Japan, China, and the Growth of the Asian International Economy, 1850-1949 (Japanese Studies in Economic and Social History) (v. 1)

Japan, China, and the Growth of the Asian International Economy, 1850–1949

JAPANESE STUDIES IN ECONOMIC AND SOCIAL HISTORY

Edited by Osamu Saito and Kaoru Sugihara for the Socio-economic History Society of Japan Vol.1

Japan, China, and the Growth of the Asian International Economy, 1850–1949

Forthcoming Vol.2

The Role of Tradition in Japan’s Industrialization (edited by Masayuki Tanimoto)

Vol.3

Planned Economy, Occupation and High-speed Growth (edited by Juro Hashimoto and Haruhito Takeda)

Vol.4

The Demography of Traditional Japan, 1600–1870 (edited by Osamu Saito)

Vol.5

Education and Modern Economic Growth in Japan (edited by Konosuke Odaka)

Japan, China, and the Growth of the Asian International Economy, 1850–1949 Volume 1 Edited by KAORU SUGIHARA

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Great Clarendon Street, Oxford ox2 6dp Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With oYces in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York ß The Socio-economic History Society of Japan The moral rights of the author have been asserted Database right Oxford University Press (maker) First published 2005 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose this same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloging in Publication Data Data available Typeset by Kolam Information Services Pvt. Ltd, Pondicherry, India Printed in Great Britain on acid-free paper by Biddles Ltd., King’s Lynn, Norfolk ISBN 0–19–829271–6 9780198292715 1 3 5 7 9 10 8 6 4 2

PREFACE This volume is the first of the series ‘‘Studies in Economic and Social History’’, edited under the auspices of the European-language Publications Committee of the Socio-economic History Society of Japan. The Society was established in 1930, and has since been publishing Shakai Keizai Shigaku (Socio-economic History), its journal, as well as occasional collected volumes, in Japanese. In the early 1990s, Professor Akira Hayami, president at the time, floated the idea of publishing some of our research in English (and in other European languages) in a coordinated form, and a committee was set up to carry out the task. A contract was then signed in 1996 between the Society and the Oxford University Press for the publication of the first five volumes featuring the main thrusts of recent Japanese research. The subsequent presidents and members of the committee devoted much of their time to the promotion of the project. On behalf of the series editors for the first five volumes, I wish to take this opportunity to thank all those who have helped carry this project forward this far. I also wish to acknowledge the financial support of the Society for part of the editorial work. This volume originates from a workshop on the role of China and overseas Chinese networks in the Asian international economy, which I organized in Osaka in 1993. The significance of this theme had been widely recognized since 1984 when the Society’s annual conference took up the theme of the trading world of Asia for its general session, and participants argued for a renewed appreciation of intra-Asian trade and Asian merchant networks for Japanese industrialization. Several authors of this volume have since written seminal articles and books to advance the field. Part of this research has been translated and introduced to readers of Korean and Chinese. A growing number of researchers are engaged in further studies of this theme in East Asia. Many people helped the conception, organization, and editorial work of this volume. Andrew Hunt, Graeme Knowd, and Lawrence Colvin helped improve the English-language presentation. Hajime Kose coordinated the expression of Chinese names and place names. Additional financial support was given by the Daiwa Bank Foundation for Asia and Oceania and the Egusa Foundation. I thank all of them for their invaluable contribution. Kaoru Sugihara

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CONTENTS Preface List of Figures List of Tables List of Maps Notes List of Contributors 1. An Introduction Kaoru Sugihara Part I Chinese Merchants and the Japanese Cotton Industry 2. Kobe Seen as part of the Shanghai Trading Network: The Role of Chinese Merchants in the Re-export of Cotton Manufactures to Japan Kazuko Furuta

v ix x xiii xiv xv 1

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3. The Chinese Merchant Community in Kobe and the Development of the Japanese Cotton Industry, 1890–1941 Naoto Kagotani

49

4. The Chinese Market for Japanese Cotton Textile Goods, 1914–30 Takeshi Abe

73

Part II The Rise of Economic Nationalism in China

101

5. The Collapse of the Chinese Imperial Monetary System Akinobu Kuroda

103

6. Japanese and British Perceptions of Chinese Boycotts in Shanghai: With Special Reference to the Anti-Japanese Boycotts, 1928–31 Harumi Goto-Shibata 7. The Tariff Policy of the Nationalist Government, 1929–36: A Historical Assessment Toru Kubo

127

145

viii Part III

Contents China’s Internal Integration in International Perspective

8. China’s ‘‘Dual Economy’’ in International Trade Relations, 1842–1949 Man-houng Lin 9. Foreign Trade, Internal Trade, and Industrialization: A Statistical Analysis of Regional Commodity Flows in China, 1914–31 Hajime Kose Part IV

The Growth of China’s Contacts with Taiwan and Southeast Asia

10. Taiwanese Merchants in the Economic Relations between Taiwan and China, 1895–1937 Man-houng Lin

177 179

198

215 217

11. Patterns of Chinese Emigration to Southeast Asia, 1869–1939 Kaoru Sugihara

244

Glossary

275

Index

280

LIST OF FIGURES 2.1. The Shanghai network 3.1. Quantities and prices of imports of raw cotton to Japan, 1891–99 4.1. Exchange rates between Japan and China, 1913–34 4.2. The Structure of the Japanese cotton industry in the interwar period 4.3. Changes in the type of cotton cloth sold by Obitani Shoten, 1913–36 7.1. Movements of imports and rates of import duty, 1926–36 10.1. Values of Taiwan–China and Taiwan–Japan trade, 1902–37 10.2. The ratio of Taiwan–China trade as compared with Taiwan–Japan trade or Taiwan–other countries’ trade, 1902–37 11.1. Number of Chinese migrants to and from Southeast Asia, 1891–1938 11.2. Diagram of Chinese migration networks 11.3. Chinese migration networks, 1881, 1921, 1927, and 1933 11.4. Diagram of the overseas Chinese in the Southeast Asian distribution networks

32 53 89 89 94 162 218

219 251 251 253 266

LIST OF TABLES 1.1. The geographical composition of intra-Asian Trade, 1883, 1898, 1913, 1928, and 1938 2.1. Chinese imports of gray shirting and re-exports to foreign countries, 1870–81 2.2. Re-exports of gray shirting from Shanghai to other ports for the second half of 1874 2.3. Re-exports of gray shirting from Shanghai to other ports, 1874–78 2.4. Imports of gray shirting to Kobe and re-exports from Shanghai to Kobe, 1868–78 2.5. Imports of shirting by treaty ports in Japan, 1868–84 2.6. Auction in Shanghai market, Sept. 23, 1875 3.1. Exports by foreign and Japanese merchants from Kobe, 1890 and 1910 3.2. Imports and importers of raw cotton to Kobe, 1900 3.3. Imports of cotton yarn to China: main trading routes, 1904 3.4. Share of Chinese merchants in export trade at Osaka and Kobe, 1925 3.5. List of main buyers of cotton textiles from Hiromu Takase in Banshu district, 1932 3.6. Composition of monthly sales of ‘‘Sarong 42–8’’ classified by unit price by Hiromu Takase in Banshu district, 1932 3.7. Geographical composition of imports of cotton textiles into Singapore and ethnic composition of firms engaged in import trade, June–Dec. 1934 3.8. Composition of importers of the main categories of textile goods in Singapore, June–Dec. 1934 3.9. Exports from Kobe by Chinese merchants, 1925–41 4.1. Demand for machine-spun yarn, 1887/1888–1935/1936 4.2. Geographical composition of the Japanese exports of cotton cloth, 1903–37 4.3. Imports of British and Japanese finished cotton cloth to China, 1914–31 4.4. Chinese yarn production and imports from Japan and India, 1913–30 4.5. Cotton mills in China, 1922 and 1930 4.6. Exports of Japanese finished cotton cloth and sateen, 1921–33

6 28 30 31 33 34 38 51 52 55 57 59

60

64 65 68 74 77 78 80 81 84

List of Tables 4.7. Production of cotton cloth by the integrated spinning firms in Japan, 1929 and 1937 4.8. Exporters of finished cotton cloth in Osaka, Japan, c. 1930. 4.9. Production shift from narrow to wide cotton cloth in Obitani Shoten, 1923–25 4.10. Number of mills, spindles, and looms of the cotton spinning firms in China classified by ownership, 1925, 1930, and 1935 4.11. Geographical composition of Japanese exports of cotton cloth, 1919, 1929, and 1937 5.1. Movements of the copper cash rate in China, 1892–1921 5.2. Correlation coefficients for US copper price and the copper cash rate in China 5.3. Chinese sesame exports and German imports, 1900–1931 5.4. Cotton exports, 1910–31 5.5. The balances of Thai Treasury paper money and Banque de l’Indochine bank notes, 1903–33 7.1. China’s import duty and imports, 1926–36 7.2. Composition of Chinese customs revenue, 1928–37 7.3. Composition of China’s central government revenue, 1913–19 and 1927–36 7.4. The effects of the territorial loss and smuggling on China’s Imports, 1926–36 7.5. Changes in silver prices, exchange rates and imports in China, 1926–36 7.6. An estimated impact of import duty 7.7. Commodity composition of Chinese imports, 1912–36 7.8. Commodity composition of Chinese Exports, 1912–36 7.9. Commodity group composition of Chinese imports from the United States, 1926–36 7.10. Commodity composition of Chinese imports from Japan, 1926–36 8.1. Quantity of opium produced in Southwest China and of foreign opium 8.2. Chinese opium production by region 8.3. The freight rank of various kinds of transportation in China 8.4. Unit price of the chief import goods in late Qing China, 1872–1911 8.5. Price of native opium compared with that of foreign opium 8.6. Per capita opium usage of each province, 1889 9.1. Regional composition of China’s foreign trade and trade balances, 1914–31 9.2. Regional composition of China’s internal trade and trade balances, 1914–31

xi 90 92 93

95 97 110 110 118 119 123 151 152 154 156 158 159 160 161 171 171 183 184 185 186 187 188 203 204

xii

List of Tables

9.3. Imports of foreign and native goods to nine regions of China, 1914–31 9.4. The ratio of native goods to internal trade, 1914–31 9.5. Geographical composition of trade of the main regions of China, 1919 and 1930 10.1. Taiwanese and Japanese population in China as of April 1, 1936 10.2. Land owned or rented by Taiwanese in Xiamen 10.3. Trade between Taiwan and China by areas, 1925–39 11.1. Indian and Chinese migration to Southeast Asia, 1891–1938 11.2. Number of Chinese residents in Southeast Asia, 1934 11.3. Number of Chinese migrants emigrating to Southeast Asia, 1869–1939 11.4. Number of Chinese migrants immigrating from Southeast Asia, 1873–1939 11.5. Movements of Chinese migrants in the Straits Settlements, 1923–39 11.6. Composition of the Chinese labor force in the Federated Malay States, 1931 11.7. Estimates of the value of remittances by Overseas Chinese, 1905–38 11.8. Estimated ratio by occupation of the overseas Chinese in Southeast Asia

205 209 210 221 223 227 246 246 247 249 255 261 264 269

LIST OF MAPS 2.1. East Asian treaty ports in the 1870s 9.1. Skinner’s macroregions 10.1. Cities across the Taiwan Straits

25 199 221

NOTES Japanese names are expressed in Western order, that is, first name followed by family name. The transcription of Chinese characters follows the pinyin system, except for references and some historic terms and place names. A glossary at the end of this volume was prepared for the identification of characters and different styles of transliteration.

LIST OF CONTRIBUTORS Kaoru Sugihara, Graduate School of Economics, Osaka University, Osaka Kazuko Furuta, Faculty of Economics, Keio University, Tokyo Naoto Kagotani, Institute for Research in Humanities, Kyoto University, Kyoto Takeshi Abe, Graduate School of Economics, Osaka University, Osaka Akinobu Kuroda, Institute of Oriental Culture, University of Tokyo, Tokyo Harumi Goto-Shibata, Center for International Research and Education, Chiba University, Chiba Toru Kubo, Faculty of Arts, Shinshu University, Nagano Man-houng Lin, Institute of Modern History, Academia Sinica, Taipei Hajime Kose, Faculty of Economics, Ryukoku University, Kyoto

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1 An Introduction kaoru sugihara

1. Towards a New Perspective Modern Asian economic history in the second half of the nineteenth century and the first half of the twentieth century has traditionally been written in terms of the Western impact on Asia and Asia’s response to it; the history of international contacts between Asian countries has not been considered as fundamental to the understanding of the region’s economic modernization. Efforts have been made to correct this tendency over the last twenty years, especially with regard to East Asia, and we now have a stream of research, which has interpreted the history of intraregional trade, migration, and capital and money flows as factors that determined the course of East Asian economic development. Works that have been carried out along these lines have already been introduced to the English-language literature to some extent. (Many authors in Latham and Kawakatsu (1994) and Sugiyama and Grove (2001) share this interest. See also works cited in this chapter.) Meanwhile, case studies that have been accumulated in Japanese scholarship confirm that trade links with Asia, with strong elements of intra-Asian competition, were indeed vital to Japanese industrialization. This volume substantiates these claims by adding further evidence to them and bringing in the Chinese dimension more fully than has been possible hitherto. It should be acknowledged that, in accounting for the growth of East Asian international economic relations, the economic history of the Japanese colonial empire (especially Korea and Taiwan), as well as her informal empire (especially Manchuria), should occupy a central place in the analysis, especially with regard to the interwar period. However, they are relatively well covered in the English-language literature (Myers and Peattie 1984; Duus, Myers, and Peattie 1989, 1996), while Japanese international economic relations outside them have received less attention. Nor have Japanese-language sources been fully utilized for the discussion of Asian international economic history as a whole. We therefore opted to concentrate on themes dealing with interactions outside

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the empire, in the hope of making a contribution to the understanding of the workings of the Japanese empire as well. Three main themes run through the ten chapters that follow. First, trade and other economic interactions between Japan and China were important in shaping the pattern of regional industrialization. Neither Japan nor China imported technology and organizations, and attempted to ‘‘catch up’’ with the West on their own. Japan’s industrialization took place, taking advantage of Chinese merchant networks in Asia, while Chinese competition was a critical factor in Japanese technological and organizational ‘‘upgrading’’ in the interwar period. The Chinese Nationalist government implemented its industrialization programme, not only in the midst of political and military conflicts with Japan, but also in the context of its keen competition with Japan in the international marketplace. The purchase of Japanese textile machinery during the critical period of the Chinese boycotts of Japanese textiles, for example, was an integral part of Chinese import-substitution industrialization. This was the background against which the idea of the ‘‘flying geese’’ pattern of economic development was formulated (Akamatsu 1962). Second, China’s pattern of integration into the international economy was shaped by the growth of intra-Asian trade, migration, and capital flows and remittances, as well as by direct contact with the West. While the impact of the West was largely confined to the littoral region of China, intra-Asian trade was more directly connected to China’s internal market. The opening of Chinese ports to foreign trade was not just an opening to the West. It was simultaneously an opening to Asia on an unprecedented scale. The dichotomy between the littoral region and the hinterland, a picture often painted by Western observers, was less valid for Asian exporters of opium, cotton yarn, and sundries. Both the fall of the imperial monetary system and the rise of economic nationalism in the early twentieth century should be seen, not just in terms of China’s response to the West-dominated international order, but also as both a response to, and a cause of, increasing contact with the Asian international economy. Third, a study of intra-Asian trade and migration, which crossed territorial and colonial borders, helps us to understand the nature of colonialism and the international climate of imperialism. In spite of the tendency to prioritize the mother country’s economic interests, the moral and institutional discrimination against colonized peoples, and the disruptions caused by imperialist rivalries, East Asian merchant and migration networks exploited economic opportunities, taking advantage of colonial institutional arrangements and even political conflicts. They made a contribution to national and regional economic development in the politically more favorable environment following the Second World War by contributing the valuable expertise and entrepreneurship that they had accumu-

An Introduction

3

lated prewar. To argue thus does not implicate the limits of colonial power, nor does it undermine the significance of the effects of Japanese aggression in the 1930s. The suggestion here is that the prevailing principle of the international order of Asia—governed principally by Western powers, especially Britain, but shared also by Japan for most of the period under review—was ‘‘imperialism of free trade’’, which aimed at ‘‘free trade if possible; annexation, and territorial control if necessary’’ (Gallagher and Robinson 1953). There are two main reasons why these topics have not been brought into focus until relatively recently. First, Asia was long seen as a region that did not possess internally generated forces of change of either a technological or an institutional kind. This misinterpretation has now largely been corrected through the growth of revisionist literature, which emphasizes the Smithian dynamics from the earlier period and the adaptable capacity of Asian economies under Western impact (Pomeranz 2001; Sugihara 2003). While the indigenous, predominantly rural economy was reinterpreted as an economy that pursued a developmental path, different from the Western one but with a capacity for growth in efficiency, economic historians of the more recent period have variously identified market growth, entrepreneurship, human resource development, and industrial policy as the main agents that responded to Western impact, absorbed Western technology and institutions, and promoted industrialization. (The pioneering works include Nakamura (1971); Brandt (1989); Rawski (1989); Yamamura (1997).) In the revised picture, these countries are seen as having had high social and economic capacities in order to be able to respond to technological change. This also applies to the literature on Southeast Asia and South Asia, though to a lesser extent. (The more recent syntheses include Huff (1994); Booth (1998); and Roy (2000).) Such a revised picture provides an essential understanding from which to assess the impressive economic recovery and development of the region in the postwar period. The second reason for this lack of recognition lies in the fact that most of the existing literature, traditional or revisionist, has been written from the perspective of a single country. Individual studies on trade, migration, remittances, investment, and technological and managerial transfers exist, but little attempt has been made to assess the significance of dynamic gains from intra-Asian trade or technological fusions for Asia’s economic development. Political studies have focused on conflicts and clashes, rather than cooperation and fusion, while economic historians concentrated on the assessment of trade rivalries and ‘‘currency wars’’. A received picture is that while Japanese aggression and the Asia–Pacific War exposed the difficulties Asian people faced in maintaining an international order by themselves, Western imperialism was also to be challenged by the emergence of Asian nationalism. While

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recent works have tried to understand the process of economic change behind these tensions (see Sugiyama and Guerrero 1994), some political historians expressed reservations on the tendency for the new literature to place too much emphasis on cooperation at the level of international relations (Best 2002). Even if it is possible to say that we now identifiy regional interactions as a force of economic change that went beyond what was normally expected under Western impact, their place in historiography has yet to be established.

2. Major Themes This section outlines my own understanding of the subject in the hope of providing a broad context into which this volume was conceived. (All the facts and figures, unless otherwise stated, derive from Sugihara (1996). For English summaries of Chapters 1 and 4 of this work, see Sugihara (1986, 1998), respectively.) This will be followed by the final section, which will relate it to the content of each chapter.

2.1. The growth of the Asian international economy First, it was the growth in exports of Chinese tea and silk to the West that started a chain of development in intra-Asian trade in the nineteenth century. While China’s need to import silver provided a stimulus for long-distance trade, the British failure to find commodities that were exportable to China induced the growth of large-scale intra-Asian trade, namely the export of opium from India to China. This trade began in the late eighteenth century and, during the first half of the nineteenth century, Britain used the earnings arising from her involvement in India, including her exports of cotton textiles, to settle her deficit with China. The mechanism of this ‘‘opium triangle’’ has often been studied from the point of view of British history with the opening of China as a primary focus (for a classic study, see Greenberg 1951). However, the general effects of the growth of the opium trade on Asian trading networks and economies have not been fully explored until relatively recently. From our point of view, the real significance of the opium trade lies in its substantial growth during the period from the 1860s to the 1880s, which had a major impact on the pattern of China’s integration into the international economy (see Chapter 8 of this volume). Because the opium trade was so large in size, as much as 70 percent of China’s total import trade in 1864 was made up of imports from other Asian countries. By the 1860s, British traders had ceased to be major players, and the trade came to be increasingly conducted by Asia-based merchants. The growth of the opium trade was also a vital factor underlying the emergence of

An Introduction

5

Singapore, Hong Kong, and Shanghai as centers of intra-Asian trade (Trocki 1990). Second, when the opium trade declined as a result of the growth of opium production in China, imports of machine-made yarn became the focus of intra-Asian trade. Chinese weavers began to switch from traditional handmade cotton yarn to machine-made yarn. Bombay yarn dominated the trade in the 1880s, but was met with keen competition from Japan in the 1890s as Meiji industrialization progressed. India and Japan competed hard in the Chinese and other Asian cotton yarn markets (and later cotton textiles) during the early twentieth century. Japan purchased a large amount of raw cotton from India in order to manufacture cotton goods for both domestic consumption and exports. More generally, she imported primary products from, and exported manufactured goods to, other Asian countries, while importing machinery from, and exporting raw silk and tea to, the West. This growth in Japanese trade represented the emergence of industrialization-led trade in Asia. The character of intra-Asian trade shifted from a trade induced by Western impact and long-distance trade to one largely generated by economic forces within the region. The rate of growth in intra-Asian trade exceeded most expectations. As is well known, following the establishment of colonial regimes in South and Southeast Asia and the opening of East Asian ports, trade between the West and Asia grew at a speed roughly comparable to that of the growth in world trade. Between 1883 and 1913, Asia’s export trade with the West grew at an annual rate of 3.2 percent and its imports at 4.3 percent. However, intra-Asian trade grew more rapidly during the same period—at an annual rate of 5.5 percent. Table 1.1 summarizes some of the relevant statistics. It should be noted that intraregional trade of this magnitude did not develop in Latin America, Africa, or anywhere else during this period. Nor did intra-European trade grow as fast as intraAsian trade. Intra-Asian trade was an integral part of the growth of multilateral settlement patterns in world trade during this period (Saul 1960). By the end of the nineteenth century, more than half of Japan’s trade was conducted with other Asian countries. Asia’s share in China’s trade was also fluctuating between 40 and 60 percent for most of the late nineteenth and early twentieth centuries, although the value of exports was always smaller than that of imports. Thus, during the period from the 1890s to 1914, part of China’s surplus with the West was offset by her deficits with India and Japan, both of which in turn had trade deficits with the West. In this way, the growth of the intra-Asian cotton trade, generated by regional industrialization, acted as a means of smooth trade settlement between Asia and the West. Part of China’s trade deficit was also financed through remittances from Southeast Asia.

Kaoru Sugihara

6

Table 1.1. The geographical composition of intra-Asian Trade, 1883, 1898, 1913, 1928, and 1938 1883 West India Southeast Asia China Japan Total

(68) (85) (58) (57) (76) (47) (80) (71)

82.44 (68) 60.48 (69)

Intra-Asian trade total (1) World trade total (2) (1)/(2)

44.45 34.69 14.98 13.54 17.78 8.55 5.23 3.70

Asia 17.02 5.12 6.70 8.35 3.96 9.29 1.20 1.52

(26) (13) (26) (35) (17) (51) (18) (29)

28.88 (24) 24.28 (28)

1898 Total 65.85 40.97 25.62 23.66 23.25 18.02 28.88 24.28

(100) (100) (100) (100) (100) (100) (100) (100)

121.25 (100) 87.88 (100)

West 42.71 33.51 15.19 15.95 15.47 13.46 8.54 14.69

(63) (75) (39) (51) (60) (51) (51) (52)

81.91 (55) 77.61 (59)

Asia 20.93 6.37 14.70 14.17 8.85 12.51 8.04 13.53

(31) (14) (37) (46) (34) (47) (48) (48)

52.52 (35) 46.58 (36)

33.77

60.96

1,531.64

2,003.48

2.22%

Total 68.15 44.52 39.25 31.05 25.80 26.62 16.90 28.36

(100) (100) (100) (100) (100) (100) (100) (100)

150.10 (100) 130.55 (100)

3.04%

Sources and Notes: Sugihara (1996: 14, 21, 96–7). World trade totals for 1883 and 1898 were calculated from Lewis (1952/1983: 106–7) and are very rough estimates.

Chinese merchant migration networks played a key role in this process. The Chinese dominated China’s trade with other Asian countries, while China’s economic contacts with the West were also filtered, linguistically and culturally, through Chinese merchants and compradors (Hao 1986). The networks, centered around Hong Kong and Singapore, became important in linking Southeast Asia to South China. They were also vital in promoting the Japanese export trade of manufactured goods in East Asia. In Southeast Asia, their dominance in Japanese trade was even more notable. Even when Japanese and Western exporters brought Japanese goods to Southeast Asia, importers usually sold them to Chinese wholesalers, who in turn handed them over to local merchants who were also often Chinese. From the Japanese point of view, Chinese merchants offered information, contacts and ‘‘trust’’, using their extensive networks and experience. They were so competitive that it has been argued that the question of how to respond to the China-centered international system—rather than how to catch up with the West—formed an important part of Meiji policy (Hamashita 1990). Indeed, the Japanese organized trade associations partly in an attempt to break the Chinese monopoly (Kagotani 2000; Chapter 2); this was an integral part of Japanese industrial policy (Sugihara 1994). The heavy dependence of East Asia’s foreign trade upon overseas Chinese networks gave a unifying character to the pattern of East—and, to some extent, Southeast—Asia’s integration. Third, intra-Asian trade went through further transformation in the interwar period. Japan’s fully fledged industrialization was the prime

An Introduction

7

(Million Pounds) 1913 West 96.01 91.55 56.83 48.04 29.17 38.51 33.05 33.98

(63) (75) (55) (58) (48) (45) (45) (43)

Asia 41.85 26.61 42.17 31.66 31.41 53.38 36.49 42.03

1928 Total

West

Asia

1938 Total

(27) 152.69 (100) 135.93 (58) 65.52 (28) 232.92 (22) 122.25 (100) 118.36 (58) 64.46 (32) 200.43 (41) 104.05 (100) 142.42 (53) 90.92 (34) 269.44 (38) 82.50 (100) 96.84 (56) 59.13 (34) 173.10 (52) 60.92 (100) 56.80 (39) 84.23 (58) 144.93 (62) 86.13 (100) 72.45 (41) 104.70 (60) 174.85 (50) 72.64 (100) 93.03 (41) 120.71 (53) 228.74 (53) 78.82 (100) 93.23 (36) 138.37 (53) 260.18

(100) (100) (100) (100) (100) (100) (100) (100)

West 63.93 54.14 94.22 63.90 19.11 26.31 38.18 69.92

Asia

(52) 33.07 (27) (47) 40.91 (36) (51) 46.40 (25) (55) 35.73 (31) (29) 47.35 (72) (25) 92.66 (87) (17) 170.12 (74) (32) 125.86 (57)

Total 122.12 114.27 183.37 115.99 66.18 106.97 230.75 221.32

(100) (100) (100) (100) (100) (100) (100) (100)

215.06 (55) 151.92 (39) 390.30 (100) 428.18 (49) 361.38 (41) 876.03 (100) 215.44 (36) 296.94 (49) 602.42 (100) 212.08 (57) 153.68 (42) 369.70 (100) 380.88 (47) 366.66 (45) 808.56 (100) 214.27 (38) 295.16 (53) 558.55 (100) 167.30

434.96

381.63

4,020.06

6,725.02

4,626.29

4.16%

6.47%

8.21%

mover of this, with a rapid increase in her trade with Korea, Taiwan, and Manchuria. The composition of trade there consisted of Japanese exports in manufactured goods and imports of primary products, a small but rising share of which were related to heavy and chemical industries. There was also a degree of industrial development in Korea, clearly colored by not only Japan’s strategic needs but also by the needs of a large cotton textile sector. Japanese investment in Manchuria was so heavy that the value of Manchuria’s trade grew rapidly during the 1930s, exceeding the amount of trade in the rest of China by 1938. More generally, the yen bloc trade became much larger in volume than the rest of intra-Asian trade by the 1930s. It was certainly a much tighter trading bloc than the intra-Asian trade regime, with colonies and Manchuria strongly connected to Japan. At the same time, Japan aggressively sought export markets in South and Southeast Asia, when the growth of the modern cotton textile industry in China reduced the imports of cotton yarn and textiles from Japan in the 1920s. It was equally important for Japan to import raw materials and energy, especially oil, from outside the yen bloc. Thus, between 1913 and 1938, intra-Asian trade grew further while the growth of trade between Asia and the West was checked by the Great Depression. The proportion of intra-Asian trade in total world trade grew from 4.2 percent in 1913 to 6.5 percent in 1928, and to 8.2 percent in 1938. In terms of foreign trade statistics, the trade of China (excluding Manchuria) with other Asian countries in sterling terms shrank sharply in the interwar period. This should not be interpreted as an indication of China having become less involved in industrialization-led trade. The bulk of

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trade of raw cotton, cotton yarn, and cotton cloth for ordinary use was now conducted within China. The diffusion of industrialization in Asia through the growth of intra-Asian trade was thus ‘‘internalized’’, and part of the division of labor between manufactured goods and primary products, which had previously appeared in foreign trade statistics, was now found in internal trade statistics, examined in Part IV of this volume. At the same time, China began to purchase raw cotton from India on the one hand, and higher range cotton textiles from Japan on the other. By the second half of the 1930s, she was importing industrial machinery increasingly from Japan rather than from the West, and also beginning to export some of the lower range cotton textiles she was able to produce, to Southeast Asia. This process of successive import substitution in China was the second pillar that determined the change in the pattern of intra-Asian trade, from a relatively simple commodity trade, mainly involving primary products, to the more sophisticated chain of trade of manufactured goods. In addition to trade relations, there were massive flows of migration between North China and Manchuria, between South China and Southeast Asia, and between India and Southeast Asia since the late nineteenth century. The size of intra-Asian migration grew in the early twentieth century, and by the interwar period it became greater than anywhere else in the world (see Chapter 11 of this volume). By that time, remittances made by overseas Chinese and Indians and investment of capital by Japanese were generating large flows of capital across Asian waters. The average annual amount of remittances by the overseas Chinese from 1905 to 1938 was estimated to have been over 25 million pounds sterling (Table 11.7 of this volume; calculated using the exchange rate in Hsiao 1974). In other words, the modern Asian international economy, connected through trade, migration, and remittances, grew rapidly during the period from 1850 to 1938, initially emanating from India, then spreading to East and Southeast Asia. As Asia’s integration into the world economy proceeded, regional integration became even stronger, and the region’s relative ‘‘autonomy’’ from the West-centered world economy became more noticeable (see Table 1.1). Although China began to import Western capital and manufactured goods in large quantities, the amount of Western capital invested in East Asia cannot be said to have been large, by the standard of the non-European world. East Asia remained a comparatively ‘‘autonomous’’ region throughout the period under review. In 1913 the volume of intra-Asian trade roughly matched Asia’s exports to the West. By the interwar period, the center of gravity of the Asian international economy had shifted decisively from South and Southeast Asia to East Asia. By the 1930s, both Japan and China traded far more with other Asian countries than with the West. East Asia thus emerged as the only region that was able to sustain active trading.

An Introduction

9

2.2. The contributions of the West Nevertheless, the growth of the Asian international economy occurred not in isolation, but in response to the impact of the West. In this section I note three ways in which the Western impact induced intra-Asian economic integration and Japan’s and littoral China’s economic modernization. Our suggestion is that the direct Western impact was not in itself powerful enough to determine the pattern of East Asia’s economic linkages, but that it was fundamental to the growth of the Asian international economy as a whole. First, the enforcement of the West-dominated international order provided the institutional framework for East Asia’s integration. Through the two opium wars, the principle of free trade was forcefully imposed by the West, and under the treaty port system, trade with the West grew, and Western technology and capital were introduced to the region. The establishment of railways, ports, shipping routes, and telecommunication systems opened up new markets and investment opportunities. All of these changes gave not only Western entrepreneurs but also Asian traders business opportunities in local and international markets, and increased Japan’s and littoral China’s economic contacts with other Asian countries. As a result of this environment of ‘‘forced free trade’’, gains from trade were exploited much more fully than before. Its significance can be further understood if one compares it with the less rapid growth of intra-European trade in the same period, where interstate rivalries led to the rise of protectionism after the late nineteenth century. Of course, this does not mean that China’s traditional international relations, centered around the tributary trade system, ceased to exert an influence. Not only did the tributary trade system itself survive well into the 1870s, but Chinese merchant networks showed strong resilience in the face of Western competition after Western naval powers began to dominate Asian waters. Thus, while Western powers created a system of free trade and provided ‘‘international public goods’’ such as law and order in colonial and treaty ports (for this concept see Kindleberger 1986; for its application to the nineteenth century, see O’Brien 2002), overseas Chinese networks of commerce, migration, and remittances, developed across colonial or national boundaries, provided supplementary ‘‘international public goods’’ of crucial importance for Asian producers and local merchants. (Any commodity, regardless of its place of origin and its nature, would be traded by the networks, across the territorial boundaries.) It must be acknowledged that this combination fully came into existence only after the opening of East Asia’s ports to foreign trade in the nineteenth century, not before. Second, the growth of intra-Asian trade was fundamentally dependent upon the growth of Asia’s trade with the West. It is easy to see that

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imports of Western manufactured goods were crucial for the transfer of Western technology and organizations, and the construction of cities and transportation networks. Asian trading links were developed by taking advantage of the growth of new ports and cities, and the availability of steamship routes and Western banking and insurance facilities. In Japan the presence of Western engineers and businessmen was relatively limited and their influence short-lived, while the Chinese economy was more exposed to direct Western (and Japanese) contacts, even though to a far lesser extent than those of colonial economies of Western powers. This partly explains why China’s modern economic resources were concentrated on the littoral region (see Chapter 8 of this volume). Third, much less recognized were the effects of Asia’s exports to the West on the growth of intra-Asian trade. The growth of the purchasing power of the economies of Japan, littoral China, and Southeast Asia largely depended on the export of primary products (or semimanufactured goods) to the West. For example, exports of raw silk and tea brought about the rise of purchasing power in the peasant population of the region engaged in export production, and this in turn increased the demand for rice, bean products, and other foodstuffs. This ‘‘final demand linkage’’ effect (for the concept of the linkage effect, see Hirshman 1958) was responsible for the growth of commercial agriculture in these countries. Both the export sector and commercial agriculture absorbed labor, previously underemployed in traditional agriculture, and contributed to the rise in peasant household income. This rise in income in turn increased the demand for manufactured goods. Initially, the effect was small, as much of the foreign exchange that the export sector earned was spent on imports needed for economic modernization. As demand rose and exporters gained experience, however, it became possible for them to retain some extra income, which helped the rise in demand for manufactured goods; hence, the concurrent growth of modern and traditional industries in Japan and littoral China. Thus, if Chinese raw silk exports increased and the demand of the exporting region for cotton textiles increased, it might have induced the increase of hand-weaving in China, which in turn increased the imports of Indian or Japanese machine-made yarn. Hence, the greater the amount of Asia’s exports to the West became, the greater the volume of intra-Asian trade, so long as the bulk of demand was met locally or regionally, rather than through the imports of Western manufactured goods. Numerically important in the growth of intra-Asian trade induced by the final demand linkages were rice, sugar, and other foodstuffs, but benefit of the fragmental rise in the purchasing power of the population was also crucial for industrialization. And it was regional industrialization that further stimulated the intra-Asian trade of raw cotton, as well as food and clothing needed for industrial workers.

An Introduction

11

2.3. Critical issues in the 1930s The resilience of intra-Asian trade and regional industrialization, coupled with the growth of heavy and chemical industry, helped Japan to achieve a quick industrial recovery from the Great Depression and a modest rise in household income in the 1930s. Yet Japan went to war with China in 1937, and with the United States in 1941. In this section I wish to make two general points on the economic background to these decisions. First, Japanese aggression was related to her desperate need to secure energy and raw materials for industrialization. Aggression was not necessarily driven by the effects of the Great Depression, nor was it caused by internal economic troubles alone. Heavy and chemical industrialization proceeded with a degree of autonomy from international market conditions and military spending. It was based on the development of private investment, internal industrial linkages, and the modest expansion of the domestic market (Sugihara 1989/2001). The ‘‘impasse’’ came from the shortage of raw materials, which was a result of strong, rather than weak, industrial growth. In spite of internal political disruptions, China, too, managed to maintain her drive for industrialization and remained a powerful economic force for much of the 1930s. As has been suggested in the second section of this chapter, China’s ‘‘withdrawal’’ from the statistics of intra-Asian trade simply reflects the fact that industrialization-led trade penetrated into the Chinese domestic economy and its record was transferred to internal trade statistics. Meanwhile, the growth of modern industries in Shanghai, Tientsin, and other centers continued, and the dynamic interactions between Japan and China in terms of technology transfer and investment kept pushing regional industrialization. It is also worth pointing out that China remained a large economy, compared to the Japanese empire. On the eve of the outbreak of war in 1937, the size of GDP of Chinesecontrolled area roughly matched that of the entire Japanese empire, Manchuria, and, Japanese-controlled area of North China combined. This is primarily because the population of the former area was much larger, but also because the difference in the standard of living between the two areas was not that great. This explains why a relatively smooth technology transfer occurred, and regional industrialization proceeded on a very large scale. Furthermore, China was better endowed with relevant natural resources, although Japan had the more advanced military capability. Thus, Manchuria and North China became important battlegrounds for the procurement of coal and other resources for the fast-growing heavy and chemical industries, and raw cotton for the cotton industry, even though their supply alone would not have been enough for Japanese needs. In this respect, conflicts and clashes occurred, as a result of regional

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industrialization rather than out of economic stagnation. Had either of these two Chinese advantages (population and resources) been absent, Mao’s strategy of ‘‘protracted war’’ would not have been formulated (Sugihara 1997/2001). Second, Western powers were inclined to support, rather than hinder, regional industrialization. It is true that Japan faced tough trade negotiations with British India and the Dutch East Indies, and the Ottawa agreement of 1932 made it difficult for Japanese manufactured goods to penetrate into the markets inside the British empire. Even so, the Japanese share in the trade of British India and the Dutch East Indies did not decline after tariffs and quotas were set up, partly because of the devaluation of the yen and partly as a result of commodity diversification (the Japanese increased the export of manufactured goods with less import duty). More generally, the main trading countries in the British empire increased, rather than decreased, trade with countries outside the empire (including Japan). One possible reason for the relative indifference of the British to Japanese trade expansion is that Britain had a stake in trade finance, shipping, insurance, and other services, and that the growth of Asian trade was beneficial to them (Cain and Hopkins 2001; Sugihara 2002). Although the amount of Japanese trade with South and Southeast Asia did not increase over the decade (it did so only temporarily), this trade was vital to Japan, in the sense that she needed oil and industrial raw materials—hence, the foreign exchange. The greater the Chinese resistance, the greater the need to secure resources from outside the yen bloc had become. It was also important for Britain to extend the influence of the sterling area beyond the empire, so that sterling became the key currency, independent of gold, and she could pay for her imports in sterling. Thus, Britain tolerated the devaluation of the yen and supported currency reform in China, and by the mid-1930s both Japanese and Chinese currencies were linked to sterling. They were both linked at a devalued rate, so that regional industrialization could proceed, and the two currencies achieved a degree of exchange rate stability. In this respect, the two currencies continued to serve the needs of intra-Asian trade and industrialization until as late as 1938, despite ‘‘currency wars’’ over Manchuria and North China (Sugihara 2001). Meanwhile, conflict arising from the Japanese search for natural resources expanded well beyond China. The outbreak of the Second World War in 1939 gave Japan the opportunity to move down to occupy much of Southeast Asia, partly to secure oil there. Yet the war in Europe also led to the collapse of the value of sterling, and the East Asian monetary regime lost an anchor currency. Hyperinflation ensued, and the Asian international order, which had underpinned the regime of free trade since the second half of the nineteenth century, finally collapsed.

An Introduction

13

Between 1937 and 1945 the Chinese had to fight against Japan, largely without Western support. The communist strategy was to build its economic base around internal integration, while the Nationalist government attempted to modernize littoral China’s economy through closer cooperation with overseas Chinese merchant networks, hence through intraAsian trade to some extent. Both groups did cooperate in a resistance effort, but that effort was not powerful enough to produce a united China after the Japanese surrender. A large number of Shanghai capitalists who formed the core of the East Asian cluster of industrial technology and managerial know-how fled to the South in the late 1940s, to make a vital contribution to the industrial development in Taiwan, Hong Kong, Singapore, and other countries in the postwar period. In summary, we recognize that the impact of the West was a major indirect influence on East Asia’s integration into the world economy. We nevertheless argue that, contrary to the assumptions behind the existing literature, it is essential to recognize the central importance of intra-Asian regional dynamics in accounting for the prewar economic development of Japan, China, and their neighboring countries. We also recognize that Japanese expansionism and the expansion of the yen bloc in the 1930s did much damage to the dynamics of intra-Asian economic interactions. Even so, it should be acknowledged that the East Asian economic links not only continued, but were actually reinforced, at least more firmly than in the rest of the world, during and after the Great Depression. While taking care not to undermine their importance, we need to go beyond the conventional political and military interpretations of East Asian history, the primary aim of which has been to explain the causes of the Asia–Pacific War.

3. Contents of This Volume The rest of this volume is divided into four parts. Part I looks at the history of interactions between the Japanese and Chinese cotton textile industries, focusing on the role played by the Chinese merchant community. As was made clear in the previous sections, our intention is not to disregard the impact of the West but to bring out, more clearly than before, the complex intermeshing of the Western impact and traditional elements in the sphere of the Asian international economy. A good example of this is given in Chapter 2 in which Furuta traces the ways in which British cotton textiles were distributed by Chinese merchants through their East Asian trading network centered in the city of Shanghai. Thus, Kobe, a major Japanese port, became part of the Shanghai network, just as Tientsin and Inchon did. Local distribution of Western goods provided a good opportunity for Chinese merchants to reassert their commercial authority in East Asian waters. The Japanese historiography on the history of international

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contacts during this period has been so heavily concentrated on the assessment of Western impact and the Japanese response to it that Furuta’s exposition, when it first appeared in Japanese in 1992, became a source of inspiration for further research into intra-East Asian trade. The cotton textile industry played a central role in both Japanese and Chinese industrialization, as well as in the rise of Osaka and Shanghai as national centers of technology and commerce. In Chapter 3, Kagotani challenges the traditional understanding of the development of the modern Japanese cotton industry, and argues that a critical role was played by Chinese and other Asian merchants in the export of Japanese yarn and textiles. The causes of the strength of Chinese merchant networks have been discussed and debated, in which Kagotani emphasized the solidarity of Chinese merchants (vis-a`-vis the Japanese) while Furuta focused on the open and international nature of the Shanghai network unavailable elsewhere in the region (Furuta 2000; Kagotani 2000). They contributed to the renewed recognition of the importance of networks as a key institution for modern Asian economic development. Chapter 4 traces the process of Japanese exports to China in the critical years of the late 1910s and the 1920s, when both countries tried to find market niches to exploit. Abe’s previous study showed a strong growth of local weaving centers in interwar Japan, clarifying the supporting roles played by local-government-sponsored industrial experimental stations and export merchants, and revising the previous understanding that large integrated mills were the sole driving force behind the industry’s expansion (Abe 1989). Building on this revision, his contribution to this volume suggests the ways in which Japanese industry responded to Chinese competition. In addition to direct investment in China and diversification into artificial silk production, the Japanese cotton industry also focused increasingly on producing processed cotton cloths. In order to adjust to the size and diversity of the Chinese market, ‘‘upgrading’’ the range of export products was attempted, which in turn improved the industry’s technological and commercial skills. Part II examines the decline of the old Chinese monetary system, and the rise of Nationalist movements which aimed to protect and foster domestic industries. In Chapter 5, Kuroda offers an interpretation of the way in which the Chinese imperial monetary system disintegrated in the early twentieth century, and was replaced by a system fully conducive to international integration. His account suggests that securing local liquidity during the harvest seasons had been an essential factor for the development of the agrarian empire. The local peasant economy’s needs were served by copper cash, while silver, which served as the main means of settlement for regional and external trade, had functioned in tandem with copper, rather than independently (see also Kuroda 1994). The establishment of the international gold standard, and the successive adoption of the

An Introduction

15

gold or gold exchange standard in India, Japan, and the Straits Settlements from the end of the nineteenth century to the early twentieth century made it more and more difficult for China to sustain its engagement in international trade and overseas remittances while preserving its monetary regime. The reassessment of the boycott movements in China is the subject of Chapter 6. The literature on political history has often discussed them in the context of growing conflicts between China and Japan. In this chapter, Goto-Shibata traces the history of anti-Japanese boycotts from a different angle, taking the period from 1928 to 1931 when the Nationalist government began implementing its program for import-substitution industrialization. Seen in the context of Sino-foreign business rivalries, the boycotts functioned as a measure for promoting industrialization. In some cases, though not in others, the boycotts were more effective than the imposition of tariffs, as the former could be targeted against those goods which were manufactured in foreign-owned factories in China (such as Japanese mills in Shanghai) as well as against imported goods. Japanese and British businessmen’s reaction to the boycott movements indirectly confirms that economic aspects of this movement were important. Chapter 7 is concerned with assessing the tariff policy of the Nationalist government from 1929 to 1936. The tariff issue is central to any assessment of China’s economic policy of the time, which in turn affects the assessment of the Nationalist government as a whole. If it was capable of implementing protection for industrialization under the international order of the 1930s, it implies the presence of effective economic bureaucracy. Yet until Kubo’s (1999) study appeared, no study had examined the effects of tariffs either for the purpose of industry protection or on financial grounds. His contribution in this volume summarizes main findings on the effects of China’s tariff policy on strategically important items for import-substitution industrialization. Combined with its monetary policy and other measures, Kubo suggests, the Nationalist government’s tariff policy helped China’s industrialization. If that is the case, it also must have helped the relatively stable growth of the East Asian international economy under the Great Depression. Part III discusses the patterns of China’s internal integration and its relationships with the international economy. Chapter 8 argues that the Chinese economy could be characterized by internal disintegration between 1850 and the late 1870s, followed by a successful period of integration which lasted until around the end of the Qing era, and then a shiftback towards disintegration until 1937, after which war moved the Nationalist government to the interior, while splitting this area from the Japanese-occupied parts of the littoral region at the same time. Putting the findings of this and the next chapters together, it is possible to see that

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the period to about 1911 saw the growth of a complex network of interregional commodity flows, involving vast hinterland areas. This was largely a result of China’s increased contact with other Asian countries, through the import of large quantities of opium and cotton yarn. In contrast, after 1912, China tended towards disintegration, partly due to internal political disruptions and changes in littoral China’s main trading partners from inland China to foreign countries, especially Japan, Southeast Asia, and the United States. In particular, Shanghai-based industrialization made a critical contribution to the structural change in Chinese trade, while leaving the problem of China’s internal integration unsolved, or in some respects making it more acute. Lin’s overview is an attempt to revise the earlier observation of the persistence of a ‘‘dual economy’’, which now seems to be too static to capture the changing patterns of China’s internal integration. Chapter 9 discusses the ways in which China’s internal trade was reorganized in relation to her foreign trade during the interwar period, using relevant trade statistics. It follows the framework of William Skinner’s ‘‘macro regions’’ with minor adjustments, and attempts to isolate some of the main trends that promoted the growth of internal trade. By linking the observation of each region’s trade with other parts of China and foreign countries to the efforts of industrialization centered around Shanghai, Kose largely confirms and elaborates the process of ‘‘internal disintegration’’ outlined in Chapter 8. He also argues that in the process of China’s integration into the international economy, Chinese merchant networks continued to hold out as the main carriers of internal trade, instead of being replaced by foreign businessmen, partly as a result of import-substitution industrialization, and partly because of successful boycott movements against foreign goods or goods made in foreignowned factories. Part IV looks at aspects of China’s economic relations with Taiwan and Southeast Asia. In Chapter 10, Lin outlines the experience of the trade of Japanese colonial Taiwan with Mainland China. While Taiwan’s economy was firmly integrated into the Japanese economy and the bulk of Taiwan’s trade was conducted with Japan, there were important trade connections between Taiwan and China, which gave Taiwanese merchants an opportunity to accumulate trade experience. Japan proper’s focus on investment in Manchuria and North China left room for Taiwanese capital to flow into South China. Taiwanese merchants were able to exploit the business opportunities provided by the Japanese empire, were able to speak Chinese, and were part of a shared Chinese culture. From our perspective, Lin’s detailed study of the history of Taiwan’s trade and Taiwanese merchants, only part of which is presented here, highlights the limits, as well as the qualitative significance, of intra-yen-bloc trade. It also puts forward the benefits that intra-Asian trade had brought to Taiwan.

An Introduction

17

Chapter 11 examines the patterns of Chinese migration to Southeast Asia from 1869 to 1939. During this period, complex movements of migrant workers to, from and within Southeast Asia, took place, centered around Singapore and supported by ethno-linguistic networks. While networks did have an exclusive feature against the outsiders (e.g. Fukienese networks served only its people), the establishment of extensive networks suggests that by the early twentieth century, migration no longer depended on personal contacts but was based on the trust held among the members of the network. The flexible supply of labor helped to bring about strong growth in the 1920s, followed by a quick recovery after the Great Depression, of export sectors in the region. Thus, by the end of the 1930s, wages and working conditions in the more prosperous sections of the export sector were probably better than those in any other Asian country, including Japan.

References Abe, T., Nihon ni Okeru Sanchi Men-Orimono-Gyo no Tenkai [The Development of Local Cotton-weaving Centres in Japan] (Tokyo, 1989). Akamatsu, K., ‘‘A historical pattern of economic growth in developing countries’’, Developing Economies, Preliminary Issue (1962), 3–25. Best, A., ‘‘Economic appeasement or economic nationalism?: a political perspective on the British empire, Japan, and the rise of intra-Asian trade, 1933–37’’, Journal of Imperial and Commonwealth History, 30:2 (2002), 77–101. Booth, A., The Indonesian Economy in the Nineteenth and Twentieth Centuries: A History of Missed Opportunities (London, 1998). Brandt, L., Commercialization and Agricultural Development: Central and Eastern China 1870–1937 (Cambridge, 1989). Cain, P. J., and Hopkins, A. G., British Imperialism, 1688–2000, 2nd edn. (London, 2001). Duus, P., Myers, R. H., and Peattie, M. R. (eds.), The Japanese Informal Empire in China, 1895–1937 (Princeton, 1989). —— (eds.), The Japanese Wartime Empire in China, 1931–1945 (Princeton, 1996). Furuta, K., Shanhai Nettowaku to Kindai Higashi Ajia [Shanghai Network: The Economic Order in Late Nineteenth-Century East Asia] (Tokyo, 2000). Gallagher, J., and Robinson, R., ‘‘Imperialism of free trade’’, Economic History Review, 6:1 (1953), 1–15. Greenberg, M., British Trade and the Opening of China, 1800–1842 (Cambridge, 1951). Hamashita, T., Kindai Chugoku no Kokusaiteki Keiki [International Factors in Modern China] (Tokyo, 1990). Hao, Y., The Commercial Revolution in Nineteenth-Century China: The Rise of Sino– Western Mercantile Capitalism (Berkeley, 1986). Hirshman, A. O., The Strategy of Economic Development (New Haven, 1958). Hsiao, L., China’s Foreign Trade Statistics, 1864–1949 (Cambridge, 1974).

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Huff, W. G., The Economic Growth of Singapore: Trade and Development in the Twentieth Century (Cambridge, 1994). Kagotani, N., Ajia Kokusai Tsusho Chitsujo to Nippon [The International Commercial Order of Asia and Japan] (Nagoya, 2000). Kindleberger, C. P., ‘‘International public goods without international government’’, American Economic Review, 76 (1986), 1–13. Kubo, T., Senkan-ki Chugoku Jiritsu e no Mosaku: Kanzei Tsuka Seisaku to Keizai Hatten [China’s Quest for Autonomy in the Interwar Period: Tariff and Monetary Policy and Economic Development] (Tokyo, 1999). Kuroda, A., Chuka Teikoku no Kozo to Sekai Keizai [The Structure of the Chinese Empire and the World Economy] (Nagoya, 1994). Latham, A. J. H., and Kawakatsu, H. (eds.), Japanese Industrialization and the Asian Economy (London, 1994). Lewis, W. A., ‘‘World Production, Prices, and Trade, 1870–1960’’, Manchester School, 20:2 (1952), 105–138; reprinted in Gersovitz, M. (ed.), Selected Economic Writings of W. Arthur Lewis (New York, 1983). Myers, R. H., and Peattie, M. R. (eds.), The Japanese Colonial Empire, 1895–1945 (Princeton, 1984). Nakamura, T., Economic Growth in Prewar Japan, translated by Feldman, R. A. (New Haven, 1971). O’Brien, P. K., ‘‘The Pax Britannica and American hegemony: precedent, antecedent or just another history?’’, in O’Brien, P. K., and Clesse, A. (eds.), Two Hegemons: Britain 1846–1914 and the United States 1941–2001 (Aldershot, 2002). Pomeranz, K., ‘‘Is there an East Asian development path?: long-term comparisons, constraints, and continuities’’, Journal of Economic and Social History of the Orient, 44:3 (2001), 322–62. Rawski, T. G., Economic Growth in Prewar China (Berkeley, 1989). Roy, T., The Economic History of India, 1857–1947 (New Delhi, 2000). Saul, S. B., Studies in British Overseas Trade, 1870–1914 (Liverpool, 1960). Sugihara, K., ‘‘Patterns of Asia’s integration into the world economy, 1880–1913’’, in Fischer, W., et al. (eds.), The Emergence of a World Economy, 1500–1914, Beitrage zur Wirtschafts-und Sozialgeschichte, Band 33, 2 (Wiesbaden, 1986), 709–28; reprinted in Harley, C. K. (ed.), The Integration of the World Economy, 1800–1914, Vol. 2 (Cheltenham, 1996). ——, ‘‘Japan’s industrial recovery, 1931–1936’’, in Brown, I. (ed.), The Economies of Africa and Asia during the Interwar Depression (London, 1989); reprinted in Tolliday, S. (ed.), The Economic Development of Modern Japan, 1868–1945: From the Meiji Restoration to the Second World War, Vol. 1 (Cheltenham, 2001). ——, ‘‘The development of an informational infrastructure in Meiji Japan’’, in Bud-Frierman, L. (ed.), Information Acumen: The Understanding and Use of Knowledge in Modern Business (London, 1994). ——, Ajia-kan Boeki no Keisei to Kozo [Patterns and Development of Intra-Asian Trade] (Kyoto, 1996). ——, ‘‘The economic motivations behind Japanese aggression in the late 1930s: perspectives of Freda Utley and Nawa Toichi’’, Journal of Contemporary History, 32:2 (1997), 259–80; reprinted in Tolliday, S. (ed.), The Economic Development of

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Modern Japan, 1868–1945: From the Meiji Restoration to the Second World War, Vol. 2 (Cheltenham, 2001). ——, ‘‘Intra-Asian trade and East Asia’s industrialisation, 1919–1939’’, in Austin, G. (ed.), Industrial Growth in the Third World, c. 1870–c. 1990: Depressions, Intraregional Trade, and Ethnic Networks, LSE Working Papers in Economic History, 44/98 (London, 1998). ——, ‘‘Higashi Ajia ni okeru kogyoka-gata tsuka chitsujo no seiritsu [The establishment of an industrialisation-promoting monetary regime in East Asia]’’, in Akita, S., and Kagotani, N. (eds.), 1930-nendai no Ajia Kokusai Chitsujo [The International Order and Asia in the 1930s] (Hiroshima, 2001). ——, ‘‘British imperialism, the city of London and global industrialization’’, in Akita, S. (ed.), Gentlemanly Capitalism, Imperialism and East Asia (London, 2002). ——, ‘‘The East Asian path of economic development: a long-term perspective’’, in Arrighi, G., Hamashita, T., and Selden, M. (eds.), The Resurgence of East Asia: 500, 150 and 50 Year Perspectives (London, 2003). Sugiyama, S. and Grove, L. (eds.), Commercial Networks in Modern Asia (Richmond, 2001). —— and Guerrero, M. C. (eds.), International Commercial Rivalry in Southeast Asia in the Interwar Period (New Haven, 1994). Trocki, C., Opium and Empire: Chinese Society in Singapore, 1800–1910 (Ithaca, NY, 1990). Yamamura, K. (ed.), The Economic Emergence of Modern Japan (Cambridge, 1997) [a collection of essays originally published in various Cambridge History series].

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PART I Chinese Merchants and the Japanese Cotton Industry

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2 Kobe Seen as Part of the Shanghai Trading Network: The Role of Chinese Merchants in the Re-export of Cotton Manufactures to Japan1 kazuko furuta

1. Introduction The objective of this chapter is to examine the activities of Chinese merchants who were involved in the re-export of foreign-made cotton goods to Kobe, and through this to elucidate the position of Kobe of the 1870s in contemporary intra-Asian trade. Most of the paper is based on materials taken from the North China Herald and Supreme Court and Consular Gazette (hereafter NCH), which was first published in 1850. For reasons that will be made clear later in the paper, Shanghai is taken as the hub of the intraAsian trade that this paper seeks to examine. The most recent Japanese research on Chinese merchants can be broadly divided into four categories. First, there are studies of the history of overseas Chinese in Japan, in which the focus is generally on an analysis of the historical and social structure of resident Chinese communities (Uchida 1949; Koyama 1979; Kamachi 1980; Shiba 1981; Yamada 1983; Hishitani 1988; Suwaki and Yasui 1988). Second, Chinese merchants are dealt with in the context of writing a ‘‘positive history’’ of Asia rather than a ‘‘negative’’ mirror image of Europe, an example of which would be the study conducted by Takeshi Hamashita. Japanese merchants could not compete effectively with their Chinese counterparts within the traditional tributary system, a factor which encouraged Japan to opt for industrialization (Hamashita 1989a, b, 1990). Third, research focuses on the competition that occurred in Japan between Chinese and Western (North American and European) merchants. Shinya Sugiyama argues that trade with Japan was characterized by the contrast between Western merchants who suffered from the lack of effectiveness of the treaty port system and the trade through an agency, and Chinese merchants who could maintain abundant inventories in stock for long periods of time

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(Sugiyama 1988b, 1989). Fourth, the opening of Japan’s ports is considered from an Asian perspective. This interpretation draws attention to Chinese merchants as bearers of the ‘‘impact’’ from Asia, and extends the thesis that the opening of Japan was simultaneously an opening to trade both with the West and with Asia. Naoto Kagotani’s latest publications present an entirely new approach to this issue by emphasizing the changes in the international environment of the 1880s and providing concrete evidence of the competition between Chinese and Japanese merchants based on the analysis of actual transaction records (Sugihara 1996: Chapter 1; Kagotani 2000: Chapters 1–3). As this summary indicates, such research has offered a new focus for studies on Chinese merchants in Japan by creating intra-Asian trade as the unit of analysis in which to place country studies such as Japanese economic history. However, certain questions remain unanswered. What role did these Chinese merchants actually play in the East Asian trading network? More fundamentally, how did they fit into merchant activities in their home base in China and how did they operate there? There is an almost complete lack of meaningful research in these areas. In an attempt to address these issues, this essay considers the treaty ports of the early Meiji years from the perspective of Shanghai. Once one focuses on Shanghai as a trading center it can be seen that trading routes radiate outwards in several directions. These routes link Shanghai to treaty ports in every region of China, such as Hankou, Ningbo, and Tianjin, and it is clear that one line radiates out further afield to Kobe. In other words, the Shanghai trading network can be considered to have consisted of both Chinese and Japanese treaty ports. Shanghai and four ports to the south had been opened by the Treaty of Nanking (1842), and as a result of the Treaties of Tientsin (1858) and Peking (1860), which followed the Arrow War, this number was expanded to eleven, which spanned the coasts of North China and the Yangzi delta region. The treaty ports of the 1870s are shown in Map 2.1. On January 1, 1868, Hyogo (Kobe) was opened as a treaty port (Murata 1898). As Chinese merchants moved from Nagasaki to the newly opened port, Chinese merchants active in the Shanghai network began to show interest in the potential of this port. A standard view presented in the literature on this subject is that the power of Chinese merchants was something that emanated from their (guild-like) unity. However, a principal argument of this essay is that in the 1870s, Chinese merchants continuously shipped foreign-made cotton goods from their stocks in Shanghai to Kobe, and that they were able to do this by creating networks among different types of merchants. In other words, it was the development of networks that brought Chinese merchants a favorable transaction environment. Moreover, this period coincides with that of Japan’s greatest import of such foreign-made cotton goods. We are thus faced with the

Kobe Seen as Part of Shanghai Trading Network

25

Hakodate

Niigata Yokohama Niuzhuang Kobe

saka

Tianjin Zhifu Yellow Sea

Nagasaki

East China Sea Zhenjiang Shanghai

Wuhu Ningbo

Hankou

Wenzhou Jiujiang Fuzhou

Tamsui

Xiamen Shantou

Guangzhou 0

500 km

Map 2.1. East Asian treaty ports in the 1870s.

question of how we are to evaluate the ‘‘Asian sea’’ (Saito 1991: 205) upon which Chinese merchants transported European manufactured goods to Kobe.

2. Chinese Merchants in the ‘‘Commercial Report on Hiogo’’ The British ‘‘Commercial Report on Hiogo’’ provides invaluable information on the types of goods that were imported into Kobe. A general picture of the situation in 1874 is given in the following extract: The principal imports are cotton yarns, shirtings, drills, chintzes, Turkey reds, velvets, taffachellass, camlets, lastings, lustres, mousselines de laine, and Victoria lawn, also iron, sugar, raw cotton, kerosene oil, safflower, and medicine. Most of the former find their way from England, although some few, and as before-

26

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mentioned, moussellines de laine, principally come from the Continent. Sugar, raw cotton, safflower, and medicine are imported form China, and kerosene oil from the United States. (CR on Hiogo 1874: 51 (Vol. 5: 547) )

In presenting figures for such import trade, the Commercial Report used categories such as cotton manufactures, woollen manufactures, metals, arms and ammunition, and others, with ‘‘others’’ being divided into ‘‘Miscellaneous, foreign’’ and ‘‘Miscellaneous, local or Eastern produce’’. Generally, in the ‘‘Miscellaneous, local or Eastern produce’’ category there were items such as rice, sugar, beans, and medicine. Many reports added the explanation that almost all these goods were monopoly-like trading products of the Chinese merchants,2 a phenomenon that was not limited to Kobe, but also applied to Nagasaki and Yokohama. Chinese merchants also exported Japanese products, the bulk of which were marine products. ‘‘East Asian Produce’’ was completely produced and consumed within the region that was dominated by China and Japan. Considering how active the Chinese merchants had traditionally been, it seems only natural that they would surpass both their Japanese and Western rivals to dominate trading in this category of goods. What is particularly interesting, however, is the participation of Chinese merchants in the import into Kobe of goods that were not of Chinese origin, that is, those in the foreign category, which were primarily British-made cotton manufactures. This participation is confirmed by the following detail from the Commercial Report regarding the import into Kobe in 1874 of gray shirting, which was said to be almost entirely of British origin: Grey Shirtings—Sales are reported of 485,407 pieces, representing a value of 1,166,134 dollars . . . .These goods constituted the principal staple articles of import, and 81⁄4 lbs. are the most salable weight . . . . 7 lbs. cloth is consumed to a less extent; other weights meet with little or no enquiry. A considerable proportion of the trade is in the hands of Chinese, who purchase largely for this market at the Shanghae auctions. (CR on Hiogo 1874: 51–2 (Vol. 5: 547–8) )

In addition to gray shirting, Chinese were the main importers of T-cloth (29,808 pieces) and chintz (46,514 pieces), accounting for the majority of such goods that were shipped from Shanghai to Kobe. Supporting evidence for the importance of Chinese merchants in Kobe’s import trade is provided by the fact that in 1874, the first year in which numbers are recorded for the Chinese population, foreigners in the city numbered 1,022, of whom 372 were Westerners and 650 were Chinese (Suwaki and Yasui 1988: 3). The significance of Chinese merchants in the import of cotton manufactured goods into Kobe is more directly mentioned in the 1875 Commercial Report:

Kobe Seen as Part of Shanghai Trading Network

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I [Consul Annesley] estimate that fully one-third of the imports has been sold by Chinese, who purchase goods at auction in Shanghae and send them over as a remittance against produce. As these goods are usually of inferior quality, and frequently slightly unsound, they have an injurious effect upon the value of direct importations from London. The falling-off in these latter is very apparent as compared with former years. (CR on Hiogo 1875: 13–14 (Vol. 5: 595–6) )

In 1875 the import of gray shirting fell to 360,358 pieces worth 801,044 dollars, with the reasons for the fall-off being hinted at in the above extract. However, the Commercial Report goes on to note the increasing dominance of the Chinese in such trade: The trade in these goods is now almost exclusively in the hands of Chinese, who import from Shanghae (as above mentioned) principally to place their agents in funds for the purchase of produce, and are therefore content to sell at cost. The bulk of the deliveries has consisted of common chop 81⁄4 lbs., the value of which has ranged from 2 dol. 20 c. to 2 dol. 35 c. per piece. (CR on Hiogo 1875: 14 (Vol. 5: 596) )

In addition to gray shirting the majority of the import of chintz, which totaled 41,409 pieces, had been shipped by the Chinese as in the previous year. Moreover, low-quality black velvet was mainly imported by the Chinese and disposed of cheaply in Kobe. As a result of their dominance the Chinese merchants involved in the Kobe import trade were viewed as strong opponents by the other foreign traders: The Chinese also continue to remain formidable competitors with the foreign import trade; they purchase goods generally at auctions in China, and are thus able to effect sales to native purchasers at a lower rate than can be obtained from the foreign importer. (CR on Hiogo 1876: 11 (Vol. 6: 85) )

By 1877, Chinese dominance was almost total: The trade in all kinds of shirtings is now entirely in the hands of Chinese merchants, with whom foreigners cannot compete. (CR on Hiogo 1877: 21 (Vol. 6: 271) )3

The above reports are from the period of greatest import of Britishmade cotton cloth into the Japanese market. It seems reasonable to say that the British consuls in Kobe put a great deal of effort into producing detailed reports on the import of gray and other shirting, as they were the mainstream products among the British-made cotton manufactures. It is perhaps surprising, then, that they report that these were imported cheaply from Shanghai and that Chinese merchants were extremely active in this import trade. In order to understand how British-made cotton cloth from Manchester found its way to Kobe, it is necessary to examine the situation in Shanghai more closely.

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3. Shanghai Re-exports Table 2.1, which is prepared from materials produced by the Chinese Imperial Maritime Customs, gives figures for the import and re-export of gray shirting (yuan-bu in Chinese) into and out of China. In constructing the table, import volumes were all converted into net figures. A general shortcoming in the statistics produced by the Maritime Customs was the exclusion of figures for Hong Kong—this means that Table 2.1 could be regarded as incomplete. However, the table is presented here to show figures for the re-export of imported cotton textiles. In this table, the term re-export does not refer to goods transported to other Chinese treaty ports, but rather to those shipped to ‘‘foreign countries’’, and it may be said that virtually all were re-exports to Japan. The 1875 Trade Report made the following comment regarding foreign goods imported into China and re-exports to various foreign countries. It is clear that the overwhelming majority of the re-exports were bound for Japan: The trade in the Re-exports of Foreign goods to Foreign Countries is almost entirely centred at Shanghai. The largest market is Japan, which took Re-exports to the value of Hk. Tls. 1,624,335. (CIMC, Report on China 1875: 20)

Shanghai was the distribution center for an array of goods, including foreign-manufactured cotton cloth, which was imported to be quickly reTable 2.1. Chinese imports of gray shirting and re-exports to foreign countries, 1870–81 (Volume in pieces. Value in taels from 1870 to 1874 and in Haikwan Taels after 1875) Import

Re-export

Year

Volume

Value

Volume

Value

1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881

4,342,494 7,571,904 3,649,698 3,184,821 4,789,052 4,384,848 5,196,033 4,494,523 2,787,639 5,602,552 4,653,736 5,830,372

8,802,221 15,124,275 7,917,552 6,380,817 8,905,953 7,097,409 7,505,261 6,437,381 3,846,811 8,141,599 6,441,232 7,853,835

123,443 252,981 500,148 571,785 610,561 462,973 526,068 580,104 513,050 698,074 547,815 346,033

246,917 506,025 1,100,268 1,154,893 1,129,534 731,746 747,273 823,756 687,500 1,005,200 739,677 456,768

Source: CIMC, Returns (1870–81). Constructed from the table on imports and re-exports of foreign manufactures. Notes: All imports have been converted to net figures. Figures are for re-exports to foreign countries (not to other Chinese treaty ports).

Kobe Seen as Part of Shanghai Trading Network

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exported to various parts of China. The available customs statistics make it possible to clarify the amount that was re-exported to Chinese treaty ports and to various foreign countries as well. However, to break down the volume of re-exports further and to clarify the amount transported, for example, to Kobe or Yokohama, is generally very difficult. In order to overcome this problem this study uses tables on re-exports that were published in the NCH to calculate the amounts of foreign-manufactured cotton cloth that were re-exported from Shanghai to Kobe. As for the 1870s, the tables, published regularly for four years in each issue of the NCH from the latter half of 1874 to the former half of 1878, specify separate subcategories for cotton and wool manufactures and give the quantities and treaty port to which they were shipped. A significant feature of these re-export tables is that Kobe and Yokohama are listed as destinations alongside the various domestic Chinese treaty ports. This material presents rare information on the trading system that this study is attempting to clarify by concretely depicting a treaty port trading network in which the dynamism of intra-Asian trade is seen to go beyond the boundaries of a one-country framework. Although figures are available only for a four-year period during the 1870s, this period roughly coincides with that of Japan’s greatest import of foreign-made cotton textiles (although it must be acknowledged that the largest import volume for a single year came in 1879). For the central cotton manufacture—gray shirting—peak imports came between 1874 and 1876, followed by a smaller peak between 1878 and 1881, after which the volume dropped off. Table 2.2 gives re-export volumes for a single product—gray shirting— based on figures given in each issue of the NCH from the second half of 1874. As can be seen from the table, export volumes for goods shipped from Shanghai to all other ports are given each week. In Table 2.3 annual volumes for the re-export of gray shirting from Shanghai to other treaty ports are presented. With the exception of Hong Kong, the re-export treaty port destinations listed include only Fuzhou and ports to the north of Fuzhou, from which it can be concluded that Fuzhou was the southernmost limit of Shanghai’s trading network. Zhenjiang, Jiujiang, and Hankou were ports along the Yangzi River, as were Wuhu and Wenzhou, which were opened by the Agreement of Chefoo in 1876. To the north of Shanghai, the network included Zhifu (Yentai), Tianjin, and Niuzhuang (Yingkou), but just as importantly Nagasaki, Kobe, and Yokohama. Figure 2.1 schematizes the radiating routes that formed the transportation network for foreign cotton manufactures. In the years 1875–77, for which annual volumes can be calculated, Hankou and Tianjin received by far the largest volume of re-exports. Hankou’s share topped the list at about 25 percent of the total, with Tianjin next at around 20 percent, and these figures indicate the roles of Hankou and Tianjin as redistribution centers for the greater Yangzi region and North China, respectively.

Table 2.2. Re-exports of gray shirting from Shanghai to other ports for the second half of 1874 Date 18 July 25 July 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 Aug. 5 Sept. 12 Sept. 19 Sept. 26 Sept. 8 Oct. 15 Oct. 22 Oct. 29 Oct. 5 Nov. 12 Nov. 19 Nov. 26 Nov. 3 Dec. 10 Dec. 17 Dec. 24 Dec. 31 Dec. Total

Ningbo Zhenjiang Jiujiang Hankou Zhifu 7,950 4,500 9,230 1,410 3,350 600 3,000 2,450 2,900 1,700 2,700 3,170 5,950 3,150 3,550 2,720 700 5,870 2,100 5,950 3,350 900 3,250 8,900

7,549 17,850 19,950 21,350 17,500 16,300 20,600 8,850 20,449 12,350 8,100 9,900 4,400 8,050 9,300 5,100 2,200 16,150 16,950 4,750 12,750 4,710 13,200 3,200

7,550 6,400 6,750 13,100 5,657 2,600 1,050 1,200 4,700 650 4,500 8,750 1,250 1,800 2,500 2,000 1,170 4,350 2,370 1,100 550 50 929 5,900

89,350

281,508

86,876

Source: NCH, July 18–Dec. 31, 1874.

20,150 17,700 14,030 10,550 6,400 19,950 7,501 5,400 11,950 15,600 9,500 17,570 8,080 6,600 6,660 19,450 11,400 13,800 9,750 6,500 9,050 10,350 2,700 1,550

(Pieces)

Tianjin Niuzhuang Fuzhou Hong Kong Nagasaki Kobe

Yokohama Sundries Local

20,350 32,350 16,050 23,350 7,150 53,000 9,850 52,450 4,850 28,098 8,050 74,298 2,500 11,550 5,650 45,050 12,610 133,253 5,900 40,050 5,700 39,300 1,880 30,300 13,900 52,399 6,800 46,350 9,300 32,550 1,000 1,750 5,900 30,930 4,309 43,049 4,500 37,047 5,750 22,069 3,550 24,899 2,800 8,798 12,520 6,000 — —

4,050 6,250 3,050 7,350 — 8,700 — 4,000 12,749 13,597 — 2,000 — 1,250 — — — 1,450 1,110 5,200 — — — —

200 300 — — 100 550 — — 400 — — 450 — 150 250 — — — — — — — 120 —

— — — — — — — — — — — 200 — 2,550 2,700 — — — — — — — 500 —

1,250 — 1,000 2,000 — 6,000 1,500 — 8,802 1,700 350 5,150 — 1,051 — 2,902 — 1,250 1,500 — — 1,900 — —

— — 19,100 46,100 — 48,254 — — 11,250 14,253 21,605 1,200 33,750 40,057 — 19,750 250 23,050 850 — 21,899 15,600 — —

3,500 — — 6,500 — 27,995 6,250 — — 5,357 1,000 4,500 11,198 6,700 10,200 6,850 4,600 12,500 — — 1,850 1,900 — —

— — — — — — — 50 — — — — 200 — — — — — — — — — — —

13,950 7,550 13,000 5,400 7,200 5,500 7,250 4,100 5,850 9,500 6,300 12,300 7,900 7,150 8,300 6,850 7,650 6,400 6,200 4,900 7,900 6,150 4,400 3,850

262,191 170,869 868,890

70,756

2,520

5,950

36,355

316,968

110,900

250

175,550

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Table 2.3. Re-exports of gray shirting from Shanghai to other ports, 1874–78 (Pieces) 1874 (July–Dec.)

1875

1876

1877

1878 (Jan.–June)

Ningbo 89,350 370,995 395,151 350,639 190,074 Wenzhou — — — 29,100 12,370 Zhenjiang 281,508 593,549 545,694 571,590 299,000 Wuhu — — — 26,010 26,410 Jiujiang 86,876 208,069 211,618 167,560 97,198 Hankou 262,191 1,105,986 1,299,251 1,068,718 474,909 Zhifu 170,869 279,259 289,425 243,137 91,732 Tianjin 868,890 1,070,480 1,083,241 769,910 142,680 Niuzhuang 70,756 138,374 159,490 183,390 119,800 Fuzhou 2,520 19,100 19,840 41,821 13,730 Hong Kong 5,950 2,200 10,834 103,810 6,450 Nagasaki 36,355 43,883 23,690 33,530 24,900 Kobe 316,968 326,054 248,176 232,769 144,639 Yokohama 110,900 75,950 250,073 181,619 71,750 Sundries 250 8,300 4,700 17,600 1,950 Local 175,550 311,400 332,324 348,500 161,600 Total 2,478,933 4,553,599 4,873,507 4,369,703 1,879,192 Total of Japan 464,223 445,887 521,939 447,918 241,289 Japan (percent) 18.73 9.79 10.71 10.25 12.84 Kobe (percent) 12.79 7.16 5.09 5.33 7.70 Hankou (percent) 10.58 24.29 26.66 24.46 25.27 Tianjin (percent) 35.05 23.51 22.23 17.62 7.59 Source: Figures for 1874 are from NCH, July 18–Dec. 31, 1874; for 1875–77, NCH, Feb. 10, 1876, Feb. 8, 1877, and Feb. 7, 1878; for 1878, NCH, Jan. 10–June 29, 1878. Notes: (1) Figures for the second half of 1874 and the first half of 1878 are calculated from the weekly reports. (2) Figures for 1875–77 are annual aggregates. They are taken from tables compiled in February of the following year; statement of clearances and deliveries of cotton and woolen piece goods at and from Shanghai to the various dependencies are principally from the Customs Daily Returns.

Although Zhenjiang and Ningbo were treaty ports that were close to Shanghai, their shares continued to show a large drop in received volume. Kobe came next in its share of received re-exports, with its share at 7.16 percent in 1875, 5.09 percent in 1876, and 5.33 percent in 1877. Thus it can be seen that Kobe was a relatively important destination for the re-export of gray shirting from Shanghai. Taking Nagasaki, Kobe, and Yokohama together, Japan’s share of re-exports by volume was about 10 percent. A further question is that of the proportion of the total volume of gray shirting imported into Kobe that was accounted for by re-exports from Shanghai. Statistics for the import of gray shirting were usually given in yards, but we can examine the number of pieces imported as this was the unit used in the commercial report. Table 2.4 compares the volumes of reexports from Shanghai to Kobe taken from the NCH, with the total

Kazuko Furuta

32 Niuzhuang

Nagasaki

Zhifu

Kobe

Tianjin

Zhenjiang Shanghai

Wuhu

Hankou

Ningbo

Jiujiang

Wenzhou

Fuzhou

Fig. 2.1. The Shanghai network.

volume of imported gray shirting given in the Commercial Report on Hiogo. The table is problematic in that for 1877 the volume of re-exports that entered Kobe from Shanghai is found to be larger than the total volume of gray shirting imported into Kobe for the year, but it can be seen that the vast amount (90 percent in 1875 and 97 percent in 1876) of the total volume of gray shirting imported into Kobe was re-exports from Shanghai. As noted in Section 2, this conclusion is reinforced by the Commercial Report’s observation that virtually all gray shirting was transported by Chinese merchants. It should be remembered, however, that the most important Japanese port for the import of gray shirting was Yokohama and the share of the

Kobe Seen as Part of Shanghai Trading Network

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Table 2.4. Imports of gray shirting to Kobe and re-exports from Shanghai to Kobe, 1868–78 (Pieces) Year

Imports to Kobe (A)

Re-exports from Shanghai to Kobe (B)

1868 1869 1870 1871 1872 1873 1874 1875 1876 1877 1878

23,294 29,250 39,500 98,350 190,003 565,000 485,407 360,358 254,865 215,890 336,698

316,968 326,054 248,176 232,769 144,639

(B)/(A) (percent)

90.48 97.38

Sources: CR on Hiogo, 1868–78 and figures in Table 2.3. Notes: (A) is the total volume of imports to Kobe taken from the CR on Hiogo and (B) is the volume of re-exports from Shanghai to Kobe taken from the NCH. In (B) figures for 1874 are for the second half of the year, and for 1878, only for the first half.

total accounted for by Kobe must be considered. The Commercial Reports do not always give statistics for the import volume of gray shirting, but only total volumes for all types of shirting. Table 2.5 gives the total volume of shirting for each treaty port and it can be seen that almost all shirting was imported into Yokohama, Kobe, and Nagasaki, with Yokohama accounting for more that half of the total. Kobe’s share fluctuated between a low of 19.62 percent in 1876 and a high of 39.11 percent in 1873. Thus it can be said that during the period of greatest import of cotton goods, Chinese merchants imported a steady share of shirting into Kobe.

4. Chinese Merchants and the Purchase of Cotton Cloth in Shanghai for the Kobe Market Shanghai’s function as a re-export center for imported cotton manufactures must have been underlain by the presence of solid commercial institutions. This section will examine the relationship that the Chinese merchants, who appear in the Commercial Report on Hiogo, had with commercial institutions in Shanghai. The nature of the transactions made by the Chinese merchants is detailed in the commercial section of the NCH which revealed, on a weekly basis, the previous week’s market transactions. Details are given of the actions of the cotton-buying Chinese merchants who controlled the Shanghai cotton manufactures market, including the ‘‘Hankou dealers’’, the ‘‘Tianjin dealers’’, and the ‘‘Zhenjiang dealers’’. These merchants

Table 2.5. Imports of shirting by treaty ports in Japan, 1868–84 (Volume in pieces from 1868 to 1872 and in yards from 1873: value in dollars) Yokohama Year Volume

Kobe Value

Volume

Osaka Value

Volume

Nagasaki Value

Volume

Japan Value

Volume

Value

1868 519,156p (90.14%) 1,557,468 23,294p (4.04%) 73,220 33,423p (5.80%) 93,766 575,973p 1,724,854 1869 527,834p (86.56%) 1,530,719 29,850p (4.90%) 90,200 5,909p (0.97%) 20,848 39,458p (6.47%) 118,374 609,766p 1,783,838 1870 511,700p (84.42%) 1,458,345 41,700p (6.88%) 120,600 — — 50,612p (8.35%) 151,587 606,148p 1,738,008 1871 1,181,442p (87.61%) 3,071,749 101,150p (7.50%) 267,204 — — 61,997p (4.60%) 149,297 1,348,538p 3,498,112 1872 693,987p (71.13%) 1,765,489 191,703p (19.65%) 488,926 — — 89,942p (9.22%) 211,363 975,632p 2,465,778 1873 29,848,841 (55.42%) 1,922,281 21,065,206 (39.11%) 1,267,811 53,918 (0.10%) 3,683 2,890,201 (5.37%) 211,883 53,858,166 3,405,661 1874 41,876,578 (63.99%) 2,463,075 20,819,957 (31.81%) 1,108,825 — — 2,745,469 (4.20%) 164,728 65,442,004 3,736,628 1875 32,081,972 (66.82%) 1,852,648 13,700,141 (28.54%) 657,461 236,310 (0.49%) 13,910 1,990,674 (4.15%) 128,333 48,009,097 2,652,352 1876 43,810,082 (77.73%) 2,268,491 11,057,237 (19.62%) 656,025 g347,719 (0.62%) 17,848 1,145,156 (2.03%) 55,931 56,360,194 2,998,286 1877 31,291,668 (73.75%) 1,775,774 9,605,535 (22.64%) 467,071 g100,525 (0.23%) 5,620 1,433,743 (3.38%) 64,464 42,431,471 2,312,929 1878 24,433,446 (59.51%) 1,608,260 14,629,611 (35.63%) 803,764 g67,531 (0.17%) 4,685 1,926,920 (4.69%) 131,912 41,057,508 2,548,621 1879 46,457,658 (65.65%) 2,276,189 19,303,026 (27.28%) 1,053,206 — — 5,000,329 (7.07%) 319,828 70,761,013 3,649,223 1880 39,076,668 (73.48%) 2,017,768 12,865,977 (24.19%) 707,114 g38,500 (0.07%) 3,190 1,203,038 (2.26%) 70,255 53,184,183 2,798,327 1881 32,869,810 (74.45%) 1,629,298 10,848,974 (24.57%) 612,701 — — 432,689 (0.98%) 22,047 44,151,483 2,258,500 1882 45,139,904 (85.40%) 2,214,814 7,303,410 (13.82%) 421,868 — — 411,960 (0.78%) 23,205 52,855,274 2,659,887 1883 23,017,356 (78.44%) 1,164,482 6,104,894 (20.80%) 313,129 — — 223,423 (0.76%) 14,666 29,345,673 1,492,277 1884 14,583,621 (63.84%) 703,557 8,226,085 (36.01%) 396,907 — — 35,762 (0.15%) 11,425 22,845,468 1,111,889 Source: CR on Kanagawa, Hiogo and Osaka, Nagasaki, 1868–1884. Yokohama-shi (1980). Notes: The unit p refers to pieces; g refers to gray shirting.

