higher prices.^[15]

Despite the pioneer works of Ping-ti Ho and Dwight H. Perkins, the size of China's population before the 1953 census is still a matter of much debate. At the end of the sixteenth century the total number of people in the country was, according to Ho's estimate, around 150 million.^[16] After studying the data on famine relief in Henan for 1593–94, Shu-yuen Yim concludes that official statistics on population are substantially understated and that the total population in the empire was no less than 200 million in 1600.^[17] Mass uprisings and unprecedented droughts hit the greater part of the country in

the second quarter of the seventeenth century, causing a drastic decrease in population. Scholars are still far apart as to the extent of loss in lives during the time of the Ming-Qing transition. Estimates of the number of people at the beginning of the Manchu period vary from 70 million to 100–150 million,^[18] though I am inclined to think that the upper range, or, say, 120 million, is probably a better approximation.

Following the Manchu conquest in 1644, political and economic order gradually returned. Before the pacification of the Three Feudatories and Taiwan in the early 1680s, however, bitter fighting continued in one part of the country after another because of Chinese resistance to foreign rule. Therefore, economic recovery proceeded slowly in the latter part of the seventeenth century. By 1700 China's population was most likely still quite below the level attained a century before, and perhaps something around 150 million is not far off the mark.

The eighteenth century is one of a few periods in Chinese history in which the country enjoyed prolonged peace and prosperity, and its population grew as never before. The baojia system for annual registration of population started in 1741 and was to last until 1850. Nevertheless, the statistics before 1776 are incomplete, and some of those close to the mid-nineteenth century are believed to be much inflated. We are left with only those for the last quarter of the eighteenth century and perhaps the first two decades of the nineteenth century that can be considered relatively reliable. According to official reports cited by Ho, the number of people totaled 353 million in 1820. By 1850 it had risen to 430 million. But, after a thorough investigation of the county data of Sichuan and a survey of apparently exaggerated figures for several other provinces, G. William Skinner concludes that China's population then was around 380 million instead.^[19]

In the third quarter of the nineteenth century probably as many as 40 million people perished in the Taiping Rebellion and other social upheavals that devastated a large part of the empire and particularly the populous Lower Yangzi Valley. However, by the end of the century China had apparently regained the population lost several decades before. Despite political instability that characterized the last years of Manchu rule and the early Republican period, the country witnessed an expansion of population. In the early 1930s the total reached 500 million.^[20]

It is interesting to note that grain price movements and population move-

ments in China appear to be in line with what Lindert finds in the English case. As shown in Table 1.2 and Figure 1.3, a fairly strong correlation between population and prices is observable over nearly three centuries. Moreover, periods of rising prices happened to be periods of relatively rapid population growth (the 1700s and 1880–1930), whereas downward movements in prices were mostly accompanied by slower or negative growth in population (1650–80, 1820–80).

China's monetary system in the Qing period was bimetallic, with silver and copper cash. Paper notes issued by native banks (qianzhuang ), pawnshops, and other merchants appeared in the late eighteenth century. After the Treaty of Nanjing (1842) foreign banknotes began to circulate in treaty ports. China established its first modern bank half a century later. Not until the early twentieth century did banknotes and demand deposits constitute the largest component of the money supply. To observe the possible relationship between the stock of money and prices, I have made an estimate of the total stock of silver, the most important monetary metal in China, for a number of years in the three centuries under study.

Although China did not possess rich silver mines, it was able to cope with the growing demand for specie by importing silver from abroad for most of the period. The arrival of Westerners in the Indian and Pacific oceans following the Great Discoveries opened a new era in relations between the East and

[Full Size]

Fig. 1.3.
Trends of Population, Silver Stocks, and Rice Prices in China, 1650–1930

the West. Several Chinese products, such as silk, tea, and porcelain, were in great demand in Europe, America, and Japan, though manufactures from abroad struck little enthusiasm in the Middle Kingdom. Nor could the products—spices, ivory, sandalwood, etc.—from Southeast Asia, then under the domination of Western powers, offset the trade deficit incurred. To settle the balance, foreign merchants could offer only one thing, silver, that hardly any Chinese would refuse to accept. Meanwhile the discovery of rich silver mines in Japan, Peru, and Mexico provided a timely means of payment. Portuguese, Spanish, Dutch, British, and American, as well as Chinese, merchants all took part in this thriving trade, and large quantities of silver were thus brought into the country.

