DP14860 The efficiency of the Chinese silver standard, 1920-33

Author(s): Nuno Pedro G. Palma, Liuyan Zhao
Publication Date: June 2020
Date Revised: May 2021
Keyword(s): Chinese Economy, Exchange Rates, market integration, silver point arbitrage
JEL(s): N15, N25
Programme Areas: Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14860

We test for integration of financial markets in China during 1920-1933 using a new dataset of domestic exchange rates. Our data concerns tael-denominated telegraphic transfers between Shanghai and nine other cities. We find that Chinese financial markets, as measured by the efficiency of silver-point arbitrage, were highly integrated among major commercial hubs in north and central China, but there was a lower level of integration for more remote cities in the south. Our paper presents the first comprehensive assessment of the efficiency of the Chinese silver standard, and contributes to a revaluation of market performance during pre-communist China.