Title: The long cycles of the China-centric trading system in East and Southeast Asia
1The long cycles of the China-centric trading
system in East and Southeast Asia
- Thomas M. H. Chan,
- China Business Centre,
- Hong Kong Polytechnic University,
- Beijing, September 2006
2Globalization
- What is globalization?
- long-distance trades that links distant economies
into a global network/system and/or - Economic integration at a global level price
convergence of precious metals (as monies),
luxuries (for the metropolitan elites), and/or
ordinary commodities (as part of the lifestyles
of the general populations).
3Long-distance trade
- Regional, continental and cross-continental
- processes of economic growth and development to
provide surplus products for trading and demand
in the form of internationally accepted monies
for imports that are facilitated by - Improvement in transport technologies political
protection for long-distance traveling and
shipping of goods.
4- There has always been long-distance trade that
even stretches across continents, first in the
interlinked Eurasia-Africa continental land mass,
and later with the Americas that are separated by
oceans. - The first cross-continental long distance trade
started with the emergence of two major
civilization zones at the two ends of the
Eurasian land lass China and the Mediterranean
(plus Middle East) 2 thousand years ago.
5- Map1 The Eurasian and African world-system from
the first to the third century. - Source Philippe Beaujard, The Indian Ocean in
Eurasian and African world systems before the
16th Century, Journal of World History, vol.16,
no.4, (December 2005), p.425
6- Map2 The Eurasian and African world-system from
the seventh to the ninth century. - Source Philippe Beaujard, 2005, p.426.
7- Map 3 The Eurasian and African world-system from
the eleventh to the early thirteenth century. - Source Philippe Beaujard, 2005, p.427
8Cross-continent trade
- Cross-continental long distance trade had taken
place mostly between China and the Mediterranean
(plus Central Asian empires kingdoms, which
served both as destination and intermediary), but
mostly in one-way flow of Chinese silk products
to the west. - - China, including the Han (202 BC 220) and
Tang (618-907) empires, did not rely on trades
with the west through the Silk Road, and were not
interested in the trade either their westward
ventures were for the sake of securing the safety
of its borders against nomadic tribes. The defeat
of the Tang army by the Arabs in mid-8th Century
had stopped ever since any westward adventures of
the Chinese empires beyond its frontiers except
for the brief interval by the Mongols (Yuan
Dynasty 1279-1368), who were basically nomadic
peoples. - - with economic recovery in Europe after the
collapse of the Roman Empire and the rise the
Muslim world, 3 major routes of access to the
Orient had been established after the
military/colonizing ventures of the Crusades in
an attempt to break the Muslim control of the
gateway to the Orient and the highly profitable
cross-continental long-distance trade to China
(and India). The routes had also helped to
spread the import-substitution production of silk
products from Iran-Iraq areas to Southern Europe
(Italy later Southern France) - Janet Abu-Lughod, Before European Hegemony The
World System AD 1250-1350, Oxford, Oxford
University Press, 1989. -
9- 2. The disintegration of the Tang Dynasty
(618-907) under the forces of nomadic invasions
had cut China off from its access to west, but it
led to greater development of Southern China and
the shift of the Chinese government economy
toward the sea. The birth of commercial
shipping in China via the Indian Ocean occurred
only after the massive populating of southeast
China and the development of a communication
system between north China (with its capital in
Beijing) and south China (Janet Abu-Lughod,
1989346) A new silk trade from the sea that
linked Canton in South China via the Indian Ocean
to central Asia and then to the Mediterranean had
then been established with intense interaction
between Chinese and the Arabs, Persians,
Armenians, Islamized South Asian and Southeast
Asian since the Song Dynasty (960-1279) down to
the Ming Dynasty the Chinese state influence in
the Indian Ocean reached its zenith in early
years of the Ming Dynasty in the form of the
naval visits of Zheng He (1405-1431) , but was
abruptly stopped when the Ming government imposed
ban on sea-going trading activities until 1567.
