The rulers of China's Ming dynasty (1368-1644) acquired an insatiable desire for silver in the 16th century, largely to pay for huge prestige projects like building the Forbidden City in Beijing and repairing the Great Wall of China. A new tax system, the Single Whip Reform, had to be paid in silver. Another major source of silver bullion was trade with Japan and European merchants who brought silver from the mines in Spanish America via the Manila galleons. When the silver supply weakened in the 17th century, this contributed to the fall of the Ming and the establishment of the Qing dynasty in 1644.
The Search for a Stable Currency
The Yuan dynasty (1271-1368), when the Mongols ruled China, had – like its predecessor, the Song dynasty – attempted to promote the use of paper money to facilitate trade. Paper money had certain advantages over coins and ingots of precious metals, most significantly, that wealth did not need to be physically moved from one treasury to another. The Yuan rulers, however, needed to pay for costly public projects like dams and irrigation works, particularly along the Yellow River, which were undertaken to reduce the devastating effects of all-too-regular floods. Excessive printing of paper money by the Yuan government contributed to a dramatic rise in inflation, and so the paper money became almost worthless. Merchants' confidence in the currency was lost, and many reverted to more traditional currencies, amongst them silver bullion.
The Ming government took over China in 1368 and did make a brief attempt to revive paper money, but the project was not successful. Silver remained the most reliable form of wealth; this was especially so with the increasing globalisation of trade. As a result of this fact, when the Ming rulers introduced a new tax system, people were expected to pay it in silver.
Ming Domestic Taxes
The Ming dynasty oversaw an unprecedented growth in China's population and a general rise in economic prosperity. Over the course of the dynasty's reign, the population of China rose from 60-80 million to 150-200 million. Ming domestic policies altered as radically as the economy was burgeoning. Land and tax obligations were meticulously registered under the Ming. The old tribute system required of neighbouring states was revived. In the second half of the 16th century, the Ming decided to consolidate a range of domestic taxes into a single payment. This was the Single Whip Tax system (Yi Tiao bian fa), which was the first tax expected to be paid in silver. Previous taxes had been payable in grain, cloth, or bronze or copper coinage.
The implementation of the Single Whip Tax system is credited to an official called Zhang Juzheng (1525-1582). Imposed from 1581, the tax became more widespread through the 1580s and 1590s. The Single Whip Tax combined both land and labour dues, the two being determined by the area of land a person owned. Previous taxes were traditionally based on the yield of a person's land, with an additional poll tax on the farmer's family (i.e., how many adults were in it determined the fee to be paid).
The practical application of the new tax was left in the hands of the local gentry, which caused some resentment from small farmers. The eunuchs who held sway in a sort of parallel civil service in this period were not happy either about the reforms, since the power to raise taxes was devolved away from the central authorities. Juzheng also had enemies amongst other bureaucrats, since the reforms "sought to undermine the privileges and power enjoyed by the bureaucracy" (Rossabi, 262). Finally, any radical change in policy and institutions in China was always difficult, since reform suggested the dynasty's founders, who were by definition revered, had somehow been lacking in ability and foresight. Many of Juzheng's proposed reforms, then, were not implemented. Nevertheless, the Single Whip Tax was there to stay, and it continued well into the Qing dynasty (1644-1911).
China as the Centre of the World
The economic boom in Ming China was reflected in such prestige projects as the building of the Forbidden City in the capital Beijing, the deepening and widening of the Grand Canal so that grain ships could easily reach the capital, and repairs made to the Great Wall of China to keep out Mongol invaders. Another Ming prestige project was to re-establish China as the dominant power in East Asia.
The Yongle Emperor (reign 1403-1424) sent Zheng He (1371-1433), widely regarded as China's greatest-ever explorer, on seven diplomatic voyages between 1405 and 1433, with each voyage involving several hundred ships. Zheng He sailed along established routes to the coast of India, the Persian Gulf, and the east coast of Africa, but many of his final destinations were new points of contact for the Chinese. Zheng He's travels brought Southeast Asia into the sphere of the Chinese tribute system, but it was not successful in widening the system even further. He did, though, manage to persuade some East Asian rulers to consistently send tribute to China.
The Ming emperors also sent ambassadors overland to Herat and Samarkand in Central Asia, as well as to Manchuria, Tibet, and Korea, all with some success. The Chinese emperors hoped to woo foreign rulers with expensive gifts so that they would legitimise their claim to be the greatest power on Earth.
