Published by EH.NET (August 2008)

Tomoko Shiroyama, China during the Great Depression: Market, State, and the World Economy, 1929-1937. Cambridge, MA: Harvard University Press, 2008. xvii + 325 pp. $45 (hardcover), ISBN: 978-0-674-02831-9.

Reviewed for EH.NET by Niv Horesh, Faculty of Arts and Social Sciences, University of New South Wales.

The Great Depression and its underlying causes and multiple effects have long engaged economists, economic historians and theorists. Studies of the financial turbulence preceding World War II include classics by Friedman and Schwartz (1965), Kindleberger (1973) and Eichengreen (1992).[1] These have been recently supplemented by books aiming to link events in the U.S. with the rest of the world. Some of these new books have been reviewed on EH.NET, but none to date has centered exclusively on China.[2]

Tomoko Shiroyama?s monograph is, therefore, a much-awaited and highly valuable contribution to the literature. Its narrative is comprehensive, globally-framed and thick with quantitative data. For these reasons, it would no doubt appeal to economists and China specialists alike.

In her introduction, Shiroyama clearly sets the tone for the chapters to come. While the Great Depression was ?a watershed in the making of modern China,? its implications are often downplayed by students of China?s pre-war economy. The latter believe, for the most part, that China was shielded from deflationary pressures due to its adherence to the silver standard. Chapter 1 explains the intricacies of the silver standard, which China did not abandon until late 1935, whereas other Asian countries had switched to gold-based currencies by the 1910s. Shiroyama then argues persuasively that the depreciation of world silver prices during the 1920s greatly improved China?s terms of trade and was a boon to its farmers and emergent industrialists. However, the price of silver began to appreciate on world commodity markets as of 1931, and spiked up sharply in the lead-up to Roosevelt?s Silver Purchase Act in 1934. By then, dearer silver and slumping demand in the West had hit Chinese exports and dampened the price of domestic produce.

Chapters 2 and 3 depart from the subject matter to discuss the rise of Chinese-owned cotton-spinning mills and mechanized silk filatures in the Lower Yangzi Delta between 1895 and 1930. This portion of the book might have benefited from clearer linkages with subsequent chapters and from tighter writing. Uninitiated readers will find in these two chapters a fairly informative overview of Chinese corporate structures and capital mobilization in the early twentieth century. But they might wonder, for example, precisely what distinguishes a Chinese ?native bank? from a Chinese ?modern bank? or whether China really ?had no financial institutions such as stock markets? until 1920 (p. 63). In fact, Chinese company stocks were traded in Shanghai as early as the 1880s. Similarly, when discussing loans made by HSBC to ?native banks? (read: money shops or qianzhuang) in Shanghai between 1923 and 1929, Shiroyama states that these amounted to ?52.6 percent of the total amount lent? (p. 77). But it is not clear whether the total in point refers to HSBC?s entire loan portfolio, loans to Chinese banks broadly defined, or just loans to money shops.

Chapters 4 through 6 present very compelling evidence. Here, Shiroyama explains in detail how the slump in global trade volumes gradually depressed Chinese primary product prices. At first, the Depression was offset in China by ascending gold prices which made Chinese exports more competitive. After 1932, however, rural welfare was seriously hampered because cash crops like raw cotton or silkworm cocoons were fetching less than rural households needed in order to purchase food supplements such as rice, salt and oil (pp. 98-99). The diminishing purchasing power of farmers eventually meant a shrinking domestic market for industrial goods and a pernicious flight of silver capital from the hinterland to Shanghai, fuelling a real estate bubble there (pp. 146-148). Then the American Silver Purchase Act of June 1934 dealt a severe blow to the Chinese economy, because it made China?s silver-based currency appreciate again, and rendered Chinese exports still less attractive (pp. 153-161).

Chapters 7 and 8 recount how China?s Nationalist government steered China away from the silver standard to combat the Depression in the face of Japanese aggression. Painstakingly drawing on U.S. and British archival sources, Shiroyama emphasizes the critical role played by the Roosevelt administration in facilitating the KMT?s move off silver and in China?s transition to fiat currency. The British envoy to the region, Frederick Leith-Ross, is often credited with devising China?s currency reform in 1935, but Shiroyama observes that Britain?s role in the reform has been greatly exaggerated (p. 180).

While presenting a useful overview of previous chapters as well as a sketch of monetary policy in China to 2005, the conclusions do not readily cohere into strong statements. Earlier reference to the debate between Thomas Rawski and Milton Friedman about the severity of the Great Depression in China might have helped sharpen the analysis toward the end but, surprisingly, Friedman?s body of work does not seem to have been consulted, and is not cited in the bibliography. Still, Shiroyama?s book is sufficiently packed with other detail and incisive observations to enthrall anyone interested in the Great Depression and Chinese economic performance under KMT rule.


1. Milton Friedman and Anna J. Schwartz, The Great Contraction, 1929-1933, Princeton University Press, 1965; Charles P. Kindleberger. The World in Depression, 1929-1939, University of California Press, 1973; and Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression, 1919-1939, Oxford University Press, 1992.

2. See, for example, Patricia Clavin, The Great Depression in Europe, 1929-1939, St. Martin’s Press, 2000; Thomas E. Hall and J. David Ferguson, The Great Depression: An International Disaster of Perverse Economic Policies, University of Michigan Press. 1998; Mark Wheeler, editor, The Economics of the Great Depression, W.E. Upjohn Institute, 1998; Elmus Wicker, The Banking Panics of the Great Depression, Cambridge University Press, 1996; Randal Parker, Reflections on the Great Depression, Edward Elgar, 2002; and W.R. Garside editor, Capitalism in Crisis: International Responses to the Great Depression, St. Martin’s Press, 1993.

Niv Horesh, who is a Lecturer in Chinese Studies at UNSW, has recently finished The Bund and Beyond (forthcoming, Yale University Press), a study of British banking in pre-war Shanghai.