10- Map 4 The Eurasian and African world-system in
the thirteenth and fourteenth centuries. - Source Philippe Beaujard, 2005, p.428
11- Map 5 The Eurasian and African world-system in
the fifteenth century. - Source Philippe Beaujard, 2005, p.429
12Cycles of silver
- The starting point
- silverization (the Single Whip tax system, 1574)
in the Ming Dynasty (1368-1644) of China
following the collapse of paper currency adopted
since the Song Dynasty ( ) with silver as both
national and international currencies while China
produced little silver, Chinas economic growth
and trade had been dependent on and boosted by
the availability of silver supplies (net increase
in money supply) in the economy the demand for
silver by China had created a global system of
trade that stimulated overseas silver exploration
and production and had drawn in silver from all
over the world with the consequence of the great
expansion of Chinas exporting industries silk,
porcelain, tea, sugar cotton textiles to
exchange for silver.
131. The Potosf/Japan cycle (1540s 1640s)
- In the early 16th Century, the gold/silver ratio
in China stood at 16, while the ratio hovered
around 112 in Europe, 110 in Persia and 18 in
India In the 1590s the ratio was 17 in Canton,
112.5/14 in Spain, 110 in Japan 19 in Moghul
India this allowed an almost 100 premium and
was said to trigger massive flow of silver from
Potosf in Upper Peru and Acapulco in Mexico of
the New Spain and from Japan to China directly or
indirectly via Europe and India. (10,000 tons of
silver from Japan to China in the late 16th
early 17th Century the Manila galleons alone
carried over 50 tons of silver annually to China
throughout the 17th Century) - b) The silver import had been exchanged by
massive exports of highly profitable silk,
porcelain, sugar, etc. and was responsible for
rapid economic growth and population increase in
China (population from 155 million in 1500 to 231
million in 1600 268 million in 1650). The trade
was carried out by the Chinese, Japanese,
Spanish, Portuguese, and the Dutch with trading
centers in Manila Macau). - c) Global convergence of the gold/silver ratio
came by the 1640s and had caused the great
silver-based trade declined, leading probably to
the fall of the Ming Dynasty in China and the
long-term decline of Spain (under the so called
Dutch Disease) - Dennis O. Flynn A. Giraldez, Cycles of silver
global economic unity through the mid-18th
Century, The Journal of World History, vol.13,
no.2, (Fall 2002), pp.391-427
142. The Mexican cycle (1700-1750)
- In the first half of the 18th Century the
gold/silver ratio in China remained fairly
constant at 110-11 in contrast to the ratio of
115 in Europe. The premium was only 50, but the
volume exported to China was much higher than in
the previous cycle. - The most important export product from China in
exchange for the silver was tea and the huge
demand for silver had promoted increased
commercialization of the Chinese economy and a
rapid increase in population as in the past. - The convergence of the gold/silver ratio in 1750
had marked the end of the trade domination by the
Dutch and French, replaced by the British. The
Qing Dynasty of China had also began to show its
economic decline after it. - However, Chinas exports and trade surplus
continued on the industrial and agricultural
production capabilities built in previous eras of
flourishing export trade.
15- Source A.G. Frank, Re-ORIENT Global Economy in
the Asian Age, Berkeley, University of California
Press, 1998, p.65, Map 2.1
16The China-centric tributary system of trade in
East and Southeast Asia
- The foundation
- Territorial China as the most advanced
socio-economic system in East Asia for millennia
and had served as the core area of the
inter-state system in the region without any
challenges except intermittently from nomadic
tribes in the northern region, which only posed
military challenges but were often assimilated. - The evolution of the inter-state system followed
a process of consolidation in the core area
(shifting from Changan in the beginning of the
last millennium westward with a system of dual
centres based in Beijing the southern part of
the Chang Jiang Delta region) and a concentric
expansion outward. At times of political
unification, it took the form of empires, but at
times of disunification, it took the form of
competing and warring regional local states.