From the latter part of the nineteenth century China's economy was more closely integrated with the world market. When prices of silver were lower in the world market than in China, large amounts of specie would find their way through arbitrage into its trading ports, and vice versa. Since other countries had demonetized silver one after another, while China continued to use it as a medium of exchange and means of payment until 1935, it commanded a premium in the country for most of the period. The result is that China continued to be one of the largest recipients of silver even though it suffered a perennial trade deficit from the 1870s on.

How much silver did China possess over the three centuries under discussion? Let us begin with the most recent holdings. Eduard Kann, an expert on China's finance, estimated in early 1931 that there was about 2.5 billion ounces of silver in the country, including 1.7 billion in the form of silver dollars, sycee, and subsidiary coins and 0.8 billion in ornaments and household objects.^[21] At the rate of 1.30 silver dollars or yuan to an ounce this would amount to 3,250 million yuan , which accords well with the Bank of China estimate in the early 1930s.^[22] During the next five years, however, China incurred a net loss of 650–700 million yuan , largely because of the United States Silver Purchase Act. On the eve of China's monetary reform in early November 1935 its total silver stocks probably stood in the neighborhood of 2,600 million yuan .^[23]

Between 1893 and 1930, according to Maritime Customs statistics, China

received from abroad 1,284 million silver yuan (823 million Haikwan taels).^[24] Such being the case, it may not be far off to put the accumulated amount of specie at 1,900–2,000 million yuan at the end of the nineteenth century.

For earlier periods we are on a far less certain ground. In 1643 Jiang Chen, a scholar interested in fiscal and monetary matters, submitted to the falling Ming government a proposal for the adoption of paper money. He figured the total silver stocks then held in the private sector to be around 250 million taels, or 350 million yuan .^[25] In an essay on the crisis of silver drain in the Daoguang period (1821–50), Taiping Shanren maintained that before the crisis unfolded, the country must have possessed something more than a billion silver yuan .^[26] Both figures appear to be plausible.

In a broad survey of the influx of silver between the 1570s and 1830s Sun Yutang gives the following breakdown: 100 million silver yuan from the Spanish Philippines (1571–1821), over 500 million from England and other European countries (1700–1828), 100 million from the United States (1784–1833), and 140 million from Japan (seventeenth through early nineteenth centuries).^[27] It should be pointed out, however, that the second item most probably includes amounts imported from the Philippines and the United States,^[28] and so it should be revised downward to 300 million. According to Ch'üan Han-sheng, however, the total shipment from the Philippines during that same period was likely to have been 200 million or more instead of 100 million.^[29] Moreover, there were fairly regular shipments of Japanese bullion in the latter part of the sixteenth century. A. Kobata notes, for instance, that the Portuguese carried 500,000–600,000 taels out of Japan annually to finance their trade with China.^[30] Therefore, the silver inflow may reasonably be assumed to be around 800 million for the two and a half centuries in question.

Of the 800 million, how much was imported before the fall of the Ming dynasty in 1644? Liang Fangzhong estimates the amount at more than 100 million.^[31] But Arai Hakuseki's study shows that Japan alone exported over

100 million (748,000 kan ) in the first half of the seventeenth century, most of which ended up in China.^[32] When the shipments from the Philippines between 1571 and 1644 and those from Japan before 1600 are added, the amount should, in the light of the foregoing discussion, be around 200 million instead.

While domestic production of silver played a secondary role in the supply of monetary metals, silver mining in Yunnan was in operation for most of the Ming-Qing period. Wei Yuan, one of the foremost scholars in the statecraft school and a keen observer of the nation's economy, wrote in 1842 that "of all silver stocks [in the country] 30–40 percent comes from mining and 60–70 percent from foreign vessels."^[33] On the basis of his observation and the quantities of silver inflow, we may readily estimate the amount of bullion held in China to be in the range of 290–330 million silver yuan in the mid-seventeenth century and 1,140–1,330 million in the 1820s.

In the second quarter of the nineteenth century the balance of trade turned against China primarily because of the growing opium trade. According to H. B. Morse, there occurred a net drain of silver to the amount of 200 million yuan over the period.^[34] On the eve of the Taiping Rebellion the country's holdings probably fell to the level of 900–1,100 million. In the latter half of the century, nonetheless, China resumed importing bullion from abroad. J. Laurence Laughlin notes that between 1852 and 1875 alone, at least 1 billion yuan of silver had been shipped from England and Mediterranean ports to India and the East.^[35] So vast was the influx that China found its stocks of silver doubling in the half-century.