Global Trade
The Ming were initially a little old-fashioned in their trade policies, insisting that foreign traders only use certain ports at certain times, but eventually these rules were relaxed somewhat, and East Asia became a melting pot of trading neighbours as well as attracting Portuguese, Spanish, Dutch, and British traders. China's main exports were silk, tea, and porcelain.
Silk had been one of the staple intercontinental trade goods for centuries, lending its name to the most famous network of routes across Asia, the Silk Road. Tea was also exported to the West via the Silk Road and eastwards by ship to Japan. Tea became such a big business that by the 16th century it had begun to interest European traders, notably the Portuguese and Dutch. Chinese tea was introduced to Europe in 1607 and became extremely popular.
Made in earlier dynasties but perfected to new levels of craftsmanship under the Ming, porcelain – a hard, pure white, and translucent ceramic – was sold across China and exported to an appreciative world market, which had not yet learnt the secret of making it. The classic shapes and cobalt-blue designs on Ming porcelain, which often used foliage motifs combined with landscape scenes inspired by scroll paintings, would be imitated around the world from Japan to Britain.
In the other direction came brand new products from the New World: exotica like sweet potatoes, maize, tomatoes, peanuts and tobacco, some of which would be cultivated in areas of China not suitable for homegrown crops. Chinese merchants, both men and women, could now sell exotic goods to an increasingly wealthy population.
Sources of Silver
As trade blossomed, the Ming government became greedy for silver to feed the economy. As noted, taxes were paid in the precious metal. Another government source was the idea to allow people to avoid military service by making a payment in silver. China did have its own silver mines, too, but these were already in decline by 1430. The biggest source of silver was trade with foreigners. The Ming were so keen to obtain silver that its value was much higher in East Asia compared to Europe in the 16th century. For example, 1 oz of gold bought 11 oz of silver in Amsterdam while the same silver in China could be re-exchanged for 2 oz of gold. But where did all this silver come from?
The Japanese government, when led by the shogun Tokugawa Ieyasu (1543-1616), ensured it controlled the country's silver mines on Honshu. Silver mining greatly increased in Japan in the 16th century thanks to the introduction of Chinese and then European mining technology. Japanese silver was used to pay for imported goods arriving regularly via Portuguese traders from Portuguese Macao (held from 1557 to 1999) and Portuguese Nagasaki (1571 to 1639). The Japanese government exchanged silver for silk, porcelain, and spices such as pepper, but because silk dominated, this exchange became known as the silk-silver trade. In addition, the Great Ship, an annual treasure ship packed with Chinese gold, silk, sugar, rhubarb and other exotica, sailed from Macao to Japan and then returned full of silver bullion.
The Portuguese traders, in turn, traded their Japanese silver for more Chinese goods at Macao and Canton. "The Portuguese carried 20 metric tons of Japanese silver a year to China" (Ebrey, 309). The Portuguese traders also had silver that came from much further afield, in fact, from the other side of the world.
By the 16th century, a sophisticated global trade network had been established which involved European ships connecting East Asia to such far-flung places as the Philippines and the Americas. Silver was one of the connectors between the New World and the Old, far outstripping gold as the most precious commodity shipped by the Spanish Treasure Fleets. These Spanish galleons carried the wealth of the New World to Europe from the 1520s. The annual treasure fleets were loaded with so much silver (often over 20 tons per ship) that they were widely called the plate fleets (a corruption of the Spanish word for silver, plata), even if they carried all manner of other valuables across the Atlantic Ocean.
The Manila galleons, meanwhile, sailed across the Pacific Ocean, connecting the East Asian trade network to Spanish colonies in Manila in the Philippines (1565-1815) and Acapulco in Mexico. These galleons brought valuable trade goods like silk and spices from China and East Asia to the Americas (and, via the Isthmus of Panama and then loaded onto the Atlantic ships, to Europe, too). Indeed, the Spanish themselves called these ships the naos de China or 'Chinese ships.' In just one example, the Manila galleon Great Santa Ana, captured by the English privateer Thomas Cavendish in 1587 on its way to the Americas, was carrying 22,000 gold pesos and 600 tons of precious silks and spices.
