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Money and Monetary Policy

in China
1845-1895

HARVARD EAST ASIAN SERIES

• 19 ·

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Money and Monetary Policy
in China
1845-1895

Frank Η. H. King

Harvard University Press


Cambridge, Massachusetts

1965

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© Copyright 1965 by the President and Fellows of Harvard College
All rights reserved

Distributed in Great Britain by Oxford University Press, London

Preparation of this volume was aided by a grant from the Carnegie Corporation. The Cor-
poration is not, however, the author, owner, publisher, or proprietor of this publication and
is not to be understood as approving by virtue of its grant any of the statements made or
views expressed therein.

Publication has been aided by a grant from the Ford Foundation.

Library of Congress Catalog Card Number 65-13847

Printed in the United States of America

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ACKNOWLEDGMENTS

This book is dedicated to the memory of the late C. N. Ward Perkins,


Fellow of Pembroke College and lecturer in economics, University of Ox-
ford. First as my undergraduate tutor and later as both friend and officially
appointed supervisor, he guided me through my preliminary work and was
invaluable as a critic of this study.
I am primarily indebted to the encouragement, instruction, and advice of
John K . Fairbank, chairman of the Research Committee of the East Asian
Research Center at Harvard University, under whose sponsorship this study
was initiated. L. S. Yang and Alexander Eckstein provided assistance on
specific problems. From my colleagues at the Center I also received con-
tinuous and informal advice — the late К . C. Chao, Tse-tsung Chow, T'ung-
tsu Ch'ü, Α. Feuerwerker, Harold Kahn, and Mr. and Mrs. Y. C. Yin. For
his kindness and advice I am especially indebted to К. C. Liu.
Several scholars were kind enough to enter into correspondence with me
or to read portions of the manuscript: Y. C. Hui, Edward Kann, S. T .
Leong, D. K . Lieu, Η. M. Lo, R. W . Lovett, John MacMaster, H . McAleavy,
R. S. Sayers, F. C. Spooner, Ε-tu Zen Sun, Barry Supple, and Ying-shih Yii.
Sen Matsuda read the Japanese material to me. H . J. Habakkuk and S. C.
Wu, my Oxford University examiners, made important suggestions from
which the present version profits. At Oxford I enjoyed the hospitality of
St. Antony's College and the opportunity of association there with the Far
Eastern Studies Program under G. F . Hudson.
The financial assistance which made possible this study came principally
from the East Asian Research Center, Harvard University. I also received a
Rhodes Scholarship third-year stipend and a George Webb Medley Scholar-
ship for study at Oxford, 1958-1959.
Several versions of the manuscript have been corrected by my wife,
Catherine, who has also made important editorial suggestions.

Frank Η. H. King
Lawrence, Kansas
September 1964

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CONTENTS

Introduction
The Chinese Economy, 1845-1895 4
The traditional economy, 4. Role of the state, 8. Foreign impact on the econ-
omy, 12
Economic Change Prior to 1895 14
Shanghai, other treaty ports, and Hong Kong, 15. Other changes, 18

PART I. THE CHINESE MONETARY SYSTEM

Chapter I. Principal Characteristics of the Chinese Monetary System


The Chinese System — An Ideal Model 27
Definitions and Problems 28
Money and the unit of account, 28. Coins — their merits and demerits, 31. The
question of the standard, 34. Destruction of the coinage, 37. Bimetallic systems,
39
The Chinese System — A General Survey 42
Positive characteristics, 42. The structure of the Chinese monetary system, 47.
Foreign criticism, 49

Chapter II. The Cash Sector


Basic Characteristics 51
Condition of the coinage, 52. Low value and its consequences, 54. Cash — a full-
bodied coin, 57
The Three Cash Systems 58
The ideal model revised, 59. Smaller transactions, 63. Chinese terminology, 64
Case Studies 65
Nanking, 65. Wuhu, 66. Depreciation: Tamsui and Shanghai, 67

Chapter III. T h e Silver Sector


The Tael System 70
The monetary tael, 70. Monetary silver, 72. Payments in bullion, 74. Hankow,
79. Chungking, 79. Peking, 80. Canton and Shanghai, 80
Dollars 81
Dollars in the tael system, 82. Dollar systems, 83. Attitudes to dollar coins, 85.
Dollar bullion, 87. Dollar-tael systems, 88

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viii Contents
Chapter IV. Banking and the Monetary System 91
The Banking System 91
Remittance banks, 92. Local banks, 94. Foreign banks, 97. Other institutions,
101
Bank Money 103
Ban\ notes, 103. Current accounts, 106. Newchwang and Ningpo, 107. Foo-
chow, 109
Miscellaneous Problems 110
Gold, 110. Taxes and the monetary system, 110. Subsidiary coinage, 113
The Chinese Monetary System: A Summary 114
Tael unit of account, 115. Dollar unit of account, 116

P A R T II. STUDIES I N M O N E T A R Y H I S T O R Y

Chapter V. Ch'ing Monetary Institutions and Policy 121


The Institutional Framework 122
Central government, 123. The Board of Revenue, 124. The Peking mints, 126.
Provincial administration, 128. The process of monetary policy, 128. Personnel,
132
Traditional Monetary Policy 133
The establishment, 1644-1735, 134. Maintenance, 1736-1795, 138. Partial break-
down, 1796-1850,140

Chapter VI. The Hsien-feng Period — A Case Study 144


The Course of Monetary Change 145
Copper supply, 145. Standard cash, 147. Big-cash, 147. Iron cash, 149. Govern-
ment notes, 150
Monetary Policy and Its Failure 152
The conservative approach, 152. Second stage, 154. Later developments, 155
The Peking Monetary System in 1861 158
Development of the model, 161. Further depreciation of notes, 1861,162

Chapter VII. Treaty-Port Monetary Problems 164


Local Monetary Policy 166
The scope of local policy, 166. The dollar, 168
Abandonment of the Spanish Dollar — Canton, 1853 169
Abandonment of the Spanish Dollar — Shanghai, 1857 171
The dollar system to 1857,172. The Shanghai system in 1857, 172. Adoption of
the tael, 173. Tael or Dollar: the debate, 174. Shanghai currency tael — origins,
177. Later dollars, 179

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Contents ix
Hong Kong, A Monetary History 181
Establishment of the currency, 181. Sterling interlude, 182. The return to silver
and the mint, 184. From 1868 to 1895,186

Chapter VIII. T h e Hai\wan Tael 189


The Origins of the Hai\wan Tael 190
Inaccuracy of measurement, 190. Duties, an un\nou>n quantity, 191. The im-
perial regulations, 193
The Hai\wan Tael of the Treaties 194
Treaty provisions, 195. The Haikwan tael and its money, 196
The Hai\wan Tael in 1878 199
The influence of local factors, 200. The extra charges, 201. The solution: cur-
rency reform, 202. Shanghai, northern and southern ports, 203
The Hai\wan Tael to 1933 207
Rationalization within the treaty limits, 208. The establishment of the Customs
Gold Unit, 210

Chapter IX. Monetary Reform and the Mint Question 211


Reform in Cash Sector 213
First and unsuccessful measures, 213. The 1887-1888 currency reform, 215. Pro-
vincial reaction, 218. Copper supply, 219
Reform in the Silver Sector 220
Foreign advice and Chinese reaction, 220. Chinese silver coins prior to 1889, 223.
The Canton and Tientsin mints, 225

Conclusion. T h e Monetary System and China's Economic Development 229


The Institutional Approach — A Criticism 231
Economic Factors in China's Development 234
Production and unemployment, 234. Merchants and artisans in industry, 235.
Special problems, 238

Appendix. Suggestions for Standardization 241


Suggestions Not Involving Translation 241
Matters affecting the entire monetary system, 241. The tael system, 242. The
cash system, 242
Problems in Translation 243
The weight, unit of account, and money confusion, 243. String of cash, 244.
"Big" and "little" as qualifiers of "ch'ien," 244. Terms relating to silver, 245.
Terms relating to cash, 245

Notes 249

Bibliography 287

Glossary of Chinese Names and Terms 316

Index 321

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FIGURES

Page
1. The ideal model of the Chinese monetary system 27
2. The chung-ch'ien system: ideal model 59
3. The hsiao-ch'ien system: ideal model 60
4. The three cash systems: ideal model 61
5. Accounting tael and dollar units 89
6. The Peking monetary system, 1861 159
7. The Peking monetary system, c. 1853 161
8. The Shanghai silver sector 173

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Symbols: = is equal to
~ is variably related to
= is defined as
4- indicates the sum of money which
will satisfy the unit of account
All units of account are italicized.

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INTRODUCTION

This is a study in the monetary history of China in the fifty years prior
to her defeat in the First Sino-Japanese War. "Monetary history" is perhaps
too general a term for a study more specifically designed. We are concerned
here both with the nature of the monetary system per se and with the ability
of the government to adapt monetary policy to changing conditions within
a traditional context. This much is suggested by the title Money and Mone-
tary Policy. But a greater understanding of our purpose may result from a
more detailed statement and from a more lengthy introduction than so
specialized a study might normally warrant.
The economy of China in the nineteenth century provides an example of
failure to modernize. Many noneconomic factors, especially institutional ones,
have been offered in explanation for this. China was neither primitive nor
was its economy simple; rather it was vital, changing, developing. But it
did not modernize. It did not accept the challenge of the industrial West and
develop in this special sense of the term. To explain this satisfactorily it is
not enough to state that Chinese institutions were unfriendly to development.
That might surely be said of the institutions of any undeveloped society.
The real question is why the economic forces tending to change were in-
sufficiently powerful to overthrow the forces inimical to change. The answer
to this question, which is central, need not be entirely economic, but as an
initial step the economic factors can be isolated and the problem posed in
economic terms.
So sweeping an undertaking must, however, rest upon more restricted
monographs. This is one such study. Here we seek to understand the nature
of the Chinese monetary system and its adaptability to changing circum-
stances. And, based on this understanding, we seek to discover the attitudes
and capabilities of the traditional officials — from Emperor to magistrate —
in monetary administration and policy. Economic historians may subse-
quently weave this material into a more comprehensive monetary history
and, eventually, into a thorough account of recent Chinese economic history.
Nevertheless, tentative conclusions based on the findings of the present study

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2 Money and Monetary Policy in China
are useful, even at this early stage of inquiry. Thus in Part I we describe the
monetary system as a static concept in the context of metallic monetary sys-
tems in general. In Part II we present historical episodes which illustrate the
working of the system and its reaction to pressures. The conclusion makes
a preliminary assessment of the economy's slow realization of development
potentials and relates this to the Ch'ing monetary system and policy.
We have avoided the title "monetary history," since it might suggest to
some a type of economic analysis beyond the scope of this work. In studying
the great inflation of the 1850's, of course, the effects of a desperate monetary
policy on the price level in the Peking metropolitan area must be stated. But
even here we lack the statistics for precision. While material for a study of
prices certainly exists, it has not as yet been evaluated. Statistics for the money
supply do not exist. To analyze the interaction of money and prices at a level
of sophistication sufficient to interest professional economists is not yet pos-
sible. China was on a silver standard. There is most certainly scope for a
study of China's international economic relations, including her monetary re-
lations. For this, material exists; but its pursuit would take us far from the
purposes of the present work. Our particular title, then, has been chosen with
care.
A study of China's nineteenth-century monetary system is not only of in-
terest for its own sake, but for scholarly completeness. As presented here
it provides the student of early modern and medieval monetary systems with
a significant parallel. The explanatory system developed may be found of
use in describing other monies in a logical and perhaps clearer way. Students
of other aspects of nineteenth-century Chinese history may now find it less
necessary to quietly bypass all monetary information; they should certainly
eliminate the usual footnote on Chinese chaos, arbitrariness, or plain dis-
honesty. This would be no mean accomplishment. Finally, the monetary sys-
tem is considered as one factor in the course of economic development. This
study is necessarily narrow in scope but, hopefully, broad in interest.
During the nineteenth century, China experienced some of the most dra-
matic events of her centuries-old civilization. But it is the period from the
close of the First Sino-British War in 1842 to the Treaty of Shimonoseki in
1895 which is most relevant to China's peculiar economic response to the
West. Before the Opium War the "old Canton system" so restricted the ac-
tivities of" most foreigners that they could hardly have been expected to in-
fluence the Chinese in anything but local trading arrangements. After 1895
the permission granted to establish foreign factories in the treaty ports, the
struggle for railroad concessions which followed, and the threatened "breakup