However rudimentary the estimate of silver stocks, the direction of change in the amount of bullion that China held over the three centuries is quite clear. We may, in light of the data presented in Table 1.2 and plotted in Figure 1.3, make two observations. First, not unlike prices and population, silver stocks in China generally followed a rising trend. Second, during the latter part of the seventeenth century and the second quarter of the nineteenth century, when the country's holdings of the white metal changed little or decreased, prices were on the decline. It appears, then, that silver stocks can serve as a crude indicator of the secular movements of prices.

To be sure, the stock of money included not only silver but also copper cash, paper notes, and, later, bank deposits. In the twentieth century, in particular, banknotes and bank deposits soon overtook silver as the dominant components of money. Nor did all silver stocks circulate as money; a

good part was hoarded in safes or underground or used for jewelry by the well-to-do. Therefore, other components of money as well as the velocity of circulation should, if possible, be taken into consideration when specific periods are examined.

Climatic conditions significantly affect the state of harvest and food supply. Various empirical studies show that relatively warmer temperature increases crop output by lengthening the growing season and by making uplands cultivable, and vice versa. Referring to sixteenth- and seventeenth-century Europe, for example, Andrew B. Appleby, G. Parker, and L. M. Smith suggest that a one-degree-centigrade decline in temperature will shorten the growing season by three to four weeks and is equivalent to raising land elevation by 500 feet.^[36] A recent study by Wang Shaowu indicates, moreover, that low summer temperatures in a number of years between 1954 and 1976 reduced harvest yields by a third in Manchuria.^[37] It was precisely because of concern for food supply in the empire that the Quing government required all local officials to submit regular weather reports along with reports on grain prices.

The degree of correlation between harvest yields and grain prices is nevertheless not so clear, because prices also depend on such other factors as access to food supply from other areas or from other parts of the world, grain storage, speculation, and government policy. To observe the possible relationships between climate, harvest yields, and secular prices, let us first look into climate cycles and harvest fluctuations in the delta over the centuries in question. Two groups of scientists in China have conducted original research on the long-term temperature changes in the Middle and Lower Yangzi Valley. One group, under the leadership of Zhang Peiyuan, has focused its attention on phenodata for the Qing period; the other, led by Yan Jiyuan, has made a historical investigation of the years when the Huangpu River and Lake Tai froze. They derived virtually the same climate cycles for the area.^[38] Between the mid-1600s and the 1970s the country went through three long cycles. The cold period of the first cycle lasted through the first decade of the eighteenth century; the warm period that followed prevailed until 1780. The second cycle extended for almost a century (1781–1882), with 1830 as the turning point between the cold and warm periods. In the early 1870s another cycle started. It was also evenly split, with the 1920s as the transition years

between the cold and warm periods (see Table 1.3). It is worthy of note that in the nineteenth and early twentieth centuries secular prices moved downward in the warm period (1831–72) but upward in the cold periods (1780–1830, 1873–1920), whereas the opposite is true in the seventeenth and eighteenth centuries.

I have not yet compiled data on harvest yields. In my study of grain prices in the Yangzi Delta, however, I do find a very strong association between harvest yields and grain prices. Over the half-century between 1738 and 1789 eleven cycles in both rice prices and wheat prices can be readily identified, and all peaks of these cycles occurred in years of crop failure or poor harvests caused by floods, droughts, or epidemics in the delta or in a large part of the country in the same year or the year before.^[39] It is, however, another matter whether fluctuations in local harvests affect the secular movement of prices in an area with easy access to the food-exporting provinces of the country. We may take the deviations of annual prices from their trend values (31-year moving averages) as a measure of harvest fluctuations in the delta and then compare them with changes in secular prices. Assuming that years of normal harvests are those with rice prices within plus or minus 10 percent of the trend, that years of good harvests are those with prices 10 percent or more below the trend, and that years of deficient harvests are those with prices 10 percent or more above the trend, we find that years of good and normal

harvests outnumber years of poor harvests almost 4 to 1 and that average deviations are within the range for normal harvests for all periods (see the last four columns in Table 1.3). Accordingly, cyclical fluctuations in local harvests did not, in my judgment, have a significant impact on the long-term trends of prices, although grain prices were very sensitive to fluctuations in local harvests in the short run.

