Front Page Titles (by Subject) I.: CHINA'S CURRENCIES. - A History of Banking in all the Leading Nations, vol. 4 (Germany, Austria-Hungary, Netherlands, Scandinavian Nations, Japan, China)
Return to Title Page for A History of Banking in all the Leading Nations, vol. 4 (Germany, Austria-Hungary, Netherlands, Scandinavian Nations, Japan, China)
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
I.: CHINA’S CURRENCIES. - A History of Banking in all the Leading Nations, vol. 4 (Germany, Austria-Hungary, Netherlands, Scandinavian Nations, Japan, China) 
A History of Banking in all the Leading Nations; comprising the United States; Great Britain; Germany; Austro-Hungary; France; Italy; Belgium; Spain; Switzerland; Portugal; Roumania; Russia; Holland; The Scandinavian Nations; Canada; China; Japan; compiled by thirteen authors. Edited by the Editor of the Journal of Commerce and Commercial Bulletin. In Four Volumes. (New York: The Journal of Commerce and Commercial Bulletin, 1896). Vol. 4 A History of Banking in all the Leading Nations, (Germany, Austria-Hungary, Netherlands, Scandinavian Nations, Japan, China).
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The text is in the public domain.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
FROM 524 bc TO PRESENT TIMES.
SOME time ago I attended a session of the Mixed Court at Shanghai, China, and observing that the Chinese judge was asking questions of and receiving answers from the witness through an interpreter of his own nationality, I inquired if such was the usual form of conducting examinations in the courts of China. I was somewhat surprised to receive the answer that the witness resided in another province, and that the presiding judge was not familiar with the dialect of the province; and thus it is with the currency of China, the variations and peculiarities of which are as numerous as the dialects spoken in the different provinces. The difficulty, therefore, of writing logically of the currency of China will readily occur to the reader; and if the subject can be made intelligible by a general review, more should not, at present, be expected.
The coin which is more national in character than any other in use by the Chinese, is called cash. It is thin and circular, rather more than an inch in diameter, with a square hole in the middle, for the convenience of stringing, and should consist of equal parts of copper and zinc, and each piece should weigh fifty-eight grains troy; but their only national coin has been so debased and reduced in size, within the last fifty years, that most of it now in circulation will not weigh more than thirty grains. The cash well illustrates the size of commercial transactions among Chinese, as its fluctuating value in the provinces shows the unreliability as to the value of all transactions. About one thousand cash should be required in exchange for a dollar; but in some provinces as many as eighteen hundred are required; and often in the same province the value is so uncertain that it is not known one day what the purchasing power of a cash will be another; and to add to such apparent business perplexity, debasement has been so energetically and skillfully practised, as to invest the genuineness of the coin with so great suspicion, that purchasers in the markets have to supply themselves with genuine and debased cash to facilitate purchases, as there are articles which the genuine cash only will buy, and others which are sold for the debased.
The antiquity of the use of cash is established by authentic proof. Chinese writers discuss, with every assurance of accuracy, events happening several thousand years ago; and, while in no country in the world does age receive greater reverence than in China, there is a national sentiment which places so little value on the importance of time, as an element of consideration in the affairs of life, that native historians may not always have fully appreciated the studious research demanded by modern scholars as a first qualification to write authentically of remote events. From the collections of numismatists, there appears to have been in existence, as early as bc 524, a Chinese coin, with a square hole in the middle, similar to that seen in the cash now in daily use; while another account credits the origination of round cash to a Chief Minister of the Han dynasty, in the twelfth century, before our era. But however the issue may be decided as to the precise time when cash was first used as a coin, the date is sufficiently remote to prove that copper has existed as a purchasing power, and that it has maintained such, in more or less degree, for centuries in China.
This small copper coin, the tenth part in value of a cent, is the chief aim of acquisition by the Chinese laborer, for it supplies his wants and satisfies his aspirations. The use of such small denominational currency indicates wants which, to the laborers of the Occident, must appear easy to satisfy; but the returns of labor in the Orient demand the industry of a day, as in the other parts of the world, and the Chinese laborer must bestir himself from early dawn until evening to win the requisite number of cash to supply his necessities. Amid changing dynasties, this coin has remained unchanged in the performance of its monetary functions, and the merchants of China trade on as small margins to-day as they did at the date of the earliest records of commercial transactions in China.