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Introduction 3
of China" — in fact, the increased foreign pressure and direct interference
in the domestic affairs of China stimulated further by the Boxer uprising of
1900 — make the economic history not wholly Chinese; it can best be under-
stood when considered in connection with the New Imperialism and world
power politics. The period 1845-1895 is then the period in which the foreign
impact is first felt. The Chinese remain, however, in political control; their
reactions are still within the traditional context of the Chinese imperial state
and the continuity of Chinese history. Some modification in the dates must
be made if specific monetary problems are to be understood; Ch'ing monetary
policy and the story of the Hai\wan tael are cases in point. Otherwise we
focus our study on this key fifty-year period.
Whatever broad interest this study may have, it has its esoteric moments.
Some of these are inherent in the material. Others could be clarified if there
were sufficient space to re-explain topics already dealt with adequately in
works on subjects ranging from Confucian ethics to Genoa's return to gold.
We should not, for example, duplicate the numismatic work of Edward
Kann, the Sinological researches of Lien-sheng Yang, nor the illustrations in
the works of Kann, Η. В. Morse, or P'eng Hsin-wei. On this last subject we
have to confess that, while a picture of a cash coin or a nineteenth-century
dollar coin might be "interesting," it would not contribute to the argument;
it is consequently a luxury which must be foregone. And it might seem that
by similar reasoning we should also omit any general description of China's
nineteenth-century economy, a task which has been attempted several times
before with adequate though hardly definitive results.* We are, however,
studying the monetary system in the context of development problems, and
it is essential that we have a background of knowledge of the economy in
which the monetary system was at work. The general description given in
the following sections is focused, therefore, not only on the traditional base
but also on the more dynamic elements and on the forces of change to
which the monetary system was required to adapt itself.

* This generalization may appear harsh, but we must remember that little work has been
done in this field by economists. One important exception is a joint survey by Professors John
K. Fairbank, Alexander Eckstein (the economist), and Lien-sheng Yang, but the value of this
contribution was minimized by attempting to force Chinese economic history into a Rostowian
stages framework. Important groundwork has now been laid by Albert Feuerwerker, a historian,
in, for example, "Materials for the Study of the Economic History of Modern China," and by
Chi-ming Hou, one of the few economists in the field, in "Some Reflections on the Economic
History of Modern China ( 1 8 4 0 - 1 9 4 9 ) " and other articles. Indeed, advance publication notices
suggest that longer and more comprehensive economic studies are about to appear; these publi-
cations should eventually replace our summary. Nevertheless, as of the present date, our sum-
mary is still required to perform a specific function for readers of this essay. (For full refer-
ences, see the bibliography.)

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4 Money and Monetary Policy in China
A fifty-year period may be characterized in terms more or less valid for
the entire period. T h e resulting generalizations retain their significance since
the monetary changes which did occur did not affect the essential character-
istics of the system. W e shall, therefore, first describe the general features of
the economy. 1 Secondly, we shall outline the changes which occurred within
our period. In this we anticipate the arrangement of the main study: Part I
deals with a generalized, almost idealized, structure; Part II with histories
and cases which depart from and modify the model. T h e final section of the
present chapter provides the introduction to the monetary system itself.

T h e Chinese Economy, 1845-1895

The traditional economy. T h e 1850 population of China proper on the eve


of the Taiping rebellion has recently been estimated at 430 million, including
only those of the H a n race.2 Nationwide population surveys were not made
after the Taiping had been suppressed and, as more than 20 million people
lost their lives between 1850 and 1864 in this rebellion alone, population
figures after mid-century depend upon questionable projections.
A figure close to 85 per cent has been given for those engaged in agri-
culture, but this includes persons connected with primary production — for
example, those transporting grain to markets, and petty merchants in the
countryside. Rice is always considered typical of China, with its dependence
on controlled water supplies, heavy applications of manpower, and small
farming units. T h e organization of rice production tended to conservatism
— the marked characteristic of the Chinese peasant attached to his ancestral
land until uprooted by major famine or war disaster. So simple a picture
by no means gives a correct impression of the agricultural sector of the tra-
ditional Chinese economy. Rice culture itself assumes a store of capital in
the form of local irrigation systems, pumping equipment, river works and
dikes, and granaries. Not all China was suitable for rice growing. In the
north, wheat, millet, and kaoliang were grown; in the hills, livestock were
pastured; and in land not fully utilized hitherto, new crops were introduced:
maize, the sweet potato, vegetables — and opium.
Commercial primary production centered on tea, silk, cotton, opium, fish,
and minerals. T h e tea and silk production was based on highly developed
commercial practices, especially after the growth of foreign trade along the
south China coast. Mining was retarded both by the engineering difficulties
and by the reluctance of the government to allow the exploitation of the
mines, which, it was claimed, attracted rowdies and dangerous men and

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Introduction 5
thus threatened the peace; fisheries were retarded by the dangers of the sea.
T h e forests had been destroyed and the countryside denuded, but what
scraps were left, including the very grass itself, were cut for fuel.
T h e size of farms varied from as little as one acre to as high as ten acres,
these being average figures for selected hsien, the former in Kiangsu and
Hopei, the latter in Anhui. 3 In general it is supposed that larger farms were
to be found in the north on the loess plains, where land was not so pro-
ductive nor the rainfall so heavy. Similarly, there was little tenantry in the
north; perhaps in the south the irrigation works and high percentage of clan
holdings rented to clan members were factors responsible for the difference.
Rent tendered in kind would require some 50 per cent of the crops, a rate of
return which, given the price of land, yielded the landlord 10 per cent on
his investment. 4
T h e general picture is one of poverty, requiring little to upset the balance
and create famine. T h e balance was often upset, as drought and flood sta-
tistics, long recorded by Chinese officials, make clear. During the Ch'ing
dynasty (1644-1911), but excluding the periods 1847-1861 and 1901-1911,
there were, on an average, 27 droughts and 44 floods per century in the home
province of Chihli alone. That this province should appear the worst sufferer
may be an example of the problem of Chinese statistics, since the closeness
of the troubled areas to the capital would ensure proper recording. In the
great drought of 1876-1879, affecting 300,000 square miles in the provinces
of Shensi, Shansi, Chihli, Honan, and part of Shantung, some 9 to 13 mil-
lion people are supposed to have perished. 5 T h e Yellow River, which tended
to break its dikes even in periods of relatively moderate discharge by simply
redirecting the impact of its current against them — the river lay, it has been
said, on top of the plains, not in them — changed its course in 1852 and
flowed north of the Shantung peninsula to discharge into the Gulf of Chihli,
with resulting calamitous floods. F r o m 1887 to 1889 it abandoned this course
temporarily to flow south again, but now into the H w a i River and the already
overtaxed H u n g t z e Lake. N o t only did rivers flood, but the waters were
slow to drain f r o m the level plains, and the dikes impeded the natural flow
of flood water to the sea.
T h e causes of these floods were manifold and would have been costly to
correct. T h e Chinese government found it increasingly difficult to maintain
the existing makeshift preventive schemes and was never prepared, financially
or otherwise, to make a complete resurvey of the problem. Hampered by
poor communication, news of disaster was delayed for perhaps months, and
the remedies depended upon interprovincial cooperation and coordination in

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6 Money and Monetary Policy in China
a country where, outside the northern plains, wheeled transport was almost
everywhere impossible. Yet such relief activities were genuine and absorbed
much of the administrative energies of the state.
Coupled with these natural disasters came rebellion and foreign wars. The
greatest was the Taiping rebellion, 1850-1864, but the Muslim rising in Yun-
nan in 1856 and the Nien rebellion in the north which followed hard upon
the victories of the Taipings required vast expenditures of funds. With the
Taipings defeated, the extent of the destruction of China's richest provinces
was revealed, prompting a great resettlement migration by a race which had
only just moved into the fertile plateau country of Szechuan.
Rebellion in the northwest continued, however. In 1873 the Ch'ing had re-
established control in Shensi and Kansu, and after the death of Yakub Beg
in 1877 Sinkiang was conquered. This successful end of military operations
was followed, as already stated, by the worst drought of the nineteenth cen-
tury. The foreign wars created China's first foreign debts — both to finance
military operations and to pay indemnities — but the actual military opera-
tions were, compared to internal campaigns, relatively short. Until the
Japanese victory of 1895, it is safe to conclude, foreign wars did not in
themselves have any lasting adverse effect on the economy, although the
economic provisions of the treaties these wars provoked had a profound
effect. A recent estimate of the external loans contracted by the Imperial and
provincial governments from 1853 to 1890 shows that of a total of 45.3 million
Kuping or Treasury tads, all but 10.9 million taels or 24 per cent were for
external wars (14.5 million taels) or internal rebellion (19.9 million taels).6
All this indeed revises the uncritical picture of the centuries-old rice cul-
ture. It is rather a story of many years of human toil accumulating the
capital necessary to control natural forces and utilize them; then disaster in
the form of flood or drought, bandits or tribute. The surplus was destroyed
and vast disinvestment was the discouraging reward. Disasters were followed
by movements of people, by the rebuilding of broken installations, and by
the replanting of the land—the beginning again of production and com-
merce.
Agriculture was but one, although the most important, sector of the Chi-
nese economy. The Chinese peasant farmer was not self-sufficient, and in
the little villages artisans, food-shop keepers, money changers, and money
lenders served his needs. A survey of 515 families in Ting hsien made over
the years 1926-1936 showed the following distribution of the 1282 males' over
14 years of age listing a principal occupation:

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Introduction 7
993 farming 11 government
64 hired farm labor 8 away from home
48 student 7 peddler
40 unemployed 7 home weaving
25 merchant 6 store employee
19 education 4 apprentice
17 skilled labor 2 doctor
15 military 2 no occupation
13 unskilled labor 1 no data

Home weaving industry was the highest for subsidiary occupations, with 112
of 389 listings; then skilled labor, hired farm labor, peddler, miscellaneous
home industry, unskilled labor, and others. 7 These figures for the early
twentieth century can be taken as representative of the situation in 1895.
Beyond the limitations of the village, the salt trade, the tea and silk trades,
and the transport of ore from the mines (many of which were located in
Yunnan in the extreme southwest of China) required a commercial organi-
zation which in a limited sense did give some national economic character-
istics to an economy that was mainly local. In the larger towns the artisans
were organized in guilds, forming a potentially important sector of the
economy which to this day has been little studied. T h e imperial factories
for silks and porcelains fostered the luxury crafts for the imperial family
and court in Peking, as to a lesser extent the requirements of other officials
encouraged production in the principal seats of government.
Despite the extent of trade, especially in the retail sector, production re-
mained small scale. Attempts are now being made to discover inherent in
pre-nineteenth-century China an industrial awakening checked only by the
distortion given the economy by the foreigner, but the evidence cited is
usually confined to single and sometimes ambiguous instances. 8 That na-
tional markets existed at all is remarkable, considering the primitive state
of transport in nineteenth-century China. T h e vast river network of the
Yangtze valley and the long coast line of China should have provided cheap
if not rapid transportation, but the slowness of river transport and the
dangers of the sea trade more than offset their potential advantages. In most
of China not even wheelbarrows were used; goods were transported by men,
or in some cases by animals. On the north China plain itself there were
roads suitable for wheeled carts, but they appear to have been few. T h e
national market was confined to those luxury goods the costs of transport