Kobe Seen as Part of Shanghai Trading Network

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came to Shanghai from all over China to lay in stocks of foreign cotton manufactures. In order to buy stock in one market that was to be disposed of in another more provincial one, some merchants operated back and forth between the place holding their stock and their home province. Other merchants, who operated on a wide scale in the interior, even maintained branch offices and agencies in the market containing their stock warehouses and some had clerks permanently residing there in rented premises. For the most part, however, merchants did not maintain branch offices or agencies, but rather traveled periodically to import markets to lay in stock. They were called kebang. When kebang merchants came to Shanghai they stayed for a fixed period of time in a kind of merchant lodging called hangzhan. It was in these lodgings that they would conclude contracts for cotton stocks with traveling agents called paojie, who were sent by brokers and wholesale merchants. Among the lodgers were some who stayed for up to a year or even for several years, buying and shipping cargoes at the orders of the main office. Another crucial part of their work was to keep close and constant watch on the Shanghai market and send reports back to the main office. The hangzhan lodgings not only provided the kebang merchants with a place to stay but, if necessary, could arrange all the work of supplying warehouses and managing the transportation of goods in stock. Links with regularly employed boaties and coolies meant that hangzhan were able to conduct this work both swiftly and competently. In later years it was even reported that they could ship goods very cheaply due to special contracts they made with steamship companies. For example, Tianjin merchants who laid in stocks of cotton cloth in Shanghai shipped these stocks to Tianjin on freighters like the Lee Yuen (owned by the Lunchuanzhaoshang Company and registered in China), the Chili (owned by Russell and Co. and registered in America) and the Taku (owned by Jardine Matheson and Co. and registered in England). These facilities are regarded as a factor underlying the dominance of Chinese merchants and one of the reasons that they could sell goods more cheaply than their foreign counterparts (Toa Dobunkai 1908: 857–8). The beginning of winter saw merchants leaving the hangzhan and rushing back to their homelands. Tianjin merchants were the most important customer group for Shanghai’s large businesses and once they had withdrawn, such businesses could only wait idle until their return in the spring. After mid-November, rumors of the homeward movements of dealers from North China were important news items in the NCH (March 2, 1876; November 11, 1875; December 2, 1875, etc.). It is notable that in addition to news of the kebang merchants, the commercial section occasionally offered tantalizing glimpses of merchants called the ‘‘Japan dealers’’:

36

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Piece Goods.—We have but little change to notice today. The Tientsin, Hankow and Japan dealers have bought nothing. (NCH, July 8, 1876)

These same merchants are often referred to as ‘‘Japan caterers’’, as in the following extract: 81⁄4 lbs. Grey Shirtings—The enquiry which started the natives on buying came from Hankow, but the Japan caterers have likewise been very active, and large settlements of the commoner descriptions has been made for immediate shipment to that country. (NCH, September 16, 1876)

Unfortunately, it is impossible to determine from the terms ‘‘Japan dealers’’ and ‘‘Japan caterers’’ whether these were actually Chinese merchants. However, another expression used is ‘‘the natives’’ in a passage that continues ‘‘ . . . whose interests center in Hiogo . . . have the desirable effect of upholding the value of such articles of known chops as are marketable there’’(NCH, November 2, 1876). The following passage uses the phrase the ‘‘native caterers for Japan’’, providing further evidence of the existence of Chinese merchants who were engaged in the purchase of cotton textiles that were to be sent to Japan: Grey shirting.—The settlements of 6, 7, and 93⁄4 lbs. have been extremely light, and 81⁄4 lbs. would not have fared much better, had not the native caterers for Japan come to the fore. Of the 30,000 pieces which form the sum of the week’s sales, however, they have taken fully 18,000, and the greater portion of these has already gone forward—to Hiogo chiefly. At that port, by last accounts, there had been considerable improvement in the deliveries, and an advance of 5 cents per piece had been established, but the foreigner cannot see that even that rise gives the equivalent of Shanghai rates. . . . nor does it [seem], the financing being done in the ordinary way through the Banks. But the native has either had the funds provided, or the proceeds returned to him in Japanese silver coins, and these have been disposed of here, on terms which have enabled him to carry on the business profitably. (NCH, September 4, 1875)

An idea of the form of the Shanghai auctions is conveyed in the following extract. These auctions are apparently the same ones that are referred to in the commercial report and it should be noted that for the week in question re-exports to Kobe, at 28,350 pieces, far and away exceeded those to any of the Chinese treaty ports. While trading for Tianjin, Hankou, and Zhenjiang was sluggish, Chinese merchants engaged in the Japanese trade were exceptionally active as well as: as a matter of course, those whose interests are bound up in the Public Sales. Japanese buyers have, however, been active enough, and it is pleasing to have to record an advance in the value not only of the fabrics they have wanted—viz.,

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common 81⁄4 lbs. Grey Shirtings, Velvets, Muslins, and Black Lustres—but also of the Woollen Goods, which have been disposed of at the Auctions . . . .Grey Shirtings—81⁄4 lbs.—of common chops the settlements for Japan have again been considerable, and the effect of the business has been to raise the value of Peacocks to Tls. 1.623⁄4 per piece in Auction Thursday. (NCH, September 18, 1875)

The above extract mentions ‘‘Public Sales’’ and there is a large difference between these and ‘‘private sales’’. The term ‘‘private sales’’ refers to individual transactions between foreign import merchants and Chinese merchants, while ‘‘public sales’’ refers to transactions in the so-called auctions. From the above, it can be seen that Chinese merchants seeking stocks of cotton textiles for shipment to Kobe were active in buying at auction, and that their buying activity could have a noticeable effect on the Shanghai market in gray shirting. A closer look at the NCH gives further information on the position in the Shanghai market of the Chinese merchants who were buying cotton for Kobe: Piece goods—There has not been much to boast of in the business of the past week . . . . From the Outports there are no orders, and locally the trade is visibly contracting, owing to the commencement of harvest operations, and the uneasiness which prevails in regard to the probable yield of the crops, whilst Hiogo is said to have had more than enough; at the same time, the demand for common Grey Shirtings—81⁄4 lbs. for Kobe, slackened only the other day, and this simply because of the impossibility of going on at Tls. 1.63 or 1.64 per piece, which seems to be the maximum of the buyers for that market and in their emergency they paid Tls. 1.64 for the Peacocks sold at auction yesterday; but that lot was an exceptionally good one, I understand . . . and with that salve they soothe their troubled spirits.—Some such excuse is required, otherwise how account for the indifference of the dealers all round for a Red Pheasant—Dewhurst’s—at Tls. 1.691⁄2 per piece. . . . Ah well!—Maybe the time for the better classes will come too. Its speedy advent is ardently desired. (NCH, September 25, 1875)

Prices for the auction of the previous day, in a week in which auctions were held twice, are given in Table 2.6. It can be seen that the 81⁄4 lbs. of gray shirting to be exported to Kobe was indeed of the cheapest variety, and this corresponds with the observation of the Commercial Report that there was almost no demand for high-quality gray shirting there, even though it had sold in the past (CR on Hiogo 1876: 12 (Vol. 6: 86) ).4 For the gray shirting imported into Shanghai, the relationship between its quality and the market was approximately as follows: Grey Shirtings—81⁄4 lbs. . . . estimated at upwards of 120,000 pieces. . . . The medium to fine qualities have been wanted for the Northern and River markets; Japan has taken a goodly quantity of the lowest makes, and the balance of these—some 20,000 pieces—together with the low medium makes have found buyers among the Local and Ningpo traders, by whom they are reserved against the dying

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Table 2.6. Auction in Shanghai market, Sept. 23, 1875 Gray shirting (81⁄4 lbs.) Red Lion Blue Lion Green Lion Red Crown Peacock

Volume of sales

Price/piece (taels)

500 pieces 500 pieces 500 pieces 500 pieces 3,000 pieces

1.711⁄4 1.68 1.67 1.741⁄2 1.633⁄4 –1.64

Source: NCH, Sept. 25, 1875.

season, which usually commences in August. The unsold stock of 81⁄4 lbs. goods is now very small. (NCH, July 29, 1876)

Information of this kind is not limited to this report. The buyers from North China and the Yangzi River area were also said to have paid no attention to goods below the level of the ‘‘medium best’’, and their tastes were said to have been very particular. In contrast, most of the gray shirting laid in for shipment to Japan was of low quality, of the type that local Shanghai merchants and Ningbo kebang bought as cheap fabric for use in dying (NCH, October 5, 1876). Moreover, it was reported that ‘‘The Ningpo dealers are trying hard to work off their former speculative purchases of low 81⁄4 lbs. Grey Shirtings, and disappointed in this, they are shipping them to Japan’’ (NCH, September 2, 1876). Reflecting on the imports of cotton goods for the previous year, the commercial section described the Japan market at the beginning of 1876: Our market has been much indebted to Japan, during the year under review, for taking off our surplus stocks of Grey Shirtings, Velvets, and Figured Lustres. This proceeding was facilitated by the low rates of freight ruling whilst a severe competition was being carried on by the Mitsubishi and Pacific Mail steamer companies.

Thus it is clear that the Japanese market played a significant role as a place to dispose of low-quality foreign cotton manufactures that had been imported into Shanghai. However, in the new year, in the wake of the worsening relations between Japan and Korea, the possibility of a further decline in the buying power of the Japanese market was pointed out. There was also a danger that the falling price of silver would affect the entire import business, endangering continuing profits (NCH, March 2, 1876).

5. Transactions Involving Imported Cotton Cloth in the Shanghai Market This section will take a general look at the transactions involving imported cotton goods in Shanghai (Toa Dobunkai 1908; Odell 1916;

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Shanghaishi gongshang 1979; Miyata 1981; Sugiyama 1988a). Soon after the opening of Shanghai as a treaty port, imported cotton cloth was sold together with other goods, mainly in shops that dealt in goods from Beijing ( Jinghuohao) or Canton (Guanghuohao). Around 1850, Western textile shops (Yanghuohao) that only dealt in imported cotton cloth began to appear. In 1858, Western textile shops that had appeared outside Shanghai’s Dadongmen (Great East Gate), such as Tongchun, Yichun, and Dafeng, formed a guild called Zhenhuatang yangbu gongsuo. By 1884 the number of guild members had reached sixty-two (Shanghaishi gongshang 1979: 8–11, 33–4; Xu and Wu 1990: 183). Prior to the 1880s in Shanghai there were already large-scale Western cloth wholesalers (yuanjian pifazihao), small-scale Western cloth wholesalers who also conducted some retail trade (lingpi pifazihao), and retailers of Western cloth (lingshoudian). In addition, there were brokers (qianke) called jiaozhuang zihao, who for a fee represented the kebang merchants in bidding on goods at auction (Xu and Wu 1990: 188). In private sales the transaction partners of the foreign import merchants (yanghang) were the wholesalers of Western cloth or kebang merchants who had traveled from the interior to lay in stocks of imported cotton goods. The largest kebang were the ones mentioned in the previous section, from Tianjin, Hankou, and Ningbo, followed in size by those from Beijing, the northeast, Changsha, Siquan, Jiangxi, and elsewhere. Merchants who operated on a smaller scale came from border provinces in the northwest and southwest, or from cities and towns close to Shanghai (Xu and Wu 1990: 187). It has been said that with the opening of more treaty ports following the Tientsin and Peking Treaties and the commencement of merchants from the interior traveling to Shanghai to purchase foreign cotton cloth, large-scale Western cloth shops found that wholesaling to kebang became a mainstay of their business (Miyata 1981: 90). The transactions that took place in auctions that were termed ‘‘public sales’’ present a contrast to private sales and must therefore be analysed. The foreign houses that carried out auctions of perfectly good cotton cloth, as opposed to damaged cloth (water or fire damage), were called jiaozhuang yanghang. Each week the NCH carried a column in its commercial section giving details of the previous week’s auctions and from around July 1876 it began to give separate details of the auctions called Yuen-Fong and Kin-Ming (NCH, July 22, 1876). Yuen-Fong yanghang referred to Maitland & Co., the first British trading house to stock large quantities of cotton cloth from Manchester to be sold cheaply in Shanghai through competitive bidding. On May 21, 1874, Yuen-Fong ran an advertisement for their auction of May 25 in the Shanghai newspaper Shenbao (May 21, 1874). The following day, an article in Shenbao explained that Yuen-Fong was a house mainly engaged in trading tea in London, but that it was now beginning to use this auction form to sell—not damaged

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goods, but—proper cotton textiles. If the other Western traders started to imitate this method of competitive bidding, it could bring a great change to the Shanghai market. On May 25, over 300 buyers appeared at the auction (Shenbao, May 22, 26, 1874).5 After this, Yuen-Fong ran an advertisement in Shenbao for the competitive bidding each time it held an auction. In 1877 the houses of Van-Loong and Fuh-Sing also began to appear in the auction column. It is easy to imagine the active buying that took place in these auctions, the frequency of which had, by this time, increased to four to five times a week (NCH, March 15, April 21, 1877). The buyers who attended auctions held by the jiaozhuang yanghang were Chinese merchants from such enterprises as jiaozhuang zihao, which specialized in buying at auction; large kebang; small wholesalers of Western cloth; and relatively large Western cloth retail shops (Xu and Wu 1990: 193). Yuen-Fong would exhibit its cotton cloth inside its premises, and then employ compradors who used paojie as agents to travel about and bring in managers of jiaozhuang zihao and Western cloth shops to view the goods. On the day of the auction the foreign merchant, with his compradors and clerks, would sit on a high platform holding a hammer which he tapped loudly after the highest bid to conclude the sales. The merchants with winning bids did not pay the agreed prices immediately in cash but rather presented a zhuangpiao or draft note, specifying payment five days later. Later, the yanghang came to print auction catalogs ( jiaozhuangbu) which detailed the name, number of items, and trademarks of the following week’s goods (Shanghaishi gongshang 1979: 7–8).6 The jiaozhuang zihao brokers would send paojie runners out to circulate the jiaozhuangbu and take orders for bidding from kebang merchants. They would then bid according to the kebang orders at the next auction. After a successful bid, the kebang would pass the zhuangpiao to the jiaozhuang zihao who would send it on to the foreign trading house after taking a portion in fees (Shanghaishi gongshang 1979: 38). It stands to reason that what enabled the Chinese merchants to supply cheap cotton cloth to Kobe was this kind of transaction environment in Shanghai. Typically, the power of the Chinese merchants is attributed to their group solidarity (Uchida 1949; Miyata 1981; Kagotani 2000: Chapter 1), and the remarkable ability of Chinese merchants to come together in guild-like organizations was undoubtedly a factor in their competitiveness. However, in addition to this accepted explanation, it can be argued that the use of networks, which made their transaction environment favorable, was a crucial factor underlying their success. The Chinese merchants could not have operated at such an advantage without the accompanying trading activities in Shanghai. Perhaps it can even be said that imports of foreign-made cotton goods into Kobe in the 1870s were really part of a redistribution of such goods from Shanghai.

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Notably, auctions of imported cotton goods did not appear in Japan. Viewed from England, Japan was the far limit of the Orient, a dead end where auctions could not be held. Generally, foreign merchants in Yokohama waited in their offices for Japanese merchants to come with inquiries for goods. It has also been hypothesized that foreign traders in Japan were further disadvantaged by their relatively small array of goods and stock (Sugiyama 1989: 191). In Shanghai, auctions were possible not only because there was an abundance of goods but also because of the Shanghai network. Any place where goods could be disposed of was a viable market—if goods were not sold to Tianjin they went to Hankou, if not to Ningbo then to Kobe, and so on. However, this leaves unresolved the question of how clearly the British cotton textile capitalists understood the Japanese market and produced cotton goods for it.

6. The Changing Roles of Foreign and Chinese Merchants The 1860s were a period of great change in the operations of Chinese merchants. With the increasing commerce in cotton manufactures, the end of the era of triangular trade centering on opium marked an historic change. At the same time, the Chinese economy recovered from the ravages of the Taiping Rebellion and Chinese merchants expanded their activities into areas previously controlled by foreign traders. This, in turn, has been attributed to improvements in methods of transportation, notably the introduction of large-scale steamships (Hamashita 1989a: 99). Foreign merchants in China, realizing that profits from direct investment in commerce were decreasing, had no choice but to diversify into sideline businesses such as finance, insurance, and shipping (Ishii 1998). This was an ironic turn of events for foreign merchants as, despite the opening of the Yangzi river to foreign vessels and an increase in the number of treaty ports on the Yangzi and the North China coast following the Treaties of Tientsin (1858) and Peking (1860), the larger changes of the 1860s listed above brought about results contradictory to their expectations. In reality, the opening of treaty ports stimulated the rise of Chinese merchants. Takeshi Hamashita gives an example drawn from the 1865 Tientsin Customs Report: Chinese cotton-trading merchants in Tientsin prefer to buy directly from Shanghai, in order to save on indirect expenses paid to foreign agents in Tientsin. As a result, as competitors to the foreigners they can sell more cheaply. Also, that largescale transactions and increasing profits are slipping from the hands of Westerners and into those of Chinese merchants. Now, the latter control the market and the former respond to their influence. Finally, that foreign traders and steamship owners are becoming merely agents for Chinese merchants. (Hamashita 1989a: 100)7

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A similar item about Hankou appears in the NCH and states that ‘‘at Hankow the foreign importer has been crushed out of the trade—so to speak’’ (NCH, June 24, 1876; Rowe 1984). The following quote from the 1874 Commercial Report describes the situation in Kobe: The deliveries of cotton goods during the last season compare favourably with those of the preceding year. The most noticeable feature in this department of our import trade is the great falling off of direct shipments from England, which have, however, been more than counterbalanced by importations from China. This remark applies chiefly to grey shirting, grey drills, T-cloths, and Turkey red cambrics, the chief importers of which are the Chinese, who throughout the year successfully competed with direct shipments from England. For these class of goods this market will, it is expected, continue to draw its supplies from Shanghae, as the telegraph wires and increased shipping facilities enable houses here, particularly Chinese firms, to speedily avail of these sudden spurts, which from time to time visit this, as all other eastern markets. (CR on Hiogo 1874: 50 (Vol. 5: 546) )

Thus it is possible to draw a parallel between Tianjin, Hankou, and Kobe in terms of the relationships between foreign and Chinese merchants. However, the implications of this awaits further analysis.

7. Conclusions: Kobe as an Extension of the Shanghai Trading Network Kobe’s opening as a treaty port in 1868 must be viewed within the context of the whole of East Asia. The Chinese merchants of the Commercial Report, who occupied such a dominant position in the import of cotton goods into Kobe, were integrally involved in the re-export mechanism for foreign-made cotton textiles in Shanghai. Gray shirting, the central British-made product, once imported into Shanghai, entered the Chinese merchants’ circulation system, with 25 percent going to Hankou, 20 percent to Tianjin, and the remainder re-exported not only to the various treaty ports of China but as far afield as Nagasaki and Kobe. Table 2.3, which shows re-exports of gray shirting drawn from the NCH, demonstrates this assertion. The figures presented in the table effectively sweep away any tacit assumption of the nation as the framework that is applied in the study of modern economic history. The importance of considering trade as embracing a network of regions must be emphasized, while the idea that trade can be investigated on the level of national economies alone must be questioned. From the perspective of the import of cotton cloth, Kobe in the 1870s can be said to have been integrated into intra-East Asian trade as an extension of a network of routes radiating out from Shanghai. The nature of trade in Yokohama, the ‘‘the Economy of eastern Japan’’ facing Europe

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and America, was quite different.8 The functions of the contemporary Shanghai network did not mature until after the Tientsin and Peking treaties, which facilitated the creation of linkages between Shanghai, the central port, and the newly opened treaty ports. There were certain factors that had enabled the Chinese merchants to compete so effectively with Western traders and to control the markets in the treaty ports. These included the ability to transport large volumes of goods from Shanghai to all the other ports both safely and cheaply, a direct result of the creation of steamship routes. This was a new situation which could be said to have been brought about by the changes of the 1860s. However, Chinese merchants could not have utilized foreign steamships so effectively without the standards of cheap service and experience that were carried down from the era of premodern intra-Asian trade (Sugihara 1991: 253). An integral part of this ‘‘continuity’’ was merchants from the interior, called kebang. It was these merchants who had traditionally been responsible for the periodic booms in trade between their home regions and central commercial exchanges. Their efforts led to the development of new networks that covered not only domestic Chinese destinations, but also new lands overseas. Rather than operating either within or outside the borders of countries, Chinese trade formed what can be termed ‘‘international commerce’’ by serving as a link in trade between regions (Hamashita and Kawakatsu 1991: 40). When China is viewed from the outside, terms like ‘‘interior’’ and ‘‘treaty port’’ are used. However, trade within the ‘‘interior’’ was bound together by a network that was based on exchange and this had many similarities with transactions conducted on an international basis. The existence of a network meant that any goods that could not be sold in one market could be taken to another. Finally, the 1870s was the period of Japan’s greatest import of foreignmade cotton manufactures. In Shanghai, Chinese merchants handled cotton cloth that was bound for Kobe. These merchants bought up relatively low-quality gray shirting, mostly at auction, and then sold it cheaply in Kobe. It may be concluded that their competitive advantage in Kobe was underlain not only by their transportation networks, as noted above, but also by a deep understanding of both the transaction environment in Shanghai and information about the market for imported cotton goods there (Furuta 2003). Thus, during this period cotton cloth was steadily imported into Kobe, and almost all of it was handled by Chinese merchants in the form of re-exports from Shanghai. The origin of most of the cotton manufactures was Britain, and Shanghai must thus be evaluated as a link between Britain, the place of production, and Japan, the place of consumption. For a long time, economic historians of bakumatsu and early Meiji Japan have held to the concept that, in terms of trade, there was Japan and then

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there was Europe with little or nothing in between. In emphasizing Europe, these historians have also upheld the idea of modern Japan having broken with its past. Against this paradigm an interpretation has emerged that stresses the enduring nature of the ‘‘Asian trading network’’ from premodern times, and also the role of the impact from Asia (Hamashita and Kawakatsu 1991). This new interpretation stresses the fact that between Japan and Europe there was Asia, although questions such as whether, in the period immediately after the opening of the treaty ports, Asia and Europe stood irrevocably opposed across ‘‘the Asian sea’’, or whether a process in which Chinese merchants were dealing in European products should be regarded as European or Asian trade, are yet to be addressed. A great deal more research is necessary to answer such questions and evaluate the trading system lying between production and consumption.

Notes 1. This is a slightly edited English-language version of my article (Furuta 1992). For the more recent works, see Furuta (2000, 2001). Furuta (2000) discusses the Chinese commercial networks and the function of information, including a statistical analysis of distribution patterns of Lancashire goods among treaty ports in China, Japan, and Korea in the 1880s and the 1890s. 2. For example, the report on sugar and cotton imports to Kobe in 1874 can be summarized as follows: Chinese merchants were the major dealers in imported sugar, which was generally produced in Taiwan and Shantou (Swatow). Satsuma’s sugar resembled Shantou’s ‘‘black sugar’’, while its saccharin was of a higher quality and it thus brought a higher price than the imported sugar. The crop of domestic cotton was poor in this year so the demand for Chinese cotton increased. However, there appears to have been some domestic prejudice against imported cotton as, despite the fact that domestic cotton cannot said to be of superior quality to the best Ningbo, its price was rather high. The volume of imported cotton rose to 17,400 piculs from the previous year’s 1,400 piculs. After such a large volume of cotton was imported and put on the market in October even the market for high-priced Chinese cotton was sluggish (CR on Hiogo 1874: 54 (Vol. 5: 550) ). This seems to reflect the adaptability of Chinese merchants in varying their imports in response to changes in the Japanese cotton crop. Chinese merchants also had a monopoly on shipping Kobe export items like seaweed, medicines, ginseng, rapeseed oil, sea cucumbers, shark fins, dried shiitake mushrooms, and sulphur (CR on Hiogo 1874: 57(Vol. 5: 553) ). 3. There was also a comment that: ‘‘It appears that they are able to purchase goods in Shanghae on credit. These they ship across to Japan and sell, irrespective in many cases of whether the transaction show a loss or not, their object being to raise money for investment in naitive produce, the profit on which remunerates them for any loss sustained on previous transactions. During the past year, however, the large purchases made by native dealers in the Yokohama market

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4.

5.

6.

7. 8.

45

had the effect of restricting the operations of Chinese importers.’’ (CR on Hiogo 1877: 21(Vol. 6: 271) ). Tanimoto gives the following evaluation of the relationship between imported and domestically produced cotton textiles based on fluctuations in demand for cotton goods and the increase in cotton buyers. Demand for imported cotton textiles did not rise above the 32.6 percent of domestic demand that it filled in 1875. However, the actual volume of imports of cotton textiles did gradually increase, with a sharper increase from 1877 to 1879 when it peaked, to a gradual decline following this. It must be realized that the increase in imports of cotton manufactures occurred within the expansion of the whole domestinc cotton textile market. The penetration of cheap imported cotton goods probably reflects the existence of first-time cotton buyers, who turned from hemp and used clothing to the purchase of imported cotton goods. It is also hypothesized that the increase in imports from 1869 to 1879 reflects the process of the penetration of cotton imports into rural markets (Tanimoto 1987: 63–4). For the evaluation of ‘‘foreign pressure’’, see the debates on the extent of competition between imported and domestinc cotton goods by Abe (1988). Also see Takamura (1971, 1987), Kawakatsu (1976, 1977, 1981, 1989), and Saito and Tanimoto (1989). For the comparison with China, see Ishii and Sekiguchi (1982), Takamura (1982), and Shibahara (1985). It should also be noted that Yuen-Fong staged a long-term campaign appealing to buyers of cotton cloth who might be outside Shanghai in towns like Ningbo and Xuzhou, urging them to come personally to the auctions to eliminate middlemen. If they personally bought up their stocks at a very fair price, profits would not be eaten up in the fees routinely charged by Shanghai’s middlemen. See Shenbao (May 29, 1874). In later years the three yanghang houses of Gongping, Yiji, and Yihe sold some of their imported cotton cloth at auction. The days were set: Gongping (which also sold for Ruihe) on Tuesday, Yihe on Wednesday, Yuen-Fong on Thursday, and Yiji on Friday. Although it is unclear how much was sold at auction, Odell stated that there was nowhere like China for the importance of selling cotton manufactures at auction, expressed in the statistic that, of gray shirting which was imported into Shanghai in 1913, about 37 percent went at auction. Maitland & Co. was the largest yanghang selling at auction every week, followed by Probst Hanbury & Co.; Jardine, Matheson & Co.; Noel Murray & Co.; L. Moore & Co.; and these names correspond to Yuen-Fong, Gongping, Yihe, Ruihe, and Luyishima, respectively (Odell 1916: 77, 86, 116–9). For items on the superiority of Chinese merchants in Tianjin, Ningbo, Fuzhou, Niuzhuang, Jiujiang, etc., see Miyata (1981: 87–8). As discussed by Hamashita in his presentation at the sixtieth National Meeting of the Socio-Economic History Society of Japan, 1991.

References Abe, T., ‘‘Meiji zairai sangyo kenkyu no mondaiten: Orimonogyo o chushin to shite [Issues on the studies of traditional industries in Meiji Japan with special

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reference to the textile industry]’’, in Nenpo Kindai Nihon Kenkyu 10 (Tokyo, 1988). CIMC (China, Imperial Maritime Customs), Reports on Trade at the Treaty Ports in China (CIMC Reports). ——, Returns of Trade at the Treaty Ports in China (CIMC Returns). CR, Irish University Press Area Studies Series, British Parliamentary Papers, Japan, Embassy and Consular Commercial Reports, 1859–1899, 10 vols. (Shannon, 1971). Furuta, K., ‘‘Shanhai nettowaku no naka no Kobe: gaikokusei menseihin o hakobu Chugoku shonin’’, Nenpo Kindai Nihon Kenkyu 14: Meiji Ishin no Kakushin to Renzoku (Tokyo, 1992). ——, Shanhai Nettowaku to Kindai Higashi Ajia [Shanghai Network: The Economic Order in Late Nineteenth-Century East Asia] (Tokyo, 2000). ——, ‘‘Inchon trade: Japanese and Chinese merchants and the Shanghai network’’, in Sugiyama S., and Grove, L. (eds.), Commercial Networks in Modern Asia (Richmond, 2001). ——, ‘‘Keizaishi ni okeru joho to seido: Chugoku shonin to joho [Information and Institutions in Economic History: Chinese Merchant and Information]’’, Shakai Keizai Shigaku, 69-4 (2003), 11–27. Hamashita, T., Chugoku Kindai Keizaishi Kenkyu [Economic History of Modern China] (Tokyo, 1989a). ——, ‘‘Higashi Ajia kokusai taikei [The international system in East Asia]’’, in Yamamoto, Y. (ed.), Koza Kokusai Seiji, Vol. 1: Kokusai Seiji no Riron (Tokyo, 1989b). ——, Kindai Chugoku no Kokusaiteki Keiki [International Factors in the History of Modern China] (Tokyo, 1990). —— and Kawakatsu, H. (eds.), Ajia Koekiken to Nihon Kogyoka 1500–1900 [The Asian Trading World and Japan’s Industrialization 1500–1900] (Tokyo, 1991). Hishitani, B., Nagasaki Gaikokujin Kyoryuchi no Kenkyu [Studies in the Foreign Settlement in Nagasaki] (Fukuoka, 1988). Ishii, M., Kindai Chugoku to Igirisu Shihon [Modern China and British Capital] (Tokyo, 1998). Ishii, K., and Sekiguchi, H. (eds.), Sekai Shijo to Bakumatsu Kaiko [World Market and the Opening of the Ports in Bakumatsu Japan] (Tokyo, 1982). Kagotani, N., Ajia Kokusai Tsusho Chitsujo to Kindai Nihon [The International Commercial Order of Asia and Modern Japan] (Nagoya, 2000). Kamachi, N., ‘‘The Chinese in Meiji Japan: Their Interaction with the Japanese before the Sino–Japanese War’’, in Iriye, A. (ed.), The Chinese and the Japanese: Essays in Political and Cultural Interactions (Princeton, 1980). Kawakatsu, H., ‘‘Meiji zenki ni okeru naigai menpu no kakaku [Prices of foreign and native cotton textiles in the early Meiji period]’’, Waseda Daigaku, Seiji Keizaigaku Zasshi, joint issues 244–5 (1976), 508–35. ——, ‘‘Meiji zenki ni okeru naigai menkankeihin no hinshitsu [Qualities of foreign and native cotton goods in the early Meiji period]’’, Waseda Daigaku, Seiji Keizaigaku Zasshi, joint issues 250–1 (1977), 184–211. ——, ‘‘19-seikimatsu ni okeru Eikoku mengyo to Higashi Ajia shijo [British cotton industry and East Asian market in the late 19th century]’’, Shakai Keizai Shigaku, 47–2 (1981), 1–32.

Kobe Seen as Part of Shanghai Trading Network

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——, ‘‘Nihon sangyo kakumei no Ajiashi-teki ichi [Locating the Japanese industrial revolution in Asian history]’’, Waseda Daigaku, Seiji Keizaigaku Zasshi, joint issues, 297–98 (1989), 213–45. Koyama, T., Kobe Osaka no Kakyo [Chinese in Kobe and Osaka] (Kobe, 1979). Miyata, M., ‘‘Shinmatsu ni okeru Gaikoku boekihin ryutsu kiko no ichi kosatsu : Girudo no ryutsu shihai o chushin to shite [A study on the foreign trade organization in late Qing China with special reference to the control of distribution system by the guild organization]’’, Sundai Shigaku, 52 (1981), 73–102. Murata, S., Kobe Kaiko 30-nenshi [Thirty Years of the Port of Kobe from its Opening] (Kobe, 1898). NCH (North China Herald and Supreme Court and Consular Gazette). Odell, R. M., Cotton Goods in China, U.S. Department of Commerce, Bureau of Foreign and Domestic Commerce, Special Agents Series, No. 107 (Washington, D.C., 1916). Rowe, W. T., Hankow: Commerce and Society in a Chinese City, 1796–1889 (Stanford, 1984). ——, Hankow: Conflict and Community in a Chinese City, 1796–1895 (Stanford, 1989). Saito, O., ‘‘Ajia no umi to Ajia ni seomuketa hatten shiko [Asia’s sea and Japan’s developmental path that refused to be confined by it]’’, in Hamashita, T., and Kawakatsu, H. (eds.), Ajia Koekiken to Nihon Kogyoka 1500–1900 (Tokyo, 1991). ——, and Tanimoto, M., ‘‘Zairai sangyo no saihensei [Reorganization of traditional industries]’’, in Umemura, M., and Yamamoto, Y. (eds.), Nihon Keizaishi 3: Kaiko to Ishin (Tokyo, 1989). Shanghaishi gongshang xingzheng guanli ju, Shanghaishi fangzhipin gongsi menbu shangye shiliaozu (eds.), Shanghaishi Menbu Shangye [Commerce of Cotton Textiles in Shanghai] (Beijing, 1979). Shiba, Y., ‘‘Meijiki Nihon raiju Kakyo ni tsuite [Chinese who came to Japan in the Meiji Period]’’, Shakai Keizai Shigaku, 47-4 (1981), 57–72. Shibahara, T., ‘‘Higashi Ajia ni okeru kindai [The modern era in East Asia]’’, in Rekishigaku Kenkyukai, and Nihonshi Kenkyukai (eds.), Koza Nihon Rekishi 7: Kindai 1 (Tokyo, 1985). Sugihara, K., ‘‘Ajia-kan boeki to Nihon no kogyoka [Intra-Asian trade and Japanese indutrialisation]’’, in Hamashita and Kawakatsu (eds.), Ajia Koekiken to Nihon Kogyoka 1500–1900 (Tokyo, 1991). ——, Ajia-kan Boeki no Keisei to Kozo [Patterns and Development of Intra-Asian Trade] (Kyoto, 1996). Sugiyama, S., ‘‘Textile Marketing in East Asia, 1860–1914,’’ Textile History, 19: 2 (1988a), 279–298. ——, Japan’s Industrialization in the World Economy, 1859–1899 (London, 1988b). ——, ‘‘Kokusai kankyo to gaikoku boeki [International environment and foreign trade]’’, in Umemura, M., and Yamamoto, Y. (eds.), Nihon Keizaishi 3: Kaiko to Ishin (Tokyo, 1989). Suwaki, I., and Yasui, S., ‘‘Meiji shoki no Kobe Kakyo [Chinese in Kobe in the early Meiji period]’’, Kobe Daigaku Kyoyobu, Ronshu, 42 (1988), 1–28.

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Takamura, N., Nihon Bosekigyoshi Josetsu [An Introduction to the History of Japanese Cotton Spinning Industry], Vols. 1–2 (Tokyo, 1971). ——, Kindai Nihon Mengyo to Chugoku [Modern Japanese Cotton Industry and China] (Tokyo, 1982). ——, ‘‘Ishin zengo no ‘gaiatsu’ o meguru ichinino mondai [A couple of issues on ‘the foreign pressure’ around the period of the Meiji Restoration]’’, Tokyo Daigaku Shakai Kagaku Kenkyusho, Shakai Kagaku Kenkyu, 39–4 (1987), 1–29. Tanimoto, M., ‘‘Bakumatsu Meijiki menpu kokunai shijo no tenkai [The development of the internal market in cotton textiles in Bakumatsu and Meiji Japan]’’, Tochiseido Shigaku, 115 (1987), 54–67. Toa Dobunkai, Shina Keizai Zensho [A Complete Book of Chinese Economy], 11 compilation (Tokyo, 1908). Uchida, N., Nihon Kakyo Shakai no Kenkyu [Studies in Overseas Chinese Communities in Japan] (Tokyo, 1949). Xu, T., and Wu, C. (eds.), Zhongguo Ziben Zhuyi Fazhanshi [History of Development of Chinese Capitalism], Vol. 2 (Beijing, 1990). Yamada, N. (ed.), Nihon Kakyo to Bunka Masatsu [Overseas Chinese in Japan and Cultural Conflicts] (Tokyo, 1983). Yokohama-shi (ed.), Yokohamashishi [Municipal History of Yokohama], Shiryohen 2, Nihon Boeki Tokei (revised edition), Tokeihen (Yokohama, 1980).

3 The Chinese Merchant Community in Kobe and the Development of the Japanese Cotton Industry, 1890–1941 naoto kagotani

1. Introduction In the second half of the nineteenth century, most of Asia was integrated into a world economy that was dominated by the West. It is therefore natural that studies of modern Japanese history have been primarily concerned with the Japanese response to the impact of the West. Recent studies, however, have shifted their focus to the growth of the Asian regional economy, with particular emphasis on the history of intraAsian trade. As Asia’s exports of primary products to the United Kingdom, industrial Europe, and the United States increased, and as imports of Western capital followed, the purchasing power within Asia grew, and this resulted in the growth of intra-Asian trade. However, there was also an important autonomous element in the development of this regional economy. Kaoru Sugihara argues that it was Asian countries themselves that were able to produce food, clothing, and other mass consumer goods that were most suitable for the Asians, and therefore the consumer demand for producers of primary products for export to the West was, in fact, largely met within Asia. It was these more complex linkages that provided a basis for industrialization in Asia (Sugihara 1996: Chapter 3). Exports of traditional or newly created modern Asian consumer goods from the producing regions were largely organized by Chinese and Indian merchants, not by Western traders. Therefore, the role of the networks of Japanese, Chinese, and Indian merchants played a crucial role in Asia’s prewar industrialization. According to Sugihara, the dynamics of intra-Asian trade came from the development of a regional economic capacity to respond to external stimuli through these native Asian merchants’ networks. This chapter traces the history of the relationship between the Chinese merchants’ networks in Asia and the modern Japanese cotton industry

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during the period from 1890 to 1941, with special reference to the development of the cotton industry in the Osaka–Kobe area. Relatively close to the continent, this area allowed Chinese merchants to freely engage in commerce in the period from 1890 to 1941. Osaka was the traditional center of commerce and manufacturing during the Tokugawa period (1603–1868) and, after a brief disruption during the period of the Meiji Restoration, underwent a revival as the center of modern commerce and manufacturing with a strong orientation towards the cotton trade. Kobe, about 30 km west of Osaka, became a major port for the Kansai area during the Meiji period (1868–1912), in part because the port of Osaka was slow to improve its facilities to cater to modern shipping. Table 3.1 indicates both the volume of Kobe’s export trade handled by foreign merchants in 1890 and the ratio of trade carried by the Chinese merchants. As is shown in row (B) of Table 3.1, Kobe’s exports to the West were largely handled by Western merchants, and the volume of goods exported by the Chinese merchants was negligible. According to row (A), which refers to Kobe’s exports to Asia, Chinese merchants were the dominant players, accounting for 53 percent of trade. In the case of Kobe’s export trade to the West, British merchants took up 38 percent, but there was cutthroat competition among Western merchants, and Britain’s relative position in the Western trade was not as overwhelming as was that of Chinese merchants in Asian trade. Chinese merchants proved to be adept and easily responded to the business opportunities presented by the international system of free trade in the second half of the nineteenth century. Until recently, Japanese historiography has ignored the importance of the activities of Chinese merchants in this era, in spite of the fact that the share of the Osaka–Kobe trade in total Japanese overseas trade increased substantially at the turn of the twentieth century. Japanese historians, instead, have focused on how Japan built up its national economy, which supported the nation-state in the Meiji period, and on how Japan built an overseas empire. Because it has been assumed that the Chinese merchants’ networks did not have an overall strategy or organization on par with the policies of a nation-state, and also because China, during both the late Qing and Republican periods, was unable to protect its economy under the unequal treaties with Western powers and Japan, Chinese merchants’ networks have not received a great deal of attention (Hamashita 1989; Shiba 1995). Japanese historiography has also emphasized the view that the modern Japanese cotton industry developed by learning advanced technology and organization from the West, and by combining this new knowledge with indigenous technology, organization, and human resources. These studies have focused on Western traders in Yokohama; an entrepot that linked Japan to Western countries, mainly through exports of raw silk and imports of cotton manufactured goods.

Chinese Merchant Community in Kobe

51

Table 3.1. Exports by foreign and Japanese merchants from Kobe, 1890 and 1910 (Million yen) 1890

(A) To Asia (B) To others Total

Chinese

British

German

American

Total

6.0 [53] 0.4 [3] 6.4 [26]

1.8 [16] 4.9 [38] 6.8 [28]

2.3 [21] 3.7 [29] 6.1 [25]

0.5 [4] 2.9 [23] 3.4 [14]

11.3 [100] 12.9 [100] 24.3 [100]

Chinese

British

German

Japanese

Total

10.5 [23] 0.7 [—] 10.5 [12]

8.0 [17] 8.7 [18] 16.7 [18]

0.5 [—] 11.7 [24] 12.2 [13]

25.4 [55] 20.0 [42] 45.4 [48]

44.4 [100] 41.1 [100] 84.8 [100]

1910

(A) to Asia (B) to others Total

Source: Kagotani (2000: 123, 141). Notes: Figures are my estimates from various sources. Original figures for 1890 were in sterling, and were converted at the exchange rate of 9.859 yen per pound.

In response to Sugihara’s suggestion that Japan’s industrialization was part of a broader Asian economic development, however, I have suggested elsewhere that the development of Japanese exports was initially generated by Chinese merchants in the Osaka–Kobe area (Kagotani 2000: Chapter 1), and that we need to understand the role of Chinese merchants’ networks in order to understand the process of Japan’s industrialization. The accounts that follow suggest that the initiative of Chinese merchants remained important throughout the period of Japan’s industrialization.

2. Breaking the Chinese Merchants’ Monopoly in the 1890s Kazuko Furuta emphasized that much of Japan’s import trade in cotton piece goods in the 1870s was handled by Chinese merchants based in Shanghai (Furuta 2000: Chapter 1. See also Chapter 2 of this volume). British cotton textiles were distributed by Chinese merchants through their trading networks centered in Shanghai, China’s largest and most important treaty port. In the 1880s and the 1890s, merchants engaged in Kobe–Shanghai trade were also responsible for bringing raw cotton from China to Japan. As Japan had promoted the development of its cotton industry, Chinese merchants wanted to export raw cotton to Japan through the Kobe–Shanghai route. Chinese raw cotton was cheaper, and therefore was competitive with Japanese domestic cotton (Kagotani 2000: Chapter 3). Table 3.2 shows that, as late as 1900, 75 percent of Chinese raw cotton imported into Kobe were carried by the ‘‘Shanghai trading network’’, as defined by Furuta. The turning point came when Japanese cotton mills began to systematically establish a purchasing system of raw cotton from British India in the

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Table 3.2. Imports and importers of raw cotton to Kobe, 1900 (Thousand bales) Nationality of importers Chinese cotton Indian cotton American cotton Total Chinese (17) Japanese (11) Others (24) Total (52)

180 51 9 240

86 113 199

137 65 202

180 274 187 641

Source: Kagotani (2000: 127). Notes: The numbers in brackets indicate the number of importers. Others include Indian importers.

1890s (Kinoshita 1960; Takamura 1971: Chapter 2). Indian cotton had a slightly longer staple and was better suited for the Japanese mills, by this time equipped with the new ring frame mechanism. With the help of Japanese shipping lines, subsidized by the national government in Tokyo, the Japan Cotton Spinners’ Association, one of the most powerful industrial bodies which represented 90 percent of large cotton mills, secured a regular supply of Indian cotton, through Japanese importers and other merchants (see Table 3.2). Yunosuke Yasukawa, an employee of Mitsui Bussan, noted in his memoirs that the motivation of Mitsui Bussan, a large trading company that first imported Indian raw cotton, was to purchase raw cotton in Bombay and import it directly into Japan in an effort to circumvent the monopoly of the Chinese merchants who dealt almost exclusively with Chinese raw cotton (Toyo Menka 1961: 41). Why did Mitsui Bussan try to send local agents to Bombay for the purchase of raw cotton? In those days, Japanese cotton spinners used Chinese raw cotton to make cotton yarn. Chinese raw cotton was exclusively carried by Chinese merchants residing in Kawaguchi, a port in Osaka Bay, and had a close relationship with Shanghai. Thus, Japanese cotton mills were obliged to purchase raw cotton at relatively high prices, and Chinese merchants in Osaka secured a large margin. We came to think that these conditions were a disadvantage to Japanese cotton mills and decided to import raw cotton directly by ourselves. (Yasukawa 1996: 18–19)

After Mitsui Bussan began to develop a supply route from British India, other Japanese trading companies such as Nihon Menka, Naigai Wata, and Gosho followed. This shift in the supplies of raw material enabled Japanese mills to develop a new range of products, particularly yarn of twenty staple counts. The new product competed well with Indian cotton yarn in the Japanese market by providing Japanese mills with relatively cheap new material. Figure 3.1 indicates the price difference between Chinese cotton and Indian cotton. Figure ‘‘C’’ refers to the price at the harbor, while ‘‘A’’ refers to the mill gate price of Indian cotton, and ‘‘B’’

Chinese Merchant Community in Kobe (yen) 24

Unit price of Indian cotton A

53

Unit price of Chinese cotton B

23 22 21 20 19 B 18 (kan million) 800 17 700

16

600

15

500

14

400

13

A SEPT. Unit price of JUNE imported cotton C MAY APR. APR. AUG. AUG.

300

DEC.

DEC.

APR. OCT. MAY

JUNE 200

Cotton imported ( ) Cotton consumed by mills ( )

100 0 1891

1892

1893

1894

1895

1896

1897

1898

1899

Fig. 3.1. Quantities and prices of imports of raw cotton to Japan, 1891–99. Source: Kagotani (2000: 132).

refers to the mill gate price of Chinese cotton. There were merchants intermediating between the harbor and the mill, so that ‘‘A’’ or ‘‘B’’ should usually be higher than ‘‘C’’. But this was not the case in the second half of the 1890s; as this figure shows, ‘‘A’’ was often lower than ‘‘C’’, demonstrating that the purchasing route from India was extremely competitive. On the other hand, the price of Chinese cotton carried through Shanghai (as part of the Shanghai trading network) did not decrease very much. Why did this difference occur? The answer appears to be that the demand for Chinese cotton was excessive due to the development of

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Chinese cotton mills in the 1890s, which led to the growth of demand for domestic raw cotton in China. On the other hand, Indian cotton had been in oversupply because it had been replaced by American cotton. Those merchants engaged in Indian raw cotton trade were sensitive to international competition and lowered their prices, through competitive bids, while those who handled Chinese cotton were inclined to cooperate with each other in order to maintain their profit margins and market share (Kagotani 2000: Chapter 3, 2001). Thus it was important that the Japanese cotton industry managed to end its dependence on the Shanghai trading network, which had brought cotton textiles to Japan in the 1870s and raw cotton in the 1890s.

3. The Rise of Chinese Importers in North China before World War I Along with this change, Japanese exporters, such as Mitsui Bussan, began to bring Japanese cotton yarn and mostly coarse cotton cloth to China in the 1900s. As is shown in Table 3.1, row (A), Japanese merchants thereby came to dominate Kobe’s exports to Asia, taking up 55 percent in 1910. One result of this initiative was the relative decline of the Shanghai trading network, especially the Shanghai–Kobe route ruled by Chinese merchants. Table 3.3 shows that by 1904, 132,000 piculs were directly exported from Japanese ports to North China treaty ports, while only 106,000 piculs went to Shanghai for distribution. The more the direct route to ports in North China grew, the less important the route via Shanghai became. This change in the pattern of exports to East Asia has been seen as evidence that Japan succeeded in building up a national economy independent of foreign merchants. Thus Japanese researchers had been inclined to end their investigations on the role of Chinese merchants in Japan at this point. Interestingly, however, this new development induced the growth of prominent Chinese importers, who traded foreign goods, initially based in North China ports. Some of the Chinese merchants who dealt with foreign goods, called ‘‘Yokaso’’ in Japanese, had a large amount of capital, and had close links with the Chinese merchants in Kawaguchi (an area in the port of Osaka where Chinese merchants from North China, not from Shanghai, resided after the 1910s) who were the key agents of the Japan– North China trade. By the early 1910s, these importers also purchased Japanese cotton goods from Japanese exporters in North China. They had a considerable advantage over Japanese traders in Chinese internal trade and distributed Japanese cotton goods through internal trading networks. For example, ‘‘Shinsho Yoko’’ (Shokosho Shomukyoku 1929: 51), a Japanese exporter in Tianjin, sold cotton cloth woven by Toyo Boseki Kaisha,

Chinese Merchant Community in Kobe

55

Table 3.3. Imports of cotton yarn to China: main trading routes, 1904 (Thousand piculs) Indian

Indian

Japanese

Chinese

Japanese

Via Via Hong Via From Directly from Shanghai Kong Shanghai Shanghai Japan Total North–East North Central–West Central–East South Total

96 183 408 274 961

26 10 537 573

28 106 271 41 1 447

2 29 94 45 5 175

4 132 1 137

156 460 773 360 544 2,293

Source: Toa Dobunkai (1908: 351–5). Notes: Chinese yarn refers to domestic yarn carried from Shanghai via coastal and river routes.

a large Japanese spinning and weaving company, to major Chinese importers in large quantities. Toyo Boseki had depended on the Tianjin market for sales of their cotton cloth, and had consigned 42,000 bales of cotton cloth to Shinsho Yoko and 14,000 bales to Mitsui Bussan in 1914 (Toyo Boseki 1914: 4). And 64 percent of the sales of Shinsho Yoko went to three Chinese importers; Yi Chang Yuan, Guo ging Long, Long Sun (Toa Dobunkai 1908a: 366, 606, 1908b: 186). The relationship between Shinsho Yoko and Chinese importers in North China was of a long-term contractual nature rather than based upon spot transactions. By creating these new business relations, Toyo Boseki was able to secure good market conditions for its production. Japan’s industrialization, which was responsible for increased exports of Japanese cotton goods, also led to an increased consumption of soybeans produced in North China around this period. As Hajime Kose pointed out (see Chapter 9 of this volume), the development of this new trading route replaced the existing Shanghai–North China route, which had previously carried raw cotton and cotton yarn from Shanghai to the north and soybeans from the north to Shanghai. This also implied the relative decline of the Shanghai trading network. One indication is the scale of capital of Chinese importers: the capital of Guo ging Long, active in the new trade route, amounted to 700,000 taels (Toa Dobunkai, 1908b: 186), while the amount of capital of Yuanchang, the largest Shanghai importer from the Osaka–Kobe area, was only 100,000 taels (Aichiken Shohin Chinretsusho 1912: 14). Thus the growth of prominent Chinese importers was responsible for developing a new East Asian trading network for Japanese cotton goods. As a result, Japanese yarn competed well with Indian yarn and Chinese hand-spun yarn in the North China market.

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4. The Emergence of Three Separate Trading Routes from Kobe in the Interwar Period It has been generally assumed that after the First World War, Japanese merchants dominated Japan’s export trade. While it is true that Western merchants lost their hold in Japan at a relatively early stage, there is strong evidence to suggest that Chinese merchants in Japan revived their position after the war. Table 3.4 shows that in 1925, 56 percent of the exports from Osaka to North China was carried out by Chinese merchants, while their share of Osaka’s trade with central China (Shanghai) was small. In the meantime, another group of Chinese merchants based in Kobe was responsible for the growth of exports from Kobe to Hong Kong and Southeast Asia. They handled 41 percent of this trade in 1925. Around this period these Chinese merchants began to initiate the purchase of Japanese goods to replace the Western goods that had been dominant until the outbreak of World War I. It was cotton goods that they wanted from Japan at a time when the West was not able to supply similar products. Toshita Kameyama, a Japanese merchant of cotton textiles who sold to foreign exporters at Osaka port, remarked, ‘‘European cotton textiles had not been brought to Asia due to the outbreak of the First World War, so Chinese merchants had come to buy Japanese cotton textiles as substitutes. Merchants in Kawaguchi, in particular, brought samples of textiles, and suggested the marketability of coloured textiles, such as sarong, poplin, satin, drill and so on. The development of Japanese high-valued textiles, which were made by local weaving centres, depended on the information of these Chinese merchants’’ (Nihon Menshifu Yushutsu Kumiai 1941: 42). Similar circumstances must have existed in Kobe as well. This evidence indicates that the Chinese merchants did not regard Japan’s industrial development as something to be resisted. Instead, for them, Japan’s industrialization was no more than the development of a ‘‘factory’’ which could supply them with various textiles at a reasonable price. Osaka and Kobe were Japan’s two major ports with respect to the China and Southeast Asia trade. Therefore, one can identify the emergence of three separate routes in the 1920s: the Osaka–North China route was used by Chinese merchants, the Osaka–Shanghai route by Japanese merchants, and the Kobe to South China and Southeast Asia route by both Japanese and Chinese merchants (see Table 3.4). As mentioned above, Chinese merchants from Shanghai had an influence on Japanese cotton mills until the end of the nineteenth century. At this time, however, these merchants disappeared from the Osaka trade with Shanghai. One can think that they were overwhelmed by the activities of Japanese merchants. However, this interpretation fails to explain why Chinese merchants revived their position in dealing with Japanese

Table 3.4. Share of Chinese merchants in export trade at Osaka and Kobe, 1925 (Million yen) From Osaka

Exports to

Exports by Chinese merchants

From Kobe

Total exports

Share of Chinese merchants

Exports by Chinese merchants

(37) (56) (11) (—) (—) (—)

25 —

China North Central South Hong Kong Southeast Asia

125 110 15 — —

339 198 140 1 18 43

Total

125

400

India

—

(Cotton yarn exports) (Cotton textiles exports)

12 73

Total exports

From both ports Share of Chinese merchants

Exports by Chinese merchants

(23) (—)

150 110

25 25 30

111 58 50 3 35 99

(47) (71) (30)

(31)

80

245

76

(—)

—

46 197

(26) (37)

50

Total exports

Share of Chinese merchants

40 25 30

450 256 190 4 53 142

(33) (43) (21) (47) (21)

(33)

205

645

(32)

69

(—)

—

145

(—)

80

(63)

37

63

(26) (44)

Source: Osakashi Sangyobu (1928: 59–60, 169–87, 1939: 49–55). Notes: Total exports of cotton yarn and cotton textiles from Osaka include exports to China only. Total exports of cotton textiles from Kobe include exports to China and Southeast Asia only.

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colored cotton textiles in the Osaka–North China trade and the Kobe– South China and the Southeast Asia trade. Around this period, Shanghai became one of the biggest industrial cities that was producing cotton textiles (including colored ones) for the domestic market, and so Chinese merchants changed their business from trading in Japanese industrial goods to trading in domestic ones (Toyo Menka 1931). This change meant that Japanese merchants in the Osaka–Shanghai trade now faced keen competition from Chinese merchants when Japanese textiles arrived in Shanghai. Two separate routes where Chinese merchants’ participation was strong had kept up with the development of Japanese production of colored cotton textiles. After World War I, these were mostly made by small- and medium-sized textile factories in the local weaving centers (see Chapter 4 of this volume), rather than by large Japanese spinning and weaving companies in the major cities. Colored cotton textiles made up 14 percent of the total exports of cotton textiles in 1914, 33 percent in 1919, and 65 percent in 1929 (Shokosho Shomukyoku 1929). They came to take up 80 percent of total exports of cotton textiles in the 1930s and were exported mainly by foreign merchants even during the second Sino– Japanese War (1937–45). Table 3.5 reveals the importance of foreign merchants’ purchases in the Japanese exports of colored cotton textiles in Kobe, particularly for the early 1930s. The data refer to the amount of sales by a weaving company of Hiromu Takase, a relatively large cotton textile manufacturer in Banshu district, located about 40 km northwest of Kobe and one of the fastest growing and the most successful local weaving centers during this period (Abe 1989: Chapter 4). The weavers of Banshu specialized in making a variety of high-valued textiles (mostly colored ones such as sarong), and were noted for responding to local demands by shifting production lines in a flexible manner. This table makes it clear that Chinese and Indian merchants, such as Sam Shing, K. N. Dhanawall, P. K. Nataraja, B. M. Kharwar, Hotchand Khemchand, and A. A. Karim, whose activities were centered around Southeast Asia (Nanyo Kyokai Singaporu Shohin Chinretsusho 1929), purchased cotton goods from Takase. Ten years ago, Mr. Takase, head of the company at that time, told me that these foreign merchants were responsible for the purchases in the critical months of recovery from the Great Depression. It was these foreign merchants who were willing to buy Takase’s cotton textiles (especially sarongs) in bulk at a high price. Table 3.6 shows that Sam Shing (No. 1 in Table 3.5, from Guangdong), whose activities were centered on Singapore and who was a director of the Kobe Kasho Nanyo Yushutsu Kyokai [the Association of Chinese Merchants in Kobe] (Kikakuin 1939: 353), purchased large amounts of Takase’s sarong at a high price each month during the second half of 1932, while Japanese traders, such as

Chinese Merchant Community in Kobe

59

Table 3.5. List of main buyers of cotton textiles from Hiromu Takase in Banshu district, 1932 Buyer 1 Sam Shing
2 Nissho 3 Mitsui Bussan 4 K. N. Dhanawal

5 P. K. Nataraja 6 Kondo Yo Shoten 7 Netherlands-Asiatic
Trading Co. 8 M. Shokai
9 B. M. Kharwar 10 Hotchand Khemchand

11 A. A. Karim Bros. 12 Kawai 13 Others Total

Foreign merchants total

Sales (percent)

Unit price (yen/tan)

15.7 12.7 7.7 7.7 7.2 5.5 4.8 2.9 2.8 2.7 2.4 2.3 25.6 100 (229,457 yen) 56.7 (130,457 yen)

1.24 0.88 0.63 0.62 0.98 0.89 0.34

Kobe Osaka Osaka Osaka Kobe Kobe Kobe

1.23 1.07 0.68 1.24 0.63

Kobe Kobe Kobe Kobe Kobe

0.83

Source: Takase (1932–34). Notes:
refers to foreign merchants, and & to Japanese merchants.

Nissho (No. 2 in Table 3.5), purchased them at a lower price (Takase’s sales to these two figures are shaded in Table 3.6). Foreign merchants played an important stabilizing role in local textile production in prewar Japan. Thus, the evidence in the interwar period suggests the development of a two-tier structure, in which Japanese merchants dominated the trade of plain cotton cloth in relatively large orders, while Chinese, Indian, and other foreign merchants remained vital in the development of a higherrange market of cotton textiles in Asia. This latter development was often carried out by thriving local weaving centers in Japan rather than by powerful big businesses, such as Toyo Boseki. It was this development that supported the rapid growth of Japanese exports in the first half of the 1930s. There were important differences between Chinese merchants in Osaka and Kobe (Osakashi Sangyobu 1928, 1939; Kobe Zeikan 1932; Boekikyoku 1938). The Osaka traders were willing to make anticipatory purchases of Japanese cotton textiles (including colored ones), and were dependent on their main offices in North China, while the Kobe-based merchants traded on a self-supporting accounting system, and on a commission basis. Osaka-based merchants purchased cotton textiles by remittance from their head office in North China, while Kobe-based merchants drew documentary bills on the consumer in foreign exchange banks in Kobe.

Table 3.6. Composition of monthly sales of ‘‘Sarong 42–8’’ classified by unit price by Hiromu Takase in Banshu district, 1932 (Yen) Unit price

Feb–Mar.

Apr.–May

June–July

Aug.–Sept.

Over 1.60
1 150(1)

Over 1.50 Over 1.35


1 1,450(1)

Over 1.25

8 3,325(5)
1 2,630(4) & 1,300(3) 12 1,677(2)

Over 1.20

2 2,480(6)

Over 1.30

Over 1.15

8 2,300(4)

Over 1.10


1,650(3) 6 560(1) & 2,180(6)
9 545(1)

Over 1.05 Below 1.05 Total

8,685(16) [543]


1 2,720(5)

2 3,474(5)

6 3,900(7)
1 1,300(1)

8 1,150(2)
1,150(4)

12 2,001(4)
1 1,295(1) 6 1,220(2) 12 360(1)
4 3,480(7)
2,300(3)

6 784(2)

12 1,368(2)


654(1)
9 545(1)
785(1) 19,954(36) [554]


1 111(1)


1 260(1)

Oct.–Dec.

Total

1 8,986(15)

5 5,780(12) 3 4,500(6)
1 3,768(7) & 2,980(6)
2,900(6)
4 1,450(4)
9 740(1)
1 185(1)

14,740(27) [546] 8,418(14) [601] 15,714(28) [561]

5,173(7) [739] 4,488(10) [448] 20,757(38) [546]

5 428(1)
1 7,637(13) 2 2,270(4) 6 470
9 1,980(3) 2 1,221(4) 2 1,090(3)

2 888(3)
9 220(1)

8,671(19) [456] 5,125(13) [394] 3,565(7) [509]

32,371(62) [522]

99,551(185) [538]

& 1,700(4) 6 1,080(2) 20,315(35) [580]

18,226(36) [506]

12,900(22) [586]

Source: Takase (1932–34). Notes: ( ) refers to the number of sales, [ ] to the average amount of sales. The number in the circle or box indiates the merchant number in Table 3.5, whereas
refers to other foreign merchants, and & to other Japanese merchants. See also the text for details.

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Relatively speaking, they had sufficient operating funds, and were more independent. As soon as the anti-Japanese movements broke out and prompted serious deterioration in trade between Japan and China (especially in response to the Manchurian Incident in 1931), Osaka-based Chinese merchants had gone back to North China, while the Kobebased merchants tended to stay on in Kobe. Of these two merchants, the former were temporary and the latter were permanent, and were assumed to be reliable by those Japanese merchants of cotton textiles who dealt with them (Post 1995; Shimizu and Hirakawa 1999). Although the lack of information prevents me from summarizing the features of Osaka-based Chinese merchants, it is possible to get some information on the history of the Kobe-based merchants. Those Japanese merchants of cotton textiles who were members of Kobe’s Association of Cotton Textiles for Exports recognized seventeen ‘‘reliable’’ Chinese merchant firms even in September 1932 (Osaka Menpusho Domeikai 1932: 17). It was necessary for the Chinese merchants to show that they were reliable and stable members of the Association, especially after the Manchurian Incident. The Chinese members, classified according to their area specialization, were as follows: To the Dutch East Indies: Dong Nan (Tung Nam) De Ren He (Tack Yuen Woo) To Singapore: San Sheng (Sam shing) Li Xing (Lai Hing) Yu Fa (Yue Fat) Cheng Xing (Seng Hing) Ren He (Yun Woo) To Xiamen (Amoy), Fuzhou, and Manila: Jian Dong Xing (Kian Tong Hing) Xin Rui Xing (Sin Sui Hing) Long Shun Liu Fang (Loong Shun) Yu Xing (Yue Hing) Zhi He (Tee Hoo) Dong Fang (Tong Hong) Jiag He Long (Kien Hoo Leong)

Guangdong Guangdong Guangdong Guangdong Guangdong Guangdong Guangdong

Fujian Fujian Fujian Fujian unknown unknown Fujian

To unknown areas: Tai Chang (Tai Cheong) Jin Long (Kim Loong) Yi He (Yee Woo)

unknown unknown Guangdong

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They were Chinese merchants in Kobe from the Fujian and Guangdong provinces, and had their own sphere of influence, reflecting their place of origin. Chinese merchants from Fujian tended to export Japanese cotton textiles to South China and Manila, while the merchants from Guangdong to Southeast Asia.

5. The Chinese and Indian Merchants Dealing with Profitable Japanese Cotton Textiles in Southeast Asia in the 1930s In the first half of the 1930s, Japan was able to take advantage of her proximity to the Asian market to compete successfully with European goods in Manchuria, India, and Southeast Asia, while Japanese exports to China were diminished both by the development of a modern Chinese cotton industry and by the rise of anti-Japanese movements after the Manchuria Incident of September 1931. Japan’s exports came to depend on the markets in the Japanese, British, and Dutch colonies. The main factors behind the increase in exports of Japanese cotton textiles were their low prices which had been realized through the rationalization of cotton firms since the 1920s, and the devaluation of the Japanese yen, particularly during 1932. The Japanese yen fell very rapidly in value relative to the British and Dutch colonial currencies. This accelerated the increase in exports of Japanese cotton textiles to British and Dutch colonies in Asia. Japanese historiography has emphasized that both this increase in exports and the fiscal policy of the Minister of Finance, Korekiyo Takahashi, contributed to Japan’s recovery from the Great Depression after 1932. With an increase in Japanese exports, cotton textiles became a focus of Anglo–Japanese and Dutch–Japanese commercial conflicts, and so prompted Japan to hold trade negotiations with Britain and India in 1933, and with the Dutch in 1934 (Kagotani 2000, Chapter 5). The increase in the exports of Japanese cotton textiles to the European colonies in Asia made the European powers intensify their protectionist policies, and it has been supposed to have isolated Japan from the world. The anti-Japanese movements by the Chinese merchants were also supposed to have isolated her, and Japan has been supposed to have faced the development of ‘‘bloc economies’’ by European countries in this period (Sugiyama 1994). However, the Japanese share in the imports of British India and the Dutch East Indies did not decrease immediately after the trade negotiations with Britain and India in 1933 nor after the talks with the Dutch in 1934. Chinese merchants, and Indian merchants as well especially during the 1930s, had a tendency to continue to deal with Japanese cotton textiles, though British merchants attempted to block Japanese goods, and tried to

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give preference to the goods produced within the empire. Chinese merchants implemented a boycott of Japanese goods, protesting against the Manchurian Incident of 1931. In the case of Singapore, it was no longer possible for the leading Chinese merchants in Circular Road there, who remained loyal to British piece goods in the 1920s, to ignore the fact that their boycott was largely futile, since Chinese merchants outside of Circular Road were buying Japanese goods from Indian, Japanese, and Arab importers, and outside Singapore the smaller Chinese dealers were stocking Japanese goods and Chinese consumers were buying them. The Chinese merchants’ patriotism could not prevail over their trading instincts, in view of the fact that 100 Straits dollars, which purchased 132 yen in May 1932, was equivalent to 170 yen by August of that year. Table 3.7 is based on the annual reports of Nanyo Kyokai [a Japanese society for the promotion of Nanyo, an area mainly referring to Southeast Asia] (Nanyo Kyokai Singaporu Shohin Chinretsusho 1935), which tried to show a result of the ‘‘quota system’’, announced by the British government in May 1934, which applied to cotton goods from all foreign countries in British colonies. The quotas were to be based on average imports between 1927 and 1931, which was the period before the rapid increase in Japanese trade could be felt. This indicates that, in the case of imports into Singapore of Japanese cotton textiles during the period from June to December 1934, Chinese importers, such as Changfa (Cheong Fart), Jiyi (Chup Yick), Lishengyuan (Lee Sang Yion), Wuhanxing (Ng Hong Hing), Guanghualong (Kwong Wah Loong), and Youcheng (Yau Seng & Co.), handled 38 percent; Japanese importers, such as B. S. Shimoda & Co., Mitsui Bussan, S. Katoh, and Mitsubishi Shoji, 30 percent; and Indian importers, such as Maganlal Nagindas, J. Kimatrai, T. Chhotalal, G. Ramchand, and R. Purshotam, 26 percent. The relative position of Japanese importers was not as overwhelming as might be thought, indicating that the imports into Southeast Asia depended on these Chinese and Indian merchants’ networks, even after the quota system came into force from June 1934. Table 3.8 shows that the main categories of textiles imported by European importers, such as Henry Waugh, Watts & Co., Edgar Brothers, Brinkman and Barlow (Brown 1994), from the West (see (4) in Table 3.8) were similar to textiles imported by the Chinese from Japan (see (2)), such as W. cotton, D. cotton, Print cotton, and G. cotton. This means that the Chinese importers wanted to deal with textiles such as those imported from the West, so that the Chinese directly competed with European merchants in Singapore in the 1930s (Shokosho Boekikyoku 1934; Nanyo Kyokai Singaporu Shohin Chinretsusho 1935). Therefore, the competitive advance of Japanese textiles was not only supported by the drastic devaluation of the Japanese yen in 1932, but also by the

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Table 3.7. Geographical composition of imports of cotton textiles into Singapore and ethnic composition of firms engaged in import trade, June–Dec. 1934 Japanese firms

Chinese firms

Indian firms

European firms Total imports

Imports from

(thousand yards)

Japan China Britain

(1) 15,827 [30.0] (2) 20,252 [38.4] (3) 13,844 [26.3] 2,782 [5.3] 52,707 [100.0] 14 [0.3] 4,127 [94.9] 1 [0.0] 205 [4.7] 4,348 [100.0] 0 [0.0] 1,227 [9.7] 571 [4.5] (4) 10,833 [85.8] 12,632 [100.0]

Total imports

15,841 [22.7]

25,608 [36.7]

Imported from

14,416 [20.7]

13,821 [19.8] 69,688 [100.0]

(number of firms)

Japan China Britain

14 [13.6] 1 [2.7] 0 [0.0]

32 [31.1] 34 [91.9] 39 [40.2]

39 [37.9] 1 [2.7] 24 [24.7]

18 [17.5] 1 [2.7] 34 [35.1]

103 [100.0] 37 [100.0] 97 [100.0]

Total imports

15 [6.3]

105 [44.3]

64 [27.0]

53 [22.4]

237 [100.0]

Source: Nanyo Kyokai Singaporu Shohin Chinretsusho (1935). Notes: (1)–(4) correspond to Table 3.8.

dependence on and cooperation with Chinese merchants’ networks. From the Japanese point of view, it was crucial that the Chinese merchants preferred Japanese goods to those produced by the Europeans. The fact that Chinese merchants had the tendency to deal with Japanese goods, although the European powers intensified their protectionist policies to secure markets abroad for the home country’s cotton industry, helped produce a rather unexpected outcome, namely that bloc economies were not always successful in Asia. On the other hand, this table also shows that the main categories handled by the Indian importers from Japan (see (3) in Table 3.8) were similar to textiles handled by the Japanese (see (1) ), such as Print poplin, W. shirtings, G. shirtings, and B. shirtings. This does not necessarily suggest competition between Japanese and Indian importers in the usual sense of the word, but was rather related to Chinese boycotts of Japanese products in 1928, and from October 1931 to mid-1932. At these moments, Chinese importers were hesitant to distribute textile goods known to have originated in Japan, and these series of boycotts created new and major openings for Indian importers. By 1933, Indian merchants, along with Arab merchants, were responsible for the distribution of Japanese goods in local markets where Japanese dealers could not easily enter, as a result of Chinese boycotts of Japanese products. Significantly,

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Table 3.8. Composition of importers of the main categories of textile goods in Singapore, June–Dec. 1934 (Thousand yards) (1) Japanese 1 2 3 4 5 6 Total Grand total

(2) Chinese

W. shirtings 2,824 I D. cotton Print poplin 1,649 I W. cotton G. T. cotton 1,199 Print cotton D. poplin 973 B. cotton G. shirting 954 I C. cotton B. shirtings 812 C. poplin

(3) Indian 4,888 E 3,941 E 2,894 E 1,720 E 910 846 I

Rayon Print poplin C. poplin Print shirtings W. shirtings G. shirting

(4) European 2,337 1,250 J 1,045 C 1,037 902 J 691 J

W. cotton D. cotton Print cotton G. cotton B. cotton Str. poplin

3,446 C 1,886 C 1,415 C 1,227 594 C 575

8,411

15,199

7,262

9,143

15,827

20,252

13,844

10,833

Source: Same as Table 3.7. Notes: (1)–(4) correspond to Table 3.7. If the particular category (for example, W. shirtings) is dealt with by more than one ethnic group (in this case Japanese and Indian), I have indicated it at the end of each entry, using capital letters. E stands for European, C for Chinese, I for Indian and J for Japanese.

after the first Indo–Japanese cotton trade negotiations of 1933, ‘‘the Indian Commercial Association’’ was founded by Indian merchants at Osaka in November 1934 for the purpose of increasing the volume of exports of Japanese goods to South and Southeast Asia. It is also worth noting that the Indian community in Kobe, mostly from Bombay, Sind, and Punjab, became large enough to open a Muslim mosque in the city in October 1935. Furthermore, as low-priced Japanese exports increased, Dutch importers also began to show an interest in handling Japanese goods, which became increasingly profitable. Large Dutch importing houses that had been financed by Dutch investors and therefore had to pay dividends began to feel that the restrictions brought perilous conditions, for they had been able to make considerable profits on the Japanese goods. In particular, many important Dutch concerns, taking advantage of the higher purchasing power of their guilder, and of low yen freight rates, opened their own buying offices in Kobe. They bought on cash terms, used Japanese ships, and sold the goods through their organization in the Dutch East Indies. This activity indicates that Kobe-based Chinese merchants not only steadily increased their exports of Japanese goods from Kobe to Southeast Asia in the first half of the 1930s, but induced other international entries into this trade, further promoting Japanese exports.

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6. The Chinese and Indian Merchants’ Response to the Differential Exchange Rate Policies in Asia in the 1930s Chinese, and to a lesser extent Indian merchants, continued to deal in profitable Japanese goods, although the European powers intensified their protectionist policies to secure markets abroad for their country’s cotton textile industry. The result was that, in the first half of the 1930s, the European attempt at protectionist bloc economies in Asia was ultimately unsuccessful (Kagotani 2000, Chapter 5). We therefore need to inquire into the main factors that prompted Chinese and Indian merchants’ networks to turn to Japanese goods. A key factor was the poor economic performance of the European colonies in Southeast and South Asia in the 1930s, aggravated by deflationary policy (Booth 1990, 1998). Because the purchasing power of consumers in the colonies was deteriorating in the 1930s, merchants in these colonies sought Japanese goods, which consisted mostly of cheap consumer goods. There were two main economic motivations behind the European home countries’ possession of the colonies. First, the colonies were expected to serve as markets for European goods. Second, they were to pay interest on government loans, dividends on investments, as well as the political costs needed by the home government, such as ‘‘home charges’’ in the case of British India (Chatterji 1992: Chapter 7) and pension payments in the case of the Dutch East Indies (Booth 1990, 1998). Therefore, the exchange rate was often more or less fixed at a relatively high level, because exchange rate fluctuations were not desirable from the point of view of exports behind ‘‘industrial’’ interests and regular debt payments behind ‘‘financial’’ interests (Cain and Hopkins 2001). However, this policy facilitated a rapid increase in Japanese exports to these colonies when Japan abandoned the gold standard in December 1931, immediately devaluing the yen. While South and Southeast Asia set their exchange rates at relatively high levels, East Asian nations devalued their currencies that were linked to sterling at a heavily devalued rate, such as in Japan after 1932 and in China after 1935. This meant that East Asia as a region formed a ‘‘devaluation sphere’’ against South and Southeast Asia (Kagotani 2000: Chapter 5; Sugihara 2001). Significantly, it was Chinese merchants, and in the 1930s Indian merchants as well, who strongly reacted to the formation of this ‘‘devaluation sphere’’ in East Asia, recognizing a contrast with South and Southeast Asia, and promoted exports of Japanese goods. The above discussion implies that there was clearly a sense of complementarity between European financial interests and Japanese exports to European colonies, and that the concerns of financial interests were of greater significance to the prosperity of Europe than home industry protection. It was the Chinese and Indian merchants’ response to the differential exchange rate policies in Asia that prompted the rise in

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exports of Japanese goods. The interests of the European manufacturing sector were sacrificed, as long as Japanese goods were profitable for Asian and even European (especially Dutch) merchants.

7. The Chinese Merchants Dealing with Japanese Goods after the Second Sino–Japanese War The existing literature in Japan has argued that the outbreak of the second Sino–Japanese War in 1937 ignited the anti-Japanese movements over a wide area and that Chinese merchants in Southeast Asia refused to import Japanese goods. The Chinese merchants’ networks have been assumed to have closed their doors to Japan because of the growing conflict in China. Actually, Singapore was to become the center of anti-Japanese movements under the leadership of influential overseas Chinese such as Hu Wenhu (Aw Boon-haw) (Cochran 2001) and Chen Jia-geng (Tan Kah-Kee) (Ward, Chu, and Salaff 1994). Overseas Chinese citizens in Southeast Asia did boycott Japanese goods, and made large financial contributions to China’s war effort (Toa Kenkyusho 1945). Nevertheless, it is impossible to ignore the importance of Chinese merchants’ contributions to Japanese economic activities even in these troubled times. The pro-Japanese group in the Dutch East Indies was mainly composed of those overseas Chinese merchants who were born and grew up in the Dutch East Indies, the peranakan, who were also called kyosei in Japanese, those whose families had come originally from Fujian province (Miyoshi 1939). The peranakan merchants who had strong commercial relationships with Japanese merchants as late as early 1940s were as follows (Kagotani 2000: Chapter 10): Zhuang Xiyan (Tjung See Gan) Xue Chaoxing (Xue chao-xing) Xue Chaoyang (Xue chao-yang) Yu Hongrui (Yu hong-rui) Chen Shi Yang (Chan shi-yang) Lin Song Liang (Lin song-liangese) These Chinese merchants responded to the wartime situation in accordance with the necessity of their actual location, not according to the Nationalist government’s policy against Japan, while those overseas Chinese who were from Guangdong province and still had a close relationship with their home province, the totok, or shinke in Japanese, formed an extremely anti-Japanese movement. Zhuang Xiyan (Tjung See Gan) and Qiu Yuanrong (Hioe Njan Joeng) were leading figures in the textile trade in the Dutch East Indies. The former figure (Leo 1995: 39, 213),

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although born in Nanjing in 1885, had migrated to the Dutch East Indies from Fujian province in 1905, where he established the Tjoan Bie Textile Company in 1917, and served as the president of Shanghui, one of the Chinese Chambers of Commerce established in Java in the early twentieth century, from 1928 to 1932, and from 1935 to 1936. Even with the outbreak of war in China, Zhuang Xiyan had a strong desire to import Japanese goods, because European goods were not being brought to Asia due to the outbreak of World War II in Europe. On the other hand, Qiu Yuanrong was not active in importing Japanese goods, and was active in the anti-Japanese campaign. He was born in 1895 in Meixian, Guangdong province, and came to Java at the age of eighteen, where he soon became a successful businessman, specializing in textiles and later in many other fields. Like many well-to-do Hakkas in Java, he was a leading member of the Chinese Nationalist Party (Guomindang). Prior to World War II, he was widely recognized in the totok community, especially among businessmen. In 1936–40 he was elected as the president of Shanghui as a successor of Zhuang Xiyan, and as the president of Huaqiao Gonghui, a totok organization dominated by Hakkas, for the period 1942–46. He was also the chairman of the China Charity Fund Committee, a group that raised money during the second Sino–Japanese War from Indonesian Chinese. This evidence suggests that differences in the reactions and activities of overseas Chinese at this period may have been related to some degree to their place of origin. Table 3.9 estimates the transactions of Kobe-based Chinese, calculated from the business tax records. It indicates that Kobe-based Chinese were

Table 3.9. Exports from Kobe by Chinese merchants, 1925–41 (Million yen) The amount of exports handled by Chinese merchants whose name was first entered in the business directory

1925 1926 1929 1932 1936

1921 32.6 1925 26.8 1928 1932 1936 1938–43 Total A 59.4 Exports from Kobe to Southeast Asia B 135.4 Number of exporters C 81 A/B (percent) 43.9 A/C (thousand yen) 733 Source: Kagotani (2000: 204).

32.0 41.4 15.1 20.8 17.5 8.2 16.6 5.1 0.7

19.6 14.3 12.7 9.0

52.8 123.7 79 42.7 668

75.5 106.2 119 71.1 634

29.1 55.6 67.6 151.1 47 40 43.0 36.8 619 1390

1938 1941 7.3 6.5 2.5 2.2 5.4 1.4 25.2 92.0 55 27.4 458

10.2 1.9 3.0 1.9 3.3 9.7 29.8 96.1 86 31.0 347

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able to restore their business in 1941, even though the level of transactions did not exceed the results of 1936. Interestingly, the dealings in 1941 were carried on by newly risen merchants who entered into Kobe after 1937. They handled 32 percent of total dealings, and were regarded as a new pro-Japanese group. They had close connections with Southeast Asia, especially with the Dutch East Indies, an important market for Japanese cotton textiles until 1941 when Japan’s foreign assets were frozen by the United States (Kagotani 2000: Chapter 10). It is important to realize that a critical role was played by Chinese and other Asian merchants’ networks in the export of Japanese colored cotton textiles as late as the early 1940s.

8. Conclusion: Profitable and Dutiable Japanese Goods Were Needed in the 1930s The general historiographic consensus has been that Western reactions to the influx of Japanese industrial goods in their colonies in Asia were negative and were intended to check the increase of Japan’s exports. However, it can be argued that the European colonial governments in Asia recognized that the continuation of imports of Japanese goods was necessary on three accounts. The first came from the perspective of social policy; indigenous consumers needed Japanese goods at a time when their purchasing power was deteriorating; cheap Japanese consumer goods would satisfy the colonial subjects and take some pressure off of the local authorities. In the Dutch East Indies, for example, the colonial government introduced, instead of raising import tariffs, an import quota system aimed at limiting imports of Japanese cotton textiles. It did so on the basis of the import figures of 1933, a year in which the level of imports of Japanese goods was particularly high. Had they wanted strictly to limit Japanese exports, an import figure of a different base year, sometime before 1933, could have been easily selected. The second consideration was the collection of import tariff revenues. In European colonies in Asia, tariff revenues were needed to meet annual payments to their respective home countries. It can be argued that the colonial governments were obliged to keep the suitable level of imports of Japanese goods for this reason. When the boycott movement against Japanese goods by Chinese citizens in Southeast Asia broke out after the Manchurian Incident of 1931, the colonial governments in British Malaya, the Dutch East Indies, and the Philippines attempted to control these Chinese movements in a rather strict fashion (Kagotani 2000: Chapter 5). In British India, the Government of India tried to raise the duties on imported cotton textiles in order to balance the budget in the early 1930s (Chatterji 1992: Chapter 8). The increase in import duties not only protected the Indian industry but also kept the confidence in the rupee by

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contributing to the improvement of fiscal conditions. It was clear for the Government of India that Japanese goods were as important a source of revenue as Lancashire goods in the 1930s, since there was a large difference in rates between the preferential and non-preferential tariffs, even though the volume of British cotton textile imports was larger. After the Indo–Japanese cotton trade negotiations of 1933, the import tariff rate against Japanese cotton goods was 50 percent, compared with 25 percent against the British goods (Kagotani 2000: Chapter 6). Thus in 1935, the Government of India collected the tariff revenue of 21 million rupees from Japanese cotton textiles imports, compared to 21 million rupees from the British counterparts, while the tariff revenue from the import of sugar decreased dramatically from 68 million rupees in 1933 to 20 million rupees in 1935, as a result of the import-substitution efforts of the Indian sugar industry (Nichi-in Kyokai 1935: 186–7). Until 1937, therefore, Japan was able to maintain a certain level of interdependence with British India and the Dutch East Indies, linking the Japanese yen to sterling at a devalued rate. Japanese goods remained in demand, as long as they were dutiable for the colonial governments, and dealing with them was profitable for Asian and European importers.

