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