:China during the Great Depression: Market, State, and the World Economy, 1929–1937.(Harvard East Asian Monographs, number 294.)

Abstract

Tomoko Shiroyama's book is a welcome addition to the recent historiographical effort to place modern Chinese economic history within a wider, global historical context. By focusing on the effects of the Great Depression in China, the author is able to bring to light the complex networks that connected domestic economic and financial practices with international fluctuations in the price of silver and to illustrate how this international crisis affected state-market dynamics. Some of the effects on China's economy of the silver crisis generated by the Great Depression—the rise in the price of silver, the resulting drain of silver out of China, and the deflationary trends it triggered—have been the focus of earlier studies. Shiroyama, however, makes the case that its impact was deeper than previously thought, upsetting the very foundations of the silk and cotton industries of the Lower Yangzi Delta, her two case studies. According to Shiroyama, important characteristics of China's financial and industrial systems made the national economy particularly vulnerable to fluctuations in the price of silver. The Chinese government, in fact, was unable to control its own currency since its value “was not guaranteed by the state but with silver” (p. 23). Because silver “was a mere commodity” in other countries, “its market price was influenced by supply and demand factors, irrespective of China's economy” (pp. 27, 36). While this situation did not pose a problem in the early twentieth century, when silver remained cheap, it became a serious threat during the Great Depression (p. 36). The rising value of silver and plummeting commodity prices not only generated a credit crisis in rural areas but also paralyzed the emerging industrial economy of the Lower Yangzi Delta. Silk and cotton manufacturers financed their operations completely through bank loans, using as collateral assets raw materials, industrial equipment, and real estate. As the price of commodities fell, the value of this kind of collateral plummeted, making it impossible for manufacturers to obtain credit and to keep operations going.