The global silver trade between the Americas, Europe, and China from the sixteenth to nineteenth centuries was a spillover of the Columbian exchange which had a profound effect on the world economy. Many scholars consider the silver trade to mark the beginning of a genuinely global economy,China and the Birth of Globalization in the 16th Century, by Dennis O. Flynn and Arturo Giráldez with one historian noting that silver "went round the world and made the world go round". Although global, much of that silver ended up in the hands of the Chinese, as they accepted it as a form of currency. In addition to the global economic changes the silver trade engendered, it also put into motion a wide array of political transformations in the early modern era. "New World mines", concluded several prominent historians, "supported the Spanish empire", acting as a linchpin of the Spanish economy.
Spaniards at the time of the Age of Discovery discovered vast amounts of silver, much of which was from the Potosí silver mines, to fuel their trade economy. Potosí's deposits were rich and Spanish American silver mines were the world's cheapest sources of it. The Spanish acquired the silver, minting it into the peso de ocho to then use it as a means of purchase; that currency was so widespread that even the United States accepted it as valid until the Coinage Act of 1857. As the Spanish need for silver increased, new innovations for more efficient extraction of silver were developed, such as the amalgamation method of using mercury to extract silver from ore.
In the two centuries that followed the discovery of Potosí in 1545, the Spanish silver mines in the Americas produced 40,000 tons of silver. Altogether, more than 150,000 tons of silver were shipped from Potosí by the end of the 18th century. From 1500 to 1800, Bolivia and Mexico produced about 80% of the world's silver with 30% of it eventually ending up in China. In the late 16th and early 17th century, Japan was also exporting heavily into China and the foreign trade at large.
As has been demonstrated, China dominated silver imports. China's huge demand of the silver was caused by the failure of making paper money "Hong Wu Tong Bao" and "Da Ming Tong Bao Chao" and the difficulties when making copper coins. After various status changes in China history, silver played a more important role in the market and became a dominant currency in China in the 1540s. The silver flow into China passed through two cycles: the Potosí /Japan Cycle, which lasted from the 1540s to the 1640s, and the Mexican Cycle, which began in the first half of the 1700s. The market value of silver in the Ming territory was double its value elsewhere, which provided great arbitrage profit for the Europeans and Japanese. The room for arbitrage profit was further enlarged because of the silver content difference between silver ingots from Ming and Qing China and New World silver. At the same time, China also made significant arbitrage earnings in the markets for silks, ceramics, and other non-silver, which formed a multiple arbitrage system. In addition, the abundance of silver in China made it easy for the country to mint it into coinage and many methods and tools for identifying and measuring silver appeared to solve the problem caused by the difficulty in identifying and measure silver from 16th to 19th century. That process was so widespread that local Chinese government officials would demand taxes to be paid in silver to the point that silver eventually backed all of China's economy.
Silver in the Americas
A major drive of the Spanish colonization of the Americas during the late 15th and 16th centuries was the discovery, production, and trading of precious metals at a time when there was a severe shortage of them. The Spanish, along with other European nations, likewise had a great desire for Chinese goods such as silk and porcelain. Conversely, the Europeans did not have any goods or commodities which China desired, so they traded their newly mined silver from the Americas which was badly needed in China at the time due to long running silver shortages, in order to make up for their trade deficit. The two most important mining colonies of the Spanish Empire were Bolivia and Mexico, who were estimated to have provided one-hundred thousand tons of silver from the mid-16th century to the end of the colonial period in 1824. The richest and most productive mine in the Americas was that of Potosí then located within the Viceroyalty of Peru, in what is now modern day Bolivia. The richest camp in Mexico was the city of Zacatecas, followed by other places in the Mexican Bajío (then a part of the Viceroyalty of New Spain). Most silver was extracted in Mexico, however, production of any single Mexican mine was far less than that of Potosí, until surpassed by Guanajuato also in the Bajío in the 18th century.
Mining processes in the Americas
Relatively simple mining and processing techniques of the Incas and other indigenous people dominated American silver mining for the early part of the 16th century. However, mining in the Americas became reliant on mercury amalgamation after it was developed and popularized in the mid-16th century. Mercury amalgamation dramatically increased the volume of silver production in the Americas, giving way to silver's central role in American economies and the burgeoning global economy. From 1575 to 1590, the use of amalgamation multiplied the output of Potosí, the most prominent Andean silver mine, by six. The presence of mercury at Huancavelica coupled with the abundance of cheap labor supplied by the rotational labor system mita made this intense production possible. Mercury amalgamation was invented by a Spaniard in central Mexico in the 1550s. Historians dispute which individual was the first to invent the process, but most agree that it was a Spaniard. Mercury represented one of the highest costs of production for the Americas, since much of it had to be shipped from Almadén in Spain. The ratio of mercury to silver produced was about two to one. Furthermore, German miners introduced the stamp mill and lead smelting in the 1530s. Gunpowder was often used to blast large holes to create the mine shafts, although there were not many deep shafts. Potosí had the most ore, however it was lower quality than that of Mexico.