The introduction of paper currency into China appears to have been due to the use of seals, and is very closely connected with the history of printing. When it became the custom of certain Chinese officials to give a money value to certain articles by impressing their seals upon them, the idea of paper money was naturally suggested. Seals were borrowed from Western Asia, and the Chinese having made them, and cut upon them their own writing, they were used in giving validity to official documents as well as a manifest proof of their genuineness. Their use was extended by subsequent legislation by giving one to every officer, and the grade of the official was indicated by the metal from which the seal was made—those made of silver being given to officers of the first and second rank, and the copper seals of the Taotais being a continuation of the old rule which has come down from 221 bc The seal may also be accepted as marking the visible sign of the change from feudalism to centralization; the official who carried it admitted his representative capacity and acknowledged the Imperial head of the State from whom he received it.
The most reliable date of the introduction of paper into China is stated to be about ad 200, but seven centuries passed before books were printed, and as many as eight before paper currency was systematically adopted by the Chinese Government. The long interval between the introduction of paper and the adoption of a paper currency is attributed to the habit of the workmen of first cutting into the material of the seal instead of cutting the inscription in relief; but when the thought occurred that relief cutting would leave a white ground, with a red or black inscription, the invention of blank forms and the printing of books followed.
ad 806 is the most reliable date of the first appearance of paper currency, and it was then that bills of exchange were called “flying money.” By an Imperial ordinance, then first made, merchants in the capital could receive Government bills in return for copper money, and at any of the provincial capitals the provincial treasurer could pay the amount stated upon the bill. This system of banking was a facility offered to merchants by the Government, and was again in operation about the year ad 960, a bureau being instituted at the capital for the transaction of the business. And in ad 1023, when copper became so scarce in the province of Szechuen that an attempt was made by the Government to relieve the wants of the situation by the introduction of iron cash coinage, the failure was so seriously felt that paper notes were again put in circulation at Chengtu, it being stipulated that such notes were to be returned every three years, an idea which originated with the wealthy merchants, and being accepted by the Government, the merchants were left to conduct the business. When the Golden Tartars conquered North China in ad 1150, they adopted a paper currency, because of the scarcity of copper, and during the succeeding century of their reign, as during the century following of Mongol domination, the most strenuous efforts were made to maintain a paper medium.
The following details of the progress of paper money are given by Martin, in his history of China: In the year 119 bc, paper money was used by the Chinese; sometimes a nominal currency was issued on pieces of skin a foot square, or on pasteboard; in the Tang dynasty, ad 807, the currency was more regular and copper only used for coining. Contributions were obliged to be made to the treasury, for which “the Sian,” voluntary money, was issued; ad 960, notes were issued for merchandise deposited in the public treasuries like pawnbrokers’ duplicates; they were called “Pien ch’ien,” or accommodation money, were everywhere negotiable, made on paper a foot square, with their current value stamped on them, and had an official seal. Subsequently, a system of cheques was issued to replace the heavy iron coinage used. About the tenth century, a better system of banking was introduced; bills of exchange were issued, payable every three years. About the twelfth century, the public creditors were paid by the issue of notes, or contracts in nominal value, ranging from 200 to 1000 cash. The extent to which these were issued toward the close of the century is stated to have been 28,000,000 ounces of silver. Different provinces, also, issued their own paper, and a great monetary confusion arose.
PAPER MONEY IN THE THIRTEENTH CENTURY.
Marco Polo, the Venetian traveler, who resided in China for upward of twenty years, about the year ad 1256 thus describes the mode in which paper money was then made and issued by the Emperor, or Grand Khan, in the city of Peking. The bark is stripped from a tree (the mulberry), on the leaves of which the silk-worm feeds. It is first well soaked in water, then pounded in a mortar into a pulpy consistency, and then made into paper of a dark color, which is cut into oblongs of different sizes and values. These notes are signed by special officers, and stamped with the Emperor’s seal, which attaches value to it. The penalty for forgery is death. This money is circulated throughout the empire, and any article can be procured by those who have this money. When these notes are damaged from use, they are exchanged at the mint for new ones, at the charge of three per cent.; the holders could obtain gold or silver for them anytime, by applying at the mint, provided the metal was intended to be manufactured into ornaments, drinking cups, etc. The armies of the Emperor were paid with this currency. One of the Government notes extant during the Ming dynasty has the following on one half of it: “At the petition of the treasury board, it is ordained that paper money thus marked with the Imperial seal of the Ming shall have currency and be used in all respects as if it were copper money; whosoever disobeys will have his head cut off.”
ABOLITION OF PAPER FOR SILVER.