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Shokosho Boekikyoku [Bureau of Trade Affairs, Ministry of Commerce and Industry] (ed.), Kaigai Shoshijo ni Okeru Honpo Sen-i Kogyohin [Japanese Textiles in Overseas Markets], Vol. 8 (Tokyo, 1934). Shokosho Shomukyoku [Bureau of Commercial Affairs, Ministry of Commerce and Industry] (ed.), Naigaishijo ni Okeru Honpo Yushutsu Men-Orimono no Gensei [The Current State of Japanese Cotton Textiles for Export at Home and Abroad] (Tokyo, 1929). Sugihara, K., Ajia-kan Boeki no Keisei to Kozo [Patterns and Development of IntraAsian Trade] (Kyoto, 1996). ——, ‘‘Higashi Ajia ni okeru kogyoka-gata tsuka chitsujo no seiritsu [The establishment of an industrialization-promoting monetary regime in East Asia]’’, in Akita, S., and Kagotani, N. (eds.), 1930-nendai no Ajia Kokusai Chitsujo (Hiroshima, 2001) Sugiyama, S., ‘‘The expansion of Japan’s cotton textile exports into Southeast Asia’’, in Sugiyama, S., and Guerrero, M. C. (eds.), International Commercial Rivalry in Southeast Asia in the Interwar Period (New Haven, 1994). Takamura, N., Nihon Bosekigyo-Shi Josetsu [An Introduction to the History of the Japanese Cotton Spinning Industry], Vol. 1 (Tokyo, 1971). Takase, H., Uriage-cho [An Account Book on the Sales of Cotton Textiles] (Nishiwaki, 1932–34). Toa Dobunkai (ed.), Shinkoku Shogyo Soran [A Compendium of Chinese Commerce], vol. 5 (Shanghai, 1908a). —— (ed.), Shina Keizai Zensho [A Compendium of the Chinese Economy], Vol. 7 (Shanghai, 1908b). Toa Kenkyusho [Institute for the Research of East Asian Affairs] (ed.), Nanyo Kakyo Konichi Kyukoku Undo no Kenkyu [A Study on the Anti-Japanese Movement by Overseas Chinese in Southeast Asia] (Tokyo, 1945). Toyo Boseki Co. (ed.), Taisho-San-Nen Shimo-Hanki Kaisha Yoran [Business Memorandum for the Second Half of the Year 1914], No. 1 (Osaka, 1914). This memorandum is currently kept at the Corporate Communications Department of Toyo Boseki Co. Toyo Menka Co. (ed.), Tomen Yonju-Nen-Shi [Forty Years of Toyo Menka] (Osaka, 1961). —— (ed.), Shiten-cho Kaigi Gijiroku [Minutes of All Branch Managers’ Meeting in Toyo Menka] (Osaka, 1931). These minutes are currently kept at the Central Library of Osaka City University. Ward, A. H. C., Chu, R., and Salaff, J. (eds.), The Memoirs of Tan Kah Kee (Singapore 1994). Yasukawa, Y., Yo no Sokuseki [The Course of My Life] (Tokyo, 1996). The manuscript of this book is currently kept at the Corporate Communications Department of Tomen Co.

4 The Chinese Market for Japanese Cotton Textile Goods, 1914–30 takeshi abe The purpose of this chapter is to show how the Japanese cotton industry developed its market in China during and after World War I (1914–18), and why it rapidly lost ground by around 1930. Cotton industry was one of the most important industries in Japan from the premodern times to the early 1960s, and China had been its largest foreign market since the 1890s. It is said that the industry had established an unrivaled competitive advantage during the interwar period. However, it was confronted with several serious difficulties in the Chinese market during and after World War I. In particular, both Chinese industrialization and the surge of nationalism resisted the increase of imports from Japan, compelling the industry to resort to such measures as the establishment of their spinning mills in China (zaikabo), the introduction of a number of cost-reducing measures, and the worldwide search for alternative markets. Although many researchers argued that the Japanese cotton industry had a competitive advantage during and after the war, one of the most important reasons why the industry made great efforts to acquire it was that it had to compensate for the loss of the Chinese market.

1. The Japanese Cotton Industry before World War I It is necessary to begin with a brief review of how the industry developed before World War I. Although the Japanese traditional cotton industry had been highly developed since about the late seventeenth century, it was in 1867 when the Kagoshima Spinning Mill began operations that the modern spinning industry took root. This was followed by the Meiji government’s attempt to plant modern cotton spinning mills with 2,000 spindles, based on technology developed in Lancashire. But it was not until the mid-1880s that modern spinning companies like the Osaka Spinning Company, its newly emerged mills fixed with 10,000 spindles, took off, with the support of the government’s monetary policy, though not its financial policy. Thereafter, the industry went through a remarkable phase of development, as Table 4.1 shows, replacing not only

Takeshi Abe

74

Table 4.1. Demand for machine-spun yarn, 1887/1888–1935/1936 (Unit: 1000 kori)

Exports

Integrated weaving mills

Sanchi (producing centers)

Year

Production

Imports

1887–1888 1889–1890 1891–1892 1893–1894 1895–1896 1897–1898 1899–1900 1901–1902 1903–1904 1905–1906 1907–1908 1909–1910 1911–1912 1913–1914 1915–1916 1917–1918 1919–1920 1921–1922 1923–1924 1925–1926 1927–1928 1929–1930 1931–1932 1933–1934 1935–1936

58 (18%) 178 (42%) 374 (73%) 527 (82%) 812 (87%) 1,215 (92%) 1,433 (96%) 1,431 (98%) 1,497 (100%) 1,851 (99%) 1,862 (99%) 2,160 (100%) 2,481 (100%) 3,184 (100%) 3,646 (100%) 3,728 (100%) 3,738 (100%) 4,040 (100%) 4,244 (100%) 5,045 (100%) 4,983 (100%) 5,317 (100%) 5,378 (97%) 6,572 (98%) 7,168 (100%)

269 (82%) — (—) — (—) 328 (100%) 250 (58%) 0 (0%) — (—) 428 (100%) 140 (27%) 0 (0%) — (—) 513 (100%) 119 (18%) 13 (2%) — (—) 633 (98%) 117 (13%) 54 (6%) — (—) 876 (94%) 109 (8%) 370 (28%) — (—) 954 (72%) 59 (4%) 550 (37%) 48* (3%) 894 (60%) 29 (2%) 407 (28%) 84* (6%) 970 (66%) 5 (0%) 565 (38%) 108 (7%) 830 (55%) 28 (1%) 535 (28%) 193 (10%) 1,151 (61%) 11 (1%) 394 (21%) 230 (12%) 1,248 (67%) 4 (0%) 607 (28%) 321 (15%) 1,236 (57%) 4 (0%) 660 (27%) 440 (18%) 1,385 (56%) 2 (0%) 1,039 (33%) 588 (18%) 1,560 (49%) 1 (0%) 1,123 (31%) 653 (18%) 1,871 (51%) 2 (0%) 892 (24%) 758 (20%) 2,080 (56%) 9 (0%) 535 (14%) 924 (25%) 2,288 (61%) 6 (0%) 686 (17%) 827 (20%) 2,533 (63%) 15 (0%) 519 (12%) 1,206 (28%) 2,534 (59%) 7 (0%) 516 (10%) 1,422 (28%) 3,114 (62%) 6 (0%) 189 (4%) 1,490 (30%) 3,310 (66%) 14 (0%) 127 (2%) 1,582 (30%) 3,622 (68%) 144 (3%) 121 (2%) 1,568 (28%) 3,833 (69%) 113 (2%) 113 (2%) 1,868 (28%) 4,704 (70%) 32 (0%) 207 (3%) 1,942 (27%) 5,051 (70%)

Total demand 328 (100%) 428 (100%) 513 (100%) 646 (100%) 930 (100%) 1,324 (100%) 1,492 (100%) 1,460 (100%) 1,502 (100%) 1,878 (100%) 1,873 (100%) 2,164 (100%) 2,485 (100%) 3,186 (100%) 3,647 (100%) 3,730 (100%) 3,747 (100%) 4,046 (100%) 4,259 (100%) 5,052 (100%) 4,989 (100%) 5,331 (100%) 5,522 (100%) 6,685 (100%) 7,200 (100%)

Sources and Notes: Takamura (1971, Vol. 1: 146, Vol. 2: 82); Koda (1931: 26–7, 199–200); Dai Nihon Boseki Rengokai, relevant years. In this table, dashes indicate that no amount was entered, while asterisks indicate estimates. The Japanese unit, one kori, represents 400 lbs of cotton yarn. I am grateful to Professor Toshiaki Ushijima for his assistance in compiling this table.

domestic hand-spun yarn, but imported yarn from Lancashire and India. Around 1890, the cotton spinning industry completed import substitution, and began to increase yarn exports. By 1897, apparently encouraged by the repeal of the export duty on cotton yarn in 1894 and after victory in the Sino–Japanese War (1894–95), exports of yarn surpassed imports by volume. In 1896 the import duty on raw cotton was repealed, and a number of Japanese raw cotton producers were obliged to abandon their production, while the cotton spinning companies became able to obtain cheaper, and higher quality, raw cotton, especially from India. This shift of the raw material base was helped by a few large trading companies such as Mitsui Bussan Kaisha and Nihon Menka, as well as by the availability of competitive freight rates offered by big shipping companies like Nihon Yusen Kaisha and of trade finance offered by the Yokohama Specie Bank.

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In the depression after 1897 the larger cotton spinning companies started to enlarge their size through mergers and acquisitions, following the examples of the United Kingdom and the United States. After the Russo–Japanese War (1904–05), six large companies—Osaka Boseki, Mie Boseki, Osaka Godo Boseki, Kanegafuchi Boseki, Amagasaki Boseki, and Settsu Boseki—became particularly prominent, all of which produced not only various yarns but also mainly plain gray cloth (Takamura 1971; Abe 1990). According to Table 4.1, the demand for Japanese yarn before World War I came from three sources: exports, integrated weaving mills, and independent weavers (at local producing centers). Although the first two types of demand gradually increased their shares, the last category remained the most important, almost always accounting for over 50 percent of demand, even at the lowest point immediately before the war. Thus the cotton weaving industry in modern Japan can be divided into two large business groups. The first group started to develop around 1890, and combined spinning and weaving, consisting of large-scale mills equipped with power looms from the beginning, and was keen on adopting the latest mechanized technology. The second group, in contrast, boasted a history dating back to the Edo period (1603–1868), and specialized in weaving. It was made up of the producing-center cotton weaving industry. The overwhelming majority of weavers, at least until about the time of the Russo–Japanese War, operated as part of a putting-out system, in which members of farming households, using hand looms and working in their spare time, wove cotton cloth that was collected by local merchants. It was common for large members of such independent weavers, merchants, and processors to become concentrated within a relatively small area, thus forming what were called sanchi, cotton-textile producing centers. After the Russo–Japanese War some producing centers like Sen’nan (Osaka Prefecture), Senboku (Osaka Prefecture), Chita (Aichi Prefecture), Enshu (Shizuoka Prefecture) and Banshu (Hyogo Prefecture) shifted towards a factory system. In these producing centers, the construction of small- and medium-sized mills equipped with power looms increased at a remarkable speed, and the cottage industry that relied upon hand looms began to decline. In this way, this classical type of traditional industry was for the most part transformed into small- and medium-sized manufacturing industries (Abe 1992: 3–27).

2. The Structural Change during World War I China had been a very important market for the Japanese cotton industry. After the 1890s, Japanese exports of thick cotton yarn of less than 20 count rapidly increased, competing well with Indian goods. After the Russo–

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Japanese War, some of the Japanese cotton spinning companies which also had weaving mills succeeded in exporting coarse cloth into North China despite severe competition from the United States. Thereafter a large quantity of Japanese cotton cloth came to be exported, and the total value of Japanese exports of cotton cloth exceeded that of imports in 1909. Table 4.2 shows the rapid growth of Japanese exports of cotton cloth during the boom of World War I, which was brought about not only by integrated spinning and weaving companies, but also by specialized weaving firms in many sanchi. Central to this growth was further export expansion in the Chinese market. Needless to say, this was owing to the decrease or stagnation of exports in Lancashire cotton goods into China. Some examples are shown in Table 4.3. However, according to Table 4.4, the peak year of Chinese imports of cotton yarn both from India and Japan in volume terms was 1915, while Chinese production rapidly increased and it surpassed the total volume in those two countries in 1917. These facts suggest that Japanese cotton spinning companies as well as Indian cotton mills lost the Chinese market in thick cotton yarn during the war when Chinese domestic cotton spinning mills began to develop, and substituted imported goods. It is well known that immediately after the war, the number of zaikabo became established (see Kuwahara 1982, 1990, 1992; Takamura 1982; Nishikawa 1987; Duus 1989). It began with the establishment of the Shanghai Cotton Spinning Co. Ltd. in 1902, which was partly sponsored by the general trading company, Mitsui Bussan Kaisha. Thereafter, not only Mitsui Bussan but also Nihon Menka had zaikabo in Shanghai, but much more important was the construction of many mills in Shanghai by Naigaiwata Kaisha, which, like Mitsui Bussan and Nihon Menka, was originally known as an established cotton trading company. The arrival of this company completely metamorphosed zaikabo in the 1910s. Naigaiwata had had two cotton spinning mills in Japan by 1905, began the operation of its newly founded cotton mill in Shanghai in 1911 and, by the end of 1914, ran three mills with about 110,000 spindles in Shanghai. While the trading companies had established zaikabo, no spinning companies had done so before World War I. But, during the war most of them began to feel the threat from a rapid decrease of their yarn exports to China, and they began planning to build zaikabo and realized their operations after the war, first in Shanghai and slightly later in Qingdao and Tianjin. Previous research has offered several reasons to account for their emergence, including the development of Chinese spinning mills, the rise of labor cost in Japan during and after the war, the rise of tariff barriers in China just after the war, the delay in the delivery of foreign spinning machinery,1 and international pressure for Japan to prohibit night duty for female workers—planned in 1926 but materializing in 1929. Although

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Table 4.2. Geographical composition of the Japanese exports of cotton cloth, 1903–37 (Value : 1,000 yen) Year

Mainland China

1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937

2,984 (43.4%) 3,068 (39.6%) 4,607 (40.1%) 8,161 (52.3%) 4,718 (28.9%) 4,534 (31.0%) 6,728 (38.1%) 10,078 (49.2%) 10,128 (35.3%) 12,717 (34.4%) 18,965 (44.1%) 26,189 (60.3%) 27,332 (57.1%) 34,784 (47.5%) 84,804 (57.3%) 88,048 (32.8%) 143,284 (40.8%) 130,516 (37.1%) 100,988 (49.6%) 108,758 (49.0%) 100,292 (42.8%) 137,921 (42.2%) 194,013 (44.8%) 180,077 (43.3%) 123,492 (32.2%) 158,498 (45.0%) 150,116 (36.4%) 86,914 (31.9%) 30,521 (15.4%) 37,154 (12.9%) 25,605 (6.7%) 12,030 (2.4%) 11,912 (2.4%) 7,861 (1.6%) 11,296 (2.0%)

Guangdong Province Hong Kong Manchuria n.a. n.a. n.a. n.a. 2,731 2,110 3,584 4,980 6,757 6,169 9,109 3,331 3,178 4,025 8,988 20,832 44,208 26,593 15,537 18,494 14,618 15,705 19,502 16,042 13,119 15,074 15,358 9,186 6,173 16,108 18,822 19,217 15,222 28,332 29,426

1,113 872 1,087 1,395 1,084 424 522 866 562 873 1,143 1,032 913 1,454 2,648 3,621 3,208 9,347 12,307 10,213 11,625 19,339 20,577 24,723 29,583 17,464 20,785 18,252 9,765 3,755 5,675 7,311 9,802 15,102 9,436

n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 3,544 3,263 21,626 40,253 35,733 47,221 55,748

China total

World total

4,097 (59.6%) 3,940 (50.9%) 5,694 (49.5%) 9,556 (61.2%) 8,533 (52.2%) 7,068 (48.4%) 10,834 (61.3%) 15,924 (77.8%) 17,447 (60.8%) 22,759 (61.6%) 29,217 (67.9%) 30,552 (70.4%) 31,423 (65.6%) 40,263 (55.0%) 96,440 (65.1%) 112,501 (41.9%) 190,700 (54.3%) 166,456 (47.3%) 128,832 (63.3%) 137,465 (61.9%) 126,535 (54.0%) 172,965 (53.0%) 234,092 (54.1%) 220,842 (53.1%) 166,194 (43.3%) 191,036 (54.2%) 186,259 (45.1%) 114,352 (42.0%) 50,003 (25.2%) 60,280 (20.9%) 71,728 (18.7%) 78,811 (16.0%) 72,669 (14.6%) 98,516 (20.4%) 105,906 (18.5%)

6,875 (100.0%) 7,743 (100.0%) 11,492 (100.0%) 15,618 (100.0%) 16,344 (100.0%) 14,611 (100.0%) 17,673 (100.0%) 20,463 (100.0%) 28,685 (100.0%) 36,953 (100.0%) 43,016 (100.0%) 43,403 (100.0%) 47,900 (100.0%) 73,173 (100.0%) 148,108 (100.0%) 268,600 (100.0%) 351,195 (100.0%) 352,173 (100.0%) 203,673 (100.0%) 222,052 (100.0%) 234,227 (100.0%) 326,537 (100.0%) 432,850 (100.0%) 416,255 (100.0%) 383,837 (100.0%) 352,218 (100.0%) 412,707 (100.0%) 272,117 (100.0%) 198,732 (100.0%) 288,713 (100.0%) 383,215 (100.0%) 492,351 (100.0%) 496,097 (100.0%) 483,591 (100.0%) 573,065 (100.0%)

Source and Note: Dai Nihon Boseki Rengokai, relevant years. In this table, ‘‘n.a.’’ refers to ‘‘data not available’’.

all of these factors did contribute to the industry’s move, I wish to pay particular attention to the executives’ strong sense of crisis in the face of the development of the Chinese cotton spinning industry. Kuwahara offered a detailed analysis of the direct motives of the establishment of zaikabo, and argued that Dai Nihon Boseki, which was formed in 1918 through the merger of Amagasakibo and Settsubo, Fuji Gas Boseki and Nisshin Boseki, decided to erect their zaikabo after the war, in order to secure the thick yarn market in China, while Kanegafuchi Boseki, Toyo Boseki (which was established in 1914

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Takeshi Abe

Table 4.3. Imports of British and Japanese finished cotton cloth to China, 1914–31 (Value: Haikwan Taels) Year (1) Italian 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 (2) Venetian 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 (3) Lasting 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 (4) ¼ (1) þ (2) þ (3) 1914 1915 1916 1917 1918 1919 1920 1921 1922

United Kingdom

Japan

Direct gross imports

Through Shanghai

10,052,809 5,907,941 4,758,587 5,691,336 5,452,068 4,557,527 11,363,149 12,183,643 8,484,264 6,383,940 7,099,240

6,050 4,162 11,344 385,635 632,758 1,029,179 781,065 559,364 2,334,265 5,120,961 9,226,428

11,605,990 7,186,280 6,198,094 7,568,259 7,618,757 7,303,693 13,285,095 14,399,657 12,345,892 12,832,479 17,424,077

2,439,907 n.a. n.a. 1,719,601 634,449 n.a. 4,974,129 1,870,983 n.a. n.a. 5,740,035

n.a. 4,037,385 3,215,443 n.a. 3,456,788 n.a. 5,436,464 n.a. n.a. 6,199,854 5,053,630

3,998* 22,065* 395,797 523,751 379,012 499,239 90,518 16,205 60,268 46,265 33,866

4,657,900 4,138,421 3,773,636 3,616,654 4,219,252 5,107,094 6,049,407 4,769,485 6,408,529 7,084,698 5,563,047

1,212,392 528,093 376,734 486,169 915,780 1,014,396 2,111,619 0 850,949 1,769,760 1,470,814

1,420,579 1,119,098 1,253,030 1,985,256 2,122,635 1,047,242 4,037,396 3,792,379 2,902,609 3,388,256 4,293,264

197,973* 213,593 240,253 1,408,042 2,837,816 7,604,948 8,324,602 9,453,331 12,125,656 12,013,892 11,379,910

2,348,544 1,805,735 1,820,784 3,970,303 5,659,827 9,662,062 13,035,600 14,563,059 16,691,714 17,434,371 19,173,286

480,626 n.a. n.a. 1,502,600 n.a. n.a. 4,633,737 3,014,376 2,815,677 3,707,623 3,911,986

11,473,388 11,064,424 9,227,060 7,676,592 11,031,491 5,604,769 20,837,009 15,976,022 11,386,873

208,021* 239,820* 647,394 2,317,428 3,849,586 9,133,366 9,196,185 10,028,900 14,520,189

18,612,434 13,130,436 11,792,514 15,155,216 17,497,836 22,072,849 32,370,102 33,732,201 35,446,135

n.a. n.a. n.a. n.a. n.a. n.a. 11,719,485 n.a. n.a.

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79

Table 4.3 Continued Year 1923 1924 (5) Sateen 1924 1925 1926 1927 1928 1929 1930 1931 (6) Sateen drill (five-shaft) in (5) 1924 1925 1926 1927 1928 1929 1930 1931

United Kingdom

Japan

Direct gross imports

Through Shanghai

15,972,050 16,446,134

17,181,118 20,640,204

37,351,548 42,160,410

n.a. 11,122,835

12,894,446 8,290,978 11,775,776 3,114,996 6,623,867 8,474,915 1,418,855* 2,512,129

10,692,098* 19,034,293 26,004,355 20,038,191 22,714,959 22,534,107 10,335,156 15,114,841*

26,508,131* 29,510,340 41,260,133 28,061,561 32,335,357 33,438,412 14,699,185 19,062,458

n.a. n.a. 10,620,261 n.a. n.a. 9,610,852 n.a. n.a.

160,527 40,357 151,128 80,201 243,272 1,817,576 418,202 160,718

8,678,182 13,923,817 17,813,548 13,588,136 15,246,244 16,145,212 6,286,185 9,660,165*

8,994,431 14,234,381 19,720,257 16,598,102 17,232,565 19,650,703 8,337,574 10,338,395

2,798,110 2,830,549 3,659,441 2,294,378 3,860,468 4,800,162 n.a. 918,513

Source and Notes: CMC, Returns of Trade and Trade Reports (title varies). In this table ‘‘n.a.’’ refers to ‘‘data not available’’, while asterisks indicate that the coverage of the data is incomplete. In principle, figures for Japan include imports from Taiwan but exclude imports from Korea.

through the merger of Osakabo and Miebo), Fukushima Boseki, and Nagasaki Boshoku followed suit. Only Osaka Godo Boseki erected Doko Boseki, a zaikabo, anticipating the growth in demand for Chinese fine yarn of more than 20 count, and targeting this segment of the market (Kuwahara 1990). Thus, the rapid import substitution of thick yarn from China was the crucial factor that urged Japanese companies to erect zaikabo. Table 4.5 gives a list of the top thirty spinning firms in China by number of spindles in 1922 and 1930. The percentages indicated in the ‘‘subtotal’’ columns show that those thirty firms took up most of the total spindles and looms. In 1922, the number of Chinese, Japanese, and British firms were nineteen, eight, and three respectively and sixteen, eleven, and three respectively in 1930. Twelve Chinese firms (Shen Xin, Da Sheng, Hua Xin, Yu Yuan, Yu Feng, Heng Feng, Tong Yi, Han Kou Di Yi, Yong An, Hu Nan, Heng Yuan, and Pu Yi), six Japanese firms (Naigaiwata, Shanghai Boshoku, Nikka Boshoku, Doko Boshoku, Toyoda Boshoku, and Da Kang

Takeshi Abe

80

Table 4.4. Chinese yarn production and imports from Japan and India, 1913–30 (Unit: 1,000 bales) Imports from Year

Production

India (A)

Japan (B)

(A)þ(B)

1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930

541 645 645 726 795 928 918 927 1,011 1,905 1,898 1,891 1,909 1,979 2,049 2,234 2,329 2,422

418 373 396 337 324 148 280 220 155 110 98 68 54 59 48 55 43 28

424 414 448 431 351 226 165 195 196 232 141 102 141 80 36 29 25 19

842 787 844 768 675 374 445 415 351 342 239 170 195 139 84 84 68 47

Source: Chao (1977: 95, 308).

Sha Chang (Dai Nihon Boseki) ), and one British firm (Yi He managed by Jardine, Matheson & Co.) retained prominent positions. Many scholars emphasized the strong presence of Japanese zaikabo in interwar China. They often pointed out that zaikabo installed advanced machines and facilities, managed Chinese employees well, and succeeded in purchasing cheap raw cotton, skillfully blending it and selling their goods well, with the support of efficient trading companies, shipping companies, and banks. They further argued that the Japanese army supplied zaikabo with a favorable environment in which to develop their business. All of these arguments may be valid. Nevertheless, it is also the case that none of them prevented the progress of Chinese cotton spinning mills. From the primary sources, Kubo scrutinized fifteen cases of Chinese mills including Shen Xin, Da Sheng, Hua Xin, Yu Yuan, Yong An, Heng Yuan, Jin Hua, and Yu Hua which appear in Table 4.5, in the interwar period, and found that the mills in Shanghai and in inland North China had earned large profits because they could easily get cheap raw cotton and sell their products until the mid-1930s (Kubo 1986: 20–39). Lee offered two good examples of Chinese firms’ development in 1929 after the prolonged business depression since 1922: Shen Xin and Yong An Cotton Mill Corporation, both of which also appear in Table 4.5,

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Table 4.5. Cotton mills in China, 1922 and 1930

Rank

Nationality

(1) 1922 1 2

J B

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

C C C J C J C C C B C B C J C C C C J J C C C C J C J

30 Subtotal

C

Total

Rank (2) 1930 1 2 3

Firm (number of mills. The parent company)

Looms

Naigaiwata (12) Yi He (Jardine, Matheson & Co.) Bao Cheng (3) Shen Xin (4) Da Sheng (3) Shanghai Boshoku (3) Chu Xing Nikka Boshoku (3) Hua Xin (4) Yu Yuan San Xin Dong Fang Hou Sheng Lao Gong Mao Yu Feng Toyo Boseki Heng Feng Tong Yi Hong Yu Han Kou Di Yi Dai Nihon Boseki Doko Boshoku Yong An Hu Nan Heng Yuan Zhen Xin Toyoda Boshoku Guang Yi Da Kang Sha Chang (3. Dai Nihon Boseki) Pu Yi Yi 19 Chinese Firms (29) 8 Zaikabo (25) 3 British Firms (5) Top 30 Firms (59) 54 Chinese Firms (64) 11 Zaikabo (28) 3 British Firms (5) Total 68 Firms (97)

1,598,074 (63.2%) 671,828 (26.6%) 257,866 (10.2%) 2,527,768 (100.0%)

Firm (number of mills. The parent Nationality company) J C J

Spindles

Naigaiwata (12) Shen Xin (8) Nikka Boshoku (8)

266,148 (10.5%) 153,000 (6.1%)

1,600 (11.8%) 1,900 (14.0%)

136,424 134,686 125,380 96,424 90,000 83,056 75,000 70,000 69,000 54,768 50,688 50,098 50,000 50,000 41,280 36,864 35,328 33,440 33,000 31,200 30,720 30,000 30,000 30,000 30,000 28,000 27,000

(5.4%) (5.3%) (5.0%) (3.8%) (3.6%) (3.3%) (3.0%) (2.8%) (2.7%) (2.2%) (2.0%) (2.0%) (2.0%) (2.0%) (1.6%) (1.5%) (1.4%) (1.3%) (1.3%) (1.2%) (1.2%) (1.2%) (1.2%) (1.2%) (1.2%) (1.1%) (1.1%)

0 (0.0%) 1,400 (10.3%) 680 (5.0%) 886 (6.5%) 700 (5.1%) 500 (3.7%) 0 (0.0%) 500 (3.7%) 1,000 (7.4%) 400 (2.9%) 396 (2.9%) 500 (3.7%) 200 (1.5%) 0 (0.0%) 454 (3.3%) 0 (0.0%) 240 (1.8%) 500 (3.7%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 260 (1.9%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%)

26,520 1,123,330 616,828 257,866 1,998,024

(1.0%) (44.4%) (24.4%) (10.2%) (79.0%)

Established year of the first mill Spindles 1911 1916 1897

434,776 (10.8%) 383,232 (9.5%) 244,832 (6.1%)

0 6,330 2,986 2,800 12,116

(0.0%) (46.5%) (22.0%) (20.6%) (89.1%)

7,817 (57.5%) 2,986 (22.0%) 2,800 (20.6%) 13,603 (100.0%)

Looms 1,600 (5.2%) 3,857 (12.5%) 500 (1.6%) (Continues)

Takeshi Abe

82 Table 4.5. Continued

Rank

Firm (number of mills. The parent Nationality company)

4 5

C J

6 7

C J

8 9

C J

10

J

11 12 13

C J B

14 15 16 17 18 19 20 21 22 23

J C B J C C C C C J

24 25 26 27 28 29 30

C J C C C C B

Yong An (3) Shanghai Boshoku (5) Da Sheng (4) Da Kang Sha Chang (2. Dai Nihon Boseki) Hua Xin (4) Gong Da Sha Chang (2 Mills. Kanegafuchi Boseki) Kanegafuchi Boseki (5) Han Kou Di Yi Yuho Boseki Yi He (Jardine, Matheson & Co.) Doko Boshoku (2) Yu Yuan Liu Shu Pu Toyoda Boshoku Yu Feng Tong Yi Heng Feng Pu Yi (2) Hu Nan Yi Long Xing Sha Chang (Nisshin Boseki) Jin Hua (2) Dong Hua Yu Hua Yu Da Heng Yuan Chong Xin Gong Yi

Established year of the first mill Spindles

Looms

1923 1895

213,512 193,720

(5.3%) (4.8%)

1,538 3,048

(5.0%) (9.9%)

1899 1921

152,444 134,992

(3.8%) (3.3%)

1,392 1,320

(4.5%) (4.3%)

1918 1922

107,296 89,968

(2.7%) (2.2%)

250 2,276

(0.8%) (7.4%)

1923

88,320

(2.2%)

2,112

(6.9%)

1920 1922 1895

88,000 84,000 78,860

(2.2%) (2.1%) (2.0%)

1,200 0 812

(3.9%) (0.0%) (2.6%)

1922 1918 1914 1921 1920 1920 1890 1918 1921 1923

74,024 71,360 65,072 61,536 56,448 55,808 52,064 50,520 50,000 42,660

(1.8%) (1.8%) (1.6%) (1.5%) (1.4%) (1.4%) (1.3%) (1.3%) (1.2%) (1.1%)

1,126 1,000 1,002 1,296 0 0 612 0 250 0

(3.7%) (3.2%) (3.3%) (4.2%) (0.0%) (0.0%) (2.0%) (0.0%) (0.8%) (0.0%)

1924 1921 1922 1922 1920 1922 1907

41,744 41,536 41,040 35,712 35,440 34,000 33,296

(1.0%) (1.0%) (1.0%) (0.9%) (0.9%) (0.8%) (0.8%)

0 0 500 0 310 0 666

(0.0%) (0.0%) (1.6%) (0.0%) (1.0%) (0.0%) (2.2%)

Sub total

16 Chinese Firms (33) 11 Zaikabo (40) 3 British Firms (3) Top 30 Firms (76)

1,468,620 (36.4%) 10,909 (35.4%) 1,490,364 (37.0%) 13,278 (43.1%) 177,228 (4.4%) 2,480 (8.1%) 3,136,212 (77.8%) 26,667 (86.6%)

Total

60 Chinese Firms (78) 16 Zaikabo (45) 3 British Firms (3) Total 79 Firms (126)

2,223,874 (55.2%) 14,243 (46.2%) 1,630,436 (40.4%) 14,082 (45.7%) 177,228 (4.4%) 2,480 (8.1%) 4,031,538 (100.0%) 30,805 (100.0%)

Source and Notes: Shanghaishi Mianfangzhi Gongye Tongye Gonghui Choubeihui (1950). The data about operating mills compiled from the original source are shown. Ranks show the order by the number of spindles. C: China; J: Japan; B: Britain.

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actually controlled nearly 25 percent of the total spindleage among the Chinese-owned mills in 1929. The former had eight mills with 294,000 spindles and 2,062 looms. Four mills were located in Shanghai, one of which was purchased in 1928 from the British, and the rest were in Wuxi and Changzhou in Jiangsu, and in Hankou. The managing director was Rong Zongjing, a 57-year-old in 1930 and a native of Wuxi known as ‘‘the Small Shanghai’’, who managed many commercial and industrial enterprises in Shanghai, Hankou, Tianjin, Wuxi, and Shandong, and was called not only the ‘‘Cotton King’’ but also the ‘‘Flour King’’, as he directed nineteen flour mills in Shanghai and Hankou. Native bankers helped him financially many times during the depression. The form of business organization of Rong’s mills was semi-corporation, as capital had been subscribed mostly by his ‘‘family’’ and Rong himself owned more than one-third of the total capital, and no shares were ever sold in the open market. Yong An had three mills in Shanghai with 217,000 spindles and 2,062 looms, two of which were purchased in 1925 and in 1928, respectively. The chief managing director was Guo Le, born in Guangdong, who moved to Australia in 1875 when he was 25, and opened the Yong An Department Store in Shanghai after his return to China in 1916. He invested heavily not only in department stores but also in life insurance and shipping, but was more of a ‘‘captain of industry’’ than a capitalist, not being a very large shareholder in Yong An mills. Among the mills, No. 1 Mill in particular was said to be one of the best managed and most progressive mills in China, and all three mills were managed by those Chinese who had received technical education in American colleges (Lee 1930: 492–3). World War I gave the Japanese cotton industry an excellent business opportunity to enlarge the cloth market in China. However, simultaneously, Japan was confronted with the serious problem of losing the thick yarn market as a result of the rapid development of Chinese cotton mills. The foundation of zaikabo by Japanese cotton spinning companies was a countermeasure to this crisis.

3. Exports of Japanese Cotton Cloth to China in the 1920s 3.1. The growth of finished cotton cloth exports to China in the 1920s In the interwar period, while zaikabo were established to supply China with thick yarn of 20 count or less and coarse cloth, the main products of Japanese cotton spinning companies increasingly became finer yarn, and both integrated spinning and weaving companies and the specialized weaving firms attempted to export finished cotton cloth (bleached, dyed, and printed piece goods), woven by finer yarn, to China. Thus the export of Japanese cotton cloth to China continued in the 1920s, although

Takeshi Abe

84

Table 4.6. Exports of Japanese finished cotton cloth and sateen, 1921–33

Year

Exports of finished cotton cloth (A)

(A)/ Cotton cloth

Production of sateen Sateen (B)

(B)/(A)

Sateen to China

Sen’nan (C)

Japan (D)

(C)/(D)

(1) Volume (1,000 square yards. Up to 1927, 1,000 yards) 1921 n.a. n.a. 1922 n.a. n.a. 1923 n.a. n.a. 1924 n.a. n.a. 1925 n.a. n.a. 1926 n.a. n.a. 1927 n.a. n.a. 1928 810,039 57.2% 1929 974,525 54.4% 1930 899,390 57.2% 1931 852,463 60.3% 1932 1,282,380 63.1% 1933 1,478,924 70.8% (2) Value (1,000 yen) 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933

122,443 141,497 142,721 208,693 297,486 298,177 278,175 228,888 254,764 165,873 130,371 199,899 289,713

59.8% 63.8% 60.8% 63.9% 68.7% 71.7% 72.5% 65.0% 61.7% 61.0% 65.6% 69.2% 75.6%

4,420 8,898 24,770 51,152 110,825 164,103 159,252 145,312 148,616 85,371 71,235* 86,240* 62,742*

n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17.9% 15.3% 9.5% 8.4% 6.7% 4.2%

4,138 n.a. 24,325 47,405 101,121 139,034 120,563 120,252 117,792 58,063 45,210* 63,160* 29,561*

n.a. 758 3,843 12,886 29,965 52,201 56,846 101,994 84,324 54,280 59,949 80,312 45,224

n.a. n.a. 52,790 73,952 123,977 161,666 201,607 261,734 n.a. n.a. n.a. n.a. n.a.

n.a. n.a. 7.3% 17.4% 24.2% 32.3% 28.2% 39.0% n.a. n.a. n.a. n.a. n.a.

2,547 4,261 11,037 25,775 56,044 66,454 56,429 61,042 56,142 28,083 16,641* 20,864* 18,169*

2.1% 3.0% 7.7% 12.4% 18.8% 22.3% 20.3% 26.7% 22.0% 16.9% 12.8% 10.4% 6.3%

2,387 n.a. 10,799 23,858 51,196 54,525 40,764 51,302 45,641 16,245 11,109 15,534 9,084

n.a. 203 1,598 5,283 9,614 11,614 14,614 23,053 17,256 6,938 7,874 12,797 6,935

n.a. 11,080 16,256 29,917 44,265 44,035 49,061 64,499 51,916 23,004 n.a. n.a. n.a.

n.a. 1.8% 9.8% 17.7% 21.7% 26.4% 29.8% 35.7% 33.2% 30.2% n.a. n.a. n.a.

Sources and Notes: Toyo Keizai Shinposha (1935); Okurasho; Osakafu Tokeisho; Shokosho Tokei Hyo; Seki (1956: 307). Data with asterisks are the total of dyed sateen and printed sateen. China includes Kuwantung and Manchukuo. ‘‘n.a.’’ indicates ‘‘data not available’’.

its share in the total value of Japanese exports of cotton cloth tended to decrease (see Table 4.2). Table 4.6 shows that during the 1920s finished cotton cloth annually took up about 60–70 percent of the total value of Japanese cotton cloth exports. According to another set of statistics on 1927 published by Nihon Yushutsu Men Orimono Kogyo Kumiai Rengokai (Japanese Export Cotton Weaving Firms’ Association), values of the main types of finished cotton cloth for export were as follows: sateen 48,617,000 yen (34.1 percent); jean (twilled cotton cloth) 31,410,000 yen (22.0 percent); cotton stripe 30,273,000 yen (21.2 percent); cotton flannel 14,472,000 yen (10.1 percent); cotton crepe 6,656,000 yen (4.7 percent); drill 4,190,000 yen (2.9 percent);

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kokura (Japanese twilled cotton cloth) 2,179,000 yen (1.5 percent); and printed cloth 1,752,000 yen (1.2 percent), totaling 142,601,000 yen (100.0 percent) (Nihon Boshoku Tsushinsha 1930: 169–72). These data suggest that sateen was the principal variety in finished cotton cloth exports in the 1920s. Let us go back to Table 4.6. Though the value of sateen exports was negligible in 1921 and 1922, it increased from 1923, and in 1926 when the value attained its peak, sateen took up 22 percent of the total value. In the latter half of the 1920s, exports remained stagnant both in volume and in value, but sateen’s share in the total probably reached its peak in 1928, taking up 18 percent in volume and 27 percent in value. It then rapidly decreased after the Showa Panic of 1930–31. Furthermore, it is worth noting from Table 4.6 that most of the sateen was exported to China throughout the 1920s. In fact, the gains of Japan’s trade in China were chiefly in dyed and printed ‘‘sateen’’ and ‘‘drill’’ from around the mid1920s (Lee 1926: 92). Let us therefore examine the development of cotton sateen exports in the 1920s in greater detail.

3.2. Cotton sateen in China In the 1910s and the 1920s, cotton sateen used in China included Italian, Venetian, and Lasting sateen. But in the Japanese export statistics of cotton cloth to China recorded in (Dai) Nihon Boeki Nenpyo (Annual Return of the Foreign Trade of Japan), published by the Ministry of Finance, Italian, Venetian, and Lasting sateen are not found. They seem to have been included in ‘‘sateen’’. It is reported that middle-class Chinese preferred patterned Italian for dress materials and black Italian for shoes or caps in the latter half of the 1910s. Upper classes used silk cloth, or patterned Italian of the highest quality for dresses, shoes, and caps. Italian was also often used as lining cloth. Venetian was a high-grade Italian, while Lasting was a low-grade Italian. Chinese substituted Lasting for Italian and used it as material for umbrellas (Kato 1917: 132–3). In the first half of the 1920s, most sateen was used for dresses. Italian was widely welcomed as dress material, for it has an appearance similar to silk goods and is durable at the same time. Most of the black and plain Italian was used to produce ordinary jackets for the middle and upper classes. Venetian was said to be used in the same way as Italian (Kinugawa 1919: 107; Yamazaki 1927: 96–9. Also see Shokosho Shomukyoku 1925: 204–5). In short, cotton sateen was preferred as substitutes for silk cloth mainly by middle-class Chinese. Table 4.3 lists Chinese imports of sateen from the United Kingdom and Japan during the period from World War I until the first half of the 1920s. In the early years the United Kingdom enjoyed an overwhelming share. In the boom years of 1917–18, which were brought about by World War I, the

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United Kingdom was unable to supply cotton goods to foreign markets sufficiently, and Japan’s share, that had been negligible, suddenly increased. The Japanese technology for producing sateen was not well developed at this time (see Kinugawa 1919: Chapter 5), and the Japanese share fell sharply during the postwar 1920 financial panic. Chinese imports of cotton sateen from Japan, however, came to expand again from about 1923 (see for example, Osakafu Naimubu 1929: 115–18). Among the treaty ports of China, Shanghai was a leading importer of cotton sateen. For example, 5,918,028 taels, or 33.4 percent of Chinese imports of cotton goods, were sateen, Italian, and imitation Venetian imported into Shanghai in 1926 (Shokosho Shomukyoku 1929: 154–74). The circumstances under which finished cotton cloth including sateen was traded in Shanghai are well recorded. Japanese finished cotton cloth came to be imported from about 1925, but the sale of Japanese goods declined after a large-scale boycott occurred in 1928. At the beginning of the 1930s it was still a serious problem. Incidentally, of (estimated) 215,000 boxes of finished cotton cloth exported from Japan to Shanghai, 52,500 boxes (24.4 percent) contained five-shaft sateen (black, printed, and colored), 8,700 boxes (4.0 percent) contained eight-shaft sateen (black and colored), and 1,800 boxes (0.8 percent) contained Italian. At the end of the 1920s, traders of finished cotton cloth in Shanghai can be classified as follows: 1. 2. 3. 4. 5. 6.

Japanese importers, Chinese importers, foreign importers, Chinese traders, Japanese finishing mills, and Chinese finishing mills.

Japanese importers consisted of only eight shops in the middle of the 1920s. But in about 1930, the number of shops increased to thirty-five, sixteen of which belonged to Shanghai Nihon Menpu Dogyokai (Japanese Cotton Cloth Merchants’ Association in Shanghai), and included some of the biggest trading companies of cotton goods, i.e., Toyo Menka which was separated from the Mitsui Bussan Kaisha in 1920, Nihon Menka, Ito Chu Shoji (Ito Yoko) and Gosho (Gosho Yoko). Nine shops out of these sixteen shops had adopted the company form of organization. Eight were branches of Japanese companies, and seven dealt in raw cotton, cotton yarn, and gray cloth as well. Those importers who were companies purchased finished cotton cloth from exporters in Osaka, and had their own trademarks and brands. They dealt in much larger quantities than individual enterprises. Nineteen shops which had never joined Dogyokai were individual enterprises, with the exception of the famous Mitsui Bussan Kaisha (Mitsui Yoko). Almost all of them dealt exclusively in the

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finished cotton cloth bought from the exporters in Osaka, and did not have their own trademarks and brands (Minami Manshu Tetsudo Kabushiki Kaisha 1930: 3–6). As for Chinese importers, we can identify the names of seventeen shops, which can be divided into (a) those importers in Shanghai who dealt with the exporters in Osaka who travelled to Shanghai, (b) those who purchased cloth through their own agents based in Osaka, and (c) those who used both methods. In order to communicate with Japanese businessmen, two shops employed Japanese, and the others had Chinese employees who could understand the Japanese language (ibid: 6). In Shanghai at the end of the 1920s, foreign importers constituted twenty-eight British trading companies, six American trading companies, six German trading companies, and three French trading companies. Incidentally, the number of Japanese trading companies amounted to twenty-eight (Shokosho Shomukyoku 1929: 223–9). Chinese traders were further classified into four groups: (a) Qianke. They consisted of about fifty shops. They were so-called brokers. (b) Zihao. They consisted of about 100 shops, and were commission merchants. Each of them had an office, a considerable amount of capital and some employees, and dealt in cotton cloth both on the spot and in futures. (c) Dianjia. They consisted of about 100 shops, and retailers or wholesalers. They displayed sample cloth in their show windows, and also sold other cloth to local customers in compliance with their requests. They usually traded through (a) and (b) on an on-the-spot basis, but also often traded on the spot or in futures by themselves. (d) Kebang. They came to Shanghai from other parts of China and stayed there for a short time on business. They usually purchased cloth through commission merchants on the spot. However, some of them directly dealt with Japanese importers and Chinese importers. The Shanghai market did not have a strong influence on areas either south of Fuzhou or north of Qingdao. On the other hand, about thirty Kebang, particularly those who came from Sichuan, Changsha, Hankou, Jiangxi, and Ningbo were said to have always ruled the finished cotton cloth market in Shanghai (Shokosho Shomukyoku 1929: 230–3; Minami Manshu Tetsudo Kabushiki Kaisha 1930: 6–8). As for Japanese finishing mills, Naigaiwata, the best-known zaikabo, recognized the significance of cotton cloth finishing after the big dispute of May 30, 1925, and had begun to produce five-shaft sateen as early as around the end of the 1920s. In January 1930 Naigaiwata completed the first finishing mill in Shanghai, whose output of dyed black cloth per month was 80,000 tan (Adachi 1932a, b; Motoki 1932). At the end of the 1920s, a few Japanese spinning companies in Shanghai were planning to weave finished cotton cloth, though they seem to have failed to realize such plans.

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Chinese finishing mills included the following firms: Da Feng Dyeing and Textile Mill; Hong Zhang Dyeing and Textile Mill; Guang Hua Dyeing Mill; Yong An Textile Limited Liability Company; Lun Cang Bleaching and Printing Limited Liability Company; and Shanghai Printing and Dyeing Limited Liability Company. Among them, Lun Cang depended for its capital and technology on the United Kingdom and Shanghai Printing and Dyeing hired a Japanese engineer (for the Shanghai mills, see Minami Manshu Tetsudo Kabushiki Kaisha 1930: 9).

3.3. What brought about the expansion of the export of sateen? Let me now discuss the reasons why Japanese sateen sold well in China in the 1920s, perhaps replacing English goods. It was clearly important that the Japanese cotton industry had experienced the export of sateen to China during the World War I boom when the dominance of Lancashire goods was temporarily weakened. It was also clear that the rate between yen and tael moved favorably for Japanese exports in the period from World War I to the first half of the 1920s (see Figure 4.1). However, I wish again to pay special attention to the effective organization of the Japanese cotton industry with respect to the production and distribution of finished cotton cloth (see Figure 4.2). In Japan before World War I, almost all the cotton sateen was imported mainly from the United Kingdom, the most part of which was used as material for Western-style clothing and umbrellas (Hwang 1992: 241–4), and began to be produced during or after the war. Cotton sateen was produced chiefly by the cotton-weaving sanchi. In 1929 among the fiftynine members of the Greater Japan Cotton Spinners’ Association, fortythree were companies engaged in integrated weaving (Dai Nihon Boseki Rengokai), but, as Table 4.7 shows, in the 1920s most of their products were of plain shirting, with little sateen produced. Cotton-textile sanchi after World War I2 were generally divided into two groups; those which supplied gray or bleached cloth (producing centers A in Figure 4.2), and those which supplied printed or dyed cloth (producing centers B in Figure 4.2), and it was the former group that produced cotton sateen. In the 1920s a sizable proportion of gray cloth to be finished for the manufacture of cotton sateen was produced in the Sen’nan district, which was located in the southern area of Osaka Prefecture and was a well-known sanchi for gray cloth. On Table 4.6, although Sen’nan’s share in the nationwide production value of sateen was negligible in the early 1920s, it markedly rose to 18 percent in 1924 and to 36 percent in 1928. In Sen’nan, sateen was produced chiefly by such upper-class weaving firms as Obitani Shoten, Nakabayashi Menpu, Kumatori Orimono, and Minami Orimono. (As for these firms, see Abe 1989: Chapter 4, 1992: 16–18.)

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180 160 140

Tael per 100 yen

120 100 Exchange rates 80 60 40 20 0 13 914 915 916 917 918 919 920 921 922 923 924 925 926 927 928 929 930 931 932 933 934 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Year

19

Fig. 4.1. Exchange rates between Japan and China, 1913–34. Source: Calculated from Dai Nihon Boseki Rengokai, relevant years.

Six big spinning companies S

About sixty spinning companies S

Producing centers A

S

Twilled cloth & sateen

Plain cloth W

W

Producing centers B

Independent finishers

W

Printed or dyed cloth W Industrial association

F

F

F

T

T

T

D−E

D−E

E

S W F T D E

Spinnning Weaving Finishing Trading companies Domestic market Export market Integration Business transactions Combination

Fig. 4.2. The structure of the Japanese cotton industry in the interwar period. Note: For description of producing centers A and B, see text.

Sateen produced in Sen’nan was finished, and then exported to China. There were many finishing firms around the city of Osaka. In 1929, 126 bleaching mills or 18.6 percent of the national total, and 383 dyeing mills

Takeshi Abe

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Table 4.7. Production of cotton cloth by the integrated spinning firms in Japan, 1929 and 1937 (Unit: yard) 1929

1937

Ranking

Products

Amount

Percent

1 2 3 4 5

Shirting Sheeting Coarse Shirting Twill Sateen Total

826,469 159,052 152,414 108,352 72,308 1,538,249

53.7 10.3 9.9 7.0 4.7 100.0

Products

Amount

Percent

Shirting Twill Sheeting Coarse Shirting Sateen Total

1,222,663 217,015 171,072 74,836 35,075 1,890,554

64.7 11.5 9.0 4.0 1.9 100.0

Source: Dai Nihon Boseki Rengokai, relevant years.

or 31 percent of the national total, were located in Osaka Prefecture (Shokosho Tokei Hyo). Two big mills, Yamatogawa Senkosho (see Yamatogawa Senkosho Nanajunen Shoshi 1966) and Inabata Senkojo (as for the mill, see Takanashi 1938), were especially reputed for their excellent technologies for finishing cotton sateen from the prewar days. In addition, around the period of World War I, bigger spinning companies began to have their own mills. The Yodogawa Mill of Kanegafuchi Boseki Kabushiki Kaisha (Kanebo) was one such example (see Adachi 1930a, 1930b, 1938; Ishiguro 1960; Kanebo Kabushiki Kaisha 1988; Annual Reports of Kanebo). The mill began to be constructed in 1916 in Osaka Prefecture, and was completed in 1924 to become ‘‘the biggest finishing mill in the Orient’’ and ‘‘the cash-box of Kanebo’’, representing the emergence of a big business in the cotton finishing industry. This mill began to be constructed in July 1916 with 5 million yen under the direction of Shingo Tsuda (1881–1948). He was strongly supported by President Sanji Muto, and became the president of Kanebo in 1930. Tsuda finished the preparation of the dyeing mill in March 1918, tested the dyeing facilities in April, and began to accept gray cotton woven by other weaving firms in May. In May 1919 the Yodogawa Mill added a bleaching mill. During the construction of this new mill, Kanebo asked Manchester finishers if Kanebo could inspect their mills, but this proposition was refused. So, Kanebo had to contract three English technicians, whose salaries were 30,000 yen each per annum, and whose period of employment was three years. In the early days of the Yodogawa Mill there was a big problem with unstable markets for their products, because the cotton cloth merchants pursued markets haphazardly. The Yodogawa Mill found it difficult to cope with the need for frequent changes of equipment necessitated by the instability of demand. However, during World War I, the United Kingdom could hardly export any cotton cloth, especially printed sateen and black sateen. On the other hand, in China, products from the Yodogawa Mill were extremely cheap, being below a third in value when compared

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with Lancashire goods, and therefore were welcomed. When Lancashire cotton goods came back to the Chinese market after the war, they never regained their former superiority. Although the Yodogawa Mill suffered a setback during the depression after the panic of 1920, it was able to obtain a good deal of orders for bleached cotton cloth from China in 1923. In April 1924 it built a new printing mill with the additional capital of 5 million yen. As soon as it became clear that the Yodogawa Mill was doing well in bleaching and printing, Tsuda launched the principle of bulk production in February 1927, in order to improve performance in the dyeing department, and then began to accept consignments of gray cloth to be finished at the lowest prices. What followed was a flood of orders to the Yodogawa Mill. Profits were said to be 420,000 yen in 1923, 240,000–250,000 yen around March/April in 1930, and 800,000 yen around August/October in 1932. Obviously, the Yodogawa Mill was indispensable to Kanebo during the interwar period. Around October 1930 the mill was said to have finished not only all the cotton cloth woven by Kanebo on about 9,000 power looms, but also twice the volume of gray cloth made by other firms. It appears that such big mills as the Yodogawa Mill finished the sateen woven in Sen’nan. Finished sateen was exported to China mainly through trading companies in the city of Osaka. Table 4.8 lists the trading companies that exported finished cotton cloth to Shanghai in around 1930. Bigger companies, i.e., Yamaguchi, Itoman, and Tamurakoma had originally developed through domestic trading in the imported finished cotton cloth (for example, shirting made in the United Kingdom) since the opening of ports to foreign trade at the end of the Edo era. Hattori Shoten, the headquarters of which was in the city of Nagoya in Aichi Prefecture, succeeded in dealing in, and later producing, cotton yarn and cloth during and after World War I. Takemura, Iwata, Toyoshima, and Tatsuke were members of bigger textile trading companies called Senba Hassha (eight bigger companies in Senba district, the center of Japanese cotton goods trade located in Osaka). They were originally wholesale merchants dealing in cotton yarn, had enjoyed vast trading networks and a good reputation in Japan, and came to deal in cotton cloth around World War I. Most of such trading companies with a yarn business background fervently dealt in cotton cloth after World War I, for those who had been engaged in yarn speculation were seriously hit by the panic in 1920. At any rate, cotton sateen was exported by the bigger trading companies in Osaka. Table 4.8 includes the aforementioned Kanebo Yodogawa Mill as an exporter. It is likely that finished cotton cloth shipped from the mill amounted to a considerable volume in around 1930. Meanwhile, Chinese importers seem to have purchased finished cotton cloth also from Chinese merchants in Kobe and in Kawaguchi, which is a part of Osaka (see Kobe

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Table 4.8. Exporters of finished cotton cloth in Osaka, Japan, c. 1930 Name Yamaguchi Shoten Hattori Shoten Itoman Shoten Tamurakoma Shoten Takemura Shoten Iwata Shoji Kawai Gomei Kaisha Nishijima Shoten Todayu Shoten Toyoshima Shoten Tatsuke Shoten Iwao Shoten Mitsuya Shoten Kanegafuchi Boseki’s Yodogawa Mill Nishizawa Shoten Kurashige Shoten Ai Enu Shoten Maruboshi Shoten Yamamoto Koyata Shoten Okada Shoten Fujimoto Shoten Hasebe Shoten Total

Organization J J J J J J U P J J J J J J P P J J L P P P

Estimated volume of exports to Shanghai 20,000 boxes 15,000 12,000 12,000 10,000 9,000 9,000 8,000 8,000 7,000 7,000 7,000 5,000 5,000 4,000 3,000 n.a. n.a. n.a. n.a. n.a. n.a. 141,000

Source and Notes: Minami Manshu Tetsudo Kabushiki Kaisha (1930: 12–13) J: joint stock company, L: limited partnership, U: unlimited partnership, P: private enterprises.

Zeikan 1934: especially 161–73, 222–9). Thus, weaving firms in Sen’nan, finishing mills around Osaka, and trading companies in Osaka seem to have formed close business relations. Let me cite an interesting episode to illuminate this point. (A detailed explanation of the case of Obitani is given in Abe 1989: Chapter 3, 1994.) Obitani Shoten in Sen’nan, which used to collect narrow white cotton cloth for the domestic market from some nearby mills in the district during the period after the Russo–Japanese War while producing the same product in its own mills at the same time, was badly hit by the panic of 1920, and suffered from depressed market conditions. In order to overcome such difficulties, Obitani began to produce wide flannel cloth with Wakayama Senko (a dyeing and finishing company in Wakayama Prefecture) at the end of 1922. But Obitani recognized the depression of flannel production in Wakayama Prefecture, and decided not to get too involved in the flannel cloth business. In the process of searching the more promising products, Obitani found that sateen and twilled cotton cloth

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Table 4.9. Production shift from narrow to wide cotton cloth in Obitani Shoten, 1923–25 (Unit: 100 tan)

Year

Month

1923

Jan.–Feb. Mar.–Apr. May–June July–Aug. Sept.–Oct. Nov.–Dec. Jan.–Feb. Mar.–Apr. May–June July–Aug. Sept.–Oct. Nov.–Dec. Jan.–Feb.

1924

1925

Wide cloth

Narrow cloth (white cotton)

Flannel

Others

404 350 284 210 245 187 261 205 4 51 48 32 —

50 18 20 21 12 8 3 7 6 4 35 10 0

— — — — 18 16 7 51 104 39 30 71 96

Source and Notes: Abe (1989: 157). Tan is a measure of quantity of cloth, traditionally associated with a narrow width of about 37 cm and a length of about 11.4 m. However, ‘‘wide cloth’’ in this table was several times wider than ‘‘narrow cloth’’, while the length remained the same. Thus, 1 tan of wide cloth was clearly much larger. Nevertheless, both were measured in tan. In this table, dashes indicate that no amount was entered.

(sateen, mutsuaya, and ajiro [both are twilled cotton cloth]) might meet such needs. In the autumn of 1923, the first shipment of sateen took place, and after 1924 the shipments of mutsuaya and ajiro followed (see Table 4.9). Helped by the devaluation of yen after the great earthquake in September 1923, Obitani advanced into the field of exported cotton cloth including the types of sateen which were said to be the most popular varieties in the Chinese market. Obitani continued to weave sateen and twilled cotton cloth, particularly five-shaft sateen, during 1925–30. In contrast, the production of narrow cotton cloth decreased sharply after 1922 (see Figure 4.3). After May 1924 it was hardly shipped at all (see Table 4.9). As Obitani’s products rapidly changed, cloth came to be increasingly woven in Obitani’s own mills, and Obitani abolished handling the products of other weaving firms. Although Obitani did not have a very good business environment in the 1920s when depression continued, it managed to keep its balance sheet in black during the 1920s, with the exception of 1926. One reason why Obitani was able to cope with difficult conditions seems to be that it succeeded in bulk sales of five-shaft sateen to Yagi Shoten, which was a member of Senba Hassha and a well-known trading company in Osaka, in

Takeshi Abe

94 18,000,000 16,000,000

Value: yen; quantity: tan

14,000,000 12,000,000 10,000,000

Narrow cloth quantity Wide cloth quantity Total value

8,000,000 6,000,000 4,000,000 2,000,000 0 1913 1915 1917 1919 1921 1923 1925 1927 1929 1931 1933 1935 Year

Fig. 4.3. Changes in the type of cotton cloth sold by Obitani Shoten, 1913–36. Source and Note: Abe (1989: 135). The original source is from the Obitani Shoten papers.

the middle of the 1920s. Yagi is said to have cooperated with Kanebo Yodogawa Mill around the period from 1923 to 1924, and noted that Obitani became a big consumer of yarn. Thus Yagi succeeded in selling a lot of yarn to Obitani in 1924. Almost simultaneously, Yagi began the purchase of cotton cloth produced by Obitani. In addition, in the middle of the 1920s, Obitani, Ichitaro Ichihashi of Yagi, and Kiyoshi Inoue of Kanebo made the following cooperative arrangement: (1) Obitani weaves cloth of five-shaft sateen using Kanebo’s yarn. (2) The Kanebo Yodogawa Mill finishes the cloth. (3) Yagi exports the finished cloth to China and Korea. Obitani completed the construction of a big mill in the early 1930s, and in 1934 it became the biggest independent weaving firm in Japan in terms of the number of looms. The cooperation with Yagi and Kanebo was a foundation of this development. We have another case showing the cooperation within the cotton industry, although it is not directly related to sateen. In Senboku, which is a sanchi renouned for gray near Sen’nan, Kikusaburo Morita Mills started a similar scheme around 1929. It wove calico using yarn from the large spinning company newly established, Kureha Boseki, and then exported it through the powerful Osaka trading company, Ito Chu Shoji, which had close ties with Kureha. Ito Chu is said to have sold 30 percent of Morita’s cloth (see Abe 1989: Chapter 4). Such an effective organization among cotton spinning companies, independent weaving firms, and trading companies as was found in the

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Table 4.10. Number of mills, spindles, and looms of the cotton spinning firms in China classified by ownership, 1925, 1930, and 1935 Year

Total

Chinese-owned Japanese-owned British-owned

Number of mills 1925 1930 1930/1925

122 127 1.04

73 81 1.11

45 43 0.96

4 3 0.75

3,572,440 4,497,902 5,526,847 1.26 1.23

2,034,816 2,499,394 3,008,479 1.23 1.20

1,332,304 1,821,280 2,284,860 1.37 1.25

205,320 177,228 233,508 0.86 1.32

Number of spindles 1925 1930 1935 1930/1925 1935/1930

Number of looms 1925 1930 1935 1930/1925 1935/1930

22,924 33,580 52,009 1.5 1.5

13,371 17,018 24,861 1.3 1.5

7,205 14,082 23,127 2.0 1.6

2,348 2,480 4,021 1.1 1.6

Sources and Notes: For mills, Woodhead (1926: 696, 1932: 108). For spindles and looms, Chao (1977: 301–2, 305–6). Number of spindles and number of looms assigned to British-owned mills include a small number owned by other Western firms.

case of Obitani is an important factor that accelerated the rapid expansion of Japanese sateen exports to China.

4. The Japanese Loss of the Cotton Cloth Market in China after the Late 1920s As Table 4.2 shows, the value of exports of Japanese cotton cloth to China rapidly decreased in the latter half of 1920s. Exports of sateen to China also declined after around 1928 both in volume and in value (see Table 4.6). The figures on China in the 1930s, especially after 1934, on Table 4.2 are negligible. In China, Japan lost not only the cotton yarn market in World War I, but also the cotton cloth market by 1930. Needless to say, the fundamental cause for this was the development of Chinese-owned cotton spinning firms. During and after World War I industrialization became evident at least in Shanghai, and consumer goods-centered manufacturing industries like cotton spinning, flour, cigarettes, and matches grew strongly, although such industries as chemical, machinery, and paper developed only after the 1930s (Chang 1967;

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Kubo 1986; see also Chapter 7 of this volume). In the cotton spinning industry, which was the most important, Chinese-owned mills steadily expanded their spindles and looms, although Japanese zaikabo certainly grew most rapidly (see Table 4.10). It is no accident that exports of Japanese cotton cloth experienced a rapid decline around the late 1920s. The retreat of the Japanese cotton industry from the Chinese market was accelerated by two factors closely related to nationalism. First, there were the Chinese boycott movements against imported goods from Japan. After the Russo–Japanese War, Japanese cotton goods often met with boycotts, and after World War I, boycotts occurred several times. Although the boycotts, including the famous May 30th incident, did not damage Japanese business so seriously before the Jinan incident of May 1928, the Japanese cotton industry thereafter came to suffer from Chinese boycotts a great deal (Banno 1989). Another factor was the tariff policy of the Nanjing Guomindang (Nationalist Party) government, which was newly established in China in 1927. China had been obliged to keep a low tariff rate of 5 percent for over eighty years under the unequal treaty to the powers. However, the Nanjing government succeeded in rewriting the law for the first time; this was promulgated it in December 1928, and raised the tariff rates for a number of commodities imported from foreign countries after the following year. The average rate increased from 3.4 percent in 1927 to 30.2 percent in 1935. This policy aimed not only at gaining annual financial revenue but also at protecting domestic industries from international competition, and actually excluded many Japanese goods from the Chinese market including cotton piece goods (Kubo 1980: 38–55; see also Chapter 7 of this volume). The Japanese cotton industry had energetically pursued cost-cutting efforts mainly through the introduction of such new technologies as highdrafting spinning machines, automatic power looms, and air-conditioning equipment in the integrated spinning companies from the mid-1920s, thereby realizing remarkable growth in productivity. The industry also diversified into silk products, rayon and rayon staple, and wool products in the same period, and ardently searched for new foreign markets, especially in the 1930s, as Table 4.11 shows. (See also Abe 2004.) Such strategies brought about a golden age in the Japanese cotton industry in the 1930s.

5. Concluding Remarks Many scholars have taken the supremacy of the Japanese cotton industry in the world market in the interwar period for granted, especially in the 1930s. In fact, the volume of exports of cotton cloth from Japan first surpassed those from Lancashire in the United Kingdom in 1933. Another

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Table 4.11. Geographical composition of Japanese exports of cotton cloth, 1919, 1929, and 1937 [1919]

[1929]

Countries

Value (yen)

China

143,284 (51.1%) China

Guangdong Province India Dutch East Indies Australia Hong Kong

Countries

44,208 (15.8%) India 29,508 (10.5%) Dutch East Indies 24,416 (8.7%) Egypt 3,745 3,208

[1937]

Volume (1,000 square yards)

Countries

150,116 (36.4%) Dutch East Indies 109,139 (26.4%) India

Volume (1,000 square yards) 85,704 (15.0%) 63,041 (11.0%)

42,283 (10.2%) Manchuria

55,749

(9.7%)

24,410

29,379

(5.1%)

29,196 23,003

(5.1%) (4.0%)

22,139

(3.9%)

16,078

(2.8%)

(5.9%) Guangdong Province (5.0%) Argentina (3.7%) Kenya, Uganda & Tanganyika (1.4%) North America (1.4%) Siam

(1.3%) Hong Kong 20,785 (1.1%) Guangdong 15,358 Province Straits 2,742 (1.0%) Straits 5,798 Settlements Settlements The 506 (0.2%) The 5,629 Phillipines Phillipines Others 28,694 (10.2%) Others 39,189 (9.5%) Others Total 280,311 (100.0%) Total 412,707 (100.0%) Total

248,776 (43.4%) 573,065 (100.0%)

Source: Yamazaki et al. (1973: 139, 264).

oft-noted fact is that the rapid expansion of Japanese exports in cotton piece goods brought about international trade rivalries. However, we should note that the chain of events began with the Japanese cotton industry having been threatened by the remarkable development of Chinese cotton spinning firms during and after World War I. It first gave rise to the decline of cotton yarn exports from Japan during the war, and the establishment of zaikabo by Japanese cotton spinning companies resulted from this crisis. On the other hand, exports of Japanese cotton cloth expanded during and after World War I, and finished cloth like sateen, with higher value added, became the leading export. In particular, exports of Japanese finished cloth to China expanded rapidly in the mid-1920s with the support of the effective organization of the Japanese cotton industry. But the prosperous years did not last long. In the late 1920s, Japanese exports of finished cotton to China began to decrease rapidly; this was also a result of Chinese industrialization. The boycott movements and tariff policy of the Nanjing government coming from Chinese nationalism apparently accelerated the decline of Japanese cotton piece goods exports to China. One of the important reasons why the Japanese cotton industry energetically adopted many prominent strategies in order to strengthen its competitive advantage in the interwar period seems to have been to cope with the surge of industrialization and nationalism in China. As for zaikabo, many scholars have emphasized that it had a supreme competitive advantage, while Chinese-owned mills were always kept

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stagnant under the pressure (see Yen 1966; Kuwahara 1982, 1990, 1992; Takamura 1982; Nishikawa 1987; Duus 1989). It is true that zaikabo performed well due to excellent facilities and management. However, the motives for the establishment of zaikabo by Japanese cotton spinners were generally passive. In addition, the development of Chinese-owned mills should not be underestimated, and needs further consideration. So far, many scholars have focused on the ‘‘strength’’ of the Japanese cotton industry and the ‘‘weakness’’ of the Chinese cotton industry. We now need to pay much more attention to the ‘‘strength’’ of the Chinese cotton industry, and reinterpret the history of the Japanese cotton industry in the interwar period from this perspective.

Notes 1. During the war boom, a number of Japanese firms ordered spinning machinery from English and American manufacturers, but the machines only arrived in Japan after the financial panic of 1920 when domestic demand was already depressed. This prompted some Japanese firms to establish new mills in China, using the machines at their disposal. 2. There were 74,734 cotton weaving workshops for weaving cotton cloth in 1929. Integrated spinning and weaving companies were included in these figures, but they were negligible (Shokosho Tokei Hyo).

References Abe, T., Nihon ni Okeru Sanchi Men-orimonogyo no Tenkai [The Development of Japan’s Cotton Weaving Industry in the Interwar Period] (Tokyo, 1989). ——, ‘‘Men-kogyo’’ [The Cotton industry in Meiji Japan], Nishikawa, S., and Abe, T. (eds.), Nihon Keizai-shi 3: Sangyo-ka no Jidai 1 (Tokyo, 1990). ——, ‘‘The development of the producing-center cotton textile industry in Japan between the two world wars’’, Japanese Yearbook on Business History, Vol. 9 (1992). ——, ‘‘Obitani Shoten: the strategy and structure of a cotton weaving firm in the Sen’nan district of Osaka prefecture’’ [Discussion Paper of the Faculty of Economics], Osaka University (1994). ——, ‘‘Organizational changes in the Japanese cotton industry during the interwar period: from inter-firm-based organization to cross-sector-based organization’’, in Farnie, D. A., and Jeremy, D. J. (eds.), The Fibre that Changed the World (Oxford, 2004). Adachi, K., Kanebo ka Toyobo ka [Kanebo or Toyobo?] (Tokyo, 1930a). ——, Kanebo yo, Omae wa Doko e Iku [Kanebo, Where Are You Going?] (Osaka, 1930b). ——, Boseki Kai no Tenbo [The Prospect of Japanese Cotton Spinning Industry] (Tokyo, 1932a).

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——, Nagaiwata o Kataru [On Naigaiwata] (Tokyo, 1932b). ——, Tsuda Sekkyoku Seisaku to Kanebo no Shorai [Tsuda’s Aggressive Strategy and the Future of Kanebo] (Hyogo, 1938). Annual Reports of Kanebo. Banno, J., ‘‘Japanese industrialists and merchants and the anti-Japanese boycotts in China, 1919–1928’’, in Duus, P., et al. (eds.), The Japanese Informal Empire in China, 1895–1937 (New Jersey, 1989). Chang, J. K., ‘‘Industrial development of Mainland China, 1912–1949’’, Journal of Economic History, 27:1 (1967). Chao, K., The Development of Cotton Textile Production in China (Cambridge, MA, 1977). CMC (China Maritime Customs), Returns of Trade and Trade Reports, various years; title varies. Dai Nihon Boseki Rengokai [Greater Japan Cotton Spinners’ Association], Menshi Boseki Jijo Sankosho [Half-yearly Report of Cotton Spinning Industry]. Duus, P., ‘‘Japanese cotton mills in China, 1895–1937’’, in Duus, P., et al. (eds.), The Japanese Informal Empire in China, 1895–1937 (New Jersey, 1989). Hwang, W., Nihon Toshi Chusho Kogyo-shi [The History of Japanese Urban Smalland Medium-Sized Manufacturers] (Kyoto, 1992). Ishiguro, E., Taiga: Tsuda Shingo Den [A Great River: The Biography of Shingo Tsuda] (Tokyo, 1960). Kanebo Kabushiki Kaisha, Kanebo Hyakunen Shi [100 Years History of Kanebo] (Osaka, 1988). Kato, T., Shina no Mengyo [Cotton Industry in China] (Osaka, 1917). Kinugawa, T., Heiwa to Shina Mengyo [Peace and Chinese Cotton Industry] (Tokyo, 1919). Kobe Zeikan, Yushutsu Men-orimono [Cotton Cloth for Exports] (Kobe, 1934). Koda, Y., Honpo Mengyo no Tokei-teki Kenkyu [A Statistical Analysis of the Japanese Cotton Industry] (Osaka, 1931). Kubo, T., ‘‘Nankin seifu no kanzei seisaku to sono rekishiteki igi’’ [The tariff policy of the Nanjing government and its effects on China’s industrial development], Tochi Seido Shigaku, 86 (1980). ——, ‘‘Kindai chugoku mengyo no chitai kozo to keiei ruikei’’ [Types of management and regional differences in the cotton industry in modern China], Tochi Seido Shiguaku, 113 (1986). Kuwahara, T., ‘‘The business strategy of Japanese cotton spinners: overseas operations 1890–1931’’, in Yonekawa, S., and Okochi, A. (eds.), The Textile Industry and its Business Climate: International Conference of Business History Vol. 8 (Tokyo, 1982). ——, Kigyo Kokusaika no Shiteki Bunseki [The Historical Analysis on the Internationalization of Japanese Firms] (Tokyo, 1990). ——, ‘‘The local competitiveness and management of Japanese cotton spinning mills in China in the inter-war years’’, in Jeremy, D. J. (ed.), The Transfer of International Technology (Aldershot, 1992). Lee, B. Y., ‘‘Decline of British textile trade in China’’, The China Weekly Review (December 25, 1926).

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——, ‘‘Foreign competition and Chinese cotton mills’’, The China Weekly Review (August 30, 1930). Minami Manshu Tetsudo Kabushiki Kaisha, Shanhai ni Okeru Honpo Kako Menpugyo no Genkyo [The Present Condition of Japanese Finished Cotton Cloth in Shanghai] (Shanghai, 1930). Motoki, M. (ed.), Nagaiwata Kabushiki Kaisha Gojunen Shi [50 Years History of Naigaiwata Co. Ltd.] (Osaka, 1932). Nihon Boshoku Tsushinsha, Nihon Boshoku Nenkan Showa 6 Nen [Almanac of Japanese Spinning and Weaving Industry, 1931 edn.] (Tokyo, 1930). Nishikawa, H., Nihon Teikokushugi to Mengyo [Japanese Imperialism and the Cotton Industry] (Kyoto, 1987). Okurasho, Nihon Boeki Nenpyo (Up to 1928, Dai Nihon Boeki Nenpyo) [Annual Return of the Foreign Trade of Japan] (Tokyo). Osakafu Naimubu, Showa 3 Nen Osakafu Shosei Gaiyo [Outlook of Commerce of Osaka Prefecture in 1928] (Osaka, 1929). Osakafu Tokeisho [Statistical Tables of Osaka Prefecture] (Osaka). Seki, K., The Cotton Industry of Japan (Tokyo, 1956). Shanghaishi Mianfangzhi Gongye Tongye Gonghui Choubeihui [The Association of Cotton Spinners and Weavers of the City of Shanghai], Zhongguo Mianfang Tongji Shiliao [Statistical Book of Cotton Spinning in China] (Shanghai, 1950). Shokosho Shomukyoku, Kaigai Shijo ni okeru Honpo Menpu [Japanese Cotton Cloth in Overseas Markets] (Tokyo, 1925). ——, Naigai Shijo ni okeru Honpo Yushutsu Men-orimonogyo no Gensei [The Present Condition of Japanese Cotton Textile Industry for Export in Japan and Foreign Markets] (Tokyo, 1929). Shokosho Tokei Hyo [Ministry of Commerce and Industry, Statistical Tables] (Tokyo). Takamura, N., Nihon Bosekigyo-shi Josetsu [An Introduction to the History of the Japanese Cotton Spinning Industry], 2 vols. (Tokyo, 1971). ——, Kindai Nihon Mengyo to Chugoku [The Modern Japanese Cotton Industry and China] (Tokyo, 1982). Toyo Keizai Shinposha, Nihon Boeki Seiran [Foreign Trade of Japan: A Statistical Survey] (Tokyo, 1935). Takanashi, K. (ed.), Inabata Katsutaro Den [Biography of Katsutaro Inabata] (Osaka, 1938). Woodhead, H. G. W. (ed.), The China Year Book (Tianjin, 1926; Shanghai, 1932). Yamazaki, C., Shina no Boseki to Orimono [Spinning and Weaving in China] (Tokyo, 1927). Yamazaki, H., et al., Koza Teikokushugi no Kenkyu 6, Nihon Shihonshugi [Studies in Imperialism, Vol. 6, Japanese Capitalism] (Tokyo, 1973). Yamatogawa Senkosho Nanajunen Shoshi [70 Years History of Yamatogawa Senkosho] (Sakai, 1966). Yen, C., Chugoku Kindai Sangyo Hattatsu-shi [The History of Modern Chinese Industrial Development], translated by Yoshi’ie Yoda (Tokyo, 1966).

PART II The Rise of Economic Nationalism in China

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5 The Collapse of the Chinese Imperial Monetary System akinobu kuroda

1. Introduction Between the end of the nineteenth century and the 1930s the Chinese monetary system underwent drastic changes. Prior to and during this period diverse forms of currencies were in circulation in China but, after a series of monetary reforms, these were eventually unified in 1935.1 The purpose of this chapter is to discuss the collapse of the traditional monetary system which had originally evolved under the Chinese Empire, and to clarify the historical significance of monetary unification by examining the impact this collapse had on China’s market structure.2 In order to achieve these objectives this chapter is divided into five sections, including this introduction. Section 2 examines the monetary system that was in existence around the 1890s, that is, before the series of monetary reforms began. Section 3 presents an account of the phases of monetary reforms in the late Qing and Republican periods. This is followed by an examination of how the monetary reforms and currency unification affected China’s market structure. The final section offers a brief summary of the arguments presented in this chapter, and gives suggestions for future research.

2. Multiple Monetary Standards and Currency Circuits During the Qing dynasty (1644–1911), various attempts were made at monetary reform.3 In particular, drastic reform measures were taken during the Civil War that followed the Taiping Rebellion in the 1850s (Peng Zeyi 1979). At this time, the Qing dynasty rulers cast token copper cash coins with face values of 50 or 100 wen and various other units, and issued paper money with a face value of one qian (1,000 wen), etc. However, both the dual-denomination copper cash and the official paper money circulated at a large discount and the reform failed, with these newly issued currency units disappearing in the 1860s as the war ended.

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The traditional copper cash, which had a face value of one wen, subsequently re-established its position as the only government-issued currency. However, although it may initially appear so, this did not mean that China’s monetary standards had been unified under a single, official copper currency. There were still various currencies in circulation and many units of account used in China at the end of the nineteenth century. Nevertheless, two metal-based currencies—the silver liang (or tael) and copper cash—formed the basis of the monetary system in the late Qing period. Before looking at other types of currencies or units of account, it is necessary to describe the silver liang and copper cash, and to outline the functions that they performed. Silver liang was a unit of account that was not denoted by any specific form of coin and, under the liang system, trading was conducted not through the counting of silver coins but through the weighing of silver ingots using a measure known as liang. The way in which silver ingots were weighed was rather complicated as the unit of account consisted of three elements—weight, purity, and a divisor (e.g. 0.98 in the case of the Shanghai liang). It is important to note that these three elements differed from region to region and from commodity to commodity. Therefore, the same liang could mean different units of account of silver depending upon the region and the commodity being traded.4 On the other hand, the value of a copper cash was generally fixed at one wen and this currency was used simply by counting the number of coins, or cash. Although less complicated than the liang system, the copper currency also had various units of account. In large transactions, copper cash was presented as a string and large denominations were valued at a premium. For example, in Hankou a string of 980 cash was counted as a qian, that is 1,000 wen. Like the silver liang, various qian coexisted in China and the units of copper cash that made up a string varied by region and commodity. The situation was further complicated by the fact that, in addition to silver liang and copper cash, other kinds of money were also in circulation. As in other nineteenth-century East Asian countries, these included silver dollars, most of which came from Mexico. For daily transactions three kinds of ‘‘Mexican’’ coins were in circulation, with denominations of one dollar, and ten or twenty cents. However, coins of smaller denominations did not necessarily circulate as subsidiary coins—for example, the ratio of a ten-cent coin to one dollar was not fixed at one-tenth, but generally quoted at a lower rate that varied from region to region. It must also be noted that silver dollars were available only in the southeastern coastal regions and treaty ports. In other areas they were redeemed as silver ingots and their value calculated on the basis of the liang, and they were not readily accepted by people in inland rural areas. Furthermore, other

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kinds of dollars were circulated in the more limited areas. The Japanese dollar, for example, was in wide circulation in Fujian province. Besides these metallic currencies, paper money was also used. Foreign bank notes were generally in circulation in treaty ports where the banks had branches. In local markets, merchants also issued copper cash notes with a face value of one qian and various other units. However, the circulation of these currencies was usually limited to a particular county or town, a point which will be discussed later. It is important to establish for what purposes each of these various forms and types of money was used. On a superficial level, a division can be made on the basis of final usage which produces three nonexclusive categories. The first category includes moneys mainly used for daily transactions—copper cash in most regions and one or two silver dollar currencies in the southeastern coastal regions. In the second category are the moneys that were used for the trading of special commodities, and in many cases these were connected with the export of local products to remote areas of China and foreign countries. For example, Jingdezhen was a region that was famous for porcelains and the export of such products to Shanghai brought in a lot of Mexican dollars. The Mexican dollar consequently became an accepted form of currency in Jingdezhen (Toa Dobunkai 1918, Vol. 11: 931), but was not in circulation in the surrounding regions. Finally, we find that silver liangs were typically used for payment settlement. Although even within a region people used different liangs for different commodities, there was generally one liang that formed the standard account within that region.5 Traders who came from outside the region tended to convert their silver ingots on the basis of the native liang standard. A further issue in need of clarification is that of who supplied these diverse forms of money and controlled their circulation within such a complicated framework. Money, particularly of small denominations, had a long history of usage in traditional China and even in rural markets bartering was rather limited except in times of extreme monetary instability. However, there was little legal control over the monetary system and the ruling liang within a certain region was not a legal standard, but a private one. It was not even an exclusive unit of account—people could use another liang if they preferred. Although official liangs such as the Kuping liang, which was used for collecting land tax, did exist, they always circulated as one among many different kinds of liang. The government issued only copper cash—not silver currency—and even the copper cash was circulated under the unit of account set by local merchants. It is clear, therefore, that the rule and order of monetary circulation in local markets was based on agreements made between merchants, and that the terms of these agreements were flexible. In this chapter, the system outlined above, in which circulation was based on agreements

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made by merchants, will be called a ‘‘currency circuit’’.6 The case of a single silver-liang-based unit of account serving as a standard in one region was but one example of this. As noted above, some merchants issued a copper cash note, and this was called a qianpiao. Qianpiao were accepted in both local towns and villages and, although the notes were privately issued for the customers of a particular merchant, within the region of issuance people would accept and use them regardless of the merchant by whom they had been issued. Outside the region of issuance, however, the note could only be used at a significant discount. Qianpiao brought elasticity to the supply of metallic copper cash used as payment for peasant crops, and demand for cash by the peasants led to the formation of a currency circuit that maintained the existence of these local notes. As the area within which particular copper cash notes circulated did not exactly overlap with the area of the single prevailing silver liang account, one can begin to visualize a picture in which various layers of currency circuits piled on top of one another within a region. During the nineteenth century many such currency circuits existed side by side in China. With the exception of the use of bills of exchange, people generally used silver for the settlement of transactions, although the transported silver was always converted into the native liang. One characteristic of the monetary system was that the exchange rates of the various forms of currencies fluctuated on an almost daily basis and even a ten-cent silver coin was quoted separately from one silver dollar. More importantly, the varying rates of quotations were always based on the predominant liang in any particular region. It must also be noted that the currency circuit in traditional China was not an entirely hermetic unit. Currencies flowing in from outside the circuits were not necessarily excluded from circulation, as can be seen in the case of Mexican dollars in Jingdezhen. Rather, agreements on the monetary system permitted the inflow of various currencies from outside without causing disorder in local markets.