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8 Money and Monetary Policy in China

of which were borne by rich court officials, and primary products which
could be produced only in certain limited areas. Rice was a special problem
and will be considered below in the context of the state's role in the economy.
The economic policies of provincial authorities too often supplemented
the natural barriers, accentuating the local character of the economy by
prohibiting interregional trade in key commodities at critical times.9 But
in densely populated China the potential size of even local markets might
have suggested the economic feasibility of larger scale production. This is a
reasonable supposition, and it will be considered in greater detail elsewhere.
Role of the state. Upon this traditional economy there were imposed the
imperial and the provincial governments. Simply stated, their economic
purpose was to ensure the people's livelihood — the purpose of a paternalistic
government concerned with promoting the economic welfare of the people.
Certainly the economic activities of the government were explained by offi-
cials in such terms, and certainly the more honest attempted to govern in this
spirit.
Paternalism is not usually a dynamic force, and the Chinese version was
no exception. Responsibility for the people's livelihood appears to have been
understood in the sense of encouraging the traditional occupations and
avoiding disaster by conforming to tried examples and activities. The state
therefore encouraged agriculture, and the Emperor as well as local officials
throughout the country plowed symbolic fields in evidence of this. Officials
gave moral encouragement to producers and supported public works projects.
Their duty was to keep the economy going: to promote production, to main-
tain public works, to keep law and order, to act as referees in guild disputes
(in fact, in any economic problem likely to cause disorder). With few ex-
ceptions these activities were not positive; except in crises officials did not
often take the initiative.
But the state itself created the major economic problem which officials had
to solve. The court, the officials, and the military had to be supported; the
state had to tax. The basis of the taxation system was the land tax, which
before 1850 furnished probably more than 75 per cent of total imperial
revenue.10 The land tax was usually collected in legal tender in an amount
fixed in 1723 by the K'ang-hsi Emperor. Thus the most important source of
revenue appeared inflexible, although the amount actually collected exceeded
the specified amount more than threefold by the end of the nineteenth cen-
tury. Such excess sums went to collectors, local and provincial authorities,
but not directly to the imperial treasury in Peking. In 1853 the revenue re-
quirements of the governments were so great that the li\in tax, a tax on

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Introduction 9

goods in transit, was first levied, accounting by 1900 for 18 per cent of the
total revenue.11 With the growth of foreign trade and the efficient adminis-
tration of the customs under the foreign-staffed Imperial Maritime Customs,
import and export duties on general cargo and foreign opium accounted for
26 per cent of the national revenue, and the native customs, for duties on
trade carried in native-type craft, accounted for another 2 per cent.
In bad years taxes were remitted in part or in whole. In periods of re-
bellion they could not be collected. The most important tax in an agricul-
tural community, the land tax, had been "fixed." The finances of the Chi-
nese Empire were not on a sound basis, but reform proved impossible.
National revenue could, however, be supplemented. This was done not
only through the li\in and the customs, but also through various devices,
to be considered below, which were uncertain in effect and tended to have
undesirable consequences. Likjn could not be increased indefinitely, not only
for purely economic considerations relative to the disruption of trade, but
also due to the complications involved with foreign goods which under the
treaties had paid their full duty. And foreigners objected to the tax in princi-
ple. The import and export duties were fixed by treaty and could not be
increased unilaterally. As they were based on an ad valorem intent but
actually set down as specific duties denominated in a silver unit of account,
the revenues suffered from a decrease in the gold price of silver, although
the full effects of this were not felt until after 1895 when the external gold
debt of China was significant.
The imperial government had to depend from time to time on such devices
as the sale of rank and even office, on thinly veiled forced levies from rich
officials and merchants, and on exploitation of traditional government mo-
nopolies of which the most important was salt. During the Taiping rebellion
the government issued token coins and paper money in an effort to meet
the requirements of the military budget and yet maintain vital public works,
but more extensive use of this obvious fiscal device was impossible due to
the hyperinflation which it produced and the traditional reluctance of the
Chinese, a reluctance well justified by experience, to accept government fiat
money.
The mainly negative aspects of Ch'ing economic policy should not com-
pletely shroud those positive actions which the government either undertook
itself or directly promoted. The government was certainly responsible for
the maintenance of public works, trunk roads, post houses, and the Grand
Canal. In practice, especially in the period being considered, the govern-
ment paid directly for maintenance of the Grand Canal and for flood con-

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ίο Money and Monetary Policy in China
trol work on the Yellow River. Other public works were generally financed
locally, in some cases by the so-called scholar-gentry. Since a rice-eating court
was situated in a non-rice-producing part of China, one of the major eco-
nomic activities of the government was ensuring the transport of tribute
grain from the Yangtze and western Shantung areas up the Grand Canal
to Tientsin and then to Peking. 12 The grain tribute itself, like the silk and
mining tributes, was originally in kind and the amount was fixed, but the
amount, since the grain tribute had been commuted to money payments,
could be manipulated by the setting of arbitrary prices and exchange rates.
The energies devoted to maintenance of the Grand Canal, which also pro-
vided a means for commercial transport — especially on the return journey
— were negated by the violent changes in the course of the Yellow River,
which the canal had to cross. By the 1870's the grain was being transported
by sea on the ships of China's first modern-type enterprise, the China Mer-
chants Steam Navigation Company. Thus where foreign influence and
traditional requirements met, action was indeed taken.
Local governments with or without the prompting of the imperial regime
were known to license enterprises — for example, banks, food shops, and
mines. In certain cases such licensing may have been for revenue purposes
only, but in others the government definitely wished to keep the licensed
enterprises under some sort of positive control.13 Fear of disturbance in the
mines or of the dislocation caused to trade by the failure of banks issuing
money without proper capitalization — these were both factors weighing in
the decision of the magistrate.
When all these governmental activities have been listed, however, the
temptation still remains to refer to the economic policy of the Ch'ing as
laissez faire.14 There are three reasons why the use of such a label is un-
sound. First, such Western phrases, especially Western phrases which have
vague and ambiguous meanings in their own context, do not properly convey
the full implications of the Chinese situation. For those versed in Chinese
history, the terms can no doubt be used without confusion, as, for example,
the seemingly unfortunate term "gentry" is used to refer to local scholars
who had a certain social status in their community. For others, such use is at
best confusing, at worst misleading. Secondly, laissez faire carries with it a
context of liberalism. An economic policy which is more akin to medieval
conservatism than to nineteenth-century liberalism cannot properly be
described by it. Thirdly, when the Chinese government's policy with regard
to modernization and monetary policy is considered in more detail, the
conclusion will be clear that laissez faire is as inaccurate a term as "mercantil-

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Introduction
ism," which has also been used, and that some descriptive phrase is re-
quired that is designed specifically for the Chinese situation. 15 Even then it
will only have meaning for those familiar with the course of events.
That the government was not required to control economic activity in
more detail was a consequence of the role of the scholar-gentry and the
guilds in economic life. Both "gentry" and "guild" are terms taken from
Western history; the parallels suggested by identical terms are nowhere
exact; the terms must be understood in their Chinese context.
The scholar-gentry — that is, Chinese who had passed certain examina-
tions in classical traditional scholarship or who had been permitted to pay
certain sums in lieu thereof — had special privileges and immunities as a
result of their acquired status as scholar. They are estimated to have formed
no more than 2 per cent of the population of China. 16 As scholars they
would have had prestige and been the recognized leaders of thought in
their home communities even if their status had not carried more positive
reward. Chinese officials were taken from the scholar-gentry — an obvious
source of gentry power, prestige, and wealth — but officials may have ac-
counted for but 2 per cent of the gentry. The great majority had income as
teachers, assistants and secretaries to officials, defense corps promoters, man-
agers of clan organizations, contacts between officials, and income from
land. They were the connecting link between government and people; it
was through them that the official made contact with the people he governed.
In the economic field they were often sponsors of local public works which
the officials encouraged but did not finance. They were regarded as poten-
tial sources of additional revenue, and their position within the local com-
munity, to which the official by law was a stranger, meant in practice that
the autocratic power of the bureaucracy was tempered by the need to ap-
pease public opinion as represented by the local gentry. By their very training
their opinions were conservative — a fact which does not appear to have been
much modified by the increasing possibility of achieving gentry status by
purchase.
The guilds cannot be compared directly with their European counterpart
since each played a role in a different form of society. But the Chinese
guilds tended to control the various trades with the intention of maintain-
ing a status quo, by setting conditions of apprenticeship, new entry, credit
terms, and techniques of production. Guilds were strengthened in their con-
trol by the tacit support of the government, by the importance of clan and
family relationships, and by the ability of related guilds to join in united
action against any threat to their policies.17

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12 Money and Monetary Policy in China
The role of the government in the Ch'ing economy of the nineteenth
century can best be summarized by the term "paternalistic." Potentially there
was a basis for leadership in the economy, but there was also scope for un-
limited obstruction, and it was the latter tendency which would be rein-
forced by the influence of the scholar-gentry and the nature of China's
commercial and industrial organization.
Foreign impact on the economy. Foreign influence on the Chinese econ-
omy came first through trade, but trade brought diplomatic concessions,
and these in turn forced changes in China's traditional ways, the repercus-
sions of which, some would claim, reached their climax in 1949. The estab-
lishment of Western-style diplomatic relations and the opening of the
interior of China to foreign trade and residence brought the influence of
foreign economic ideas from the coastal ports and from the purely trade
sector to every province in the country. But up to 1895 the accumulated im-
pact of trade, war, diplomacy, missionary activity, and constant foreign
pleading for modernization had achieved very little, particularly if Japan
be used as the measure.
Foreign influence began, then, with trade. By the 1830's the favorable
balance of trade which China had enjoyed through her sale of tea and silk
to Western traders confined to the port of Canton and to Russian traders
across the land frontiers of Asia had been upset by the increased Chinese
import of opium. 18 The consequent outflow of monetary silver or sycee
coupled with Chinese objections to opium itself led eventually to the First
Sino-British War. The treaties which followed established foreign trade on
a more normal footing, opened four new ports (Foochow, Amoy, Ningpo,
and Shanghai), established a schedule of specific duties intended to repre-
sent a 5 per cent ad valorem assessment, defined the principle of extra-
territoriality, and ceded Hong Kong to the British. The difficulties arising
from these treaties led to the Second Sino-British War and new agreements
in 1858, 1860, and 1861 following Chinese defeats. The customs duties were
recalculated and nine further treaty ports were opened; foreign representa-
tives were to reside in Peking, a momentous concession in view of the tradi-
tional Chinese view of foreign relations existing only between suzerain and
vassal.
For various reasons trade statistics are inadequate for analysis. Hong Kong
was treated by the Chinese customs as a foreign country; native customs
records were not as reliable as those of the Imperial Maritime Customs;
bullion movements were not properly recorded; and the amount of smug-
gling, especially over the Asian land frontiers and the southern Chinese