When the Mongols were driven from power, says Klaproth, they had ruined China by their paper money; and notwithstanding the effort of the Ming dynasty to revive paper currency by recalling the old and issuing new notes for 100 to 1000 cash, and trying to keep up their value by forbidding traffic in gold or silver, the value of the notes declined in 1448 to three cash of copper to 1000 cash paper. And in ad 1455, although the Government decreed the taxes to be paid in paper money, forbidding the use of metal money, the nominal Government currency gradually declined and was finally abandoned, as the products of the Mexican and Peruvian silver mines flowed into the ports of Southern China through the agency of foreign trade. Notes were finally abolished about ad 1620, the conquest of silver over paper having occupied about a century. But silver had been used in China as money long before the introduction of American silver, though the importation of American silver was found the unfailing stream through which the ruling currency of China was kept in circulation; and the discovery of the silver mines in America is the cause of the dominance of silver in China as the currency in all large transactions. Eighty years after the discovery of America and sixty-one years after the Pacific Ocean was first seen by Bilboa from the mountain-tops of Nicaragua, the import of silver had been so large that seven or eight ounces had the value of one ounce of gold.
In a work by Wang-liu, published in 1831, the point is made that silver was not employed as money before the Tang dynasty, ad 618, and that it was then introduced. In another work, called “Si-chien,” by Ku-Yen-Wu, who died two centuries ago, it is stated that, before the Tang dynasty, copper cash was the medium of exchange between the Government and people, and silver had never come into use; but other authorities maintain that at that time silver was already introduced in South China, meaning by that term Canton and Kuangsi.
THE THREE BELTS OF CIRCULATION.
The exposition of Chinese history by Ku-Yen-Wu shows that there were, in regard to money circulation, three belts of country; that in the extreme south, gold and silver were in use, Canton being the centre of trade; in middle China, all along the Yang-tse into Szechuen, copper cash were used everywhere as the medium of exchange—the first and second belt being ruled from Nanking as the centre; and in the north, which was under Tartar administration, copper coin and grain were employed as a double medium of exchange. From this account of the circulation of silver, it appears that it began to be a currency in South China first, and at a time when China sent her prefects regularly to rule in Cochin-Chinese and Cambodian cities; and the silver, which circulated by weight in Canton in ad 500, would be partly Burmese, as it was then abundantly produced in Burmah, and partly what Arabian merchants and others brought from distant ports; for Arabian merchants probably shared the commerce of the southern provinces of China, as there are many proofs of the activity of Arab merchants from the Han dynasty downward. So much for remote history.
CURRENCY OF THE PRESENT.
But the date of the introduction of silver into China and the capacity of the silver mines of China are not of so much practical interest to the business man as a knowledge of the silver currency now in use. It is doubtful if the traveler or merchant can now visit any province of China where he will not find in circulation the Mexican dollar, which seems to supply a great desideratum of the Chinese merchant, and passes current throughout the empire. The tael is the money of account and the base of all monetary transactions in China. It is supposed to be a certain weight of silver, called sycee silver, and in shape resembles the shoe of a Chinese woman. The tael is not issued by the Government; it is in no way vouched for or guaranteed by any legal authority; and yet it is the standard of value in all money transactions, while in appearance only a rough ingot of silver, with variable weight and fineness, and having no fixed standard. To add to the confusion of such a money—circulated without authority, stamped by no government, varying in weight in different parts of China—not only is there a difference in the value, but often more than one kind of tael is used at the same port. It would be perplexing to attempt any minute account of all these current taels; and as Shanghai is the largest treaty port in China, it would probably be more intelligent to give a general explanation of the tael currency as it is found in Shanghai, an interesting paper on which has been written by James K. Morrison.
There is at Shanghai what is called a Shanghai tael weight and a Shanghai tael currency, the latter having no existence as a coin, and yet being the money of account; and, as stated, being “only a certain weight of silver called sycee silver, of a variable fineness within certain limits, but adjusted by the addition of a premium or betterness to a fancied standard, and the product dealt with or worked out in an arbitrary manner ruled by custom. The standard is called fancied, because it cannot be found to be clearly laid down by the Chinese what the standard of fineness is on which they work.”