3. Phases of Monetary Reforms In this section, the effect of the monetary reforms of the late Qing period on the monetary system described above will be examined. The reform process can be divided into two stages. The first stage began around 1902, with the provincial governments strengthening their control over the circulation of money in response to the possibility that China was drifting towards disintegration. During this stage copper coins with a face value of ten wen began to circulate and drive the one wen copper cash out of the market. Furthermore, 1000 wen paper notes were issued by provincial

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governments and gradually took over the sphere dominated previously by the private qianpiao. The second stage started during World War I, when the Chinese silver dollar began to replace foreign dollars and soon came to prevail. Meanwhile, there was an expansion in the circulation of bank notes compatible with the silver dollar, especially China Bank notes. During the 1920s, before the Nationalist government’s monetary unification of 1935, the currencies that were in circulation in the major part of China had already been substantially unified by the Chinese Yuan Shikai silver dollar. These two waves of monetary reform, which are described in more detail below, led to the gradual disappearance of the more than threecentury-old monetary system based on the old copper cash and silver liang.

3.1. Stage 1: The disappearance of the copper cash and the appearance of provincial paper money As noted in Section 2, officials had proposed the issuance of multidenominational copper cash and the corresponding official paper money on several occasions during the Qing period. In fact, the government did take such measures during the early Qing era in the middle of the seventeenth century and the Civil War period in the middle of the nineteenth century. However, in both cases, government financial crises and copper shortages led to the issuance of money of incompatibly high denominations, which was then seriously discounted and driven out of the market soon after the return of peace. This is an example of a supply-side factor being responsible for the failure of the government’s attempt at monetary reform. In the period under consideration in this study it will be argued that both demand- and supply-side factors were significant in causing a shortage of copper and an appreciation in its price. From the latter half of the 1890s to the early twentieth century, China suffered from a serious shortage of copper cash and sources from this period show that this hampered the purchase of products, such as tea, from the peasants (Zhang 1990, Vol. 2: 342–3). A look at the relevant supply-side factors may help to establish why this shortage occurred. According to foreign reports a major reason was the fact that the government had suspended the issuance of copper cash (Toa Dobunkai 1905: 255). It is true that during the last quarter of the nineteenth century the Qing dynasty seriously neglected the issuance of copper cash, as the government found that issuing large amounts of small-denomination cash, unlike that of high-denomination currencies, brought them more financial strains than profits. However, the appreciation in the value of copper cash only began in the latter half of the 1890s, when the issuance of copper cash had already been discontinued for decades. Hence, it is

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necessary to consider other factors that may have been behind the post1895 appreciation in the price of copper. A further possibility is that the shortage of copper in China was related to changes in the international copper price. Due mainly to the rising demand from the then newly developing electricity industry, the international price of copper had increased significantly since the end of the nineteenth century and this could have caused the copper shortage (Yang 1962/1977: 226). If this was the case then it could be hypothesized that the shortfall of copper cash in China was caused by the ongoing worldwide industrial revolution. However, as is demonstrated below, although the price of copper in the United States and quotations of copper cash in China were both on rising trends, there was not a strong correlation between them in this period. In summary, the shortage of copper cash at the end of the nineteenth century should not be regarded as having been caused by supply-side factors alone. Generally speaking, the effects of the copper shortage were felt more strongly in the inland districts which depended on copper cash for daily transactions, than in the coastal districts where silver coins were more frequently used. This point can be illustrated through consideration of the situation in Hankou, which was the largest trading center for rural commodities in inland China and was known for handling the largest volume of tea exports in China. Although British India had already surpassed China in its share of world tea trade by the 1880s, the export of tea was still the most important trade in Hankou even towards the end of the nineteenth century (CIMC 1912: 342). Payment to tea farmers was usually made in copper cash and, almost without exception, copper money tended to appreciate against the silver liang during May—the tea harvest season—due to the increased demand. In the middle of the 1890s the scarcity of copper cash, which led to the prevalence of inferior-quality cash, brought much inconvenience and aggravation to merchants and the authorities. In 1895, as a response to this problem, the provincial government of Hubei (where Hankou was located) began to issue a silver dollar, backed by the strong Westernization policy of Zhang Zhitong who had been governor for eighteen years. The issuance of a silver dollar by this Chinese authority had two goals—to expel foreign silver dollars, especially the Mexican one, and to supplement the circulation of copper cash (Zhang 1990, Vol. 1: 622). Issuing a provincial dollar succeeded to some extent in achieving the first goal, that is, to substitute for the Mexican dollar. The Hubei dollar was not only circulated in the area surrounding Hankou, but was also exported to Shanghai (Tsusho Isan 1900: 37–57). However, it did not relieve the copper famine and, contrary to expectations, even with the official backing of the Chinese authorities it was not able to replace the copper cash. A Maritime Customs report clearly indicates the reason for

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the failure—peasants preferred the 1,000 wen copper cash to the one-dollar silver coin quoted at 1,300 wen (CIMC 1912: 283). The problem, therefore, was not just due to the general scarcity of copper, but also to farmers’ choice of money used in payment. By the spring of 1903, the price of copper had appreciated to an all-time high. A report by the Japanese Consular in Hankou ascribed one of the causes of the appreciation to the good harvest in that year which meant that large amounts of copper cash were needed to make payments to farmers (Tsusho Isan 1903: 32–3). The most significant aspect of this report was not so much the information on the cause of the rise in the copper price in that particular year, but that which suggested that a good harvest was naturally associated with high demand for copper cash. The key point is that the relative inelasticity of the money supply impressed upon the people the strong connection between a good harvest or large construction project (when a large amount of wages had to be paid) and the appreciation of copper cash. Furthermore, this relationship is important in understanding the success of the introduction of high-denomination copper coins and official paper moneys at the beginning of the twentieth century, a process which is analysed below. In 1904 the market began to change, with merchants no longer troubled by the copper famine. A large amount of ten-wen copper coins began to circulate, rapidly replacing the one-wen copper cash and around 1,910 copper coins became the main currency used by peasants in Hubei province. The traditional copper cash became just a subsidiary currency representing one-tenth the value of one copper coin, in spite of the fact that the intrinsic value of a ten wen copper coin was much less than ten times the value of a copper cash. As a result, the exchange rate between the copper currency and the silver liang—which was 1,170 wen for one liang in 1903—fell to about 2,060 wen in 1913. Copper currency, even compared to its value of 1,645 wen in 1894, depreciated in value, as is shown in Table 5.1. Meanwhile, prices quoted in copper currency had risen during the same period,7 as can be inferred from Table 5.2. These two trends seem to indicate that the transformation of copper currency from copper cash to a copper coin with less intrinsic value simply resulted in an adjustment in the nominal price level in China during the two decades prior to World War I. This could suggest that effectively no real change occurred. Clarification of this point requires a re-examination of the process by which the change from copper cash to the copper coin took place. One thing that should not be overlooked is that both the copper coin and the copper cash were but one part of the circulating currencies that were based on the wen unit. The copper cash note denominated in wen, the so-called qianpiao, also circulated alongside the metallic currencies. In the spring of 1904, when appreciation of the price of copper currency ceased, a report

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Table 5.1. Movements of the copper cash rate in China, 1892–1921

1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921

Nantong (wen/dollar)

Shashi (wen/liang)

1,033 1,050 1,030 911 903 900 900 900 913 900 830 810 914 1,080 1,081 1,213 1,317 1,338 1,295 1,313 1,291 1,317 1,397 1,381 1,283 1,289 1,313 1,354 1,468

1,630 1,630 1,645 1,274 1,292 1,288 1,370 1,274 1,333 1,312 1,200 1,170 1,200 1,420 1,620 1,620 1,790 1,950 1,935 1,900 1,890 2,060 2,010 2,080 2,250 2,350 2,400 2,440 2,500 2,760

Copper price in the United States (liang/picul)*

Export value from Shashi (liangs)

11.7 11.5 12.5 13.8 13.3 15.8 16.5 22.5 22.3 20.7 19.7 20.9 20.9 23.2 26.3

181,220 91,878 135,966 161,793 331,948 486,290 685,385 622,043 458,288 534,941

Sources: Nantong (Lin Jubai 1984: 159–60); Shashi (CIMC, Decennial Reports, passim); Copper price in the United States (Weed 1908: 16); export value from Shashi (CIMC, Returns of Trade and Trade Reports, passim). Notes: * Original figures are in US dollars and are average yearly prices. Conversion into liang is based on the average annual exchange rate.

Table 5.2. Correlation coefficients for US copper price and the copper cash rate in China

1893/1900 1897/1904 1901/1906 1893/1906

Shashi

Nantong

0.55 0.31 0.94 0.20

0.70 0.24 0.82 0.29

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by the Japanese consul in Hankou stated that, ‘‘the authority is issuing official copper cash notes, guan-qianpiao, at a lower rate against silver liang than the market’’ (Tsusho Isan 1904: 39–41). Printing provincial paper money in place of the copper coin was effective in subduing the increasing demand for copper cash. The Hubei provincial government was the most successful issuer of paper money and around 1910 it printed copper cash notes to a total value of three times its copper reserves (Xie 1988: 256). In contrast to this success, the copper cash notes that were issued by the Hubei provincial government before 1904 had failed to prevail in the market. The main reason for this was that these copper cash notes lacked convertibility and this, in turn, was due to the copper cash famine (CIMC 1912: 305), However, after 1904 the convertibility of provincial paper money came to be sustained by the copper coin. The circulation of the official copper cash notes throughout the areas linked to Hankou by trade was undoubtedly the most important change in China’s monetary system that occurred before World War I. The prevalence of provincial paper money had an adverse effect on the acceptability of private copper cash notes that were issued by local merchants. A Decennial Report made by the customs of Shashi, which was located by the Yangzi River in the western part of Hubei province between Hankou and Chongqing, pointed out that the official copper cash note circulated at a nominal value of 1,000 wen whereas the private copper cash note was discounted to 800 wen (CIMC 1912: 245–6). The provincial paper money held out well in the trading areas of Hankou until the second half of the 1920s, after which time occurred a decline of copper currency and a revival of private notes (Kuroda 1994: 274). The driving out of the private copper cash note by the official copper cash note may well have had a significant impact on the economy. In order to establish whether this was so it is necessary to clarify the circulation mechanism of the private copper cash note and to distinguish between the private copper cash note and the bill of exchange or promissory note. Generally speaking, the private copper cash note was guaranteed permanent convertibility into the hard currency, such as the copper cash or copper coin, and its most important characteristic was that its circulation was limited, usually to a certain region or regions. The complexity and limitations of private copper cash notes can be shown through an example from Shanxi province. In 1913, forty shops in a particular town in Taiyuan county issued their own copper cash notes, the total value of which was estimated at more than 100,000 qian, or 100 million wen. However, shops in another town (called Jincizhen) in the same county, which was only one-and-a-half hours walk away, issued their own copper cash notes. Usually, a shop would accept another’s copper cash notes at face value provided that the issuing shop was located in the same town. However, outside the commercial area of the town,

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even with distances as short as in the above example, private copper cash notes were usually either not accepted at all or accepted only at a serious discount (Kuroda 1996). Currency circuits, as defined in this chapter, were typically found in regions that maintained the circulation of certain private copper cash notes. The dominance of provincial paper money over private notes in Hubei province must have caused some changes to the system of currency circuits. When the Hubei provincial government issued its copper cash notes, it was initially inclined to put the seal of the county of issuance on them. However, Governor Zhang Zhitong prohibited counties from using the seal in an effort to extend the provincial paper money’s sphere of circulation beyond county boundaries (Zhang 1990: Vol. 4: 20). As well as establishing branches of the provincial mint in the three treaty ports, Hankou, Shashi, and Ichang, the provincial government also set up branches in some centers where peasant commodities were collected, and in other centers local financiers were entrusted with the role of providing branch services. In regions where branches of the mint were established, the official copper cash note soon drove out the private money. As a result, the circulation of the official copper cash note was extended throughout the whole province. The way in which the sphere of circulation of official paper money expanded can be illustrated through further examples. Xianning was a tea-producing county which was nine hours away from Hankou by steamship. There was only one money exchanger (Qianzhuang) in Xianning and he had no previous experience of making transactions with the exchangers in Hankou. Once the official copper cash note came to prevail, tea merchants would take these notes to the money exchanger, who would convert them into copper coins which could be used to purchase tea from the peasants (Toa Dobunkai 1918, Vol. 9: 525–6). The sphere of circulation of provincial paper money was thus extended through its function of facilitating the purchase of local commodities that were to be transported to Hankou, the largest port of inland China. Branches of the provincial mint were even established at Xinyang in Henan province and Wuxie in Jiangxi province—towns which, although outside Hubei province, were centers for gathering sesame and hemp that was bound for Hankou. These are clear illustrations of a process in which a strong demand-pull for currency to pay for peasant produce enabled provincial paper money from Hankou to replace local private copper cash notes. The important point here is that changing economic conditions in early twentieth-century China, particularly the increasing export of rural commodities, necessitated the establishment of a mutually acceptable interregional currency in areas linked to Hankou. In order to transport and trade commodities from those peripheral regions that had no prior financial linkages with Hankou, a currency that could guarantee some interregional consistency of value was needed.

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Returning to the reasons for copper currency’s appreciation, further reference to Table 5.1 shows changes in export values and copper currency quotations in Shashi. The export value in the maritime statistics excluded most re-exports of goods from other ports such that it can be said that the export values in the table reflect the actual production for export of the northwestern part of Hubei province. During the period of copper currency appreciation, between 1897 and 1904, export values and copper currency quotations in Shashi show a high positive correlation with a coefficient of 0.90, as calculated in Table 5.2. In contrast, the copper currency quotation and the price of Lake Superior Ingot Copper (which reflected international copper price movements) do not display a high correlation with a coefficient of only 0.31 during the same period. In the case of Nantong in the Lower Yangzi the coefficient is also low. Therefore, it was not the international copper price movement but the demand for copper to conduct transactions involving rural commodities that caused the appreciation of copper currency in China around the turn of the century. In summary, increasing demand for peasant produce and the need to make payments to farmers, around the turn of the century, caused an appreciation in the value of copper currency. The strong demand of the trading ports for rural commodities enabled provincial paper money to prevail over the local currency circuits and an interregional currency system linked directly with the peasants emerged. Although the impact of trade differed from region to region most provinces then issued their own paper money in an attempt to make seigniorage profits. Supply-side motivations may have been similar but the strength of demand for the currency differed. It is often said that the demand-pull for local peasant commodities exerted by the major treaty ports originated directly from international trade. However, if that was the case, then the demand for an interregional currency did not stimulate the monetary unification of the Chinese trading ports, rather it promoted the monetary autonomy of provinces with major trading ports—a situation that was conducive to the formation of military divisions by the governors of such provinces.

3.2. Stage 2: The prevalence of the Chinese silver dollar and bank note The second stage of the reform of China’s monetary system occurred during the period 1914–27. The start of this second stage can clearly be traced to the outbreak of World War I and the issuance of the Yuan Shikai dollar, although the end year is not so clear-cut. To understand the changes that took place it is necessary to examine the circulation of money in China in the middle of the 1920s. A survey published by the Shanghai Bank in 1925 is invaluable for this purpose (Shanghai Bank 1925).

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In 1924 the Shanghai Bank conducted an investigation of the circulating currencies in forty-eight cities across China. The survey showed that the Yuan Shikai dollar was already the most widely circulated form of money in every city, except for Dalian where Japanese yen coins and Chosen Bank (Bank of Korea) notes dominated. Before World War I, Mexican dollars had circulated at a premium in Jiangnan district, and the Japanese dollar had been the prevailing silver money in use in Amoy and Jiujiang. In the year of the survey, however, both foreign dollars had become minor components of the total money supply. Another survey in 1924 estimated that 960 million silver dollars were in circulation in China, of which 750 million were Yuan Shikai dollars and only 30 million were foreign dollars, with the remainder being accounted for by other Chinese dollars (Toa Dobunkai 1926: 792). The prevalence of the Yuan Shikai dollar was not limited to areas which had a history of using silver currencies. In inland China, silver dollars had not been in general circulation for use as a currency for daily transactions, but by 1924 the Yuan Shikai dollar was performing precisely this role. Even in Laohekou in Hubei province, where copper currencies had once been absolutely dominant, the Yuan Shikai dollar came to prevail. By the middle of the 1920s a vast area centered around Hankou, which had traditionally preferred copper currency, had switched to the silver dollar. A further change was that bank notes began to circulate in regions beyond the treaty ports. As was mentioned in Section 2, bank notes issued by the branches of foreign banks were already in circulation before World War I, but only in the ports where branches of the banks were located. In contrast, a large proportion of the bank notes in circulation in the 1920s was issued by Chinese banks, especially the China Bank. Moreover, these bank notes began to circulate in towns that were far from the trading ports. These three changes—the replacement of foreign dollars, the disappearance of copper-preferring regions, and the circulation of the China Bank note—were interrelated and tied together by the prevalence of the Yuan Shikai dollar. A simple answer to the question of how so many Yuan Shikai dollars could circulate was that World War I had induced a rise in the international silver price that led to the outflow of silver from China. The scarcity of silver in China then created a demand for a new silver dollar (Miyashita 1952: 518). However, although this explanation is not incorrect it is inaccurate and the situation at the beginning of the war must be examined more closely. Prior to World War I, the Mexican dollar was used as a means of payment for exports and was quoted at a higher rate than other dollars. Demand for export goods was reflected in, and reflected, the value of the Mexican dollar which varied according to seasonal trends. In 1914 the Shanghai quotation of the Mexican dollar against the silver liang began to

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fall (Zhongguo Renmin Yinhang 1960: 619), and during World War I the Mexican currency’s premium position was lost to Chinese dollars as exports were depressed by the breakout of the War. In the autumn of 1914 foreign banks in Hankou, where the Yuan Shikai dollar had not yet begun to circulate, started to suspend their short-term export loans due to the difficulty of selling export goods. Simultaneously, Chinese dollars began to flow into Hankou, gradually driving out the Mexican dollar. In other words, the most important factor underlying the spread of Chinese dollars, including the Yuan Shikai dollar, was the disappearance of the once superior Mexican dollar due to World War I. Rather than the disappearance of the Mexican dollar resulting from the prevalence of the Yuan Shikai dollar, the direction of causality was the reverse with the former resulting in the latter. Thus, it was the disruption of exports due to World War I that lay behind these changes in the Chinese monetary system. Of course, as the war was mainly fought in Europe it did not affect all the exports from China and some new export items even appeared due to wartime demand. However, one must remember that it was the growth of rural commodity exports that sustained the emergence of provincial paper moneys as interregional currencies. The loss of export markets seriously affected the credibility of paper moneys used in transactions for peasant products and even the currency circuits based on copper in the areas centered around Hankou collapsed after the war. The point being made here is that for the popularity of interregional currencies to be maintained there had to be continuing external demand for local products, and the loss of such demand meant the death of the currency. Once provincial paper money was no longer able to play the role of linking local products with the trading ports, its credibility was lost. After World War I, bank notes, especially those with convertibility tied to the Yuan Shikai dollar, began to develop as popular interregional currencies to replace the copper-coin-based provincial paper moneys. China Bank notes were the primary example of this and these notes were at first issued separately by local branches of the China Bank, with each note only being available within the service area of the issuing branch. Initially, these notes were used as a method of payment that complemented the demand for local currency. However, in the 1920s the role played by the China Bank notes began to expand and this can be illustrated by examining the trade of wood oil in the area bordering the provinces of Hunan and Guizhou. Hongjiang was a town that was located on the border of Hunan province, more than 500 km from Hankou. Until about 1920, merchants from Hankou who wanted to purchase wood oil and transport it to Hankou had to take bills of exchange to Hongjian and have them converted into hard currency or notes issued by exchangers there. They could then take

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this money to purchase wood oil at Sanjiang, which was located on the border of Kuizhou province. However, according to a survey conducted in 1923, merchants by that time no longer needed to make an exchange at an intermediate city. More than 100,000 dollars of bank notes had been issued by the Hankou branches of the China Bank and the Communication Bank and were now in circulation in Hongjian. Furthermore, the Yuan Shikai dollar and notes issued by the Sanjiang branch of the China Bank were also in circulation in Sanjiang, so transactions involving wood oil could thus be conducted solely by using the financial services of the China Bank (Kuroda 1994: 269–70). After World War I, the same process progressed through the Yangzi river area and everywhere the circulation of the Yuan Shikai dollar and bank note drove the silver liang and copper currency out of local markets. The procurement of rural commodities thus facilitated the replacement of native financiers with branches of the China Bank and the decline of native money exchangers was always accompanied by the commencement of the circulation of bank notes. Examples of this occurred in the mid-1910s in Boxian in Anhui province, a regional center for the shipment of sesame seeds to Shanghai (Toa Dobunkai 1919: 832–3), and in the early 1920s in Zhoukou in Henan province where sesame was purchased to be transported to Hankou (Yinhang Zhoubao 1921: 14). Until the end of World War I, bank notes had only circulated within the borders of the county of the issuing branch. After the war, the circulation of bank notes expanded greatly and by the end of 1921 covered areas well beyond the boundaries of a single province. In 1925, the Hankou branch of the China Bank issued the Wusheng Tongyongquan, literally the ‘‘Five Province Mutual Use Currency’’, which became very popular in cities such as Laohekou where copper had long been the dominant currency. Finally, after the crackdown of the Wuhan National Government in 1927, bank notes issued by banks in Shanghai began to circulate in Hankou (Gongshang Banyuekan 1929: 8–9). Therefore, towards the end of the second stage of monetary reform the bank note, which had once been no more than a local currency, was instrumental in uniting two large economic centers—Shanghai and Hankou. It is necessary to examine the factors underlying this process. Between 1919 and 1921, cities across China were struck by financial crises. In traditional China such crises were usually caused by a decrease in silver stocks which tended to destabilize local markets. One of the causes of the crisis that began in 1919 was clearly that the international silver price had peaked, not during World War I, but in the period of 1919–20. The annual average price of British standard silver per ounce in London was forty-eight pence in 1918, and but increased to fifty-seven pence in 1918, and sixty-one pence in 1919 (US Treasury Department 1936:

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89). However, there were other causes besides this one and these can be ascertained by looking at the case of Hankou in 1919. The crisis in Hankou started in May 1919, a month that marked the beginning of the cotton-buying season. The end of the war had resulted in the resumption of exports to foreign markets in the spring of 1919 and cotton procurement increased the demand for silver dollars. As a result of these two factors there was a net outflow of silver stocks from Hankou, triggering a financial crisis that lasted until the autumn of that year, at which point the provincial government prohibited the further outflow of silver to other provinces (Tsusho Koho 1920: 1029–55). The point to be noted here is that even in Hankou, where copper currency had once prevailed, the purchase of peasant produce now also exerted a strong impact on the demand for silver dollars. The disruption of exports to Europe and the rise of domestic industry during World War I had altered the Chinese pattern of trade and this was a further factor behind the changes in the monetary system. Typical commodities included sesame and raw cotton, and before the war sesame was processed and traded in Hankou for the European market, with the German oil and chemical industries as its most important customers. Table 5.3 shows the amount of sesame exported from Hankou and the value imported by Germany. A survey conducted before World War I reported that net profit per mu (approximately six acres) of sesame was fifteen qian (1,000 wen), in comparison to a net profit of twelve qian from one mu of cotton. During the war, however, the situation was reversed, with the German demand for sesame not recovering after the war, thus reducing the profitability of sesame cultivation, whereas domestic mills’ (in particular, Shanghai mills) demand for cotton continued to grow. During this period, Hankou was the trading center that linked raw cotton from inland China with Shanghai cotton mills, and Table 5.4 shows the postwar growth in the Hankou trade of Shanghai-bound raw cotton. The survey was conducted again after the war and stated that the net profit from raw cotton cultivation had risen to 16 qian (Rinji Sangyo Chosakyoku 1919 Vol. 2: 76). There is no doubt that some peasants in the central Yangzi area switched from sesame to cotton cultivation, as is hinted at in the survey. Changing trade patterns, such as those outlined above, dictated changes in the currencies in circulation. Demand for raw cotton in Shanghai caused the silver dollar that was in circulation in the Lower Yangzi area to penetrate into the cotton-growing regions of the central Yangzi area. Further impetus to this process was provided by the collapse of the copper currency circuits during the war. The Yuan Shikai dollar gained popularity because of its role as a currency used to make payments to cotton-growing peasants, and bank notes compatible with the Yuan

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Table 5.3. Chinese sesame exports and German imports, 1900–1931 Chinese export (Value: 1,000 Year liang) 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931

953 1,203 4,185 2,030 560 2,350 4,513 3,671 9,138 11,674 14,377 11,739 11,965 12,372 6,366 9,556 6,998 1,101 1,173 15,577 10,830 8,812 7,452 12,161 6,496 4,112 7223 4764 8,194 12,137 15,067 14,395

From Chinese Hankou export (Volume: 1,000 (1,000 piculs) piculs) 276 297 882 527 129 576 1,070 735 1,792 2,153 2,731 2,073 2,000 2,035 1,251 2,298 1,558 223 234 2,839 2,056 1,481 1,258 1,926 934 529 901 566 956 1,467 1,923 1,671

423 453 670 510 616 753 1,073 763 1,642 1,917 2,066 1,677 1,904 1,375 1,013 1,753 929 330 138 1,765 979 550 882 985 395 160 512 378 721 603 994 1,035

German import (1,000 mark)

From China (1,000 mark)

From India Sesame Price (1,000 in Vienna mark) (Kronen/1,000)

8,403 10,207 14,382 15,495 12,210 12,094 16,053 20,492 25,271 22,024 41,167 33,831 35,522 43,711

346 395 2,564 4,168 395 2,873 5,621 1,639 15,185 13,730 24,277 21,818 27,338 30,043

7,439 8,741 10,820 10,786 11,044 8,534 8,874 17,436 8,913 7,040 15,070 10,933 6,878 11,849

90 87 82 87 94 121 111 103 103 115 105 112

Sources: China (CIMC, Returns of Trade and Trade Reports, passim); Germany (Kaiserliches Statistisches Amt and Der Seifenfabrikant, passim). Notes: The value of sesame imports from China possibly excludes that via the third countries.

Shikai dollar steadily expanded their spheres of circulation. In the mid1920s, notes issued by the China Bank were generally accepted for transactions involving raw cotton in cotton trading cities such as Zhengzhou of Henan province (Zhongwai Jingji Zhoukan 1925: 41). The changes that occurred also had political implications. The second stage of monetary transformation was clearly conducive to the political unification of the 1920s, which culminated in the founding of the Nanjing

Collapse of the Chinese Imperial Monetary System Table 5.4. Cotton exports, 1910–31

119 (1,000 piculs)

Year

Total quantity

From Hankou

From Shanghai

To foreign countries

To Japan

To domestic ports

1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931

1,343 990 1,172 953 768 1,233 1,508 1,515 2,185 2,022 872 1,440 1,918 2,409 2,480 2,608 3,250 2,838 3,744 2,782 2,581 1,844

228 113 299 213 135 430 734 760 985 1,162 419 645 972 1,121 1,168 1,074 1,610 910 1,709 1,188 809 315

752 388 233 239 254 139 200 368 514 177 136 185 173 207 310 146 133 213 116 97 72 49

1,247 878 806 739 675 726 851 832 1,292 1,072 376 609 842 975 1,080 800 879 1,447 1,112 944 826 790

1,105 642 604 527 433 551 657 616 1,212 912 220 561 644 804 890 611 793 1,147 867 755 664 696

96 112 366 214 132 503 655 697 899 944 497 838 1,085 1,478 1,417 1,848 2,402 1,398 2,607 1,891 1,820 1,104

Source: CIMC, Returns of Trade and Trade Reports, passim.

National Government in 1927. This was in sharp contrast to the first stage which tended to promote the political division of China. Although it may have appeared that the struggle among ‘‘military landlords’’ peaked in the 1920s, the economic and financial basis of political division had been severely diminished by this time. The success of the circulation of the China Bank notes in the Yangzi River area, China’s most important economic region, formed the basis of the monetary unification in 1935 which aimed at establishing a managed currency system in China.

4. Formalization of the Money Supply and Currency Circuits This chapter has thus far considered two phases of monetary change: the first phase was marked by the emergence of provincial monetary autonomy, and in the second forces acted to create a unified monetary system and reverse the process of decentralization. These two phases represented a dynamic process that in many ways seemed to reflect the self-perpetuating cycle that had been swinging between centralization and decentralization throughout China’s long history (King 1965: 124).

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Towards the end of the period under consideration in this study, the combination of the prevalence of provincial paper money, the circulation of bank notes, and the disappearance of traditional currency circuits created a situation that had never been seen before in Chinese history. On the surface, this created a simmering tension between provincial and central governments, and between traditional financial institutions like the local money exchangers and the new Western-style banks. Underlying this tension was the more fundamental conflict of whether or not, in the light of changing demand, the money supply should be maintained by the local currency circuits or regulated by transregional official institutions. Traditionally, central government intervention in monetary affairs differed in degree from time to time. The issuance of government currency was usually accompanied by a process of adjustment in local markets as they set up their own units of account for monetary circulation. Local currency circuits in traditional China had no legal basis and no formal geographical boundaries so people were free to establish new units of account for the silver liang and copper currency, and decide on premiums and discounts on hard currencies based on their own assessments. Nevertheless, most of the time there was a majority consensus in operation regarding the currencies in use and in order to maintain and stabilize local liquidity people must have abided by some kind of standards, even if these were largely based on laissez-faire principles. Local markets came to agreements on currency in different ways and with different results. Between 1908 and 1909, the desire of provincial governments to gain seigniorage profits led to the overissuance of copper coins which were thus devalued, with the extent of the devaluation varying from region to region. In the Lower Yangzi River area, a tenwen copper coin gradually came to be discounted to eight or nine wen, and in the town of Zhujiazhen near Shanghai, native merchants held a meeting and came to an agreement that they would count a ten-wen copper coin as nine wen from that day on. Influenced by the general trend of discounting in Zhejiang province, tea merchants from Huizhou began to discount a ten-wen copper coin to nine wen and they were followed by the pawnshops of the same region. In contrast, native rice merchants decided to observe the face value of the coin, possibly under the influence of the chamber of commerce in Suzhou prefecture (Huazhong Shifan Daxue 1991: 1184–5, 1192). Zhouzhuangzhen town in Suzhou also decided to stick to the face value of the copper coins. The above cases show that merchants were flexible in evaluating circulating currencies in accordance with the market, and it was usually the currency favored by the majority that came to prevail in the region. A kind of competitive mechanism was in operation in that when preferences differed merchants had to compete to win over the majority opinion.

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Competition was generally more effective than any formal or informal regulations. Local liquidity had been maintained by private copper cash notes and there were few regulations regarding the issuance of these. Whenever and wherever there was a possibility of seigniorage profits, due to a shortage of local currency, increasing numbers of merchants would join in the issuance of notes until profitability was exhausted.8 In the early twentieth century, however, the establishment of formal monetary institutions began to affect the issuance of local copper cash notes. As mentioned above, there were tendencies both to substitute provincial paper moneys for private copper cash notes and to control the issuance of local copper cash notes through the supervision of local chambers of commerce. The latter tendency was reinforced around the time of the collapse of the Qing dynasty in 1911, when many counties (xian) began to establish chambers of commerce. Some chambers tried to set limits on the issuing of private copper cash notes and declared that any note without their seal could not be circulated. In some cases these measures were introduced as a means to counter the extraordinary overissuance of privatepaper money thatoccurred after World War I. In other cases the measures were used by local merchants to consolidate their control of the local money supply, within a county or town, and to weaken the economic power of merchants from outside. The Taiyuan Chamber of Commerce in Shanxi province, for example, appealed in 1913 to the newly established county assembly to prohibit merchants in Jincizhen town, a market center in the southwestern district of the county, from engaging in the exchange of silver and copper cash and from issuing private notes in Taiyuan.9 The chamber represented native merchants in their efforts to break, through administrative measures, any currency circuit that existed independently from the county or town. Throughout the early twentieth century, the sphere of market transactions was marked by the strengthening of this kind of formalization process. The trend was clearly one of restricting the number of money suppliers, and only allowing members of the chamber of commerce to engage in trade. The process of transformation of the monetary institutions was characterized by a contradiction between forces favoring the formalization process and those favoring the removal of barriers to free entry and trade. On the face of it, the trend towards formalization won. By the 1930s, most traditional local monetary institutions, such as exchangers, had disappeared. In Shanxi province in 1936, for example, county banks issued paper money with a face value of less than one dollar. This paper money was directly convertible to the paper money printed by the provincial bank, which was in turn the lender to these county banks. In other words, paper money issued by the higher level institution formed the reserve for local paper money. By this time people rarely used hard currency, and silver was concentrated in bank or government vaults.

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However, problems did arise. For example, people in Shanxi suffered from serious inflation following the overissuance of provincial paper money around 1930, and this was followed by severe deflation. During the deflationary period there was not sufficient paper money in circulation to meet market demand and this situation was not rectified until the next inflationary period that accompanied the Japanese military invasion in 1937. In summary, the officialization of the money supply succeeded in eliminating the currency circuits that were outside the control of the official institutions, but failed to take over their function of adjusting the discrepancies between the demand and supply for money. The changing monetary institutions may have strengthened government control, but they destabilized rather than rationalized the operation of the market.

5. Concluding Remarks The changes that occurred in the Chinese monetary system were driven not only by domestic factors, but also by China’s increased involvement in international trade. As exports of rural commodities increased, their production gradually shifted and became concentrated in large trading ports. As a result, an urgent need arose for a new interregional currency and this explains why provincial paper moneys were successfully circulated before World War I, particularly in provinces that had large trading ports such as Hankou. However, the provincial paper currencies lost their base when exports were disrupted during World War I, and the importsubstitution-based industrialization of the interwar period led to their replacement with widely circulating bank notes. The two stages of change in the monetary system—provincial monetary autonomy followed by forces tending towards monetary integration— should not be seen as a mere repetition of the traditional cyclical swings between decentralization and centralization that have occurred throughout China’s long history. The transformation this time was more fundamental in that the currency circuits, which had long maintained local liquidity, had finally been eliminated. This transformation was achieved through a process in which rural commodities were supplied by local markets to trading ports—both for foreign and for domestic markets—accompanied by the issuance of currencies by banks and other official institutions. However, although the new currencies issued were convertible, they were not flexible enough to deal with the fluctuating demand for money, a function once carried out by the now defunct currency circuits. If the horizons are broadened, similar processes can be seen worldwide. At the local market level there were several instances of struggles between local currency circuits and convertible currencies controlled by formal institutions. For example, in British West Africa cowries circulated in local

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markets. Cowries, like copper cash, were bulky and small in value and the local markets in West Africa maintained their own units of account. However, in the early twentieth century, silver sterling coins and other subsidiary coins made of nickel gradually replaced cowries and other local moneys. Undoubtedly, the supply of currencies including bank notes issued by the West Africa Bank, to procure rural commodities such as palm oil, underlay this change (Mcphee 1926/1971; Ofonagoro 1979). Table 5.5 shows the increasing issuance of paper money by the Siamese government and bank notes by the Banque de l’Indochine (Bank of Indochina) in the early twentieth century. Each of these processes was facilitated by the development of rice exports, in Siam and French Indochina, respectively, and was accompanied by the disappearance of traditional local currencies—cowries in Siam and copper cash in French Indochina. The form may have varied but processes of this kind had been going on all over the world. An important historical role of the international gold standard system was its absorption of local currency circuits through its facilitation of the procurement of rural commodities. Implicit in the international gold standard was a destructive impact that was exerted on local autonomous monetary systems that had been maintained by petty traders. This impact was a result of the extension of the use of formal currencies for transactions involving goods for export. However, in cases where the establishment of formal currencies was not accompanied by autonomous development of interregional currencies, markets naturally became unstable. Returning to the Chinese case, prevailing instability in the peasant economy, such as that accompanying the extraordinary expansion in money issuance between the end of the 1910s to the first half of the 1920s, must, at least in part, have been a reflection of international changes in the money supply. Further comparative research is necessary to clarify this issue.10 Table 5.5. The balances of Thai treasury paper money and Banque de l’Indochine bank notes, 1903–33

Year

Thai Treasury paper money (million baht)

Banque de l’Indochine bank notes (million francs)

1903 1908 1913 1918 1923 1928 1933

3.5 14.8 26.1 59.7 91.7 135.3 114.3

40.2 57.0 86.5 174.4 831.1 1,841.1 956.4

Sources: Thai Treasury (Siam 1939: 322–3); Banque de l’Indochine (Gonjo 985: 376–7).

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Although there are similarities, international comparisons illustrate the peculiarity of currency circuits in traditional China. There were few instances where local markets were ruled by oligarchic collections of merchants and although the larger merchants had more influence, their power was limited unless they obtained the consensus of the majority of petty traders. This made the formation of a hierarchical structure among the local markets in China extremely difficult and dispersion was the predominant feature of the market structure in traditional China. It is not difficult to imagine that the huge and dispersed market made up of the center of East Asia and the surrounding peripheries maintained a certain degree of independence from the world economy.

Notes 1. No previous studies offer an effective interpretation which covers the whole process of monetary reforms from the late Qing dynasty to the Nanjing National government. They have only described the diversity of the system and stressed its chaotic feature, to highlight the significance of the unification policy in 1935. See, for example, Nozawa (1981), Shi Yufu (1984), and Zhuo Zunhong (1986). 2. On the relation of markets in traditional China, Skinner elucidated a hierarchical structure of markets by focusing on the patterns of distribution of goods and services. This chapter will study another aspect of this structure by focusing on monetary circulation. See Skinner (1964–65). 3. For monetary situation in China in general, see Kann (1926) and King (1965). 4. Miyashita’s work describes the liang system in detail (Miyashita 1952). 5. For example, we can find such a case around 1700 in a diary written by a local elite in the Anhui Province (Shan 1983). 6. Miyashita called the merchants sharing a liang the ‘‘payment community’’. However, he originally cited G. F. Knapp’s ‘‘Zahlgemeinschaft’’, which had been meant to express a group of customers who accept banknote (Knapp 1918: S.122; Miyashita 1952: 22). We call it ‘‘currency circuit’’ here. 7. In Ichang, located in the western side of the Hubei Province, price of rice rose from 3,600 wen per shi of 200 catties in 1892, to 5,200 wen in 1901 and to 7,530 wen in 1911. Price of salt also rose from 5,400 wen per picul to 8,000 wen and to 10,600 wen. We should note that, even during the 1890s when copper cash was appreciated, prices rose (CIMC 1912, passim). 8. We can see an extreme case in Jinan, where the number of issuing shops, including wine shops, etc., increased to more than 1,000, the number of print shops for qianpiao also increased to 250, between 1919 and 1922 (Zhongwai Jingji Zhoukan 1924: 1–10). 9. The following three paragraphs are based on Kuroda (1996). 10. Official estimates of silver coin circulation in Thailand was 103 million baht in 1919, compared to 100 million baht in 1907. It is clear that the increasing demand for baht had been sustained by the issuing of paper money (Ingram 1955: 154–5).

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References CIMC (China Imperial Maritime Customs), Decennial Reports, 1902–11, Vol. 1 (1912). ——, Returns of Trade and Trade Reports (annual publication). Gongshang Banyuekan [Industry and Commerce Bimonthly], ‘‘Yin Gonghui Yijue Shensha Zaihan Tonghui Banfa [Bank Association decided how Shanghai banknotes circulated in Hankou]’’, Guonei Jingji Shiqing [Domestic Economic Affairs], 1:13 (1929). Gonjo, Y., Furansu Teikokushugi to Ajia: Indoshina Ginko Kenkyu [French Imperialism and Asia: A Study of Banque de l’Indochine] (Tokyo, 1985). Huazhong Shifan Daxue Lishi Yanjiusuo [Central China University of Education, Institute of History] and Suzhou Shi Danganguan [Suzhou Municipal Record Office] (eds.), Suzhou Shanghui Dangan Sangpian [Documents of Suzhou Chamber of Commerce], 1905–11 (Wuchang, 1991). Ingram, J. C., Economic Change in Thailand since 1850 (Stanford, CA, 1955). Kaiserliches Statistisches Amt, Statistisches Jahrbuch fu¨r das Deutsche Reich (annual publication). Kann, E., The Currencies of China (Shanghai, 1926). King, F. H. H., Money and Monetary Policy in China 1845–1895, (Cambridge, MA, 1965). Knapp, G. F., Staatiche Theorie des Geldes (Mu¨nchen und Leipzig, 1918). Kuroda, A., Chuka Teikoku no Kozo to Sekai Keizai [The Structure of the Chinese Empire and the World Economy] (Nagoya, 1994). ——, ‘‘20-seiki Shoki Taigen ni Miru Chiiki Keizai no Genki [The Drawing of Boundaries of Regional Economies in Traditional China: The Case of Taiyuan County in the Early Twentieth Century]’’, Toyoshi Kenkyu, 54:4 (1996), 103–36. Lin Jubai, Jindai Nantong Tubu Shi [History of Native Cloth in Modern Nantong] (Dafeng, 1984). Mcphee, A., The Economic Revolution in British West Africa (London 1926; 2nd edn., London, 1971). Miyashita, T., Chugoku Heisei no Tokushu Kenkyu: Kindai Chugoku Ginryo Seido no Kenkyu [A Specialized Study of the Chinese Currency System: A Study of the Silver Liang System of Modern China] (Tokyo, 1952). Nozawa, Y. (ed.), Chugoku no Heisei Kaikaku to Kokusai Kankei [The Monetary Reform and International Relations in China] (Tokyo, 1981). Ofonagoro, W. I, ‘‘From traditional to British currency in southern Nigeria’’, Journal of Economic History 39:3 (1979), 623–54. Peng Zeyi, ‘‘1853–1868 nian de Zhongguo Tonghuo Pengzhang [China’s inflation in 1853–1868]’’, Zhonguo Shehui Kexueyuan Jinji Yanjiusuo Jikan, 1 (1979), 200–32. Rinji Sangyo Chosakyoku, Shina no Menka ni Kansuru Chosa [Survey on Cotton in China], Vol. 2 (Tokyo, 1919). Der Seifenfabrikant, magazine for German oil and fat industry. Shanghai Bank, Guonei Shangye Huidui Yaolan [A Survey of Domestic Commercial Exchange] (Shanghai, 1925).

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Shan Yuanxiang, ‘‘Weizhai Riji [Diary of Shan Yuanxiang]’’, in Zhongguo Shehuikexueyuan Lishi Yanjiusuo Qingshi Yanjiushi (ed.), Qingshi Ziliao [Materials during the Qing dynasty], Vol. 4 (Beijing, 1983). Shi Yufu, Zhongguo Huobi Jinrong Shilu¨e [A Concise History of Money and Finance in China] (Tianjin, 1984). Siam, Central Service of Statistics, Statistical Year Book, Siam, 1935–36 and 1936–37 (Bangkok, 1939). Skinner, G. W., ‘‘Marketing and Social Structure in Rural China’’, Journal of Asian Studies, 24:1 (1964), 3–43; 24:2 (1965) 195–228, 24:3 (1965) 363–99. Toa Dobunkai, Shina Keizai Zensho [Complete Works on the Chinese Economy], Vol. 1 (Shanghai, 1905). ——, Shina Shobetu Zenshi [Provincial Topographies of China], Vol. 9, Kohoku sho [Hubei Province] (Shanghai, 1918). ——, Shina Shobetu Zenshi [Provincial Topographies of China], Vol. 11, Kosei sho [Jiangxi Province] (Shanghai, 1918). ——, Shina Shobetu Zenshi [Provincial Topographies of China], Vol. 12, Anki Sho [Anhui Province] (Shanghai, 1919). ——, Shina Nenkan [China Yearbook] (Shanghai, 1926). Tsusho Isan [Consular Reports on Trade] published by the Japanese Ministry of Foreign Affairs], 174, ‘‘Kanko (Meiji) 32 nen Boeki Nenpo [Annual Report of Hankou Trade, 1899]’’ (1900). ——, 56, ‘‘Kanko Kinyukai to Yushutsu no Genkyo [Report on the Financial Community and Export in Hankou]’’ (1903). ——, 45, ‘‘Kanko Kinyukai to Dosen Rufu no Jokyo [Report on the Financial Community and Prevalence of Copper Cash in Hankou]’’ (1904). Tsusho Koho [Consular Reports on Trade; published by the Japanese Ministry of Foreign Affairs], 735, ‘‘Taisho 8 Nen Kanko Boeki Nenpo [Annual Report of Hankou Trade, 1919]’’ (1920). US Treasury Department, Bureau of the Mint, Annual Report of the Director of the Mint, 1935 (Washington, D.C., 1936). Weed, W. H., The Copper Mines of the World (New York and London, 1908). Xie, H., ‘‘Qingmo Gesheng Guanyinqianhao Yanjiu 1894–1911 [A study on provincial treasuries in the late Qing period]’’, Zhonguo Shehui Kexueyuan Jingji Yanjiusuo Jikan, 11 (1988), 199–274. Yang, D., Qingdai Huobi Jinrong Shigao [A Draft History of Money and Finance under the Qing Dynasty] (Beijing 1962; rep., Hong Kong, 1977). Yinhang Zhoubao [Bank Weekly], 221, ‘‘Zhoukou’’ (1921). Zhang, Z., Zhang Wenxiang Gong Quanji [Complete Works of Zhang Zhitong] (Beijing, 1990). Zhongguo Renmin Yinhang Shanghai Shi Fenhang, Shanghai Qianzhuang Shiliao [Materials on Native Banks in Shanghai] (Shanghai,1960). Zhongwai Jingji Zhoukan [Domestic and Foreign Economy Weekly], 84, ‘‘Jinan zhi Jinrong Jiguan yu Tonghuo [Financial Institutes and Currencies in Jinan]’’, (1924). ——, 137, ‘‘Zhengzhou zhi Mianhuaye [Cotton in Zhengzhou]’’, (1925). Zhuo Zunhong, Zhongguo Jindai Bizhi Gaige Shi: 1887–1937 [A History of Monetary Reform in Modern China] (Taipei, 1986).

6 Japanese and British Perceptions of Chinese Boycotts in Shanghai: With Special Reference to the Anti-Japanese Boycotts, 1928–31 harumi goto-shibata

1. Introduction In a consideration of China’s role in the Asian international economy, the issue of antiforeign boycotts cannot be ignored. China’s antiforeign boycotts started around the turn of the twentieth century, and were repeated intermittently. At first, they were conducted only in limited regions with minor effects, and it was not until the dramatic growth of Chinese nationalism in 1919 that their scale and effects became significant. Further development was brought about with the rise of the Guomindang after 1923. Although Japan had been the most frequent target of the boycotts, it was Britain that was singled out first for attack after the above-mentioned changes. During the period from 1925 to 1927, Britain’s share of total Chinese trade fell from more than 40 percent to 30 percent, while the damage to Japanese interests turned out to be not so large. From May 1928 onwards, however, Japan came to be singled out as the exclusive target of the Chinese boycotts and hence suffered serious damage. There were several reasons for this return to an anti-Japanese stance. First, having marched northwards through South China and the Yangzi Valley where Britain had substantial interests, the Nationalists approached Japan’s sphere of interest. Second, the dispatch of a Japanese expeditionary force to Shandong in May 1928 resulted in a Sino–Japanese military clash at Jinan. Third, the Nationalists succeeded in reuniting the country. One of their most important aims was to abolish all unequal treaties, a move which would enable China to achieve economic independence. On October 1, 1928, the Nationalists declared that they would promote tariff autonomy and enforce national tariffs from January 1, 1929 onwards. Since Britain had shown at the end of 1926 that she was ready to recognize China’s right to tariff autonomy, there were no serious

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obstacles to negotiations between the two countries. In total contrast, Japan found negotiations with Nanjing extremely difficult. In addition to these factors, the growth of Japan’s economic power should not be forgotten. Japan had gained an enormous economic advantage during World War I because the exports of the Western powers had decreased and because Japan had reached the stage where her industries, especially the cotton industry, were producing a substantial volume of exports. Japanese cotton manufacturing in China also grew dramatically, partly as a result of some raising of China’s tariff walls after 1918 (Bush 1982: 23; Takamura 1982: 114–16). China also gained from the temporary retreat of the Westerners during World War I, when Shanghai capitalists expanded into manufacturing and modern banking (Takamura 1982: 104–5). By 1924, however, this ‘‘golden age’’ ended with a full return of foreign competition and the resulting economic crisis for the Chinese industrialists made them acutely aware and resentful of foreign economic encroachments (Coble 1980: 26). The greatest rival for China’s growing economy was Japan rather than Britain, because even the end of the war did not bring back the golden days of British industry and trade, especially for the cotton goods of Lancashire. In addition, Britain returned to the gold standard at prewar parity in 1925, so British exports to China as well as to the rest of the world became relatively costly and declined rapidly between 1925 and 1930. The League of Nations’ report of 1932 was among the first studies published in English on the issue of antiforeign boycotts by the Chinese. C. F. Remer followed it with A Study of Chinese Boycotts, trying to specify the economic effects of the boycotts. After a long interval, Junji Banno examined anti-Japanese boycotts during the period from 1919 to 1928 (Banno 1989: 314–29). There is also a more recent and extensive work by Jordan (1991). Although contributions made by these studies are substantial, it cannot be said that this issue has been thoroughly examined. As Remer’s interests were limited to the economic effect of the boycotts, he did not elaborate on their psychological impact, which was equally significant, nor on the actual methods of the boycotts. Jordan’s research covered the period after July 1931 extensively, but dealt with the earlier period only in passing. Banno’s analysis centered on Japanese political parties, and he paid scant attention to developments in China and the rest of the world. Besides, as he researched only the period until 1928, his study omits a very important aspect of Sino–foreign business rivalry. This chapter examines the anti-Japanese boycotts in Shanghai between May 1928 and September 17, 1931. Three points should be noted regarding the approach used in the study. First, it examines Japanese and British businessmen’s perceptions of the boycotts in detail. The Japanese who resided in Shanghai during this period were divided into two groups: the ‘‘Native Faction’’, which consisted of numerous poor tradesmen, and

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the ‘‘Company Faction’’, which consisted of the people who worked for the branches of big trading companies, banks, and cotton mills (Ishii 1986: 228, 235). The Japanese discussed in this chapter are mainly the elite of the ‘‘Company Faction’’. Second, this chapter makes use of Japanese documents and works published in Japanese, which are abundant (see, for example, Kikuchi 1966). Third, by taking British evidence into consideration, this chapter places Sino–Japanese rivalries in a wider context. No previous researchers have analysed both Japanese and English materials in examining this subject.

2. The Anti-Japanese Boycott in Shanghai in 1928 After the Sino–Japanese military clash at Jinan in May 1928, China imposed a strict boycott on Japan and organized the Anti-Japanese Association to halt transactions in Japanese goods. This association advised Chinese merchants to cancel contracts with the Japanese and it demanded that merchants should register by May 31 goods already kept in stock. If merchants made donations to a newly founded national salvation fund, the association would issue certificates allowing them to sell the Japanese goods. Thus trade in Japanese goods was still possible, but it became markedly more difficult and expensive. The rate of contribution to the fund differed according to the commodities involved, and basic necessities which could not be substituted by Chinese products were exempted. The Association declared that it would use the fund to organize anti-Japanese agitation, assist people who had suffered from the Jinan Incident, and establish factories which would produce substitutes for Japanese goods (NCH, August 4 and 11, 1928; Nippon Shoko Kaigisho 1929: 20–5). On June 21, 1928, Shichitaro Yada, the Japanese consul-general in Shanghai, reported that the Guomindang seemed to be supporting students and the masses in carrying out the anti-Japanese boycott (JFMA, E, Yada to Tanaka, No. 415, June 21, 1928). A report for the League of Nations also acknowledged that the Guomindang played a role in the boycott, and the works of Remer and Coble reaffirm this point (League of Nations 1932: 117–18). Remer, writing in 1933, stated that ‘‘the spread of the boycott was closely associated with the extension of the power of the Nationalist Party’’ (Remer 1933a: 239, 242). According to Coble, ‘‘KMT organizations in major commercial centers used coercion to restrict the markets for imports from Japan and for goods produced in Japanese factories located in China’’, although he considered that the dominant forces in the Guomindang saw the boycott as a liability (Coble 1980: 176–7, 183). Chinese mass movements had been closely linked with the communist element and after the Guomindang severed all connections with the

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communists and the Soviet Union in 1927, mass movements became an issue in the reorganized party. The majority denounced the movements, while the left wing regarded anti-imperialism and mass movements as the two most important policies inherited from Sun Yixian. Presented with the Sino–Japanese clash at Jinan, the leftists asserted that mass movement was the only effective means of standing up to foreign powers (Kubo 1984: 11; Eastman 1991: 1–8; So 1991: 50–1, 55, 85–6). Although on July 9, 1928 the Japanese government officially and vehemently demanded the dissolution of the Anti-Japanese Association, the Chinese authorities countered with a demand that the Japanese withdraw from Shandong, and the negotiations made no progress (JFMA, E, Yada to Tanaka, No. 519, July 31, 1928; Nippon Shoko Kaigisho 1929: 54). From late July onwards, the anti-Japanese movement became more severe, because of the commencement of friction over the treaty revision. A National Anti-Japanese Convention which met in Shanghai from July 21 to 28 maintained that ‘‘the sole sustenance of Japanese imperialism was the expansion of her economic influence’’. In order to ‘‘shatter Japan’s economic domination in China’’, it backed ‘‘the Nationalist Government for the abrogation of all unequal treaties’’ and requested ‘‘the government to provide a protective tariff so to shut out Japanese commerce effectively’’. In this respect it was imperative to place the boycott association ‘‘under the guidance of the Kuomintang’’, and to amalgamate all antiJapanese bodies into one central organization (FO371/13236, F5001). It should be noted that what was attacked most strongly here was Japan’s economic expansion and domination, not her territorial ambition. This anti-Japanese boycott was not limited to China as overseas Chinese joined in the protests against the Japanese, causing damage to Japanese trade (FO371/13172, F5448; NCH, August 11, 1928; Nippon Shoko Kaigisho 1929: 232). During May 1928, the Japanese were still optimistic about the antiJapanese boycott. Businessmen in Osaka insisted that the Japanese government should pursue a hardline policy. They believed that the Jinan Incident was provoked by the ‘‘impossible’’ Chinese, and regarded the situation as a good opportunity to recover the prestige of the Japanese and their commercial rights in China, which they thought had been abused by the Chinese (JFMA, A.1.1.0.2-4, governor of Osaka to Foreign Minister, No. 2005, May 10, 1928). On May 15, 1928, Hiyoshi Kato, the acting commercial attache´ in Shanghai, presented a very optimistic analysis based on the experiences of the previous anti-Japanese boycotts. According to him, there was usually an interval of one month between the declaration and implementation of an antiforeign boycott, and the boycott itself usually lasted for two or three months. Thus he expected the anti-Japanese boycott in 1928 to be over by August or September. Furthermore, before and after the

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boycott, transactions usually increased dramatically, compensating for losses during the inactive period. He suggested two reasons for this. One was that most of the Japanese goods were basic necessities, which were difficult to do without. Another was that the yen weakened during boycott periods, making imports from Japan cheaper (JFMA, A.1.1.0.2-4, Kato to Tanaka, No. 125, May 15, 1928). Henry J. Brett, a British commercial counsellor, endorsed Kato’s observations, adding that there would be a temporary stimulus to demand for Japanese goods for immediate delivery. He also reported that in some instances orders were so numerous that Japanese firms had found it impossible to accept them all (FO371/ 13209, F3244). In June, the Japanese Chamber of Commerce in Shanghai organized a series of meetings for Japanese business representatives in Shanghai. As the meetings were to be held on Fridays the organization was named Kinyokai (the Friday Club). Members of the Consulate, the commercial attache´, and the resident naval and military officers were also expected to attend these sessions (Murai 1984: 212). At the first and second meetings, on June 26 and July 6, 1928, many representatives insisted that Japan should take a strong stand against the Chinese. In order to improve the merchants’ future prospects, Hatanaka of the Association of Japanese Cotton Piece Goods Merchants in Shanghai wanted a complete termination of the anti-Japanese movement regardless of how serious the present damage might be. The chairman argued against a consul, Shimizu, who claimed it was impossible for Japan to protest against the antiJapanese boycott because the Chinese had liberty of choice in making purchases (Kinyokai: Nos. 1 and 2). At the third meeting on July 13, Shimizu mentioned the possibility of using naval power, an idea to which the naval attache´ was well disposed. At the fourth meeting on July 20, the issue of using military power was again mentioned, this time by a sugar dealer. The Japanese merchants became very keen on the idea of relying on naval power and repeatedly mentioned it, so that Shimizu, who mentioned it first, now attempted to instil them with caution (Kinyokai: Nos. 3, 4, 6, 7, and 8). At this stage, nothing materialized from the idea, but the more irritated Japanese businessmen in Shanghai became over time, the keener they became on this idea.

3. The Government in Nanjing and the Anti-Japanese Boycott On October 8, 1928, the Nationalist government of reunited China was established and Nanjing was chosen as its capital. This section will consider the period from October 1928 to August 1929, when the antiJapanese movement, which started after the Jinan Incident, became even more intense.

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Although the anti-Japanese boycott started as a protest against the Jinan Incident, its aim and character gradually changed. First, it came to be used as a tool to put pressure on the Sino–Japanese negotiations. At a meeting of the International Chambers of Commerce held in Geneva from January 26 to 28, 1929, a representative from China insisted that, from China’s point of view, it was impossible to draw a line between the political and the economic aspects of international problems. Moreover, he continued, China regarded the boycott of Japanese goods as almost the only weapon available to her (CHAS/MCP/35). Second, the boycott came to be used as a tool for the development of national industries. The Chinese tried to ‘‘further Chinese industries by stimulating the production of certain articles which [had] hitherto been imported from Japan’’ by using the national salvation fund. The leading figures of the anti-Japanese movement were the left wing of the Guomindang and the Chinese bourgeoisie, who also showed keen interest in the recovery of tariff autonomy. Their intention was not only to boycott Japanese products, but also to protect and develop national industries (League of Nations 1932: 117; Kikuchi 1966: 326; Kubo 1985: 350–7). The main commodities exported from Japan to China were cotton piece goods, cotton yarn, coal, sugar, and marine products; all were affected by the anti-Japanese boycott (Kinyokai Pamphlet, No. 16, June 30, 1929: 6). Trade in Japanese cotton piece goods prospered during the half year before the Jinan Incident, but became totally inactive in the latter half of 1928 (Shanhai Shoko Kaigisho Nenpo: 7). For a long time, Japanese cotton merchants had endeavored to oust Lancashire goods from China, and they had almost established a monopoly, but this resulted in another collision with Chinese ambitions. China’s industrialization had started with cotton textiles, and the greatest rival local entrepreneurs faced was Japan. Japan’s economic power had come to be regarded as the greatest obstacle to China’s economic independence, and a boycott served the same purpose as protective tariffs against imports from Japan (Remer 1933a: 153, 240; Kubo 1985: 376). Furthermore, the boycott was the only effective measure against the products of Japanese cotton mills flourishing in China. The methods of the boycott gradually developed and became more rigorous. On January 15, 1929, the Anti-Japanese Association in Shanghai stopped issuing certificates acknowledging contributions to the national salvation fund. Instead, it decided that Japanese goods should be confiscated and sold at public auctions. As a result, transactions involving Japanese goods became almost impossible in Shanghai. The profits from the auction were paid into the national salvation fund and used to set up various firms, especially cotton mills which produced finer yarns in competition with Japanese cotton mills in China (League of Nations 1932: 117; Kinyokai, No. 29, January 18, 1929; Kinyokai Pamphlet, No. 3, January 31, 1929, 17; Nippon Shoko Kaigisho 1929: 82).

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The economic effects of the anti-Japanese boycott are difficult to determine. Trade statistics show that Japan’s exports to central China were larger in 1928 and 1929 than in 1927, but the Japanese businessmen in Shanghai argued that the figures were misleading. First, they pointed out that many goods were kept in storage in Shanghai after being shipped from Japan. Although these goods were treated as having already been exported, the merchants had not received any payments, because those goods had yet to be delivered. In fact, the merchants had to pay warehouse charges (Kinyokai Pamphlet, No. 16, June 30, 1929: 4). Second, Japan’s share of trade with China decreased markedly. Imports into China as a whole increased by 18 percent from 1927 to 1928, while imports of Japanese origin increased by only 8.7 percent (Remer 1933a: 143). The Japanese businessmen in Shanghai believed that, since China’s purchasing power recovered in 1928, exports from Japan would have increased drastically had there been no strong anti-Japanese boycott. They lamented the loss of the profits which they felt should have been theirs. Although the Japanese were very unyielding at the earliest stages of the boycott, some began to get discouraged as it continued. Using military power was not mentioned any longer at the meetings of the Friday Club, probably because no positive response from the navy had been forthcoming. To the contrary, at the twenty-eighth meeting on January 12, 1929, the opinion was voiced that Japan should make concessions, up to a certain point, and observe how the Chinese reacted. The Japanese in Shanghai started to hope for the earliest possible resolution of the problems caused by the Jinan Incident.1 In contrast, a new analysis by the foreign ministry of the effects of the anti-Japanese boycott, dated January 11, 1929, restated the position adopted by the ministry in September 1928. The commercial attache´ in Shanghai continued to believe that the situation in China made the severance of economic relations impossible, because most of the commodities exported from Japan were necessities of daily life. Even after he received a report from Kato who, in total contrast to the report in May 1928, said that the anti-Japanese boycott was very thorough and that no Japanese goods were seen in the cities on the lower reaches of the Yangzi River, he insisted that the Japanese should not be so pessimistic as the Chinese would again demand Japanese goods after the boycott was over. Presented with this optimistic opinion, the Japanese businessmen in Shanghai began to think that the diplomats were extremely unconcerned and unhelpful.2 On January 30, 1929, Japan approved China’s new tariff rate, and the socalled national tariff came into force on February 1, 1929. On March 28, plenipotentiaries of China and Japan signed agreements to settle the Jinan Incident. However, these agreements did not bring about the termination of the anti-Japanese boycott. It was not until July 31, 1929 the Guomindang finally banned the anti-Japanese movement, and this action had

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a remarkable effect. Although Nanjing had insisted for four months that there was no way of controlling people’s anger and hatred of Japan, it immediately became clear that the government could readily stop the anti-Japanese movement. The main reasons for the ban were a decline in the influence of the leftists within the Guomindang (Kubo 1984: 22–3, 26), and promising developments in Sino–Japanese negotiations for China’s tariff autonomy. The Japanese merchants in Shanghai feared that the boycott might be revived, but it was not in fact resumed until the summer of 1931. From July 1929 to June 1931, the emphasis of Chinese nationalism was on developing an independent Chinese economy and encouraging people to buy Chinese products. However, since the fundamental structure of Sino–Japanese business rivalry had not changed, a single incident could easily reincite the anti-Japanese movement. Such an incident occurred in 1931.

4. The Great Depression and the Policies of Nanjing This section examines the period from September 1929 to June 1931, when most of the world was hard hit by the Great Depression. Paradoxically, the Great Depression initially benefited China. Between 1928 and 1931, silver, the basis of the Chinese monetary system, lost more than half of its value on the international market, so that the Chinese currency was effectively devalued and the consequent stimulation of exports made up for the closure of certain markets. The devaluation slowed up imports and worked as a substitute for the customs tax, which was still insufficient to protect national industries. Under these circumstances, the Japanese cotton mills in Shanghai made large profits. In addition to the favorable exchange rate, the general situation in China became relatively stable and there were no anti-Japanese boycotts (Takamura 1982: 160). With the exception of the Japanese cotton industry in China, business was bad for both Japan and Britain. At the sixty-eighth meeting of the Friday Club on October 18, 1929, every field of business reported that transactions had decreased. In addition to this difficult situation, the expectation that Japan would return to the gold standard resulted in an appreciation of the yen, which made exports from Japan more difficult. This situation was especially serious for small Japanese merchants in Shanghai who dealt mainly with exports from Japan. ‘‘Kuomintang ideology stressed economic growth as necessary for national strength and improvement of the livelihood of the people’’ (Coble 1980: 8), although experts’ views vary on how far the Guomindang succeeded in putting its ideology into practice. Arthur Young’s opinion is very favorable. He stated that the Nanjing government was committed to

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development, creating an environment increasingly favorable to industry, and that under extremely difficult conditions its accomplishments were impressive (Young 1971: vi, 149, 313, 387). Coble held the opposite opinion as he considered that the Nanjing government made only modest efforts to aid industry and commerce (Coble 1980: 8, 84). Richard Bush was more sympathetic to Nanjing than Coble, but he argued that it could tackle most issues only intermittently because it was overloaded (Bush: 316, 333). The Japanese in Shanghai gained the impression that the Nanjing government was making considerable efforts to promote China’s economic independence. One of the most important objectives was revision of the unequal treaties. Although Nanjing raised tariffs to provide revenue to stabilize government finances, a protective effect was inevitable. Nanjing also held conferences and formulated various policies in order to protect and develop national industries (Kinyokai Pamphlet, No. 50, January 10, 1931; Young 1971: 49, 307). Therefore, the Japanese in Shanghai could not be confident about the future prospects of their businesses. Several of Nanjing’s policies were discussed at the meetings of the Friday Club. First, there was tariff reform. In May 1930, Japan accepted China’s tariff autonomy, and Japanese businessmen in general calmly accepted the tariff changes, partly because it was obvious even to them that tariff autonomy was the natural right of the Chinese as well as of other nations, and partly because China agreed to levy only minimal duties on most Japanese merchandise until 1933. These tariff changes played some part in the increase in the number of Japanese-owned spindles and looms in China. The investment of capital was of course stimulated by the rapid decline in the price of silver (Remer 1933b: 498). Second, unlike the British, who thought that the surrender of extraterritorial rights was a matter of far greater importance than tariff concessions, and unlike the Japanese in other parts of China, the Japanese Chamber of Commerce in Shanghai did not treat the abolition of extraterritoriality as a major issue (Soejima, 1985: 214–20). Third, the Friday Club also discussed the problem of discriminatory taxes and discriminatory treatment of foreign goods. Some local Chinese authorities imposed ‘‘undue’’ taxes, and the rate for foreign goods such as cotton goods and matches was higher than that for Chinese goods. The freight rate charged by the Chinese National Railway for foreign commodities was also higher than that for Chinese commodities. The chairman of the Friday Club insisted that the discriminatory rate violated the nine-power treaty, and he asked the consulate to protest against it in cooperation with other countries.3 The British merchants also felt that there should be no discrimination between foreigners and the Chinese (JBCCS, 14–5, May 1929: 127).

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The Chinese government introduced excise duties on cotton yarn and cloth, goods which were vital to the Shanghai economy, on February 1, 1931. Plans also called for a business duty and a special consumption tax. Although the Japanese in Shanghai did not complain about the excise duty, they opposed the introduction of plural taxes. Fearing that the tax burden might become excessive, they asked the Japanese government to lodge a strong protest (Kinyokai Pamphlet, Nos. 52, 56, 57, and 60). The Chinese also began to control transactions themselves. The British commercial counsellor observed that the general import trade at ports on the Yangzi River was rapidly passing out of the hands of foreigners, as Chinese merchants tended to buy outright in Shanghai and from that point the goods passed into Chinese hands (BT 60, 18/3, folio 10). What had been unusual was the situation before China’s reunification by the Guomindang. The economic rights of the powers were unfairly protected by the system of unequal treaties and foreign settlements, and China could not compete on an equal basis. Nevertheless, since the foreigners had taken this situation for granted for such a long time, they now felt as if they had been deprived of their proper rights. The more protectionist policies the Nanjing government tried to introduce, the bleaker the prospects seemed to become for foreigners doing business in China. As a late starter in the industrial world, Japan had many industries which had to compete with Chinese counterparts, such as the cotton and match-producing industries. The future prospects for small-scale Japanese businesses were especially bleak and they were afraid that, after all their investments and efforts, they might be completely driven out of China some day.

5. The Revival of the Anti-Japanese Boycott in the Summer of 1931 Following the establishment of the government in Nanjing, Chinese resistance to the expansion of Japan had also become powerful and effective in the northeastern provinces of China (Manchuria). The greatest focus of tension and friction was the railway question. Another source of tension was the migration of Koreans into Manchuria. The Chinese regarded this as the spearhead of Japanese imperialism, while Japan worried about the possible link between Korean movements towards independence, the Chinese anti-Japanese movement, and Chinese communism. The Wanbaoshan Incident on July 2, 1931 and the Korean Incident from July 4 to 7 led to a revival of agitation against Japanese goods in Shanghai. At Wanbaoshan near Zhangchun, a conflict occurred between ethnically Korean peasants and Chinese peasants over disputed irrigation ditches. The armed Chinese clashed with the Korean peasants, and this escalated

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into an exchange of gunfire. The Wanbaoshan Incident caused antiChinese riots in Korea, in which, as revenge, 119 Chinese were murdered and more than 200 injured. On July 13, various Chinese industrial and commercial organizations, the Shanghai Guomindang, and the Chinese in Shanghai held a mass meeting, where the Shanghai Municipal Anti-Japanese and Protect Overseas Chinese Association (AJPOC) was organized. This body declared a boycott of Japanese goods and the permanent severance of economic relations with Japan, because Korea was Japan’s colony. AJPOC petitioned the Central Executive Committee of the Guomindang in Nanjing that the various party branches throughout the country be immediately ordered to impose a nationwide boycott of Japanese goods (NCH, July 14 and 21, 1931). At this time, there were several different opinions among the Guomindang members and merchants. Nanjing kept its distance from the boycott, stressing that the agitation was a private initiative directed from Shanghai. Since Chiang Kai-shek was engrossed in the anticommunist expedition and an intraparty power struggle, he wanted to avoid a conflict with Japan, which was then under the guidance of Foreign Minister Kijyuro Shidehara. Furthermore, the financial situation did not allow the Nanjing government to be too favorable to the anti-Japanese boycott, because both trade with Japan and Japanese manufacturing within China were rich sources of revenue. The boycott would be helpful only if the excise and export duties paid by Chinese industry could expand enough to provide additional revenues. As a result, both the Japanese consul-general in Shanghai and the Japanese naval attache´ reported that the Chinese were not keen on boycotting Japanese goods. The Japanese authorities hoped that, lacking encouragement from the Nanjing government, the antiJapanese agitation would remain ineffective and soon die out. On July 22, Mamoru Shigemitsu, who became the minister to China on August 6, 1931, urged the Chinese Foreign minister to halt the boycott. Accordingly, a letter from Chiang urging the nation to be cautious was published the next day (DBFP, Nos. 493, 496 and enclosure 1 in No. 498; SNNS, July 23, 1931, 1; JFMA, A20, Murai to Shidehara, No. 321-1, July 15, 1931). In total contrast to the stance of Nanjing, however, the Shanghai Guomindang decided to participate in the AJPOC and lead the movement, although it did this through individual members taking active roles (Jordan, 1991:38–39). Chinese business interests in Shanghai naturally thought that they should make the most of this opportunity in order to compete effectively with Japanese producers, to promote their own businesses, and to expand the movement advocating the use of ‘‘national goods’’. Yet, there were divisions between the old commercial elites of Shanghai and the more numerous nationalistic merchants. It was the Guomindang-oriented

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young businessmen in Shanghai who were the most enthusiastic about the boycott. The old commercial elites, such as Yu Qia-qing and many modern and native bankers, controlled the wealth of Shanghai, and they were insubordinate to the Shanghai Guomindang. The boycott, once enforced, would hurt many Chinese traders who profited from dealings in high-quality, low-priced Japanese industrial and consumer goods. Thus some merchants were dissatisfied with the overly rigorous method of the boycott. For example, Yu stated that ‘‘only a boycott which was voluntarily instituted by merchants could bring about the desired results’’. His advocacy of the manufacture and use of native products aside, the opinion of Yu Qia-qing as a capitalist was incompatible with the attitudes of the Shanghai Guomindang and radical Chinese merchants (DBFP, enclosure 1 in No. 498; Jordan 1991: 32–7, 41–2, 56, 63, 127; JFMA, A20, Shigemitsu to Shidehara, No. 660, July 20, 1931; Kikuchi: 384). The AJPOC urged merchant groups throughout China to prohibit the sale of all Japanese goods as of July 24. On July 16, it ordered newspaper companies not to carry advertisements for Japanese commodities. On July 19, the actual boycott started, although on a small scale. As usual, transactions in Japanese goods initially increased, because Chinese merchants tried to gain profits before another full-scale anti-Japanese boycott made dealings difficult. On the afternoon of July 23, the registration of Japanese goods started. One point that differed from the former boycotts was that the confiscation of goods alleged to be Japanese-made at checkpoints manned by the AJPOC pickets was adopted as the main method from the beginning. Confiscated goods were taken to AJPOC storage facilities, and sold by public auction (NCH, July 21, 1931; SNNS, July 21, 1931, evening, 2). By the last week in July, the AJPOC decided to treat harshly any Chinese merchants who were found guilty of violating the anti-Japanese regulations. Any person who attempted to smuggle Japanese goods valued at 5,000 Chinese dollars or more would have his or her face branded with the three Chinese characters ‘‘Mai Kuo Chi’’, which meant ‘‘traitor’’; any person found attempting to ‘‘smuggle’’ Japanese goods valued at 2,500 Chinese dollars or more would be arrested and placed in a wooden cage for a week; and any person found attempting to ‘‘smuggle’’ Japanese goods valued at 1,000 Chinese dollars or more would be paraded through the streets in the Chinese part of the city for three successive days (NCH, July 28, 1931). Although Chinese opinion was not united, the Japanese in Shanghai felt that their business was in danger. The new policies of the Nanjing government had already nurtured a sense of uncertainty about the future which was further strengthened by the forceful nature of the revived boycott, with its confiscations and corporal punishments. As commodities were confiscated by the AJPOC, the Japanese in Shanghai became

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extremely agitated. They considered the anti-Japanese movement of this time to be neither mild nor lukewarm and were afraid that, although the movement was not so conspicuous as the previous boycotts, its more effective organization would make it last much longer and damage their business more seriously.4 At the 113th meeting of the Friday Club on July 24, 1931, the representative of the Association of Japanese Cotton Piece Goods Merchants in Shanghai observed that the powerful Chinese cotton piece goods merchants had joined the anti-Japanese association and that the effect of the anti-Japanese agitation would be serious. The consulate, however, emphasized that the Nanjing government was not supporting the movement and that even the members of the Shanghai Guomindang were joining it merely on an individual basis (JFMA, A20, Murai to Shidehara, No. 404, August 14, 1931; Kinyokai, No. 113). Japan’s cotton spinning industry in Shanghai did not rely on the initiatives of the Foreign Ministry or the army to protect its interests. Instead, it regarded the navy as a greater source of protection. The Japanese First Expeditionary Fleet, whose commander had the authority to decide whether to use force at Shanghai, was more active in this period than during the period of the anti-Japanese boycott of 1928/29 (For details, see Goto-Shibata 1995: Chapter 6). The Japanese naval landing party was called out several times in August and the effect of dispatching sailors made a strong impression on the Japanese in Shanghai. During the month prior to the Manchurian Incident, Chinese enthusiasm for the boycott seemed to have weakened slightly. In the eyes of the Japanese in Shanghai, this was because of the dispatch of the naval landing party in their defense. They therefore came to the conclusion that they should rely on the navy instead of the consulate.

6. Opinions of the British in Shanghai The British business community in Shanghai was very much against the anti-Japanese movement of the Chinese, and severely criticized its disruption of the peace and order of the Shanghai International Settlement. On October 12, 1928, the North China Daily News asked whether the Chinese had thought about the bad impression the boycott would make on other countries, and described the confiscation of goods as ‘‘the barefaced thieving of the Boycott Committee’’. On November 30, 1928, it carried a leader on the subject entitled ‘‘Disgraceful Boycott’’, which spoke of ‘‘open theft’’ and ‘‘licensed brigandage pure and simple’’. It warned that the officials of the Nanjing government should reflect on China’s prestige abroad and condemned the action as ‘‘a very black mark against the new regime’’ (NCH, October 13 and December 1, 1928).

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The confiscation of Japanese goods by private anti-Japanese organizations deeply worried British businessmen. Strong concern over ‘‘the lawlessness of the acts of [those] Anti-Japanese Organizations’’ led the British Chamber of Commerce in Shanghai to send a letter to the acting British consul-general on March 11, 1929. In this letter, which was forwarded to the senior consul on March 13, the chamber argued that unless action was taken by the Chinese government to prevent such ‘‘illegal acts’’, the entire trade of Shanghai was bound to be seriously affected. On April 9, at a meeting of consuls-general, many criticized the violent activities of the anti-Japanese organizations. Now that there was a central government in China, the foreigners involved in China thought that the government should take responsibility for controlling its own territory and protecting its trade with foreign countries. As a result, on April 17, 1929, the senior consul asked the senior minister to request the Nanjing government to make anti-Japanese societies stop their activities.5 The September 1929 issue of the Shanghai British Chamber of Commerce Journal also carried a short article entitled ‘‘Sale of Confiscated Cargoes’’. It started with examples of advertisements. Cargoes confiscated by the Anti-Japanese Society will be offered for sale by auction from August 20 to August 30. The cargoes are divided into three classes: piece goods, cotton goods and sea products. Persons desirous of purchasing any of these goods are requested to apply to the office of the Headquarters of the Guomindang at Shanghai, Ling Ying Road (West Gate). (Advertisement in the Shun Pao, August 20, 1929) The Kuomintang Headquarters are offering for sale, beginning yesterday, Japanese goods seized during the recent boycott. The sale will terminate on August 30 (North China Daily News, August 23, 1929). (JBCCS, 14-9, September 1929: 225)

The journal complained that in no civilized country was any society, association, or individual permitted to confiscate and/or sell property belonging to any other person or persons. The most serious aspect of this sale of confiscated goods was, according to the journal, that the supposedly responsible Nanjing government condoned the sale of stolen goods (JBCCS, 14-9, September 1929: 225). On July 15, 1931, the leader of the Shanghai Times criticized the antiJapanese resolution passed at the meeting of the AJPOC on July 13, arguing that a boycott would not solve any problems and would merely create ill-feeling between the countries, and obstruct international trade.6 The Shanghai Municipal Council also tried to maintain order in the settlement. The municipal police allowed anti-Japanese posters and slogans to be taken away and tried to prevent the detention of Japanese goods. On July 29, the municipal council officially banned the seizure of Japanese goods in the international settlement and announced that it

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would arrest anyone who detained Japanese goods. It warned the AJPOC, whose headquarters were located within the borders of the international settlement, that, if it pursued cargoes owned by Japanese firms in the international settlement, the municipal police would intervene. The Chinese were irritated by this policy of the municipal council and threatened the British, saying that since Japan and Britain were obviously birds of a feather, if Britain did not change its policy, the Chinese intended to turn the anti-Japanese boycott into an anti-British movement.7 In the meantime, the safety of a British teenager named John Thorburn was of great concern to both the British and Japanese communities in Shanghai.8 The teenager left his home on June 1, 1931 and then disappeared. Reports circulated that a foreigner had been arrested because he had shot two Chinese military police, and since there were strong grounds for believing that the foreigner was Thorburn, Britain requested the Chinese Foreign Minister enquire into the case. The Chinese were, however, evasive and denied any knowledge of a foreigner having been arrested. Not until October 20, 1931, after the outbreak of the Manchurian Incident, was a formal reply received. It stated that Thorburn had been killed by a regimental commander at Suzhou. The procrastination of the Nanjing government concerning this matter reduced the sympathy of the British community towards the Chinese (DBFP, No. 473; FO371/15509, F3543; ibid., F4036; FO 371/15510, F4172; NCH, July 21, 1931).

7. Conclusion This chapter has examined the anti-Japanese boycotts, placing them in the context of Sino–foreign business and commercial rivalries. The boycotts were used not only as a means to put pressure on Sino–Japanese negotiations but also as a tool for developing China’s national industries. They were expected to serve the same purpose as protective tariffs against imports from Japan. Their main targets were Japanese cotton yarns and piece goods which were competing with Chinese cotton goods. It should be noted that raising China’s tariffs against Japanese imports would have had no impact on the products of the Japanese cotton mills in Shanghai, so that the boycotts were considered to be the most effective measure to protect Chinese products from those that their competitors produced in China. The economic effects of the boycotts are actually difficult to assess. It is almost impossible to determine who was hurt by the boycotts. As Part I of this volume has shown, not only Japanese but also Chinese merchants were engaged in Sino–Japanese trade, so that Chinese traders who had profited from dealings in Japanese commodities also suffered from the anti-Japanese boycotts. However, this fact was not usually emphasized. The Chinese Nationalists believed that they were attacking the Japanese,

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while the Japanese press reported that the Chinese were treating the Japanese commodities unreasonably. This chapter has also taken the psychological effects of the boycotts into consideration. The Japanese businessmen in Shanghai were the last persons who could analyse the situation objectively. Faced with the antiJapanese boycotts and the Nanjing government’s efforts towards economic development, they had increasingly grown insecure about the future, fearing that, after all their investments and efforts, they might be completely driven out of China some day. The prospects for small-scale Japanese businesses were especially bleak. The Japanese businessmen’s reaction to the boycotts became antagonistic over time. The British in the late 1920s were worried that the activities of antiJapanese organizations could seriously damage the entire trade of Shanghai. Maintaining trade was the overwhelming concern of the British businessmen in the region, and they objected to the boycotts. From the viewpoint of the Japanese and British businessmen in Shanghai, refusing to buy foreign commodities of a certain origin was a choice which could be left to Chinese customers, and was within the limits of their understanding. However, neither of them could accept the confiscation of commodities which belonged to other people. For them, this was nothing but theft, which should not be tolerated in any lawful country. By examining British observation of the anti-Japanese boycotts, this chapter has shown that, at least until the summer of 1931, the common ground between Britain and Japan was firmer than that between Britain and China.

