Money, Banks and Finance in Economic Thought

Strategies for Monetary Reforms: Money Doctors and Chinese Economists during Monetary Reforms in China at the 1930s

Nenovsky Nikolay, CRIISEA, University of Amiens
Zhang Shouyi, CRIISEA, University of Amiens

At the end of 19th and the first half of 20th century, although China was not extracting silver, the Chinese monetary system had been defined as the "Silver Empire." The colonial nature of the Chinese economy made it dependent on international currency flows, chaos and instability within it. Attempts to unify and introduce a stable monetary standard were numerous, some of which were projects by foreign experts (Matsuoka, 1936). Most of the foreign projects offered the introduction of a gold or gold-exchange standard (e.g. Jenks, 1904/1905, Vissering, 1911/1912, Kemmerer, 1928/1930). In 1918, it was attempted to introduce the gold standard. In most cases, Chinese economists oppose these ideas (Chu, 1931). Of particular interest are currency reform projects after 1929 and especially the evolutions of these projects. It came under the pressure of the World Depression, two devaluations (that of the pound in 1931 and the dollar in 1933), the US decision to use silver (the 1934 Silver Act), and the aggressive circulation of Japanese money in China. These processes leaded, especially after 1932, to a deep deflation and depression in China. The silver price was rising and silver massively flowed out of the country. The sharp contraction in money supply, the collapse of credit, the real appreciation of Chinese money, and the rise in the peasants' debts have led the Chinese economists to undertake their reform strategy. Despite the depression, there were pressure to accept Kemmerer's gold standard plan or exactly gold exchange (new Sun fixed 1 to 1 to USD). Nevertheless, in November 1935 Chinese economists declared radical reform, which dropped out of circulation silver. A “paper money managed regime” was introduced, with the yuan maintained to the pound through interventions. In essence, the yuan was devalued and entered the sterling block. The resistance of the United States and Japan in particular had been significant, but China chosen the British block (England offered China loan and access to the London money market). In this paper, we are making a comparative analysis of the core elements between the Kemmerer project and those of the leading Chinese economists and politicians of this age, and especially of Soong (1894-1971) and Kung (1881-1967). Of particular interest are the accents that Chinese economists placed on the specifics of Chinese economic reality, the Chinese attitude towards money, and the role of money on the real economy, on debt, as well as on term of trade and trade flows. These points, in most cases, are absent from the Kemmerer proposal, which focused mainly on monetary and price stability. Kemmerer’s plan generally served the interests of the US. The present study also provides interesting perspectives for studying the hierarchy of money, currency wars, monetary dependence, - topics that are currently very relevant.(Banque de France' Archival sources-dossiers sur la Chine used which are extremely rich and not yet explored)


Keywords: monetary theory, monetary stabilisation, money doctors, Chinese monetary history, Chinse economic thought

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