China and the Manila Galleons
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Beginning in the 1570s , silver initiated significant and continuous trade at the global level. Conservative official estimates indicate that Latin America alone produced about 1 5 0 , 0 0 0 tons of silver between 1 5 0 0 and 1800 (Barrett, 1 9 9 0 , 2 3 7 ) , perhaps exceeding 80 per cent of the entire world's production over that time span (Cross, 1 9 8 3 , 3 9 7 ) . And virtually all of it engaged in intercontinental trade. Explanation for the spectacular dominance of silver in the early-modern world economy requires analysis of both the demand and the supply sides of that industry. On the demand side, China was by far the most significant end-market customer. China's paper-money system suffered a crisis in the fourteenth century and had virtually collapsed by the middle of the fifteenth century; silver imports provided a stable substitute for fiduciary money. Thus, a partial explanation for significant demand for silver in China dates to the fifteenth century when silver helped satisfy
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the void created by worthless paper money. China's multi-century appetite for silver did not stem, however, solely from the monetary sector; rather, it grew from a mix of fiscal (government revenues and taxation), monetary (medium of exchange) and private-sector developments. The private sector favoured silver and increasingly taxes became payable in that medium. This trend spread to the government sector, culminating with the Ming dynasty's 'single-lash-of-the-whip' tax system, which consolidated numerous Chinese taxes and specified payment in silver in the middle of the sixteenth century. 1
On the supply side of the equation, silver originated mostly from Peru and Mexico in the West, and Japan (especially in the late sixteenth and early seventeenth centuries) in the East. Supplies were controlled by the Spanish Emperor and the Shogun. Both indirectly sold to China. Political hostilities precluded direct official trade of Japanese silver into the Chinese market by merchants of either country, although private Chinese merchants did call on Nagasaki. 2 That role fell to European and other Asian intermediaries in the Sino-Japanese silver trade.