Notes 1. JFMA, A.1.1.0.2-4-1, petition from Sino–Japanese Economic Association and Japanese Cotton Mill Owners Association in China to Tanaka, March 4, 1929; Kinyokai, No. 28. 2. JFMA, A.1.1.0.2-4-4, Hainikka no keika to tai Shi boeki ni kansuru ken, January 11, 1929; ibid., Yokotake to Tanaka, March 26, 1929; JFMA, E, Yokotake to Tanaka, No. 60, March 7, 1929. 3. JFMA, E.2.6.0.1-3, Shigemitsu to Shidehara, No. 958, July 11, 1930; Kinyokai, Nos. 83, 85, 92, 97, and 105, respectively on May 9, 1930, June 13, 1930, September 19, 1930, November 28, 1930, and March 27, 1931; Kinyokai Pamphlet, No. 37, June 29, 1930: 1–2 and No. 47, November 28, 1930. 4. JFMA, A20, military attache´ to General Staff, No. 772 (1, 2), July 22, 1931; ibid., petition from Shanghai branch of Japanese Cotton Mill Owners Association in China to president of Japanese Cotton Spinners Association, August 7, 1931; SNNS, July 25, 1931, 7; ibid., July 27, 1931, evening, 1; ibid., July 29, 1931; ibid., July 30, 1931, 9; ibid., July 31, 1931, evening, 2. 5. JFMA, E, Shigemitsu to Tanaka, No. 513, April 17, 1929. The English original is kept in the file.

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6. JFMA, A20, Murai to Shidehara, No. 321–2, July 15, 1931. Murai reported on the newspaper comment. 7. JFMA, A20, Vol. 2, Murai to Shidehara, No. 363, July 29, 1931; ibid., the military attache´ to General Staff, July 29, 1931; ibid., Murai to Shidehara, No. 372, July 30, 1931; Kinyokai, No. 115, August 5, 1931; SNNS, July 29, 1931, 9. 8. SNNS reported this news almost every day. See also Bickers (1996).

References Manuscripts and Newspapers CHAS/MCP/35, School of Oriental and African Studies Library, China Association papers, International Chamber of Commerce, January 26, 27 and 28, 1929 BT (Board of Trade papers), National Archives FO (Foreign Office papers), National Archives JFMA (Japanese Foreign Ministry Archives), A.1.1.0.2-4 JFMA, A.1.1.0.2-4-1 JFMA, A.1.1.0.2-4-4 JFMA, A.1.1.0.20-2 (A20) JFMA, E.2.6.0.1-3 JFMA, E.3.3.0.J/X1-C1 (E) Kinyokai, Tokyo Shoko Kaigisho Shoko Toshokan, Kinyokai Hokoku [Minutes of the Friday Club Meetings] NCH (North China Herald) SNNS (Shanhai Nichinichi Shinbun)

Books and Articles Banno, J., ‘‘Japanese industrialists and merchants and the anti-Japanese boycotts in China, 1919–1928’’, in Duus, P. et al. (eds.), The Japanese Informal Empire in China (Princeton, 1989). Bickers, R., ‘‘Death of a young Shanghailander: the Thorburn case and the defence of the British treaty ports in China in 1931’’, Modern Asian Studies, 30 (1996), 271–300. Bush, R. C., The Politics of Cotton Textiles in Kuomintang China 1927–1937 (New York and London, 1982). Coble, P. M., The Shanghai Capitalists and the Nationalist Government (Cambridge, MA, and London, 1980). Cochran, S., Big Business in China (Cambridge, MA, and London, 1980). DBFP (Documents on British Foreign Policy) second series, VIII. Eastman, L. E., et al., The Nationalist Era in China 1927–1949 (Cambridge, 1991). Goto-Shibata, H., Japan and Britain in Shanghai, 1925–31 (Basingstoke and London, 1995). Ishii, I., Gaikokan no Issho [The Life of a Diplomat] (Tokyo, 1986). JBCCS (Journal of the British Chamber of Commerce, Shanghai). Jordan, D. A., Chinese Boycotts versus Japanese Bombs (Ann Arbor, 1991).

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Katsuragawa, M., ‘‘Sokai zaijyu Nihonjin no Chugoku ninshiki [Japanese residents in the settlements in China and their perceptions of China],’’ in Furuya, T. (ed.), Kindai Nihon no Ajia Ninshiki [Modern Japanese Perceptions of China] (Kyoto, 1994). Kikuchi, T., Chugoku Minzoku Undo no Kihon Kozo [Basic Structure of Chinese Nationalist Movement] (Tokyo, 1966). Kinyokai Pamphlet, Shanhai Hainikka Jitsujo [Real Situation of the Anti-Japanese Movements in Shanghai] (Shanghai, 1928–31). Kubo, T., ‘‘Nankin seifu seirituki no Chugoku kokuminto [The Guomindang in the period of the establishment of the government in Nanjing]’’, Ajia Kenkyu, 31– 1, 1984, 1–33. ——, ‘‘Kokumin seifu ni yoru kanzei jishuken no kaifuku katei [Regaining of tariff autonomy by the Nationalist government]’’, Toyo Bunka Kenkyujo Kiyo, 98, 1985, 347–93. League of Nations, The Report of the Commission of Enquiry of the League of Nations into the Sino–Japanese Dispute, Geneva, 1932. Murai, S., ‘‘Shanhai Jihen to Nipponjin shokogyosha [Shanghai Incident and the Japanese businessmen and industrialists]’’, Nenpo Kindai Nihon Kenkyu, 6, 1984. Nippon Shoko Kaigisho, Shina Nanyo ni okeru Saikin Nikka Haiseki no Keika Narabi ni Eikyo [The Process and Effects of Recent Anti-Japanese Movement in China and Southeast Asia] (Tokyo, 1929) Remer, C. F., A Study of Chinese Boycotts (Baltimore, 1933a). ——, Foreign Investments in China (New York, 1933b). Shanhai Shoko Kaigisho Nenpo [Annual Report of the Japanese Chamber of Commerce and Industry in Shanghai], No. 11, 1928. So, W., The Kuomintang Left in the National Revolution 1924–1931 (Oxford, 1991). Soejima, S., ‘‘Chugoku no fubyodo joyaku teppai to ‘Manshu Jihen’ [Abrogation of unequal treaties in China and ‘Manchurian Incident’]’’, in Furuya, T. (ed.), Nicchu Sensoshi Kenkyu [A Study of Sino–Japanese War] (Tokyo, 1985). Takamura, N. Kindai Nippon Mengyo to Chugoku [ Japanese Cotton Industry and China] (Tokyo, 1982). Young, A. C., China’s Nation-Building Effort (Stanford, 1971).

7 The Tariff Policy of the Nationalist Government, 1929–36: A Historical Assessment1 toru kubo

1. Introduction This chapter presents part of my reassessment of the economic development of interwar China. It argues that economic development was made possible by the external economic policy pursued by the Nationalist government of the Republic of China, in response to the international environment between the wars. China at this period should not be viewed as merely a passive entity under pressure from and invaded by the great powers. Rather, she was an active influence in international relations, striving hard to recover and strengthen her political and economic autonomy. An intense focus on external economic policy itself reflected the reality of international polity. The great powers were so closely involved in the Chinese economy that the entire fabric of the Chinese government’s economic policy had to be developed more or less as ‘‘economic diplomacy’’. At the same time, the aspects of the Nationalist government’s economic policy that turned out to be relatively successful were also concentrated on tariff policy and monetary policy, both of which are areas intimately connected with external relations. The discussion of the tariff policy detailed below suggests that, after recovering tariff autonomy, the Nationalist government did materialize both its revenue generation function and its industry protection function to a considerable extent, through four revisions of import duties from 1928 to 1934 (Kubo 1980, 1999). As for monetary policy, the monetary reform of 1935 should be the focus of analysis, as it basically achieved domestic currency unification, stabilized the exchange rate at a slightly devalued level, and helped the recovery of the Chinese economy (Kubo 1981, 1999: Chapter 8). Also, by the mid-1930s, various export promotion measures, such as reduction of export tariffs, establishment of bonded factories, and assistance in opening up Southeast Asian markets, were

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carried out with a focus on the promising sectors of industry (Kubo 1987, 1999: Chapter 5). The reasons for the success of economic diplomacy must be sought in the growth of policy initiatives within China, as well as in the international environment surrounding the country (Kubo 1995b, 1996b). This chapter discusses the contents of the Nationalist government’s economic diplomacy through the examination of the process of development of tariff policy, and the factors which made its promotion possible. It also attempts to show the effects of the tariff policy on economic development in concrete terms.

2. The Development of Tariff Policy This section outlines the process of the revision of import duties, the key element of the tariff policy. Import duties have two main functions, to collect revenue and to protect industry. The government’s tariff policy went forward amid a complex interplay of benefits and losses, or advantages and disadvantages, associated with these two functions. Taking the financial aspect of tariffs first, customs duties were the central government’s most stable source of revenue at that time, providing a source of finance for administrative, military, and other expenditures, and also being channeled into the redemption fund for domestic and foreign debt, and indemnities. Thus it was not just the Nationalist government which had good reason to welcome the increase in revenue gained from raising tariffs. The governments of the great powers, foreign banks, and Chinese banks, which were in a position to receive indemnity payments or repayment of foreign or domestic debt, might well support the policy as well. Throughout this process, however, it was of course necessary to avoid a situation where excessive tariff increases led to a great reduction in imports, which might cause a fall in total revenue. From the viewpoint of the industry protection function, those Chinese manufacturers who were acquiring strength, and those Chinese banks which were increasing their loans to and investments in these manufacturers, were eager for the imposition of protective duties on foreign goods. So was the Nationalist government, which declared the strategy for import-substitution industrialization, seeking political support from industrialists and bankers. The governments of the powers, foreign manufacturers, and trading companies, on the other hand, considered protective duties as undesirable. In particular, Japan’s light industry, which was in competition with the Chinese domestic industry in many sectors, strongly opposed China’s move towards raising import tariffs. However, in view of the possibility of expansion of exports of heavy industry goods and chemicals accompanying Chinese industrial devel-

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opment, and an increasing shift from exports of goods to exports of capital, the powers, particularly the United States and Britain, were not totally opposed to a minor rise in import duties on light industry goods. Even in the case of Japan, Japanese spinning mills in China, engaged in large-scale development of manufacturing facilities there, were able to adopt a relatively tolerant stance towards the Nationalist government’s protective tariff policy. It was against this background that the Nationalist government developed its tariff policy. This process will be reviewed below, with special attention to the four full revisions of import duties. The first revision was promulgated in December 1928, after the United States, Britain, and other powers had signed a new treaty recognizing China’s tariff autonomy, and came into force in February 1929 (Kubo 1999: Chapter 1). The successive revisions will be identified by their year of promulgation, e.g. ‘‘the tariffs of 1928’’, rather than by the year they took effect. High-tariff items with a tariff of 20 percent or more were limited to alcohol, cigarettes, and some other luxuries, while the rates of duty on light industry goods such as cotton goods, sugar, wheat flour, and sundries, which made up most of imports, were kept low. The tariffs of 1928 were based on the rates in the powers’ proposal, which were more or less agreed at the Peking Tariff Conference held in 1925–26 between the powers and the representative of the Chinese government, and were of a strongly revenue-generating nature with only a pale tinge of protection. In other words, the possibility was created of an increase in revenue from customs duties, part of which would help to repay foreign debt, while erection of tariff barriers which would obstruct the import to China of foreign goods was at the same time carefully avoided. The opposition of the powers was therefore not strong, and even Japan, which had not yet recognized Chinese tariff autonomy, displayed a tolerant attitude to the implementation of the tariffs of 1928. The Nationalist government then managed to obtain the appointment of Frederic Maze as Maritime Customs Inspector General, by taking advantage of the temporary disruption of Anglo–Japanese diplomatic cooperation. This was an important achievement for the government, which had until then adopted a cautious approach to the revision of import duties. The appointment of Maze, who promised to be faithful to the Nationalist government’s tariff policy, was realized in January 1929, which made the government effort to implement the tariff policy much easier than before (Kubo 1999: Chapter 7). In May 1930, Japan, the only country that had not yet given its approval to China’s tariff autonomy, finally signed the Sino–Japanese Tariff Agreement, and China became able to set her own tariffs, for the first time since the mid-nineteenth century (Kubo 1999: Chapter 2). This was the result of teamwork, in which the economic diplomacy advanced by the minister of

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finance T. V. Soong and the ‘‘revolutionary diplomacy’’ of the foreign minister C. T. Wang (Wang Zhengting) worked in tandem (Li 1993). However, the Japanese side made the Nationalist government promise in the agreement and its supplementary documents, that for one to three years they would leave untouched the import tariff rates on sixty-two items, including cotton goods, wheat flour, marine products, and sundries. Despite being subjected to this restriction, the Nationalist government managed by negotiation to remove a number of items from the list of exemption in the original Japanese proposal, and also succeeded in shortening the period of exemption. The process outlined above culminated in December 1930 in the promulgation of the new national tariff rates, which were implemented in January 1931 (Kubo 1999: Chapter 2). Among the main items whose tariff rates were raised were alcohol, cigarettes (to 50 percent), silk and artificial silk (to 45 percent), matches and ceramic ware (to 40 percent), woollen cloth, sugar, and luxury foods (to 35 percent), linen goods, raw silk, glass, and European umbrellas (to 30 percent), while items for which rates were reduced to 5–7.5 percent were machinery, motors, and vehicles. Increases were made in the rates of tariffs on luxuries such as alcohol and cigarettes, from which large amounts of revenue were expected, and those light industry goods which, with the considerable progress of domestic industry, were now beginning to be produced in China were also made to pay high tariff rates. On the other hand, items related to production equipment, which was indispensable for the development of the country’s light industry, had their rates lowered. While there was still a revenuegenerating element in the customs duties, it is clear that a stronger emphasis was put on the protective function than before. However, bound by the Sino–Japanese Tariff Agreement, the Nationalist government was unable to make any change on the tariff rates for cotton goods at this time. The third comprehensive revision of import tariffs was promulgated on May 22, 1933, that is, as soon as the Sino–Japanese agreement not to alter certain tariff rates lapsed. It was immediately implemented (Kubo 1999: Chapter 3). One aim of these tariffs of 1933 was a revenue collection to remedy the fall in customs revenue since 1932, resulting from the Japanese army’s occupation of Manchuria. However, the principal items whose rates were raised were printed cotton cloth (to 30–80 percent), bleached and dyed cotton cloth (to 25–30 percent), cement and sulfur dyes (to 50 percent), machine-made paper, hats, and buttons (to 40 percent), knitted goods, woollen yarn, and canvas shoes (to 30 percent), marine products (to 20–35 percent), coal, clocks, and watches (to 25 percent). It became clear that rates had been raised by large amounts across the board, with the focus on items whose rates had been left unchanged under the Sino– Japanese Tariff Agreement, and particularly in those sectors where do-

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mestic light industry was producing goods and had been eager for such import tariff rises. Thus the tariffs of 1933 can be described as a further step in the direction of protective tariffs. Japan, fearing damage to her export to China and asserting that this revision would have an adverse effect on China’s trade and her people’s lives and would not meet the need to increase tariff revenue, protested in an overbearing manner, demanding that the Nationalist government authorities reconsider their action. Britain too, even though this was a small matter for her compared with what it was for Japan, nevertheless expected the tariff revision to be damaging to her Chinese trade, and began secret negotiations with the Nationalist government through the finance minister, demanding a re-revision. The United States, by contrast, was scarcely affected by the increases in import duties, and displayed a tolerant attitude to the tariffs of 1933. In view of the international environment in which China found herself at that time, the Nationalist government decided to readjust the tariffs of 1933, in line with the diplomacy of accommodating Japan of Wang Jingwei who was both head of the Executive Yuan and foreign minister (Liu 1995; Xu 1996), and in June 1934 once again promulgated revised import tariff rates, implementing them from July (Kubo 1999: Chapter 4). Because the Nationalist government bowed to the insistence of Japan and reduced the tariffs on some light industry products, the Chinese industrial and commercial world and public opinion were severely critical of the tariffs of 1934. However, this acceptance of Japan’s demands actually went no further than a partial amendment lowering the tariffs on fifty-five items such as processed cotton cloth, marine products, machine-made paper, woollen yarn, and woollen textiles by a few percent, while the duty on more than 350 items, amounting to about half of the total number, was increased, with the result that the protective character of the tariffs of 1933 was basically maintained in those of 1934. It should also be mentioned that among the goods on which duty was raised were items such as machinery and metal products, the domestic production of which China had not yet caught up with demand. The tariffs on these should therefore be considered more of a revenue-generating nature than of a protective one. In addition to the four main revisions described above, partial revisions were carried out in every year, for example, the increase in the import duty on sugar in April 1932 (to about 80 percent), the increase in the import duty on rayon products in August of the same year (to about 70 percent), and the increase in the import duty on wheat flour in December 1933 (to about 20 percent), and from December 1931 a surcharge of 10 percent of the regular import duty, for the purpose of flood damage aid and supplementary finance, was levied on all categories of goods.

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Between the end of 1934 and mid-1937, planning was under way to completely phase out interport duty, an internal duty levied on shipment of goods between Chinese ports, reduce or eliminate export duties, and introduce a fifth general increase in import duties (Kubo 1999: Chapter 5). Abolition of the interport duty (a kind of transit tax)2 was intended to be a counterrecession measure at that moment, and was something which the shipping companies and commercial world had been crying out for. In March 1935 the Nationalist government’s Executive Yuan took the decision to abolish it totally as from June. At the same Executive Yuan meeting a revision plan was passed whereby export tariff rates would be reduced or eliminated on more than 100 items, more than half the list of items subject to export tax. Chiefly included were goods where an increase in exports could be expected and goods which were subject to strong competition in the international market. As a way of making up the tax revenue lost by this action, a 10 percent across the board increase in import taxes was decided. This set of measures was intended to stimulate the domestic distribution of goods, promote exports, and advance the economic development of China herself, and was an extension of the protective tariff policy pursued in the revision of import taxes. However, this policy was in the end never implemented because of concern for China’s international relations, in particular the ever tenser relationship with Japan. As has been seen, tariff policy was not pursued merely as a means of securing a source of revenue for the Nationalist government, but was considered as an effective means of achieving China’s economic development through the import-substitution industrialization strategy, and was promoted as such. In the next section we will examine how effective it was in reality.

3. Changes in Customs Revenue and Import Trade As a result of the substantial rise of import duty, the revenue increased greatly and became a valuable source of finance for the government. At the same time, the flow of imports, especially of light industry goods, was suppressed by the higher levels of duty, and the total value of imports showed a tendency to decline. This decline was in due course to become a factor which curbed growth of the total import duty collected. These various changes will now be examined in more detail. First, tariff rates. The average rate of duties on the total of imported goods was no more than 5–6 percent until 1928, even including surcharges. With the implementation of the 1928 tariffs it rose to more than 10 percent, and to 15 percent or more after the 1930 tariffs came into force. It reached 20 percent or more with the tariffs of 1933, and was about 30 percent from the 1934 tariffs onwards (Table 7.1).

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Table 7.1. China’s import duty and imports, 1926–36 (1,000 yuan)

Year

(1) Total import duty

(2) Surcharge (2.5 percent)

1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936

66,768 54,379 72,446 167,099 211,639 316,285 260,379 293,874 288,674 277,260 282,441

950 20,000 30,000 — — — — — — — —

(3) Total imports

(4) Average tariff rates ( (1) þ (2) )  (3) (percent)

(5) Import volume index 1926 ¼ 100

1,751,537 1,578,147 1,863,320 1,972,083 2,040,599 2,233,376 1,634,726 1,345,567 1,029,665 919,211 941,545

(3.8) (3.4) (3.9) (8.5) (10.4) (14.2) (15.9) (21.8) (28.0) (30.2) (30.0)

(100.0) (84.1) (100.8) (107.2) (100.4) (99.5) (81.2) (74.7) (65.2) (64.1) (59.7)

Sources: (1) and (3) are taken from China Maritime Customs, The Trade of China (title varies). (2) are estimated from the government financial reports. Figures for (5) derive from (3) indexed and deflated by the import price index in Table 7.5. Notes: (1) include various surcharges which came into force since 1931. As a result of the Japanese invasion of the northeast, (1) and (3) since July 1932 do not include the amount reported by the Maritime Customs in the northeast region.

Next, let us examine the changes in tariff revenue. The amount of import duty collected more than doubled as a result of the tariffs of 1928, and in 1932 exceeded 200 million yuan. It can be seen that as a result of the tariffs of 1930 it increased almost a further 50 percent, then decreased in 1932, recovering in the next year, and thereafter continued at the 250–260 million yuan level until 1937 (Table 7.2). Of these customs revenues, after subtraction of expenses required for the administration of the Maritime Customs, initially an overall total of about 40 percent, and from 1932 a little more than 20 percent, was apportioned to such payments to foreign countries as redemption of foreign bonds, and the remainder was used by the Nationalist government for redemption of its domestic loans and for its administrative and military expenditures (Table 7.2). It was not only the enormous tariff revenue that was important for the government’s finances. Revenue could also be derived from domestic loans issued with tariff revenue as the redemption fund. Customs revenue formed 40 percent or more of total annual income up until the 1932 financial year, and continued to provide 30 percent or more of revenue in every year thereafter with the exception of the 1935 financial year, while the income derived from domestic loans issued designating tariff revenue as the main redemption fund amounted on average to a further 20 percent or more of annual revenue. It would certainly be no

Table 7.2. Composition of Chinese customs revenue, 1928–37 (1,000 yuan) Composition of revenue

Year

Total revenue

Import duty

Period of the Peking government 1912–27 98,640 39,266 Average (100.0) (39.8) Period of the Nationalist government 1928 145,067 72,446 (100.0) (50.0) 1929 259,178 167,099 (100.0) (64.6) 1930 313,402 211,639 (100.0) (67.6) 1931 417,813 314,687 (100.0) (75.4) 1932 344,429 236,292 (100.0) (68.6) 1933 355,254 265,611 (100.0) (74.8) 1934 351,171 260,215 (100.0) (74.2) 1935 339,142 250,165 (100.0) (73.8)

Composition of expenditure

Surcharge

Export duty

Transit tax

Foreign debt redemption

Internal debt redemption

Government reserve fund

— —

29,667 (30.1)

14,113 (14.3)

55,695 (56.4)

9,036 (9.2)

9,451 (9.6)

— — — — — — 1,598 (0.4) 24,088 (7.0) 28,263 (8.0) 28,460 (8.1) 27,095 (8.0)

42,156 (29.1) 56,545 (21.8) 55,384 (17.7) 47,831 (11.4) 26,777 (7.8) 23,245 (6.5) 24,701 (7.0) 20,732 (6.1)

14,478 (10.0) 16,631 (6.4) 19,833 (6.3) 19,154 (4.6) 20,552 (6.0) 18,003 (5.1) 16,968 (4.8) 13,208 (3.9)

82,010 (56.5) 91,662 (35.3) 128,340 (40.9) 168,008 (40.2) 96,213 (27.9) 86,393 (24.3) 76,039 (21.7) 67,512 (19.9)

22,797 (15.7) 66,613 (25.7) 85,642 (27.3) 117,851 (28.2) 116,613 (34.0) 122,409 (34.5) 147,150 (41.8) 158,071 (46.7)

7,907 (5.5) 62,976 (24.3) 48,449 (15.5) 55,584 (13.3) 84,100 (24.4) 93,901 (26.4) 78,933 (22.5) 74,329 (21.9)

1936 1937 1928–37 Average

341,270 (100.0) 394,538 (100.0) 326,126 (100.0)

254,539 (74.5) 261,287 (66.2) 229,398 (70.3)

27,902 (8.2) 29,167 (7.4) 16,657 (5.1)

24,474 (7.2) 29,073 (7.4) 35,092 (10.8)

13,685 (4.0) 20,149 (5.1) 17,266 (5.3)

77,298 (22.7) 77,403 (19.6) 95,088 (29.2)

132,820 (38.9) 130,341 (33.0) 110,059 (33.8)

83,705 (24.5) 131,205 (33.3) 72,109 (22.1)

Source: Kubo (1999: 155). Notes: Transit tax refers to: coast trade duty, transit dues, native customs dues for up to 1930, native customs dues and interport duty for 1931, and interport duty after 1932.

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Table 7.3. Composition of China’s central government revenue, 1913–19 and 1927–36 (Percent) Tax revenue

Customs revenue

Salt tax

Land tax

Income from state enterprises

Income from internal bonds

—

17.7

—

20.6

6.0 6.9 7.0 6.8 11.9 11.0 11.8 10.2 11.4 12.6

— — — — — — — — — —

— — — — 0.1 2.8 2.0 5.9 5.7 1.0

39.8 15.9 15.6 24.9 16.7 3.6 8.9 15.9 12.5 17.8

Consolidated tax

Year

Total

Period of 1913–19 Period of 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936

the Peking government 79.4 15.1 17.2 the Nationalist government 34.4 8.6 13.8 56.2 41.0 6.9 77.2 47.2 20.9 68.5 40.4 19.4 82.1 49.3 19.2 80.1 44.8 21.8 73.7 39.3 19.8 63.2 34.5 16.2 52.8 23.2 15.6 61.6 30.5 15.7

Sources: For 1913–19, Kubo (1995a: 115). For 1928–36, Kubo (1999: 156). Notes: Figures for 1913–19 are averages of 1913, 1914, 1916, and 1919. Figures for 1927–36 refer to each financial year, i.e. 1927 is from the July 1, 1927 to the June 30, 1928.

exaggeration to say that the Nationalist government’s finances critically depended on the customs revenue (Table 7.3). From 1932 on, while tariff rates were increased, the revenue from them had difficulty in growing, due to the fall in the total volume of imports. One important reason for this fall was the loss of Dalian, Yingkou, and other ports in the northeast as a result of the Japanese army’s invasion, but at the same time, as will be demonstrated in detail later, it was also a result of the import-suppression effect of the tariff increases. Let us turn to quantitative changes in the import trade. With the rise in tariff rates on imports there was certainly a tendency for the volume of imports to fall. To take a five-year period centered on the implementation of the tariffs of 1933 and of 1934 (i.e. 1931–36) as an example, the average tariff rate doubled from 14.2 percent to 30.0 percent, while the volume of imports fell by about 40 percent (Table 7.1). Nevertheless, one should not jump to the conclusion that there was a simple causal relationship between the rise in import tariffs and the fall in the volume of imports on the basis of this fact alone. It is possible that factors other than the import tariff rates were operating to produce changes in import volumes. In fact, looking carefully at Table 7.1, it can be seen that in the case of the tariffs of 1928, despite an increase in the rates of duty, the volume of imports rose

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rather than fell after they were implemented, and for the tariffs of 1930, the fall in the volume of imports after implementation was less than 1 percent on an annual basis. As these examples show, changes in volume of imports are not necessarily determined by changes in import tariff rates alone. In the account which follows, then, various other factors affecting the import trade—the occupation of the northeast by the Japanese army, rampant smuggling, fluctuations in supply and demand reflecting the business cycle, changes in import prices as a result of changes in exchange rates, and the development of the Japanese goods boycott movement— will be examined, and the interrelation between tariff rates and import volumes will be discussed, referring to earlier research by Cheng Yu-kwei and others. Due to the Japanese army’s invasion of the northeast, imports to the region ceased to be included in China’s trade statistics (China Maritime Customs) from July 1932. Also, from the tariffs of 1928, smuggling in order to escape the high customs duties was being carried out through the Kuangtung Leased Territory, Taiwan, and Hong Kong. From 1934 to 1936, the ‘‘Smuggling in East Hebei (Jidong)’’ under the aegis of the Japanese army (smuggling through the ‘‘customs’’ of the East Hebei Government, the regional puppet regime set up by the Japanese army along the coast of eastern Hebei province) was particularly buoyant. Both of them were important factors reducing the volume of imports in the statistics. Let us then try to isolate the effects of these two factors and attempt to establish an undistorted picture of the changes in the import trade. First, in order to eliminate the direct influence of the loss of the northeastern region on the import trade we will exclude that region’s share—corresponding to approximately one-sixth of the total imports figure for the whole country—before 1932 as well, and compile consistent import trade statistics for the rest of China (Table 7.4, columns (1) and (6) ). Next, estimates of the relative weight of smuggled imports to the total for legitimate imports for each year are available. Using the estimates (which err, if anything, on the high side) of 10 percent for 1929–33, 15 percent for 1934, 22.8 percent for 1935, and 21.2 percent for 1936, I made a calculation of the changes in total volume of imports (in terms of yuan and index figures) including smuggled imports (Table 7.4, columns (4) and (8) ). (For 1929–33, Otte 1936; for 1934–36, Bank of China; for the smuggling in East Hebei, Imai (1976) remains an essential reference.) According to this calculation, even when the effect of the occupation of the northeast and that of smuggling are removed, the basic trend of a rapid decline of imports from 1932 on is undeniable, though it looks less dramatic. A special factor influencing China’s import trade in this period which must be mentioned was the movement to boycott Japanese goods as a protest against Japan’s invasion of China. With the invasion of the

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Table 7.4. The effects of the territorial loss and smuggling on China’s imports, 1926–36 (1,000 yuan) (1) Imports (2) (3) excluding Estimated Estimated (4) those to share amount (1)þ(3) Year northeast of smuggling

(5) Index of (4)

1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936

(100.0) (100.0) (88.1) (82.3) (103.9) (100.7) (121.0) (107.2) (128.6) (98.2) (149.5) (99.1) (113.8) (81.3) (100.5) (79.1) (80.4) (64.4) (76.6) (59.6) (77.5) (55.0)

1,473 1,298 1,530 1,620 1,723 2,002 1,524 1,346 1,030 919 942

— — — (10.0) (10.0) (10.0) (10.0) (10.0) (15.0) (22.8) (21.2)

— — — 162 172 200 152 135 155 210 200

1,473 1,298 1,530 1,782 1,895 2,202 1,676 1,481 1,185 1,129 1,142

(6) Volume index of (1)

(7) Volume index of (3)

(8) Volume index of (4)

— — — (10.7) (9.8) (9.9) (8.1) (7.9) (9.7) (13.6) (11.7)

(100.0) (82.3) (100.7) (117.9) (108.0) (109.0) (89.4) (87.0) (74.1) (73.2) (66.7)

Sources: (1) China Maritime Customs, The Trade of China, 1936. (2) see text. (6) Cheng (1956: 70). Notes: (3) ¼ (1)  (2)  100. (4) ¼ (1) þ (3). (7) ¼ (6)  (2)  100. (8) ¼ (6) þ (7).

northeast in 1931, this movement spread throughout the country and reached such a scale that it was assessed thus: ‘‘From whatever angle it is approached, the economic effectiveness of the 1931 boycott is apparent’’ (Remer 1933: 231). It must be noted, however, that the boycott was not one of foreign products in general but of Japanese goods. Since in sectors where there was no domestic production there were cases where the gap left by Japanese goods was filled by British, American, or other foreign countries’ products, there was not necessarily a direct connection between the boycott movement and the fall in total volume of imports. From the above examination, it is clear that a rapid decline of imports from 1932 on cannot be fully explained by the loss of the northeast, smuggling, and the boycott movement. Another set of important factors which determined the changes in the import trade at this period, the fluctuations in import prices and financial conditions resulting from exchange rate changes, and the presence of China’s own business cycle which interacted with them, must be considered. Our examination of the effect of rises in import duties should then be placed in such a context. From the end of 1929 to 1934, in contrast to the severe blow dealt to most countries by the Great Depression, China retained the rhythm of her own business cycle to a certain extent, owing to a lag in the movement of

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exchange rates as a result of the fact that China was de facto a silver standard country. From 1929 to 1931, a period when the international price of silver plunged and thereafter remained consistently below the price prevailing in China, silver flowed into the country in large quantities from outside, and the monetary situation was eased. At the same time, the prices of imported goods rose due to the fall in the exchange rate of the silverlinked tael (or yuan), the currency unit used for the settlement in external transactions, and the rise in import tariff rates greatly strengthened this tendency, as a result of which the domestic price index itself began to rise (Table 7.5). Easy monetary conditions and the rise in domestic prices stimulated economic activity within China, and a boom and a new demand for goods ensued. Therefore, despite the rising import prices due to the fall in the price of silver and the raised customs duties, the volume of imports remained at a relatively high level. The years 1932–35, on the other hand, were a period of high silver prices, the price on the international market rising steeply mainly as a result of America’s policy of purchasing silver. In this period, silver flowed out of China, where the price was lower, creating a shortage of money inside the country. In addition, with the rise in the exchange rate, China’s export competitiveness was rapidly lost, and the market for Chinese products shrank. Domestic prices fell and, coupled with natural disasters and the devastation of the rural economy, the Chinese economy as a whole was plunged deep into economic crisis. Because domestic prices fell and exchange rates rose in this way, one would have expected the prices of imported goods to fall. But they hardly fell in this period, staying at levels about 30 percent higher than those of 1926 (Table 7.5). The reason for this phenomenon must be sought partly in that prices had risen in foreign countries where the process of recovery and return to prosperity had begun, but especially in that China’s import duties had risen. With prices of imported goods staying high during the period of falling demand, it was natural that imports decreased dramatically. It was after the currency reform of November 1935 that the Chinese economy escaped from the influence of the international fluctuations in the price of silver, and the government came to be able to control the exchange rate in accordance with its own needs to some extent. Until then China’s exchange policy was not something which had a great influence on trade. In most cases the exchange rate fluctuations were caused by the movements in the international price of silver. Lastly, we cite calculations of Cheng Yu-kwei, who has shown that the increase in tariffs was an important factor in the decline of imports (Cheng 1956). Cheng determined import volume indices for goods on which the import tariff rate was less than 20 percent and considered these figures as showing the case where import trade was unaffected by

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Table 7.5. Changes in silver prices, exchange rates and imports in China, 1926–36 (1,000 yuan) (1) Price index of Year silver 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936

(100.0) (90.9) (93.8) (85.4) (61.7) (46.5) (45.2) (56.1) (77.4) (103.5) (72.8)

(2) Exchange rate index

(3) Net inflow (outflow) of silver

(4) Import price index

(5) Wholesale price index

(6) Foreign price index

(7) Import volume index

(8) Smuggled exports of silver

(100.0) (91.0) (95.0) (85.9) (59.5) (45.0) (55.8) (62.7) (73.5) (82.0) (65.0)

82,891 101,400 165,764 164,877 104,395 70,803 þ11,444 þ14,122 þ256,728 þ59,397 þ249,623

(100.0) (107.3) (102.6) (107.7) (126.7) (150.2) (140.2) (132.3) (132.1) (128.4) (141.7)

(100.0) (104.4) (101.7) (104.5) (114.8) (126.7) (112.4) (103.8) (97.1) (96.4) (108.5)

(100.0) (96.0) (95.7) (93.1) (81.4) (69.7) (66.9) (67.5) (73.0) (75.9) (78.5)

(100.0) (82.3) (100.7) (117.9) (108.0) (109.0) (89.4) (87.0) (74.1) (73.2) (66.7)

— — — — — — — — 23.2 230.1 40.0

Sources: (1) Cheng (1956: 263). (2) ibid. (70). (3) Zhongguo kexueyuan Shanghai jingji yanjiusuo (1958: 108–9). (4)(5) Caizhengbu guoding shuize weiyuanhui (1936: 112). (6) Zhongguo kexueyuan Shanghai jingji yanjiusuo (1958: 114). The average of British and American indices. (7) from (8) of Table 7.4. (8) (Cheng 1956: 70). Note: (3) ‘‘’’ refers to inflow, ‘‘þ’’ outflow.

the rise in import tariff rates. We compute the difference year by year between the above figures and the all-categories import volume indices, and present these figures as showing the degree of influence of import duty rises (Table 7.6). We could see from this table that while the tariffs of 1928 scarcely reduced imports, those of 1930 had a slight effect, and those of 1933 and 1934 were both important factors reducing imports. The above examination clearly shows that the Nationalist government’s tariff policy did not just increase the government’s revenue but was also actually effective in reducing imports. However, detailed study by sector is necessary to discover whether this reduction in imports really succeeded in its aim of protecting the domestic industry. This will be examined in the next section.

4. Industrial Development and Structural Change under Protective Tariffs Under tariff protection, import-substitution industrialization proceeded, centering on the consumer goods sector of light industry, and brought about changes in both trade patterns and industrial structure. A change in the pattern of trade is shown clearly in the change in the composition of imports (Table 7.7). The proportion of light industry goods in total imports,

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Table 7.6. An estimated impact of import duty (Percent) (1) Import volume index for items with less than 20 percent

(2) Import volume index for all items

(3) (1)  (2)

107.8 102.4 82.7 78.6

108.2 97.6 59.5 56.0

0.4 4.8 23.2 22.6

1928 revision 1930 revision 1933 revision 1934 revision Source: Cheng (1956: 59). Notes: 1926 ¼ 100.

which in 1912 was over 50 percent of the total, and still in 1926 accounted for over 40 percent, fell rapidly in the 1930s and by 1936 had become about one-seventh of the total. By contrast, the relative importance of imports in the heavy and chemical industry products increased. If the import totals for 1926 and 1936 are compared, light industry goods show a dramatic fall of about 80 percent, while heavy and chemical industry goods show a rise of about 30 percent. If there was a general expansion of the market for light industry goods, as seems to have been the case, the above changes unmistakably suggest a sharp increase in domestic production of light industry goods, hence a rapid progress of import-substitution industrialization. Since this growth in light industry increased the demand for production equipment and raw materials, that is to say, machines, metals, and chemicals, which were heavy and chemical industry products, and this demand could not be satisfied by domestic products, given China’s level of industrialization, imports of chemical and heavy industry products tended to rise rather than fall. It should be noted that at this period most of the goods in the ‘‘Miscellaneous’’ category in the trade statistics, which increased sharply in 1936, were probably armaments such as military planes and guns whose category came not to be specified in this period. Thus imports of heavy and chemical industry goods were also stimulated by the urgent need to strengthen national defense. In the export trade, by contrast, change is not so clear (Table 7.8). Even so, it can be seen that the proportion of total exports accounted for by manufactured goods produced in modern factory (the total of the ‘‘light industry products’’ and ‘‘heavy and chemical industry products’’ columns in Table 7.8) had risen from 15 percent in 1912 to 31 percent in 1933, while that of handicrafts fell from 44 percent to 32 percent. Although a slight reversal is seen in 1936, the basic changes in the composition of export goods are apparent, reflecting structural change caused by the progress of industrialization.

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Table 7.7. Commodity composition of Chinese imports, 1912–36 (Million yuan)

Year

Primary products

Heavy and chemical industry goods

Light industry goods

Unclassified

Total

1912 1926 1930 1933 1936

209 (28.4) 629 (35.9) 756 (37.0) 617 (45.8) 280 (29.8)

101 (13.7) 330 (18.9) 569 (27.9) 439 (32.6) 442 (47.0)

403 763 685 274 135

25 29 31 16 84

737 (100.0) 1,752 (100.0) 2,041 (100.0) 1,347 (100.0) 941 (100.0)

(54.7) (43.6) (33.6) (20.4) (14.3)

(3.4) (1.7) (1.5) (1.2) (8.9)

Source: China Maritime Customs, The Trade of China (title varies). Notes: Calculated from the sources by the author. For commodity classification, see Kubo (1980: 54–5).

Light industry was a sector where modern factory production was recording remarkable growth at that time. According to our estimates of the composition of output for 1933, light industry accounted for 88 percent of the factory sector (Makino and Kubo 1998). To what extent then did the tariff policy of the Nationalist government actually protect domestic industry, in particular light industry? We examine below the tariffs, changes in imports, and the development of these industries, sector by sector. Figure 7.1 shows import tariff rates and changes in volumes of imports for each main item taken up in this chapter. It should be noted that although the phrase ‘‘domestic industry’’ is used, this includes sectors, such as the cotton-spinning industry, where a considerable proportion of factories were ones established in China and owned by foreign capital. I have therefore divided the items treated here into three groups, according to the degree of penetration of factories with foreign capital, in order to obtain a more precise understanding of the significance of tariffs for factories with Chinese capital. The value of production of the sectors taken up in this chapter in total light industry goods production is about 61 percent (calculated from Makino and Kubo 1998), while the proportion of total imports accounted for by imported goods in these sectors was 31 percent in 1926, but had fallen to 6 percent by 1936. Therefore the results of the discussion in this chapter may be said to be adequate to support our judgments about overall trends.

4.1. Industrial sectors with a predominantly Chinese capital base 4.1.1. The cement-manufacturing industry China’s cement industry had its beginnings at the end of the nineteenth century, and in 1930 the Chee Hsin Cement Co. Ltd., Shanghai Portland Cement Works, Ltd., China Portland Cement Co., Ltd., Hwa-kee Hupeh

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Table 7.8. Commodity composition of Chinese exports, 1912–36 (Million yuan)

Year

Primary products

1912 1926 1930 1933 1936

227 (39.2) 528 (39.2) 620 (44.5) 219 (35.8) 301 (42.7)

Heavy and chemical industry goods 21 (3.6) 39 (2.9) 41 (2.9) 32 (5.2) 46 (6.5)

63 (10.9) 340 (25.2) 301 (21.6) 158 (25.8) 95 (13.5)

Light industry goods 251 (43.5) 427 (31.7) 425 (30.5) 197 (32.2) 260 (36.9)

Unclassified 15 14 8 6 3

(2.6) (1.0) (0.6) (1.0) (0.4)

Total 577 (100.0) 1,347 (100.0) 1,395 (100.0) 612 (100.0) 706 (100.0)

Source and Notes: Same as Table 7.7.

Cement Works, and Kwangtung Government Cement Works had a total production capacity of 550,000 tons a year. The only foreign capital was the Japanese-owned Onoda Cement factory in the northeast region. The domestic market is estimated to have been at about 700,000 tons per year, which suggests that the entire output should be able to find an outlet within the country. However, as about 200,000 tons per year of foreign cement was imported, there was actually a surplus of about 10 percent of domestic production, and sometimes there was even a situation where cement was exported at a below-cost price (Gongshang Banyuekan 1931). In order to resolve this situation, the cement manufacturers formed the China Cement Industry Association, and repeatedly demanded an increase in import tariff rates to prevent the importation of foreign cement (Nankai daxue jingji yanjiusuo 1963: 59–61). The increase in import duty, which the cement manufacturers long awaited, was included in the tariffs of 1933. As a result, there was now ‘‘no hope of selling Japanese goods in the area’’ (the Shanghai Branch of Mitsui Bussan) (Shanhai Nihon Shoko Kaigisho Nenpo 1933: 21). Between 1932 and 1934 imports of foreign, chiefly Japanese, cement fell by 133,000 tons, and the domestic production by Chinese capital factories recorded an increase of 94,000 tons (Shenbao Nianjian 1936: 716–18). The largest domestic manufacturer, the Chee Hsin Cement Co., Ltd. rated the import tariff rise as highly significant, viewing the reduction in foreign imports as ‘‘due, not to the foreign goods boycott movement, but to the effect of the increase in duty’’ (South Branch Office 1933 Business Report. Cited in Kubo 1985). Thereafter, the cement industry temporarily experienced stockpiling around 1934, affected by the recession. However, from the 1935 currency reform onwards, against the background of economic recovery and the institution of a cartel, growth was again achieved (Zhonghang Yuekan,

Toru Kubo

Import volume index

162 Processed cotton cloth (printed) 100

Processed cotton cloth (bleached or dyed) 200 %

100 % 50

50

0 0 '26

'36 Matches

300

200

0

100

100 %

0 0 '26

Wool

%

100

150

50 50

100 50

0 '36

'36

Sugar

%

100 50

0 '26

0 0 '26

'36

Woollen textiles

%

50

50 50

0

100

%

50 50

'36

'36 Cigarette

Plain cotton cloth

50

0 '26

0 0 '26

'36

%

50

50 100

0 '26

Cotton yarn

%

50 100

0

100

Wheat flour

%

50

'36

'36

200

%

0 '26

0 0 '26

'36

Rayon cloth

100

50 100

0

200

%

50

rate of 50 import duty

0 '26

1926=100 Cement

50

0 0 '26

'36

0 0 '26

Import volume index. I have excluded imports to the northeast. Calculated from China Maritime Customs, The Trade of China (title varies). Rates of import duty. Where specific duty was placed, it was converted to an advalorem duty, in accordance with the list of rates of duty published by Maritime Customs. Where rates were divided into the smaller categories, I have calculated the weighted average.

Fig. 7.1. Movements of imports and rates of import duty, 1926–36.

'36

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12–5, 1936a: 118. See also Bank of China’s Yingye baogao). The experience of the cement industry in this period could be regarded as a typical example of a successful growth of domestic industry promoted by tariff protection.

4.1.2. The match-manufacturing industry The match manufacturing industry too began domestic production at the end of the nineteenth century. Leaving aside the Japanese-owned eight factories located in Shandong province, this was a sector dominated by Chinese factories with their own capital, which supplied 80 percent or more of domestic production (Qingdaoshi gongshang xingzheng guanliju shiliaozu 1962: 42). After the high tariffs of 1930 were implemented, prices of foreign matches rose by an enormous 68.9 percent (Caizhengbu guoding shuize weiyuanhui 1936: 62). As a result, the volume of imports fell dramatically and the market for domestically produced matches expanded, and because at the same time market prices as a whole were pushed up, the domestic industry prospered. Of seventy-five match factories set up between 1928 and 1937, no less than forty were started in the three years from 1930 to 1932 (Qingdaoshi gongshang xingzheng guanliju shiliaozu 1962: 37). However, with the arrival of recession the industry became involved in excessive competition, and matches were designated as a category of goods subject to the consolidated tax (a kind of consumption tax against certain commodities). Smuggling and tax evasion were rampant. Thus one company after another suspended operation or went bankrupt between 1932 and 1935. During this time, the large-scale China Match Co. Ltd. came into being through absorptions and mergers of enterprises, and price regulation, and a production cartel was instituted with this company playing a leading role. Under the recovery which started after the currency reform, the performance of all the companies improved (Kubo 1995a: 31). Thus in the case of match manufacturing, the tariff policy undoubtedly protected the domestic industry and caused it to prosper, but in the end to support continuous growth, various measures had to be taken to reform the organization of the sector itself.

4.1.3. The rayon textile industry From around the time that customs duties on imports of rayon textiles were raised in 1930, silk weavers in the Lower Yangzi basin and the native cotton cloth weavers of Gaoyang in Hebei province began to enter into production of silk–rayon fabric or cotton–rayon fabric, and the volume of imports of rayon cloth fell rapidly (Wu 1936: 23–9; Xu 1991: 178–81). In this sector there were no factories owned by foreign capital, and it is clear that tariffs fulfilled the role of protecting and

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promoting the development of industrial production based on Chinese capital. However, a point which should be noted is that rayon yarn, on which a high rate of duty was imposed in the same way as on rayon cloth, accounted for a considerable proportion of smuggled imports from the time of the imposition of higher import tariffs onwards, and rather than a fall there was actually a rise in imports.3 In order to achieve a shift to domestic production of rayon, then a leading-edge product of the chemical industry, it was not enough just to raise the rate of duty on imports. At the time there had been frequent discussions on how to overcome this problem, including plans to establish state-run rayon yarn factories (Zhonghang Yuekan, 8–3, 1934: 133; 12–4, 1936, 144–5). Also a proposal was made for a plan for a bonded factory whereby rayon would be exempted from import duty provided that the rayon cloth made from it was exported. This proposal was put into practice in the Mayar Silk Mills No. 10 factory in September 1936, and performed the function of aiding exports to Southeast Asia (Xu 1991: 197).

4.1.4. The flour-milling industry This was a sector in which the predominance of mills based on Chinese capital was overwhelming, but from 1932 to 1933, due to the inflow of low-priced foreign flour and the loss at the same time of the northeastern market with the Japanese invasion, the industry suffered the double blow of a contraction of the domestic market and a collapse of prices, and was faced with a very serious crisis (Zhonghang Yuekan, 5–1, 1932; Guoji Maoyi DaoBao 1933). At this point the tariff rise of December 1933 was implemented. However, even though imports were suppressed by the high level of duties, this by itself was not enough to save the mechanized flourmilling industry from the dire straits it was in (Zhonghang Yuekan, 9–1, 1934: 167–8). The purchasing power of the population had been reduced by the recession, a situation about which little could be done. Manual milling and home milling, which continued on a large scale especially in rural areas, accounted for some 80 percent of domestic production. Meanwhile, the price of wheat, raw material, soared due to a bad harvest. All of these factors created severe conditions for the mechanized milling industry (Kubo 1995a: 26–7). It was not until 1936, when a series of counter-recession measures were finally implemented, such as curtailing of operations, price regulation, and introduction of a rebate on factory tax for exports, and there was the prospect of a good wheat harvest, that results took a turn for the better (Bank of China 1934: 27). Thus it can be seen that, even though the rise in duty as such was to some extent effective in suppressing imports, there were cases where it did not function adequately as a measure for the protection of domestic industry.

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4.2. Industries in which both Chinese and foreign capital were important 4.2.1. The cotton-spinning industry Since the 1920s, that is, before the Nationalist government’s tariff policy began, the volume of imports of cotton yarn had already been falling and the industry had been becoming self-sufficient, with domestic machinespun yarn taking up 96 percent of the market by 1926 (Kubo 1995a: 14). In this industry, moreover, there was a heavy investment of foreign capital, especially Japanese. To take the 1930 spindle figures as an example, 56 percent was Chinese capital and 40 percent Japanese (Kubo 1995a: 16). Under these circumstances, in order for Chinese capital to win in the battle to survive in the intense competition with Japanese capital, Chineseowned factories set up in the inland raw cotton production areas made use of their locational advantage to produce inexpensive goods at low cost, while Chinese-owned factories set up in the urban areas of the coastal region pursued heavy replacement investment with internally accumulated reserve funds to produce high-quality, high-priced goods (Kubo 1986). As far as the cotton-spinning industry is concerned, therefore, the role that a tariff policy could play in protecting Chinese capital at this stage was extremely limited.

4.2.2. The cotton textile industry There was also progress in conversion to domestic production of plain cotton cloth. The ratio of imports to domestic products, which stood at 68.3 percent in 1926 and 23.1 percent in 1930, in 1936 had fallen to a mere 1.4 percent (calculated from Yan 1963: 363: Chao 1977: 312). Import-substitution industrialization, which had been under way, was further accelerated, and brought to completion as a result of the increase in import tariff rates. In this sense, tariff policy worked to protect and nurture domestic industry. It should be noted, however, that vigorous competition also developed between Chinese-owned and Japanese-owned cotton-spinning factories in China which also had a textile sector. In order to survive, the urban Chinese factories of the coastal region had to engage in active investment in the textile sector as well (Kubo 1990). In brief, the setting of protective tariffs in plain cotton cloth provided a stimulus for the expansion of cotton cloth production inside China for both Chinese and Japanese capital.

4.2.3. The cotton cloth processing industry The cotton cloth processing industry, engaged in the processes of dyeing and printing, is one of the sectors in which the effect of protective tariffs was most conspicuous. Starting with the establishment in 1912 of the

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Chee Ming Dyeing and Weaving Co. and in the following year of the China Dyeing Works, Ltd. (both in Shanghai), some factories devoted wholly to cotton cloth processing were set up with Chinese capital. However, even in 1930 the value of total production of Shanghai factories with ten or more employees amounted to only 5,180,000 yuan, while imports of dyed or printed cotton cloth to Shanghai reached 21,390,000 yuan (calculated from Lieu 1936: 256–7). Domestic products were under severe pressure from foreign competition. Consequently, petitions were repeatedly made to the government asking for the duty on imports of dyed or printed cotton cloth to be raised, particularly by the cotton cloth processors (Shenbao, February 26, March 9, March 14, 1930, and November 20, December 17, 1932). The increase in the import duty on such cloth in the tariffs of 1933 was a reflection of these demands. Once the higher tariffs were introduced, the volume of imports of processed cotton cloth fell sharply. The China Cotton Industry Association, the industrial association of the Chinese-owned cotton-spinning industry, assessed the situation thus: ‘‘The effect of the tariff increase is very clearly seen in a further fall in imports of cotton products in 1933’’ (Zhonghang Yuekan, 9–2, 1934). A Japanese trading company too reported: ‘‘The imposition of the fatally heavy duty on imports of processed cotton cloth means that such imports will decline irremediably’’ (Shanhai Nihon Shoko Kaigisho Nenpo, 1934: 5). Meanwhile, what was happening to the industry in China? To take Shanghai as an example again, between 1930 and 1933 the number of dyeing or printing works with thirty or more employees almost doubled from twenty-four to forty-three, and total production expanded similarly, from 5 million to 9 million yuan (Lieu 1936, 80). It was, however, not only specialist processing production that increased. In this period, increasing numbers of large cotton spinning factories in China, especially Japanese spinning factories, were equipping themselves to expand into cloth production and cloth processing. Similar efforts were of course made by Chinese-owned spinning factories (Takamura 1982; Kubo 1990). Thus some of the reduction in imports of processed cotton cloth was made up by the increase in production of Chinese-owned cotton cloth processing specialist companies, while some by the entry of large cotton-spinning factories, especially Japanese spinners in China. Thus it can be seen that in cotton processing sector too, the Nationalist government’s protective tariff policy brought about development for both Chinese capital and Japanese capital in China.

4.2.4 Cigarette manufacturing The huge American-owned company British American Tobacco dominated the Chinese market with a share of 60–70 percent, while most of Chinese-owned enterprises, with the exception of some large companies

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such as Nanyang Tobacco, were on a small scale (Kubo 1995a: 29). With the increase in import duty on cigarettes due to the tariffs of 1930, the selling price rose and the volume of imports fell sharply, while the price of leaf tobacco, raw material, tended to be rather low, so that the domestic tobacco industry expanded (Zhonghang Yuekan, 5–6, 1932). However, due to factors such as overheated competition, the general collapse of demand due to the recession, and the upward revision of the consolidated consumption tax, a number of small-scale and vulnerable Chinese-owned enterprises were driven into a crisis state. In 1934 production and consumption were reported to have fallen to less than half the previous year (Zhonghang Yuekan 1935: 123). Thus in industrial sectors where the expansion of domestic industry had already reached a considerable level and strong foreign capital businesses existed, the effect of protection on Chinese capital was rather limited.

4.3. Sectors where domestic industry was underdeveloped 4.3.1. The wool-spinning industry Until the Tung-ya Wool Co. was established in Tianjin in 1931, there were no wool-spinning factories in China. Even after the implementation of high rates at the tariffs of 1930, the volume of imports of spun woollen yarn remained for some time at a relatively high level. Yet by 1935–36 the volume of domestic production increased rapidly (from 1.70 million pounds in 1934 to 9.00 million pounds in 1936), and this was mirrored by the fall in the volume of imports (from 7.13 million pounds in 1934 to 1.35 million pounds in 1936) (Shanghaishi gongshang xingzheng guanliju, et al. 1963: 106). As is clear from these changes, the setting of a high tariff rate for imports of spun woollen yarn provided an opportunity which prompted the sudden rise of the domestic industry. However, the more important wool-spinning mills set up in this period involved a considerable amount of foreign capital. Alongside the Chinese capital Yeh Hsin Wool Spinning and Weaving (in Wu-xi) and others, factories were set up in Shanghai with investment by the Japanese mills, and also by Patons & Baldwins Ltd., a British firm. The volume of production of such foreign-owned factories accounted for almost two-thirds of the total production within China (Shanghaishi gongshang xingzheng guanliju, et al. 1963). The setting of a protective tax did not necessarily promote the growth only of Chinese-owned enterprises.

4.3.2. Woollen textile manufacturing It was when, starting with the establishment of the China Wool Manufacturing Co., Ltd. in Shanghai in 1930, full-scale woollen textile factories were finally set up that the tariffs of 1930 were implemented, raising the

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rate of import duty on woollen textiles. Imports of woollen textile products recorded a considerable reduction around the time of the implementation of the new duty. The fall in the exchange rate arising from the fall in the price of silver also contributed to a sharp rise in the price of imported goods. The average price rise of the main items was 13.0 percent in 1930, 31.7 percent in 1931 (Guominzhengfu quanguo jingji weiyuanhui 1935, Japanese translation: 351). Although there was a slight falling off of demand thereafter under the influence of the recession, its impact was not as great as on mass consumption goods, as consumers of woollen textiles tended to be the middle class and above. Thus, the conditions for the growth of domestic industry were ripe, but there was as yet no sign of domestic goods driving out imports in the 1930s.

4.3.3. The sugar industry From the time of the major revision of sugar import duty, the prices of imported goods rose very sharply, as can be seen from the example of the average annual rise of 26.4 percent in the price of two types of the Java white variety (calculated from Caizhengbu guoding shuize weiyuanhui 1936: 52). And the volume of imports fell dramatically. However, the only sugar produced in China at that time was so-called ‘‘native sugar’’ such as Chaozhou sugar, and the modern factory production of refined white sugar had not yet begun. Therefore, the dramatic reduction in the volume of imports of sugar in the Maritime Customs’ trade statistics did not only mean an increase in demand for native sugars, but also implied an increase in smuggling of white sugar. White sugar was one of the three principal items of contraband along with rayon yarn and rice paper for cigarettes (Zhonghang Yuekan, 8–6, 1934: 147–8; 12–5, 1936b: 118). To break out of this situation there was a move in China both to deal severely with smuggling and to attempt to set up modern sugar factories with government funds. In Guangdong province, under the Chen Jitang administration in particular, a succession of new mechanized sugar factories began operation from 1935 to 1936, in accordance with the provincial government’s active pursuit of promotion which was also in part designed to ensure a source of revenue (Kang 1996). In this case, then, although there was a marked expansion of smuggling as a direct reaction to the raising of the tariff, in the long term the higher tariff opened the way for the development of a modern sugar manufacturing industry.

4.4. Summary In sectors such as the cotton-spinning and weaving industry, and the cigarette-manufacturing industry where a considerable degree of import

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substitution had already been achieved and there were also powerful foreign-owned enterprises, the setting of a high rate of import duty, even if attempted, would hardly have had any effect in terms of protection and nurturing of Chinese capital. And in sectors like the matchmanufacturing industry which had many problems such as a proneness to excessive competition, or the machine flour-milling industry where unmechanized sector was of much greater importance and demand dropped dramatically with the fall in the purchasing power of the masses caused by the recession, domestic industry was not necessarily able to get an expected development under way, even if imports decreased due to high tariffs. In this sense there was a limit to what could be achieved by a protective tariff policy. However, there certainly were sectors, such as the cement-manufacturing industry, the rayon textile industry and the cotton cloth processing industry, for which the decline in volume of imports following the raising of import duties created favorable conditions for domestic production, and Chinese-owned enterprises were able to develop. There were also the cases of the woollen-spinning industry and the modern sugar industry, where the rise in import duties provided the chance to establish full-scale manufacture of domestic goods. It should also be remarked that, even though the development of foreign-owned enterprises in China was conspicuous, one of its effects was to advance China’s industrialization one step beyond the stage of dependence on imports from abroad.

5. The Impact on International Relations The Nationalist government’s pursuit for protective tariff policy also had a great impact on China’s international relations. The policy itself was a product of the international relations, as it was implemented with the support of America, Britain, and other countries, and through repeated negotiations with Japan. At the same time, the structural transformation of the Chinese economy promoted by the tariff policy in turn had various effects on each country’s economic relations with China, and, through them, generated a reaction to the prevailing framework of international relations as a whole. It need hardly be said that the powers played an important role in the external economic relations of China in the 1930s. Imports from Britain, America, Japan, and Germany took up about 60 percent of the total import trade of China. Also, as we have seen, the progress of import-substitution industrialization under the protective tariff policy reduced imports from the powers into China dramatically, especially those of light industry goods. However, the changes in import trade varied greatly country by

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country, and so did those in the economic relationship between China and each country. In the case of America and Germany, which had traditionally exported only small amounts of light industry goods to China, the reduction in the figure for imports of light industry goods was not so great. Taking America as the example, the amount of decrease in imports of light industry goods between 1926 and 1936 was no more than 30 million yuan (Table 7.9). By contrast, in the case of countries with large exports of light industry goods, the change was very marked. For Japan in particular the 188 million yuan decrease in imports of Japanese light industry goods between 1926 and 1936 was six times of America’s (Table 7.10). The results of calculation based on the import volume and the tariff rates of each country’s main commodities to China suggest that the greater the volume of a country’s light industry imports to China, the higher the average import tariff rate on the total imports from that country to China, and the greater the effect of the import duty rises on that country’s imports to China (Cheng 1956: 65). As stated earlier, the progress of China’s import-substitution industrialization in the 1930s, centering on light industry, caused another important change, an increase in imports of heavy and chemical industry products. Looking at the figures for each country from 1926 to 1936, no great difference can be seen between America and Japan. If a comparison is made assuming that the major part of the 1936 ‘‘Miscellaneous’’ column should be interpreted to have been ‘‘heavy and chemical industrial products’’, the two countries’ figures display very similar patterns of change, rising in 1930, declining in 1933, and recovering somewhat in 1936. If we focus on the economic relations between Japan and China, the above observation can be interpreted as follows. As a result of the Nationalist government’s protective tariff policy and the import-substitution industrialization based on it, China’s light industry imports as a whole were reduced dramatically, and Japan, whose light industry exports to China were large, was economically hardest hit. However, China’s industrial development centering on light industry also brought an increase in importation of heavy and chemical industrial products, thus offering the powers a new opportunity for trade, and in this respect Japan, like the other powers, had to some extent secured a place. Thus Japan was presented with two choices in its trade relationship with China. One was to do everything possible to ensure a market for Japanese-made light industry goods, applying political and military pressure to force the Nationalist government to give up its high-tariff policy, in other words the path of resisting and checking China’s economic development. The other was to try like the other powers to find a new way of accessing the Chinese market by increasing exports of heavy and chemical industry products, in other words to accept Chinese economic development and try to discover therein opportunities for development of a new Sino–Japanese economic

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Table 7.9. Commodity group composition of Chinese imports from the United States, 1926–36 (Million yuan)

Year

Primary products

1926 1930 1933 1936

109 (57.9) 142 (61.1) 93 (60.8) 27 (32.7)

Heavy and chemical industry goods 39 56 44 37

(20.9) (24.0) (29.2) (45.4)

Light industry goods 35 (18.8) 31 (13.5) 15 (9.6) 5 (6.6)

Unclassified 4 3 1 12

(2.4) (1.4) (0.5) (15.2)

Total 188 232 152 82

(100.0) (100.0) (100.0) (100.0)

Source and Notes: Same as Table 7.7.

Table 7.10. Commodity composition of Chinese imports from Japan, 1926–36 (Million yuan)

Year

Primary products

Heavy and chemical industry goods

1926 1930 1933 1936

76 (22.6) 52 (15.9) 10 (14.2) 11 (15.5)

49 (14.6) 90 (27.6) 24 (34.9) 38 (55.9)

Light industry goods 205 177 32 17

(60.9) (54.1) (48.0) (25.7)

Unclassified 7 (2.0) 8 (2.4) 2 (2.9) 2 (2.9)

Total 337 327 68 68

(100.0) (100.0) (100.0) (100.0)

Source and Notes: Same as Table 7.7.

relationship. Needless to say, the former entailed a full-scale invasion of China and the latter offered the possibility of avoiding military invasion. As is shown by the Kodama mission to China under the banner of Sino– Japanese economic cooperation, it was not the case that absolutely no attempts were made in the latter direction. Broadly speaking, however, from the time when China successfully carried out the currency reform of November 1935 with her own initiative, but with the support of America and Britain, and new development of the Chinese economy was being recognized, the isolation of Japan, which had been tenaciously plotting to detach North China and had tried to prevent the currency reform, became all the more evident. The trade friction between China and Japan threatened to become a quagmire from which their relationship could not be rescued (for recent Japanese scholarship in diplomatic history, see Inoue 1994).

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6. Conclusion The development of the tariff policy by the Chinese Nationalist government after its recovery of tariff autonomy enabled the government to set protective tariffs, while at the same time providing a firmer financial base. It was also a factor which helped the growth of domestic industry and promoted import-substitution industrialization, particularly in light industry. While the actual driving force behind this development is to be found in the active economic diplomacy of the Nationalist government, one must take note of the specific international circumstances surrounding the Chinese Nationalist government, which were a product of the international order that emerged during the interwar period. This order, known as the Versailles–Washington system,4 was so constituted as to tolerate to some extent nationalist movements and their demands in the non-European world, which naturally included recovery of tariff autonomy, and made it possible for nationalist powers to gain strength and also for the economy of such regions to develop. In addition, the international economy was rushing headlong into a period of formation of trading blocs and an ability to prevent tariff rises was being lost. Development of industry based on the protective tariffs brought about a structural transformation of the Chinese economy. On the one hand, economic relationships with America and Britain became closer, while on the other, economic friction with Japan was becoming serious. America and Britain were trying to find a way of advancing their own economic interests, especially financial interests, and accepting import-substitution industrialization, especially in light industry, of the Chinese economy, while Japan saw this as something from which it would lose far more than it would gain. The impasse in Sino–Japanese economic relations was also a factor which helped to create in Japanese society a mood of support for a full-scale invasion of China. Nevertheless one must not exaggerate the impact of the tariff policy on the development of the Chinese economy. In actuality, the tariff policy was far from being a panacea. In the cotton-spinning and cigarettemanufacturing sectors, where foreign capital enterprises had become very important, no rises in import duties however great could save Chinese-owned enterprises from their business crisis, and in the flourmilling industry too, where the recovery of market conditions was too difficult a task, tariff policy did not prove effective. To bring about development and expansion in these sectors, monetary reform was required, as well as the development of comprehensive industrial policies ranging from the improvement and diffusion of agricultural products as raw materials for modern industry, the introduction of new manufacturing technology, and innovation in business management—things which

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the Nationalist government was beginning to tackle through its National Economic Council (Kubo 1996a). In the long run, a much more fundamental issue associated with tariff policy was the arrival of the age of trading blocs, the development for which the protective tariff policy was partly responsible. The authority of the principle of free trade was being lost from the international economic order, and as trading blocs were formed and each country claimed its exclusive zone, this became an element hindering China’s exports. In actuality, China’s light industry exports to Southeast Asia in the 1930s were seriously damaged by import duty increases and the establishment of import quota systems in that region (Kubo 1987). Economic development based on protective tariffs has been discussed and assessed in this chapter, primarily with a closed economy model in mind. For the development of the international economy as a whole, it is certainly not desirable that each country should carry a protectionist stance too far. Nationalist China was to face this problem again, after the conclusion of World War II when deciding whether to liberalize her external trade and join the GATT (Kubo 1996b).

Notes 1. This chapter integrates a number of Japanese-language publications about tariff policy by the author, including Kubo (1999). It has been translated by Kaoru Sugihara with the assistance of Lawrence Colvin and the author. 2. There were several kinds of transit tax in China in the 1920s and the 1930s. Coast trade duty imposed upon re-imports, transit dues imposed upon imports from coastal ports to inland ports, and native customs dues (so-called Likin) imposed upon everything at the native customs all existed for up to 1930. Coast trade duty and transit dues were abolished in 1930, while native customs dues were abolished in 1931. Meanwhile, interport duty was imposed upon most of domestic transported commodities after June 1, 1932. 3. For example, in 1936, legitimate imports of rayon yarn were 4,020 tons (China Maritime Customs), and the ‘‘East Hebei smuggling’’ imports were 4,495 tons (this figure is based on a Japanese survey. See Nihon Kokusai Seiji Gakkai 1962: 174–7), give a total of 8,515 tons, almost matching the 8,736 tons of imports in 1929 before the increase in smuggling. There is also the testimony of businessmen in Guominzhengfu quanguo jingji weiyuanhui (1936; Japanese translation: 136–7). 4. It was generally perceived that a new kind of international order came into being in the Far East after the Washington Conference was held in 1921–22. Here we call it the Washington system, although this system did not function in the same way as the Versailles system, and cannot be regarded a full equivalent to the latter.

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References Bank of China, Yingye baogao [Business Report], various years. Caizhengbu guoding shuize weiyuanhui (ed.), Shanghai Wujia Niankan, Minguo 25 Nian Ban [Shanghai Price of Commodities Yearbook, 1936]. Chao, K., The Development of Cotton Textile Production in China (Cambridge, MA, 1977). Cheng, Y., Foreign Trade and Industrial Development of China (Washington, D.C., 1956). China Maritime Customs, The Trade of China, various years; title varies. Gongshang Banyuekan [Semimonthly Bulletin of Industry and Commerce], ‘‘Zhongguo shuini gongye [The Chinese cement industry]’’, 3–17 (1931). Guoji Maoyi DaoBao [Information Journal for Foreign Trade], ‘‘Minguo 22 nian woguo gongshangye huigu [China’s industry and commerce in 1933]’’, 5–12 (1933). Guominzhengfu Quanguo Jingji Weiyuanhui [National Economic Council, Nationalist Government], Jingji Zhuankan, Di 3 Zhong, Maozhi Gongye [Economic Special Report 3: The Woollen Textile Industry] (1935), Japanese translation, Shina Kogyo Soran, Vol. 2. Guominzhengfu Quanguo Jingji Weiyuanhui [National Economic Council, Nationalist Government], Jingji Zhuankan, Di 6 Zhong, Renjuan Gongye [Economic Special Report 6: The Rayon Industry] (1936), Japanese translation, Shina Kogyo Soran, Vol. 2. Imai, S., ‘‘Iwayuru ‘Kito mitsu-boeki’ ni tsuiteno ichikosatsu [A Note on the Smuggling in East Hebei’]’’, Rekishigaku Kenkyu, 438 (1976). Reprinted in Imai Shun, Chugoku Kakumei to Tainichi Kosen—Konichi Minzoku Toitsu Sensen-shi Kenkyu Josetsu (Tokyo, 1997). Inoue, T., Kiki no Naka no Nihon Gaiko: Nicchu Senso ni Itaru Taigai Seisaku no Keisei to Tenkai [Japanese Diplomacy in the Midst of Crisis: The Formation and Development of Foreign Policy up to the Sino–Japanese War] (Tokyo, 1994). Kang, J., ‘‘1930-nendai Kanto Chin Saito Seiken no Seitogyo Kensetsu [The Establishment of sugar manufacturing by Ch’en Chi-t’ang’s Canton government in the 1930s]’’, Chikaki-ni-Arite 30 (1996). Kubo, T., ‘‘Nankin Seifu no Kanzei Seisaku to sono Rekishiteki Igi [The tariff policy of the Nanking government and its historical significance]’’, Tochi Seido Shigaku 86 (1980). ——, ‘‘Heisei kaikaku iko no Chugoku keizai [The Chinese economy after the currency reform]’’, in Nozawa, Y. (ed.), Chugoku no Heisei Kaikaku to Kokusai Kankei (Tokyo, 1981). ——, ‘‘Kigyo-shi shiryo o dou yomubekika—‘Keishin Yokai Koshi Shiryo’ henshu-yo shiryo kado no kento [Interpreting a company history record—An Enquiry into data cards used for the editing of ‘Historical Documents of the Qixin Cement Co.’]’’, Chugoku Kindai-shi Kenkyu-kai Tsushin 18 (1985). ——, ‘‘Kindai Chugoku mengyo no chitai kozo to keiei ruikei—sono Hatten no Ronri o megutte [Regional typology and management patterns of the modern Chinese cotton industry]’’, Tochi Seido Shigaku 113 (1986).

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——, ‘‘Kokumin seifu no yushutsu sokushin seisaku to Chuka Kogyo Kokugai Boeki Kyokai—1930-nendai ni okeru yushutsu shiko kogyoka no mosaku [Export promotion policy of the Nationalist government and the Association of Chinese Industry and foreign trade China]’’, Toyo Bunka Kenkyu-sho Kiyo, 103 (1987). ——, ‘‘Chintao ni okeru Chugokubo-Zaikabo kan no kyoso to kyocho [Competition and cooperation between Chinese and Japanese cotton mills in Qingdao]’’, Shakai Keizai Shigaku, 56–5 (1990). ——, Chugoku Keizai 100-nen no Ayumi [A Hundred Years of the Chinese Economy], the 2nd edn. (Kurume, 1995a). ——, ‘‘Berusaiyu taisei to Washinton taisei [The Versailles system and the Washington system]’’, in Rekishigaku Kenkyu-kai (eds.), Koza Sekai-shi, 6 (Tokyo, 1995b). ——, ‘‘Kin-gendai Chugoku ni okeru kokka to keizai—Chuka Minkoku-ki keizai seisaku-shiron [State and economy of modern and contemporary China : understanding the history of the economic policy of the Republican period]’’, in Yamada, T. (ed.), Rekishi no nakano gendai Chugoku (Tokyo, 1996a). ——, ‘‘Kokumin seifu no seiji taisei to keizai seisaku [The political system and economic policy of the Nationalist government]’’, in Yasui, S. et al. (eds.), Chugoku Kindaika no Rekishi to Tenbo (Kyoto, 1996b). ——, Senkanki Chugoku Jiritsu e no Mosaku—Kanzei Tsuka Seisaku to Keizai Hatten [China’s Quest for Sovereignty in the Interwar Period—Tariff Policy and Economic Development] (Tokyo, 1999). Li, E., Beifa Qianhou de ‘Geming Waijiao’, 1925–1931 [Nationalist China’s ‘Revolutionary Diplomacy’ before and after Northern Expedition, 1925–1931] (Taipei, 1993). Lieu, D. K., The Growth and Industrialization of Shanghai (Shanghai, 1936). Liu Wo, Guonan Qijian Yingbiantucun Wenti zhi Yanjiu [Study on Expedient for China’s Survival during Japanese Invasion] (Taibei, 1995). Makino, F. and Kubo, T., ‘‘Chugoku kogyo seisangaku no suikei: 1933 nen [Estimates of Chinese manufacturing output in 1933]’’, Discussion Paper (Institute of Economic Research, Hitotsubashi University), D97-18 (1998). Nankai daxue jingji yanjiusuo, Qixin Yanghui Gongsi Shiliao [Historical Documents of the Qixin Cement Co.] (Beijing, 1963). Nihon Kokusai Seiji Gakkai, Taiheiyo Senso e no Michi [The Road to the Pacific War], Vol 3 (Tokyo, 1962). Otte, F., ‘‘Structural changes in China’s import trade since 1919’’, Chinese Economic Journal and Bulletin, 10 (1936). Qingdaoshi gongshang xingzheng guanliju shiliaozu (ed.), Zhongguo Minzu Huochai Gongye [The Chinese National Match Industry] (Beijing, 1962). Remer, C. F., A Study of Chinese Boycotts (Baltimore, 1933). Shanghaishi gongshang xingzheng guanliju, et al. (eds.), Shanghai Minzu Maofangzhi Gongye [Shanghai National Woolen Spinning and Textile Industry] (Beijing, 1963). Shanhai Nihon Shoko Kaigisho Nenpo [Annual Report of the Shanghai Japanese Chamber of Commerce and Industry] (1934). Shenbao, a newspaper published in Shanghai (1930, 1932). Shenbao Nianjian [Shenbao Year Book] (1936).

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Takamura, N., Kindai Nihon Mengyo to Chugoku [The Modern Japanese Cotton Industry and China] (Tokyo, 1982). Wu, Z., Xiangcun Zhibu Gongyeshi de Yi ge Yanjiu [A Study of Rural Weaving Industry] (Shanghai,1936). Xu, X., Jindai Jiangnan Sizhi Gongyeshi [A History of the Modern Silk-Weaving Industry in the Southern Yangzi Delta] (Shanghai, 1991). Xu, Y., ‘‘Tanku teisen kyotei-go ni okeru Chugoku no tainichi gaiko ni tsuite [China’s Japan diplomacy after the Tang-ku truce: an analysis of ‘Kun Sou Dai Yuan’]’’, Chikaki-ni-Arite, 30 (1996). Yan, Z., Zhongguo Mianfangzhi Shigao [A History of Cotton Spinning and Weaving in China] (Beijing, 1963). Zhongguo Kexueyuan Shanghai Jingji yanjiusuo, et al. (eds.), [Shanghai Economic Institute, the Chinese Academy of Science, et al. (eds.), Shanghai Jiefang Qianhou Wujia Ziliao Huibian [Collected Materials on Shanghai Commodity Prices before and after the Liberation] (Shanghai, 1958). Zhonghang Yuekan [Monthly Bulletin of Bank of China], ‘‘Shanghai mianfen jie shou waimai qinghsiao zhi yingxiang [Shanghai flour mills are damaged by the dumping of foreign flour]’’, 5–1, 1932. —— ‘‘Ge huashang yancao gongsi yingye jinkuang [Recent situation of every Chinese tobacco company]’’, 5–6, 1932. ——, ‘‘Shibu chouban guoying renzao sichang [Ministry of Commerce plans to establish a state-owned rayon factory]’’, 8–3, 1934. —— ‘‘Siyun shitang jushu jinkou [A large amount of sugar are now being smuggled]’’, 8–6, 1934. ——, ‘‘Yang mimai shui zhengshou hou liangshi jinkou jiantui [After collecting import duty against foreign rice and wheat, their imports declined]’’, 9–1, 1934. ——, ‘‘Huashang shachang lianhehui nianhui baogao [The annual report of the China Cotton Industry Association]’’, 9–2, 1934. ——, ‘‘23 niandu juanyuye shuailuo yuanyin [Causes of tobacco industry declining in 1934]’’, 10–3, 1935. ——, ‘‘Hu chouye changshang qing she renzao sichang [Shanghai silk–rayon fabric weavers and merchants demand the establishment of a state-owned rayon factory]’’, 12–4, 1936. ——, ‘‘Guochan shuini chanliang zengjia [Domestic production of cement are increasing]’’, 12–5, 1936a. ——, ‘‘Shou huabei zousi yingxiang guonei tangye yi xian juejing [Domestic sugar industry severely damaged by the smuggling in North China]’’, 12–5, 1936b.

Part III China’s Internal Integration in International Perspective

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8 China’s ‘‘Dual Economy’’ in International Trade Relations, 1842–1949 man-houng lin Simom Kuznets observed that Italy, Brazil, the United States, Canada, Germany, Switzerland, and France shared regional unbalanced development in the nineteenth century and the early twentieth century, which was not eased until the following stage of development. In the first stage of development, the state exerts more effort in prosperous areas, which have better financial systems, better transport, and bigger markets, where money and talent can be better developed. Meanwhile, poorer areas would have fewer elites to speak for them. Insufficient transportation in the first stage of development limits the extent of technological diffusion and social change. The gap between the prosperous and the poor areas becomes wider, and this is called the development of a ‘‘dual economy’’. The dual-economy problem tends to be more serious if the area opened for modern international trade is also the center for food and industrial materials production (Kuznets 1965). China happened to be such an economy. Although China’s civilization originated in the inland northwest, frequent wars between the Han and non-Han on the northern frontier, rice production in the south, and the development of international commerce have all helped to shift China’s economic center to the southeastern littoral region since the eleventh century (Lin 1992: 62–3). Most of China’s primary goods—silk, cotton, rice, sugar, and salt—were produced in the southeastern littoral area, and most treaty ports were also established in the same region. With the opening of the first treaty ports in 1842, China increased its connection with the international economy through trade. A further question, therefore, is to what extent this international involvement contributed to the dual economy in China. In Skinner’s well-known terminology, the ‘‘poorer areas’’ and ‘‘more prosperous areas’’ in China’s dual economy have been referred to as ‘‘Peripheral China’’ and ‘‘Core China’’. In 1926, an American economist in China, Remer, suggested a similar but more precise differentiation for China’s dual economy: ‘‘exterior China’’—the hinterland of treaty ports or within 50–75 miles (approxi-

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mately 80–120 kms) from railways or rivers; and ‘‘interior China’’— the opposite of exterior China. These two Chinas had diverse price scales, wage trends, and degrees of integration with the international economy (Remer 1926: 240). This chapter will use Skinner’s term to denote Remer’s definition for China’s dual economy so that Core China includes only the hinterland of treaty ports and areas within 50–75 miles from railways or rivers, while Peripheral China is the opposite of Core China.1 This chapter will give an overview of the extent to which the Chinese economy was dualistic in this sense and how this dualism was affected by China’s fluctuating international relations as seen in its foreign trade. It will do so by looking at successive stages of China’s modern history.

1. Stage I: 1850–late 1870s In the period from 1850 to the late 1870s, when competition from Japan, India, and Ceylon for China’s tea market, from Japan for China’s silk market, from Java for China’s sugar market was not yet intense, the world economy was more favorable for China, and its main exports sold well. The records left by the London Customs reveal that the annual growth rates of tea and silk exports from China to the British empire were lower in the period of 1814–49 than those of 1850–86 (Lin 1995: 385–417). Chinese tea was produced in the hills of Core China and China’s silk was produced mainly in the Lower Yangzi Valley and the Pearl River Delta, also in Core China. Sugar, which had a good market in Europe, America, and Australia, came from parts of Core China such as southern Taiwan and southern Guangdong (Lin 1997: 23–33, 58; Fan 1980: 23). In the same period, several great civil wars ravaged China: the Taiping Rebellion in the middle and southern parts of China from 1850 to 1868; the Muslim Rebellion in Yunnan, Shaanxi (Shensi), and Xinjiang from 1854 to 1877; the Miao Rebellion in Guizhou from 1854 to 1873; the Nian Rebellion in the Huai Valley from 1858 to 1868 (Guo 1980: 172). These rebellions had seriously interrupted the interregional trade between Core and Peripheral China. In the late eighteenth and early nineteenth centuries the copper forwarded annually from Yunnan to Beijing was worth around 113 million silver taels. However, copper production was totally interrupted from 1856 to 1874 during the Muslim Rebellion in Yunnan, and afterwards production did not return to previous levels. In 1874–86 and 1887–1906, this trade amounted to only 59,100 taels and 192,100 taels, respectively (Quan 1974: 155–82). Similarly, shipments of sugar produced in South China and sold in central China, North China, and Manchuria decreased due to the Taiping Rebellion (Du 1961: 26). To attest to the disruptions in his province, the Shaanxi Governor sent an official report to Beijing in

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1871 saying, ‘‘Previously, rich families in each part of Shaanxi had a vast trade with Southeast China. Since the flames of war have scorched Southeast China, the wealth of Shaanxi has been diminished. Also due to the misfortunes in Shaanxi itself, the wealth of the rich has all been burned in the war’’ (Fang 1979: 66). The Taiping Rebellion also disrupted trade between Sichuan and the provinces to the north and south of the Yangzi. In the post-Muslim Rebellion period, Gansu was so destitute that ‘‘Longdistance traders will not come. . . . Merchants have been afraid to come to Gansu. Tobaccos and hides produced beyond the Great Wall in Gansu were formerly main exports. But as much of Gansu had been destroyed, rich merchants took their capital out of Gansu. The remaining poor are unable to carry on.’’ In Guizhou it was reported that, ‘‘The long-distance traders will not come, the local people have been unemployed and turned into vagrants. The transportation to the other provinces has been disrupted. There are no goods sold here. And local products such as mercury, medicine, and indigo cannot be sold to the earlier market. Both the merchants and the commoners are impoverished’’ (Wang 1990: 84–91). As for foreign trade in the north and northwest, much less brick tea was sold to Russia from Jiujiang and Hankou via Shanxi (Shansi), Mongolia, Siberia, and central Asia (Xie 1977: 97–106; Chen 1980: 11–25; Liu 1980: 51). Although Core China was also devastated by the Taiping Rebellion, it was very quickly revived by the thriving silk, sugar, and tea trade with Britain and European countries, particularly in the period of 1850–70s. At this time, many new inventions began arriving in the treaty ports, such as electric lamps, the telephone and telegraph, gas, and modern plumbing facilities. In addition, foreign stores, Western buildings and churches, printing presses, saw mills, shipyards, foreign banks, and factories for producing flour, food, medicine, and silk filature were also being built in the treaty ports (Hubei daxue zhengzhi jingjixue jiaoyanshi 1958: 233). These developments shaped a vivid contrast with the impoverished inland regions. As noted by Rhoads Murphey, in the 1870s, when famine occurred inland, Tianjin, a treaty port in North China, was still thriving (Murphey 1974: 17–73). This indicates that a dual economy had developed sometime between 1850 and the late 1870s.

