Stanford: Stanford Economics and Finance (an imprint of Stanford University Press), 2013, c2014. xii, 364 pp. (Tables, figures.) US$65.00, cloth. ISBN 978-0-8047-8719-2.
In this wide-ranging study, Niv Horesh seeks to identify the lines of convergence and divergence between Chinese and Western monetary systems from antiquity to the twenty-first century. This is not a history of Chinese money, but rather an examination of certain episodes or “historic junctures” that illuminate both “surprising commonalities” as well as the “Great Divergence” (13) between these distinctive monetary systems. On balance, though, it is the divergences rather than the convergences that stand out. Horesh rightly emphasizes the often-neglected place of copper currencies in the West from Roman to early modern times, but the basic distinction between gold/silver coinage in Europe and the Islamic world on one hand and bronze coins in East Asia on the other, persisted down to modern times. More central to Horesh’s argument, the technological divide in mining and minting, the contrast between the Chinese state’s monopoly on coining and printing money versus the more entrepreneurial world of the West, and the financial revolution in early modern Europe that created joint-stock companies, central banks and national debt financing, explain why the monetary institutions of the West rather than in China nurtured modern economic development.
The book has an inauspicious beginning. The first chapter proposes the novel argument that the invention of round (bronze) coins in China derived from the influence of Hellenic currencies mediated by the round coins the Maurya Empire in South Asia introduced sometime after 304 BCE. Horesh makes the fundamental error of attributing the first issue of round coins in China to the First Emperor of Qin (r. 249–10 BCE). In fact, archaeological finds have confirmed that the Qin state issued its round Banliang coins beginning in 336 BCE, antedating the appearance of the Mauryan circular coins. Most of the chapter is devoted to much later (and hence irrelevant to the issue at hand) examples of coins reflecting cross-cultural influences, such as the bilingual Sino-Kharosthi coins of Khotan from the first-second centuries CE. Horesh deems the “circumstantial and archaeological evidence” for his thesis “quite compelling” (38). However, his argument proceeds from the absence rather than the presence of either archaeological or documentary evidence.
In any event, the rest of the book focuses not on mutual influences but rather the separate and what Horesh describes as the “path-dependent” trajectories of Chinese and Western monetary practices, with particular attention to the evolution of paper money and banking. Horesh recognizes conceptual differences in thinking about money, but he devotes little space to monetary theories. Instead, he attributes what he calls the “Great Monetary Divergence” primarily to differences in technology in a broad sense, encompassing minting technology, state support or lack thereof for mining, and concepts such as hard currency reserves for paper money issues. In Horesh’s view, this Great Monetary Divergence can be traced back at least to the sixteenth century: in contrast to the Ming Empire’s disastrous experiment with fiat paper money, which bequeathed a lasting aversion to fiduciary currencies, Tudor England’s equally misguided Great Debasement of 1542–51 led to a series of crucial breakthroughs in the conceptualization of money—the inviolability of currency reserves, national legal tender currencies, and the creation of national debt through banknote issuance—that propelled the rise of England as a fiscal-military nation-state as well as the creation of modern monetary and banking institutions. Horesh contends that this Great Money Divergence and related developments, such as Europeans’ global pursuit of trade and mining resources, figured centrally in economic development that resulted in the Industrial Revolution happening in England rather than elsewhere.
Part 2 examines fiduciary currencies and banking in nineteenth- and twentieth-century China, the main focus of Horesh’s previously published research. Horesh observes that to the very end of the imperial era, the first decade of the twentieth century, the Chinese economy relied almost entirely on hard currency; private banknotes, whether issued by domestic or foreign banks, occupied only a marginal place in the money supply. He undoubtedly is correct in arguing that the absence of sound paper instruments was a key factor in China’s high interest rates, which certainly discouraged capital investment. In a chapter devoted to Japan’s colonial banks in China, Korea and Taiwan—one of the novel contributions of the book—Horesh shows that the Japanese flexibly applied different banking policies depending on varying political and economic circumstances. In his view, the Japanese colonial banks cannot be seen simply as appendages of the Japanese state; instead, they acted as semi-official commercial banks, not unlike the British banks in Hong Kong. However, Horesh downplays the ways in which these banking institutions, both British and Japanese, served colonial agendas.
In his final chapter Horesh takes up the current debate on the prospect that the People’s Republic of China’s renminbi currency will supplant the US dollar as the global reserve currency within the forseeable future. He points out that there is a historical precedent for the PRC’s accumulation of enormous foreign currency reserves in the massive inflow of silver to China during the period from the sixteenth to the nineteenth century to offset the European states’ negative trade balances with China. (Earlier in the book [14, 116–17], however, he regards this influx of bullion as a sign of China’s weakness, not strength.) Horesh explores the pros and cons for China that loosening controls over the renminbi and capital flows in order to internationalize its currency would entail, underscoring the strong reservations harboured by Chinese economists and policy makers. Still, the renminbi’s role as an international currency surely will expand in the coming decades. Thus it is only in the future that we can expect that the separate trajectories of Chinese and Western monetary histories will at long last converge.
Richard von Glahn
University of California, Los Angeles, USA