The Asian goods the Manila galleons carried had been paid for using silver. When the cargo was landed and exchanged for silver again, the bullion was sent back to the Philippines to be used to buy the goods for the next voyage. At their peak, each Manila galleon carried an average of 3 million silver pieces of eight per trip. Through the triangular trade between the Americas, the Philippines, and East Asia, "China absorbed 50% of silver mined in Mexico and Bolivia" (Ebrey, 309).
To acquire all this metal, indigenous people in the Americas were mercilessly robbed, captured, and tortured to find out where their silver and other valuables were hidden. Anything made of silver was then ruthlessly melted down to make coins and bars of bullion. When the silver items ran out, the Spanish conquistadors turned their attention to the source, the mines. These they found and further exploited, while new mines were also located. By 1540, silver made up over 85% of annual precious metal shipments to Spain.
In 1547-8, the Zacatecas mines in Mexico began operation under Spanish control, the rich local vein of silver having already been mined on a smaller scale by the Zacatec people. Guanajuato in central Mexico (opened in 1550) was another highly profitable mine. To better exploit silver-bearing ore, deep shafts were required along with extensive drainage channels, a labour-intensive process that required a serious investment.
The Potosí mines in the Andes at Cerro Rico, Bolivia, were discovered in 1545 by Diego de Huallpa, and they proved to be the single most spectacular source of wealth for the Spanish in the whole of their empire. At their peak around 1600, the Potosí mines numbered over 600, and they collectively yielded some 9 million silver pesos each year, more than all the silver mines then operating in the world combined. These mines were worked using forced labour and slaves, both local and those shipped in from Africa.
Silver, then, was flowing into Ming China in vast quantities from both the Americas and Japan. Yet more silver came into the region in the early 17th century as more European powers joined the Portuguese and Spanish traders. Dutch traders entered the Japanese silver market in 1609, the British in 1613, but neither had direct access to China, and Japanese traders continued to desire Chinese goods above all else. European traders were obliged to secure Chinese goods in secondary markets in other parts of East Asia and then ship them to Japan or Europe. It seemed the China-Japan trade relationship was impregnable, but in just a few decades, the Ming grip on power began to loosen, and the Japanese shoguns turned to a policy of isolationism.
Silver Shortages & the Fall of Ming China
Political divisions and family rivalries at court, corruption, a ballooning and inefficient civil service, government overspending, and the cost of defending Korea against two Japanese invasions all took their toll on the Ming rulers' ability to hold on to power. Further, the overtaxation of the peasantry fuelled widespread rebellions. The civil unrest was made all the worse by a series of floods, droughts, and crop shortages, as well as a smallpox epidemic. There was, too, a decline in the flow of silver into China which had been so useful to the Ming economy. Disruptions to the silver supply began around 1639, and this had direct consequences on rent prices and deflation (when goods become cheaper but so, too, decrease earnings, which makes the payment of debts and fixed costs like rent much more difficult to pay):
Part of the reason people rioted over rents was that real rents had risen due to deflation, itself brought on by the sudden drop in the supply of silver. In 1639 the Japanese authorities refused to let traders from Macao into Nagasaki, disrupting trade that had brought large quantities of silver to China. Another major source of silver was cut off a few months later when Chinese trade with the Spanish in the Philippines came to a standstill after a slaughter of Chinese residents. For China the drop in silver imports led to hoarding of both silver and grain, creating artificial shortages.
(Ebrey, 314)
The Japanese government, the Tokugawa Shogunate (1603-1868), limited the silver taken out of the country from 1668 because European traders were taking so much of it, around 20 tons every year. Japan's mines were beginning to peter out. Another reason the shoguns limited outside trade and expelled all Europeans was their general distrust of foreigners, particularly because of the introduction of Christianity via European missionaries, a process the shoguns regarded as detrimental to traditional Japanese values. This period of cultural isolation, known in Japan as the Sakoku Period ('chained off nation'), continued until the mid-19th century.
The knock-on effect of Japan's closed trade policy was that European traders had far less silver to spend on Chinese goods. At the very same time, the sources of silver from the Americas were also petering out, producing by 1700 only a quarter of the silver per year they had yielded a century before.
As a consequence of all of these problems, from dwindling silver to natural disasters, the economically, politically (and some would say morally) impoverished Ming could not resist the invasion of the Manchus, who took over China and established the Qing dynasty in 1644.