2. Stage II: Late 1870s–1906 Rhoads Murphey used the dual-economy framework to describe the relationship between the treaty ports and Peripheral China throughout China’s modern history. He argued that imported foreign goods were, by and large, only used in the treaty port areas and the treaty ports constituted a kind of enclave economy. Unlike China’s traditional cities, the treaty ports had little connection with Peripheral China (Murphey 1974:

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52–7). But evidence from the period between the late 1870s and 1906 does not support Murphey’s thesis. It is certainly true that Core China continued to grow and formed a stark contrast to Peripheral China. Core China was responsible for more than 95 percent of China’s foreign trade in 1889–93 (Yan 1955: 67–8). Core China had better access to advanced technology (Lei 1981: 78), and consumed more luxury goods (Lin 1985: 105). However, it was also the case that the economy of Peripheral China grew and the connection between Core China and Peripheral China was actually very much reinforced. Soybeans from North and Northeast China, native opium from Southwest, Northwest, North, and Northeast China, animal products from Northwest China, and other products from Peripheral China prospered due to growing markets in Core China. The interregional trade between the north and the south and between the east and the west also intensified. The sale of sugar from Shantou (Swatow) to Singapore, Malaysia, Thailand, and Vietnam stimulated the production of soybeans in Manchuria because soybean cake was used as a fertilizer in the cane fields. This caused the area used to produce soybeans to expand from southern Manchuria into central and northern Manchuria (Lei 1981: 38). This trade grew from the 1870s onward. South China absorbed about 50 percent of Zhifu’s (in North China, also named Yantai) exports in the early 1870s and 30 percent in the late 1870s, largely because of South China’s demand for soybean cakes from North China (Liu 1990: 13–16). Before the opening of the treaty ports, central China had been the main market for Manchurian soybean cakes. However, by 1900, South China’s ports, including Shantou, Fuzhou, and Xiamen (Amoy), imported 80 percent of Manchurian soybean cake, while central China imported just 10 percent, although the absolute amount of central China’s imports did not decrease (Lei 1981: 6–7). The import of consumable goods such as paper, tea, cotton cloth, pottery, and silk manufactures by northern ports such as Tianjin and Zhifu from central China or South China also increased (Fan 1980: 24–6; Ye 1982: 39; Liu 1990: 22–31). In the interregional trade between East and West China, the import of opium and cotton from India altered China’s economic activity well into the inland regions. For example, Indian opium stimulated production of native opium. Although China started to produce opium in the 1820s, it was not until 1880 that the production of native opium had surpassed foreign opium imports. The production of native opium increased more than twelve times between the late 1870s and 1906, when total native opium production was nine times greater than that of imports (Lin 1985: 194–207) (Table 8.1). Although almost every province produced some opium, the main opium-producing areas continued to be Peripheral China. In 1879, provinces of Sichuan, Yunnan, Guizhou, Shanxi (Shansi), Shaanxi (Shensi),

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Table 8.1. Quantity of opium produced in Southwest China and of foreign opium (Unit: 10,000 piculs; f: foreign; n: native opium) Years 1836 1847 1866 1876

1881

1896

1906

Opium production in Southwest China Thousands (take 0.5 as average) 0.9 1.65 2.75   1876 1876 ¼ 1:7, ¼ 1:8 1866 1847 22.4   1881 ¼ 8:1 1876 24   1896 ¼ 1:1 1881 36.4   1906 ¼ 1:6 1896

Foreign opium 4–5 5.0 7.68 7.0

f/n 8–10 6 4.5 2.5

6.6

0.29

4.9

0.2

5.4

0.15

Source: Lin (1985: 69, 193–4, 207–9).

Gansu, Henan, Guangxi, and Xinjiang accounted for 89.80 percent of the total national output of opium. In 1890 and 1906, this share was respectively 88.93 percent and 84.47 percent. Provinces located along the Yangzi, including Hunan, Hubei, Jiangxi, and Anhui, accounted for only 2 percent of the total national opium production in 1879 and in 1906. The maritime provinces, including Manchuria, Zhili, Shandong, Jiangsu, Zhejiang, Fujian, Guangdong, supplied about 10 percent of the total national opium production (Table 8.2). Before 1869, Yunnan was the most important opium-producing province, but thereafter, Sichuan took its place (Lin 1985: 189–96). When G. W. Skinner edited The City in Late Imperial China, he wrote in his contribution that ‘‘transaction between the centrally located cities of one region and those of another were minimized by the high costs of unmechanized transport and the great distance involved’’ (Skinner 1977: 217). In traditional China, cost of interregional land transportation was high relative to water transportation. For the same distance and the same weight, the cost of using carriers or mule carts was, respectively, 28.3 and 15 times that of using a boat (Table 8.3). Using carriers was particularly expensive, because it entailed considerable lodging and food expenses necessary for them to cover the long distance. It took about fifty-one days to cover the 3,060 li (one li is 11⁄3 miles) from Qengdu to Shantou by foot while it took about 2–3 days by railroad (Lin 1985: 274). From Changchun to Yingkou, in the rainy season, it took 21 days, while in the winter it took

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Table 8.2. Chinese opium production by region 1879 1896 (White) (Hart) Total Inland Provinces Percentage of total Henan Jiangxi Shensi Gansu Sichuan Yunnan Guizhou Guangxi Xingjiang Coastal Provinces Percentage of total Manchuria Zhili Shandong Jiangsu Zhejiang Fujian Gangdong Provinces along the Yangzi Percentage of total Hunan Hubei Jiangxi Anhui

(Unit: piculs) 1905 (Morse)

1906 (Maritime 1907 Customs) (Leech)

98,000 334,000 376,000 584,800 331,000 88,000 297,042 323,000 494,000 273,000 89.80 88.93 85.90 84.47 82.48 5,000 5,000 15,000 5,000 4,000 5,000 30,000 5,000 5,000 10,000 50,000 10,000 5,000 34,000 5,000 45,000 120,000 250,000 238,000 200,000 17,000 80,000 30,000 78,000 3,000 12,000 40,000 15,000 48,000 15,000 3,000 500 3,000 500 7,000 34,958 42,500 80,500 47,500 7.14 10.47 11.30 13.77 14.45 6,000 15,000 15,000 15,000 3,000 1,500* 5,000 12,000 10,000 1,000 1,458y 10,000 18,000 10,000 10,000 5,000 16,000 5,000 3,000 14,000 5,000 14,000 5,000 2,000 2,000 5,000 2,000 500 500 500 3,000 2,000 10,500 10,300 10,500 3.06 0.58 2.80 1.76 3.17 1000 3,000 1,000 3,000 2000 4,000 3,000 4,000 500 300 500 2,000 3,000 6,000 3,000

Sources: 1879 (White): Waung (1979: 216). 1896 (Hart): Jiang et al. (1963: 3945); CMC, Annual Report China 1890: 22. 1905 (Morse), 1907 (Leech): I.O.C. II:57. * CMC, Annual Report China 1890: 22. y Obtained by dividing the amount of opium tax by the tax rate available in Jiang et al. (1963: 3945).

15 days (Lei 1981: 106–8). On the other hand, it took 15 days from Fujian or Guangdong to Tianjin by seaship (Lei 1981: 178; Ye 1982: 8). In most of Peripheral China, no boat, highway, or railroad could be used. The main form of transportation was human carrier, although in some level places, mule carts could be used. In addition to the geographic and climatic suitability and the utilization of marginal land and labor in Peripheral China for the production of native opium (Lin 1985: 265–7), the high price of native opium was also sufficient to cover the transportation costs between Peripheral and Core China. Among the chief import commodities, the average unit price of foreign

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Table 8.3. The freight rank of various kinds of transportation in China Transportation

Freight rank

Carrier Highway car Wheelbarrow Mule cart Rails Railway River boat

28.3 25 16 15 2 1.67 1

Notes: The freight takes from the northern section of the Grand Canal, 1934. The original freight was measured in fen by each li and each ton. On this table, when river boat shows 1 and carrier shows 28.3, it means the freight by carrier is 28.3 times that of river boat for the same distance and for the same weight. Source: Calculated from the sources given in Zhang (1987: 16).

opium was the highest. It was 326.4 times that of rice, 163.2 times that of wheat, 45.7 times that of cotton, and 26.9 times that of copper (Table 8.4). Despite the fact that native opium was inferior to imported opium in morphine content, native opium could still be sold for almost half the price of imported opium (Table 8.5). As opium was so profitable on a per unit basis, carrying it 200 miles by carrier would cost only 0.16 percent of its original price (Lin 1985: 274). By contrast, the cost of carrying coal for 200 miles was 10 to 20 times its original price in the production area (Perkins 1969: 120). Hence, opium’s viability for long-distance trade was about 10,000 times that of coal. Even lighter products than coal cost more than opium to transport. For example, the cost of transporting cotton to Shanghai was 10–15 percent of its original price in Hankou (Perkins 1969: 120). At the same time, the unit price of native opium was still about 22.8 times that of cotton. Furthermore, light products such as silk, tea, and cotton were to a great extent produced in Core China. What Peripheral China produced was generally too heavy to carry far (Lin 1985: 235–42). Opium consumption was a nationwide phenomenon (Table 8.6). Though opium produced in various places might have different grades, there were consumers for whatever grade of opium a particular region in Peripheral China produced. China’s more fluid social structure allowed people of lower status to imitate the consumption pattern of the upper class and the lower classes would consume goods of a lower grade than those consumed by the upper classes. Native opium produced in Peripheral China was sold nationwide (Lin 1985: 440–4, 469–71), and half of all native opium was produced for the long-distance domestic trade (Lin

Table 8.4. Unit price of the chief import goods in late Qing China, 1872–1911 (Unit: Haikwan Taels/picul) Years 1872–1881 1882–1891 1892–1901 1902–1911 Average

Opium

Raw silk

417 360 534 974 571.2

350 340

345

Silk cocoon

Green tea

British cotton yarn

Copper

Rice

Hides

Wheat

Sugar

Lamb wool

Cotton

77 58 68 102 76.25

24 19 24 34 25.25

22 19 23 40 26

16 14 24 31 21.25

1 1 2 3 1.75

10 11 13 25 14.75

4 3 3 4 3.5

5 7 6 5 5.75

7 8 10 17 8.4

9 10 13 18 12.5

Sources: Calculated from CMC, Decennial Report, 1902–1911: 336–8; the price of silk is taken from BPP (Vol. 17: 579–605).

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Table 8.5. Price of native opium compared with that of foreign opium Years Place 1863 1863 1869 1887 1887 1893

Zhenjiang Xiamen China Niuzhuang (Yingkou) Hankou China Average

Percent Sources 60 50 33 50 40 60 48.83

CMC: Special Series: Opium, No. 2: 71 ibid., No. 2: 76 BPP, Vol. 9: 344 BPP, vol. 16: 393 CMC: Special Series: Opium, No. 9: 14–16 BPP, Vol. 18: 327

1985: 432). The import of Indian cotton made South China rely less on the cotton of North China and Southwest China, which also led to increased opium production in these areas (Zhao and Chen 1977: 49; Ye 1982: 65; Zhang 1982: 19). The value of native opium constituted as much as onesixth of the value of all of China’s interregional trade (Lin 1985: 432–5). The integration between West and East China can also be seen in the increased trade between the northwest and the north. Animal products including skin, wool, and milk sold from the northwest to Tianjin increased seventyfold from 1870 to 1911 (Ye 1982, appended table 2.3a). In return, Tianjin merchants sold cotton cloth and daily goods in Northwest China (Ye 1982: 11). Integration also took place within specific regions, as a result of the development of the world market of cash crops and products of cottage industries. The tea export trade continued to make use of more hilly lands of the provinces in South China (Lin 1997: 57–9). Native opium was produced as well in non-arable lands in the coastal provinces (Li 1957: 464; Zhengzhi guanbao, Guangxu 34.6.28). Cotton grown in North China made better use of the newly developed land (Ye 1982: 67). Cottage industries also developed in the countryside. With new foreign technology, greater markets, more raw materials, capital, and labor, some industries such as the drawing-yarn, cotton cloth, divine money (paper money burned at worship rituals for the use of deities) industries in Shantou and the silk filature industries in Chongqing became centered in the treaty ports (Fan 1980: 92; Zhang 1982: 142–6). Yet industries such as paper and pottery in Shantou were developed in the rural areas where raw materials were produced. The summer cloth and indigo industries of Shantou remained at the already well-known original production sites in the countryside (Fan 1980: 92). At the same time, other industries easily spread into Peripheral China. Though technology for making matches was learned from abroad, as it is easy to learn and requires little capital, it spread rapidly in both rural and urban areas around Chongqing. The bristle and cotton textile industries were also spread throughout the rural

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Table 8.6. Per capita opium usage of each province, 1889 Province Coastal Provinces Manchuria Zhili Shandong Jiangsu Zhejiang Fujian Guangdong Provinces along the Yangzi Hunan Hubei Jiangxi Anhui Inland provinces Henan Shanxi (Shansi) Shaanxi (Shensi) Gansu Sichuan Yunnan Guizhou Guangxi

Population

Total opium used (picul)

Per capita opium usage*

6,000,000 18,000,000 36,000,000 21,000,000 12,000,000 20,687,000y 30,000,000

6,000 16,000 18,000 24,000 16,000 24,000 18,000

100 88 50 114 133 116 60

21,000,000 33,000,000 24,000,000 21,000,000

21,000 32,000 20,000 12,000

100 97 83 57

22,000,000 12,000,000 8,000,000 5,000,000 68,000,000 11,000,000 8,000,000 5,000,000

14,000 10,000 7,000 3,000 50,000 9,000 4,000 5,000

64 83 87 60 74 82 50 100

*

Unit: 1/10,000 picul. From Li (1957: Vol. 2: 9–10). Source: Calculated from Shanghai Mercury (1889).

y

areas of Sichuan as they could use off-season labor and the product was light in weight and easily transportable (Zhang 1982: 129, 146, 155, 164). Some cotton cloth peddlers in rural Sichuan had even expanded to become cotton cloth-making firms after cotton yarn was imported from abroad (Zhang 1982: 161). In the process of integration into the international economy, some old cities were surpassed by new cities, which commanded better markets. Tainan, Shantou, Jiujiang, and Zhifu, once important links to the world market, fell victim to unfavorable market conditions. Taiwan’s political and economic center was moved from Tainan to Taipei (Lin 1997: 180–8). Zhifu was likewise surpassed by Qingdao (Lin 1986: 899). This shows that some parts of Peripheral China became even more closely integrated with the international economy than the original Core China. Before the opening of treaty ports, China already had interregional trade, such as the official trade in tribute grain, shipped from the Lower Yangzi area to Beijing through the Grand Canal (Ye 1982: 7). Nonofficial

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trade was conducted by, among others, Shanxi merchants who operated between Tianjin, Zhili, Shandong, Henan, and Shaanxi (Ye 1982: 8). Textiles from Jiangsu, Zhejiang, Fujian, and Guangdong were shipped to Shandong, Zhili, and southern Manchuria and then soybeans, wheat, dates, and pears were carried back (Ye 1982: 9). Tianjin cotton was sold to Canton, Shantou, and Fuzhou (Ye 1982: 65), while Henan merchants purchased Tianjin salt with Chinese medicines (Ye 1982: 19). Shantou sugar was sold to Shanghai, Suzhou, and Tianjin (Fang 1979: 3, 114). Fujian’s paper was distributed nationwide (Fang 1979: 66). Taiwan had sugar and rice to exchange for clothes, lumber, and food from the Mainland China (Lin 1997: 7). Cotton from Hubei was sent to Sichuan (Zhang 1982: 19). Paper from southern Jianxi was sold at Zenjiang and forwarded to Tianjin through the Grand Canal (Xie 1977: 90). On an international level, after the Treaty of Nerchinsk between Qing and Russia was signed in 1689, trade caravans moved between Tianjin and Kyakhta (Ye 1982: 8). In addition, the raw silk of Sichuan had been processed into silk filature and sold abroad (Zhang 1982: 38). The interregional trade on the eve of the Opium War was valued as 387 million taels, as calculated by Wu Chengming and others. According to an estimate made by Perkins, and adjusted by Lin, the interregional trade in 1908 was 730 million taels (Lin 1985: 435). The interregional trade of China roughly doubled from mid-nineteenth century to the turn of the twentieth century.

3. Stage III: 1906–37 The successful Opium Abolition Movement of 1906–16 seriously damaged the interregional integrative function of native opium in the period from the late 1870s to 1906. Due to this movement, trade between Sichuan and coastal China via Chongqing decreased to one-sixth of its original level, and the trade balance for Sichuan became unfavorable (Zhang 1982: 19). A similar situation occurred in Yunnan. In 1885–86, opium composed 70 percent of Yunnan’s total exports to other provinces (CMC, Decennial Reports, 1882–91: 668). The cotton yarn and cotton needed by Yunnan’s 12 million people was imported at an annual cost of more than 150 million dollars. With the opium prohibition, few other goods could be exchanged for garments (Long 1939: 1a). Each year before the Abolition Movement, Shaanxi had to spend several millions of taels of silver to purchase textiles, and it had depended on opium production to balance this silver outflow (Qiu 1906: 5–6). Similarly, because of the production of native opium, North China could afford to purchase sugar from Shantou and luxury goods in the south (CMC, Decennial Reports, 1882–1891: 526–7). The Abolition Movement greatly diminished this trade.

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Changes in the international market also facilitated the disintegration between the north and the south around 1911. This can be seen in the case of Shantou, which shifted its main export destination from North China to Southeast Asia (Fan 1980: 23). By 1913, sugar, silk filature, paper, and tea exported from Shantou to Tianjin could not compete with foreign products (Ye 1982: 39). Shantou also imported fruits, vegetables, divine money, livestock, and textiles from Southeast Asia. Even Shanghai, its chief trade partner before it became a treaty port, became less important (Fan 1980: 24). Meanwhile, Tianjin and Zhifu traded less with Shantou and more with central and North China, Manchuria, and Japan (Ye 1982: 39; Liu 1990: 25–7). This disintegrative process between south and north, and east and west was accompanied by the fall of the Shanxi banks, traditional native banks with remittance networks all over China. The Shanxi banks collapsed with the fall of the Qing regime, as they were dependent on the savings of the Qing bureaucracy for capital (Zhang 1982: 99). When opium was banned in Sichuan, its previously sufficient public coffers were no longer adequate, and public finances became unstable. Sichuan was one of the provinces to initiate the 1911 Revolution, which overturned the 2,000year-old imperial system (Zhang 1982: 8, 61, 99). These kinds of developments indicate that the disintegration of the interregional economy and the polity were intertwined. There was a revival of opium use in the Republican period after the Opium Abolition Movement of 1906–16. Nevertheless, opium use in the Republican period tended to fluctuate more due to more frequent attempts at prohibition. Opium production was in the hands of each warlord and at its post-1911 peak the production nationwide did not compare with that of the late Qing period. As a result, the spatial integrative function of the opium trade was less important than it had been in the late Qing (Yu 1934: 178). Some of the interregional integration of the late Qing period continued and some new interregional trade developed with the changes in the international economy. The export of animal products from Northwest China to Japan via Tianjin doubled between 1911 and 1931, after a seventyfold increase from the 1870s to 1911 (Ye 1982, appended table 2.3a). The growth rate had decreased between these two periods, and the value of this trade in 1931 still did not match the value of native opium trade from Northwest China to the coastal provinces (Lin 1986: 895–6). Chinese medicines, musks, tung oil, silk, bristles, and copper continued to be exported from the southwest. The value of these products was much less than that of native opium sold from this region around 1906 (Lin 1986: 896): . .

opium silk

68,000,000 taels 1,750,000 taels

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medicine musk bristles copper

191

3,000 taels 200,000 taels 800,000 taels 146,000 taels

The Republican period of the 1910s–1937 was a period of much military conflict. In contrast to this, as observed by the Royal Asian Journal, in the decades after the great civil wars of 1850–late 1870s, China had been internally peaceful (Kingsmill 1898: 54, 89). It can be inferred that interregional connections were more difficult in the turbulent Republican period than in the very late Qing period. More modern establishments were accumulated in Core China. By 1937, 89 percent of spinning machines, 80 percent of the flour factories, 90 percent of the tobacco companies, most of the electrical–chemical factories, and four-fifths of the highways were located in the coastal provinces. It was mainly the coastal areas that were involved in foreign trade (Chang 1958). At this time, the most serious dual-economy problem that the Nationalist government faced was that about 95 percent of government revenue came from industrial and commercial taxes from Core China. The fall of Core China in the short period of 1937–38 forced the National government to pursue inflationary policies to face the challenge of war (Chow 1963: 64).

4. Stage IV: 1937–49 The fall of Core China to Japanese occupation in 1937–38 forced 639 modern factories to move to the interior and some new factories were also built there. In 1945, 93 percent of the more than 6,000 factories were built inland after 1937 (Yang 1967: 982–4). In the same year, 83.09 percent of modern factories were distributed in the interior provinces including Sichuan, Guizhou, Shanxi, Suiyuan, Ningxia, Shaanxi, Yunnan, Gansu, Xikang, and Guangxi, and 16.91 percent were in Hunan, Jiangxi, Guangdong, Anhui, Zhejiang, Fujian, Hubei, and Jiangsu (Zhongguo tongshang yinhang 1967: 183). The inland industries developed faster in the period 1937–43 than in the period 1943–45. After 1943, due to the boycott by Japan, Peripheral China had great difficulty in obtaining raw materials, while at the same time much of the capital of entrepreneurs was used for speculation (Chen and Galenson 1969: 17). Although the share of new modern industries was greater in Peripheral China than in Core China, Peripheral China was severed from the international economy by the mutual boycott between Japan and Nationalist China. Some goods and military weapons were transported through the railway from Yunnan to Vietnam and on the Burma Road between China

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and India. Besides some air transportation to Hong Kong, South Asia was China’s chief wartime trading partner (Qing 1983: 663). By contrast, in the area occupied by Japan 58–71 percent of trade was done with Japan (Cheng 1956: 180–1). This was the climax of Japan’s increasingly important role in China’s foreign trade that had begun in 1895 (Yan 1955: 65). The United States was Nationalist China’s first trading partner from the 1930s to 1949 (Yan 1955: 65). Southeast Asia also became important after 1945, and although China had an unfavorable trade balance with the United States, it had trade surplus with Southeast Asia after the war. The trade with Japan and South Asia declined because of the destruction of the war. Russia became insignificant in China’s foreign trade when it entirely stopped purchasing tea bricks from China (Cheng 1956: 180–2). Central China, led by Shanghai, controlled about 80 percent of China’s import trade and between 60.4 percent and 71.3 percent of China’s export trade in 1946–48. South China ranked next among China’s regions for foreign trade. Due to the disruption caused by Russian occupation troops and the hard-fought civil war, Manchuria’s role in foreign trade drastically dropped (Cheng 1956: 182–3). Following the defeat of Japan in 1945, the inland industries declined. The wartime demand for products of these inland factories decreased, and their market was also diminished by the migration of people back to the coastal region. Furthermore, goods from the coastal area and from foreign countries competed with their products, and capital flowed back to coastal areas, particularly because of the overvaluation of the Nationalist government’s currency relative to the currency in coastal areas. To take Kunming in Yunan for example, 22,755,000 yuan flowed from Kunming to Shanghai in 1948, and 408,000 yuan flowed in the opposite direction. Due to the devastation of the war and the Civil War, raw materials were difficult to get. Factories inland were poorly built and their production cost was higher. Furthermore, workers wanted to go back to their home in coastal areas. Due to a similar impulse, the Nationalist government was forced to move its capital from Chongqing back to Nanjing (Yang 1948: xia 15–xia 16). More and more factories were closed inland (Zhang 1964: 215, 255). Although the coastal industries were threatened by foreign competition, they still had advantages in transportation and finance, and developed more rapidly than those inland. From 1945 to 1947, electricity used in coastal areas increased by 258 percent, and by 239 percent in Taiwan, yet electrical consumption only increased 13.9 percent inland and decreased 361.4 percent in Manchuria (Cheng 1956: 168). In 1945, industries in coastal areas made up 15.3 percent of all industries nationwide, a share that increased to 48.2 percent of 1946 and 52 percent of 1947 (Cheng 1956: 170). In 1949, 77 percent of railroad lines were distributed in the developed area and 23 percent of it was located in the

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underdeveloped area (Wu 1967: 115). Most of the resources were again concentrated in the coastal areas. Although the handicraft industries grew alongside the modern industries prior to 1933, they dropped off between 1933 and 1949, and particularly after 1945 (Chang 1969: 94). The dualeconomy problem again became serious and awaited the advent of the Communist regime after 1949.

5. Concluding Remarks Even though the opening of treaty ports had reinforced China’s Western relations, it actually strengthened China’s Asian relations as well. Indian opium had extended its impact from South Asia well into interior China before the Opium Abolition Movement of 1906–16. In the wartime years of 1937–45, South Asia was particularly important for Nationalist China. Southeast Asia, which provided China with rice and consumable goods, was also China’s trading partner in the entire period of 1842–1949. Hong Kong, together with Britain, was China’s most important trading partner from the mid-nineteenth century to the 1930s. After 1895, Northeast Asia (Japan) became more important. Japan, as well as the United States, provided more and more textiles and industrial raw materials to China and consequently reduced Britain’s role in the early twentieth century. In 1930–40, Nationalist China traded mainly with the United States and Japanese-occupied parts of China traded mainly with Japan. Except for some trade in brick tea and gasoline oil, North Asian trade, meaning Russia’s economic involvement with China, became less conspicuous. China’s international involvement through trade came mainly from South and East China. From 1850 to 1949, except for the wartime years of 1937–45, East and South China also accumulated most of China’s modern economic resources. The establishment of treaty ports in East and South China reinforced this concentration of economic resources. In the Civil War years of 1850–late 1870s, when the world economy was more favorable and competition from Japan, India, and Ceylon for China’s tea market, from Japan for China’s silk market, and from Java for China’s sugar market were not yet intense, Core China had closer connections with the world economy than with Peripheral China. During this period, Core China’s integration with international economy barely penetrated inland. Between 1906 and 1937, a similar tendency developed by which North China had more trade with Japan, and South China had more trade with Southeast Asia. The interregional connection within China from 1906 to 1937 seems to have been more fragile when compared with the late 1870s–1906, when interregional integration within China due to trade was at its peak. From 1945 to 1949, although the interregional connections

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became strong again, Core China simply absorbed most of the interior resources. In contrast, between the late 1870s and 1906, soybeans were sold from Manchuria to South China, woolen products were sold from northwest to North China, and native opium and many other cash crops and cottage industry products (such as papers, matches, and porcelain) were exchanged for daily goods between Peripheral and Core China. This trade made up the main interregional connections within China. An overview of China’s trade with other countries in 1850–1945 shows the importance of associated interregional relations in determining political and social stability. The fall of the 2,000-year-old imperial system was concomitant with the disintegration of the spatial economy within China around 1911. In 1937–38, Japan occupied Core China where China’s domestic resources were excessively concentrated. This loss of resources influenced the Nationalist government’s wartime inflationary policy, which in turn paved the way for its loss of control over Mainland China. In spite of enormous efforts after 1949, the dual-economy problem still exists in today’s China. Whether the rapid expansion of international relations will improve or worsen China’s dual-economy problem is a pressing current issue. Observing the late 1870s–1906, the period when interregional integration within China was at its peak, it can be seen that products with certain features had helped to integrate Core and Peripheral China: products whose profits could cover the transportation cost from Peripheral China to Core China; products (such as opium, bristle, or cotton cloth) whose production could use marginal land or surplus labor; products (such as matches) that demanded less capital and whose production process could be easily learned; or products (such as pottery) whose raw material was in the countryside. At a time when China is further exposed to the international economy, products with these features (especially of cash crops or cottage industries) could be developed inland in order to facilitate interregional integration. Loren Brandt pointed out that China had been highly integrated with the world economy from 1870 to the 1930s. Philip Huang assumed this high integration with the world economy had negative effects on integrating China’s peripheral provinces. Ramon Myers, on the other hand, assumed positive effects. Bin Wong, in reviewing the debate, pointed out in 1992 that both claims were not supported with sufficient data, and cited Shandong’s situation to say that financial facilities in the cities did not reach the countryside during this period (Wong 1992: 606–10). For such a big issue as China’s interregional economic connections, more work from various angles has to be done. However, rather than arguing between a simple positive or negative effect, from the perspective of trade, this chapter points out that China’s interregional integration fluctuated with its international economic involvement between 1842–1949.

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Note 1. Skinner points out that his ‘‘core’’ denotes the area where there was higher per capita income, higher demand for commodities, higher population density, more arable land, more capital investment, and more commercialization (Skinner 1977: 281–2, 284–5). But we usually cannot find the data to distinguish the two areas by these measures. Remer’s distinction with the use of ‘‘two days’ walking distance from the main transportation as the demarcation line’’ is more precise.

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Kuznets, S., ‘‘Regional inequality and the process of national development: a description of the patterns’’, Economic Development and Cultural Change, 13:4, Part II (1965). Lei, H., Dongbei de douhuo maoyi, yijiu lingqi-yi jiu sanyi [Manchurian soybean trade, 1907–1931] (Taipei, 1981). Li, W., (ed.), Zhongguo jindai nongye shi ziliao [Sources of Chinese Agricultural History in Modern Period],’’ in Zhongguo jindai jingjishi cankao ziliao congkao ziliao congkan [Referent Materials of Chinese Modern Economic History], 3 vols (Beijing, 1957). Lin, M., ‘‘Qingmo shehui liuxing xishi yapian yanjiu—gongji mian zhi fenxi, yiqiqisan zhi yijiulingliu’’ [A Supply-Side Analysis of the Prevalence of Opium-Smoking in Late Qing China, 1773–1906], Ph.D. dissertation, National Taiwan Normal University (1985). ——, ‘‘Kouan maoyi yu jindai Zhongguo—Taiwan zuijin youguan yanjiu zhi huigu [The economic impact on China of opening the treaty ports—a new perspective from Taiwan]’’, in Jindai Zhongguo Quyushi Yantaohui [Conference on the Regional Studies of Modern China], ed. & pub. by the Institute of Modern History, Academia Sinica (Taipei, 1986), 869–915. ——, ‘‘Zhongguo chuantong jingji de tezheng [Characteristics of China’s traditional economy]’’, Renwen Shehui Kexue Tongxun (Newsletter for Humanities and Social Science), Ministry of education, 2:5 (1992). —— , ‘‘World recession, Indian opium, and China’s Opium War’’, in Mathew, K. S. (ed.), Mariners, Merchants, and Oceans: Studies in Maritime History (New Delhi, 1995). ——, Chatang Zhangnao Ye Yu Taiwan Zhi Shehui Jingji Bianqian 1860–1895 [The Industries of Tea, Sugar, and Camphor and Socio-economic Change of Taiwan, 1860–1895], enlarged and revised version (Taipei, 1997). Liu, S., Yantai Maoyi Yanjiu, Yiba Liuqi-Yijiu Yijiu [A Study on Yentai Trade, 1867– 1919] (Taipei, 1990). Liu, T., Trade on the Han River and Its Impact on Economic Development, c. 1800–1911 (Taipei, 1980). Long, Y., Yunnan Xingzheng Jishi [A Record of Yunnan Administration] (Yunnan, 1939). Murphey, R., ‘‘The treaty ports and transformation’’, in Elvin, M. and Skinner, W. (eds.), The Chinese City Between Two Worlds (Stanford, 1974). Perkins, D. H., Agricultural Development in China, 1368–1968 (Chicago, 1969). Qing, X. (ed.), Zhonghua Minguo Jingji Fazhan Shi [The Economic History of the Republic of China], vol. II (Taipei, 1983). Qiu, J., Shanjing Hanjiang Liuyu Maoyi Biao [Tables of Trade on Han River in Shaanxi], Guanzhong cungshu [Shaanxi Historical Series] (comp. in 1906, reprinted by Shaanxi tongzhi guan, 1934–1935). Quan, H., ‘‘Qingdai Yunnan tongkuang gongye [The copper industry of Yunnan in the Qing period]’’, Xianggang Zhongwen Daxue Zhongguo Wenhua Yanjiu Suo xuebao [Journal of Institute of Chinese studies, the Chinese University of Hong Kong], 7:1 (1974). Remer, C. F., The Foreign Trade of China (Shanghai, 1926). Shanghai Mercury, Opium Statistics in China, Foreign and Native (Shanghai, 1889).

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Skinner, G. W., ‘‘Regional urbanization in nineteenth-Century China’’, in Skinner, G. W. (ed.), The City in Late Imperial China (Stanford, 1977). Wang, H., Wan-Qing Huobi Bijia Yanjiu [Silver–copper Cash Ratio of Late Qing China] (Kaifeng, 1990). Waung, W. S. K., ‘‘Introduction of opium cultivation to China’’, Journal of the Chinese University of Hong Kong 5:1 (1979). Wong, R. B., ‘‘Chinese economic history and development: a Note on the Myers– Huang exchange’’, Journal of Asian Studies, 51:3 (1992). Wu, Y., The Spatial Economy of Communist China: A Study on Industrial Location and Transportation (New York, 1967). Xie, S., ‘‘Jiujiang maoyi yanjiu [A study of the trade of Jiujiang]’’, M.A. thesis of the Department of History, National Taiwan University (1977). Yan Z., Zhonggou Jingdai Jingjishi Tongji Ziliao Xuanji [Selected Statistical Materials on China’s Modern Economic History] (Beijing, 1955). Yang, J. (ed.), Dalu Lunxian Qian Zhi Zhonghua Minguo [The Republic of China before 1949], Vol. 3 (Taipei, 1967). Yang, L., ‘‘Shinianlai zhi jiqi gongye [Machinery industry of the past decade]’’, in Xihong, T. (ed.), Shinianlai Zhi Zhongguo Jingji [Chinese Economy in the Past Ten Years] (Shanghai, 1948). Ye, S., ‘‘Tianjingang di maoyi dui chi fudi jingji chi yingxiang [Trade of Tianjin ports and its impact on the hinterland], M.A. thesis, Department of Economics, National Taiwan University (1982). Yu, E., Zhongguo Jinyan Faling Bianqian Shi [History of the Changes in Chinese Anti-opium Laws] (Shanghai, 1934). Zhang, Q., ‘‘Sanshiwu niandu zhi Zhongguo jingji [Chinese economy in 1946]’’, Dongfang zazhi [Oriental Magazine], 43:11 (1947). Zhang, R., Pinghan Tielu Yu Huabei De Jingji Fazhan, Yi Jiu Ling Wu-Yi Jiu San Qi [Peking–Hankow Railroad and the Economic Development of North China, 1905–1937] (Taipei, 1987). Zhang, S., Jindai Sichuan Pendi Duiwai Maoyi Yu Gongshang Ye Bianqian [Foreign Trade and Industrial and Commercial Change in Modern Sichuan Basin], M.A. thesis, Department of History, National Taiwan Normal University (1982). Zhang, W., Zhongguo Huobi Jinrong Lun [On Chinese Monetary and Financial System] (Taipei, 1964). Zhao, G., and Chen, Z., Zhongguo Mianye Shi [The History of Cotton Industry in China] (Taipei, 1977). Zhengzhi Guanbao [Political Gazette], 1907–1911 (Taipei: Wenhai chuabnshe rpt., 1965). Zhongguo tongshang yinhang, Wushi nian lai zhi Zhongguo jingji [The Economy of China in the Past Fifty Years] (Taipei, 1967).

9 Foreign Trade, Internal Trade, and Industrialization: Patterns of Regional Commodity Flows, 1914–311 hajime kose

1. Introduction This chapter examines the changes in the patterns of China’s regional commodity flows between 1914 and 1931, through the examination of statistical information contained in the Chinese Maritime Customs Reports. In some important respects the approach of this chapter differs from that which is often used in the studies of the history of China’s foreign trade. Here China is viewed as a set of regional economies, and it is assumed that a large part of each region’s response to external stimuli is reflected in the growth of trade in regional treaty ports. The regional division adopted here is based on the ‘‘macroregions’’ suggested by William Skinner, who divided China into eight regions: North China, Upper Yangzi, Middle Yangzi, Lower Yangzi, Northwest China, Southeast Coast, Lingnan, and Yun-Kwei (Skinner 1977). To these we have added Northeast China and eliminated Northwest China, to reflect the relative economic importance of these regions during the period under review. In view of its overwhelming importance as a center of commerce, Shanghai is treated as a separate unit (see Map 9.1). Past research on the history of China’s foreign trade has usually consisted of statistical examinations of foreign trade alone. This chapter, however, considers statistics on both foreign and internal trade, and treats them essentially in the same fashion. For example, if a port in North China was open to foreign trade and hence traded with both Shanghai and Kobe, each of these trading relationships would be treated in the same way, since they may arguably have had a similar impact on the regional economy. For instance, imports of cotton cloth from the ports of Shanghai and Kobe may have been compared by local merchants and consumers, as if their country of origin had not mattered, while exports of local produce to Shanghai and Kobe may have been dealt with by Chinese merchants in

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much the same manner. The traditional approach does not present such a comparison between foreign trade and internal trade, making it difficult to assess the nature of ‘‘external stimuli’’ from the perspective of the regional economy. A further defect of the traditional approach to this subject is illustrated through the following example. If the above port experienced growth in its trade with, say, the United States, this could have meant that a direct trading

NORTHEAST CHINA

NORTH CHINA

SHANGHAI LOWER YANGZI

UPPER YANGZI MIDDLE YANGZI

SOUTHEAST COAST

YUN-KWEL LINGNAN

Map 9.1. Skinner’s macroregions. Source: Skinner (1977: 9) Notes: For slight adjustment, see text. Northwest China was usually part of the trading area of Tientsin (Tianjin).

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route had been developed. In other words the port was bypassing the intermediation of Shanghai, thus replacing the existing internal trade with foreign trade. The traditional approach, which ignores transfer trade (in this case the internal shipment to Shanghai of goods that were eventually to be exported to foreign countries), may interpret it as the growth of trade, even though the total volume of trade of the port remained unchanged from our point of view. The objectives of our approach are to take these points into account in an examination of the implications of the growth and decline of Shanghai as an entrepot and the growth of direct trading routes. It must be acknowledged at the outset that this approach is at best a starting point for statistical evaluation of the size and structure of China’s internal trade (Sazanami 1990: 102–6). This is because the approach not only ignores various forms of rail, land, and river-borne trade, which did not pass through the treaty ports, but also implicitly assumes that the treaty port trade reflected the basic patterns of China’s regional commodity flows. In reality, a different regional classification and, to a lesser extent, a different commodity classification, would produce different patterns. Nevertheless, it is possible to argue that the nine regions identified in this study are reasonably coherent units, and that appropriately qualified internal trade statistics are useful as a first approximation of the scale of trade between these regions.

2. Internal and Foreign Trade The Opium War of 1842 and the subsequent signing of the Nanking Treaty are generally regarded as turning points in the history of China’s foreign trade. The treaties that were signed in Nanjing, and later in Tianjin, Shimonoseki, and other places, secured a number of privileges for foreign business. In spite of the high expectations, however, the volume of trade did not initially grow as rapidly as anticipated—although China’s foreign trade had begun to take off towards the end of the nineteenth century it was not until the period that lasted from the outbreak of World War I in 1914 to the invasion of Manchuria by the Japanese in 1931 that steady growth took hold. Between 1914 and 1931 the value of trade expanded from 925 million Haikwan Taels (Hk.Tls. Haiguan Liang) to 2,343 million Hk. Tls., an increase of 153 percent. The average annual value of trade during this period was 1,593 million Hk. Tls., an increase of 162 percent over the average volume for the period 1896–1913 (Ho 1935: 13). Internal trade also began to grow at about the same time but difficulties in determining the place of origin and final destination of the goods traded mean that it is difficult to gauge its real value. In this study the volume of internal trade is simply defined as the amount of trade between treaty ports. This definition has clear limitations if the objective is to

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determine the absolute level of trade, but it provides a good idea of the magnitude of the changes that occurred between the years for which statistics are available. According to statistics produced by the Maritime Customs, internal trade expanded from 1,008 million Hk. Tls. in 1914 to 2,464 million Hk. Tls. in 1931. During the same period the gross value of internal trade was 34,901 million Hk. Tls., with an average annual value of 1,939 million Hk. Tls. In examining the structure of internal trade it is useful to distinguish between the trade of domestically produced goods and that of foreign goods. The content of domestically produced goods varied region by region, with Northeast China consisting predominantly of bean-growing districts; southern provinces, especially Fujian, being sugar producers; and the Lower Yangzi provinces of China cotton-growing and clothproducing districts. Several basic trade links existed for these goods between China’s regional economies in the early twentieth century, and the distribution of such goods consisted of the first type of internal trade. For example, bean cake was used in the south as fertilizer for sugar cane, and those peasants who accumulated wealth through bean cultivation purchased native cloth. In this way a chain of commodity exchange developed (Kato Shigeshi 1953: 612–13). One factor which had an important effect on the pattern of growth of China’s internal trade was the problem of payment settlement. Due to the lack of silver and a unified currency system, it was often difficult to settle accounts. As a result, internal trade often took the form of barter trade, that is, if a trader wished to sell his products in a particular region, he needed to buy products from that region.2 Under such circumstances, foreign merchants had to purchase Chinese goods in order to sell, or depend on native merchants for the expansion of their sales in China. Thus, although there was strong demand for American cotton cloth in Northeast China, imports of American goods depended on the trade of beans or bean cakes, which were otherwise unrelated to American interests. As a result, American goods were imported to Shanghai, which was the center of internal trade, and were then distributed to North and central China by Chinese merchants. The trade of foreign goods that was conducted by Chinese merchants thus constituted a second type of internal trade and, judging simply by volume, trade of this kind was more important than that of domestic goods. Returning to the issue of payment settlement, it was important that Chinese merchants could easily get a balance of exchange in Shanghai, so that they could exchange American goods for Chinese goods. In other words, Shanghai also operated as China’s center for the supply of short-term credit (Kose 1994: 140–1). The Japanese approach differed from the case of American cotton, as Japan tried to ship her goods directly to Northeast China, that is, without going through Shanghai. As a result, the competition between Western

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and Japanese goods was of a form in which Japanese goods were carried by Japanese merchants and Western goods by Chinese merchants. After the Russo–Japanese War, the trade networks in Northeast China were disrupted by instability in the payment settlement system, allowing Japanese goods to penetrate into the region. Although small in size, the trade conducted by Japanese merchants in this way might be classified as a third type of internal trade. Moreover, the Chinese Revolution presented Japan with a similar opportunity in North China. The value of Tianjin’s direct foreign import trade in 1899 was 1.7 million Hk. Tls., while imports via other Chinese ports were worth 10.9 million Hk. Tls.. By 1919 the value of direct foreign imports into Tianjin had increased to 66.9 million Hk. Tls., while imports via other Chinese ports totaled 19.9 million Hk. Tls.. During the same period Japanese direct trade jumped from 0.1 million Hk.Tls. to 40.5 million Hk. Tls.

3. Patterns of Internal Trade and Trade Balances Throughout the first half of the twentieth century, China posted large trade deficits, although the size of the deficits temporarily declined during World War I. A number of authors have sought to explain the reasons for this persistent phenomenon, and how China was able to maintain its balance of payments (Morse 1904; Remer 1933; Cheng 1956; Chen 1996). However, no attempt has been made to consider this issue from the perspective of regional trade, taking both foreign and internal trade balances into account. This section surveys the structure of and changes in trade and trade balances in each region. In Table 9.1 a summary is presented of the regional composition of foreign trade and trade balances for the period under review. The same is done in Table 9.2 for internal trade and trade balances, and an effort has been made to exclude local trade (trade within the region) from the internal trade statistics, so that the table approximates to the volume of interregional trade. In Table 9.3 an attempt has been made to isolate the trade of domestic goods in China’s internal trade. Approximately twothirds of internal trade was made up of the trade of foreign goods, although the proportion accounted for by domestic goods differed greatly region by region. Primarily on the basis of these tabulations, the profile of trade and trade balances in each region are outlined below. The region that was most heavily involved in direct foreign trade was Northeast China, which was also the only region that almost invariably recorded export surpluses, the size of which increased over time. On the other hand, the region’s internal trade balance was negative, at least until the first half of the 1920s. This implies that, in the earlier years, the internal trade deficit was settled through the external trade surplus. However, the

Table 9.1. Regional composition of China’s foreign trade and trade balances, 1914–31 (Million Hk. Tls.) 1914–19

1920–25

1926–31

Total

Imports Exports Balance Imports Exports Balance Imports Exports Balance Imports Exports Balance Northeast China North China Upper Yangzi Middle Yangzi Shanghai Lower Yangzi Southeast Coast Lingnan Yun-Kwei Total

554 453 5 229 1,331 64 176 551 58 3,421

663 263 1 85 1,285 55 107 491 68 3,018

109 190 3 145 45 10 69 60 11 402

756 727 4 323 2,562 112 244 816 98 5,642

Source: CMC, Foreign Trade of China, 1914–1931 (title varies).

1,148 521 3 105 1,555 33 154 651 72 4,242

392 206 2 218 1,007 78 90 165 26 1,400

1,161 941 6 245 3,788 134 343 756 100 7,474

1,838 802 5 149 2,076 26 181 560 68 5,705

646 139 — 96 1,663 108 162 196 32 1,750

2,471 2,121 14 797 7,631 310 763 2,123 256 16,486

3,648 1,586 9 340 4,916 114 442 1,702 208 12,965

1,177 536 5 457 2,715 196 321 420 48 3,521

Table 9.2. Regional composition of China’s internal trade and trade balances, 1914–31 (Million Hk. Tls.) 1914–19

1920–25

1926–31

Total

Imports Exports Balance Imports Exports Balance Imports Exports Balance Imports Exports Balance Northeast China North China Upper Yangzi Middle Yangzi Shanghai Lower Yangzi Southeast Coast Lingnan Yun-Kwei Total

309 456 119 629 1,401 397 265 244 1 3,821

208 322 102 824 1,505 387 103 65 0 3,516

101 133 17 195 104 9 162 179 1 303

456 840 245 1,072 1,720 562 389 439 3 5,726

383 395 162 1,144 2,679 470 158 124 0 5,515

73 446 83 72 959 93 230 316 3 213

506 1,050 316 1,229 2,177 599 534 682 18 7,111

581 519 227 1,313 3,483 422 166 204 6 6,921

Source: CMC, Foreign Trade of China, 1914–1931 (title varies). Notes: The value of exports has been adjusted using Han (1951) and South Manchuria Rail Co. (1931).

75 531 90 84 1,305 177 369 448 13 164

1,272 2,345 680 2,930 5,298 1,558 1,188 1,365 22 16,658

1,172 1,235 490 3,281 7,666 1,279 427 393 6 15,949

100 1,110 190 351 2,368 280 761 972 17 711

Table 9.3. Imports of foreign and native goods to nine regions of China, 1914–31 (Million Hk. Tls.) 1914–19

Northeast China North China Upper Yangzi Middle Yangzi Shanghai Lower Yangzi Southeast Coast Lingnan Yun-Kwei Total

1920–25

1926–31

Foreign goods (A)

Native goods (B)

B/AþB (percent)

Foreign goods (A)

Native goods (B)

B/AþB (percent)

Foreign goods (A)

Native goods (B)

B/AþB (percent)

584 580 54 462 545 285 192 550 56 3,309

160 274 68 204 259 158 200 214 1 1,538

21.5 32.1 55.7 30.6 32.2 35.7 51.0 28.0 1.8 31.7

813 947 69 612 1,485 407 286 826 98 5,542

279 558 178 439 509 246 305 373 3 3,300

25.5 37.1 72.1 41.8 25.5 37.7 51.6 31.1 3.0 37.3

1,198 1,199 89 555 2,579 403 410 763 99 7,297

377 836 233 532 798 321 4242 543 18 4,082

23.8 41.1 72.4 48.9 23.6 44.3 50.8 41.6 15.4 35.9

Source: CMC, Foreign Trade of China, 1914–1931 (title varies).

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internal trade balance gradually improved and this relationship disappeared during the second half of the 1920s. From Table 9.3 it can be seen that the proportion of domestic goods in import trade was not as large in this region as in other regions of China. This was because while in Niuzhuang (Yingkou: a declining port located near Dalian) Chinese merchants dominated trade and maintained links with Shanghai, the increasing Japanese influence made the port of Dalian a major center for direct foreign trade, especially with Japan. Although it is undeniable that foreign trade dominated the growth of the region’s trade, it is interesting to note that the volume of internal trade also increased substantially. The rate of growth of internal shipments was rapid, nearly matching that of foreign export trade. The share of internal trade was naturally larger in noncoastal regions such as North China, Upper Yangzi, and Middle Yangzi than in coastal regions. For example, the proportion of internal trade in total trade for North China was always greater than that for Northeast China. North China’s trade balances, both internal and external, were negative between 1914 and 1931, but, while external trade deficits were on a decreasing trend, internal trade deficits were rising. Furthermore, the share of domestic goods in internal import trade was also on the increase. In other words, North China provided a good market for domestic produce, relative to its purchasing power. Although much smaller in size, a similar trend is observable for the trade of Upper Yangzi. Middle Yangzi was also more suited geographically to internal trade than it was to direct external trade, and traditionally it produced a variety of commercial crops such as raw cotton, sesame, and tea. During the period in question these goods were exported in increasing quantities, mainly to other regions of China. However, Middle Yangzi also increased its imports, particularly of domestic produce, from other regions, and its internal trade surplus became slightly smaller over time. This, however, was offset by an equally slight decrease in its foreign trade deficits. Shanghai enjoyed a larger volume of trade than any other region, with the rapid growth of both its foreign and internal trade securing its dominant position in China’s trade as a whole. A closer look at the composition of Shanghai’s trade, however, reveals the development of striking trade imbalances—while Shanghai’s already large foreign trade deficits increased rapidly, the internal trade surplus increased equally fast. Part of the reason for this can be found in Shanghai’s traditional function as an entrepot. A large amount of foreign goods imported to Shanghai were reexported to other provinces so that, to a certain extent, Shanghai was merely passing internal provinces’ foreign trade deficits on to foreign countries. This must have brought in a large sum of invisible income to the city, and have created substantial employment in its service sector. However, Shanghai’s role in China’s trade underwent a fundamental

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change during the 1920s. As the city’s manufacturing capacity developed, it began to process a number of imported goods, both from other parts of China and from abroad, and its exports began to include a significant amount of industrial goods made in modern factories. This point will be examined in more detail in Section 4 of this chapter. Lower Yangzi was characterized by having a relatively large amount of internal trade. This was because it continued to use Shanghai and some other ports outside the region as intermediaries in its foreign trade, so that the volume of its direct foreign trade was very small. The bulk of Lower Yangzi internal trade consisted of the trade of foreign goods brought in from these ports or of goods to be exported to foreign countries. However, it is worth noting that even in this region the internal trade of native goods increased faster than that of foreign goods during the period under review. Finally, the Southeast Coast and Lingnan, which consisted of southern provinces, had traditionally been heavily involved in foreign trade. However, it should be pointed out that these regions too played a role in the growth of China’s internal trade. It is well known that a large amount of remittances were sent from Southeast Asia to South China by overseas Chinese. Traditionally, these remittances have been regarded as having been a factor offsetting China’s large foreign trade deficits.3 However, this does not mean that South China spent the bulk of these remittances on the purchase of foreign goods. In fact, southern provinces’ internal trade deficits were larger than their foreign trade deficits. Although the Southeast Coast substantially increased its imports of foreign goods, it is probable that the overall share of domestic goods in the internal trade of southern provinces increased. Partially as a result of this, southern provinces’ internal trade deficits increased faster than their external deficits. This internal linkage may not have been a two-way commodity exchange, and, unlike in Shanghai, it did not generate an industrialization-based trade. It nevertheless had some effect on internal integration. In this way overseas remittances are likely to have contributed to the growth of internal trade, and hence to South China’s integration into the domestic economy, rather than having simply ‘‘leaked out’’ to foreign countries. In summary, internal trade, which was primarily conducted by Chinese merchants, grew almost as fast as foreign trade during the period of 1914–31. Although Northeast China and the southern provinces were both heavily oriented towards foreign trade, internal trade was more important for most other regions. However, about two-thirds of this internal trade was made up of trade in foreign goods. On the other hand, the proportion of domestic goods in regional imports increased in almost all regions, with the exceptions of Shanghai and the Southeast Coast. In Shanghai, imports of foreign goods increased much more rapidly than imports of domestic goods. Even so, Shanghai absorbed the

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largest amount of Chinese goods of all the regions. Overall, the expansion of internal trade was a crucial factor in China’s integration into the international economy.

4. The Impact of Industrialization Following Japan’s lead, modern factory production began to take root in China in the early twentieth century. The pace of industrial development started to accelerate around 1920, stimulated by the expansion of internal trade outlined in Section 3, and its center was undoubtedly Shanghai. Modern factories were established in Hankou, Tianjin, and many other places during the ‘‘golden age’’ of 1911–37 (Bergere 1986). The increase in internal purchasing power, combined with the difficulties (relating to payment settlement and distribution networks) which foreign goods faced in penetrating China’s internal market, meant that there were good market opportunities for modern Chinese goods. In this section an examination will be made of the impact of the development of the modern cotton industry on the patterns of China’s internal and foreign trade. There were important differences in the quality of cotton yarn and cotton cloth that Chinese-owned and Japanese-owned mills in China produced. They served for different segments of the market, and complemented each other (Mori 2001: 311–19). Table 9.4 shows that between 1914 and 1931 the relative importance of cotton in China’s internal trade increased. The proportion of total internal trade accounted for by raw cotton, cotton yarn, and cotton cloth increased from 22.2 percent in the period 1914–19 to 34.2 percent in 1926–31. Table 9.4 also shows that the circulation of agricultural produce and processed goods such as rice, beans, bean cake, and wheat flour remained important, although their shares tended to stagnate or decline. In considering changes in the structure of the internal trade of cotton, Hankou, the main port of Middle Yangzi, must be recognized as the largest port for the trade of raw cotton. Although a very small percentage of Hankou’s consignment of raw cotton was directly exported to foreign countries, most was shipped to Shanghai. Judging from figures for Shanghai, about half of the Hankou raw cotton shipped to Shanghai was reexported to foreign countries. However, during the 1920s, this re-export trade declined as a result of an increase in raw cotton consumption in Shanghai. In fact, the increase in home consumption went much further than just offsetting the decline of exports. The average proportion of total exports from Middle Yangzi accounted for by raw cotton exports increased from 11.9 percent in 1914–19 to 20.3 percent in 1926–31. At the same time, the value of raw cotton imported from foreign countries, mainly the United States and India, to Shanghai also rose. This imported

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Table 9.4. The ratio of native goods to internal trade, 1914–31 (Percent)

Cotton yarn Raw cotton Cotton cloth Bean cake Yellow bean Rice Wheat flour

1914–19

1920–25

1926–31

Total

13.8 5.9 2.5 4.1 2.9 7.2 4.8

18.8 8.1 4.1 3.3 3.1 5.4 4.3

18.7 8.6 6.9 2.4 3.3 2.9 5.4

17.9 7.9 5.1 3.0 3.2 4.5 4.9

Source: CMC, Foreign Trade of China, 1914–1931 (title varies).

raw cotton is said to have been used at Japanese and other foreign-owned mills. The average percentage of total imports to Shanghai made up by foreign and domestic raw cotton imports increased from 12.8 percent in 1914–19 to 23.2 percent in 1925–31. Looking more closely at the regional structure of the yarn and cloth markets, North and central China, as well as regions neighboring Shanghai, became the main markets for Shanghai-manufactured modern cotton goods. Domestically produced cotton cloth secured its position in the markets of the central provinces first, and those of the northern provinces a little later. Around 1913, 60.5 percent of Shanghai cotton yarn was shipped to central China and 31.8 percent to North China, of which Hankou took up 37 percent, and Tianjin 18.2 percent. Statistics are also available for the period between January and September 1917, which shows that in this period Hankou took 38.6 percent and Tianjin 20 percent. In the case of cotton cloth (sheetings and drills), 46.6 percent went to the north (Kato, T. 1917: 267), with Hankou taking 29.3 percent of Shanghai shipments, and Tianjin 16.5 percent (Kinukawa 1919: 29–32). By contrast, the southern provinces did not absorb a large amount of Chinese goods. Only in the 1930s did imports of Chinese plain cloths to the south exceed those of foreign ones. However, imports of Chinese yarn to the treaty ports increased rapidly, and exceeded total imports of foreign goods throughout China during the period under review. Furthermore, Chinese cotton yarn and cotton cloth began to be exported and the value of cotton cloth exports expanded to a size as large as that accounted for by any internal region towards the end of this period. The principal destination was Egypt, which took up one-third of the total export trade in 1931. The cloths for export were mostly made in Shanghai and this was a classic case of import-substitution-based industrialization, which in turn affected the composition of China’s foreign trade. An important question is how this was related to the growth of internal trade. Table 9.5 shows the share that five other countries took of the total value of imports into and

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Table 9.5. Geographical composition of trade of the main regions of China, 1919 and 1930 (Percent) United Hong Kong India Japan British Isles States China Imports from: Northeast China 1919 1930 North China 1919 1930 Middle Yangzi 1919 1930 Shanghai 1919 1930 Total 1919 1930 Exports to: Northeast China 1919 1930 North China 1919 1930 Shanghai 1919 1930 Total 1919 1930

1.6 4.6 5.4 6.4 5.6 2.5 4.3 1.3 12.0 9.6

0.9 0.4 0.1 2.3 0.4 2.6 4.0 9.2 2.1 5.8

46.5 39.1 36.8 23.7 23.2 5.4 13.3 12.6 19.5 14.4

0.8 3.7 3.0 3.5 1.8 2.0 10.7 8.2 5.1 4.8

9.8 7.4 10.2 9.6 9.8 4.1 11.0 16.7 8.6 10.2

28.0 26.6 39.9 45.4 60.2 78.7 50.3 32.8 46.7 41.7

0.5 1.8 4.0 5.9 3.4 4.7 11.0 8.5

0.0 0.0 0.0 0.1 1.6 20.7 0.8 8.2

53.0 30.7 35.7 23.6 10.1 5.6 16.4 11.6

3.0 2.8 0.5 6.2 8.7 4.1 4.8 3.4

5.3 1.9 4.0 14.2 19.1 12.3 8.5 7.1

12.3 22.6 52.1 39.0 42.2 56.3 47.1 49.4

Source and note: Tsai and Chen (1936). Percentages refer to each country’s share in the total (external and internal) trade of the main region. ‘‘Total’’ refers to each country’s share in the total trade (external and internal) of China.

exports from different regions of China. Only the changes relating to the cotton trade are examined here and two broad conclusions can be drawn from the table. First, India’s position in China’s import trade was maintained, but its role changed from that of a supplier of manufactured goods to one of raw materials. In 1919, cotton yarn constituted 77.3 percent of imports from India but by 1931, raw cotton took up 73.7 percent. The United States also maintained its relative importance in China’s import trade as a supplier of raw cotton. In both cases, there was a relative concentration of imports in Shanghai. Second, while Japan enjoyed by far the largest share of both the import and the export trade of China, its relative importance was on the decline. Although Japan had very close relations with northern provinces, making up a large proportion of their trade, its trade links with the south were very limited. In 1919, southern ports’ share in the value of Japanese export trade to China was 1.4 percent and their share in the import trade was 1.1 percent. The figures for 1931 were 3 percent and 0.1 percent,

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respectively. The main reason for the decline of the Japanese share in China’s import trade lay in its dramatic decrease in North and central China. One report points out the effects of the Chinese boycott movement (Shanhai Shuppan Kyokai 1925: 32–6; see also Chapter 6 of this volume). This movement was initially of a voluntary nature, and only entailed the boycott of Japanese goods by Chinese merchants. However, it gradually became powerful enough to affect Japanese business activities as a whole. The major characteristic of Japanese merchant activities, as compared to those of Western merchants, was the development of branch networks within China through which the market in the interior was opened up. Under the influence of the boycott movement, however, Chinese merchants forced Japanese trade branches to withdraw from the interior and to confine themselves to Shanghai. This undoubtedly affected the distribution of Japanese goods in China. At the same time, some Chinese merchants were prepared to take the risk of purchasing Japanese goods in Shanghai, disobeying nationalist instructions. One indirect consequence of this movement, therefore, was that control of the internal distribution networks changed hands, from the Japanese to the Chinese. This must have helped maintain, and possibly even strengthen, Chinese control of internal trade and trade information.

4. Conclusion China’s integration into the international economy did not take place in a uniform way. Southern provinces were the first to establish trade links with foreign countries but the economic changes generated in the south were not sufficient to induce the overall integration of China’s trade. Following the southern provinces, North and central China established economic relations with foreign countries through the port of Shanghai. This development strengthened the importance of Shanghai as an entrepot, and a new kind of ‘‘internal trade’’ between regional treaty ports and Shanghai grew as a spin-off of the opening of regional ports. In this way Shanghai established itself as the center of China’s trading networks, although this did not in itself suggest that the city became the center of internal market integration. The foreign-trade-induced internal linkages were developed primarily by those groups of Chinese merchants who had an ability to obtain information and finance, and maintain their sense of solidarity among themselves to compete with foreign and fellow Chinese merchants. In the early twentieth century, especially in the period after World War I, some regions began to establish direct trade links with foreign countries. This brought about a remarkable expansion in foreign trade.

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Shanghai lost its importance as an entrepot to that extent, although it was possible in some cases to develop the more local foreign-contact-induced internal linkages. In this respect the growth of foreign trade implied internal disintegration. On the other hand, the purchasing power which was accumulated in the regional economy offered an important opportunity for domestic industrial development. Import-substitution industrialization brought a new logic to internal economic integration, and Chinese merchants responded to it by attempting to secure the gains of internal trade and to forestall Japanese merchant penetration.

Notes 1. The English-language version of this paper has been prepared with the help of the editor. 2. For more detailed discussion on the issues relating to payment settlement, see Chapter 5 of this volume, although the author of that chapter is doubtful of the numerical significance of barter trade. 3. According to Shozo Fukuda, the average amount of overseas Chinese remittances was 640 million Hk.Tls. in 1914–21, 647.7 million Hk.Tls. in 1920–25, and 1,109.4 million Hk.Tls. in 1926–31 (Fukuda 1939: 404–5).

References Bergere, M., The Golden Age of the Chinese Bourgeoisie, 1911–1937 (Cambridge, 1986). Chen, Z., Zhongguo Guoji Shouzhi Yanjiu 1895–1936 [China’s Balance of Payments, 1895–1936] (1996). Cheng, Y., Foreign Trade and Industrial Development of China (Washington, D.C., 1956). CMC (China Maritime Customs), Foreign Trade of China, various years; title varies. Fukuda, S., Kakyo Keizairon [Treatise on the Economy of the Overseas Chinese] (Tokyo, 1939). Han, C., (ed.), The Statistics of China Interport Trade, 1936–1940 (Beijing, 1951) Ho, P., The Foreign Trade of China (Shanghai, 1935). Kato, S., Shina Keizaishi Kosho [Studies in Chinese Economic History], Vol. II, (Tokyo, 1953). Kato, T., Shina no Mengyo [The Cotton Industry in China] (Osaka, 1917). Kinukawa, T., Heiwa to Shina Mengyo [Peace and the Chinese Cotton Industry] (Tokyo, 1919). Kose, H., ‘‘Chinese merchants and Chinese inter-port trade’’, in Latham, A. H., and Kawakatsu, H., (eds.), Japanese Industrialization and the Asian Economy (London, 1994). Mori, T., Chugoku Kindai Mengyo-shi no Kenkyu [The History of Cotton Industry in Modern China] (Kyoto, 2001).

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Morse, H. B., An Inquiry into Commercial Liabilities and Assets of China in International Trade (Shanghai, 1904). Remer, C. F., Foreign Investments in China (New York, 1933). Sazanami, T., ‘‘19-seiki-matsu Chugoku ni okeru kaikojo-naichishijo-kan kankei [The relationship between treaty ports and internal markets in late 19th century China]’’, Shakai Keizai Shigaku, 57:5 (1990), 85–112. Shanhai Shuppan Kyokai, Yosuko no Fugen to Jukyu [Resources and Market Conditions in the Yangzi River Region] (Shanghai, 1925). Skinner, G. W., ‘‘Regional urbanization in nineteenth century China’’, in Skinner, G. W. (ed.), The City in Late Imperial China (Stanford, 1977). South Manchuria Rail Co., Trade Return of North China (Dalian, 1931). Tsai, C., and Chen, Y., Statistics of Foreign Trade of Different Chinese Ports with Various Countries (Shanghai, 1936).

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PART IV The Growth of China’s Contacts with Taiwan and Southeast Asia

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10 Taiwanese Merchants in the Economic Relations between Taiwan and China, 1895–1937 man-houng lin

1. Introduction In the postwar era, Taiwan’s economy has been highly dependent on foreign trade. Its trade dependency ratio (the total of import value and export value, divided by national income) was over 100 percent in the 1960s–1970s and remained as high as 87.7 percent in 1990 (Directorate General of Budget 1992, table 33). In this respect it is notable that previous scholars have observed that during the period of Japanese colonial rule Taiwan’s foreign trade was monopolized by the Japanese colonial government and zaibatsu and consequently, that Taiwanese people lacked experience of foreign trade (Taiwansheng wenxian weiyuanhui 1971: 283b). However, had Taiwanese merchants, who were operating in the postwar period, really been unable to gain experience in conducting foreign trade during the colonial period? This chapter will show that the trade between Taiwan and China between 1895 and 1937 provided Taiwanese merchants with important opportunities to accumulate foreign trade experience. The ratio of the value of Taiwan’s trade with China to that with Japan dropped dramatically in the Japanese colonial period (see Figure 10.1). In the first seven years after the cessation of Taiwan to Japan, this ratio did not change significantly, but it then fell rapidly from 80 percent in 1902 to 9.1 percent in 1914. During 1915–29, as the European countries and America withdrew from the Chinese market due to World War I and Japanese goods exported from China to Taiwan increased, this ratio was maintained at around 10.3 percent. However, between 1930 and 1937, as a result of the global economic depression and the Chinese boycotts of Japanese goods, the ratio dropped to a mere 2.9 percent. After 1937, Taiwan–China trade was disrupted by the Sino– Japanese War.

Man-houng Lin

218 700

(1,000 Japanese yen)

600

+ +

500 +

400 +

300 200

+ +

+

100 0

+

+ +

+ + + + + +

1902

1907

+ + + + + +

1912

+

+ +

+

+

+

+

+

+

+ + +

+

1917

: With China

1922

1927

1932

1937

+ : With Japan

Fig.10.1. Values of Taiwan–China and Taiwan–Japan trade, 1902–37. Source: Taiwansheng wenxian weiyuanhui (1971: 170b–171b).

The above ratio averaged 7.4 percent between 1902 and 1937. In the same period, the value of Taiwan’s trade with countries other than Japan and China was four times of that with China, while the value of Taiwan’s trade with Japan was four times of that with countries other than China and Japan (Figure 10.2). The relative insignificance of Taiwan–China trade in relation to Taiwan’s total foreign trade during the Japanese colonial period may explain why few scholars have paid attention to Taiwan–China trade or to their economic ties in general, and especially to the role of Taiwan– China trade in the rise of Taiwanese merchants. In his description of the rise of Taiwanese capitalists, Tu Zhaoyan, for example, did not deal with trading activities between Taiwan and China and their significance (Tu 1975: 369–479). This chapter, based upon newspapers and the reports of contemporary Japanese and Chinese observers, first, describes Taiwanese merchants’ migration to, direct investment in, and trade with China, and their increasing role in the navigation and finance of the commerce across the Taiwan Straits, from 1895 to 1937. Second, it looks at the policy of the Japanese government towards such economic ties. Finally, it suggests that the above development had implications for the accumulation of foreign trade experience by Taiwanese merchants. For the purposes of this chapter, ‘‘Taiwanese merchants’’ refers to businessmen who registered their domicile as Taiwan either immediately prior to or after 1895 when Japan took over Taiwan. According to the Treaty of Shimonoseki, Taiwanese who did not leave Taiwan prior to the deadline of 1897 would become Japanese nationals. Taiwanese and their offspring living abroad could also change to Japanese nationality after Japan issued

Taiwanese Merchants in the Economic Relations

219

700 +

(1,000 Japanese yen)

600 +

500 +

400 +

300

+ +

200

+ +

+

100 0

+

+ + + + + +

1902

1907

+ + + ++ + +

1912

: With China/with Japan

+ +

+ +

+

+

+

+

+

+

+

+

1917

1922

1927

1932

1937

+: With China/with other countries

Fig. 10.2. The ratio of Taiwan–China trade as compared with Taiwan–Japan trade or Taiwan–other countries’ trade, 1902–37. Source: The same as Figure 10.1.

their nationality law in 1899 (Taiwan Sotokukanbo Gaijika 1937: 18–19). Taiwanese, such as Lin Jishang, who had moved to China to maintain their Chinese nationality but continued to have significant contact with Taiwan during the Japanese colonial period, will be considered as Taiwanese in this chapter. However, merchants from Quemoy, which belongs to the post-1949 Republic of China in Taiwan but did not belong to Japan prior to 1945, such as the owner of Taiyihao, a company heavily involved with Taiwan–China trade, are not regarded as Taiwanese merchants.

2. Economic Ties of Taiwanese Merchants 2.1. Migration Prior to 1895, migrants generally flowed from Mainland China to Taiwan, which was then a relatively new Chinese settlement (Lin 2002b: 275–9). After Taiwan’s cessation to Japan, rich merchants and bureaucrats, followed by ronin (scoundrels) moved from Taiwan to China, in much the same way as Xiamen (Amoy) merchants moved back to their home areas when the United States occupied the Philippines (CMC, Trade Reports and Returns, Amoy, 1899: 454). Since Chinese nationality law recognizes bloodline as the basis for nationality and the Treaty of Shimonoseki acknowledged that the Taiwanese could obtain Japanese nationality even in China, Taiwanese who moved to China could, in effect, obtain dual nationality until 1911 when a new Chinese nationality law was enforced. Even after 1911, Taiwanese

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usually had relatives either in Fujian or in Guangdong, from where many people had emigrated. At that time foreigners could not purchase land in China, or be employed by Chinese, whereas Taiwanese could. At the same time, Taiwanese did not have to pay the transit tax called lijin that was required of Chinese. Furthermore, Taiwanese of Japanese nationality could obtain the extraterritorial protection of the Japanese consuls residing in the treaty ports (Taiwan Sotokukanbo Gaijika 1937: 18–19; Nakamura 1980: 424). Although the Taiwanese of this category were in consequence hated and discriminated against by the Chinese, they had some advantages when investing in China. Of course, Taiwanese merchants who kept their Chinese nationality also invested in China but lacked such advantages and disadvantages. Colonial Taiwanese migrants most commonly resided in Fujian, Guangdong, Shanghai, and Manchuria, and the total number of Taiwanese living in China increased from the 1900s to the 1930s. For example, the Taiwanese population in Fujian and Guangdong was only 335 in 1907 but reached 12,900 in 1936. In Xiamen, which had the largest number of Taiwanese in Mainland China, the Taiwanese population increased from 2,800 in 1917 to 6,000 in 1924, to 6,800 in 1929, and 10,217 in 1937 (Taiwan Sotokukanbo Gaijika 1935: 8). Including 7,000–8,000 nonregistered Taiwanese, Xiamen had about 18,000 Taiwanese in 1937. In the same year, Fuzhou had 2,000, and Zhangzhou and Quanzhou several hundred each (Lin 1994: 71). Between 20,000 and 21,000 Taiwanese resided in the whole province of Fujian. Proximity and common ancestry drew many Taiwanese to Xiamen, Fuzhou, and Shantou (Swatow: see Map 10.1). Xiamen in particular, which was only a one-day boat trip from Taiwan and which shared similar languages and customs with most Taiwanese people, drew Taiwanese merchants most. In Fuzhou, Shantou, and especially in Xiamen, the population of Taiwanese was even greater than that of the Japanese, as can be seen in Table 10.1. From 1905 onward the Osaka Shipping Company intensified its shipping activity between South China and Taiwan. In addition to the original lines between Hong Kong and Tamsui and between Hong Kong and Anping, routes to Xiamen, Fuzhou, Yokohama, Gaoxiong, Guangzhou, and Shantou were added and the frequency of departures was increased (Taiwan Nichi-nichi Shinpo, M37.12.13; Osono 1921: 65). Along with the Osaka Shipping Company, the private Yamashita Shipping Company navigated between Taiwan and Xiamen–Shantou–Hong Kong–Beihai under the orders of the Japanese government (Osono 1921: 66). These shipping lines facilitated the movement of Taiwanese merchants to South China. Most of the Taiwanese who went to Shanghai had previously migrated to Fujian and Guangdong provinces. The number of Taiwanese in Shanghai was 616 (386 men and 230 women) in 1935, 651 (408 men and 243 women) in 1936, and 678 (423 men and 255 women) in 1937. As anti-

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221

N

Fuzhou

Tatoitia Banqiao

Jilong

Fujian Zanghua Xiamen

Lugang

Wufeng

Tainan Shantou

Gaoxiong

Guangzhou

Taiwan Hong Kong

Guangdong

0

100

200

300 miles

Map 10.1. Cities across the Taiwan Straits. Table 10.1. Taiwanese and Japanese population in China as of April 1, 1936 Population

Fuzhou

Xiamen

Shantou

Guangzhou

Hong Kong

Japanese Taiwanese Total

385 1,777 2,162

420 10,217 10,637

135 605 740

416 147 563

1,427 179 1,606

Source: Taiwan Sotokukanbo Gaijika (1937: 13). Notes: The total represents a sum of Taiwanese and Japanese figures, and is somewhat different from the total shown in the original source.

Japanese sentiment in Shanghai was intense, many Taiwanese pretended to be Chinese, so the actual number of Taiwanese may have been as high as 800 (Tekishu-sei 1938: 160). Although there was direct navigation between Taiwan and Shanghai in 1901, commerce changed little for over thirty years. Husked rice and coal constituted 63 percent of its cargo space, and passengers 18 percent. This was very different from lines between Taiwan and Fuzhou in which passengers took up 82

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Man-houng Lin

percent of the space and commercial cargo 9 percent. There were 11,000 passengers between Taiwan and Fuzhou every year and another 1,500 passengers between Shanghai and Fuzhou (Yoshikai 1938: 179). The Shanghai dialect was different from Taiwan’s, and anti-Japanese sentiment there was intense prior to 1931. Hence, relatively few Taiwanese went there. However, after the Mukden Incident of 1931, many soldiers were sent from Taiwan to Shanghai and many more Taiwanese merchants became involved in trading goods for the Japanese war with China (Tekishu-sei 1938: 157–9; Yoshikai 1938: 183–4). The number of Taiwanese in Manchuria increased from 60 in 1911, to 500 in 1932, and 600 in 1938 (Shengjing Shibao, 1938.8.9). Before the Mukden Incident no direct line between Taiwan and Manchuria existed. Passengers and cargo had to go indirectly on the Osaka–Dalian and Osaka–Taiwan lines. After the Mukden Incident, both the Osaka Shipping Company and the Japanese Post Shipping Company opened direct lines between Gaoxiong or Jilong and Dalian, thus passing through either Shanghai or Tianjin. In every place where Taiwanese settled, a Taiwanese association sponsored by the Japanese consul was established to promote trade across the Taiwan Straits, and provided some or all of the following services (Tekishu-sei 1938: 159; Nakamura 1990: 129): 1. kindergartens or schools to prepare children for Japanese elementary education; 2. boarding places for newcomers or travelers; 3. employment agency services; 4. financial pools to circulate capital; 5. language classes in Japanese or translation services between Taiwanese, Japanese, and Chinese; 6. services for mutual aid, arbitration of conflicts, and common welfare for the Taiwanese living there. From Table 10.2, it can be seen that the amount of land owned by Taiwanese in Xiamen increased drastically after 1895, rising from only 273 tsubo (one tsubo equals 3.306 square meter or 35.6 square feet) in 1895 to 101,264 tsubo in the 1930s. If rented or mortgaged land is included, Taiwanese in Xiamen had 126,659 tsubo of land by 1937. The land ownership or rental provided a basis for Taiwanese investment in China.

2.2. Investment Huang Chengzhang from Tatoitia (center of Taipei in the Japanese colonial period) who went to Fuzhou to open a pawnshop, and Huang Jinliu from Mengjia (center of Taipei in Qing period) who opened a firm dealing in shipping materials in the suburbs of Fuzhou, were typical examples of

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223

Table 10.2. Land owned or rented by the Taiwanese in Xiamen Category Owned before 1895 Inherited after 1895 Owned through purchase or donation after 1895 Rented after 1895 Mortgaged land Total

Land area (tsubo) 273 9,846 101,364 13,878 1,298 126,659

Source: Taiwan Sotokukanbo Gaijika (1937: 14–15).

Taiwanese merchants who invested in China (Nakamura 1980: 427–8). The Taiwanese in Xiamen, Fuzhou, and Shantou generally opened family firms dealing in foodstuffs such as rice, teas, soft drinks, tobacco, wines, ice, fruits, confectionery, marine products, and molasses; items relating to clothing such as textiles, dyes, jewelry, leather, gumshoes, laces, eyeglasses, and sundries; transportation equipment such as bicycle parts and repair tools for ships; medical materials such as alcohol, ginseng, medicine, and medical equipment; residential materials such as cement, charcoal, furniture, lumber, and tiles; luxury items such as porcelain, paper, toys, stationery, clocks and watches, antiques, and incense; production materials such as fertilizer, machines, and nails; and general services such as real estate, printing, restaurants, delivery, native banks, pawnshops, trust companies, and foreign trade companies (Uchida 1927: 12; Taiwan Sotokukanbo Gaijika 1937: 21–2; Nakamura 1990: 134). The Taiwanese in Shanghai concentrated on real estate investment (Tekishu-sei 1938: 160). In Guangzhou many Taiwanese students engaged in business; money exchange, raw silk, and charcoal constituted their main trade (Taiwan Sotokukanbo Gaijika 1935: 8). Taiwanese merchants in Hong Kong had no advantages over Chinese merchants and the few Taiwanese merchants there focused on foreign trade and sundries (Taiwan Sotokukanbo Gaijika 1935: 8). After 1931, many Taiwanese set up trading companies in Manchuria and when the tariff on tea imported from Anhui and Fujian was raised, after the Mukden Incident, many Taiwanese tea merchants also went there. Two tea merchants from Taipei, Lin Jianyin and Wang Zuozhou, set up the Yongan Company in 1934 to sell Taiwanese tea to Manchuria (Shengjing Shibao, S10.1.15). By 1935, six of the twenty Manchurian tea merchants specialized in selling Taiwanese tea (Shengjing Shibao, S11.3.27) and in 1937, a Taiwanese tea merchant association was set up to promote the sale of tea in Dalian (Shengjing Shibao, S13.1.27). In 1935, rich merchants from Taizhong set up a company that specialized in selling Taiwanese bananas, pineapples, sweet potatoes, and camphor in Manchuria (Shengjing Shibao, S11.2.2).