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Introduction 13
coast, is difficult to estimate. Balance of payments estimates are further
complicated by lack of data on invisibles, especially remittances. But by the
end of the nineteenth century a balance had been achieved which appears to
have been typical of the economy until quite recent times. A n unfavorable
balance of trade, aggravated by the service of foreign loans, an import of
bullion, and payments to Chinese diplomatic missions and students abroad,
was offset by an import of foreign capital, foreign expenditures on mission-
ary activities, armed forces, and educational institutions, and the remittances
of overseas Chinese (probably the most remarkable item in view of its
persistence to very recent times). 1 9 More significant than these over-all
figures was a change in the composition of China's export trade from almost
complete dependence on tea and silk to what had previously been called
"the muck and truck" trade — feathers, vegetable oil and oil products, soya
beans, groundnuts, wood oil, egg products, hides and skins, brisdes, straw
braid, and other miscellaneous items. China lost much of her tea trade to
India and her silk trade to Japan, at least partially through inability to main-
tain standards which foreign buyers demanded, although, since Indian tea
is sufficiently different to bring in the question of change of tastes, a sub-
jective element was also involved. 20 T h e Marxist view that nascent Chinese
industry was smothered by the import of machine-made textiles which first
destroyed the domestic-type industry and then prevented the growth of a
modern textile industry in China requires more careful study in view both
of the effect which the Taiping rebellion and others had in dislocating
production and of the inadequacy of data on the output of Chinese industry
during the century. 21
China's second defeat by Britain stimulated some officials to advocate
"self-strengthening" by borrowing certain limited techniques from the West,
especially in the military field. T h e first consequences of such thinking were
the establishment of arsenals and shipyards, of official institutions teaching a
limited curriculum of Western science and language, and even of a short-
lived project for education abroad of selected Chinese youths. 22 These activi-
ties, coupled with the advice given by foreigners to the less conservative
officials, of whom Li Hung-chang is the prime example, led to the begin-
ning of foreign-style mining, the first Chinese railroad, and minor industrial
enterprises. T h e availability of Chinese merchants having a limited familiar-
ity with foreign commercial methods made it possible for the government
in cooperation with such men to establish the China Merchants Steam Navi-
gation Company, the Kaiping Mining Company, the Imperial Telegraph
Administration, and eventually the Hua-sheng Spinning and Weaving Mill

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14 Money and Monetary Policy in China
under a system known as "official supervision and merchant management." 23

However promising such developments may have been for the future, their
impact on the Chinese economy before 1895 was quantitatively slight. T h e
foreigners were, after all, mainly traders. They lived in the treaty ports.
Chinese merchants had successfully kept them out of domestic trade. Thus,
however influential leading missionaries, customs officials, or individual engi-
neering advisers might be with those officials with whom they were in im-
mediate contact, their influence beyond a specific problem was generally not
great, and the vast majority of the Chinese — both commoners and gentry-
scholars— knew of foreigners only by reputation, a reputation not good
when judged by traditional standards.
One might well argue that it need not have been this way. Chinese, espe-
cially the compradores, who lived in the treaty ports and who daily observed
the foreigners, should have had proof of their superior ways and could them-
selves have begun projects which, when their value was appreciated, would
have been copied throughout China. Some merchants may well have been
impressed with what they saw. Yet we might ask what indeed they did see
in a chiefly mercantile community which could have been relevant to capital
development, which could have directed their attention to the importance
of economic growth defined as a significant increase in per capita gross
domestic product. Undoubtedly, too, some scholars studied and were influ-
enced by Western thought. And again we might ask what aspects of Western
thought impressed them or whether they could have realized the total im-
plication of that thought and its potential effect upon economic progress.
T h e foreigners had influence; they created an impression. But to transform
that influence and impression into action which would be sufficiently effec-
tive to change the nature and course of the Chinese economy in the period
before 1895 — that is something different.
Change was, however, hardly absent from the Chinese economy in the
fifty years preceding the First Sino-Japanese War. This is the subject of the
following section.

Economic Change Prior to 1895

T h e government of an agricultural economy emerging from a series of


civil wars which had ruined the countryside might be expected to devote its
economic energies to agrarian restoration. There would be public works to
be rebuilt, abuses of the tax administration to be corrected, and cottage in-
dustries to be re-established. As Tseng Kuo-fan, then governor general of

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Introduction 15
Kiangnan and Kiangsi, stated, "During the years of fighting, the livelihood
of the gentry, merchants, and artisans has not been entirely destroyed; but,
as to the farmers, there is no man who is not in distress." 24 This emphasis on
agriculture need not be thought of as an alternative to or in competition with
economic modernization; agricultural recovery was a prerequisite to the
modernization of other sectors, and the policy of local officials was sound
whatever its motivation. Yet despite this primary concern with agriculture,
some progress towards industrial modernization was made, both under
official sponsorship and on private initiative.
In this second part of our general survey of the economy prior to 1895,
the limited nature of economic change will be considered — first, changes
in the treaty ports and Hong Kong; secondly, changes brought about by
the development of the official supervision and merchant management sys-
tem.
Shanghai, other treaty ports, and Hong Kong. In the thirty years between
1865 and 1895 some 90 companies were at one time or another listed on the
Shanghai share market.* In addition there were at least 74 other companies
in Shanghai using foreign machinery or techniques to some degree. Exclud-
ing mining and railway enterprises, there were 64 companies in the other
treaty ports using foreign machinery. 25
The figures for the total number of shares and their market value as of-
fered on the Shanghai exchange are as follows:

1877 1880 1885 1890 1895


Shares (thousands) 84 69f 289 878 1300
Shanghai taels (millions) 11.6 13.8 30.8 47.2 57.6
Pounds sterling (millions) 3.6 3.5 7.0 11.1 8.5

These aggregate figures describe a secular increase in the modern sector of


the Shanghai economy, but a sectoral analysis would be useful.
Banks and other financial institutions, including land investment com-
panies, dominated the market quantitatively throughout the 1865-1895 period,
the market value of their shares varying between 57 per cent of the total
* In considering the companies listed on the Shanghai stock market a few cautions should
be noted. First, some of the companies had their head offices outside China, may have operated
mainly in other countries, and may have been listed on several other exchanges from which
they derived most of their capital. Second, there are no reliable figures as to the percentage
of capital invested by Chinese in these companies, although figures as high as 40 per cent
may be found. Finally, wholly Chinese joint-stock companies having no foreign shareholders
were not listed and are considered later.
+ The fall in the number of shares offered in 1880 is the result of the failure of certain
shipping ventures which had been floated before 1877.

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16 Money and Monetary Policy in China

quoted in 1890 and 43 per cent in 1895. If the insurance and shipping cate-
gories are added to banks — all of them most intimately connected with
trade — they account for roughly 85 per cent of the market. T h e remaining
15 per cent was divided among public utilities (about 3 per cent), manu-
facturing (important only in 1895 when it reached 7 per cent), and com-
panies operating outside China (12 per cent in 1890 and 5 per cent in
1895). 26 There is nothing really surprising in this; but it does emphasize
again that, in the foreign joint-stock sector at least, there had been little
quantitative breakout from the activities of the China trade itself.
Despite the unsatisfactory scope of the statistics, several further facts
emerge. First, the companies were not conspicuous for success. Of the 90
companies listed, 72 either failed or at some time showed the market value
of their shares below paid-up capital. This is consistent with the existence
of speculative periods followed by failures of many more concerns than were
listed on the stock exchange. 27 These fluctuations were caused by many fac-
tors — China's relations with the Powers, the speculative move of funds from
the interior and the resulting land speculation during periods of refugee
movements to the treaty ports, the course of the exchanges and other specula-
tive aspects of foreign trade which affected the native money market, and
business fluctuations in the United Kingdom, especially the collapse of
Baring Brothers and the depression of the early 1890's.
Of the unlisted 74 companies using foreign machinery in Shanghai about
one quarter were Chinese owned and operated. Chinese capital was, in ad-
dition, present in many of the other companies. The significant fact is that
in Shanghai at least 17 wholly Chinese companies were using foreign ma-
chinery before 1895; in the other treaty ports the proportion was about the
same. Almost all the Chinese companies were founded after 1880.
Almost half the Shanghai companies were devoted to some sort of manu-
facturing— flour milling, furniture making, textiles. Another quarter were
in processing — especially silk filatures; and about 15 per cent were in ship-
ping and docking. Some 17 of these companies were listed as having failed,
but this is a minimum. Most of the failures were in shipping and docks,
where over-optimism as to the prospects for expansion of the China trade
would be most felt. These are not impressive figures.28
Employment statistics are not available for every company, but it would
appear that, in general, employment did not average much in excess of 200,
perhaps a modal figure. Nevertheless there are examples of firms employ-
ing over 1000. Yet, of the men employed, only a portion came into contact
with modern machinery and an even smaller proportion actually used it.

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Introduction 17

Perhaps most important of all, the statistics do not indicate what percentage
of the Chinese firms undertook innovations in management; they may have
restricted themselves to the employment of a few modern machines. Thus
the dissemination effect of Shanghai industry before 1895 was even less
impressive.
If institutional factors were the key to China's slow acceptance of moderni-
zation, Hong Kong, a British crown colony, should have been able to
set the pace. That it failed to do so despite such obvious advantages as the
right of incorporation with limited liability and the protection of a govern-
ment sympathetic to enterprise suggests that Hong Kong was subject to
economic forces similar to those operating in China and that these were
unfavorable. The timing of Hong Kong's industrial revolution, which began
during the trade depression following the Korean War-United Nations
embargo, emphasizes the importance of the economic factors.
The Chinese community in nineteenth-century Hong Kong brought with
them the social organization typical of neighboring Kwangtung. Institu-
tional factors were not absent, but they were minimal. Nor was Hong Kong
as favorably situated as Shanghai; building on her steep slopes was costly
and the price of reclaimed land high. Hong Kong was, however, on the
trade routes and, unlike the situation in Republican times, her manufac-
tures did not suffer from the Chinese import tariff; either this was levied on
goods made by machine in the treaty ports of China itself, or the native-
produced goods were subjected to their own transit taxes. This complex of
factors in Hong Kong's nineteenth-century economic history has yet to be
analyzed.
An 1871 Hong Kong share list shows a pattern similar to that of Shanghai
— banking and insurance, enterprises ancillary to the China trade, hotels,
and a distillery. A rice-cleaning mill had been unsuccessful, unable to com-
pete, so it was said, with native hand labor. There were plants for the re-
fining of sugar and camphor, with the latter particularly successful. The
Indo-Chinese Sugar Company, the most important company then in opera-
tion, found that its supplies were controlled by Chinese merchants and that
the price they set made operation unprofitable.29 The company attempted to
go into planting to break this monopoly but was forced to cease operations
in Hong Kong and move to Siam. 30 The Hongkong and Shanghai Bank,
which was involved in many of these early industrial experiments, began to
take a more conservative attitude towards fixed investments.31
A summary of industrial activity in Hong Kong in 1886 is not impressive:
manufacture of Chinese "hubble-bubble" pipes and brass sheathing; leather

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18 Money and Monetary Policy in China

boots and shoes manufactured for export to North and Central America;
tobacco; preserved ginger (still important in Hong Kong today); and the
remelting of old glass.32 Even when these are coupled with the shipyards
and their ancillary activities, the enterprises listed fall short of providing a
basis for an industrial revolution. The early hopes that industry would
flourish in Hong Kong were unrealistic, and investment in speculative land
and mining companies became, as in Shanghai, an important outlet for
excess funds.
Other changes. In the period of self-strengthening following the defeat
of the Chinese in the Second Sino-British War there were ten events which
the Chinese historian Li Chien-nung considered important in the moderniza-
tion process. Not all are directly concerned with the economy, but all had
their indirect effects.