A word as to what is meant by sycee silver may be of intelligent interest. The word sycee is called by the Chinese “wan yin,” meaning pure silver; and sycee, as used in Shanghai, is cast into ingots, or shoes, weighing about fifty Shanghai or Chauping taels weight. In some parts of China, ingots of lesser weights may be seen, but this is seldom. In making sycee, which is usually done at Shanghai by melting down silver bars imported from Europe and America, the melters impress on each shoe their “chop,” or name, and one or two characters giving reference to the record of the date of casting, the weight and premium. When the “shoes” are cast, they are inspected by an official called the “kung koo,” not appointed by the Government, but selected by the Chinese bankers and money-changers and paid a small fee of so many cash on each shoe he inspects; and when satisfied, the kung koo writes on each shoe in black ink in large Chinese characters its weight and the premium it bears, and then the shoes of sycee are ready for circulation. In order to guard more effectively against fraud, not only are the melter and inspector individually responsible, but deadly penalties are enforced against their heirs for all time.
Mr. Morrison gives an example of the method used for arriving at the value of the sycee in Shanghai currency as follows:
1. The weight of the sycee is taken in Chauping taels.
2. To this is added the premium or betterness that the sycee bears, and which is marked by the kung koo on each shoe.
3. The combined sum of weight and premium is then divided by 98, and the result is taels Shanghai currency.
The calculation in figures is given as follows:
The premium represents the fineness of sycee and ranges from four to six per cent., or from two to three taels on each shoe of about fifty taels weight. Different reasons are given for the two per cent. mentioned under No. 3 or the dividing by .98. One is that it is an old custom; another that it represents the kung koo’s fees and melter’s profits; while a third is that it did not originally exist, but is the arbitrary act of an impecunious viceroy who desired to fill his exhausted treasury. However, the two per cent. in no way affects the value of the Shanghai currency.
THE STANDARD OF SYCEE.
The necessity of having a standard of fineness, as well as a working standard, is apparent, particularly as the premium added to the weight of the silver varies; and yet it is difficult to ascertain from the Chinese, with their characteristic disregard for accuracy in such matters, what the standard of sycee is. Some place the standard of sycee of six per cent. at six per cent. under 1000 (pure silver); others say it is 998, and still others fix the standard at 916.66. The shipment of sycee to the Indian mints, extending over a long term of years, has made it possible to ascertain, with reasonable accuracy, the proportion of pure silver in 1000 taels of Shanghai sycee. While particular shipments varied as much as from one-half of one per cent. below to one-half of one per cent. above the usual standard, it was found that 916.66 Chauping taels weight of pure silver was the average output of 1000 taels of Shanghai currency. This (916.66) is the standard accepted by foreign bankers in China for the Shanghai tael currency. That is, if the Shanghai tael existed as a coin it would contain 916.66 parts of pure silver in 1000 parts. There is a difficulty, however, in accepting 916.66 as the standard on which the Chinese work their system of premiums. It is necessary to eliminate the two per cent. “custom,” which makes the working standard on which the Chinese calculate the premium to be 935.37. Working on this standard, and assuming the highest premium sycee can bear to be six per cent., we arrive at a maximum fineness for Shanghai sycee of 991.50. This is nearly one per cent. short of being pure silver, but it is above the average fineness of sycee as now met with. To bring it up to pure silver 1000 touch, it will require a premium of about 6.91 per cent. on the standard named. The original standard of sycee, which must have been founded on the difference between a standard and pure silver, was probably 943.396. Although this standard is much higher than the present working standard, it is believed to be the one on which the currency system of Shanghai was originally founded. Assuming that this is substantially correct, it shows that “sycee, like everything else connected with coinage in China, has deteriorated very considerably.” If the two per cent. referred to above did not originally exist, but was brought into force when the standard was 943.396, it would reduce the value of the tael to 924.528. Or, it is not at all improbable that “various squeezes” gradually brought the standard down to 935.374; and finally the two per cent. reduction was made, further reducing the intrinsic worth of the currency tael to 916.66, as it is at present, but leaving the system of premium to be calculated on the previous quality of 935.374. However this may be, the present Shanghai currency tael contains 916.666 parts of pure silver in 1000 parts; or, in other words, 1000 taels of Shanghai sycee ought to contain on an average 916.666 Chauping taels of pure silver. The assays in India practically confirm this standard. The actual weight of sycee required to equal a Shanghai tael varies according to the premium the sycee bears; but actual weighing and experience fix the ratio at 930 Chauping taels to 1000 taels Shanghai currency. If a Shanghai tael coin were to be issued, based exactly on the present tael currency, it would weigh 565.697 grains troy, of which 916.666 parts would be pure silver and 83.334 parts alloy.
THE STATUS OF GOLD IN CHINA.
