Globalization in Asia, 16th -19th centuries:
The Silver Trade, Impact and Implications
Financial globalization came to Asia well before the likes of George Soros or Barton Biggs walked this earth. But, rather like today, it was a mixed blessing, bringing wealth—and trouble. The currency that flowed into Asia from the 16th to the 19th century was in the form of bars of silver and Spanish silver coins which gave an unprecedented boost to trade with China, India, and Southeast Asia.
... By the end of the 15th century, new direct sea routes to Asia allowed Europeans to discover for themselves that it was just as Marco Polo had described—a place of enormous wealth and splendor. Asia was not only spilling over with the spices they hankered after, it had Chinese tea, porcelain and fine silks to offer
... But the traders were soon disappointed by their inability to buy all they coveted. Their Asian counterparts were not interested in the trinkets that they wanted to barter: They wanted settlements to be made with gold or silver...
... the biggest boost to trading with Asia came with Spain's discovery of silver in newly conquered Mexico, Bolivia, and Peru in the early 16th century. When the galleon trade across the Pacific between Acapulco and Manila started in 1572, Spanish silver began flowing into Asia in huge quantities.
... It's said that at least half the silver mined in America between 1527 and 1821 found its way to China. [Fernand] Braudel [1902-1985], the historian, believed the claim plausible because in China there was an attractive profit to be made exchanging silver for gold. For example, in 1570 the ratio of silver to gold was 6:1 in China, as against 12:1 in Spain, which opened up great possibilities for arbitrage.
... by the end of the 18th century, the balance of trade became a major issue as the Chinese had not yet developed a taste for European cotton or woollen cloth or Europe's mechanical products like clocks. Between 1760 and 1780, Qing China's import of silver rose from 3 million taels to 16 million taels.
... In the 1820s, the crisis over silver was heightened by a worldwide silver shortage and an increasing amount began to flow out of China. The amount of silver leaving China rose from 2 million taels a year in 1820 to 9 million taels in 1830. The country's lack of silver resulted in a major new problem—inflation. Merchants and farmers alike used copper coins to buy silver to pay their taxes and the soaring price of the metal was a crushing burden. But it was the opium trade which was seen to be at the root of China's financial problems. And it was the opium trade, plus the Daoguang emperor's efforts to stamp out the scourge, which eventually triggered the Opium War—and that changed China for ever.
— from "Early Warning," by Nayan Chanda, Far Eastern Economic Review, 162/23, June 10, 1999.