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On the darker side, some Taiwanese merchants, protected by their extraterritorial rights, operated opium shops, brothels, and gambling houses. In the suburbs of Fuzhou, perhaps 30 percent of Taiwanese were engaged in the opium trade (Taiwan Sotokukanbo Gaijika 1935: 8; Nakamura 1990: 435–8). Some Taiwanese ran businesses called benriya (convenient shops), which were engaged in semi-smuggling and sold Japanese products brought in by the Taiwanese without paying Chinese customs’ revenues (Taiwan Sotokukanbo Gaijika 1935: 22–3). Taiwanese ronin took on the leadership role among the gangsters in Fujian (Taiwan Sotokukanbo Gaijika 1935: 8; Nakamura 1990: 435–8). In terms of size, most of the businesses in which Taiwanese merchants were involved were of a small scale. In 1910, among the 251 registered Taiwanese merchants, 70 percent had capital of between 1,000 and 8,000 yen (Nakamura 1980: 429). However, some Taiwanese had greater capital and in 1929 twenty Taiwanese firms engaged in business in Xiamen had capital exceeding 100,000 yen, which superseded local Chinese merchants (Taiwan Sotokukanbo Gaijika 1935: 21). In the same year in Fuzhou, fourteen Taiwanese firms had capital exceeding 100,000 yen (Taiwan Sotokukanbo Gaijika 1935: 20), and their local political–economic power exceeded any local Chinese group until 1933 when many Chinese students, who had been studying abroad, returned (Nakamura 1990: 134). In 1934, Shantou had fourteen Taiwanese firms with capital exceeding 100,000 yen (Taiwan Sotokukanbo Gaijika 1937: 24–5). In Xiamen, large Taiwanese enterprises included agricultural plantations, coal mines, and manufacturing businesses (Taiwan Sotokukanbo Gaijika 1935: 16). Examples of the last category include (1) a Taiwanese leather factory that in 1920 possessed capital of 62,500 yen; (2) a Taiwanese ice factory that in 1928 was manned by twenty-two workers and produced five tons of ice a day; (3) a Taiwanese wine factory that in the same year employed eighty workers, had annual production of 110,000 yen, capital of 650,000 yen, and a net profit of 50,000 yen; and (4) a crystal sugar factory that was set up in 1917 with capital of 100,000 yen, employed sixty workers, and used Java sugar to make crystal sugars to sell in Tianjin and Shanghai, producing 12,000 boxes annually (one box contained 40 kg) and bringing in annual revenues of 20,000 yen (Taiwan Sotokukanbo Gaijika 1935: 16). Examples from other areas include a Taiwanese shoe factory in Fuzhou that in 1914 employed thirty-two workers, had capital of 45,000 yen, and annual production of 26,000 yen. Some major investors in such enterprises were members of prominent Taiwanese families who had not converted to Japanese nationality. For example, in Xiamen in 1933, the Xiamen Telephone Company, which had capital of 300,000 yen, was owned by a Taiwanese merchant with Chinese nationality, Lin Erjia. Lin Erjia was the offspring of the Lins of Banqiao

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225

who were Taiwan’s richest family (CMC, Trade Reports and Returns, Amoy, 1907: 442; Kato 1933: 109; Taiwan Nichi-nichi Shinpo, M38.5.26). The Lins of Banqiao’s companies were variously registered as Chinese, Japanese, French, and English companies, exploiting their respective advantages (Lin 2001b: 94–5; the multiple-nationality phenomenon of Chinese merchants is detailed in Lin 2001c). The Lins of Banqiao had other large investments in Fujian, and Lin Erjia served as the chairman of the Xiamen Chamber, helping it in 1907 to set up a company to provide electric lighting. The total capital of that company was 1.2 million yen, half of which came from Lin Erjia himself (Taiwan Sotokufu 1935: 9). In 1909, Lin Erjia was invited by his son’s father-in-law and the Qing emperor’s mentor Chen Baochen, to build a railroad in Fujian; then in 1918 he helped to build a highway between Anhai and Quanzhou (CMC, Decennial Report, 1912–21, Amoy: 159; Lin Benyuan jisi gonghui 1985: 54–5). Lin’s help was also crucial for the establishment of the Electric Power Company in Quanzhou. When Sun Yixian started promoting modern industries, notables in Quanzhou tried to establish a power company but the capital that they raised was little more than 10,000 yen, which was far from enough. Through the invitation of the Kong family, who were marital relatives to Lin Erjia, Lin invested more than 80,000 yen, 85 percent of the total capital. Lin’s investment made possible the purchase of a powerful generator to initiate Quanzhou’s first electric power company. From 1913 to 1922, Lin Erjia’s family continued to direct this company and make other investments (Fujian sheng 1987: 5–6). In 1915, Lin Erjia’s eldest son, together with a relative surnamed Cai, invested 500,000 yen in an enterprise to open coal mines in Anxi (Nakamura 1988: 264). Lin Xiongxiang, the nephew of Lin Erjia, invested in motor and lumber companies in Fuzhou and lent several million yen to the Fujian provincial government (Lin 1929: 64; Taiwan Sotokukanbo Gaijika 1935: 17; Nakamura 1990: 139). By 1937, the loan from Taiwan for the Fujian provincial government came mainly from the Lins of Banqiao (Nakamura 1988: 264). Another nephew of Lin Erjia, Pengshou, was doing business between Taiwan, Xiamen, and Shanghai and made a great deal of money. Pengshou’s younger brother, Heshou, owned considerable real estate in Shanghai (Lin Benyuan jisi gonghui 1985: 73). The Lins of Banqiao also owned a sugar company in Tongan, which produced sixty tons of sugar a day (CMC, Decennial Report, 1902–11, Amoy: 109). Lin Chaodong of the Lins of Wufeng, another big family in Taiwan, kept his Chinese nationality when he moved to China after 1895, and he too had considerable investments in Fujian. Lin Chaodong was the son of Lin Wencha, who had used his local militia to serve the Qing government during the Taiping Rebellion and had played a crucial role in the establishment of the Lins of Wufeng as a prominent lineage. Lin Chaodong had

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used 6,000 silver taels to purchase the monopoly for producing and exporting camphor in Fujian (Taiwan Nichi-nichi Shinpo, M34.9.5; CMC, Decennial Report, 1892–01, Amoy: 109). His several sons were involved in the construction of a canal and a railroad, and in the installation of steam pumps to irrigate 2,000 chia of land in Fujian (Taiwan Nichi-nichi Shinpo, T6.1.7; CMC, Decennial Report, 1892–1901, Amoy: 140).

2.3. Direct trade across the Taiwan Straits The Taiwan Nichi-nichi Shinpo pointed out that, ‘‘[In 1900], most merchants trading between Taiwan and Xiamen were Taiwanese merchants of Japanese nationality’’ (Taiwan Nichi-nichi Shinpo, M33.11.25, Chinese section). Taiwanese merchants participating in the cross-Straits trade came from various parts of Taiwan. For example, Yang Shiying and Zheng Youfu, from the central part of Taiwan, went to Yongding in Fujian in 1917 to buy tobacco to bring back to Taiwan (Taiwan Nichi-nichi Shinpo, T6.1.7). Also in 1917, merchants from northern Taiwan, like Jian Aniu of Taoyuan, established a firm in Dalian in Manchuria to export fertilizer to Taiwan (Taiwan Nichi-nichi Shinpo, T6.3.29). In 1918, Lin Zhenguo from Tatoitia specialized in trade with Shantou (Taiwan Nichi-nichi Shinpo, T7.12.16). Other merchants from Jilong went directly to Fuzhou to buy Chinese firs (Taiwan Nichi-nichi Shinpo, T8.5.6). Merchants from southern Taiwan, like Jin Zucheng and Sun Qingbo, opened a store in Xiamen that sold sugar, rice, gold, and silver. Zhang Taochen from Jiayi went to Xiamen in his youth and served there in 1919 as a manager of foreign companies and was a committee member of the Taiwan Association of Xiamen (Taiwan Nichi-nichi Shinpo, T8.9.17). Until 1931, Taiwanese merchants mainly traded in South China, but thereafter this area was superseded by Manchuria. Before the Osaka Shipping Company opened direct lines between Japan and South China in 1932, a great deal of Japanese goods were sold to South China through Jilong, but after the opening of these lines this indirect trade declined (Ide 1931: 47). Central China was the third destination of Taiwanese traders after South China and Manchuria in both periods. North China was insignificant in such trade before Japan seized control there after 1938 (Table 10.3). In general, Taiwan exported agricultural products such as rice, tea, hemp, and sugar to China in this period and the re-export of Japanese cloth, dried fish, coal, and matches became increasingly important. In return, China sold timber, paper, cloth, and tobacco to Taiwan (Taiwansheng wenxian weiyuanhui 1971: 174–82). The trade with central China increased after 1931 and was composed of iron bars, timber, tiles, cement, sugar, oranges, coal, alcohol from Taiwan and rice husks, beans, garlic, and raw cotton from the mainland (Yoshiake 1938: 183). After 1931, Taiwan’s trade with Manchuria consisted of bean cake, beans, and fertilizer from Manchuria, and tea, sugar, rice, and fruits such as pineapple,

Table 10.3. Trade between Taiwan and China by areas, 1925–39 (yen) Year

North

1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

2,674,000 1,256,000 739,205 1,039,687 862,715 587,018 1,102,547 1,782,870 764,023 817,187 1,916,949 853,334 938,417 2,472,674 12,193,160

Percent 4.5 2.0 1.0 2.4 1.8 1.8 4.6 6.5 2.6 2.3 4.0 1.8 2.3 4.5 11.4

Central 10,219,000 8,580,000 7,459,808 5,732,701 7,497,682 5,190,787 4,072,872 2,817,872 4,797,696 4,988,038 7,099,542 6,129,066 3,600,932 5,139,176 10,297,249

Percent

Southern

Percent

Manchuria

Percent

17.4 13.8 15.0 13.3 15.3 16.0 16.9 10.3 16.3 14.2 15.2 13.2 9.0 9.8 9.7

23,279,000 29,923,000 25,529,428 17,541,893 20,107,247 11,940,489 8,120,691 6,053,156 4,415,144 8,029,052 9,712,070 8,339,114 5,288,628 926,184 12,849,535

39.6 48.2 50.0 40.7 40.9 36.6 33.7 22.2 15.0 22.9 20.8 17.9 13.2 1.7 12.1

— 22,315,000 17,331,638 18,749,387 20,684,600 14,852,678 10,791,173 16,655,986 19,462,056 21,229,449 28,053,159 31,242,738 30,431,898 45,518,159 71,022,122

— 36.0 34.0 43.5 42.0 45.6 44.8 61.0 66.1 60.6 60.0 67.1 75.6 83.9 66.8

Total 58,808,000 62,074,000 51,060,079 43,063,668 49,152,244 32,570,972 24,087,283 27,309,351 29,438,919 35,063,726 46,781,720 46,564,252 40,259,875 54,236,193 106,362,066

Sources: For 1925–27, Taiwan Sotokufu Kanbo Chosaka (1927: 170). For 1927–36, Taiwan Sotokukanbo Gaijika (1937: 43). For 1937–39, Taiwan Sotokufu Zaimukyoku (1940: 1).

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banana, and watermelon from Taiwan (Kishizawa 1939: 25–34; Shengjing shibao, S9.3.30, 9.10.28). In terms of travel, contemporary immigration laws pertaining to Taiwan and to Japan were different; a travel permit was required to go from Taiwan to China, but was unnecessary to go from Japan to China. Hence, many Taiwanese went to China via Japan (Taiwan Nichi-nichi Shinpo, T13.7.6). For example, in 1918, some Taiwanese merchants went to Japan to buy paint to sell in South China (Taiwan Nichi-nichi Shinpo, T7.11.24), and in 1919 a large amount of Taiwan sugar was exported to Manchuria through Japan (CMC 1919: 14–15). Almost all crucial Taiwanese merchants in the colonial period took part in the trade across the Taiwan Straits. For instance, the Lins of Banqiao had several chief managers to oversee their investments in the crossStraits trade. Around 1919, the third branch chief manager, Yang Runbo, set up the Taifenghang in Tatoitia to engage in trade with Fuzhou, Shanghai, Shantou, and Xiamen where branch stores had already been established (Uemura 1919: 208). The first branch chief manager, Xu Zhigui, was engaged in the alcohol business between Taiwan and China (Lin 1929: 50, 56). In 1919, the Lins of Banqiao and Gu Xianrong’s family jointly owned a company to trade between Tatoitia and Hong Kong (Lin 1929: 50, 56). In 1920, Gu Xianrong established a company that specialized in the export of timber from Taiwan to China (Sima 1987, Vol. 1: 110). Guo Chunyang, who exported two-thirds of Taiwan’s Paozhong tea to Southeast Asia, had branch stores in Taiwan, Xiamen, Zhangzhou, Shanghai, Hankou, Tianjin, and Hong Kong, and accumulated several million dollars (Lin 1929: 56). The Lins of Wufeng also had Lin Jietang trading cotton yarns and cotton cloth from Kobe through Taiwan to Fuzhou (Taiwan Nichi-nichi Shinpo, T6.1.7). The ‘‘Sugar King’’ Chen Zhonghe sold sugar to China in addition to his original business practice of exporting Taiwanese sugar to Japan (Lin 1929: 8). Some less well-known Taiwanese merchants also monopolized the trade in certain products. The Taiwan Nichi-nichi Shinpo reported in 1919 that the re-export of Japanese textiles through Taiwan to China was monopolized by an unnamed Taiwanese merchant. This may have been Zhou Ziwen for the same newspaper mentioned in 1918 that the Jenmei Company, which was set up by Zhou, sold Japanese marine products and textiles to South China and Southeast Asia, and his manager Chen lived in Kobe and was familiar with the Japanese situation (Taiwan Nichi-nichi Shinpo, T7.1.6). Zhou was a native of Mengjia and set up joint-stock companies in Shanghai and Singapore. He was the first Taiwanese living in Xiamen to receive the Japanese Government’s gentry badge (Taiwan Sotokufu 1916: 58).

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2.4. Navigation and finance 2.4.1 Navigation According to the Amoy Gazetteer, the Qing government required that junks owners operate their own crafts, that is, rentals to the poor was an activity from which the ‘‘rascals’’ were strictly prohibited. Magistrates were expected to enforce the ban, and the failure to do so was punishable by the loss of one year’s salary if the official was unaware of the offense, or by a demotion by two ranks if he knew about it but failed to act on it (Lin 1991b: 143–4). In these circumstances, ships operating across the Taiwan Straits were for the most part owned by rich mainland merchants (Zhou 1962, juan 6, taiyun). For example, until 1902–6, most of the junks sailing between Fuzhou and Taiwan were owned by merchants from Quanzhou prefecture (CMC, Decennial Reports, 1902–06, Fuzhou Native Custom Reports: 172). In the colonial period, Taiwanese merchants were not only able to purchase, but also could hire ships to trade with China. As early as 1898, the Lins of Banqiao profitably hired ships for 80,000–90,000 yen to go to Tianjin to buy white fish, wines, and sweets (Taiwan Nichi-nichi Shinpo, M31.11.13; M31.22.15). This was followed by another merchant who hired foreign steamers at Shanghai to ship products from North China back to Xiamen and Tamsui (Taiwan Nichi-nichi Shinpo, M31.11.8; M31.11.29). In 1898, the Japanese government started to allow the Taiwanese to buy sailing boats and obtain licenses to operate them (Taiwan Nichi-nichi Shinpo, M31.11.1). In 1917, Ouyang Guanghui of Mengjia purchased five sailing boats in China to carry timber (Taiwan Nichi-nichi Shinpo, T6.10.23). Taiwanese merchants also purchased steamers. In 1898 a group of Taiwanese merchants, including the Lins of Banqiao, jointly purchased a steamer to compete with the British Douglas Company which monopolized steamer navigation between Taiwan and China. The Taiwanese steamer sailed three times a month between Hong Kong, Xiamen, and Tamsui at rates lower than those of the Douglas Company (Taiwan Nichi-nichi Shinpo, M31.6.23, 31.7.24). However, this Taiwanese steamer company failed within the space of half a year, due to the owners’ lack of experience in handling maritime problems (Taiwan Nichi-nichi Shinpo, M31.12.1). Other Taiwanese businessmen also purchased steamers and it was reported by Taiwan Nichi-nichi Shinpo in 1904 that the Taiwanese merchant Chen Youwen had accumulated his wealth by investing in steamers (Taiwan Nichi-nichi Shinpo, M37.11.5). In Lugang (a port in central Taiwan) and Tatoitia, Taiwanese merchants owned a total of eight steamers of between 40 and 150 tons as well as several sailing boats that were used partly in the cross-Straits trade.

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2.4.2. Finance Before the Japanese occupation of Taiwan, Taiwanese already operated remittance banks in Tatoitia and Xiamen to provide the remittance services required both for Taiwan’s export of tea through Xiamen to the United States and for other trades between Xiamen and Taiwan. Some pawnshops also provided credit for the export of tea (Taiwan Ginko 1902: 47). After 1895, some merchants involved in banking activities left Taiwan for China. Moreover, as the export of camphor and the import of opium became a monopoly of the colonial government, Taiwanese merchants’ need for the services of remittance banks decreased. There were eighteen or nineteen banks operating around the time of the Japanese takeover, but by 1902 only four banks remained. Among them, three had main offices in Xiamen and branch offices in Tatoitia. The fourth had its main office in Taipei and a branch office in Taizhong and had been invested in by Gu Xianrong who provided 10,000 yen of capital. Of the three other banks with main offices in Xiamen, one was invested in by the Chen and Lin families and had 10,000 yen of capital. The second largest, with 60,000 yen of capital, was invested in by the Lins of Banqiao’s clan property (jointly owned by all clan members) together with the Wang and Xu families. The Lins of Banqiao quickly emerged as the leaders in financing the cross-Straits trade in the early colonial period. The largest bank, with 10,000 yen of capital, was called Jianxianghao and had been invested in by Lin Heshou of the Banqiao Lins, who later acquired a great deal of real estates in Shanghai. In 1902, Jianxianghao was able to acquire all native banks in Xiamen to lead the improvement of their business (Taiwan Nichinichi Shinpo, M35.4.6). From January 1 to 11, 1904, at the end of the Chinese lunar year, when accounts for the business across the Straits were settled, 502,270 yen was forwarded from Taipei to Xiamen, and Jianxianghao itself had forwarded 500,050 yen (Taiwan Nichi-nichi Shinpo, M37.1.14). In addition to Xiamen, Lin Heshou had remittance banks in Shanghai and Kobe (Uemura 1919: 190) and in 1910, Lin Heshou’s brother Songshou opened remittance banks in Shanghai (Lin 1929: 1). Around 1905, financing the trade across the Straits became lucrative enough to attract new investors (Taiwan Nichi-nichi Shinpo, M38.4.8). In 1904, the four remittance banks in Taipei charged two dollars as commission to forward exchange bills of 1,000 dollars to Xiamen, Shanghai, and Hong Kong; three dollars to remit the same to Kobe and Fuzhou, and remitting to Taichou and Wenzhou, where there were no branch stores, cost five dollars (Taiwan Nichi-nichi Shinpo, M37.9.3). The Shi family of Lugang, the Wu family of Zhanghua, and Chen Tianlai, the head of the tea association in Tatoitia, all set up native banks to finance the cross-Straits trade. In 1902, a rich merchant in Lugang called Shi Fanqi, set up a Yongquan native bank in Xiamen and a Dingxing Company in Lugang, with branches in Zhanghua and Tatoitia. The branch in Tatoitia was

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particularly heavily involved in the cross-Straits trade (Taiwan Nichi-nichi Shinpo, M35.12.5). The Lins of Wufeng, in 1902, and the Wus of Zhanghua, in 1917, also set up native banks in Xiamen (Taiwan Nichi-nichi Shinpo, M35.11.19; T6.1.7). Chen Tianlai had branch exchange stores or agents in Tainan, Xiamen, Shanghai, Fuzhou, Hong Kong, and Kobe (Lin 1929: 33). In 1920, the Taiwan Nichi-nichi Shinpo remarked, ‘‘A lot of Taiwanese merchants lend money in Xiamen’’ (Taiwan Nichi-nichi Shinpo, T6.1.7). By 1935, native banks, mainly capitalized by Taiwanese investors, managed 70 percent of the payment for the cross-Straits trade and had surpassed the Taiwan Bank in importance (Ide 1931: 52). It was not until 1937, when the Japanese occupied Xiamen, that the Taiwan Bank gained full control over Xiamen’s financial sector, including the trade across the Straits (Miyagawa 1923). Despite their apparent prosperity the native banks had many defects and Taiwan’s modern banks were all Japanese banks. Jianxianghao’s manager, for example, stole the bank’s money, causing the whole business to fail (Taiwan Nichi-nichi Shinpo, T11.8.4). Furthermore, since the native banks relied mainly on ‘‘trust’’ credit, interest rates tended to be high. Lin Erjia’s younger brother, Lin Pengshou, established the Taiwan Industrial and Commercial Bank in 1926 (Lin Benyuan jisi gonghui 1985: 45–6). The Xiamen branch of the Taiwan Industrial and Commercial Bank was headed by Lin Mutu. Lin was a native of Banqiao and a good friend of Lin Xiongxiang (Lin 1929: 15). The Fengnan Company, opened by Lin Mutu, had 500,000 yen of capital, and took charge of 5 million yen of exchange bills across the Straits in 1927 (Taiwan Sotokukanbo Gaijika 1937: 21; Tekishu-sei 1938: 107, 124). In 1917, a good friend of the Lins of Banqiao, Gao Dilong, invested 500,000 yen in the Taiwan Financial Company in Tatoitia which was also involved in the cross-Straits trade (Taiwan Nichi-nichi Shinpo, T6.2.23). Under the encouragement of the Japanese government, the Lins of Banqiao also set up the Bank of Southern China in 1919 to promote trade with South China and Southeast Asia (Taiwan Nichi-nichi Shinpo, T8.3.15). Lin Erjia’s son, Lin Xiongzheng, appointed Hideyuki Nakayama, a Japanese who had investigated Xiamen’s economic situation, as adviser. Nakayama had been a classmate of both the head of the Civil Engineering Bureau and the head of the Monopoly Bureau of the Government-General of Taiwan and it was as a result of Nakayama’s persuasion that Lin agreed to open the Bank for South China (Uemura 1919: 214).

3. Japanese Government Policies Japanese government policies towards Taiwan–China trade went through important changes during the period under review. In the Meiji

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period, just after Taiwan had been ceded to Japan, it tried to ban the trade between Taiwan and China. Meanwhile, some Taiwanese ronin were sent to China to serve as intelligence for the Japanese invasion. In the Taisho period, the Japanese government took advantage of the economic prosperity brought by World War I and promoted the economic development of South China and Southeast Asia. Then, in the Showa period under the influence of the post-World War I depression, a series of military invasions of South China and other countries in Southeast Asia were attempted (Yano 1978; Nakamura 1988: 5–11). The Japanese, as part of their plan to develop China economically, encouraged trade by Taiwanese merchants in China, especially in the 1920s and 1930s (Taiwan Nichi-nichi Shinpo, T13.1.19). However, in contrast to the direct support offered to Japanese merchants, the assistance Taiwanese merchants received from the Japanese government was basically indirect. The sponsorship of the Bank of Taiwan is one example. After it was established in 1899 in Taiwan, the bank started to finance trade and remittances between Taiwan and China (Taiwan Nichi-nichi Shinpo, M33.6.16, 33.6.1, 33.6.28; T11.11.14). From 1899 to 1918, Japanese businesses operating in South China increased fivefold, which to some extent was as a result of the support of the bank (Huang 1919: 94). The help the Taiwanese merchants obtained from the bank took the form of its support for Taiwanese associations, schools, hospitals, and newspapers in cities where the Taiwanese resided (Huang 1919: 95). Japanese government funding for the development of South China and Southeast Asia was not abundant. In 1923, the budget for this purpose was 800,000–900,000 yen, of which 434,100 yen was used to support hospitals that the Japanese government set up in Xiamen, Guangzhou, Fuzhou, and Shantou; 90,700 yen was used to support primary schools for Japanese children in Fuzhou, Xiamen, and Guangzhou, ‘‘academies’’ in Fuzhou and Xiamen for Taiwanese children, an ‘‘academy’’ in Shantou for Japanese and Taiwanese children; 41,000 yen was used to support the Japanese newspapers issued in Fujian; 765,000 was employed to support Japanese government workers in the Bureau of Telcommunication in Guangzhou; and the remainder was mostly used in Southeast Asia. Only 20,000 yen was used to support the Bank of South China, which was concerned with the development of South China, and this was only a tiny fraction of the Bank’s 10 million yen of capital (Taiwan Minbao, 1939.4.11). Politically, the Taiwanese merchants were in some ways aided and in others hurt by the activities of the Japanese government. As Japan was one of the great powers in China at that time, having a Japanese nation-

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ality provided protection for Taiwanese merchants (Taiwan Minbao, 1939.10.25; Taiwan Nichi-nichi Shinpo, T14.10.25) who could also use the hospitals, schools, and newspapers that the Japanese government provided there (Taiwan Nichi-nichi Shinpo, T14.10.25). At the same time, this Japanese affiliation made the Taiwanese merchants targets of a series of anti-Japanese movements and boycotts of the Republican period (CMC 1919, Swatow: 997; 1920, Swatow: 19; Taiwan Nichi-nichi Shinpo, M35.3, T8.10.31, T8.11.1, T8.11.2). Furthermore, the reputation of Taiwanese merchants was sometimes damaged by the Taiwanese ronin who opened opium dens, brothels, and gambling stores, and even committed crimes, sometimes with the support of the Japanese government (Taiwan Minbao, 1939.10.25).

4. Historical Implications 4.1. Increased opportunities for the Taiwanese merchants to engage in direct foreign trade As the direct trade between Taiwan and Mainland China was primarily controlled by the latter before 1895, the involvement of Taiwanese merchants had been focused on indirect trade (long-distance trade passing through Xiamen or Hong Kong) between Taiwan and Mainland China in 1860–95 (Lin 2001a). In comparison with the limited involvement of Taiwanese merchants in indirect trade between Taiwan and Mainland China between 1860 and 1895, we can see from the increase in land owned by Taiwanese in Xiamen (276 tsubo in 1895 to more than 10,000 tsubo in 1935) that the native Taiwanese greatly expanded their investments in China after 1895. Along with the investment and trade with Fuzhou, Shantou, Guangzhou, Shanghai, and Manchuria, this indicates vastly increased investment by Taiwanese merchants in China. After carrying many accounts of Taiwanese merchants’ trading activities in China, Taiwan Nichinichi Shinpo noted in 1918 that, ‘‘In recent years, it could be seen that the native Taiwanese had expanded their activities abroad’’ (Taiwan Nichi-nichi Shinpo, T7.11.24). These developments are indicative of the increased direct foreign trade experience of Taiwanese merchants. Reversing the inward flow of capital from mainland China to Taiwan that had continued for more than two centuries (Lin 1997: 79, 2002b: 284–90), the development of such activities generated a steady flow of capital from Taiwan to China, not unlike what is currently happening.

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4.2. Increased exposure to the multiple political and cultural identities Those engaging in foreign trade inevitably encounter problems with political and cultural identities and this was a pressing problem for the Taiwanese merchants in the colonial period. Lin Xiantang of the Lins of Wufeng, for example, was the head of the peaceful anticolonial home-rule movement in Taiwan. But he responded to the Japanese government’s call to develop a storage business in China, as he thought that it could help China’s development (Sima 1987, Vol. 1: 110). The desire to trade with China gave Taiwanese merchants an incentive to learn Mandarin, allowing for better communication outside of Fujian (Taiwan Nichi-nichi Shinpo, T8.3.22, 6.1.21). In selecting schools for their children, Taiwanese merchants had to decide between Chinese schools and Japanese schools. Some Taiwanese merchants in Shanghai who insisted on choosing Chinese schools had to send their children to Japanese schools after Japan occupied Shanghai (Tekishu-sei 1938: 157–9). In Tatoitia, people had to observe the Japanese New Year and not set off firecrackers or gamble during the Chinese New Year, yet, they still settled accounts before the Chinese New Year (Taiwan Nichi-nichi Shinpo, T6.1.21). This ability to straddle cultures could be seen when they invited, in 1925, the most miraculous sea goddesses in Taiwan to welcome a Japanese prince who was visiting there (Taiwan Nichi-nichi Shinpo, T14.6.7). Gu Xianrong, who was the first Taiwanese appointed as a member of Japan’s Upper House, established the Confucian temple in Taipei, and Gu himself was deeply interested in Chinese opera (Sima 1987: Vol. 2: 101). Taiwanese merchants’ stores were seen in China as foreign investment and were called yanghang, or foreign stores. Furthermore, when these merchants purchased or rented ships to sail to China, they flew the Japanese flag (CMC 1908: 89a; 1914: 919; 1915: 965). Some Taiwanese merchants had cooperated with the Japanese merchants in investing in activities linked to trade with China. For example, the Yens of Jilong cooperated with Okura-gumi and Mitsui to export Taiwanese coal to China (Taiwan Nichi-nichi Shinpo, T6.2.1) and some Taiwanese worked for Japanese companies. The wealthiest Taiwanese in Canton, Lin Lisheng, was invited to work for the Osaka Shipping Company because of the skill he had demonstrated in working for the Douglas Shipping Company (Taiwan Nichi-nichi Shinpo, M35.11.19). Shi Fanqi of Lugang who had opened native banks in Xiamen and Taiwan was an adviser to the Bank of Taiwan in Xiamen and served as a comprador for a Japanese employment agency (Taiwan Nichi-nichi Shinpo, T6.1.7). Some Taiwanese merchants also had joint businesses with the Chinese as the Chinese tried to avoid taxation through such investments (Nakamura 1980: 429). Taiwanese merchants in China were associated with various kinds of political movements, benefiting or suffering from these involvements as

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various times. The joint venture of the Yen family of Jilong with Wu Peifu to open Shanxi’s coal mines was interrupted by the fall of Wu in 1927 (Sima 1987, Vol. 1: 55–6). Lin Chaodong’s son, Lin Jichang of the Lins of Wufeng, was loyal to Sun Yixian and was killed by Sun’s rivals (Taiwan Nichi-nichi Shinpo, T8.5.4). Lin Lisheng was closely affiliated with Sun Yixian and held high rank positions when Sun Yixian and his successor were in control of the Guangdong province, and was appointed the minister of finance when Sun Yixian’s protege was in power (Nakamura 1988: 264). However, Lin was removed when the Guangxi clique replaced Sun Yixian’s clique. In summary, Taiwanese merchants’ historical experiences were diverse. It seems reasonable to state that such a complex experience would have taught Taiwanese merchants to be flexible in facing the problems of political and cultural identity when they were involved in foreign trade after World War II.

4.3. Associations among the Taiwanese merchants Associations and interactions greatly facilitated the emergence of the merchant class in Taiwan. Large- or small-scale merchants often gathered at brothels to make acquaintances or to talk about business. Famous brothels that were frequented by merchants in Taiwan included Jiangshan lou, Chunfeng deyi lou in Tatoitia, Xin sheng lou in Taizhong, the islandwide chain of establishments including Dong Huifang (later changed to Penglai ge) in Tatoitia, Xi Huifang in Tainan, and Xin Huifang in Beitou. These gathering places reinforced the interaction among the Taiwanese merchants. Even leading merchants with different political inclinations maintained associations with each other. For example, the Lins of Banqiao, the Gu family, as well as the Chens of Gaoxiong were proJapanese. The Lins of Wufeng were leaders of the peaceful anticolonial movement. In fact, we see many associations involving those on both sides. During the Russo–Japanese War, the Japanese government had a fundraising campaign in Taiwan. According to the donation list, the Lins of Banqiao donated 800,000 yen, Gu’s family gave 100,000 yen, the Chens of Gaoxiong 125,000 yen, the Lins of Wufeng 72,000 yen, and Li Chunsheng and others gave 10,000–30,000 yen (Taiwan Nichi-nichi Shinpo, M37.3.10, 37.3.12). When Lin Erjia, Lin Heshou, and Lin Pengshou accompanied Fujian officials visiting Taiwan, the Lins of Banqiao took care of their visit to northern Taiwan and the Lins of Wufeng their visit to central Taiwan (Taiwan Nichi-nichi Shinpo, M38.1.13). When the son of Lin Chaodong, Lin Jishang, returned to Taiwan, he stayed in the Gu family house in Taipei (Taiwan Nichi-nichi Shinpo, T8.10.3). However, on another occasion, when Lin Jishang asked Gu Xianrong to sell camphor at a loss without adequate

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compensation, Gu brought a lawsuit against Lin (Taiwan Nichi-nichi Shinpo, M38.4.15). After these events of the Meiji period, the families seem to have made their peace and in the Taisho period the Lins of Banqiao and the Gu family organized a company to promote South China trade, and they employed Lin Chaodong’s prote´ge´ to take care of their Hong Kong business (Taiwan Nichi-nichi Shinpo, T8.10.3, 8.2.11). The Lins of Wufeng left photos taken at the Lins of Banqiao’s garden at Xiamen when the Lins of Wufeng visited China in 1936 (Lai 1989: 235). In addition to these informal associations, Taiwanese merchants trading on the mainland established associations either in a traditional or in a modern style. More than forty Jiayi merchants, who were selling longan fruit to the mainland, formed a traditional style guild in the temples (Taiwan Nichi-nichi Shinpo, T6.8.23). Particularly in the boom period of 1914–19, many associations of a modern style were formed. For example, merchants from Jilong organized an East China merchant association to trade with coastal China (Taiwan Nichi-nichi Shinpo, T8.4.12). One event revealed that Taiwanese merchants investing or trading in China enjoyed considerable influence in Taiwan. When tea merchants in Tatoitia elected a president for their association in 1904, competition for the post was intense and it was the candidate who got the support of compradors and Taiwanese merchants in China that finally won (Taiwan Nichi-nichi Shinpo, M37.11.9).

4.4. New concepts in corporate management 4.4.1. The use of a stock market to accumulate capital In 1905 when Lian Yatang, a famous intellectual and the grandfather of Taiwan’s crucial political leader, Lian Zhan, was preparing to establish a newspaper to promote trade between Taiwan and China, he and Shi Fanqi of Lugang issued stocks in Taiwan to acquire capital so as to purchase necessary machines (Taiwan Nichi-nichi Shinpo, M37.12.13). Although when Shinpei Goto invited Taiwanese merchants to buy the stocks of the Taiwan Sugar Company, they were unwilling as they did not feel secure with the stock ownership. By 1936, Taiwanese merchants had already become accustomed to holding or using stocks. Their purchase of Japanese stocks had an influence on Tokyo’s stock market, and the Taiwanese merchants even transferred their knowledge of stocks to Manchuria (Shengjing Shibao, S11.3.12, 11.3.13).

4.4.2. The protection of trademarks and the use of advertisements (a) Trademark. Before the Japanese colonial period, merchants’ trademarks were only protected by guilds (Taiwan Nichi-nichi Shinpo, T9.7.2). However, in the colonial period the protection of trademarks was reinforced by

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legal means. For example, in 1920, a divine money trade association in Tatoitia accused four stores of misusing their trademarks on divine money that had been smuggled from China. The four stores were punished by the Taipei Court (Taiwan Nichi-nichi Shinpo, T9.1.21). A similar case occurred in Tainan (Ino 1928/1965, Vol. 2: 14–16). (b) General advertisements. Newspapers of the colonial period carried advertisements of Chinese medicines and divine money from China in their pages. This was a new commercial practice as, prior to the colonial period, advertisements were limited to storefront signs and displays which only people who passed by the stores could see. Advertisement in newspapers vastly expanded the size of the market that could be reached by merchants both in Taiwan and abroad (Taiwan Nichi-nichi Shinpo, M38.3.19). (c) Advertisement in parades. Many commodities from China and other areas were advertised in the parades held in all the big cities in Taiwan during annual religious festivals (Taiwan Nichi-nichi Shinpo, T8.4.18, 8.11.2, 11.4.10, 13.5.12). Local officials and gentry, Western and Chinese doctors, and merchants of all trades would contribute a decorated cart, each carrying a pretty young woman and a flag to advertise their commodities (Taiwan Nichi-nichi Shinpo, T9.8.25). Chinese orchestras and gongfu players would perform at the parades. When these parades took place, additional trains would run to carry passengers from all over the island to see them, and in addition to watching the performances, spectators would purchase the commodities and take them home (Zhuang Zhanpeng, 1991: 84–5). Big families such as the Lins of Banqiao would host this kind of parade, and famous intellectuals like Lian Yatang would rank the poems and designs used in advertisements (Taiwan Nichi-nichi Shinpo, T8.4.18, 9.6.21). Such activities helped to integrate the commercial and intellectual elite with local popular culture. (d) Exhibitions. The tea merchants from Taiwan organized a delegation to promote Taiwanese tea in Manchuria (Shengjing Shibao, S13.11.2). In Dalian, there was an office to introduce Taiwanese products (Shengjing Shibao, S11.1.16). In 1935, exhibitions were held to promote Taiwan’s products in the China market in both Manchuria and Taipei (Shengjing Shibao, S 13.11.2, 11.5.8).

4.4.3. The concept of a company During the colonial period Taiwanese merchants trading in China organized cooperative companies. For example, merchants from Gaoxiong, Chen Fuquan, and Cai Wen organized companies to trade with South China (Taiwan Nichi-nichi Shinpo, T8.4.4). Companies organized by Taiwanese merchants could apply the bankruptcy law as it applied in Japan. In Japan only one heir inherited the family property so that when a

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company went bankrupt, the other offspring need not take any responsibility, while in the Chinese equal inheritance system all the heirs were supposed to be responsible for a bankruptcy. It was not until 1904 that Taiwanese heirs could apply for the Japanese bankruptcy law, and this helped the Taiwanese understand that a corporation was a type of business concern different from the old-style family business (Taiwan Nichinichi Shinpo, M37.10.25, 37.11.21). These concepts and those outlined in Sections 4.4.1 and 4.4.2 above were to remain, to some extent, in the postwar period.

4.5. Technology transfer from Taiwan to China As a frontier area settled by the Chinese only from the seventeenth century onward, Taiwan largely relied on the mainland for its supply of necessary technology. Except for the period when Taiwan was occupied by the Dutch East India Company and the period of 1860–95, when some foreign technology was brought in as a result of European–American influences, Taiwan’s more advanced technology was introduced from Mainland China. Plows, cattle, seed for rice cultivation, sugarcane shoots and sugar-refining skills for sugar production, camphor-evaporating processes, and fruit growing were all introduced to Taiwan from southern Fujian and Guangdong (Liao and Huang 1986: 123–41). Even the tea exported to the world market in the late nineteenth century was introduced from Fujian, which was China’s major tea-growing province (Lin 1991a: 197). In the Japanese colonial period, a total of around 10,000–50, 000 laborers came from the mainland to Taiwan, including tea pickers, miners, cooks, barbers, shoemakers, silver- and goldsmiths, and rickshaw pullers (Takahashi 1937: 397). This influx of skilled labor helped to maintain the flow of traditional technology from China to Taiwan, yet brought little qualitative change to the Taiwan economy. However, during the colonial period the trend began to reverse and the new technology began to flow in the opposite direction, from Taiwan to China. In Xiamen, for example, the Taiwanese opened a variety of establishments dealing in such varied areas as Western medicine, hospitals, the manufacture of electrical materials, ice, fertilizer, soft drinks, printing, iron, camphor, the provision of electric power, railroads, and telegraph services. Quanzhou’s first sugar factory was built by four rich Taiwanese merchants together with local notables in 1936, and used Taiwanese merchants for the refining process (Fujian sheng quanzhoushi weiyuanhui wenshi ziliao yanjiu weiyuan hui 1987, series 3: 10). Moreover, overseas Chinese who were native to Quanzhou went to Taiwan and Java to purchase new sugarcane varieties to grow in Quanzhou. Taiwanese technologies for making rattan work, straw hats, and straw mats were also imported to Quanzhou (Fujian

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sheng quanzhoushi weiyuanhui wenshi ziliao yanjiu weiyuan hui 1987, series 1: 123). The Lins of Wufeng decided to initiate a storage business in China because mainland businessmen did not have the necessary experience or skills (Taiwan Nichi-nichi Shinpo, T6.4.5). These are indicative of the transfer of technology or know-how from Taiwan to China.

5. Conclusion After the Japanese takeover of Taiwan, Japan replaced Mainland China as Taiwan’s main trading partner. However, the trade between Taiwan and Mainland China was not severed in the period of 1895–1937, unlike the situation from 1955 to 1979. Even though the relative importance of China trade declined, the absolute value of Taiwan–China trade conducted by Taiwanese was basically maintained. In terms of migration and investment, the Taiwanese in South China were much more important than in Southeast Asia, Japan, or Manchuria (Lin 2002a). During the period of 1895–1937, Taiwanese merchants could own or hire junks or steamships, enabling them to gain a substantial share of the commerce with China. Prior to 1931, South China (including Xiamen, Fuzhou, and Shantou) was their main area of activity. After 1931, following the path of Japanese military activity, Manchuria surpassed South China in importance, and trade with central China also grew substantially. Prior to 1937, proximity and cultural familiarity enabled Taiwanese merchants’ investments in Fujian to extend well beyond trade and to include manufacturing and communication facilities. A member of the Banqiao Lin family even served as the chairman of the chamber of commerce in Xiamen. Native banks that were invested in mainly by Taiwanese merchants, handled 70 percent of the trade across the Straits, which was clearly more than that handled by the Bank of Taiwan (Ide 1931: 52). Moreover, many Taiwanese lent money in Xiamen. In contrast to the flow of capital and technology from Mainland China into Taiwan prior to 1895, the trade across the Straits during the period of 1895–1937 saw capital and technology mainly flowing in the opposite direction. While Taiwan’s capital and advanced technology flowed into China in the colonial period, about 5,000–10,000 mainland laborers worked in Taiwan each year. This pattern of cross-Straits economic relations, in which China provided labor and Taiwan provided capital and advanced technology, is very similar to the situation today. Taiwanese merchants who emerged in the cross-Straits trade received little financial support from the Japanese government. However, they could benefit from having both Japanese and Chinese citizenships prior to 1911. The Japanese citizenship enabled Taiwanese merchants to avoid paying the inland transit tax, and allowed them to enjoy the rights of

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extraterritoriality. Meanwhile, Chinese citizenship enabled them to buy land and work in China. Even after 1911, Taiwanese merchants usually had relatives in Fujian or Guangdong to facilitate such a purchase. They could also utilize schools, hospitals, and newspapers sponsored by the Japanese government. During 1895–1937, Taiwanese merchants in China therefore enjoyed considerable advantages. However, these could become disadvantages when anti-Japanese sentiments became intense and illegal activities of the Taiwanese ronin aroused hatred. Nonetheless, even in this complex and somewhat unstable situation Taiwanese merchants were able to establish themselves in the cross-Straits economic relations and adapt to changing circumstances. Through the development of the cross-Straits trade, Taiwanese merchants gained considerable experience in direct international trade, an experience which they lacked prior to 1895. Taiwanese merchants cultivated new personal relationships with the Chinese, the Japanese, and among themselves. They also became accustomed to some modern commercial institutions and practices such as stock markets, trademark protection, limited liability corporations, advertisements (in newspapers and by way of trade exhibitions and parades), and establishing international companies (some of which had multinational organizations). Their exposure to a mixture of Taiwanese local culture, Chinese traditional culture, Japanese culture, and Western influences, as well as to a variety of political arrangements in the course of their commercial activities, helped develop their cultural and political flexibility. International trade has been an important sector of Taiwan’s postwar economy. The experience that Taiwanese merchants acquired through trade across the Taiwan Straits during the colonial period is undoubtedly related to the remarkable postwar development of Taiwan’s international trade. (This connection has been detailed in Lin 2002c: 10–1.) For the history of early-twentieth-century East Asia, whether there was a tendency for China and Japan to be integrated or disintegrated is an issue of great interest. The shift for Taiwan to trade more with Japan than with Mainland China, and the eventual dominance of Taiwan– Manchuria trade over Taiwan–South China trade in Taiwan–China trade indeed suggested a tendency for disintegration. On the other hand, the increasing investment by Taiwanese in China clearly showed a development towards integration.

References CIMC (China Imperial Maritime Customs), Returns of Trade and Trade Reports, various years; title varies (Shanghai).

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—— (China Imperial Maritime Customs), Decennial Reports, 1892–1901, 1902–11, (Shanghai). CMC (China Maritime Customs), The Trade of China, Annual Report, various years; title varies (Shanghai). Directorate General of Budget, Accounting and Statistics, Executive Yuan, the Republic of China, Monthly Bulletin of Statistics (November 1992). Fujian sheng quanzhoushi weiyuanhui wenshi ziliao yanjiu weiyuan hui (Zhongguo renmin zhengzhi xieshang huiyi), Quanzhou Wenshi Ziliao [Historical Sources of Quanzhou], Vol. III (Quanzhou, 1987). Huang, Q., ‘‘Riju shiqi de Taiwan yinhang, 1899–1945 [Bank of Taiwan in the Japanese Colonial Period],’’ M.A. thesis, National Taiwan Normal University, 1991. Ide, K., ‘‘Taishi boeki no fushin to Taiwan boeki no shinkosaku [The downturn of the trade with China and the policies to promote Taiwan’s trade]’’, Taiwan Jiho (October 1931). Ino, Y., Taiwan Bunka-shi (Tokyo, 1928; reprinted in Tokyo, 1965). Kato, S., ‘‘Amoi oyobi Suwatou no kogyo [Industries of Xiamen and Shantou]’’, Taiwan Jiho (November 1933). Kishizawa, T., ‘‘Boeki kosei ni okeru Tai–Man kankei [The Taiwan–Manchuria relations from the perspective of trade structure]’’, Taiwan Jiho (July–August 1939). Lai, Z. (ed.), Taiwan Wufeng Lin-Jia Liuzhenji—Jinxiandaishi Shang De Huodong, 1897–1947 [Photos of the Activities of the Lins of Wufeng in the Modern and Contemporary Period] (Taipei, 1989). Liao, Y., and Huang, T., ‘‘Shilun MingQing shiqi Quanzhou yimin dui Taiwan nongye de kenzhi [A tentative survey of the contribution of the Quanzhou migrants to open Taiwan’s agriculture]’’, Nongye Kaogu [Agricultural Archaeology], the 2nd issue of year 1986, Jiangxisheng nongye kaogu yanjiu zhongxin, Jiangxisheng shehui kexueyuan lishi yanjiusuo (Nanchang, 1986). Lin Benyuan jisi gonghui, Banqiao Lin Benyuan jiazuan [The Family Biography of the Lins of Banqiao] (Taipei, 1985). Lin, J., Taiwan Jinbutsuden [Taiwan’s Who’s Who] (Taipei, 1929). Lin, M., Taiwan Kaikyo Ryogan Keizai Koryushi [A History of the Economic Relations between Taiwan and the Chinese Mainland] (Tokyo, 1997). ——, ‘‘Decline or prosperity? Guild merchants trading across the Taiwan Straits, 1820s–1895’’, in Sugiyama, S., and Grove, L. (eds.), Commercial Networks in Modern Asia (Richmond, 2001a). ——, ‘‘Riben zhimin shiqi Taiwan yu Xianggang jingji guanxi de bianhua: Yazhou yu shijie guanxi diaodong zhong zhi ti fazhan [The change in economic relations between Japanese Colonial Taiwan and Hong Kong—a chapter in the structural change in the relationship between Asia and the world]’’, Zhongyang yanjiuyuan jindaishi yanjiusuo jikan, 36 (2001b): 47–115. ——, ‘‘The multiple nationality of overseas Chinese merchants: a means for reducing commercial risk’’, Modern Asian Studies, 35:4 (2001c), 985–1010. ——, ‘‘Taiwanese merchants, overseas Chinese merchants, and Japanese government: Taiwan’s economic relation with Japan, 1895–1945’’, Journal of Asia–Pacific Studies, 4 (2002a): 3–20.

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Lin, M., Wanjin Shixue Yu Liangan Siwei [Historical Contemplations on Relations between Taiwan and the Chinese Mainland] (Taipei, 2002b). ——, ‘‘Networking of Taiwanese Merchants in Early Postwar East & South-East Asia’’, Eleventh Annual International Conference of the World History Association, August 15–18, 2002, Seoul National University, Seoul (2002c). Lin, R., Fujian Duiwai Maoyi Yu Haiguan Shi [Foreign Trade and Maritime History of Fujian] (Xiamen, 1991a). ——, Zhongguo Dalu Yu Taiwan De Lishi Yuanyuan [Historical Connection between Mainland China and Taiwan] (Shanghai, 1991b). Lin, Z., ‘‘Kangzhan shiqi Fujian de Taiwan jimin wenti [Taiwan Japanese in Fujian in the Sino–Japanese War period]’’, Taiwan Yanjiu Jikan [Bulletin for Taiwan Studies], (February 1994). Miyagawa, J., Amoi [Xiamen] (Taipei, 1923). Nakamura, T., ‘‘Taiwan sekimin o meguru shomondai [Various issues on Japanese Taiwanese]’’, Tonan Ajia Kenkyu, 18:3 (1980). —— (ed.), Nihon no Nanpo Kanyo to Taiwan [ Japan’s Engagement with ‘‘the South’’ (Nanpo) and Taiwan] (Nara, 1988). ——, ‘‘Kanan ni okeru Taiwan sekimin [Japanese Taiwanese in southern China]’’, Nanpo Bunka, 17 (1990). Osono, I., Nanho Jigyo [Current affairs in Southern countries] (Taipei, 1921). Shengjing Shibao [Mukden Times]. Sima, X., Taiwan Wuda Jiazu [The Greatest Five Families in Taiwan], Vols. 1 and 2 (Taipei, 1987). Taiwan Ginko, Taiwan Kinyu Jiko Sankosho, Daiichi, Furoku [Reference Report on Financial Affairs, 1st edn., Appendix] (Taipei, 1902). Taiwan Minbao, ‘‘Duiyu nanzhi nanyang fei yongtu de piping [A Critique on the use of the expense for the southern China and Southeast Asia]’’, Taiwan Minbao [Taiwanese newspaper] (1939). Taiwan Nichi-nichi Shinpo [Taiwan Daily]. Taiwan Sotokufu, Taiwan Resshin-Den [Biographies of Taiwan Gentry] (Taipei, 1916). ——, Nettai Sangyo Chosa: Nanshi Nanyo ni Okeru Shinbun, Nanshi Nanyo ni Okeru Hojin no Keizai Katsudo Jokyo [Survey on Tropical Industries: Journalism and Japanese Activities in Southern China and Southeast Asia] (Taipei, 1935). Taiwan Sotokufu Kanbo Chosaka, Shina no Jikyoku to Shina Boeki no Shocho [China’s Current Affairs and Changes in China Trade] (Taipei, 1927). Taiwan Sotokufu Zaimukyoku, Taiwan Tai Nanshi Nanyo Boeki Hyo [Tables for Taiwan’s Trade with Southern China and Southeast Asia] (Taipei, 1940). Taiwan Sotokukanbo Gaijika, Taiwan to Nanshi Nanyo [Taiwan, Southern China and Southeast Asia] (Taipei, 1935). ——, Taiwan to Minami Shina [Taiwan and Southern China] (Taipei, 1937). Taiwansheng Wenxian Weiyuanhui [Provincial Taiwan Historical Sources Commission], Taiwansheng Tongzhigao [Taiwan Provincial Gazetteer], Vol.4, jingjiji, shangyepian [economic gazetteer, commercial chapter] (Taipei, 1971). Takahashi, K., Gendai Taiwan Keizairon [On Contemporary Taiwan’s Economy] (Tokyo, 1937).

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Tekishu-sei, ‘‘Zai-ko Taiwan-jin no kinkyo [Recent situation of Taiwanese in Shanghai]’’, Taiwan Jiho (May 1938). Tu, Z., Nihon Teikoku Shugi-ka no Taiwan [Taiwan under Japanese Imperialism] (Tokyo, 1975). Uchida, G., Shinsuwatou [New Shantou] (Taipei, 1927). Uemura, K., Taiwan Jigyokai to Chushin Jinbutsu [Taiwan’s Business Circle and its Key Figures] (Taipei, 1919). Yano, T., ‘‘Taishoki ‘Nanshinron’ no tokushitsu [The characteristics of the argument for ‘Moving towards the South’ during the Taisho peirod]’’, Tonan Ajia Kenkyu, 16–1 (1978). Yoshikai, U., ‘‘Taiwan tai Chu-shi no kaiun [Maritime transportation between Taiwan and central China]’’, Taiwan Jiho (May 1938). Zhou, K., Xiamen Zhi [Gazetteer of Xiamen], Bank of Taiwan, Taiwan Wenxian Congkan series, 95 (Taipei, 1962). Zhuang Zhanpeng, Taipei Lishi Sanbu [A Historical Journey around Taipei] (Taipei, 1991).

11 Patterns of Chinese Emigration to Southeast Asia, 1869–1939 kaoru sugihara

1. Introduction By the end of the nineteenth century most parts of Southeast Asia had come under the colonial or informal control of Great Britain, France, the Netherlands, and the United States. As a result of the opening of the Suez Canal and the transport and communications revolutions, the export of primary products, such as rice, sugar, rubber, tin, and oil and palm oil to the West in large quantities, became possible, and the provision of internal infrastructure, especially urban and railway construction, progressed. Thus, Southeast Asia, together with Africa, Latin America, and other Asian regions, was integrated into the world economy as a region supplying primary products. At the same time, the region’s position in the world economy was fundamentally different from those of other primary producers. Under colonialism and the impact of the West, the region not only strengthened its ties with the Western powers, but also developed economic relations with India, China, Japan, and other Asian countries, while economic interdependence within the region also strengthened. As a result, the individual countries or political units did not independently become economic satellites of the Western powers, but rather were incorporated as a region into the international economy. The driving force behind this regional integration was the Indian and Chinese migration networks (Sugihara 1996: Chapter 3). Chinese and Indian migration to Southeast Asia has a long history, but the period from the 1870s to the 1930s saw a much larger flow, showing a clear departure from the pattern in the previous period (see the next section of this chapter). Taking the seven regions of Southeast Asia, namely, Burma, the Straits Settlements, Malaya, Siam (Thailand), French Indochina, the Dutch East Indies, and the Philippines (there were changes in the names of these regions and their territorial divisions, but they do not affect the main points of this chapter), and looking at flows during the

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1891–1938 period, the influx of Chinese is thought to be at least 16 million and the influx of Indians at least 14 million. As can be seen from Table 11.1, most returned home after a short stay (usually one agricultural season or two to three years). The rate of return was 85 percent for Indians and 81 percent for Chinese. At the same time, some Chinese migrants remained in Southeast Asian society, playing an important economic role as laborers and merchants, or sometimes industrialists and financiers. It is thought that approximately 6.2 million Chinese were resident in Southeast Asia in the latter half of the 1930s (see Table 11.2). Although caution is necessary when dealing with such ‘‘stock’’ figures as the number of Chinese varies greatly depending on the definition used, it is certain that compared to the Indians the scale and economic influence of the resident Chinese was greater (for Indian emigration, see Sugihara 1996: Chapter 9). The purpose of this chapter is to describe the formation and structure of Chinese migration networks, and to suggest that they contributed towards regional economic integration, transcending the framework imposed by Western colonialism. It argues that, at least by the interwar period, the nature of the modern migration networks established in Southeast Asia was different from both that of the traditional Asian trading networks up until the nineteenth century, and that in the West, in that they started to develop the institutional characteristics and social norms specific to modern Asia. As such, they were an important part of the economic change in Southeast Asia, which prepared the region’s economic development during World War II and postwar periods.

2. The Development of Migration Networks Let us first establish the statistical profile of migration for the period under review. Tables 11.3 and 11.4 indicate the approximate number of deck passengers to and from Southeast Asia. Figure 11.1 presents the trend, in the form of total immigration and emigration numbers, which shows that (1) the number of migrants increased after the 1870s, reaching the first peak at the beginning of the twentieth century, (2) the second and largest peak was attained after World War I in the 1920s, and (3) after declining at the beginning of the 1930s under the impact of the Great Depression, a considerable level of migration was recovered. If we focus on the numbers returning to China, we find that they generally accord with the trend of the outgoing numbers, but it is worth noting that at the beginning of the 1930s the number of returnees temporarily exceeded that of emigrants. Even so, there was an overall surplus of immigrants on the Southeast Asian side. The percentage of total emigrants returning to China between 1873 and 1939 was 80 percent, although we do not know

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Table 11.1. Indian and Chinese migration to Southeast Asia, 1891–1938 Indians Period 1891–1900 1901–1910 1911–1920 1921–1930 1931–1938 Total

Chinese

No. entering Southeast Asia

No. leaving Southeast Asia

No. entering Southeast Asia

No. leaving Southeast Asia

1,423,756 2,836,691 3,795,985 4,851,130 2,651,139 15,558,701

1,064,070 2,434,993 3,145,913 4,093,655 2,524,491 13,263,122

1,875,423 2,500,798 2,465,449 3,818,103 1,805,510 12,465,283

1,419,603 1,908,045 1,901,023 2,860,811 1,982,054 10,071,536

Sources and Notes: Figures for Indians represent the number of migrants to Burma and Malaya only, and come from Cheng (1968: 262–3) and Sandhu (1969: 312–13, 316–17). Figures for Chinese are calculated from Tables 11.3 and 11.4.

Table 11.2. Number of Chinese residents in Southeast Asia, 1934 Siam Malay Peninsula Dutch East Indies French Indochina Burma The Philippines British Borneo Total World total

2,500,000 1,709,392 1,232,650 381,417 193,598 110,500 75,000 6,202,557 7,838,895

(79) (100)

Source and Notes: Kikakuin (1939: 4). It states that the 1934 National governments Overseas Chinese Affairs Commission report, the original source, estimated these figures based on reports by consuls overseas. See (ibid.: 3, 122–3).

how frequently the same person traveled the same route over the period concerned. The basic picture is that the Chinese population in Southeast Asia increased rapidly during this period through both the arrival of immigrant Chinese and the natural increase of the number of their families. In fact, the above summary is not the incontrovertibly accepted opinion. The source of the figures in Tables 11.3 and 11.4 are the numbers of immigrants and emigrants to and from Southeast Asia from the ports of Xiamen (Amoy) in Fujian province, Shantou (Swatow) in Guangdong (Canton) province, and Hong Kong with Guangdong province as its hinterland, but the relationship between the figures obtained from these Chinese ports and those of Hong Kong has not been fully investigated. Because a small number of passengers from the former two ports left for Hong Kong and from there crossed to the Straits Settlements (mainly Singapore, Penang, and Malacca), a simple summation leads to double

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Table 11.3. Number of Chinese migrants emigrating to Southeast Asia, 1869–1939 Year 1869 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915

Xiamen

(19,602) (21,380) (26,546) n.a. n.a. 17,925 (19,167) 30,475 41,223 36,148 47,370 37,626 51,150 33,571 61,576 56,341 54,085 57,750 56,340 56,296 61,282 76,670 58,284 42,706 57,634 66,276 90,358 79,399 85,673 78,231 75,629 59,178 72,340 76,632 52,121 46,336 80,071 86,840 97,572 72,200 56,674 41,012

Shantou 20,824 22,282 21,132 27,013 15,082 16,914 21,184 12,144 21,431 22,163 17,276 16,913 29,396 50,585 56,802 49,698 44,082 54,409 55,832 49,017 57,622 51,985 40,819 44,581 72,177 60,153 74,507 75,293 50,202 55,964 69,234 71,660 70,825 88,053 114,592 89,957 81,435 99,919 131,836 99,414 98,080 113,302 110,580 124,671 117,149 86,796 79,330

Hong Kong

Total

(41,582) (41,582) (41,582) 33,529 50,325 70,625 78,864 57,438 51,247 57,517 64,522 82,997 96,195 47,849 42,066 (57,166) (57,166) (57,166) (57,166) 73,138 (63,365) (63,365) (63,365) 61,075 83,635 69,774 71,711 83,384 76,304 64,341 76,725 105,967 71,081 77,430 111,058 135,565 122,657 142,759 76,296 68,275

20,824 22,282 21,132 27,013 15,082 36,516 42,564 80,272 63,013 63,745 68,730 86,405 130,496 170,672 150,388 148,315 139,225 170,081 172,400 206,788 161,812 148,136 155,735 158,087 186,269 178,601 224,315 196,942 156,273 176,963 196,585 245,653 219,998 245,437 276,207 241,890 204,954 248,984 314,435 222,616 221,846 304,431 332,985 344,900 332,108 219,766 188,617 (Continues)

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248 Table 11.3. Continued Year

Xiamen

Shantou

Hong Kong

Total

1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 Total

72,847 52,840 36,123 46,065 62,419 78,664 56,909 69,008 76,600 86,199 223,009 92,605 93,091 n.a. n.a. 45,829 35,121 26,973 35,604 38,037 50,682 86,946 33,929 17,900 3,655,719

82,396 69,474 57,389 63,323 81,189 99,713 106,152 113,309 119,615 102,998 77,257 189,465 173,169 125,322 (114,292) 80,700 36,657 33,741 53,661 63,901 64,367 68,363 59,095 21,091 4,910,954

117,653 96,298 43,830 59,969 105,258 156,011 98,393 120,224 129,859 140,534 216,527 285,593 257,162 227,523 188,900 100,869 55,639 57,515 131,984 149,515 153,170 232,325 110,887 71,285 6,154,777

272,896 218,612 137,342 169,357 248,866 334,388 261,454 302,541 326,074 329,731 516,793 567,663 523,422 352,845 303,192 227,398 127,417 118,229 221,249 251,453 268,219 387,634 203,911 110,276 14,721,450

Sources and Notes: CIMC, various years; Blue Books, Hong Kong; Hong Kong Administrative Reports. Figure for Shantou (1929) is from Li Daoji, Ri-dosai, ‘‘Qingmo Minchu Chaozhou Yizhi Xianluo zhi Yanjiu’’, Guoli Zhengzhi-daxue lishi-yanjiusuo shuoshi lunwen, 1990. The figures include a very small number of non-Chinese. They also include a very small number of passengers whose destination was not Southeast Asia. Figures in parenthesis are estimates. Xiamen (1880) was estimated from total emigrant figures in 1879 and 1881, using 1879 and 1881 relative weights for emigrants to Southeast Asia in figures for total emigration. Shantou (1930) was calculated similarly. Hong Kong for 1876–78, 1891–94, 1896–98 were calculated back from five-year average figures. On those and other more detailed aspects of Chinese migration statistics, see Fujimura (1995). For the statistics contained in Hong Kong government shipping office annual reports, see Kani (1993: 1–10). However, the basic picture presented here is confirmed by the studies of Fujimura and Kani.

counting. As for the return journey to China, the problem of double counting is further exacerbated, because a much larger number of migrants traveled via Hong Kong. Therefore, I have adopted here figures for the former two ports excluding immigrants and emigrants to and from Hong Kong, added to the figures for Hong Kong.1 As a result, the figures for migrants from the former two ports are considerably smaller than the figures usually cited.2 It seems to me, however, that only in this manner,

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Table 11.4. Number of Chinese migrants immigrating from Southeast Asia, 1873–1939 Year 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919

Xiamen n.a. (16,461) (21,083) (18.338) n.a. n.a. 14,178 (12,024) 19,116 21,140 35,095 29,345 31,884 30,208 53,528 35,412 33,096 35,964 34,310 30,605 46,338 27,275 18,970 31,716 27,725 26,435 28,646 26,225 34,769 27,015 28,786 29,803 20,243 16,840 21,509 19,213 25,713 14,590 11,204 15,169 44,767 56,302 34,181 33,050 24,097 12,097 29,030

Shantou 1,528 725 1,306 0 237 264 375 168 113 338 24 3,771 3,597 330 103 8,130 250 424 339 97 57 3,003 1,948 6,742 10,655 9,831 10,821 9,705 11,653 13,479 22,878 15,035 17,308 31,508 42,945 35,347 40,954 46,458 50,051 41,289 37,587 39,503 36,491 29,257 20,480 32,065 25,598

Hong Kong n.a. n.a. n.a. (47,418) (47,418) (47,418) 50,542 47,774 52,983 61,905 74,722 73,767 80,773 88,704 92,375 98,800 99,315 101,147 (104,118) (104,118) (104,118) (104,118) (104,118) (105,300) (105,300) (105,300) 110448 121,322 129,030 129,812 140,551 149,195 110,483 134,912 145,822 157,809 144,821 149,564 149,894 163,248 166,921 168,827 109,753 72,405 98,232 74,109 136,020

Total 1,528 17,186 22,389 65,756 47,655 47,682 65,095 59,966 72,212 83,383 109,841 106,883 116,254 119,242 146,006 142,342 132,661 137,535 138,767 134,820 150,513 134,396 125,036 143,758 143,680 141,566 149,815 157,252 175,452 170,306 192,215 194,033 148,034 183,260 210,276 212,369 211,488 210,612 211,149 219,706 249,275 264,632 180,425 134,712 142,809 118,271 190,648 (Continues)

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250 Table 11.4 Continued Year

Xiamen

Shantou

Hong Kong

Total

1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 Total

37,693 45,364 49,491 34,455 46,575 87,204 78,887 114,222 82,176 n.a. n.a. 80,555 74,238 44,585 37,509 39,293 43,652 33,287 14,290 9,295 2,156,266

29,265 36,559 61,650 63,432 81,174 65,611 84,003 109,667 87,960 (89,877) (90,841) 101,784 83,819 39,007 37,388 47,431 45,772 47,363 22,658 16,729 1,906,657

122,438 159,064 143,547 121,102 130,194 91,622 128,661 181,100 187,847 185,390 223,136 283,890 232,396 141,133 113,694 112,420 120,641 101,629 83,620 62,655 7,590,908

189,396 240,987 254,688 218,989 257,943 244,437 291,551 404,989 357,983 275,267 313,977 466,229 390,453 224,725 188,591 199,144 210,065 182,279 120,568 88,679 11,653,831

Sources and Notes: Estimation methods are same as Table 11.3. Shantou (1929) is also an estimate.

that is, by including Hong Kong in the Chinese side, we can capture the flow between the top half of Figure 11.2 (China, Hong Kong) and the bottom half (Southeast Asia). The approach adopted in this chapter clearly has several limitations, one of which is the noninclusion of immigration and emigration figures for the fourth port Qiongzhou (Kiungchow), but at least with regard to immigration and emigration trends and rates of return, it is a more accurate picture than hitherto furnished. Looking at the destination of emigrants from the three main ports, it is clear that those from Xiamen mostly went to the Straits Settlements. In the case of emigrants from Shantou, by contrast, the importance of the direct route to Siam gradually increased from the 1880s, and in 1907 surpassed the number of emigrants to the Straits Settlements for the first time. Rivalry between the two routes continued until the Straits Settlements regained its leading position after 1934. As far as the emigration route from Hong Kong is concerned, a vast majority of people headed for the Straits Settlements although, at the end of the decade that began in 1910, the number of emigrants using the direct route from Hong Kong to the Dutch East Indies temporarily exceeded that to the Straits Settlements. In short, the Straits Settlements was the first port of entry for approximately two-thirds of Chinese emigrants to Southeast Asia.3

Patterns of Chinese Emigration to Southeast Asia

251

600

500

(1,000 persons)

400 Number of emigrants 300

200

100 Number of immigrants

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 9 19 8 00 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38

0

Fig. 11.1. Number of Chinese migrants to and from Southeast Asia. Sources: Tables 11.3 and 11.4.

Xiamen

Shantou

(China) Hong Kong

(Southeast Asia) Dutch East Indies

Straits Settlements (Mainly Singapore and Penang)

Malaya

Fig. 11.2. Diagram of Chinese migration networks.

Siam

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Out of the emigrants from Xiamen and Shantou a considerable number returned to China via Hong Kong. As stated previously, the overall rate of return between 1873 and 1939 was 80 percent, but in contrast to the 59 percent rate of direct return to Xiamen, and the 40 percent rate of direct return to Shantou, migrants corresponding to 123 percent of emigrants from Hong Kong returned to Hong Kong, which was the preferred first port of entry for return migrants. One problem with previous research is that the statistics on the receiving side, that is to say, the bottom half of Figure 11.2, have not been sufficiently integrated into the overall picture. On the Southeast Asian side, the main recipient countries were Siam, Malaya, and the Dutch East Indies followed by French Indochina, the Straits Settlements, British Borneo, and the Philippines, and there was a tendency to study the process of immigration into each country or region separately without a due consideration of the overall pattern of migration. However, the Straits Settlements played an important role as a distribution center regulating the movement of migrants to the three main regions. Let us pursue this line of enquiry in some detail by looking at Figures 11.2 and 11.3. In 1881, the direct routes from Hong Kong to the Dutch East Indies and Siam were not yet important. By this period, Hong Kong and the Straits Settlements were already playing an important role as distribution centers. For example, the laborers working in the tin mines in Malaya were supplied from Xiamen and Shantou via the Straits Settlements (the main routes are indicated by thick arrows), with many returning to China via Hong Kong. In 1877, coercive and threatening acts by secret societies were discovered, with regard to supplying labor to the mines in Sumatra. This led to intervention by the colonial government through the establishment in Singapore and Penang of the Protectorate of the Chinese, the main duty of which was to handle the long-standing problem of protection of the Chinese (Cambell 1923/1971: 11–13). Intervention by the colonial government increased the level of trust in these cities as distribution centers to some extent. On the other hand, after the 1890s, the authorities concerned became attentive to the prevalence of plague and frequently prevented the entry of immigrants, and by taking restrictive measures stood in opposition to the shipowners and employers (e.g. Mantetsu 1941: 113–14 and 116–23). Under these conditions, the plantation managers of Deli (Sumatra), aiming at lowering the cost of supplying labor, attempted in partnership with a German shipping line to open a direct route from Shantou, obtaining a measure of success (Annual Report 1888: 15–17; CIMC 1893: Swatow: 423; Kani 1993: 3). Furthermore, competition within the same route also intensified. For example, in 1906, on the direct route from Shantou to Bangkok, the main force of which were Dutch ships, the entry of Nippon Yusen using low fares as a weapon caused severe price competition (CIMC 1906: Swatow: 383; 1907: Swatow: 461).

Patterns of Chinese Emigration to Southeast Asia 1881

253

1927 Xiamen

Xiamen

Shantou

17

Shantou 33

1 53

26

5

Hong Kong

21

10

1

28

Hong Kong

79

83

96 97

54

52 37

40

4

37

32

7 Dutch East Indies

(?)

Straits (?) Settlements

Siam

Dutch East Indies

137 202 86 Siam

1933

1917

Xiamen

Shantou

Xiamen 8

11 18 27 78

66

1 50

59

38

Hong Kong

12

2 92

19

(?)

33

4

84 Dutch East Indies

21

4

14

23 7

23

24

11

7 131

Shantou 43

30

12

Hong Kong

12

Straits (?) Settlements

60

Straits (?) Settlements

Siam

Dutch East Indies

69 9

24 43

49

66

Straits Settlements 17

Siam

Fig. 11.3. Chinese migration networks, 1881, 1912, 1927, and 1933. Sources and Notes: Tables 11.3 and 11.4, and 11.5. Figures are intended to cover all the arrows indicated in Figure 11.2. No arrow suggests that the number of migrants was less than 500. I was unable to find figures for movements between the Straits Settlements and Malaya, as well as for the arrows with question marks. See text for the explanation of thick arrows.

However, as shown in Figure 11.3, even in 1912 the route via the Straits Settlements functioned as previously as the axis in the supply of immigrants to the three main Southeast Asian regions.4 These figures confirm that direct routes to Siam and the Dutch East Indies developed, but it should also be noted that some of those who emigrated using the direct routes returned via the Straits Settlements and Hong Kong. Almost all steamships carrying migrants leaving Singapore for China went first to Hong Kong. There were very few who went back from Malaya to China without passing through Singapore (Annual Report 1908: 118). The 1890 Labour Commission Report, which surveyed policies for improving the supply of labor to Malaya, recognized that the opening of direct routes had only a measured effect on the brokers of immigrants to the Dutch East Indies from China and Hong Kong via the Straits Settlements, and no effect on the competition which previously existed between Malaya and the Dutch East Indies as far as securing labor was concerned (Labour Commission 1890: 15). This understanding was basic-

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ally inherited intact in the 1911 Labour Commission Report (hereafter Parr Report). According to testimony to the committee, labor contracts were entered into after the arrival in Singapore of the immigrants from China and Hong Kong and, at this stage, brokers dispatched the migrant workers, comparing the wages in the Dutch East Indies and Malaya (Parr Report 1911: 65–6, para 44–75, 84 [Evidence 31], 87 [Evidence 33]). Even though the fees on the route via the Straits Settlements mounted up, there were also various problems with the direct route, namely, the costs of establishing the routes, the necessity of opening a network in South China, the difficulty in filling space on the return journey, and the fact that the fare was not necessarily cheaper. Thus competition with the Straits Settlements route continued to be a determinant for the success or failure of the direct routes. After 1923 it is possible to make the migration patterns a little clearer because it becomes possible to use the migration statistics of the Straits Settlements, shown in Table 11.5. In 1927 the number of migrants reached a peak, and Figure 11.3 suggests that the largest number of migrants moved through the Shantou ! the Straits Settlements ! the Dutch East Indies ! the Straits Settlements ! Hong Kong ! Shantou route. Figures for movements between the Straits Settlements and Siam are available for the period from 1931 only. But the 1919 and 1925 annual reports of the Straits Settlements record that there were large flows of migrants from Bangkok which are not included in official statistics (Annual Report 1919: 385; 1925: 35). It goes without saying that migrants to the Federated Malay States continued to pass through the distribution centers in the Straits Settlements. That is to say, in the interwar period the pivotal role of the Straits Settlements as the center of the Chinese international labor market was maintained. Furthermore, when we consider these labor movements from the Singapore side, it appears likely that a large number of migrant workers in Banka in the Dutch East Indies, and in the tin mines of Billiton or tobacco fields of Deli, moved around within Southeast Asia, in accordance with labor supply and demand conditions, via Singapore (Mantetsu 1940: 249– 50, 270). This kind of circulatory migration probably included a distinct category of laborers with experience (old hands, laukhehs: Jiuke) in large numbers, as differentiated from new migrants from China and Hong Kong (sinkhehs: Xinke), although it is not possible to express its relative importance. What is clear, though, is that the existence of circulatory migration must have made the international labor market price-sensitive and competitive. Thus it is not appropriate to regard Chinese migration as a simple two-way movement between birthplace and place of migration. An important feature is that a migration network that responded sensitively to overall supply and demand for labor in South China and Southeast Asia came into being.

Table 11.5. Movements of Chinese migrants in the Straits Settlements, 1923–39 Imigrants to DEI

Year DEI 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 Total

47,782 51,837 57,185 64,880 59,902 75,593 81,706 91,666 76,852 74,396 65,609 60,767 61,584 66,558 77,593 68,347 61,355 1,143,612

Emigrants from DEI

Siam

Total

DEI

18,566 16,138 48,923 40,300 55,192 49,513 60,629 39,744 45,375 374,380

59,285 67,275 78,309 88,647 88,724 101,692 106,242 111,500 108,516 99,364 92,217 110,379 127,289 127,590 151,053 118,925 117,222 1,754,229

52,480 61,315 80,492 88,811 86,267 97,027 93,343 92,775 61,573 50,399 43,438 46,495 49,628 62,459 79,368 69,329 59,447 1,174,646

Net emigrants

Siam

Total

DEI

16,346 13,196 17,209 36,265 52,366 48,210 56,948 37,068 40,763 318,371

64,945 78,904 104,678 114,953 119,052 126,935 115,305 112,076 86,596 69,961 66,301 91,103 114,055 121,591 151,961 118,895 113,453 1,770,764

4,698 9,478 23,307 23,931 26,365 21,434 11,637 1,109 15,279 23,997 22,171 14,272 11,956 4,099 1,775 982 1,908 31,034

Siam

Total

2,220 2,942 31,714 4,035 2,826 1,303 3,681 2,676 4,612 48,647

5,660 11,629 26,369 26,306 30,328 25,243 9,063 576 21,920 29,403 25,916 19,276 13,234 5,999 908 30 3,769 16,535

Source and Notes: Straits Settlements Government Gazette, various years. DEI stands for the Dutch East Indies. Total immigration and emigration figures in the source include movements to and from China and Hong Kong. I have excluded them from the total here, but have included minor movements to and from India and other Asian countries. Migration to and from Siam was predominantly overland.

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Finally, let me touch on the changes in the 1930s. Over the three-year period from 1931 to 1933 the numbers returning to China and Hong Kong reached 1,180,000, exceeding those of emigrants by as much as 611,000. It is clear that in 1933 the majority of migrants returned from the Dutch East Indies and Siam to China via the Straits Settlements and Hong Kong (see Figure 11.3). The direct cause of this was clearly the Great Depression and the decrease in demand for labor accompanying the slump in the price of primary products (for its effects, see Huff 2001). In addition, in 1928 the Malay government issued the immigrants restriction ordinance and after 1930 an era of entry restrictions began. Furthermore, in 1933 residency restrictions were added (Mantetsu 1941: 123–31). However, these changes to the system should essentially be understood as measures reflecting the real state of the economy. Accompanying the economic recovery, the number of immigrants from China and Hong Kong increased over the four years from 1934 to 1937. The number of permits issued in the Straits Settlements gradually increased, while the numbers of immigrants to the Dutch East Indies and Siam were maintained until around 1938. In 1938 when the issuance of immigration permits in the Straits Settlements were curtailed, migrants to Siam and other places increased (CMC 1938: 128). The network as a whole survived in this way. Furthermore, it should be noted that migration networks continued to function actively even after 1938, when movement became difficult as a result of political disruptions (Table 11.5). In the 1940s it became difficult to grasp the situation, as it became more and more difficult for governments to collect statistics. Even if we accept a declining trend in the number of migrants, it partly reflected this difficulty (CMC 1940: 111). It is unimaginable that movement had completely stopped.

3. The System of Lodging Houses and Changes in Employment Patterns Let us examine the process of recruitment and management of the migration networks. Migration patterns can be formally classified into free emigration and indentured emigration. At the beginning of the period the latter was 20 percent of the total, falling to about 11 percent as the period progressed and was abolished in British Malaya in 1916. (Strictly speaking, the indentured system was replaced by a system of ‘‘assisted emigration’’, but the number of emigrants under this system was very small.) Indentured emigration was of the nature of so-called bondage, because by paying for the passage, the debt was shouldered by the employer from the start, and in practice the contract one-sidedly restricted the rights of the emigrant to the contract. Furthermore, the poor passage conditions of the increased number of Chinese coolies to

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the new continents (America, Australia, the Caribbean Islands) after the opium wars resembled those of the slave trade, and became an international problem, even though their numerical significance was not as great as intra-Asian migration (see Kani 1979: especially Chapter 1). Accordingly, in Southeast Asia various ordinances and supervisory bodies were established aiming at migrant protection. The establishment of the aforementioned Protectorate of the Chinese (the Straits Settlements, 1877) is one such example. In the outer Provinces of the Dutch East Indies (all islands excepting Java and Madura) a coolie ordinance was established state by state after 1880. Similar attempts were made on the Chinese government side too, although they are not thought to have been effective. For this reason considerable detailed data are available regarding indentured emigration.5 In contrast, comprehensive data concerning free emigration do not exist, apart from the number of deck passengers used in the previous section. Neither the Chinese nor the Southeast Asian side provide census figures reliable enough to allow the more precise estimation. However, although called free emigration, genuine free emigration was limited to a small number of merchants and travelers, and in fact about 70 percent of free emigrants are considered to have been migrant laborers with the character of indentured emigrants. In interpreting the contemporary documents, caution is necessary as, in some cases, so-called ‘‘coolie’’ emigrants only include indentured emigrants authorized by the government and, in other cases, include free emigrants with the character of indentured emigrants. An accurate statistical foundation does not exist, but the proportion of de facto indentured laborers amongst free emigrants during the period under review probably has not changed much.6 If that is the case, about 80 percent of emigrants crossed from South China as plantation, mining, manufacturing or transportation, and construction-related laborers, under a system with the character of indentured emigration. Let us now outline the form of passage of the ‘‘free emigrants with the character of indentured emigrants’’. Basically, the crossing was made using a variety of migration agencies which developed privately and without help from any government. Summing up the observations from immediately prior to World War I to the 1930s, the overwhelming majority used migration agencies run by the Chinese themselves and shipping companies mostly run by Europeans. Five types of agencies were involved: laukhehs brokers, ketou brokers, lodging houses (kezhan), shipping agents (chuantouhang), and remittance houses (xinju). (The description below is based primarily on Taiwan Ginko 1914, Gaimusho 1929, and Ide 1941: 79–84.)7 Amongst these, remittance houses will be left to the next section, and the four that participated directly in mediation will be looked at here. First, the laukhehs are those who made a success in the region to

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which they migrated, and acted as recruiters by returning to their home towns, making known the situation in these areas, and lending the necessary capital to relatives, friends, and those living in the same village. Brokers also traveled back and forth between China and Southeast Asia, but in contrast to the former who undertook recruitment as a side job, the latter were professional recruiters. The laukhehs sometimes entrusted recruitment to the brokers. In addition to recruiting new emigrants, the brokers also delivered money, letters, clothes, and suchlike to China on emigrants’ behalf. Before starting an explanation of the networks centered on the brokers and lodging houses, the significance of recruitment methods using the personal connections of the laukhehs should be touched upon. If the laukhehs were the employers of the sinkhehs, there was a definite communication between the employers (e.g., in Malaya) and villages in China, even if part of the recruitment process was entrusted to the brokers, and there are many instances of the whole production process being managed by those from the same village (for example, in tin mines). This was called ‘‘the system of personal recruitment’’ by Blythe, author of the Federated Malay States Commission Report (hereafter Blythe Report), but the actual form resembled the Kangany system, widely observed in the case of Indian migrants. That is to say, the employers or foremen (so-called contractors who often intervened in the lives of workers) were at the same time responsible for recruitment and to this extent it can be said that before leaving their home villages the migrants had fairly definite information about where they were going and what they would be doing. On the other hand, this meant that the relationship between the employers or foremen and the workers was apt to be based on the traditional social principles of the home villages. Regarding wages and other conditions of employment, it was normal for the sinkhehs ‘‘to feel a moral duty to execute their contracts unless something extraordinary occurred’’ (Blythe 1947: 98–9). In the Parr Report, the advantages of this system were emphasized, and ‘‘a comprehensive introduction of the Kangany system to Chinese emigration’’ was suggested (Parr Report 1911: 70, para 92). However, unlike Indian migrants, this method of recruiter acting as foreman at the same time did not become the mainstream in the case of Chinese migrants. Instead, the intermediary network by brokers, lodging houses, and shipping agents survived, changing gradually into a trustworthy network with little danger of fraud or deceit. According to a pre-World War I survey, there were about 1,110 brokers based in Xiamen, about 800 in Shantou, and about 200 in Hong Kong. They formed an association among those who came from the same district, and each broker had spheres of influence at home, from which to assemble groups of migrants. Then he led groups of at least several, at

Patterns of Chinese Emigration to Southeast Asia

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times as many as 110, sinkhehs to work in the region. The broker paid the bulk of the sinkhehs’ travel costs. Included in them were the travel costs from their home villages (for example) to Xiamen, the cost of staying overnight in Xiamen, the cost of the steamship passage from Xiamen and meals during the voyage, landing taxes at the destination, and costs of food and accommodation after arrival until a job was found. At first there was no written contract regarding the loan of the cost of passage, and even when there was, there were cases where the terms of the contract were not observed. But matters gradually improved, and it became standard practice for the principal and a witness to sign a document stating joint liability at the time of the loan, the period of which was normally four months and for the loan to be interest free during this period. From the point of view of the steamship company, these types of passengers were under the category of ‘‘paid passengers’’, but in reality they were of the character of indentured emigrants, in the sense that the ticket was paid for by the broker, and were therefore called credit ticket passengers (Labour Commission 1890: 11).8 Lodging houses are hostels for migrants in the main ports. The brokers were usually affiliated to a particular lodging house run by those from the same district or had close relations with it. A large part of the capital advanced to the migrants by the broker actually came from the lodging house. The brokers dispatched the migrants to the destination, transferred the migrants to the employers or local brokers, and collected the capital, taking approximately three and a half months until returning to China, from which the usual custom of a four-month period of credit between the lodging houses and the brokers was born. In addition to collecting the accommodation fees of the migrants, the lodging houses also made contact with the shipping companies and the brokers, and undertook as agents the procedures necessary for emigration. Prior to World War I, 184 lodging houses existed in Xiamen, over 60 in Shantou, over 20 in Hong Kong, and at least 29 in Singapore. Affiliated to each lodging house there were usually from two or three to ten brokers. According to the 1929 data, there were approximately 30 houses in Hong Kong and approximately 50 in Singapore, counting powerful ones alone. Around 1930 another survey puts the total in existence in Xiamen at approximately 300. Finally, the shipping agents were agencies that made contact with the steamship companies and undertook the sale of tickets. The lodging houses could often extend large amounts in loans with a small amount of capital, because the shipping agents permitted the lodging houses to be in long-term arrears on the ticket money, the largest item in the travel expenditure. In this sense it can be said that the credit chain of ‘‘shipping agent ! lodging house ! broker ! sinkheh’’ formed the nucleus of the intermediary network. In Singapore there were four powerful shipping agents and many smaller ones and even prior to World War I a

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large shipping agent like Renji boasted loans amounting to 200,000 or 300,000 yuan. Blythe noted that the lodging houses in Singapore, in the capacity of accommodation for those migrants who could not immediately find work, became a temporary pool of the unemployed, and functioned as a labor exchange. The ‘‘employees’’ of those lodging houses (so recognized by the Chinese but often called ‘‘brokers’’ in the English literature), approved by the Protectorate of the Chinese, introduced laborers to employers from Malaya and Sumatra, after receiving the sinkhehs from China and Hong Kong from their brokers. Blythe called this ‘‘the system of lodging houses’’ (Blythe 1947: 99–110). Let us compare and contrast this system with the private recruiting system. The system of lodging houses differs from the classical ‘‘free emigration’’ from Europe to North America, in that it was not migration on a genuine individual- or family-unit level. It was migration dependent on the dialect group, coming from the same village or district and sharing a common language and culture. In particular, the gathering of information and judgment of the degree of risk involved at the time of migration was in practice the responsibility of the brokers or lodging houses. Therefore, the relationship of ‘‘trust’’ with them was a much more important concern for the migrant than making sure that the contract was backed by effective legal sanctions. In an emergency, despite the contribution of institutions like the Protectorate of the Chinese, the migrant ultimately depended on the social principles or norms held in common between the brokers and the migrants, not the guarantee that these were shared by the colonial government or local society (Blythe 1947: 99–110). If we compare it with the Kangany or Maistry system and the individual recruitment system for Chinese migrants, however, the system of lodging houses looks much more ‘‘open’’, in that the person upon whom the individual emigrant depended was not limited to one particular individual, but was, rather, ‘‘transferable’’. For example, the sense of ‘‘trust’’ was apparently transferable from the broker to the lodging house, and then from the lodging house to employer or foreman. Thus, laborers were able to move freely across territorial boundaries and long-distance. The establishment of the system of lodging houses brought about a freer movement of labor within the framework of a network of dialect groups, without depending on the security provided by colonial governments. How did the system of lodging houses affect the patterns of employment? The Chinese in Southeast Asia were engaged in varied occupations, not only in the export sector, but also in agriculture (usually other than rice), fisheries, and modern industries such as rice processing, the lumber industry, tin refining, and rubber processing, as well as the transportation and construction industries. However, according to

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Table 11.6. Composition of the Chinese labor force in the Federated Malay States, 1931 Men Rubber plantation Mining Agriculture (fruit and vegetables) Agriculture (others and multifarious) Carpenters, joiners, and cabinet makers Tailors, dressmakers, and seamstresses Makers of boots, shoes, and clogs Sawyers Bricklayers and masons

84,342 64,628 24,984 13,256 10,287 4,269 3,201 2,910 1,389

Women 16,447 8,948 7,637 2,859 14 566 58 — 14

Total 100,789 73,576 32,621 16,115 10,301 4,835 3,259 2,910 1,403

Source: Blythe Report: 1

the 1938 report of the Federated Malay States’ Labour Commission, the largest employment was found in rubber plantations and tin mines (Table 11.6). Here we take a brief look at the changes in employment patterns in these industries. According to the report, the conditions of Chinese laborers in the Federated Malay States improved remarkably, compared to eleven or fifteen years earlier. ‘‘Labourers are free not only legally but also in reality, and clearly understand much better than hitherto the environment surrounding them’’ (Blythe 1947: 4). This arguably resulted from a combination of the establishment of migrant protection policies, labor laws, and the influence of labor movements having connections with China, particularly in South China, during the interwar period. But, from the point of view of this chapter, the most important change was the influence of entry restrictions at the beginning of the 1930s. The relative decline in the number of sinkhehs weakened the significance of the network with China and Hong Kong, and the function of the lodging house system within Southeast Asia tended to shift toward the recruitment of laukhehs who were freer and had a greater ability to gather information. Furthermore, restrictions on the number of adult male immigrants caused a rapid increase in the numbers of adult female immigrants. The ratio of females in the adult Chinese population in Malaya went from 23 percent in 1921 to 29 percent in 1931 and further increased to 36 percent in 1937. The greater number of adult women who flowed to the rubber plantations and mines were married (both cases of wives left in South China emigrating and cases of marrying in Malaya were in evidence). When the laborers came to live as a family in the neighborhood of the mine or plantation, the purchase of daily necessities, previously controlled by the foreman, began to be replaced by freer purchase from various sources by the family unit. A rapid increase in the use of Japanese bicycles and the circulation of newspapers enormously

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expanded the scope of the laborers’ lifestyles and information-gathering ability (Blythe 1947: 1–4). These changes were reflected in the changes in employment patterns to a certain extent. In European-managed rubber plantations, several farms were successful in removing the Chinese foreman (contractor) and introducing direct employment methods. It was proposed that responsibility concerning laborers’ housing, hygiene, and health be gradually switched from the foremen to the employers, and a degree of control was taken to ensure that the foreman would not be able to take an unfairly large commission related to wages and material benefits. The provision of a maternity allowance also became the subject of discussion. In some modern industries similar trends were observed, and the establishment of a factory law was proposed (Blythe 1947: 7–51). All of these changes had just begun at this stage, and were occurring under the special circumstance of entry restrictions. Nevertheless, there was a tendency to break the authority of the foremen—the partners of the system of lodging houses on the production side—through increased consciousness and information-gathering ability on the laborers’ side. From this point of view, the change from an individual recruitment system to the system of lodging houses should be seen as shouldering a transitional role in opening the road to a more open direct method of employment.