From the earliest dawn of civilization, gold has retained its preëminence among the precious metals. A Chinese author of the second century writes that gold early attracted attention because of its weight and beauty, and gives the following reasons why it has retained superior value and been held in higher esteem than other metals: It does not tarnish with time; it does not become lighter when melted, even if it goes into the crucible a hundred times; and it yields without manipulation to the artificer. Writing on the subject a century later, Pliny substantially affirms this account of the superior estimate placed upon gold, and says that the superiority of gold is in its losing no weight when in the melting-pot, or in a funeral pyre on the occasion of a cremation; even when drawn into wire the hands are not soiled by it, as is the case when silver, copper, or lead is handled. It is also capable of being spread out into a thinner leaf than any other metal, and is divisible into a greater number of parts, and there is no other metal which can vie with gold in the facility with which it can be spun and woven like wool, so as to take the place among materials which compose textile fabrics. It is related that some of the Roman kings wore golden tunics when they triumphed; and Pliny records that he saw, at a naval sham-fight, at which the Emperor Claudius was present, the Empress Agrippina seated beside him, who wore a robe woven entirely of gold thread.
From the ancient records it can be learned that gold was abundant in Europe and Asia at the earliest date of authentic history. In Europe it was found in the Tagus, the Po, the Hebrus, and in Thrace, during the time of the Roman Empire; while, in Asia, it was found in the Pactolus, in Asia Minor. The Ganges was famed for its gold. The Persian Monarchy was enabled to use gold for coin because of the quantities brought from the Ural and Altai mountains, and the rivers which flowed from them; and in Spain, mountains otherwise unproductive, were found to produce gold. In China, the chief places mentioned as producing this metal are Yunnan and Szechuan, Kiangsi, Canton, Kuangsi, and Fukien.
The Chinese collect gold in the sands of rivers, melt rocky masses, persevering until they separate the metal from its stony envelope. Formerly, the Chinese treated the ore in a furnace, but there is no account, until recently, of their using powder to break up rocks, for which both dynamite and powder are now used. The gold mines of China, however, have never been worked according to any system now recognized as effective. The gold which has been extracted has been hoarded or sold to goldsmiths, and its use in buying and selling has been in the form of uncoined metal, sold by weight; its important stability of value having caused it to be everywhere acceptable in payment for commodities.
Translations from the “Peking Gazette” show that the rich families of Peking are parting with their hoards of gold because of the large price it commands in silver; and as the property-holders of China count their treasures in taels of silver, the satisfaction of seeing their wealth apparently increased so rapidly, is a temptation they find it difficult to resist. It is related that, in Chinese life, it is quite common for rich families to become poor, and that in such cases gold ornaments will be exchanged for silver, thus proving that the ambition to count wealth by numbers, without a proper regard for real value, has added to the quantity of gold in the markets of China, and increased the amount exported to foreign countries. As China is a silver-using country, and as there has been no rise in the average prices of native commodities simultaneously with the fall in the value of silver, these facts have naturally stimulated the desire of the Chinese to exchange their gold for silver, thus doubling the purchasing power of their means in the markets of their country. The demands of the gold-using countries have also been felt in the money markets of China, opening wider the door for the exportation of gold, infusing life and activity into the markets, and adding to the advantages in exchange in favor of the resident Chinaman who owned gold and who lived on the native products of China. With such forces at work in business, the purchasing power of gold continued to appreciate, and although the value of silver as compared with gold depreciated, yet, as stated, the purchasing power of silver remained virtually unchanged. In 1866, the price of gold bars of a fixed weight and fineness was 164.50 taels per bar; on July 3d, 1894, the price was 341.50 taels per bar, or an advance in taels of 177, or 107 per cent. In July, 1894, a bar of gold would buy 341.50 taels of silver, against 164.50 taels in 1866; and, as 100 taels of silver will buy as much now as then in the way of commodities, it follows that a gold bar will buy 107 per cent. more of commodities. From the above facts, which have been compiled from a trustworthy source, it is clear that legislation with reference to gold and silver has apparently brought no disadvantage to the laborer in the silver-using country; but this conclusion, in order to be sound, must be supported by another fact—that the wages of labor have proportionately increased in the silver-using countries, which is not the case with China. The Chinaman who has a hundred dollars in gold may buy two hundred Mexican dollars; but the Chinaman who has no gold, and must work to secure enough silver to purchase the necessities of life for himself and family, receives almost the same price in silver for his labor as he did when a hundred dollars in gold would not buy more than one hundred and twenty-five Mexican dollars. These two facts go together in considering the benefits and evils resulting from the monetary changes, as such changes affect the labor and commerce of the world.