We study the pricing of foreign silver coins circulating in China during the period from 1866 to 1924. Spanish and Mexican silver dollar coins often traded at prices substantially larger than their bullion value. These premiums are associated with global economic and political conditions, proxies for Chinese political and banking uncertainty, and seasonal production cycles and market conditions for China’s export commodities. Diagnostic tests using the value of copper money and imports often confirm our interpretation. Our evidence suggests how rational currency traders, bankers, merchants, farmers and consumers sustained an informal monetary system during this era.
