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Chinese Business in a Globalizing World: The Impact of the 1930s World Depression

Chinese Business in a Globalizing World: The Impact of the 1930s World Depression. Tim Wright University of Sheffield Paper Presented at the East Asian Business History Workshop, Cardiff University, 25 February 2010. Outline. Introduction China in the global economy

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Chinese Business in a Globalizing World: The Impact of the 1930s World Depression

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  1. Chinese Business in a Globalizing World: The Impact of the 1930s World Depression Tim Wright University of Sheffield Paper Presented at the East Asian Business History Workshop, Cardiff University, 25 February 2010

  2. Outline • Introduction • China in the global economy • China and the World Depression • Phase 1: Cheap Silver • Phase 2: The Rising Yuan • Conclusion

  3. China in the Global Economy • Importance of issue • China’s integration into world economy • Controversial issue then and now • Both level of integration • And costs/benefits of that integration • Foreign trade crucial for some coastal areas • Particularly silk (Lower Yangzi and Guangdong) • And soybeans (NE)

  4. China in the Great Depression • Relatively little impact on output

  5. Industrial Production in Four Countries (1929=100)

  6. China in the Great Depression • Relatively little impact on output • Though variations on trend show interesting phenomena

  7. China's Industrial Production, 1926-1936 In Relation to Trend

  8. China in the Great Depression • Relatively little impact on output • Though variations on trend show interesting phenomena • This understates dislocation • Groups in Chinese economy battered by price and currency changes.

  9. Wholesale Prices in Four Countries, 1926-1936 (Index, 1929 = 100)

  10. Exchange Rates: Chinese Dollar Against Japanese Yen and US Dollar, 1928-1936 (1929 average = 100)

  11. Two Phases First phase • To December 1931 • Devaluation • Maintains prices • Increased competitiveness for Chinese enterprises

  12. Two Phases • First phase • Second phase, 1931-1935 • Rising currency values • Deflation • Declining competitiveness

  13. Impact on Business • Falling value of silver = devaluation • Increases competitiveness of enterprises using silver • Decreases competitiveness of enterprises using gold • Rising value of silver = revaluation • Decreases competitiveness of enterprises using silver • Increases competitiveness of enterprises using yen

  14. Phase 1: Cheap Silver • Japanese Enterprises in North-east • Mostly use (gold) yen • So competitiveness and profits seriously hit by fall of silver after 1929 • Fushun Coal Mines

  15. SMR Internal Document Especially because of the unprecedented fall in the price of silver in this period, the price of SMR coal, which is on the gold standard, rose steeply, and, together with the general industrial depression, inevitably led to fuel consumers preferring cheap Chinese coal.

  16. Performance of Fushun Coal Mines, 1928–1935

  17. Phase 1: Cheap Silver • Japanese Enterprises in North-east • Mostly use (gold) yen • So competitiveness and profits seriously hit by fall of silver after 1929 • Fushun Coal Mines • South Manchurian Railway

  18. South Manchurian Railway Freight Traffic and Freight Receipts, 1925-1935

  19. Phase 1: Cheap Silver • Chinese Business • Use silver currency • So benefited by devaluation • Tōa keizai chōsakyoku: “In our opinion the inevitable result of the devaluation of the currency will be to promote exports, to raise prices and to stimulate enterprise.”

  20. Phase 1: Cheap Silver • Chinese Business • Use silver currency • So benefited by devaluation • Kailuan Coal Mine

  21. Performance of Fushun and Kailuan Coal Mines, 1928-1935

  22. Phase 1: Cheap Silver • Chinese Business • Use silver currency • So benefited by devaluation • Kailuan Coal Mine • Chinese railways in North-east • Silk exporters

  23. Phase 2: Rising Yuan • Japanese gold-based businesses • Gain from devaluation • “dumping controversy” • Coal • Imports into Shanghai

  24. Shanghai Coal Prices and Exchange Value of Yen (Indices, September 1931= 100)

  25. Phase 2: Rising Yuan • Chinese silver-based businesses • Kailuan and coal

  26. Performance of Fushun and Kailuan Coal Mines, 1928-1935

  27. Phase 2: Rising Yuan • Chinese silver-based businesses • Kailuan and coal • Zhongxing Coal Mining Company • Cotton mills

  28. Profit Rates of Cotton Mills, 1929-1936 (Profit as % of Subscribed Capital) Source: Kubo, Chūgoku no mengyō, pp. 114, 278-9

  29. Phase 2: Rising Yuan • Chinese silver-based businesses • Kailuan and coal • Zhongxing Coal Mining Company • Cotton mills • Demands for government support • Recovery from 1936

  30. Conclusion • Output effects not only important ones • Profits and distributional effects also influential • On Japanese side • Major part of background to invasion of North-east • On Chinese side • Major change in GDM policy towards interventionism • CCP view of “bankruptcy” of Chinese economy under capitalism and involvement in world trade

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