17- 3. The millennia-long domination of the Chinese
state(s) from the core area had created a graded
and concentric hierarchy as well as an unifying
cultural ideology (Confucianism) - a) The mandate of Heaven to rule all humankind
of the emperor - b) A 3-tier political system beyond the core
area the sinic zone (Korea, Vietnam, the
Ryukyu Islands sometimes Japan) the Inner Asia
zone (tributary tribes states of the
nomadic/semi-nomadic peoples of Inner Asia) and
the outer barbarians - The two combined together to create a tributary
system of China-other states relationship and
official trade centered in China based on the
political and cultural legitimacy of China. - The Chinese World Order Traditional Chinas
Foreign Relations, ed. J.K. Fairbank, Cambridge,
1968, p.2.
18- 4. The tributary system continued from the Tang
Dynasty to Qing Dynasty for more than 1,000
years, but it assumed the greatest influence in
East Southeast Asia only after the Ming Dynasty
with the naval visits of Zheng He to Southeast
Asia and the defeat of the Japanese in Korea to
assert Chinas political hegemony in the region
and in the western and northern frontiers during
the Qing Dynasty after the conquests of the
Mongolian Tibetan and in particular Kishgaria. - The tributary system consisted of official
trades of mostly gifts between the vassal states
and the empire. And along the official trades,
there had also be flourishing private trades
either in accompanying the official trade or as
illegal activities undertaken by the vassal
states with the involvement of Chinese local
officials and merchants, but against the laws of
the central government. The private trade was
promoted by the increasingly globalized trade
between China and its neighbours that had
extended across oceans and continents thanks to
the improvement in navigation technologies.
19- East and West maritime routes in Asia in the 19th
Century - Source Takeshi Hamashita, Tributes and treaties
maritime Asia and treaty ports networks in the
era of negotiation, 1800-1900, in G. Arrighi, T.
Hamashita M. Selden, eds., The Resurgence of
East Asia 500, 150 and 50 Years Perspectives,
London, Routledge, 2003, p.22,Figure 1.2
20- 5. The expansion in overseas trade had brought
great wealth and transformation of the local
economies in the coastal regions of Southern
China, which in turn created regional political
conflict between land-based interests in the
north and the commercial interests in the south
and led to brutal prolonged factional struggles
for political power in the Ming Dynasty. The
purge of the southern elite was accompanied by
the central governments ban on sea-going trade
along the coast, forcing the coastal sea-going
merchants to ally with overseas powers (first
Japan later European) which were attracted by
the huge profits generated from the illegal
trades. A maritime kingdom along the coastal
region of China based in Taiwan governing the
trade from Nagasaki in Japan to Manila under
Spanish controls to the South China Sea was
established in early Qing Dynasty. Its war with
the empire had destroyed the coastal economy and
led to a long period of trade ban, probably
giving the European powers (and Japan at a later
date) opportunities to benefit more from the
flourishing overseas private trade from the
maritime system evolved along the sea routes, and
when times came to use it to force open trade
upon China and others in the form of treaty
ports. - Takeshi Hamashita, Tributes and treaties
maritime Asia and treaty ports networks in the
era of negotiation, 1800-1900, in G. Arrighi, T.
