Bullion Trade, South and Southeast Asia

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Bullion Trade, South and Southeast Asia

In the early modern period, bullion (uncoined silver or gold in the form of ingots or bars), silver in particular, was the most essential commodity of European-Asian trade. From the early years of European expansion during the sixteenth century, European traders had to bring gold and silver coins to Asia to participate in Asian trade, since Europe did not provide other commodities to Asia in exchange for the Asian commodities in demand in Europe, such as spices, pepper, and cotton textiles. These European coins were usually sold is Asia as bullion.

The main area of silver production was Latin America, with mines operating in Potosí (Bolivia) and Zacatecas (Mexico). This American silver, including its currency, Spanish (and Mexican) dollars, was exported to Asia by two routes, with the first being via Europe. Silver was imported to Europe and then reexported to Asia via the Cape of Good Hope or Levant (the countries bordering the eastern Mediterranean). The second route was through direct trade across the Pacific Ocean by galleon ships from Acapulco to Manila.

The exact volumes of the bullion influx have been subject to controversy, but in a rough estimate 32,000 metric tons (about 35,275 short tons) of silver was sent via Europe and 3,000 metric tons (about 3,307 short tons) via Manila in total between 1600 and 1800. From 1710 to 1720, the Dutch East India Company sent precious metal, composed of silver (87%) and gold (13%), to Asia through the Cape route amounting to 38,827,000 guilders in value. Besides Latin America, Japan was also a substantial silver exporter in the sixteenth and seventeenth centuries. China and India absorbed most of this bullion, with China importing roughly one-third of the total silver inflows to Asia.

In the mid-eighteenth century, the structure of global silver circulation drastically changed. British exports of silver declined substantially around 1760, and the British colonial government was required to pay home charges (for the colonial administration costs in the home country) to Britain from the late eighteenth century. Moreover, Japan began to import gold and silver in 1763.

It is unclear whether large volumes of bullion inflows contributed to Asian economic growth or not. Based on the elementary Fisher equation of the quantity theory of money, a rise in the quantity of money should have caused an increase in prices. But available contemporary records do not offer evidence of price increases according to the bullion influx. Some historians assume that economic growth, in reference to the volume of transactions, should have increased, but others believe that bullion was hoarded, an assumption based on the decrease in the velocity of circulation.

Imported silver was mostly smelted into various forms of traditional currency. However, over the centuries Asian traders, especially in East and Southeast Asia, accepted dollar coins for payment from foreigners. In the nineteenth century, silver currency was practically standardized to the Mexican dollar for the purpose of international trade. The adaptation of the gold standard in Western countries caused the silver value to increase against gold after 1873. Apart from the Dutch Indies adapting the gold standard in 1877, Asian countries sustained the silver standard. Although it was more burdensome to pay the Indian home charge fixed in gold, Asian countries generally enjoyed the benefits of European-Asian trade until their adaptation of the gold standard, for example, in 1893 (India) and in 1902 (Siam).

see also Acapulco; Mining, the Americas; Potosí;


De Vries, Jan. "Connecting Europe and Asia: A Quantitative Analysis of the Cape-route Trade, 1497–1795." In Global Connections and Monetary History, 1470–1800, edited by Dennis O. Flynn, Arturo Giraáldez, and Richard von Glahn. Aldershot, U.K.: Ashgate, 2003.

Frank, Andre Gunder. ReOrient: Global Economy in the Asian Age. Berkeley: University of California Press, 1998.

Latham, A. J. H. The International Economy and the Undeveloped World, 1865–1914. London: Croom Helm, 1978.