1865 the Kiangnan Arsenal; 1866 shipyard at Foochow; 1870 a machine factory
at Tientsin; 1872 the China Merchants Steam Navigation Company; 1875 prepara-
tions to build steel warships; 1876 the first Chinese students to Europe [1872
first to the United States]; 1878 Kaiping Mining Company; 1880 naval academy
and telegraph; 1882 harbor and shipyard at Port Arthur; 1885 military academy
at Tientsin; 1888 the Peiyang fleet formed.33
In 1872 Tso Tsung-t'ang undertook to build an arsenal in Lanchow, and this
was followed in 1878 by woolen weaving mills and other minor industrial
undertakings.34 The provincial arsenals provided, in fact, the basis for in-
dustrial expansion — they had machinery, foreign advisers, and an increasing
number of qualified workers, but their actual role beyond the immediate
military requirements for which they were originally designed would ap-
pear to have been slight.
The "official supervision and merchant management" company was typical
of a number of Chinese enterprises in the period following the defeat of the
Taipings, in the sense that an official patron protected and sponsored a par-
ticular company, granting it certain privileges and in return supervising
its management. The Kaiping mines, for example, were from the first
pictured as serving China's future industries, supplying coal for her ships,
railroads, and factories. In 1882 the first steam train — after the ill-fated and
premature Woosung railway — ran on the tracks of the Kaiping mines.35
Between 1882 and 1895 the first commercial railways were constructed in
north China, and in 1889 Chang Chih-tung was transferred from Canton
to Wuchang to supervise his project for the building of a Peking-Hankow
line. While governor general of Wuchang, Chang also undertook the con-
struction of an iron foundry, cotton mills, and, in 1894, the development of

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Introduction 19
the Tayeh iron mines. These enterprises were the basis of that industrial
complex which gave to the Wu-Han cities the rather ambitious title, "Chi-
cago of China." Progress in the modern textile industry was especially
slow. The Hua-sheng textile mill took some twelve years, from the first
memorial to the completion of the factory in 1891, before it was in full oper-
ation. It was destroyed by fire in 1893. Production in a new factory began in
1894, and by 1895 China had 174,564 spindles and 1,800 looms in operation,
including those of Chang Chih-tung's Wuchang mill, opened in 1892.3e
The mining industry in China had suffered from the fear of successive
emperors that mines would attract large numbers of undesirables and that
trouble might arise from them. Mining was at times encouraged, however,
especially for those metals required in the traditional copper alloy cash
coinage — copper, lead, tin, and zinc. 37 The use of machinery in the mines
was hampered by transportation costs and the technical problems which
required the presence of foreign advisers. The British consul in Tamsui,
Taiwan, summarized the problem as follows:
Why is there no machinery in Chinese mines? Supposing the proprietors have
ever heard of it, they see it connected with increased outlay. Their want of capital
would not allow of their purchasing it. But if they did this would mean em-
ployment of foreigners — and mandarin interference with perhaps loss of life to
the owner.38
Lack of capital might be overcome by floating a joint-stock company in
Shanghai — a company in which only Chinese were eligible as shareholders.
But the technical problems were decisive, and although in a modern enter-
prise such as that of the Kaiping mines these difficulties too could be sur-
mounted, in general the introduction of machinery into the Chinese mining
industry was limited. 39
Economic modernization in China prior to 1895 hardly extended beyond
the treaty ports. Even in the treaty ports modern industry was restricted to
those fields ancillary to the China trade — shipbuilding and processing of
exports — while foreign participation in manufacturing industry was hin-
dered by the difficulty of importing machinery over the protests of officials
and the desire of the more progressive Chinese to keep modern-style com-
panies in wholly Chinese hands. The industry developed was, however, of
a type which afforded a basis for further expansion. Foreign settlements
required roads, public utilities, and such small businesses as printing, furni-
ture making, and building. Foreign trade required shipyards and these a
machine-tool industry. The development of the modern textile industry in
Shanghai would appear to have been a fulfillment of the potentials of the

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20 Money and Monetary Policy in China
Shanghai economy, and yet by 1895 its progress had been slight. With so
many of the ingredients of success, progress in modernization was extremely
slow, hampered by fits of speculation and attempts to establish enterprises
in bursts of over-optimism.

The above account purposely omits mention of the monetary system, which
at this stage would result in unwarranted duplication. Nevertheless, our
general survey of the economy suggests two important matters which should
be noted here.
First, the phrase "Chinese economy" may be misleading. The Chinese
economy was to a great extent many economies, paralleling, perhaps, the
partial integration of Italy in early modern times. The unifying features
were principally in the government sector, but even here they tended to be
superficial. This fact, which will be considered more fully below, is espe-
cially important to remember when dealing with Chinese money. Indeed,
it is in the monetary sector that the superficial forms of a national economy
— for example, similar appearance of the coins, similar banking practices,
similar forms of official monetary institutions and philosophy — are most
obvious. A large part of the confusion which contemporaries saw in the
Chinese monetary system arose from the expectation of a national system
as unified as appearances.
Secondly, the nature of economic activities and the tentative steps to
modernization described for the period prior to 1895 suggest that money
must have been in fairly general use, that its forms must have had some
adaptability, and that monetary policy was not dedicated solely to main-
tenance of a status quo. Those students of economic history who feel that
analysis by stage is helpful will perhaps be concerned to know whether China
had passed the natural economy or barter stage; was it in the money barter
or perhaps the money stage? Or even, was there an abortive take-off! But
this approach does not appear useful. The Chinese monetary system proved
sufficiently adaptable to meet the demands placed upon it. Modernization
did not find the monetary system a stumbling block. Whether, if moderniza-
tion had proceeded at a faster pace, the monetary system might have proved
unsuitable and unadaptable is speculation which hardly appears fruitful.
Both these topics will be more fully developed below. In Part I we shall
describe the Chinese monetary system in its principal forms, recognizing that
at any particular time and in any designated place there would be local
variations. This follows from the nature of the "Chinese economy" and
suggests a generalized exposition based on an ideal model with principal

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Introduction
deviations noted and examples of typical exceptions included. This will be
sufficient for an appreciation of the workings of the system and of its eco-
nomic implications. Those who are dealing with a particular locality will
have to make further inquiries, but the information they obtain will gain
in relevance by being considered in terms of the ideal model. For this reason
examples and illustrations have been chosen without regard to time sequence.
Indeed, the date assigned to the information may be irrelevant in view of
the method of study adopted.
If we accept a monetary system as existing and emphasize its actual mani-
festation in the several economies, we may postpone the official, institutional
framework until Part II, where policy is studied. Similarly, the sections on
banking in Part I are restricted to the narrow role of banks in their con-
tribution to the money supply; their more general and probably more sig-
nificant role in the economy is beyond the scope of this study.
In Part II, Chapter V outlines the monetary institutions and monetary
thought of the Ch'ing; Chapters VI and VII contrast episodes in monetary
history — the Hsien-feng inflation and treaty port monetary problems; Chap-
ter VIII gives a more detailed case study of the Hai\wan tael; and Chapter
IX concludes with consideration of a major reform attempt. The study of
the Hai\wan tael illustrates the characteristics of the traditional system and
policy. The handling of the mint question typifies the path of reform within
the traditional context. From these diverse studies we may reach conclusions
relative to the role of the monetary system in the development of the nine-
teenth-century Chinese economy. In anticipation, we shall find that its role
was not limiting and that we must seek other factors to explain in economic
terms China's failure to modernize. Certain of these factors are considered in
the concluding comments to this study, but their analysis awaits further
research.

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CHAPTER I

Principal Characteristics
of the Chinese Monetary System

The tap room of Williamsburg's Raleigh Tavern is truly a patriot's shrine.


But if you can withdraw your attention for a moment from the lecture of
the costumed guide and glance up at the large map on the north wall above
the chest of drawers, you will read perhaps the simplest and most direct
description of Chinese money presently available. The map itself is by John
Senex, dated 1725, and covers "Nova Asiae Tabula" in the days when Laos
was a fair-sized kingdom. Your group will have already left for the Apollo
room; you may examine the detailed information under "China" and note
especially the statement, "Copper is the only Money, which they string to
a certain number, reckoning by Strings, and not by Pieces." This is the es-
sence. We have now to modify, elaborate, and relate.
Indeed, eighteenth-century comments on Chinese money are noteworthy
for their restraint and understanding. Europeans — and Virginians — were
familiar with the complexities of a metallic coinage and could cut through to
the essential. Nineteenth-century writers on money tended to be less en-
lightening and less sympathetic. Like those who thought the Chinese "half-
civilized" because they did not avail themselves of steam power, commenta-
tors on Chinese money compared the system unfavorably with that which
had only recently come to prevail in England. In the latter half of the cen-
tury, these commentators were further motivated by their desire to effect a
reform; they stressed confusion on principle.
As our account of the Chinese monetary system proceeds, however, it
would be well to recall Senex' description. Although by our period foreign-
minted silver dollars were in general circulation in many parts of China, the
copper "cash" coin with its characteristic square center hole remained the
only indigenous coin. Domestic silver was used in exchange only in bullion
form. And much confusion may be avoided by further recalling that prices
of all but the cheapest items were quoted in a unit of account which was not
represented by a precise number of coins — for example, "reckoning by

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26 Money and Monetary Policy in China
strings." This follows logically from the fact that individual cash, being of
small value, had to be strung at some labor cost. Thus strings of cash were
at a premium over single coins. Similarly, coins may vary in size and pure-
ness; units of account, being abstract concepts, are not so subject. Thus an
understanding of the system, both in dealing with the copper coin and the
silver bullion or silver dollar, depends first upon relating abstract units of
account one to another and secondly upon relating coins or types of coins to
a particular unit of account.
Descriptions of the Chinese monetary system in the nineteenth century
are, therefore, already available in Western languages. Written, however, by
numismatists, merchants, bankers, or reformers, these fail to provide a sys-
tematic account of the system and are not suitable as a basis for subsequent
economic analysis.1 Our purpose in the first four chapters of this study is to
describe the Chinese monetary system in a manner consistent with the
terms common to metallic monetary systems, thus emphasizing similarities
with European models. This will clarify the principles of the Chinese system.
Although the Chinese monetary system is essentially similar to the metallic
monetary systems of late medieval and early modern Europe or colonial
America, there are certain details peculiar to China which must be con-
sidered in their relation to a basic model. These differences are the conse-
quence of the political organization of China, the choice of silver and copper
as the two monetary metals, the unique shape of the copper coin with its
square center hole, and the terminological problems which exist in a language
so unfamiliar to most Western economists. In this and the following three
chapters the basic model will first be constructed, the similarities to other
metallic systems noted and common terms explained, and the peculiar fea-
tures of the copper and silver sectors considered. This discussion will con-
clude with an account of the banking system, followed by an outline sum-
mary. As already explained in the Introduction, this is a static description of
the normal features of the system, but each of the chapters concludes with
illustrations in which the principles are applied to selected local conditions.
This is not intended as a minute and wholly accurate account of the mone-
tary system at any one place or time, yet it makes possible an understanding
of the essential relationships and normal characteristics of the system. The
remainder of the book takes a more dynamic and historical approach by
applying the model developed to specific situations. Regrettably, the mone-
tary statistics of this period are unusable, and little if anything of a quantita-
tive nature can be said. Speculation would be idle, and this study concen-

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Principal Characteristics of the Chinese Monetary System 27
trates, therefore, on those aspects of the monetary system for which the
sources are more suitable.

The Chinese System — An Ideal Model

A study of the Chinese monetary system involves the use of new concepts
of some complexity. For this reason the ideal model is introduced immedi-
ately and briefly explained. The Chinese monetary system was bimetallic —
silver and copper. The tael was the unit of account when payment in silver
was expected; the ch'uan, when payment was to be in copper coin, or
"cash." *
A tael could be satisfied by tender of one liang, or Chinese ounce, of mone-
tary silver. The ch'uan was divided into 1000 units referred to as ch'ien, and
one ch'ien unit of account could be satisfied by payment of one cash coin.
A ch'uan could be satisfied by payment of 1000 cash coins, normally tendered
strung together through their center holes and referred to as a "string of
cash." These relationships are combined in Figure 1 to illustrate the ideal
model.

Figure 1. The ideal model of the Chinese monetary system®

1 tael = 1 ch'uan = 1000 ch'itn

1 liang of monetary silver 1000 cash coins (i.e., a string of cash)

Symbols: = is equal to
= is defined as
! indicates the sum of money which
will satisfy the unit of account
All units of account are italicized.
a This is actually a model of the ch'ang-ch'itn system which is fully described in
the following chapter.

