Tim Wright, University of Sheffield
Globalization is nothing new, nor are economic crises. Up to the late 1920s, the coastal areas of China were closely tied in to the world economy for many years, but this pattern was to some extent interrupted by the Great Depression, which had serious effects particularly on two of China’s staple exports, silk and soybeans. The Depression had, however, a very limited effect on total output in China, whether industrial production or GDP. It was nevertheless a very important event politically, and this was partly because of its effect on businesses in China, both foreign and Chinese owned. This presentation will argue that fluctuations in the value of China’s (silver) currency were crucial in determining the fate of business enterprises in this period. Specifically, those (Japanese-owned) business enterprises that used the gold yen suffered a sharp and catastrophic decline in their competitiveness from the very onset of the Depression in 1929. This brought forward a series of responses that culminated in Japan’s abandoning the gold standard and in the Japanese occupation of North-east China in 1931. In contrast, enterprises, whether Chinese- or foreign-owned, whose business was based on China’s silver-standard currency enjoyed a boom at the very time their Japanese competitors were suffering. Their problems came in the mid 1930s when the value of China’s currency rose sharply against other currencies that had been taken off the gold standard. This led to a business crisis for these enterprises, whose manifestation was mainly in the form of falling profits rather than falling output. The government response involved a shift towards intervention in the economy on the part of the Nationalist state. The Nationalists’ currency reform was crucial to an improvement in the situation of the Chinese enterprises.