China during the Great Depression: Market, State, and the World Economy, 1929–1937 (review)

The stock market crash of 1929 ushered in a protracted period of economic decline in much of Europe, North America, and Asia, and led many states to establish greater regulatory control over capitalist enterprise. This evocative study by Tomoko Shiroyama seeks to integrate China’s historical experience during the Great Depression into the broader global narrative and to “offer critical insight on state-market relations” in the early decades of the twentieth century (p. 11). In 1927, the author contends, the new Nationalist regime adopted the existing currency system with little modification, continuing to adhere to the silver standard in an era when the United States, Europe, and Japan relied on gold to back their legal tender. Higher demand for silver ensured that significant quantities of this precious metal flowed into China during these years, and an increase in the money supply sustained a mild inflationary trend in commodity prices. The author asserts that banks negotiated loan contracts with business enterprises on the assumption that the value of their collateral would remain steady or increase over time, and the cotton and silk industries in particular took advantage of easy credit to expand their operations in regions like the lower Yangzi delta. Yet the central government lacked the institutional infrastructure to regulate the value of its currency, and changes in the international price of silver would soon endanger the economic growth China had enjoyed in the 1920s.

During the first two years of the Depression, Shiroyama argues, China escaped the deflationary pressures that beset the world’s major industrial economies, but beginning in late 1931, states such as Great Britain, Japan, and the United States abandoned the gold standard. As the international value of silver rose, Chinese products such as silk lost their competitive edge, and declining prices within China left rural producers without markets for raw materials and industrial enterprises unable to repay bank loans. The economy plunged into a severe recession, forcing the Nationalist regime in 1935 to jettison the silver standard and establish a new monetary system that required close supervision by technocratic elites. The author maintains that this unprecedented crisis prompted a shift from the laissez-faire attitudes embraced in earlier periods to a policy of committed governmental intervention, a change that “politicized the entire Chinese economy” (p. 2). Much as the New Deal redefined the relationship between state and market in the United States, the challenges of currency reform resulted in a growing official presence in the commanding heights of the Chinese economy.

In this well-written monograph, Shiroyama challenges earlier understandings of China’s experience during the Great Depression and contributes to debates over the relative severity of the downturn and the level of economic integration in Republican China. Thomas Rawski’s pioneering work on prewar China identified the years from 1914 to 1936 as a period of continued economic growth, asserting that deflationary pressures after 1929 had a limited impact on prices in China.¹ The printing of additional paper currency ameliorated the drain of silver from the country, and a stable monetary supply helped to insulate producers and consumers from the worst effects of the Depression. Marie-Claire Bergere’s classic study of the Chinese bourgeoisie also argued for a mild recession, although the author rooted her analysis in the structural characteristics of the Republican economy.² In her view, the industrial economy of China’s coastal regions maintained weak ties to the agrarian sector, and the nation’s rural heartland faced few adverse repercussions from the global collapse. In contrast, Shiroyama convincingly demonstrates that a sharp decline in prices undermined credit institutions in the countryside, deprived primary producers of markets for commodities such as raw silk and cotton, and interrupted the circulation of funds from large cities to towns, villages, and hamlets. At the same time, a...