After reviewing the literature on population, silver stocks, and climate cycles, I can now offer some tentative explanations of the long-term trends of rice prices for the three centuries in question. The high level of prices at the time of the Ming-Qing transition clearly reflects the inflation and the shortage of food consequent to large-scale warfare and a series of natural catastrophes.^[40] After the establishment of Manchu rule in 1644, peace and order were gradually restored in the country. Economic reconstruction followed, albeit slowly, with a concomitant improvement in the man-land ratio (depopulation had been drastic between 1600 and 1650). The supply of grain became plentiful relative to the demand for food, despite the cold climate that prevailed in the latter part of the seventeenth century.

During the same time the increase in the stock of money was at best moderate because the new Manchu regime imposed a total ban on coastal trade until the pacification of Taiwan in 1683. The shortage of exchange media received some relief, for the new government issued 1–2 million strings of copper cash annually between 1647–57; but the issuance was later progressively reduced to 200,000–300,000 strings a year.^[41] The transaction velocity of money most probably fell after the decades-long inflationary spiral attending the demise of the Ming dynasty. When MV either decreased or remained rather stable and T expanded, prices could not but decline.

In the next phase of the price swing—from the early 1680s to 1820—silver stocks increased at an annual rate of about 0.9 percent, while the central government resumed the policy of expansion in the issuance of copper cash, which was facilitated by rising copper output from Yunnan. In 1724 the production from Yunnan copper mines was about 1 million catties; from the early 1740s through the first decade of the next century the annual output always went beyond the 10 million mark. Meanwhile, the quantity of cash issued by the two mints in the capital jumped from less than 0.5 million strings to well over 1 million a year, and counterfeit coins flooded a greater part of the country.^[42] Furthermore, to put down the White Lotus Rebellion (1796–1804) the government spent 200 million taels, an amount equivalent

to its budget expenditures for six or seven years in normal times, which added greater inflationary pressure to the economy.^[43]

During the period 1680–1820 China's population grew at 0.72 percent a year, the highest rate in the three centuries under discussion (see Table 1.2). Moreover, eighteenth-century China was a time not only of rapid population growth but also of unprecedented commercialization. Cash crops, such as cotton, mulberries, sugar cane, and tobacco, were planted more widely in various provinces. Markets and towns proliferated as never before.^[44] These developments would most likely, in view of Lindert's analysis, noted above, lead to a rise in the velocity of money. Thus both the growth of the money supply and the growth of population were building up strong pressures for inflation. At the same time the cultivated acreage expanded by a half or so; new food crops (sweet potatoes, corn, and peanuts) were spreading, and double-cropping was increasingly practiced.^[45] Given generally warm climate the agriculture sector also experienced rather vigorous growth. Without large increases of real output the rate of the price rise would have been much higher during the upswing, which lasted for more than a century.

The second price swing followed a generally downward trend from about 1820, but turned sharply upward in the early 1880s and continued to rise through the 1920s. We may divide the half-century of downswing into two subperiods, with 1850 at the dividing line. Before 1850 warmer climate in combination with the silver drain had the effect of depressing prices. But the money supply may not have decreased because of the multiplication of paper notes issued privately by local banks, money shops, and various commercial stores and because of the increase of copper cash by debasement and counterfeiting.^[46] What was more likely to bring prices down was, besides warm climate, the possible decline in the velocity of monetary circulation caused by the apparent drop in the rate of population growth and by the increased holding of silver by the public. Before 1850 the value of silver appreciated steadily in relation to commodities and copper cash.^[47] In the expectation that its value was to rise, "wealthy people and rich merchants are striving to hoard silver"; thus observed Bao Shichen, a contemporary scholar with a great interest in political economy.^[48] Not only did the silver crisis slow down the velocity of circulation, but it also severely strained the issue of private notes. (Without central banking, private notes were backed by the credit of the individual issuing banks or by the merchants themselves.)

In the third quarter of the century mass uprisings took place in many parts of the country. Most virulent was the Taiping Rebellion, which lasted 15 years and devastated a large part of the Yangzi Valley, particularly the delta area. It cost the government more than 400 million taels to bring these peasant and minority revolts to an end.^[49] Hyperinflation followed immediately, as is shown distinctly in Figure 1.2. But the war-induced inflation proved to be just an aberration, for the level of prices sank as quickly as it rose following the return of peace and order in one part of the country after another.