Mining production in the Americas largely depended on native Amerindian labor in both Mexico and Bolivia. In Mexico, many of the natives worked as wage laborers by the middle of the 17th century. However, the labor system known as the still existed in some places. Silver production in Mexico was relatively cheap when compared to that of Bolivia, and the general trend of Mexican labor systems was that towards waged labor. In Bolivia's mines, the mit'a system was a dominant form of native labor subjection, although waged laborers worked on the mines as well. Natives under the mit'a system were paid much less, and this was necessary for the production of silver to continue in Bolivia where costs were relatively high.
Measurement and identification of silver
Silver was used as money in the silver trade from 16th to 19th centuries. To gain more benefits, deceptive methods were used. Therefore, there are many books, such as Yinpu, Bianyinpu and Xinzenggeguoyinshilunjie on silver identification in this period. In the deceptive method such as wrapping lead or copper in silver were introduced in this book.
At the same time, the amount of silver cannot be quickly and easily identified, so many methods of silver measurements have been studied. For example, Yuanbao, a fixed weight of silver, was used to facilitate trading. Dengtou, a tool for measuring the weight of silver, were also used.
First paper money The world's first paper money ("flying money") was invented by the Chinese and they needed some commodity to back it. Traditional coins were useful, but the amount of coins needed for large purchases could be bulky and dangerous to transport. That problem was solved when the Chinese created small pieces of paper with pictures of the coin printed on them. By the nature of their geography, China had no real amount of precious metals of their own to back the paper money they invented. Because the Spaniards did not find gold but did find copious amounts of silver in Bolivia and Mexico, the Spaniards and the rest of Europe used this silver to purchase the commodities of choice from China, solving both of their problems.
The status change of silver
From 960 to 1276, the Song dynasty in China's history, the importance of silver kept increasing as a currency in a long period of time.
In 1375, the beginning of the Ming dynasty, the Hongwu Emperor of Ming established Hongwu Tongbao and Da Ming Baochao as the currency of China. At the same time, he banned gold and silver as currency, which led to the decreasing importance of these two precious metals. Baochao was abolished as a currency in 1425. In addition, Ming did not have enough money to make copper coins, which was the first currency in the first dynasty. Therefore, copper coin making was banned in the early 1430s.
In the 1540s, because of the failure of making paper money and the difficulties when making copper coins, silver played a more important role in the market and became a dominant currency in China.
In 1567, the Ming dynasty lifted legal prohibitions on foreign trade, but maintained a ban on Sino-Japanese trade. Southwestern Taiwan was utilized as a location outside of Ming jurisdiction for Japanese merchants, in particular, to sell silver to Fujianese buyers.
Global flow of silver
Into China The history of global trade in silver with China can be divided into several periods, including the Potosí/Japan Cycle from the 1540s to 1640s and the Mexican Cycle in the first half of the 1700s.
The Potosí/Japan cycle started in the 1540s because of the decline of the paper money system in China during the Ming dynasty resulting from inflation and the prevalence of counterfeit money. In 1571, Spain started the trade directly with China in the Americas. The Manila galleon trade reached its peak in 1597, when the trade quantity surpassed 1.2 million pesos. Although the economy performed poorly in 1632, trade increased by 0.24 million pesos every year.Zhang, Yi. "1550-1830 年中国白银流入及其影响" ["Silver Inflows to China and Their Effects, 1550-1830"]. November 2020, pp. 3–7. With the increase in silver accumulation in the Americas and Japan and the balancing of the Chinese silver supply and demand market due to the large amount of silver imports, the price of Chinese silver and world silver prices converge and the Potosí/Japan Cycle comes to an end in the 1640s.
The Mexican Cycle refers to the first half of the 1700s. During this time, China's population came into a boom because of the importation of hardy American crops, such as sweet potatoes, corn and peanuts. A chain reaction followed swiftly: the development of China's silver market, and growing demand of silver in China. At the same time, the silver industry in Latin America, especially in Mexico came in to a boom and became the main source of silver exports to China.
Global silver trade