In addition, the silver shortage worsened seriously. Between 1827 and 1849, as much as 134 million Spanish dollars left China due, possibly, opium imports. This outflow of silver only intensified the silver shortage and prompted widespread deflation, depression, and bankruptcy. In 1838, Li Zexu reported that sales in such commercial centers as Nanhao in Suzhou and Hankow in Hubei had dropped by half compared with two or three decades earlier. At mid-century Feng Guifen would write, "All great and wealthy merchants have gone bankrupt, and business of all kinds have decreased by 50 to 60%." And, as is well known, the rise in the price of silver, particularly in relation to copper cash, in effect obliged small landowners to pay more taxes. In the second half of the nineteenth century, silver began to flow back into the country. But that brought little relief. After 1875, international silver prices began to decline, and by 1897 had lost more than half its value vis-à-vis gold. For 90% of the countries in the world, this change brought little trouble, as they were on the gold standard. In China, still on the silver standard and anxious to pay more for silver than other nations, this addiction to silver continued. Thus, when in 1897 Japan converted to the gold standard, it was surprised to recover only a tenth of the silver yen dollars it had issued between 1870 and 1897. Most of the rest of these coins had ended up in India, the Straits, and elsewhere in southeast Asia to be melted down into ornaments or demonetized by Chinese. Meanwhile, from the 1880s, Chinese provincial mints increasingly issued debased coins.

     It is not surprising, then, that Japan and even China turned to Western banks and other institutions for capital to fund their debts, wars, and industrial efforts. If Western traders were still stymied in gaining control of the coastal trade, if they still failed to penetrate the interior trade of East Asian countries, then nonetheless had the capital that had once flowed so readily from Japan and Mexico to China.

     Five weeks ago, I began this series of lectures in eleventh century China, with the intention of demonstrating how the separate economies of East Asia were increasingly interlocked with one another over the next nine centuries. This interlocking was obviously centered on China, but for it to succeed, China had to look elsewhere. Fortunately, it found the necessary goods and markets in Japan, Mexico, Southeast Asia, and India. These countries did not at all times maintain their participation. Like Japan they might retreat into an import substitution policy or pursue domestic agricultural development at the expense of greater ties with their neighbors. Secondly, the expansion of the Chinese economy overseas was aided by the great number of Chinese junks, estimated by Du Li for the China coast trade at 220,000 in the early nineteenth century.