As in the late seventeenth century, economic reconstruction proceeded with an improved man-land ratio, but the pace of economic recovery was faster. For one thing, however ruinous were the mid-nineteenth-century uprisings, they were not accompanied by the natural calamities and the consequent famine that attended the fall of the Ming dynasty (the droughts that hit China four years in a row in 1641–44 were the worst in the last 500 years). For another, continued warm climate further aided agricultural production. Prices were going down as more and more land was brought back under cultivation and more irrigation works were restored or built.

Extending from the 1880s to 1920s, the second upswing was the most inflationary period of the three centuries. While rice prices rose annually at 0.7 percent in the first upswing, they ascended at the rate of 3.3 percent a year in the second (see Table 1.2). During the half-century before the Great Depression the money supply grew at a very rapid rate. In 1930 the total stock of money (currency and deposits) amounted to about 6 billion yuan , of which one sixth were metal currencies.^[50] How much money was in circulation 50 years earlier? We can only hazard a guess. China's silver stocks then stood probably around 1.5–1.6 billion yuan (see Table 1.2). Assuming that a quarter of the silver was then in circulation and that the ratios of circulating silver stocks to copper cash and to paper notes were 2 to 1 and 5 to 1 respectively, the total amount of money in circulation would be in the range of 600–700 million silver yuan . It was probably not more than 800 million.^[51] Accordingly, the money supply may have increased by eight to ten times, or at an annual rate of 4.2 percent to 4.7 percent in the half-century. Without doubt the accelerating growth of the money supply contributed significantly to the price inflation in the period.

On the other hand, the volume of transactions also grew at an unprecedented rate. The pace of commercialization sped up as the country was increasingly integrated with the world economy from the latter part of the

nineteenth century on. Many local products, such as soybeans, straw mats, tung oil, and bristles, found their way into the world market. The introduction of steamships and railroads lowered the cost of transportation and also contributed greatly to market expansion. Consequently, China's trade, external as well as internal, experienced a rapid expansion. The Nankai indexes show that both imports and exports tripled in volume between 1881 and 1930.^[52] The interprovincial trade in real terms was, according to Perkins's estimate, more than three times in the 1920s what it was in the late nineteenth century.^[53] In view of these facts, a rate of growth in the volume of transactions of 2 percent a year is probably a good approximation. Then, the transaction velocity of money must, by implication, have risen annually by around 0.5–1.0 percent over the period.^[54]

There is good reason to believe that the velocity of transactions rose in the latest phase of secular price movements. First, population increased almost as fast as in the eighteenth century. Since the proportion of self-consumed farm output still approached nearly a half of farm output in prewar China,^[55] Goldstone's thesis is applicable, perhaps more than ever before. Second, the development of telegraph communication and modern banking, as well as the continued growth of native banks, greatly facilitated business transactions and thereby had the effect of allowing merchants to conduct their business with reduced holdings of cash.

To recapitulate, the secular movements of rice prices in the Yangzi Delta exhibit two long swings over the three centuries prior to World War II. Starting in the 1640s, prices followed a steep downward trend until the 1680s; afterward they moved up gradually, at 0.7 percent a year, to peak around 1820. The second swing went downward at first, for more than half a century. At the beginning of the 1880s it once again shifted direction, rising swiftly, at the rate of more than 3 percent a year, through 1930.

Given the fact that the delta occupied a position of economic centrality in the country, it is reasonable to regard the trends exhibited by the price series as reflecting supply and demand forces at work in the country. Population, the stock of money, and climate cycles are the three principal variables affecting the long-term trends. I found, among other things, that inflation was

nearly always accompanied by substantial expansion of the money supply, deflation by stagnation in monetary growth. The same was true for population. Rapid population growth appears to have contributed to inflation most likely because of changes in the age structure and because of the population-induced rise in the velocity of money. On the other hand, a decrease in population or a slowing down in its growth rate correlates strongly with deflation. Gradual changes in the climate probably helped moderate price inflation in the eighteenth century, pushing prices down in the nineteenth century and up in between; but the impact of falling temperatures on market transactions and hence on prices was neutralized or overbalanced by other factors in the latter part of the seventeenth century.