Hamashita M. Selden, eds., The Resurgence of
East Asia 500, 150 and 50 Years Perspectives,
London, Routledge, 2003, pp.17-50
21India
Bengali
opium
SE ASIA
Europe
cowries
China
Britain
tea
silver
gold
Manila
silver
sugar
cowries
Americas
slaves
Africa
Wold trade in 18th to 19th Century
22The decline of China and the China-centric
trading system
- The end of the Mexican silver cycle in 1750 had
reduced the volume of money supply coming from
overseas in China and although it did not impact
immediately on Chinas export, it did impose a
monetary constraint on the growth of the domestic
economy and its foreign trade. - In 1717 Chinese were forbidden to go privately
overseas and in 1757 the fate of the whole
Southeast Chinese coast was sealed for nearly a
century by the designation of Guangzhou as the
sole legal port for foreign trade trading out of
other ports were condemned as illegal and even
the massacre of the Chinese merchant community in
Manila in xxx by the Spanish army was tacitly
endorsed by the Qing government as they were
engaged in illegal overseas trade. - The inward looking policies of the Qing
government followed by similar state monopoly of
foreign trade in Japan and Korea left a political
void in the maritime regions of East and
Southeast Asia for which the European powers were
able to dominate and through their own infighting
created the ground of hegemony of the British in
the 19th Century. - G. Arrighi, P.K. Hui, H.F. Hung M. Selden,
Historical capitalism, East and West, in G.
Arrighi, T. Hamashita M. Selden, eds., The
Resurgence of East Asia 500, 150 and 50 Years
Perspectives, London, Routledge, 2003, pp.258-333
23- The inward looking policies promoted industrious
industrialization on the development of
labour-intensive technologies in great contrast
with the extensive industrialization of Europe
(and America) on the development of labour-saving
technologies. - In China economic development tended toward a
deepening of the division of labour within
households and micro-regions rather than between
metropolitan core regions and overseas peripheral
regions toward short-distance (intra-regional)
rather than long-distance (inter-regional) trade
toward state-making rather than war-making. - The immediate result is the explosion in the
Chinese population, reaching nearly 400 million
by the end of the 18th Century a formidable
political challenge to the Chinese government and
economy. - Kaoru Sugihara, The East Asian path of economic
development a long-term perspective, G. Arrighi,
T. Hamashita M. Selden, eds., The Resurgence of
East Asia 500, 150 and 50 Years Perspectives,
London, Routledge, 2003, pp.78-123. - G. Arrighi, P.K. Hui, H.F. Hung M. Selden,
Historical capitalism, East and West, in G.
Arrighi, T. Hamashita M. Selden, eds., The
Resurgence of East Asia 500, 150 and 50 Years
Perspectives, London, Routledge, 2003, p.284
24- 5. In the 19th Century China suffered from
widespread peasant uprisings. The most disastrous
one was the Taiping Uprising, which was like a
civil war that ruined most of the core area of
China. This marked the beginning of the decline
phase of the dynasty cycle for the Qing
government the wars uprisings destroyed
economy, revenues of the government and the
unified administrative control of the country. In
addition, the Qing government relied on loans
from European banks for importing European
weaponry and hiring European armies. - 6. In the 19th Century the weakened Qing
government suffered further crisis when European
powers took the opportunities to invade China.
Although European powers including Japan did not
occupied China, the military defeats, plundering
by the invading armies, and indemnities paid had
ruined the public finance of the government. The
indemnities were beyond the payment capability of
the Qing government and they were paid by
high-interest borrowings from European banks. In
the later years of the imperial government at the
turn of the century debt servicing amounted to
20 to 40 of the annual revenues of the
government, not including servicing of local
debts by local governments the fiscal crisis of
the Qing Dynasty was the primary root of its
eventual collapse in 1911.
25- 7. The weakening of China benefited Japan, which
was the second most important economy in East
Asia and which had tried for hundred years to
challenge the hegemony of China the defeat of
China in 1894 allowed the Japanese annexation of
Korea and Taiwan and the indemnities amounting to
over 1/3 of Japans GNP helped Japan to finance
further its industrialization and to put its
currency on the gold standard, which in turn
improved Japans credit rating in London and its
capacity to tap additional funds for industrial
expansion at home and imperialist expansion
overseas. Japan was able to overtake China in
the early 20th Century in the exports of raw silk
and expanded its textile industries both at home
and in China. And finally it invaded China and
other countries in East and Southeast Asia
against the colonial powers from Europe and later
the USA. - The clash between the Europe ( USA) and
China-centric inter-state system in East and
Southeast Asia took place with Japan recentering
upon itself the China-centric system. - G. Arrighi, P.K. Hui, H.F. Hung M. Selden,
Historical capitalism, East and West, in G.