4. Remittance Houses and Merchant Networks In Section 3 we examined the characteristics of the networks which mediated directly with migrants. But, if we are to understand the term ‘‘network’’ more widely, as something which underpinned the entire economic activities of the overseas Chinese, it is important to note that, in addition to the migration network, the network of remittance houses and the merchant network were formed, and the three kinds of activities developed in a mutually supplementary manner. In this section we briefly review the role of the latter two networks. The remittance houses were scattered throughout Southeast Asia, and were engaged in foreign exchange business and postal services. (The description below is based primarily on Taiwan Ginko 1914: 94–111; Tei 1943: 150–63.) They also acted as intermediaries in matters of sending personal possessions and information between the migrants and their home towns. Not only could petty amounts of money be sent to a place specified by the remitter for a small commission; the writing of letters on the client’s behalf was also accepted. According to a survey carried out immediately before World War I, although there were some large-scale remittance houses with headquarters in South China, the majority were

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small-scale and were based in Southeast Asia, almost all of them without any branch offices in South China. They maintained contact with the region through the use of agents. For example, when plantation or mining workers wished to remit money to their families, they would go to the neighborhood office or agent of the remittance house and request it be sent to their home towns, along with a sealed document. The remittance houses in the cities received these items from the branches and agencies, sorted them by destination, and sent the compiled documents to associated stores in South China (to be precise, after 1927, the items were compiled after a stamp had been affixed to each, in accordance with the international postal treaty). Meanwhile, preliminary notice of the amount of the remittance was given by telegram. Then a telegraphic transfer was requested from the banks, and the money sent to the associated stores, in such a way that it would arrive immediately prior to the arrival of the post in Xiamen or Shantou seven to ten days afterwards. There were various methods of dealing with foreign exchange, but it is generally said that even in the 1930s the commission charged by the remittance houses was comparatively small, and it was the currency conversion rate that was a decisive element from which the remittance house could make a profit, as it was often determined to their advantage. In receiving the money orders, the associated stores in South China immediately changed them into silver, and arranged a runner to await the entry of the mail ship into port. After taking delivery of the mail, cash was added to the sealed documents and, if local, was delivered by a clerk; if further away, ‘‘the lightly-dressed courier, wearing a footwear made of straw and shouldering a bamboo box, was run.’’ The courier was expected to ‘‘take a small steamboat operating on the coast or the river, return to his home, give the money to the families of the emigrants, receive a certificate called Huipi on the spot, and bring it back to the remittance house’’ (Taiwan Ginko 1914: 116). The total volume of mail handled by the remittance houses exceeded 3.7 million in 1933, and the number of remittance houses in about 1930 was 211 in British Malaya, Borneo, and Burma, 160 in the Dutch East Indies, 8 in Siam, 50 in French Indochina, and 15 in the Philippines. (Another source suggests there were about 110 remittance houses in Siam as a whole (Mantetsu 1939: 168). For the geographical distribution of remittance houses for the Chaozhou group in 1946, see Hamashita 1992, 96–114.) In South China in about 1935 there were 278 large-scale ones in Fujian and Guangdong provinces, including 153 in Xiamen and 66 in Shantou. Despite the development of the post office, the remittance houses handled the large part (60–70 percent in 1930) of remittances by the overseas Chinese, said to reach 300 million to 400 million yuan a year (see Table 11.7 for estimates in various years). The majority of branches

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Table 11.7. Estimates of the value of remittances by overseas Chinese, 1905–38 Year

Value of remittance (1,000 yuan)

Year

Value of remittance (1,000 yuan)

1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921

113,400 150,000 105,600 106,800 120,000 129,600 106,800 117,600 115,000 131,430 118,400 96,000 81,920 75,520 120,960 122,880 220,000

1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938

139,500 128,500 200,000 160,000 330,000 160,000 250,600 280,000 316,300 421,200 323,500 305,700 232,800 316,000 320,000 450,000 600,000

Source and Notes: Zheng (1943: 183). For the original sources and reasons for each estimation, see ibid., (80–4).

and agents in South China villages were merchants engaged in a side business, employing temporary staff during busy seasons (Ide 1941: 83). It is clear from the above description that the network centered on the remittance houses depended on the banking and postal systems. In some respects the banking and postal systems were in competition with the remittance houses, but in general the former played the role of supplementing the latter, thereby helping the network of the remittance houses expand. The post offices mainly substituted for the remittance houses’ and brokers’ function as the sender of documents, and did not show an appetite for remittance business itself. Even in 1935 when the recorded amount sent was highest, remittances sent via the South China post office did not even reach 1 percent of the total sum remitted (Tei 1943: 138–41). By the 1930s remittances by the banks began to compete with those from the remittance houses to a certain extent. The more important, however, was that the majority of remittances by the remittance houses themselves depended on bank money orders. At the end of the 1930s the main banks participating in the remittance of money orders were the four banks, namely, the Hong Kong and Shanghai Banking Corporation (British), the Netherlandsch Indische Handelsbank (Dutch), the Overseas Chinese Banking Corporation (overseas Chinese capital), and the Bank of

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China (Chinese) (Ide 1942: 48; Tei 1943: 141–3). The Bank of China had a network of associated banks and agents in every region of Southeast Asia, in order to deal with money orders. However, even in this case the supplementary elements of the relationship between the banks and the remittance houses unmistakably remained. ‘‘For example, a certain bank in the South Seas concluded an agreement with remittance houses to discontinue accepting small value remittances, and in this manner unpleasant competition was avoided.’’ It can be argued, judging from the relative financial strengths, that ‘‘the remittance houses were rather like bank agents . . . because the petty money collected from the overseas Chinese by the remittances houses was ultimately changed into bank remittance orders and then sent home’’ (Tei 1943: 145). For the remittance mechanism and the role of foreign banks in it in Hong Kong, see Hamashita (1990: 197–202). On the other hand, in the case of overseas Indians, remittances depended on British banks or on the financial network of the chettiar caste, and this kind of network that reached the smallest needs of the individual did not exist. From the viewpoint of the development of migration networks, the significance of remittance houses specialized in the provision of services to the public should be emphasized, as neither the banks nor specialized financiers were able to meet their needs. Let us turn to the role played by Chinese merchant networks in the development of migration networks. The usual path to success followed by the Chinese in Southeast Asia was a gradual advance over a long period of time, starting as a laborer, then getting employment as a sales clerk, and progressing to an owner of a small shop, before he became a large merchant. For example, the Lu Yu of Singapore, laborers in the copper mines; the Jian Yuan of Java, salted fish peddlers; the Zhang Hongnan of Sumatra, bookkeepers for a merchant, all became representative of the propertied classes over one or two generations (Mantetsu 1939: 2). According to research which surveyed fifty successful Chinese immigrants in the 1930s amongst whom over 70 percent crossed to Southeast Asia before they were 13, as many as thirty-eight achieved success for the first time, around the age of 40. This kind of success story of humble country folk was ‘‘the frequent material of evening storytelling, being retold in whatever remote place’’, and became the background against which many tens of thousands of fellow countrymen were sent overseas (Tei 1943: 33–4). As can be seen from Figure 11.4, the notable feature of the Chinese merchant network in Southeast Asia was that it permeated the whole domestic distribution hierarchy from foreign trade through wholesaling to retailing. In order for the possibility of upward social mobility to be realistic to any extent, it was important that the merchant network encompassed a large population at the bottom level and that the road from retail to wholesale was open. In what way did such conditions emerge? (The description below on the commercial networks is based primarily on

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Mantetsu 1939: 124–51, 1941: 203–75; Kanan Ginko 1942: 31–65; Nanpo Kaihatsu Kinko 1943.) The first is the need for a supply of basic daily necessities of the laborers and masses in the mining industry, in the plantations and in the cities, which was caused by the development of an export economy based on primary products. Elsewhere I have identified this kind of link as the ‘‘final demand linkage’’ effect (see Chapter 1 of this volume), and pointed Japan

China

Overseas Chinese merchants in Hong Kong

The West

Chinese merchants in Shanghai

Overseas Chinese merchants in Singapore

Japanese importers and exporters

Indian importers and exporters

Overseas Chinese importers and exporters

Western import and export houses

Overseas Chinese Wholesalers and intermediaries Overseas Chinese retailers

Overseas Chinese

Local produce

Local population

Fig. 11.4. Diagram of the overseas Chinese in the Southeast Asian distribution networks. Sources and Notes: Mantestu (1939: 125, 1941: 256); Kanan Ginko (1942: 59–60). I have put the descriptions of routes in the three sources together, to suggest a common pattern. Not all of the routes indicated can be found in each case.

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out that the increase in purchasing power in prewar Malaya, for example, caused an increase in imports of rice, cattle, tobacco, cotton textiles, opium, sugar, and fish products (see Sugihara 1996: 83–4). These products necessarily passed through the hands of wholesalers, retailers, and also of the foreman who was often involved in the supply and distribution of consumer products, before crossing to the consumers. This basic structure remained unaltered throughout the process of quantitative expansion accompanied by strong cyclical fluctuations up until the latter half of the 1930s. The road to an improvement in living standards was clearly not level because changes in wages together with changes in the price of daily necessities were violent, but as is clear from the sharp increase in the number of Indian and Chinese migrants, the need for the distribution network developed in response to the rapid increase of those wage earners who had to purchase nearly all daily necessities. A cursory look at the typical composition of monthly expenditure of the overseas Chinese laborer in the rubber plantation at the end of the 1930s suggests a comparatively rich diet with a significant proportion spent on pork, fish, and vegetables. There were also detailed entries of expenditure on haircuts, clothing, bathing, and bedding (Blythe 1947: 28–9). Furthermore, the development of the domestic distribution network for export products from the mines and plantations to the main ports was in certain respects connected with this. There is perhaps no economic reason why these intermediary businesses should have been monopolized by the Chinese, but in contrast to the Western merchants, it is natural that in domestic distribution, which does not require large amounts of capital, but does require local knowledge, the Chinese, who had a wealth of business talent and a flourishing ‘‘spirit of cooperation and mutual help’’ (Mantetsu 1941: 208), were extremely competitive. The wages of Indian laborers were kept low and they were confined to comparatively isolated living spaces. In contrast, the wages of the Chinese laborers were the highest amongst the main labor force, they could move unrestrainedly between industries and between regions, and had relatively frequent contact with the local population (Barlow 1978: 44–53). The launch of the Malays, Javanese, and Thais into commercial business threatened the Chinese monopoly in the 1930s, but only to a very limited extent. In this way, the three mutually supplementary networks, the migration network through the system of lodging houses, the remittance network through the remittance houses, and the distribution network of Chinese merchants and traders were developed, forming the core of the network of overseas Chinese. As a result, by the interwar period it became relatively easy for those with the desire in the emigrant-producing regions of South China to make the crossing without their own capital, to eat Chinese-style with fellow migrants sharing the same culture in Southeast Asia, to work for two or three years while maintaining contact with their

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home villages, and, after gaining some capital, to return home. In actual practice the three parts of the network blended and supplemented each other; the brokers remitted money; remittance houses put the capital for remittance into exchange or commodity speculation; general stores combined with remittance houses; lodging houses were involved in commerce. At the same time, the functional separation of the three made the flow of information multitracked, which had the effect of reducing the possibility of retaining a hierarchical relationship through exercising the monopolistic power. For example, the comparatively easy access of migrants to shops and remittance houses was an important factor preventing the brokers and lodging houses from one-sidedly monopolizing information. Already in the early 1930s, the literacy rate (the ratio of those who read to the total) of the adult male overseas Chinese in Malaya was 47 percent, which was higher than those of other Asian counterparts (Kikakuin 1939: 226–8). While the Chinese migration network depended on the village ties and traditional principles of Chinese society, even here elements of open competition were at work. Second, the Chinese merchants stretched their own distribution network not only around mines and plantations where migrants were numerous, but also in the ordinary farming villages, and they exhibited a monopolistic power in the intermediary business between traders and farmers. In this way, daily contact between the Chinese and the local population spread rapidly, and this economic activity began to have direct contact with all aspects of the local economy located outside the system discussed in this chapter. Looking at the composition of the Chinese population by industry in the 1930s in Table 11.8, the proportion engaged in agriculture and industry or mining is surprisingly small, with more than half accounted for by commercial activities. Of course, the majority of migrant laborers’ families lived in South China, so, if we are to estimate the population involved in the Chinese migration networks as a whole, the ratio of the agriculture, industry, and mining population to the commercial population would probably be reversed. However, as far as the local Southeast Asian economy is concerned, Table 11.8 more accurately expresses the profile of the Chinese presence. There was much negative appraisal about the overseas Chinese merchants: they were mainly one-man organizations with small amounts of capital and a dearth of experience of modern business transactions. It was said that business ethics were lacking and the so-called ‘‘planned bankruptcy’’ was a common practice (Mantetsu 1939: 143–7; 1940: 62–4), although whether the rate of bankruptcy of Chinese merchants was significantly higher than those of other merchants in the same field is a debatable issue. Indeed, at the level of foreign trade, they were on the defensive. Even in the main Southeast Asian ports, they met competition from European, American, and Japanese trading houses, while the cases

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Table 11.8. Estimated ratio by occupation of the overseas Chinese in Southeast Asia Agriculture Industry and mining Commerce Others Total British Malaya French Indonesia Siam Dutch East Indies The Philippines Total No. of overseas Chinese in thousands

39 16 10 21 — 17 861

23 28 20 30 25 23 1,208

25 56 70 37 75 52 2,760

13 — — 12 — 8 407

100 100 100 100 100 100 5,326

Source and Notes: Fukuda (1939: 87–8). The author’s estimates. Year unspecified.

of extending their networks into Europe or America were negligible. Nevertheless, and at that time, the legal infrastructure of the system of commercial credit was not sufficient in Southeast Asia, and almost all importers and exporters depended on Chinese wholesalers or intermediaries. In particular, it was normal for the European and American trading houses to give a comparatively long period of 1–3 months’ credit, and for the wholesalers who obtained goods in this manner to sell on credit to the provincial wholesalers. Thus, in Thailand, it is thought that at the same time as ‘‘spreading a grand branch network of shops as a wholesaler, there were many (Chinese) businesses with almost no capital’’ (Mantetsu 1939: 132). Furthermore, according to a research based on examples from the Dutch East Indies, ‘‘cheap management costs’’, undertaking ‘‘ingenious methods of financing’’, and ‘‘an ability to speculate’’, that is, ‘‘buying large stocks of goods, letting them lie for long periods and waiting for the price of cheaply bought goods to rise’’, are regarded as the strong points of the Chinese (Nanpo Kaihatsu Kinko 1943: 23–7). It seems fair to suggest that it was a generally accepted contemporary opinion that a strategy of valuing a ‘‘network of individuals’’ rather than a ‘‘network of capital’’ (i.e. the adoption of the joint-stock company as an organization) could explain both the limits of the Chinese organizational capabilities in large-scale foreign trade and their competitiveness in intermediary business. Finally, it should be pointed out that overseas Chinese business associations often existed at the intermediary business level, in an effort to create basic infrastructure (namely informational infrastructure; see Sugihara 1996: Chapter 8) for the development of commerce and industry, which was somewhat similar to the efforts undertaken by the Japanese government during the Meiji era. They included the groups organized by place of birth (provincial, prefectural, county unit ethic groups, home village associations), chambers of commerce, and trade associations (in

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the Dutch East Indies the Overseas Chinese General Business Association, the Overseas Chinese Business Association, the Batavia Importers and Exporters Association, and so forth). In addition to making contact with the local and Chinese governments, and engaging in philanthropical activities such as granting educational assistance or relief in times of crisis to the mother country, these groups operated with the concrete business promotion aims of ‘‘development of overseas Chinese businesses, introduction to and supervision of international trade, market research and informational assistance concerning overseas Chinese businesses, compilation of trade reports concerning overseas Chinese businesses, arbitration of business matters and the establishment of commercial museums for domestic products and goods in general’’. ‘‘The powerful Chinese organizations’’ (Nanpo Kaihatsu Kinko 1943: 16–23. The General Business Association in Thailand is cited as an example) that mediated between ‘‘the natives, and exporters and importers’’, hitherto based on village ties and some guilds, were reorganized, expanded, and rapidly became multifaceted. It is clear that the capacity to carry out these organizational activities was a factor indirectly supporting the development of migration networks.

5. Conclusion The formation of Chinese migration networks arguably had the following general characteristics. First, they took shape as a response to increasing Western (and later Japanese) trade and investment opportunities in Southeast Asia. It was clearly not self-induced, but was part of the Asian response to Western impact. The reading of the British commercial reports of the 1860s and the Chinese maritime customs reports of the 1870s makes it clear that the introduction of steamships was a necessary condition for the formation of the networks. The Xiamen and Shantou maritime customs reports published migration statistics classified by sailing vessels and steamships, according to which, in the 1870s, the low fare, speed, and regularity caused the latter to substitute rapidly for the former. For example, in 1874 the number of emigrants from Shantou via steamships for the first time exceeded that via sailing boats (CIMC 1876: Swatow, 154). Clearly, the introduction of steamships on intra-Asian shipping routes assumed the direct participation of Westerners. The contribution of the colonial governments cannot be ignored either, if only because port and city infrastructure was originally initiated under their control in order to facilitate trade with the West. Moreover, from the viewpoint of public safety, plague prevention measures, and the regulation of labor supply and demand, the colonial government attempted to supervise the conditions of the brokers and to restrict the number of immigrants. Nevertheless, the system of lodging houses with Xiamen,

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Shantou, Hong Kong, and Singapore at its axis, in competition with the development of direct routes, grew into a large regional network transcending the political and economic framework laid under Western colonial control. Second, one of the foundations of the growth of the networks was the efficiency of using traditional Chinese social principles and village ties as a method of recruiting and managing labor for the capitalistic management of the plantations and mines. Partly as a result of the intervention by the colonial government, the coercive and threatening activities of secret societies and the seduction and fraud of brokers gradually declined, and by the end of the 1930s labor conditions in Malaya had improved to the point that a British official concluded that labour was ‘‘free’’ in both name and reality. Some of the emigrants became industrial laborers, with the road to engaging in finance, commerce, or other services also open. Moreover, the development of the network of remittance houses and Chinese merchants reinforced the economic competitiveness of the migration network, and played an important role in getting a number of grassroot villages in Southeast Asia in touch with the international economy. This in turn helped strengthen the social status of the Chinese in Southeast Asian society, which provided another crucial background to the growth of the network. Central to this chain of virtuous circle was the efficiency growth of the migration network itself. Finally, mention should be made of the impact of the migration networks on the regional economic integration of Southeast Asia. While the presence of the overseas Chinese reduced the extent of direct economic ties with Western powers and the penetration of colonial control to some extent, it is also a fact that the migration networks caused a strengthening of another form of external ties, namely the connections between the Southeast Asian economies and China. From the viewpoint of Southeast Asian nationalism (or regionalism), a large amount of remittance to South China and the lack of commitment of the overseas Chinese to host society were matters of serious concern. Nevertheless, the migration networks, through movements of people, goods, and money, acted as a force promoting free trade and movement of capital within the region, effectively going against the logic of Western colonial control, apt to give preference to the home country. For example, in the 1932 Ottawa Conference, the British government of India’s request to the Straits Settlements for granting preferential tariff rates to Burmese rice was rejected. (Kratoska 1993; for a more general discussion of the relationship between the Asian free trade area and the creation of bloc economics such as imperial preference, see Sugihara 1996: Chapter 4). In addition to individual studies in the relationship between the Chinese in Southeast Asia and their host societies, and research into international relations between the overseas Chinese and various Western countries, it is necessary to establish the growth of these free-trade-promoting networks as the third dimension of

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Southeast Asian economic history, and evaluate its historical depth, as well as its limits, in the context of regional economic integration, and the growth of the Asian international economy which underpinned it.

Notes 1. The closest to the approach taken here can be found in Fukuda (1939: 69–70), where the total number of emigrants from the three ports was calculated, by avoiding the double counting, for the period from 1890 to 1909. However, Fukuda did not pursue this method for his discussion on the interwar period. Yu was also aware of the problem of double counting, but did not attempt an estimate. See Yu (1969: 23–6). 2. For example, see Hamashita (1992: 85, table 3). The table, based on data taken from Chaozhou-zhi, a local gazetteer, includes emigration to Hong Kong. Incidentally, the figures for the period from 1912 to 1923 in that table also include emigration from Swatow to other Chinese ports. 3. If we divide the total number of immigrants from China and Hong Kong to the Straits Settlements for the period from 1881 to 1939 (data are taken from Blue Books up to 1930 and Annual Report thereafter) by the number of emigrants from China and Hong Kong for the same period (data are taken from Table 11.3 of this chapter), the result suggests that 68 percent of emigrants headed for the Straits Settlements, although it should be cautioned that there are minor problems of the compatibility in coverage between the two figures. 4. For immigration data on the Siamese side, see Mantetsu (1939: 28–42). However, this source only states that ‘‘the number of immigrants, legal and illegal, via land routes is very large, and in recent years is sometimes said to amount to twice the number of immigrants legally entered into Bangkok via sea routes’’, and does not provide the detailed statistical information on immigration by land. For immigration data on the Dutch East Indies, see Mantetsu (1940: 93– 110). A comparison between these figures and the statistics on the Chinese side suggests that there must have been an immigration flow via the Straits Settlements in this period. 5. See Annual Report. It should be noted that some of the statistics in Ta Chen’s book do not agree with those in Annual Report or Blue Books. See, for example, Chen (1923/1967: 83–6, especially table 15 in p. 84). 6. According to one source which gives details, with the exception of those from Guangzhou, Wuzhou, and Gaozhou in Guangdong province who were all free emigrants, emigrants were composed of free emigrants (28 percent), those who were recruited by Ketou (see below) (65 percent), and those who were recruited by European (German and French) recruiters (6 percent). See Taiwan Ginko (1914: 11). To my knowledge, the first reference to 70 percent being the Ketoutype emigration is Gaimusho (1929: 31). A number of subsequent Japanese publications have cited the same figure throughout the interwar years. 7. There is little discrepancy between these sources, or, put another way, a number of Japanese publications during the interwar period repeat themselves without reference to sources. The rest of this section, therefore, will be foot-

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noted only where I relied on English-language sources. For a general outline of the process of enactment of law relating to Chinese immigrant labor, see Palmer (1960: 114–65) and Shigematsu (1976). 8. Campbell associates ‘‘credit-ticket emigration’’ with indentured emigration, but the definition adapted by the 1890 Labour Commission clearly includes free emigration with the character of indentured labor. See Campbell (1923/ 1971, Chapter 1).

References Annual Report of the Chinese Protectorate, Singapore. Barlow, C., The Natural Rubber Industry: Its Development, Technology and Economy in Malaysia (Kuala Lumpur, 1978). Blue Books, Hong Kong. Blue Books, Singapore. Blythe Report. Federated Malay States, Methods and Conditions of Employment of Chinese Labour in the Federated Malay States (Kuala Lumpur, 1938). Blythe, W. L., ‘‘Historical sketch of Chinese labour in Malaya’’, Journal of the Malaya Branch, Royal Asiatic Society, 20:1 (1947), 64–114. Cambell, P. C., Chinese Coolie Emigration to Colonies within the British Empire (London, 1971; originally published in 1923). Chen, T., Chinese Migrations with special reference to Labor Conditions (Taipei, 1967; originally published in 1923). Cheng, S. H., The Rice Industry of Burma, 1852–1940 (Kuala Lumpur, 1968). CIMC (China Imperial Maritime Customs), Returns of Trade and Trade Reports, title varies. CMC (China Maritime Customs), The Trade of China, Annual Report, title varies. Fujimura, K., ‘‘Chugoku nanbu yonko ni okeru shutsu-nyukokusha-su no suii (1855–1939 nen): kaikan ryokyaku tokei Wo chushin ni shita kisoteki suchi to gurafu [Trends of outgoing and incoming passengers in four southern ports of China, 1855–1939: Numbers and figures based on maritime customs passenger statistics]’’, Kenkyu Ronshu (by Kanagawa Daigaku Daigakuin Kiezaigaku Kenkyuka) 24 (1995), 1–37. Fukuda, S., Kakyo Keizairon [Studies in the Economies of the Overseas Chinese] (Genshodo Tokyo, 1939). Gaimusho, T., Kakyo no Kenkyu [Studies in the Overseas Chinese] (Tokyo, 1929). Hamashita, T., Kindai Chugoku no Kokusaiteki Keiki [International Elements in Modern China] (Tokyo, 1990) ——, ‘‘Imin to shogyo nettowaku: Choshu gurupu no Tai imin to hongoku sokin [Emigration and the commercial networks: Emigration from Choshu to Siam and their homeward remittances]’’ (Tokyo Daigaku) Toyo Bunka Kenkyusho Kiyo, 116 (1992), 61–106. Hong Kong Administrative Reports. Huff, W. G., ‘‘Entitlement, Destitution, and Emigration in the 1930s Singapore Great Depression’’, Economic History Review, 54:2 (2001), 290–323.

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Ide, K., Nanyo to Kakyo [Southeast Asia and the Chinese Overseas] (Sanseido, Tokyo, 1941). ——, Kakyo [The Overseas Chinese] (Rokko Shokai Shuppanbu, Tokyo, 1942). Kanan Ginko Chosaka, Ranryo Indo Shogyokai ni okeru Kakyo [The Overseas Chinese in the Commercial World of the Dutch East Indies] (Taipei, 1942). Kani, H., Kindai Chugoku no Kuri to ‘Choka’ [Coolies and ‘Choka (Zhuhua)’ in Modern China] (Tokyo, 1979). ——, ‘‘Honkon imin tokei shiryo: Tonan Ajia Indoyo homen kankei [Statistical sources relating to migration to and from Hong Kong; the Cases of Southeast Asia and the Indian Ocean]’’ CAS Newsletter, 55 (1993), 1–10. Kikakuin, Kakyo no Kenkyu [Studies in the Overseas Chinese] (Matsuyamabo, Tokyo, 1939). Kratoska, P., ‘‘The Southeast Asian Rice Trade and its Ramifications, 1850–1950’’, paper presented to the Workshop on China in the Asian International Economic History, Osaka (1993). Labour Commission (1890). Report of the Commissioners of Enquiry into the State of Labour in the Straits Settlements and Protected Native States (1891). Mantetsu Toa Keizai Chosakyoku, Tai-koku ni Okeru Kakyo [The Overseas Chinese in Thailand], Nanyo Kakyo Sosho, Vol. 1 (Tokyo, 1939: reprinted in Tokyo, 1992). ——, Ranryo Indo ni Okeru Kakyo [The Overseas Chinese in the Dutch East Indies], Nanyo Kakyo Sosho, Vol. 4 (Tokyo, 1940: reprinted in Tokyo, 1992). ——, Eiryo Mare, Biruma Oyobi Goshu ni Okeru Kakyo [The Overseas Chinese in British Malaya, Burma and Australia], Nanyo Kakyo Sosho, Vol. 5 (Tokyo, 1941: reprinted in Tokyo, 1992). Nanpo Kaihatsu Kinko Chosaka, Kakyo Chukai Shogyo to Kakaku Keisei [Intermediary Commercial Activities of the Overseas Chinese and Price Formation], San-cho 28 (1943). Palmer, J. N., Colonial Labour Policy and Administration: A History of Labor in the Plantation Industry in Malaya, c. 1911–1941 (New York, 1960). Parr Report. Report of the Commission Appointed to Enquire into the Conditions of Indentured Labour in the Federated Malay States, Proceedings of the Federal Council of the Federated Malay States (1911). Sandhu, K. S., Indians in Malaya: Some Aspects of their Immigration and Settlement, 1786–1957 (Cambridge, 1969). Shigematsu, S., ‘‘1910-nendai no Maraya Renposhu ni okeru imin rodo seisaku [The immigrant labour policy in the Federated Malay States in the decade beginning in 1910]’’, Ajia Kenkyu, 23:1 (1976), 57–83. Straits Settlements Government Gazette. Sugihara, K., Ajiakan Boeki no Keisei to Kozo [Patterns and Development of IntraAsian Trade] (Kyoto, 1996). Taiwan Ginko Somubu Chosaka, Nanyo ni Okeru Kakyo (Shina Ijumin) [The Overseas Chinese in Southeast Asia] (Taipei, 1914). Tei, R. (Zheng Linkuan), Fukken Kakyo no Sokin [Remittances of the Fujian Overseas Chinese], translated by Takamichi Ikeda, Mantetsu Toa Keizaikyoku (Tokyo, 1943). Yu, C., Kakyo Keizai no Kenkyu [Studies in the Economic Activities of the Overseas Chinese] (Tokyo, 1969).

Glossary

Pinyin transliteration Banqiao Banshu* Beihai benri ya*

Original source/ alternative transliteration

Pakhoi

Chang Fa Chaozhou Chen Jiageng Chen Shiyang Chen Tianlai Chen Zhonghe Cheng Xing Chong Xin chuantouhang

Cheong Fat

Dadaocheng Dalian De Ren He dianjia dogyokai* Dong Fang Dong Hua Dong Nan

Tatoitia Dairen Tack Yuen Woo

Fuzhou

Foochow

Gaoxiong Gu Xianrong Guang Hua Long Guang Yi Guangdong Guangzhou Guo Le

Tan Kah-Kee

Seng Hing

Tong Hong Tung Nam

Kwong Wah Loong Canton Kwoh Loh (Continues)

Glossary

276

Pinyin transliteration

Original source/ alternative transliteration

Guomindang Guo Qinglong

Kuomintang

Hankou Heng Yuan Hiromu Takase* Hong Yu Hu Wenhu Huipi Hunan Hunan Yi

Hankow

Aw Boon-haw kaihi*

Ito Chu* Jiag He Long Jian Dong Xing Jiangsu Jiangxi Jian Yuan Jin Hua Jin Long Jinki Jiyi

Kien Hoo Leong Kian Tong Hing Kiangsu Kiangsi

Kim Loong Chup Yick

Kanebo* kebang ketou kezhan Korekiyo Takahashi* kyosei* Lao Gong Mao laoke Li Chunsheng Li Sheng Yuan Li Xing lijin Lin Chaodong Lin Erjia Lin Heshou

Laukhehs Lee Sang Yion Lai Hing likin

Glossary

Pinyin transliteration Lin Jishang Lin Pengshou Lin Song Liang Lin Songshou Lin Xiantang Lin Xiongxiang Lin Xiongzheng Long Shun LuYu

277

Original source/ alternative transliteration

Lin song-liangese

Loong Shun

menka* menpu* Minami Manshu Tetsudo* Naigai Wata* Nanjing Nanyo Kyokai* Ningbo Niuzhuang

Nanking Ningpo Newchwang

Obitani* Pu Yi Yi qianke Qing Qingdao Qiongzhou Qiu Yuanrong

Tsingtao Kiungchow Hioe Njan Joeng

Ren He Rong Zongjing ronin*

Yun Woo

San Sheng sanchi* Sanji Muto* Senba*

Sam Shing

(Continues)

Glossary

278

Pinyin transliteration Senboku* Sen’nan* Shaanxi Shandong Shantou Shanxi Shen Xin Shengjing shibao Shimonoseki* Shokosho Shomukyoku* Sichuan Shimpei Goto* Sotokufu*

Original source/ alternative transliteration

Shensi Shantung Swatow Shansi

Szechwan

Sotokukanbo Gaijika* Sun Yixian

Sun Yat-sen

Tai Chang Tai Cheong Taiwan Nichi-nichi Shimpo* Tianjin Tientsin Toa Dobunkai* tsubo* Wu Hanxing Wufeng Wuxi

Ng Hong Hing

Xiamen Xin Rui Xing xinju xinke Xue Chaoxing Xue Chaoyang

Amoy Sin Sui Hing

Yagi* Yangzi (river) Yi Chang Yuan Yi He Yong An You Cheng Yu Da

Wusieh

Sinkhehs

Yangtze Yee Woo Wing On Yau Seng & Co

Glossary

Pinyin transliteration Yu Fa Yu Hongrui Yu Hua Yu Xing Yuan Chang Yuan Shikai zaikabo* Zhang Hongnan Zhen Xin Zhenjiang Zhi He Zhifu Zhuang Xiyan zihao

Original source/ alternative transliteration Yue Fat

Yue Hing

Chinkiang Tee Hoo Chefoo Tjung See Gan

*refers to Japanese style of romanization.

279

INDEX (Numbers in bold type indicate a figure or table.) Abe, T. 14, 58, 75, 88, 92, 94, 96 Adachi, K. 87, 90 advertisement, parades held in all big cities in Taiwan 237 AJPOC 137–8, 141 American goods, imported into Shanghai 201 Amoy Gazetteer 229 Anti-Japanese Association 129–30 Anti-Japanese Association (Shanghai), contributions to national salvation fund and 132 anti-Japanese boycotts 15, 130–31, 141, 155–56, 233 Arrow War 24 Asian countries, economic modernization 1 Asian international economy, growth of 4–8 ‘‘Asian sea’’ 25, 44 ‘‘Asian trading network’’, enduring nature of 44 Asia-Pacific War (1931–45) 3 ‘‘assisted emigration’’ 256 Association of Japanese Cotton Piece Goods Merchants in Shanghai 131, 139 Bank of China 164 Bank for South China 231 Bank of Taiwan (1899) 232 Shi Fanqi of Lugang adviser to 234 Banno, J. 96, 128 Batavia Importers and Exporters Association 270 Beijing, shops ( Jinghuochao) that dealt in goods from 39 Blythe, W.L. 260–62, 267 Federated Malay States Commission Report 258 Booth, A. 3, 66 Brandt, L. 3, 194 Britain (1920s) worried that anti-Japanese organizations could damage Shanghai trade 142 business bad during Great Depression 134

commercial counsellor observed trade passing out of hands of foreigners 136 fall in share of Chinese trade (1925–1927) 127 growth of Asian trade beneficial to 12 not totally opposed to rise in import duties 147 opinions of British in Shanghai on boycott 139–41 return to gold standard (1925) 128 British American Tobacco (Americanowned) 166 British Chamber of Commerce in Shanghai, letter to acting British consul-general (1929) 140 British Douglas Company 229, 234 British India 12 British West Africa, cowries circulated in local markets 122–3 brokers, remitted money 268 Bush, R.C. 128, 135 Cain, P.J. 12, 66 Canton, shops (Guanghuohao) that dealt in goods from 39 Central Executive Committee of the Guomindang in Nanjing 137 chambers of commerce, limits on issuing private copper cash notes 121 Chatterji, B. 66, 69 Chee Hsin Cement Co. Ltd 160–61 Chee Ming Dyeing and Weaving Co 166 Cheng Yu-kwei 155, 157, 170, 192, 202 Chens of Gaoxiong, pro-Japanese 235 Chen Youwen, wealth by investing in steamers 229 Chen, Z. 187, 202 Chiang Kai-shek 137 Chili, the (owned by Russell and Co.) 35 China Central led by Shanghai, trade (1946–48) 192

Index changes to monetary system 103 domestic factors and involvement in international trade 122 Chinese-owned mills expanded spindles and looms 95 composition of exports (1912–36) 159–61 composition of imports (1912–36) 158–60 composition of trade of main regions (1919 and 1930) 210 correlation coefficients for US copper price and copper cash rate 110, 113 cost of interregional land and water transportation 183–5 cotton sateen included Italians, Venetians and lastings 85–6 currency reform (1935) 171 demand for copper caused appreciation of copper currency 113 development of cotton spinning firms during and after World War I 96–7, 172 development of industry and structural transformation 172 economic center southeastern littoral region since eleventh century 179 economy and internal disintegration (1850 and late 1870s) 15–16 estimated impact of import duty 158–9 financial crisis (1919–1921) decrease in silver stocks 116 finished sateen exported to from Osaka 91 fluctuation with international economic involvement (1842–1949) 194 important market for Japanese cotton industry 74–5 import duty and imports (1926–36) 150–51, 154 importers and shops identified 87 imports of cotton yarn from India and Japan (1915) 76, 80 imports of sateen from Japan (1923) 85–7 industrialization in (1930s) 11, 208 inland industries declined (1945) 192 integrated with world economy (1870–1930s) 194, 211 internal disintegration (1850 and late 1870s) 15 interregional integration at its peak (1870–1906) 193

281

interregional trade, before opening of treaty ports 188 intra-Asian trade 6 migration and capital flows 2 list of finishing mills 88 modern economic resources concentrated on littoral region 10 modern sugar factories set up in Kwangtung province 168–9 movements of the copper cash rate 110, 113 movements of imports and rates of import duty 162 movement to boycott Japanese goods as protest against invasion 155 the powers played important role in economic relations (1930s) 169 recovery after Great Depression 17 reform of monetary system (1914–27) 113, 171 regional composition of foreign trade and trade balances 202–3 regional composition of internal trade and trade balances 202, 204 rise of nationalist movements 14 rise of wool spinning industry 167 scarcity of silver and demand for new silver dollar 114 shortage of copper and international price 108 silver exchange rates (1926 to 1936) 157–8 success of mills in inland North 80, 83 Taiping Rebellion (1850s) 41 tariff policy of nationalist government (1929–36) 15, 96–7 top thirty spinning firms (1921 and 1930) 79–82 trade deficit financed through remittances from Southeast Asia 5 trade deficits declined during World War I 202 trade formed ‘‘international commerce’’ 43 traders classified into four groups 87 trade shrank in interwar period 7 China Bank notes 115–18, 120 monetary unification (1935) 119 China Cement Industry Association 161 China Charity Fund Committee 68 China Cotton Industry Association 166 China Dyeing Works Ltd. 166

282

Index

China and Japan, trade friction 171 China Match Co., Ltd 163 China Portland cement Co., Ltd. 160 China’s modern history stage I: (1850-late 1870s) 180–81 stage II: (late 1870s–1906) 181–89 stage III: (1906–37) 189–91 stage IV: (1937–49) 191–3 China and Southeast Asia trade, Osaka and Kobe major Japanese ports 56–7 China’s regional commodity flows (1914–1931) 198–200 impact of industrialization 208–11 internal and foreign trade 200–2 patterns of internal trade and trade balances 202–8 China’s Western relations, opening of treaty ports and 193 China Wool Manufacturing Co., Ltd. (Shanghai) 167 Chinese dominated China’s trade with other Asian countries 6 extremely competitive 267 irritated by Shanghai municipal council and threatened British 141 Chinese boycotts of Japan 127, 132, 211 Chinese central government revenue 154 Chinese competition, Japanese technological ‘‘upgrading’’ and 2 Chinese customs revenue (1928–37) 151–3 Chinese from Xiamen, Straits Settlements and 250, 272n.3 Chinese Imperial Maritime Customs, gray shirtings ( yuan-bu), into and out of China 28 Chinese Imperial monetary system 103 multiple monetary standards and currency circuits 103–6 phases of monetary reforms 106–7 disappearance of the copper cash and appearance of provincial paper money 107–13 prevalence of Chinese silver dollar and bank notes 113–19 Chinese Importers in North China before World War I, rise of 54–5 Chinese and Indian cotton, price difference 52–3

Chinese and Indian merchants 49, 63, 66–7 Chinese and Indian migration to Southeast Asia, (1870 to 1930s) 244–6 Chinese industrialists, foreign competition and 128 Chinese industrialization, technology and commerce (Osaka and Shanghai) 14, 97 Chinese laborer in rubber plantation, fairly rich diet 267 Chinese Maritime Customs Reports 198, 201, 203–5, 209 steamships and formation of networks 270 Chinese medicines, exported from southwest 190 Chinese merchant networks 2, 14, 16, 267 gradual advance over long period of time 265 modern Japanese cotton industry (1890 to 1941) 49 permeated whole domestic distribution hierarchy 265–6 process of Japan’s industrialization and 51 Chinese merchants 56 percent of exports from Osaka to North china (1925) 56–7 anti-Japanese movements by 62 bearers of the ‘‘impact’’ from Asia 24 boycott of Japanese goods after Manchurian Incident 63, 97 business opportunities of international system of free trade 50 carried Western goods 202 ‘‘Commercial Report on Hiogo’’ 25–7, 44n.2 dominated trade and maintained links with Shanghai 206 exports from Kobe by (1925–41) 68 flexible in evaluating circulating currencies 120 grassroots villages in Southeast Asia in international economy 271 group solidarity 40 imports into Kobe of foreign goods 26 information and 43 internal trade conducted by 207, 212 Japanese goods after second SinoJapanese war 67–9

Index jiaozhung zihao who specialized in buying at auction 40 offered information, contacts and ‘‘trust’’ 6 ‘‘planned bankruptcy’’ and 268 prepared to risk purchasing Japanese goods in Shanghai 211 purchase of cotton cloth in Shanghai for Kobe market 33–8 re-export of foreign-made cotton goods to Kobe 23–4 revived position with Japanese in Osaka 57–8 steamship routes and 43 stretched their distribution networks 268 trade of foreign goods a second type of internal trade 201 Chinese Merchants’ monopoly, breaking in (1890s) 51–4 Chinese migration networks 5, 251, 251–2, 253–4, 256, 267, 270–71 Chinese migration to Southeast Asia (1869 to 1939) 17 Chinese Nationalist Government changes in customs revenue and import trade 150–58 effect of fall of Core China in (1937– 38) 191 GATT and 173 import duties (1928–1934) 145–6 industrialization programme 2 modernization of littoral China’s economy 13 tariff policy 146–50, 172 (1928) 147, 154–5, 158–9 (1930) 148, 155, 158 (1933) 148, 158 (1934) 149, 158 (1934) tariff policy (fifth increase) 150 impact on International relations 169–71 tariff policy, development for Chinese and Japanese capital 166 Chinese Nationalist Party (Guomindang) 68 boycotts 127, 129 ( July 31, 1929) anti-Japanese movement banned 133 monetary unification (1935) 107 severed connections with communists and Soviet Union (1927) 129–30 tariff policy of 96–7, 127–8

283

Chinese networks, across territorial boundaries 9 Chinese Revolution, opportunity for Japan in North China 202 Chinese Yuan Shikai silver dollar 107 CIMC 28, 108–9, 111 Civil Engineering Bureau 231 Civil War years (1850-late 1870s), world economy and 193 Coble, P.M. 128–9, 134–5 colonial governments, port and city infrastructure for trade with West 270 colonial period, newspapers carried advertisements of Chinese medicines 237 Communication Bank 116 ‘‘Company Faction’’, Japanese who worked for big trading companies 129 Confucian temple in Taipei 234 ‘‘coolie’’ emigrants 257 coolie ordinance (after 1880) 257 copper, demand- and supply-side factors and shortage of 107 copper cash coins 103–4, 107–10, 113 copper cash notes 105 called qianpiao 106, 109 formal monetary institutions and 121 official drove out the private money 112 copper currency (1904) appreciation of price ceased 109, 111 driven out of local markets after World War I 116 people free to establish new units of account 120 rise in prices (1897–1904) 109–10, 113 copper currency and silver liang, exchange rate fell 109 Core China absorbed most of interior resources (1945– 1949) 194 closer connections with world economy than Peripheral China 193 modern establishments were accumulated in 191 responsible for 95 percent of China’s foreign trade 182 silk, tea and cotton production 185 Taiping Rebellion and 180 cotton cloth processing industry, effect of protective tariffs 165, 169

284

Index

cotton-spinning industry, tariff policy and 165, 168 cotton textile industry, Japanese and Chinese industrialization 14 currency circuits 103–6, 112, 120, 124n.6 formalization of money supply and 119–22 officialization of money supply eliminated 122 peculiarity of in traditional China 124 ‘‘currency wars’’ 3, 12 customs duties, central government’s stable source of revenue 146, 148 Dai Nihon Boeki Nenpyo (Annual Return of the Foreign Trade of Japan) 85 Dai Nihon Boseki Rengokai (Greater Japan Cotton Spinners’ Association) 88 Decennial Report made by the customs of Shashi 111 depression after (1897), mergers and acquisitions of spinning companies 75 disintegration of interregional economy and the polity, intertwined 190 divine money trade association in Tatoitia 237 dual-economy problem 16, 193–4 Dutch East Indies 12, 238, 252, 256 ‘‘ability to speculate’’ strong point of Chinese 269 migrants and 253–4 pension payments and 66 pro-Japanese group 67 return of migrants 254 Dutch importers, Japanese goods and 65 East Asia comparatively ‘‘autonomous’’ region 8 ‘‘devaluation sphere’’ against South and Southeast Asia 66 foreign trade depended on Chinese networks 6 independence from world economy 124 produce produced and consumed within China and Japan 26 silver dollars from Mexico 104 treaty ports (1870s) 25

Economic ties of Taiwanese merchants direct trade across the Taiwan Straits 226–8 investment 222–6 migration 219–22 navigation and finance finance 230–31 navigation 229 Edo period (1603–1868) 75, 91 Egypt, Chinese cotton cloth and 209 European and American trading houses, 1–3 months’ credit 269 European-managed rubber plantations and farms, direct employment methods 262 European manufacturing, sacrificed as Japanese goods profitable for merchants 67 exhibitions (1935), Manchuria and Taipei to promote Taiwan’s products 237 exports of Japanese cotton cloth to China (1920s) 83–5 cotton sateen in China 85–8 growth of finished cotton cloth to China (1920s) 83–5 what brought about the expansion of export of sateen? 88–95 ‘‘exterior China’’ and ‘‘interior China’’ 179–80 Federated Malay States, Chinese labor force 261–2 Federated Malay States’ Labour Commission (1938) report, largest employment found in rubber plantations and tin mines 261 Fengnan Company, exchange bills across the Straits (1927) 231 ‘‘final demand linkage’’ 10, 266 flour-milling industry, Chinese capital and 164, 169, 172 ‘‘flying geese’’ pattern of economic development 2 ‘‘forced free trade’’ 9 foreign business, privileges obtained from treaties 200 foreign and Chinese merchants, changing roles of 41–2 foreign houses, auctions of good cotton cloth ( jiaozhuang yanghang) 39 foreign manufacturers, protective duties undesirable 146

Index foreign trade, growth of implied internal disintegration 212 free emigration 257 French Indo China 123, 252 Furuta, K. 13–14, 43, 51 GLOSSARY 275–9 ‘‘golden age’’ (1911–37) 128, 208 gold standard 14 Gosho company 52 Goto-Shibata, Harumi 15, 139 gray shirting, British-made product 42 Great Depression 1929 to 1934 China retained rhythm of business cycle 156–7 China and flexible supply of labor 17 East Asian economic links and 13 foreign merchants and Takase company 58 intra-Asian trade and 7 Japan and 11, 62, 134 Gu family 235–6 Guo Le (managing director of Yong An mill) 83 Gu Xianrong export of timber from Taiwan to China 228 Taiwanese as member of Japan’s Upper House 234 Hamashita, T. 6, 23, 41, 43–4, 50, 263, 265 Hankou 24, 29, 42 Crisis (1919), cotton-buying season 117 largest port for trade in raw cotton 208 sesame exports and German imports 117–18 trade of Shanghai-bound raw cotton 117, 119 ‘‘Hankou dealers’’ 33 heavy and chemical industry goods 159–60, 170 Hiogo, Commercial Report on 25–7, 33, 42 Hiromu Takase (cotton textile manufacturer) 58 historical implications of Taiwan trade associations among the Taiwanese merchants 235–6 concept of a company 237–8 increased exposure to multiple political and cultural identities 234–5

285

new concepts in corporate management protection of trademarks and use of advertisements (a) trademarks 236–7 (b) general advertiseme nts 237 (c) advertisements in parades 237 (d) exhibitions 237 use of stock market to accumulate capital 236 opportunities for Taiwanese merchants in direct foreign trade 233 technology transfer from Taiwan to China 238–9 Hong Kong 5, 6, 29, 246–7 brokers in 258 lodging houses 259, 270 migrants and 252 Taiwanese merchants in had no advantages over Chinese 223 Hong Kong and Britain, China’s trading partner mid-nineteenth century to (1930s) 193 Hong Kong and Shanghai Banking Corporation (British) 264 Hopkins, A.G. 12, 66 Hubei provincial government, issuer of paper money 111 Huipi certificate from families of emigrants for money delivered 263 Hwa-kee Hupeh Cement Works 160–61 hyperinflation, regime of free trade collapsed 12 Ide, K 226, 264–5 ‘‘Imperialism of free trade’’ 3 imports of cotton yarn to China: main trading routes 54–5 imports of foreign and native goods to regions in China 202, 205–6 import-substitution industrialization 15–16, 146, 150, 158–9 centered on light industry 170, 172 cloths for export made in Shanghai 209 new logic to internal economic integration 212 indentured emigration 256, 256–7, 257, 259, 272n.5 India 6, 15, 210 Indian and Arabian merchants, distribution of Japanese goods 64 Indian Commercial Association (November 1934) 65

286

Index

Indian cotton oversupply, replaced by American cotton 54 Indians (overseas) 265, 267 Indo-Japanese cotton trade negotiations (1933) 64, 70 industrial development under protective tariffs 158–60 industries with Chinese and foreign capital cigarette manufacturing 166–7, 168, 172 cotton cloth processing industry 165–6 cotton-spinning industry 165 cotton textile industry 165 sectors with Chinese capital base cement-manufacturing industry 160–63, 169 flour-milling industry 164 match-manufacturing industry 163, 169 rayon textile industry 163–4 summary 168–9 sectors where domestic industry underdeveloped sugar industry 168 woollen textile manufacturing 167–8 wool-spinning industry 167 internal trade amount of trade between treaty ports 200–1 between regional treaty ports and Shanghai 211 factor in China’s integration into international economy 208 larger in noncoastal regions 206 problem of payment 201, 208 ratio of native goods to (1914–1931) 208–9 International Chambers of Commerce, meeting in Geneva (1929) 132 international economy China and trade 179 old cities in China surpassed by new cities 188 period of formation of trading blocs 172–3 interregional connections, difficult in Republican period 191 interregional currency, needed for areas linked to Hankou 112 interwar period easy to make the crossing from South China without capital 267

emergence of three separate trading routes from Kobe 56–62 intra-Asian cotton trade, trade settlement between Asia and the West 5 intra-Asian migration 8 intra-Asian shipping routes, steamships assumed participation of Westerners 270 intra-Asian trade contributions of the West 9–10 dependent on growth of Asia’s trade with West 9 Great Depression and 7 ‘‘internalized’’ in China 7–8 migration, colonialism and imperialism 2 rate of growth 5–6 regional economy and 49 rice, sugar and other foodstuffs 10 Singapore, Hong Kong and Shanghai 5 transformation in interwar period 6 volume matched exports to West (1913) 8 intra-East Asian trade, Kobe integrated into (1870s) 42 Ito Chu Shoji (Osaka trading company) 86, 94 Japan (1920s) exports of cotton cloth to China decreased 83–4, 95–7 abandoned gold standard (December 1931) 66 aggression (1930s) 3 allowed Taiwanese to buy sailing boats and obtain licenses to operate them 229 approved China’s new tariff rate 133 auctions of imported goods did not appear in 41 Chinese boycotts from (1928) 127 Chinese imports from (1926–36) 170–71 cotton sateen imported from UK before World War I 88 crucial that Chinese merchants preferred their goods to European 64 disposal of low-quality foreign cotton manufactures 38 enlargement of cloth market in China during World War I 83, 128 exports of cotton cloth to China increased 76–7 exports of finished cotton cloth and sateen (1921–33) 84–5, 95

Index exports generated by Chinese merchants in Osaka-Kobe area 51 exports to China (1910s and 1920s) 14 factory system after Russo-Japanese War 75 funding for development of South China and Southeast Asia 232 gold standard 14 growth of exports of cotton during boom of World War I 76–9 hit by decrease of light industry exports to China 170 import of foreign-made cotton manufactures (1870s) 43 import of raw materials 7 import trade cotton piece goods handled by Chinese merchants (1870s) 51 industrialization and 23 industrialization and increased consumption of soybeans 55 inland industries declined in 1945 with defeat of 192 intra-Asian trade 6 invasion of northeast China (1931) 155–6 light industry goods to China and 170 list of finishing mills 87 loss of cotton cloth market in China (late 1920s) 95–7 negotiations with Nanjing difficult 128 new Sino-Japanese economic relationship 170–71 occupied Core China (1937–38) 194 opposed China’s import tariffs 146 processed cotton cloths 14 products affected by anti-Japanese boycott 132 purchasing system of raw cotton from British India (1890s) 51–2 search for new foreign markets 96–7 shipment of goods directly to Northeast China 201–2 stabilizing role of foreign merchants in prewar 59 support for Japanese merchants in Taiwan 232 trade with China in decline 210–11 trade with Korea, Taiwan and Manchuria 7 trade negotiations with Britain and India (1933) 62 trade with other Asian countries 5

287

Western engineers and businessmen relatively limited 10 ‘‘Japan caterers’’ 36 Japan and China, trade and economic interactions 2 Japan Cotton Spinners’ Association, supply of Indian cotton 52 ‘‘Japan dealers’’ 35–6 Japanese, trade organizations to break Chinese monopoly 6 Japanese businessmen in Shanghai diplomats unconcerned and unhelpful 133 fear that boycott might be revived 134 felt their business was in danger 138–9, 142 Nanjing government wanted China’s economic independence 135 naval landing party and 199 opposed introduction of plural taxes 136 Japanese Chamber of Commerce in Shanghai 131 did not treat abolition of extraterritoriality as major issue 135 Japanese and Chinese cotton textile industries, interactions between 13 Japanese colonial period, laborers came from mainland to Taiwan 238 Japanese dollar, used in parts of china 105, 114 Japanese First Expeditionary Fleet, active in this period 139 Japanese goods confiscation by private anti-Japanese organizations 138, 140, 142 profitable and dutiable needed in (1930s) 69–70 Japanese industrialization, intra-Asian competition 1 Japanese-occupied parts of China, traded with Japan 193 Japanese Post Shipping Company 222 Japanese yarn, demand before World War I 74–5 Japan-United States war (1941) 11 Java white variety of sugar 168 Jenmei Company, Japanese marine products and textiles to South China 228 Jianxianghao bank 230–31 Jordan, D.A. 128, 137–8 Junks owners, required to operate their own craft 229

288

Index

Kagoshima Spinning mill (1867) 73 Kagotani, N. 6, 14, 24, 40, 51, 54, 62, 66–7, 69–70 Kameyama, Toshita (Japanese merchant) 56 Kanegafuchi Boseki (Kanebo) 75, 77, 82, 90–2, 94 Kangany system 258, 260 Kani, T. 252, 257 Kato, T. 85 Kato, H. 131, 133 Kawakatsu, H. 1, 43–4 kebang merchants brokers called jiaozhuang zihao who represented 39 development of new networks and 43 stayed in merchant lodgings (hangzhan) 35 Kikuchi, T. 129, 132, 138 Kikusaburo Morita Mills 94 Kinyokai (the Friday Club) 131, 133 Chinese cotton piece goods merchants and anti-Japanese association 139 discriminatory taxes 135 meeting (October 1929) decrease of business 134 Nanjing’s policies discussed at meetings of 135 pamphlets 131–3, 135–6 Kobe 24, 29, 31, 33, 42 British-made cotton cloth from Manchester and 27, 43 exports handled by Western merchants 50 export trade by foreign and Chinese merchants 50–51 extension of Shanghai trading network 42–4 intra-Asian trade and 23 major port Meiji period (1868–1912) 50 part of Shanghai network 13 three separate trading routes from in interwar period 56–62 Kobe-based Chinese merchants 59, 61, 65, 68–9 Kobe Kasho Nanyo Yushutsu Kyokai (Association of Chinese Merchants in Kobe) 58 Kobe’s Association of Cotton Textiles for Exports, members recognized 61–2 Kodama mission to China, Sino-Japanese economic cooperation 171 Korea 1, 7, 38, 44 n.1

Korean Incident (July 4 to 7 1931) 136 Kose, Hajime 16, 55 Kubo, T. 15, 80, 95–6, 130, 132, 134, 145–73 Kuping liang 105 Kuroda, A. 111–12, 116 Kuwahara, T. 76, 79, 97 Kwangtung Government Cement Works 161 Labour Commission Report (1890) see Parr report Lake Superior Ingot Copper 113 Lancashire cotton goods Japanese merchants wanted to oust from China 132 never regained former superiority after World War I 91, 128 laukhehs 257–8, 261 League of Nations’ report (1932), antiforeign boycotts by Chinese 128–9, 132 Lee Yuen (owned by Lunchuanzhaoshang Company) 35 liang system 104–5 Lian Yatang (famous intellectual) 237 light industry goods in total imports 158– 60, 169–70 Lin Chaodong ( Lins of Wufeng) 225–6 Lin, Man-Houng 16, 179–80, 182, 188–90, 228, 233, 240 Lins of Banqiao 224–5, 228–31, 235–7 Lins of Wufeng 225, 228, 231, 234–5, 239 Lin Xiantang ( Lins of Wufeng), storage business in China 234 lodging houses 260, 267–8 Lower Yangtze, large amount of internal trade 207 Luchuanzhaoshang Company 35 Maistry system 260 Malaya 252, 261, 266–7, 271 Manchuria 1, 7, 16, 236 Japanese investment 7 role in foreign trade dropped because of Russian troops 192 Taiwanese merchants set up trading companies 223 Taiwan’s trade with 226, 228 Manchurian Incident (1931) 61–2, 69, 139, 141, 148 Manchuria and North China, procurement of resources and 11–12 Mao’s strategy of ‘‘protracted war’’ 12

Index Maritime Customs report, peasants preferred 1, 000 wen copper cash 109 Maritime Customs statistics, internal trade expansion and 201 matches, consolidation tax 163 May 30th incident (1925) 87, 96 Mayar Silk Mills No.10 factory 164 Maze, Frederic (Maritime Customs Inspector General) 147 Meiji period. 231–2, 269 merchants from Quemoy, not regarded as Taiwanese merchants 219 Mexican dollar 104–5, 108, 114–15 Miao Rebellion (1854–1873) 180 migrants, Mainland China to Taiwan prior to (1895) 219 ‘‘miscellaneous’’ category in trade statistics 159, 170 Mitsui Bussan 52, 54, 63, 74, 76, 86, 161 Miyata, M. 39–40 Monopoly Bureau of the GovernmentGeneral of Taiwan 231 Mukden Incident 222–3 Murphey, R. 181–2 Muslim Rebellion (1854–1877) 180–81 Myers, R.H. 1, 194 Nagasaki 24, 26, 29, 33, 42 Naigai Wata company 52 Naigaiwata Kaisha, construction of mills in Shanghai by 76 Naigaiwata (Zaikabo), five-shaft sateen (1920s) 87 Nakamura, T. 3, 223–4, 232, 234 Nakayama (influential Japanese adviser) 231 Nanjing Nation Government (1927) 118–19 Anti-Japanese boycott and 131–4 Great depression and policies of 134–6 Nan yang Tobacco 167 Nanyo Kyokai annual reports 63–4 National Anti-Japanese Convention (Shanghai) 130 National Economic Council 173 Native banks, Taiwanese investors and payment for cross-Straits trade 231 ‘‘Native Faction’’, Japanese who resided in Shanghai 128 ‘‘native sugar’’ (Ch’ao-chou sugar) 168 NCH 23, 29, 31, 35–40, 129, 138, 141 homeward movement of dealers from North China 35

289

item about Hankou 42 nature of transactions made by Chinese merchants 33 Netherlandsch Indische Handelbank (Dutch) 264 Nian Rebellion (1858–1868) 180 Nihon Menka company 52, 74, 76, 86 Nihon Yusen Kaisha (shipping company) 74 Nihon Yushutsu Men Orimono Kogyo Kumiai Rengokai (Japanese Export Cotton Weaving Firms’ Association) 84 North China, internal trade greater than that for Northeast China 206 North China Daily News 139 North China Herald and Supreme Court and Consular Gazette see NCH North China and Manchuria, massive flows of migration 8 Northeast China, heavily involved in direct foreign trade 202 Obitani Shoten weaving firm 88, 92–4 old Chinese monetary system 14 Onoda Cement factory, Japaneseowned 161 opium consumption a nationwide phenomenon 185, 188 exchanged between Peripheral and Core China 194 Indian extended impact from South Asia into interior China 193 India to China 4, 182 native sold from southwest (1906) 190 price of foreign 184–5 price of native 185 price of native compared with foreign 187 production by region 183–4 production less important than in Qing period 190 Southwest China and foreign 182–3 trade 4–5 transportation and 184–5 Opium Abolition Movement (1906–16) 189–90, 193 opium wars 9, 200, 257 Osaka businessmen insisted Japanese government pursue hard line 130

290

Index

Osaka (cont’d ) commerce and manufacturing Tokugawa period (1603–1868) 50 finishing firms around 89–92 importers who were companies purchased finished cotton cloth from 86–7 Osaka-Kobe area, development of cotton industry 50 Osaka Shipping Company 220, 222, 226, 234 Osaka Spinning Company 73 Osaka traders 59, 61 Ottawa Conference (1932) 12, 271 Overseas Chinese Banking Corporation (overseas Chinese capital) 264 Overseas Chinese Business Association 270 Overseas Chinese General Business Association 270 panic (1920), companies in yarn speculation 91–2 paper money 103, 105–6, 109 expanded circulation of official 112 issuance of by Siamese government and 123 loss of export markets affected credibility of 115 provinces issued in attempt to make seigniorage profits 113, 120 Parr report 254, 258 Patons & Baldwins Ltd. (British firm), woollen factories 167 Peking Tariff Conference (1925–26) 147 peranakan merchants, commercial relationships with Japanese merchants 67 Peripheral China 181–3, 185, 188, 191–2 ‘‘Peripheral China’’ and ‘‘Core China’’ 179–80, 195n.1 Perkins, D.H. 185, 189 piece goods 36, 37 private copper cash notes 111–12 local liquidity maintained by 121 private sales 37, 39 Protectorate of the Chinese, migrant protection 257 provincial governments, overissuance of copper coins and devaluation of 120 provincial mint, establishment of branches 112 ‘‘Public Sales’’ 37, 39

Qing China (1644–1911) 103, 106–7, 186, 190 Qingdao, zaikabo 76 Qiu Yuanrong, anti-Japanese campaign 68 Quanzhou Electric Power Company 225 products made in 238–9 raw cotton, import duty repealed (1896) 74 rayon textile industry, no foreign factories in China 163, 169 rebellions, interrupted interregional trade between Core and Peripheral China 180 regional industrialization, intra-Asian trade of raw cotton 10–11 regional integration, Indian and Chinese networks 244 Remer, C.F. 129 (1931) boycott 156 China’s balance of payments 202 decline in price of silver 135 ‘‘exterior’’ and ‘‘interior’’ China 179–80 Study of Chinese Boycotts 128, 132–3, 135 remittance houses banking and postal systems in competition with 264 foreign exchange business and postal services 262–3 like bank agents 265 network of 267, 271 put capital for remittance into exchange 268 value of business 263–4 volume of mail handled by 263 Republican period (1910–1937), military conflict 191 Revolution (1911), Sichuan one of provinces to initiate 190 Rong Zongjing, ‘‘cotton King’’ and ‘‘flour King’’ 83 Royal Asian Journal 191 Russia, economic involvement with China 192–3 Russo-Japanese War (1904–05) boycotts of Japanese cotton goods 96 companies which became prominent 75 exports of coarse cloth into North China after 75–6 Japanese fund-raising campaign in Taiwan 235 trade networks in Northeast China and 202

Index sanchi (cotton-textile producing centers) 75–6, 88, 94 seigniorage profits 113, 120–21 Senboku (Sanchi near Sen’nan) 75, 94 Sen’nan district, gray cloth for cotton sateen produced 75, 88–9, 91–2 Shanghai 5, 23–4, 27, 43 annual volumes of re-exports of gray shirting 29–31, 31, 42 anti-Japanese boycotts (May 1928 and September 1931) 128 auctions 36–7 British business community against anti-Japanese movement of Chinese 139 China’s center for supply of short-term credit 201 demand for raw cotton caused further penetration of silver dollar 117 economic relations with foreign countries through 211 foreign importers at end of (1920s) 87 growth of dyeing or printing works 166 Guomindang-oriented businessmen enthusiastic about boycott 137–8 Hankou raw cotton re-exported to foreign countries 208 Hubei dollar used in 108 hub of intra-Asian trade 23 imports of foreign goods increased more rapidly than domestic 207–8 industrialization in during and after World War I 95, 208 Japanese cotton mills made large profits in Great Depression 134 Japanese spinning companies and finished cotton cloth 87 larger volume of trade than any other region 206–7 leading importer of cotton sateen 86 list of trading companies that exported cotton cloth to (1930) 91–2 prices for auction (Sept 1875) 37–8 raw cotton imported from United States and India 208–9 re-export of gray shirting 42 re-exports 28–33 re-export volumes of gray shirting (1874) 29–30 success of mills in 80–3 Taiwanese in concentrated on real estate investment 223

291

total volume of shirting for each treaty port 33–4 trading routes in several directions 24 volumes of re-exports from to Kobe 31, 33 woollen factories set up by Japanese 167, 169 zaikabo built 76 Shanghai Bank survey (1924), investigation of circulating currencies 113–14 Shanghai-based industrialization, structural change in Chinese trade 16 Shanghai British Chamber of Commerce Journal (September 1929) 140 Shanghai capitalists, contribution to Taiwan, Hong Kong and Singapore 13 Shanghai Guomindang, decided to participate in AJPOC 137 Shanghai International Settlement 139 Shanghai market, transactions involving imported cotton cloth 38–41 Shanghai Municipal Anti-Japanese and Protect overseas Chinese Association see AJPOC Shanghai Municipal Council, international settlement and 150–51 Shanghai network 23–4, 29, 32, 43 Chinese raw cotton imported into Kobe 51–2 decline of Shanghai-Kobe route 54 Shanghai Nihon Menpu Dogyokai (Japanese Cotton Cloth Merchants’ Association in Shanghai) 86–7 Shanghai Portland Cement Works Ltd. 160 Shanghai Spinning Co.Ltd. (1902) 76 Shanghai Times, anti-Japanese resolution passed at AJPOC meeting and 140 Shanhai Nihon Shoko Kaigisho Nenpo 132, 166 Shantou 182, 187, 189, 258–9 customs reports on migration statistics 270 migrants to and from Southeast Asia 247–50 Tiawanese in opened family firms 223 tin mine laborers from 252 Shanxi 121, 190 Shenbao (Shanghai newspaper) 39–40 Shen Xin mill 79, 80–81, 83 Shiba, Y. 23, 50 Shimizu (consul), naval power and 131 Shimonoseki Treaty 200, 218–19 shinke, formed extremely anti-Japanese movement 67

292

Index

shipping agents, made contact with steamship companies and undertook sale of tickets 259 Shokosho Shomukyoku 54, 58, 85, 87 Showa Panic (1930–31) 85 Siam 123, 252, 253–4, 256 silk manufactures 182 silver high prices (1932–35) 157 lack of and payment problems 201 settlement of transactions and 106 silver dollar, issued in Hubei 108, 114 silver liang 104, 107 driven out of local markets after World War I 116 Mexican dollar quotation in Shanghai (1914) 114–15 people free to establish new units of account 120 silver sterling coins, replaced cowries 123 Sima, X 234–5 Singapore 5, 6 center of anti-Japanese movements 67 development of direct routes 270–71 ethno-linguistic networks and migration 16–17 European importers of textile goods 63, 65 four powerful shipping agents and many smaller 259 futility of boycott of Japanese goods and 63 lodging houses functioned as labor exchange 259–60, 270 sinkhehs 258–61 Sino-Japanese economic relations, full-scale invasion of China and 172 Sino-Japanese military clash at Jinan (1928) 127, 129 agreement to settle (1929) 133 anti-Japanese movement after 131–2 Japanese hoped for resolution to problems caused by 133, 142n.1 mass movements and foreign powers 130 Sino-Japanese Tariff Agreement (May 1930) 147–8 Sino-Japanese trade, Chinese merchants also engaged in 141 Sino-Japanese War (1894–95), exports of yarn surpassed imports after 74 Sino-Japanese War (1937–45) 11–12, 58, 67 Skinner, William ‘‘macro regions’’ 16, 198–9

‘‘Peripheral and Core China’’ 179–80 The City in Late Imperial China 183 smuggling Kuangtung Leased Territory, Taiwan and Hong Kong 155–6 rayon yarn 164, 168, 173n.3 rice paper for cigarettes 168 and tax evasion, match industry and 163 white sugar and 168 Soong, T.V. (Minister of Finance) 148 South Asia 192–3 Southeast Asia (1930s), effect of Chinese import duty increases 173 China’s trading partner (1842–1949) 193 Chinese engaged in varied occupations 260 Chinese and Indian merchants dealing with Japanese cotton textiles (1930s) 62–5 Chinese migration networks 251, 253–4, 256, 267, 270 Chinese residents in (1930s) 245–6 commercial credit not sufficient 268–9 composition of Chinese population by industry (1930s) 268–9 development of migration networks 245–56 immigrants from China and Hong Kong increased (1934–1937) 256 intra-Asian trade 6 number of Chinese emigrating to (1869–1939) 245, 247–8 number of Chinese immigrating from 245, 249–50 pattern of migration 252 remittance houses and merchant networks 262–70 supervisory bodies to protect migrants 257 system of lodging houses and changes in employment patterns 256–62 Southeast Coast and Lingnan, heavily involved in foreign trade 207 soybeans 182, 194 sterling, Japanese and Chinese currencies linked to (1930s) 12 Straits Settlements 15, 252, 254, 256 movements of Chinese migrants in (1923–39) 254–6 Suez Canal, export of primary products to the west and 244

Index Sugihara, K. 3–4, 6, 11–12 Asian free trade area and creation of bloc economics 271 basis for industrialization in Asia 49, 51 Chinese business associations 269 competition between Chinese and Japanese merchants 24 migration networks 244–5 purchasing power in prewar Malaya 266–7 Sugiyama, S. 1, 4, 23–4, 39, 41, 62 ‘‘system of personal recruitment’’ 258 Taiping Rebellion (1850s) 41, 103, 180–81, 225 Taisho period, Lins of Banqiao and Gu family organized company 236 Taiwan 1, 6–7, 16 before Japanese occupation remittance banks in operation 230 direct navigation with Shanghai 221 economy dependent on foreign trade 217 international trade important for postwar economy 240 mainland laborers worked in each year 239 modern banks were all Japanese 231 relied on mainland for supply of necessary technology 238 steady flow of capital from to China 233 tea merchants delegation to promote Taiwanese tea in Manchuria 237 Taiwan Association of Xiamen 226 Taiwan and China, trade between 226–8 Taiwan-China and Taiwan-Japan trade 217–18 Taiwan-China trade, Japanese government policies 231–3 Taiwanese dual nationality until (1911) 219, 239 heirs could apply for Japanese bankruptcy law (1904) 238 Japanese nationality after nationality law (1899) 218 land owned or rented by in Xiamen 222–3 more important in South China than Southeast Asia, Japan or Manchuria 239 numbers in Manchuria 222 numbers in Shanghai 220–21 population 220–21

293

transit tax (lijin) and 220, 239–40 went to China via Japan 228 Taiwanese association, sponsored by Japanese consul 222 Taiwanese merchants (1895–1937) considerable advantages in China 239–40 definition 218–19 diverse historical experiences 235 examples of who invested in China 222–3 flew Japanese flag when they sailed for China 234 formal and informal associations 235–6 indirect support from Japanese government 232 invited to buy Taiwan Sugar Company 236 Japanese nationality provided protections for 232–3 lent money in Xiamen 231 little financial support from Japanese government 239 organized cooperative companies 237 owned steamers and sailing boats used partly in cross-Straits trade 229 problems with political and cultural identities 234 size of businesses 224–5 targets of anti-Japanese movements and boycotts of Republican period 233 trade between Taiwan and China (1895 and 1937) 217 trade between Taiwan and Xiamen by merchants of Japanese nationality 226 transferred their knowledge of stocks to Manchuria 236 Taiwanese ronin (scoundrels) 219, 224, 232–3, 240 Taiwanese tea merchant association 223 Taiwan Financial Company in Tatoitia, cross-Straits trade 231 Taiwan Ginko 262–3 Taiwan Industrial and Commercial Bank (1926) 231 Taiwan Nichi-nichi Shinpo (Taiwan Daily) 228 Taiyihao (company involved with TaiwanChina trade) 219 Takahashi, Korekiyo (Minister of Finance Japan) 62, 238 Takamura, N. 52, 75–6, 97, 128, 134, 166

294

Index

Takase, Hiromu, buyers of cotton textiles from 58–60 Taku (owned by Jardine Matheson and Co.) 35 Tatoitia, bank branch offices 230 Tei, R. 262, 265 Tekishu-sei 221–2 ten-wen copper coins 109 Thailand, General Business Association 269–70 Tianjin 24, 29, 35–6, 42 Tianjin, zaikabo 76 ‘‘Tianjin dealers’’ 33 Tianjin Treaty 200 Tiensin 13 Tiensin Customs Report 41 Tjoan Bie Textile Company (1917) 68 Toa, Dobunkai 35, 38, 55 Mexican dollar currency in Jingdezhen 105 official copper cash note for tea purchases 112 suspension of issue of copper cash 107 Yuan Shikai dollars 114, 116 Toyo Boseki Kaisha (Japanese spinning and weaving company) 54–5, 59 Toyo Menka Co. 52, 58, 86 travelling agents ( paojie) 35, 40 travel permit, required to go from Taiwan to China 228 Treaty of Nanking (1842) 24, 200 Treaty of Nerchinsk (1689) 189 Treaty of Peking (1960) 24, 39, 41, 43 treaty ports (1870) 24–5, 181–2, 193, 209 Treaty of Tiensin (1958) 24, 39, 41, 43 ‘‘trust’’, transferable from broker to lodging house 260 Tsuda, Shingo 90–91 Tsusho Isan 108–9, 111 Tung-ya Wool Co, (Tientsin 1931) 167 Uchida, N. 23, 40 Uemura, K. 228, 231 United Kingdom 75, 78–9, 85–6, 88, 90–91,96 United States 147, 170–71, 192, 210 Van-Loong and Fuh-Sing, auctions and 40 Versailles-Washington system 172, 173n.4 Wakayama Senko ( dyeing and finishing company) 92 Wanbaoshan Incident (July 2 1931) 136–7

Wang, C.T (Foreign Minister), ‘‘revolutionary diplomacy’’ 148 West, effects of Asia’s exports to 10 West-dominated international order, East Asia’s integration 9 Western imperialism, challenged by Asian nationalism 3 Western powers 9, 12–13 Western textile shops, guild (Zhenhuatang yangbu gongsuo) 39 Western textile shops (Yanghuohao) 39 world economy, Southeast Asia, Africa, Latin America and Asian regions 244 World War I bank notes in regions beyond the treaty ports 114 Chinese silver dollar replaced foreign dollars 107 issuance of Yuan Shikai dollar 113 Japanese cotton industry before World War I 73–5 Mexican currency’s premium position lost 115 paper currencies lost their base when exports disrupted 122 prior to (1930s) emigrants used agencies run by Chinese 257 regions began to establish direct trade links with foreign countries 211 structural change in Japanese cotton industry during 75–83 World War II (1939) 12, 173 Wuhan national Government (1927), Shanghai bank notes 116 Wusheng Tongyongquan (‘‘Five Province Mutual Use Currency’’) 116 Wus of Zhanghua 230–31 Xiamen 182 bank offices (1902) 230 brokers 258 laborers working in tin mines from 252 lodging houses in 260, 270 maritime customs reports on migration statistics 270 merchants 219 migrants to Southeast Asia 247–51, 252–3 Taiwanese businesses in 224, 238 Xiamen Telephone Company (1933), Lin Erjia and 224–5 Xu, T. 39–40

Index Yagi Shoten (member of Senba Hassha in Osaka) 93–4 Yamashita Shipping Company 220 Yan, Z 182, 192 Yasukawa, Yunosuke (Mitsui Bussan) 52 Yeh Hsin Wool Spinning and Weaving 167 Ye, S. 187, 188–90 Yi He (Jardine Matheson & Co) 80–2 Yinhang Zhoubao 116 Yodogawa Mill of Kanebo 90–2, 94 Yokohama 26, 29, 31–3, 41–3, 50 Yokohama Specie Bank 74 Yoko, Shinsho (Japanese exporter to Tianjin) 54–5 Yongan company (1934), Taiwanese tea sold to Manchuria 223 Yong An Cotton Mill Corporation 79, 80–3 Young, A.C. 134–5

295

Yuan Shikai dollar 113–17 Yuen-Fong yanghang, Maitland & Co. 39–40, 45n.5, 45n.6 zaikabo after World War I 73, 76–7, 79–80, 83, 87, 95, 97 reason for founding 76–7, 79, 83 Zhang, S. 187–90 Zhang, Z. 107–8, 112 ‘‘Zhenjiang dealers’’ 33 Zhonghang Yuekan 161, 164, 166–8 Zhou Ziwen, joint stock companies in Shanghai and Singapore 228 zhuangpiao (draft note) 40 Zhuang Xiyan, desire to import Japanese goods 68