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The Rise of Global Silver Trade

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  • Pages: 7
  • Word count: 1596
  • Category: Economics

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National Fiscal Reform in China and Japanese Mining

The silver trade influenced different spheres of human life. The impact of silver could be appreciable in both social and economic areas. Before the popularization of silver, an international trade network functioned clearly and transparently. The world trade was booming. Everything had changed when China accepted silver as a national currency. From that point the silver reinforced. This change was both prominent and disastrous. The global silver trade in the sixteenth century impersonated a fundamental part in global price inflation, the rise and fall of Spain, the emergence of Japan, the birth of the Pacific Rim economy, and a host of other structural developments.

Between the 14th and 18th centuries, the Chinese monetary system experienced a range of conclusive reforms. Starting with the 14th century, the bronze coin monetary standard was principally superseded by uncoined silver. The supremacy of silver became completely obvious during the silver century when Chinese economics waxed with the massive penetration of foreign silver. But the appearance of the metal economy declared the disintegration of a unified monetary system of Imperial China. In the 18th century, a heterogeneous monetary system arose in which bronze coin and uncoined silver, which circulated as bullion in a broad diversity of forms and levels of fineness, served separate and distinct economic purposes. Also, by the last quarter of the 18th-century foreign coin, in the form of the Spanish coins created in Mexico, replaced domestic currencies in the southern coastal provinces.

The shift to a silver economy in the middle of 16 century matched with China’s integration into a worldwide international market based on silver. Indeed, it is now acknowledged that the insatiable demand for silver caused by the Chinese market impelled the establishment of trade networks traversing the New World, Europe, and Asia. As the principal end-market for silver produced by the rich mines of Japan and the New World, the Chinese economy reshaped the vectors of global trade. Still, China’s shift to a silver monetary standard was not a result of, but rather a precondition for, the great penetration of foreign silver. The fiscal reforms of the late 16th century, which transformed much of the labor service burden to taxes paid in silver, was the principal motive in the adoption of a silver standard. The change of taxes to payments in silver designated a grudging grant on the part of the state to the domination of silver in the private market. Although the state’s silver revenues quintupled between 1620 and 1642, even at their peak they accounted for less than 10% of every conservative estimate of the total supply of silver circulating in China. Effective demand for silver derived from the private economy, not public finance.

The rapid domination of silver constantly lessened the domestic Chinese mining. As a result, a large number of citizens were made to seek out overseas resources. At the same time, Portuguese became a member of the silk-silver and porcelain-silver trades. This resulted in, the annulment of Japanese silver production. This was triggered by the scaled demand for silver in China and the perpetual demand for Chinese silk in Japan. Thus, under the “law” of supply and demand, Japan became one of the most crucial sources in the global silver trade with China.

Spain and the American Silver

American silver emerged after the conjunction of Acapulco and Manila in the 1560s. After reaching the island of Mindanao and Cebu in the Philippines, the Spanish immediately recognized the significance of the Chinese goods available there. Since then, they started to encourage Chinese merchants to implement marine trading with them. Regarding the fact that Chinese businessmen only demanded silver in the trade, doing business with China required large amounts of silver. The Spanish merchants wanted to barter goods with the Chinese, but nothing was as important to the Chinese merchants as silver. The same situation was happening in Europe at that time, the role and the value of silver increased with every bargain. This fact resulted in vast exploitation of American silver. Since that time, American silver seized Chinese market, delivering not only through Manila’s channel but also through Goa. Later, the Dutch and the British transported silver directly to China in exchange for Chinese goods. As a result, a large amount of silver shipped from America to Europe eventually landed in China. Common knowledge is that this

Rise of International Trade Networks

The development of the global trade was stimulated by the rise of silver. The popularization of silver demand was based on two aspects: its production and the global exchange. The Ming reforms broadened the international marketing networks. The main characteristics of Chinese silver demand were the absorption of silver from all over the world, as a consequence Chinese products were exported throughout the world. Chinese export had been expanded to a completely new level of commerce.

China was the largest economy in the world at that time and was the absolute mass consumer of silver. This led, to it becoming a universal platform for international trade. This global exchange relationship – with, at one end of the link Chinese goods, and at its other end silver – formed the market networks of international links. In general, the platform of global trade was composed of three main trading lines across three continents and formed a triangle of three trade circles. These three main lines were:

  1. China-Southeast Asia – Japan;
  2. China – Manila – America;
  3. China – Goa – Europe.

Japan, America, and Europe, as the terminus of the three main lines, were all the origins of silver input to China.

Economic Effects of Silver Trade in Spain

The 16th – 18th century resulted in the Spanish invasion of Mesoamerica and Northern South Africa. These territories were rich for large deposits of silver, which was needed for international trade. So, Spain conquered it and used the native people for mining silver. Speaking of the Spanish and silver production, according to most accounts in the Spanish royal records, 326,000,000 silver coins have been extracted. Japan also had large stores of silver. Historians claim that they had a great ship that traveled to Japan every year and transporting more than 600,000 coins worth of silver. Politicians of those times even described Spain as having “silver mountains.” Finally, the income of silver into Spain became so tremendous that it caused the inflation because the ordinary supplement and demand changed incredibly. There was too much silver in the country; it lost its value and rarity. To compensate it, the value of the silver currency was lowered down, and prices had to be raised higher.

Economic Effects of Silver Trade in China

While Spain was suffering from inflation, Ming China faced the deflation. When Spain found the infinite supply of material in the US, the Ming Dynasty saw a developing market and issued that any trade fees with the Ming must pay silver. China favored the silver delivery from different countries such as Spain and Japan. However, the deflation weakened Chinese economy. The deflation resulted in the rising of currency worth. Therefore, prices have to go down because it takes less currency to acquire items that cost more before the value of currency increased. While it may seem, that lower prices are much more advantageous for the consumer, when it is not controlled, deflation can be damaging to the national producer and free market. Deflation in China was illustrated in a report to the Ming emperor by a court official, Wang Xijue when he said, “The venerable elders of my home district explain that the reason grain is cheap…is due entirely to the scarcity of silver coin. The national government requires silver for taxes but disburses little silver in its expenditures. As the price of grain falls, tillers of the soil receive lower returns on their labors, and thus less land is put into cultivation.” The question appears if so much metal was imported in China, how silver could stay rare? Despite the Ming government’s goals, which cannot be fully known, history is clear that Chinese government officials were hiding and stockpiling China’s silver holdings, rather than separating it back into the free market economy. Money is influence and influence is money, and the Ming Dynasty decided to fund that authority in silver.

Social Effects of Silver Trade

The global metal market of the 16th-18th century transformed the relationship between buyer and trader. England characterized China’s economy as not a reliable enough to invest in and that supplying them more currency would not help matters. And after silver trade connections, if your cloth is dyed you get a bill; it is obligatory to pay with the silver coins received from a money lender. There was a tendency to use a currency that is similar to silver. Different stores followed that tradition and used such money. In particularly, Chinese economy had big profit; the priority for it was a good relationship with customers. A change came to Eurasia socially through a new European mindset and a new relationship dynamic in trade, all because of the flow of silver. The global silver trade was the first step on a route to up-to-date official interaction. That helped to improve different spheres of human life. According to the historical data, it was much more convenient to use one currency during international trade.

For sure, the flow of silver from the 16th to 18th century was the source of economic and social change. Changes were different, starting from impersonated a fundamental part in global price inflation, the rise and fall of Spain, the emergence of Japan, the birth of the Pacific Rim economy, and a host of other structural developments.

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