Arrighi, T. Hamashita M. Selden, eds., The
Resurgence of East Asia 500, 150 and 50 Years
Perspectives, London, Routledge, 2003,
pp.288-299.
26- 8. Chinas fiscal and political weakening was
reflected also in the lack of progress or
transformation of its traditional exports raw
silk overtaken by Japan and tea replaced by those
planted in India Sri Lanka and extensive
penetration of imported textile products, fuel
oil, tobaccos, and most importantly opium.
Already in the 19th Century China suffered from
massive outflow of silver and by the turn of the
20th Century, its traditional trade surplus
disappeared and replaced by trade deficits, which
marked the final ending to the economic strength
of China over the past millennia.
27Relative economic strength of China versus Japan
Western countries (GDP in billion 1990 dollars)
- Source Angus Maddison, Monitoring the World
Economy, 1820-1992, Paris, Development Centre,
OECD, 1995.
28The rise of Japan in the post WWII period
- The replacement of China by Japan in the
China-centric system in East and Southeast Asia
continued during the era of Pax Americana - a) The flying geese pattern of regional division
of labour and industrialization with Japan as the
head geese and the USA as the market - b) US economic political sanctions against
Communist China and the socialism in one country
strategy of China. - 2. Economic challenge of Japan to the USA in the
1980s had led to trade conflict US pressure for
the liberalization of the Japanese economy
great fluctuation in the Yen exchange rate the
opening up of the Japanese financial system the
Japanese lost decade of the 1990s -
- Regional shares of World value added in
manufacturing calculated from World Bank
statistics (in )
29The rise of China
- one-country socialism political stability,
self-contained primitive capital accumulation
(physical capital human, social capital)
recovery of the competitiveness of the Chinese
economic system that allows facilitated the
outward reorientation of the system since the
1980s. - 2. Global industrial relocation to China since
the 1990s (first from Hong Kong, Taiwan, then
from US, Europe, Korea and from Japan) China
becoming the world factory matching the scale of
Britain in the 19th Century USA in the 20th
Century but only resuming the scale before the
18th Century. - 3. The massive building up of trade surplus,
inward foreign investment foreign exchange
reserve resembles the massive inflow of silver
from the world into China in before the 18th
Century.
30- Chinas foreign economic performance, 1985-2005
- Unit US 100 million
31Relative economic scale in 2004 (PPP calculation
of national GDP)
Source World Bank
32- Model of Triangular Trade Structure
- Source METI, White Paper on International
Economy and Trade, 2005
33- Export tends among Japan and the countries and
regions of East Asia (totals) - Source METI, White Paper on International
Economy and Trade, 2005
34- Export tends among Japan and the countries and
regions of East Asia (totals) - Source METI, White Paper on International
Economy and Trade, 2005
35- Export tends among Japan and the countries and
regions of East Asia (totals) - Source METI, White Paper on International
Economy and Trade, 2005
36The resurgence of the China-centric trading
system in East Southeast Asia
- From 2000, with the shifting of industrial
production of Japan into China and the disruption
Chinas exports have created to the Japanese led
flying geese regional system of trade and
investment, China is reasserting its role as the
core area for the region and is re-establishing
the China centric East And Southeast Asia trade
and economic system. Whether it would lead to the
return of the Chinese regional hegemony will be a
major question in the coming decades. - China has a free trade agreement with ASEAN
countries and is negotiating for a free trade
agreement with Korea and Japan. Asian monetary
system is also tending towards integration with
the lead by Japan and China after the Asian
Financial crisis in 1998 an Asian dollar is in
the process of forming.
37China-centric trading system 2003Share of its
own trade with China Hong Kong