The relationships established in Figure 1 are ideal in the sense that, first,
they abstract from the imperfections of the coinage and the specific problems
of the market place and, second, they are consistent with the weight implica-
tions of the names assigned the monies. Only the latter characteristic re-
quires explanation here.
The ideal nature of one tael being satisfied by one liang of monetary silver
is based on the fact that "liang" in Chinese was used both for the unit of
* In this study units of account are italicized, regardless of other considerations — thus,
tael, dollar, ch'uan. Names or weights of monies are not italicized — thus, liang, dollar.

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28 Money and Monetary Policy in China
account ( t a e l ) and for the weight of silver (Chinese ounce or liang) used to
satisfy it. Similarly, ch'ien refers both to a unit of account ( c h ' i e n ) and a
weight (0.1 liang), again requiring a 1:1 relationship between the unit of
account and its money. T h e ideal relationship between silver and copper is
based on the traditional Chinese value ratio of 1:100 as well as on the weight
terms used to n a m e the monies. N o w the cash, weighing 0.1 liang, should
be worth 0.001 taels (0.1 X 0.01), and thus 1000 cash should satisfy a debt
of one tael. T h i s also provides the 1:1 relationship between the tael and the
ch'uan.

Definitions and Problems

T h e confusions by which the Chinese monetary system appears to have


been characterized are of two general kinds, those common to all metallic
monetary systems and those peculiar to the Chinese. T h e very unfamiliarity
of the model just described suggests that both confusions require clarifica-
tion. A general exposition of metallic monetary systems would, however, be
a major undertaking, and the purpose of this section is to consider only those
aspects which facilitate an understanding of the Chinese system and enable
the economic historian to appreciate the Chinese system in relation to more
familiar European models. In the final section of this chapter the conclusions
of the present discussion will be applied to explain the ideal model already
considered and to fill in this bare structural outline to more realistic dimen-
sions.
Money and the unit of account. A metallic currency system may be de-
fined as one in which the assigned value of the commodity used as money is
thought to be essentially derived f r o m its market value as non-money. A
metallic monetary system is one based on a metallic currency system but hav-
ing alternative or supplementary forms of money which depend for their
assigned value logically and ultimately on their exchangeability for metallic
currency. Money is anything generally used by people as a means of pay-
ment. Although in a metallic currency system certain metals are money
par excellence because of their status as non-money, in premodern society it
is not possible to dichotomize objects as either money or non-money except
by observation at a given moment of time. 2 T h e logical contradiction does
not exist because all objects in such a system are capable of being money;
whether they are or are not depends only upon whether they are generally
accepted as a means of payment.
T h e unit of account must be understood as something distinct from money

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Principal Characteristics of the Chinese Monetary System 29

itself; it is, rather, a conventional expression of value, the common denomi-


nator of value ratios. In discussing modern monetary systems this distinction
is often blurred because money is further defined as having a fixed value in
terms of the unit of account.3 "A dollar is a dollar . . . No one haggles over
money's price." 4 In a metallic currency system, however, the relationship be-
tween money and its unit of account was always, potentially at least, in the
nature of an exchange operation, and very often this potential relationship
was realized. Thus the distinction between the unit of account and money
and the relationship between the two are of fundamental importance if the
problems of metallic currency systems in general — and of the Chinese sys-
tem in particular — are to be understood.
The unit of account concept has been known by other terms — money
unit, denomination of account, ghost money, imaginary money, money of
account. The Chinese term is hsü yin-liang or "abstract silver tael" hsü
being the operative word.5 Although these terms refer to the same concept,
"imaginary money" and "ghost money" have been especially associated with
the accounting denominations of medieval and early modern Europe.6 In
this study, "imaginary money" is used to refer to a unit of account which
does not directly correspond to a physical instrument of payment; otherwise
the term "unit of account" is used.
Although any description of the Chinese monetary system immediately
reveals the distinction between unit of account and the means of payment,
the present detailed exposition is designed to show that this is a normal
characteristic and not an aberration of the Chinese system. Confusion of the
two concepts has led some to assume that a debt of a dollar ought somehow
— perhaps morally — to be settled by payment of a dollar coin. But this
simply has not been the case. In China the rates for receiving and paying
out the same dollar coin were notoriously different. However originally de-
rived, a unit of account must be considered at any one time to be given
datum, that is, to exist independently of any means of payment.7 Those re-
sponsible for the manufacture of coins might be expected to design them to
pass in simple relationship with a unit of account, but this was a matter of
convenience. When Master of the Mint William Lowndes suggested placing
the value of the half-crown coin at two shillings, seven and a half pence
(.W l / 2 d), John Locke criticized it on the basis of arithmetic inconvenience.8
West Indian currency before the 1838 reform was complicated because Brit-
ish shilling coins circulating there did not correspond exactly with the dif-
ferent local shilling units of account. Currencies in Colonial America were
similarly confused.9

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30 Money and Monetary Policy in China
Abstract or arbitrary units of measurement may become fixed, at least
temporarily, to a suitable object of specified dimensions. Thus a loaf of bread
was defined as a loaf of a certain weight, and the gradual change in the
size of the actual loaf sold gave rise to the need of the "baker's dozen" to
insure total legal weight. Then one denomination no longer describes one
object but one "ideal" object. One pound did at one time designate the value
of 240 physical objects called pennies, but there was no logical necessity for
this relationship to continue. And it did not. For the pound was not valuing
any 240 pennies, but 240 pennies of certain specified dimensions. When the
dimensions of actual pennies available for tender changed, so did the number
of coins acceptable in payment of a debt of one pound.
Failure to understand these principles has led to such statements as, "The
pound is supposed to be 240 pennies, but actually it is many more," or for
China, "The string of cash was supposed to contain 1000 cash but it usually
contained less." The supposed paradox is based on a misunderstanding con-
cerning the relationship of money and the unit of account.
If the unit of account is an abstract unit of value and money is but a
means of settling debts so expressed, then the debt is not to be settled by a
fixed quantity of bullion or a fixed number of coins. The amounts to be
paid will depend upon the relationship of money to the unit of account at
the time of actual payment. A debt expressed in terms of the unit of account
says nothing more than that at the time of repayment some sum of money
valued at the number of units of account equal to the debt shall be repaid.
This may be more or less bullion than was borrowed. Nor is there a logical
reason why the same amount ought to be paid. T o avoid being repaid less
metal or fewer coins owing to appreciation of the metal in terms of the unit
of account, the lender could specify repayment by weight rather than value
of bullion, or he could fix the rate of exchange as in the following:
"^2,053.10i.8^. Genoese . . . for which we promise to give . . . so much
silver in old Genoese groats or Venetian groats, at the rate of £5.8s.8d.
Genoese per pound of silver, as will make up that sum." 10
Although governments or merchants' associations were often successful in
keeping money fixed in terms of the unit of account, the relationship eventu-
ally broke down. The conclusion must be that in a metallic monetary system
every monetary transaction is potentially an exchange transaction. 11 The
price of the commodity being purchased having been setded, the price of
money must be decided. Contrary to our present-day expectations, people
did haggle over money's price.
These definitions leave undisturbed the distinction between a monetary

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Principal Characteristics of the Chinese Monetary System 31

and a barter transaction. Barter may be defined as the exchange of one com-
modity directly for another, neither being valued in terms of a unit of ac-
count and neither being utilized as money. The purpose of this money-
barter-transaction distinction is to facilitate a decision as to the extent of the
monetary sector of the economy, although such a determination is subjec-
tive and qualitative and does not depend upon acceptance of any "stage" ex-
planation of economic development.12
Coins — their ments and demerits. In a metallic currency system the means
of payment may or may not be especially prepared for its monetary role,
that is, it may be either coin or bullion. There is, moreover, no sharp dividing
line between the two. In China, for example, although silver coins were not
legally minted in significant quantities until late in the nineteenth cen-
tury, silver bullion was formed into traditional shapes — shoes of sycee —
assayed and weighed, the results being certified on the shoe. These pro-
cedures differentiated silver in general from silver commonly used as a means
of payment; shoes of sycee possessed, therefore, many of the essential charac-
teristics of coins, and many economists would define them as such. The
purpose now is to examine the roles and relative merits of bullion and coin
in a metallic monetary system.
The problems and possible demerits of coins stem from the fact that they
have demand and supply characteristics which are to some degree independ-
ent of those for the precious metal of which they are manufactured. As coins
differ from bullion, they will have a demand independent of that for bullion;
for example, many are willing to pay a premium for the convenience of using
coins, but the extent of the premium assigned to this convenience may change
over time. The supply of coins will be independent of the supply of bullion
to the extent that the minting of coins or the securing of coins which will
pass current in the economy presents problems different from those which
arise from placing a supply of suitable bullion in the market. Coins may
only be bits of bullion weighed, assayed, and shaped in a standard fashion;
but the result is something different from bullion, and coins have a role of
their own in a metallic monetary system.
But the problems which might arise from such factors appeared insig-
nificant to the disadvantages of using bullion, and contemporary observers of
the China scene deplored, with few exceptions, the lack of a Chinese silver
coin. The skeptics had, however, more on their side than cynicism. Bullion,
critics stated, is clumsy and inconvenient, it must be weighed and assayed
before each payment, a process requiring cutting off excess bits of the metal
and involving all concerned in protracted negotiation. The use of full-bodied

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32 Money and Monetary Policy in China
coins, however, does not necessarily eliminate these inconveniences, especially
at the wholesale level. T h e reliability of coins varies, and coins can be
tampered with. For any sizable transaction, therefore, coins were, in fact,
weighed and their fineness checked — a process known in China as "shroff-
ing." T h e judgments of the shroffs in any such primitive process would
naturally vary. Uncertainty was reintroduced. At the retail level, of course,
any payment is inconvenient, as the prevalence of the "chit" system in the
China treaty ports or the current use of credit cards would indicate.
Inconvenience is relative, and, while the point should not be pressed too
far, there is sufficient evidence to support the conclusion that the use of full-
bodied coins does not necessarily eliminate the problems inherent in dealing
with bullion; on the contrary, the use of coins may introduce additional
problems. Progress is not necessarily indicated by a change from bullion to
full-bodied coin, but rather from bullion to a representative money having
no intrinsic worth. This conclusion escaped many would-be reformers and
resulted in much wasted effort, but the Chinese themselves were devising
new payments systems which minimized the use of metal, and in this they
were following a course not without parallel in the histories of metallic mone-
tary systems.
T h e usefulness of coins is dependent upon the willingness of the people
to literally accept them at their face value, a willingness naturally dependent
upon their assessment of the integrity of the minter and all subsequent
handlers. If the content of a coin is questioned, then its unique role as a
coin is ended — it is simply a form of bullion. But the problems connected
with coins arise, of course, even before their placement in circulation and
continue until their eventual disappearance.
T h e very existence of coins depends upon a suitable mint policy or a
favorable international trade position, implying an ability on the part of
the state to recognize relevant changes in the economic situation and to make
appropriate adjustments. T o maintain the coins in circulation requires en-
forcement of the laws relative to counterfeiting, melting, and tampering,
while the user must guard against the tendency of the state to alter the con-
tent of the coin for fiscal purposes. T o implement its policies the premodern
state had but an imperfect police system, inaccurate measures, little relevant
economic information, and no body of generally accepted theory to assist in
determining the need for correction of the monetary system. Not surprisingly
therefore, maintenance of the coinage taxed the abilities of the most con-
scientious premodern state, and the coins in metallic monetary systems were
subject to chaotic forces inadequately controlled.

