Chinese Empire Demand for Silver

From The Chinese Question: The Gold Rushes and  Global Politics, by Mae Ngai (W. W. Norton, 2021), Kindle pp. 9-10:

AT THE TIME OF the gold rushes, China was already in the grip of European colonialism. China was never directly colonized by a Western power; in fact, by the mid-eighteenth century the Qing Dynasty (1644–1911) had built an empire of its own, having expanded China’s boundaries to the west, most notably by annexing Tibet and Xinjiang. But in the mid-nineteenth century China was battered by European aggressions: the opium trade, gunboat diplomacy, and the forced opening to Western trade and missionaries. China’s humiliation stood in stark contrast to the position it had once held, even relatively recently.

For two hundred years, from 1550 to 1750, China had been arguably the most important economic actor in the world. It was not only the single largest domestic economy; it was also at the center of global trade, both with its Sino-centric tributary and trading networks in East and Southeast Asia and as the premier destination market for silver produced in Spanish America and Japan. Europeans shipped silver to China not as “money” but as commodity arbitrage: the Ming Dynasty’s (1368–1644) demand for silver for fiscal and commercial purposes fetched the highest silver prices in the world, double its price in Europe. China was the world’s great “silver sink” that not only drew but also stimulated its production in the New World.

Through the seventeenth century, Europeans traded silver for luxuries, including gold. For example, the British East India Company’s first direct transaction with China in 1637 exchanged 60,000 Spanish dollars for sugar, silk, spices, porcelain, and “loose gould.” Chinese traders also made handsome profits by buying low and selling dear, earning gross profits of 100 to 150 percent on silk and silk textiles sold to Europeans. Economic historians Dennis Flynn and Arturo Giràldez describe these late sixteenth-century dynamics of global trade as “multiple arbitrage.”

Europeans began trading silver for tea in large quantities in the early eighteenth century. Like silk, tea was a luxury item in Europe, but it had greater potential for mass consumption. The creation of a mass market for tea in Europe coincided with the rise in consumption of sugar from the plantation-slave colonies of the Caribbean in the late seventeenth century. Indeed, tea and sugar, along with tobacco, undergirded a global trade in stimulants—“food drugs”—based on a symbiosis of colonialism and slavery, on the one hand, and new mass-consumption economies in European metropolitan societies, especially Britain, on the other.

By 1800 silver’s arbitrage advantage in China had ended. The British, now hooked on tea, looked for a different means of exchange. The East India Company had already drained India of much of its silver to sell in China; now it turned to India for the mass production of opium for export to China.