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Principal Characteristics of the Chinese Monetary System 33
A government committed to providing rains will be concerned with shift-
ing the cost to the user. This can be done if the user is willing to pay a
premium for the coin, that is, accept the coin in payment for a debt requir-
ing a slightly higher weight of metal tendered in bullion form. The same
can be accomplished by requiring a specific payment for the minting process,
or seignorage. If the public is unwilling to pay the premium, the government
is forced to subsidize the coinage. Thus the very existence of the coins de-
pends upon the availability of funds to meet the subsidy, and in times of
crisis the subsidy may be withdrawn, throwing the coinage into confusion
and perhaps worsening the crisis.
If the approved coin is to have a fixed relationship with the unit of account,
the government must also set a fixed price at which it is willing to accept
precious metal at the mint. The establishment of this mint price represents
an attempt to keep money fixed in terms of the unit of account by controlling
the price of bullion entering into coins. For this policy to be effective the
demand for bullion for coinage must dominate the market and thus indi-
rectly set the price for all bullion. The monetary authority may have suf-
ficient political control to set the price of bullion without regard to economic
forces, but historical evidence suggests that purely political measures are only
temporarily effective. If then the mint price is able to dominate the market
price and if the mint charges are not greater than the premium people place
on coins, the coinage can be maintained, providing the authority is willing
to replace worn coinage, and providing laws relative to counterfeiting and
tampering can be enforced.
If the demand for bullion for non-coinage purposes increases so that the
market price of bullion is raised above the mint price, because (for example)
of an outflow of bullion to meet a trade deficit, bullion will cease to be
brought to the mint. Not only will the minting of new coins be interrupted
but the established coins will be in danger, for although coins have retained
their fixed relation to the unit of account, bullion has not. The market value
of the silver in the coins when melted into bullion is greater than the value
assigned the silver in the coins plus the premium people place on coins.
To save the coinage the government may either cry up the coinage or de-
value the unit of account. In the former case it decrees, for example, that a
coin formerly worth one unit of account is now worth two. In the latter case
it recoins so that there is appropriately less metal in the new coin, its rela-
tion to the unit of account being maintained. Inherent in both methods is
a change in the mint price of bullion. Crying up the coinage is impractical
in a system in which the coins have names identical to the unit of account,

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34 Money and Monetary Policy in China
although it is logically possible and can certainly be attempted as a temporary
measure while new coins are being issued.
T h e price of bullion in the markets can also be a reflection of increased
cost of production. O l d sources of supply may become exhausted or more
costly to exploit. N e w sources of supply m a y suddenly be discovered. Re-
bellion m a y cut off supplies. These factors can all affect the market price of
bullion unless the demand of the mint succeeds in remaining dominant. If
the interruption is thought to be temporary and if the people will place an
unusually high premium on coins during this temporary period, the coinage
can be saved. But the conclusion must be that constant vigilance is one heavy
cost of coinage in a metallic system.
These comments have all referred to full-bodied coins, coins accepted as a
means of payment on the basis of their intrinsic worth. T o k e n coins, which
pass current because they can be exchanged for full-bodied coins or bullion,
m a y also exist in a metallic system, but because they are representative they
exist on sufferance. A currency system is an attitude of mind. In a metallic
currency system, objects are accepted as means of payment and therefore as
money because of the intrinsic value which these objects have or are thought
to have, independent of their use as money. In a non-metallic system money
is accepted as such solely because it will always be received in payment of
a fixed number of the units of account in which it is denominated. These
two conflicting attitudes to money can exist for a time in the same economy,
and for this period token coins — and bank notes — can circulate. But in
periods of crisis full-bodied money is demanded and the tokens rejected,
thus deepening the crisis and perhaps threatening the credit of the state. In
a metallic monetary system there is often no difficulty in convincing people
they should use representative forms of money; the problem is to achieve
this for long periods of time. A system is metallic when for whatever reason
this problem cannot be solved — when holders of token money revert to the
intrinsic value requirement.
The question of the standard. A metallic monetary system need not be on
a metallic standard; appearances, especially terminological, can hide the ac-
tual situation. A system using full-bodied coins as money may find this in-
convenient, and there may be a shift to the use of bank notes and demand
deposits. N o statutory change will be made. T h e notes and deposits are still
repayable on demand in a standard coin which remains fixed in terms of the
unit of account. But since less and less business is done in the coin, its role
becomes de facto a subsidiary one, and the exchanges, as in H o n g K o n g prior
to 1935, are really quoted on the basis of bank money, notes and deposits.

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Principal Characteristics of the Chinese Monetary System 35

A refusal of the bank to issue more notes would affect the exchanges without
relation to metallic import or export points; the monetary system is effec-
tively off a metallic standard while maintaining all the de jure symbols. But
it is still a metallic system because the basis of the monetary system is precious
metal even if the bullion all rests quietly in the vaults of the bank. A second
way in which a metallic system can go off standard is through the imperfec-
tion of the coinage, the problem with which this section is mainly concerned.
But in either case an understanding of the process is essential if the status of
the monetary system and the explanation of its relation to other systems is
to be fully understood.
The purpose of a coinage is to eliminate the need for constant assaying of
bullion, and yet to pass coins with complete disregard for their dimensions
is not possible in a system in which intrinsic worth is the basis of money's
value. In a well-policed country coins may be expected to be up to standard;
then it will be possible to pay them by count only. Premodern states were
not, however, noted for the efficiency of such police activities, and the prob-
lem of maintaining the standard of the coinage was a real one. There is a
customary question as to whether coins were accepted by tale (that is, by
count) or by weight. As stated the question misses the point. Coins were ac-
cepted by count because of the supposed intrinsic value of the metal in the
coin. How this worked out in practice would determine whether the mone-
tary system remained on a metallic standard.
If coins are accepted by count, then the holder has no reason to care about
the content. As with a public assay of bullion, a practice especially popular
in China, it is not the accuracy of the assay — or the content of the coin —
which matters, but what people are willing to accept as its content. Since in
a metallic system coins were accepted because of the weight of bullion they
contained or were thought to contain, coins would be accepted by count only
when it appeared unlikely that the weight would be challenged by the person
to whom the coin would next be paid. Coins were accepted or refused on
the basis of expectations as to the reaction of the person to be paid. The less
likely was a coin to be challenged or tested, the less difference its actual con-
tent made. If, for example, there were a mutual agreement among merchants
in a particular market that underweight coins must be accepted at par, a
step which might be forced upon the merchants by lack of standard coin,
people would be willing to hold and use such coins. The unit of account
was then satisfied by a lesser amount of metal than its official definition re-
quired.
Unless this agreement to accept inferior coins is without limit, there will

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come a time in the life of every coin when its weight will be challenged, that
is, it will no longer be accepted by count. The timing of this challenge is
dependent upon the effectiveness of currency law enforcement, the willing-
ness of the monetary authority to maintain the coinage, and the use to which
the coin is to be put. The tendency to demand standard weight coins and so
to challenge those appearing inferior will be especially strong during a period
of bullion export.
A debased currency circulates by mutual agreement. Its poor condition in-
vites a worsening of that condition, for with the legal standards once ren-
dered ineffective there is no objective basis for the test of the coin's intrinsic
worth. Coins will be counterfeited, sweated, and clipped. The metallic con-
tent of current coins will vary considerably; they may or may not pass at
different rates; they may or may not pass at par with the unit of account. As
the coinage deteriorates, the average coin will probably maintain its relation-
ship with the unit of account; an unusually bad coin will pass at a discount
and a coin of legal standard may command a premium. Obviously the unit
of account no longer values a fixed quantity of bullion.
Especially in systems with identical names for unit of account and coin
the unique monetary relationship is between coin and the unit of account
and not between the unit of account and bullion. Upon the initiation of the
coinage, the relationship is both with coin and bullion, but as the coins de-
teriorate unchecked, coins and not bullion usually maintain their par rela-
tionship. For example, if a unit of account χ can be satisfied by payment of
coin x, and if coin χ is by law to contain у grains of pure silver, then it will
often be said that unit of account χ "is" or "values" у grains of silver. After
deterioration, unit χ can still be satisfied with the payment of coin x, although
this coin now contains less than у grains of silver. The unit of account has
become associated with the coin, and changes of its relative value in the
exchanges depend not on changes in the relative value of bullion but on that
of coins now divorced therefrom. The independence of the coins is accentu-
ated by the fact that under such deteriorated conditions the mint must either
have ceased issuing coins, thus making their supply infinitely inelastic —
except through counterfeiting — or, if the mint is still issuing, the new coins
must either be held in inactive balances or be melted; they are not affecting
the supply of coins available in the market. Such a situation is not consistent
with the usual conception of a silver standard.
Unless the currency laws can be enforced, there is little incentive for the
mint to issue new coins meeting the legal standard on the sole initiative of
the monetary authority. And with a deteriorated coinage passing at par, it

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Principal Characteristics of the Chinese Monetary System 37
is not likely that private bullion will reach the mint. It is more probable
that the monetary authorities, if they are moved to action at all, will decrease
the nominal value of the unit of account to accord with the content of the
coins actually in circulation. T h i s may have no economic significance in itself,
since the exchanges may already have taken the deterioration into account.
If, however, there is no mint in the country under consideration, some
modification of this analysis is required. In the case of China, dollar coins
were imported and passed current, first because of their determined intrinsic
value, and eventually on their own reputation for consistency. T h e coins
actually had a demand of their own, and, under these circumstances, the
exchanges could reflect varying supply conditions of the particular standard
coin current in the area. Indeed, if the production of the coin ceased and if
counterfeiting failed to m a k e up the deficiency, the divergence between the
exchange rate as quoted in terms of the dollar unit of account and the par
rate as reflected by the relevant silver quantities could differ sharply, indicat-
ing a significant premium on the standard coin.
When the exchanges move in favor of a country, bullion will be imported
and the exchanges will stop at the import point. T h i s is the condition of the
metallic standard. But if the imported bullion, say silver, cannot be added
to the money supply — or if, as in the example just cited, the money supply
cannot be increased by such imports — the exchanges can continue to rise.
Such a country still has a metallic monetary system despite its use — its
fanatical use — of a full-bodied coin; however, its exchanges no longer re-
flect — even approximately — the ratio of silver bullion values, and the coun-
try is therefore no longer on the silver standard.
Destruction of the coinage. In discussing the problems created by coins,
reference has been m a d e to the possibility of coins being melted down or —
what f r o m the economic point of view has the same consequences — ex-
ported. Since premodern governments often m a d e it a point of honor if not
of economic policy to maintain a coinage, they were frequently confronted
with the need to take measures to save it and were often frustrated by their
failure. Inaccurate assay was a cause beyond the control of the government;
a misunderstanding of the principles involved and an unwillingness to take
the best course of action if expensive or difficult were other causes. In this
section the theoretical principles involved in the destruction of the coinage
will be reviewed.
If the intrinsic value of a coin is greater than its face value, it is generally
supposed that the coin will be melted. T h i s conclusion requires both modifi-
cation and elaboration. In general, coins will not be melted unless the in-

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38 Money and Monetary Policy in China
trinsic value of the metal in the coin is greater than the face value of the
coin plus the subjective value of its use in trade. T h i s subjective value will
be governed by the availability of substitutes and their relative acceptability.
It would, for example, vary inversely with the facility with which bullion
was used as money or with the number of other varieties of coins current in
the market. If a particular coin were a fraction heavier than several other
varieties of the same coin, a slight rise in the price of bullion might send it
to the melting pot. F o r a coin to survive, the opportunity cost of neglecting
to take advantage of the difference in intrinsic and nominal values must
be less than its unique income from use as a coin.
If the unit of account has become tied to the coin so that with a deteriora-
tion of the coinage the de facto fixed relationship remains between coin and
unit of account and if coins alone are used as money, a rise in the market
price of bullion will not cause the coin to be melted. Under similar condi-
tions an export of bullion will not cause the coin to be melted or exported
while the profit to be m a d e f r o m its use at home is greater than that to be
m a d e f r o m exporting. But if the unit of account is tied to bullion, the fate
of the coin upon a rise in the market price of bullion will depend upon
whether the market price of the coin varies correspondingly.
In the contrary situation in which the market value of silver falls so that
the face value of the coin is greater than its intrinsic value, it will be sub-
ject to a discount unless the currency laws are rigidly enforced and a fixed
price for coins is the basis of the state's monetary policy. Once subject to
a varying discount, the coin has lost part of its unique usefulness as a coin,
thereby rendering itself more likely to be melted, should the market dis-
count, for example, be temporarily too high.
Where the coinage is in a state of chaos and private coinage either indis-
tinguishable f r o m the legal coinage or equally accepted in the market, any
coin with an intrinsic value greater than those on the margin of acceptance
may be clipped or sweated. Especially if counterfeiting is possible, such coins
are likely to be melted and the metal recovered f r o m such a process used
to m a k e a greater number of counterfeit coins. T h e position of the margin of
acceptance may be uncertain, but it would tend to be forced lower by com-
petitive deterioration. T h e margin might be subjected to reactions from time
to time which would push it temporarily higher again. Coins rejected as the
result of such a reaction would themselves be liable to destruction.
T h e scope of these conclusions implies that the monetary authority cannot
hope in such circumstances to improve the coinage short of a thorough and
complete currency reform. F o r if the market price of bullion is higher than

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Principal Characteristics of the Chinese Monetary System 39

the nominal mint price but lower than the effective price of bullion for
private coinage, the minting of new standard coins by the monetary authority
will have the effect of offering bullion in the market at the mint prices plus
the charge of melting, plus, if necessary, bribing the officials involved. The
introduction of a few standard coins would be insufficient to force private
minters to improve the quality of their coin; to be successful the government
must introduce within a reasonable period of time sufficient standard coins
to meet the full requirements of the monetary system. If the deterioration of
the coinage had been caused by a shortage of metal, the government's reform
would be doomed unless it was able to encourage at the same time the use
of representative money. If the problems originally arose from the exporting
of bullion, recoinage would have to be coordinated with other measures de-
signed to correct the outflow of bullion.
Even within a metallic monetary system based upon a single precious
metal, the monetary authority is faced with the necessity of constant vigilance
and for the enforcement of a coordinated economic reform to save the coin-
age. Even then the faulty assay of foreign exchange dealers or the dis-
equilibrating decision of another monetary authority can threaten the coin-
age. The governments involved were not, however, always well-informed or
well-intentioned, with the result that metallic currency systems were subject
to economically interesting changes and complexities. A brief study of bi-
metallic systems will reinforce this conclusion.
Bimetallic systems. Any commodity is eligible as money providing it is
generally acceptable as a means of payment. In practice only a few com-
modities qualified, and undoubtedly convenience and appropriateness were
important criteria. The precious metals were by these standards destined to
be selected as money. The selection of a single metal as money either in
bullion or coined form would appear to be but the logical conclusion to the
process. Two principal factors led to multimetallism and to bimetallism in
particular. The relation between the monetary requirements of an economy
and the supply of a precious metal is in great part an independent one; the
ability to draw on supplies of two metals would provide greater flexibility.
Secondly, the metals varied in value per unit of account, and one convenient
for the retail trade because of its low value would for that reason be incon-
venient for the wholesale trade. These two factors — adequate supply and
relative convenience — are quite different in their nature; the characteristics
of any particular bimetallic system reflect the relative importance of the
factors. This section is a study of the nature of these characteristics.
The classic form of the bimetallic system — and, by extension, of a multi-

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40 Money and Monetary Policy in China
metallic system — is one in which two metals, either one or both of which
may also be coined, circulate at the same time with the value of each fixed
in terms of the value of the other. Each metal has a fixed relationship with
either its own unit of account, the two units of account then having a defined
relationship, or directly with a single unit of account. The survival of this
classic form depends upon the continuing fixed price relationship of the two
metals involved. Small variations in their price may not destroy the classic
form, however, if people are willing to disregard such fluctuations for the
convenience of maintaining the monetary system; but eventually some dis-
turbance— for example, the discovery of a new source of supply of one
metal — would be sufficient to make impossible the maintenance of the
established ratio. Three possibilities then exist: first, the change can be recog-
nized and the mint ratio changed accordingly, with appropriate supporting
changes in the existing currency; secondly, the change can be neglected and
the overvalued metal can be allowed to drive the other out; or thirdly, the
two metals can be allowed to exist at fluctuating rates of exchange.
The monetary authority usually showed reluctance to tamper with the
coinage unless there were some fiscal advantage to be gained therefrom, and
there was a tendency to favor maintenance of the previous mint ratio in the
face of changed situations rather than become involved in a recoinage. If
the adjustment was attempted and was successful, the classic form would be
preserved; if change was not attempted and legal measures were inadequate
or if the change was not performed efficiently or correctly, either a de facto
monometallic standard or "parallel bimetallism" would result.
The parallel form may be described as one in which two currency systems,
each using a different metal, exist side by side. The two metals have fluctuat-
ing values in terms of each other, and dealing between them involves an
exchange operation and a consequent exchange risk. Such a system is most
likely to develop where the metals serve two different markets or two differ-
ent types of payments, for then the exchange risk occurs only when transfer
is being made from one market or type of payment to another, and can be
borne by specialists in exchange. Thus if, as was true in China, copper serves
the retail market and is used for payment of daily wages while silver is used
in the wholesale market and for payment of larger salaries, there is a large
class of people dealing entirely in small purchases and receiving daily wages
who are not directly concerned with the relationship of silver to copper. And
to the extent that they are concerned, as, for example, if the rising price of
silver in terms of copper raises the wholesale price of commodities — a rise
reflected in the retail copper price of those commodities — the copper-using

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Principal Characteristics of the Chinese Monetary System 41
purchaser may see his remedy in higher wages or some other measure within
the copper sector.
T h e breakdown of the classic form is the consequence of overwhelming
market forces changing the price of one or both metals. If each metal is
valued in terms of its own unit of account, then a change in the market value
of one metal in terms of the other metal's unit will either be reflected in the
ratio of one unit of account with the other, or one metal will no longer have
a fixed value in terms of its own unit of account. If both metals are valued
in terms of a single unit of account, one of them will be forced to discontinue
its fixed relationship with that unit. Unless the government redefines the
unit of account, one metal will tend to be exported or to have fluctuating
values in terms of the other, that is, either bimetallism will cease or a parallel
bimetallism will develop.
In a parallel system the people are left to do what the government has
failed to do — decide the correct value ratio for the metals. But with all prac-
tical government sanction to a fixed relationship gone, even the smaller fluc-
tuations may be felt in the exchanges. Such a system can operate only if
there is a development of specialists in exchange to facilitate the use of both
metals and if, as has been said, the different metals are used for different
markets.
T h e introduction of a coinage does not change the principles involved, but
it increases the variety of forms the breakdown can take. As one example,
assume that there is a classic system in which both metals are valued in terms
of a single unit of account and that the system is now subjected to the pres-
sure of a price change in one of the metals. Specifically, there are a unit of
account, x, and a silver coin, x, which is valued at one unit, x. There is also
a gold coin, y, valued originally at 10*. If the gold-silver price ratio changes,
it is more likely that у will be revalued in the market in terms of χ than that
χ will be revalued. 13
T h e strain of attempting to maintain a classic form and the exchange in-
conveniences of a parallel form of bimetallism can be eliminated by the use
of subsidiary coinage, providing people are willing to consider a single metal
as the basis of the system and the monetary authority limits the issue of sub-
sidiary coinage to the requirements of the economy. These two conditions
are directly related, for the people are more likely to accept token subsidiary
coinage if the authority limits issue to the amount needed for small change
or shows itself willing to exchange any subsidiary coinage issued in excess
of these requirements. Subsidiary coinage is that class of coins which not
being themselves full-bodied are denominated as fractions of full-bodied

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42 Money and Monetary Policy in China

coins and are accepted at face value in the metallic currency system. The
temptation to profit from the uncontrolled issue of coins the face value of
which was greater than the intrinsic value proved too great for some govern-
ments, and the subsidiary coins came to be accepted only on the basis of their
intrinsic value, that is, only to the extent that they were full-bodied coins
passing therefore at a discount over their face value.
The technical characteristics of a metallic monetary system not only create
problems which require constant attention but they also both limit and
characterize the measures which the government may wish to take for rea-
sons not directly concerned with the technical problems of a metallic system.
These are the subjects of monetary policy in a premodern state and they
strain the administrative abilities of such a state. Certain examples of this
will be presented in Part II of this book. The immediate task, however, is
to develop the ideal Chinese model, keeping in mind the points raised in
this brief consideration of metallic monetary systems.

The Chinese System — A General Survey

Positive characteristics. The Chinese economy in the nineteenth century


was undoubtedly a monetary economy. Statistics are insufficient to enable
any relationship to be established between the population of China and the
amount of money in circulation, but the reports of foreign merchants, the
nature of petty trading, and the tax system all support the conclusion that
barter, where it existed at all, was a temporary aberration caused by the in-
efficient distribution of the currency or by some temporary crisis.14 There is
no economic validity or usefulness in the "dual economy" approach to the
study of China; the difference between peasant and city life is rather that, in
the former, exchange was more limited. But when exchange occurred it was,
with the exceptions noted, a monetary transaction.15
Early foreign observers who penetrated beyond the confines of Canton and
Macao confirmed that the Chinese had a banking system and highly de-
veloped commercial practices based upon money and credit.1® The peasants
were dependent on the tradesmen of the village, and although they were
more economically self-sufficient than they may have been later in the century,
money changers, pawn shops, and primitive credit institutions were common-
place.17 With the institution of the "single-whip" method of taxation in the
Ming dynasty (1368-1643), commutation of the land tax to silver payments
had been a consistent policy of the imperial government, so that it appears
safe to conclude that by the Ch'ing dynasty (1644-1911) monetary payments

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Principal Characteristics of the Chinese Monetary System 43
were the usual method of meeting tax obligations.18 Until early Republican
times, however, part of the grain tribute was paid in kind, but in the nine-
teenth century, owing to the continual trouble the Ch'ing administration
had in keeping open the Grand Canal, temporary commutation became in-
creasingly frequent. 19 Money was used for payment of licenses and fines, and
for the purchase of official rank; similarly, with the exception of the disposal
of the tribute grain, the government paid out in money.
Temporary shortages of currency might lead to the use of "money sub-
stitutes," for example, opium orders, silk, or iron, but the transactions re-
mained essentially monetary. 20 British testimony on commercial relations
with China noted instances in which opium was "bartered" for silk, but
added, "The dollar is always employed as the means of fixing the value in
all transactions whether for cash or barter." 2 1
The Chinese monetary system was, in reality, several systems with many
common features. In a nation state the monetary system is coextensive with
the political boundaries of the state; for one state there is one system. If,
deriving from this fact, a monetary system is defined in terms of monetary
policy so that a monetary system is coextensive with the area covered by a
single monetary policy, then the situation in China is ambiguous. The im-
perial government of China undertook responsibility for certain monetary
policies, but left the execution of them to the provincial authorities; it estab-
lished certain basic rules under which the monetary systems of the provinces
were to operate, but was itself only responsible for their supervision. The
Chinese monetary system had, therefore, a structural uniformity with local
variations. The provincial authorities themselves were free to institute policies
within the framework established by the imperial government, often acting
independently of neighboring provinces and in a way detrimental to them.
One province might forbid the export of copper coin to another; 22 a province
might cease minting coins or monopolize the metals from which the coins
were to be minted; so great were the distances involved that the state of the
coinage in one province would not necessarily correspond with that in other
provinces. Silver might be exported abroad in one province without any effect
on the monetary system of another; the exchange rate between copper and
silver might be falling in one but rising in another. Interregional economic
relations took on many of the aspects peculiar to international economic
relations.
China had neither a unified economy nor a unified monetary system. If
China is said to have had an empire-wide monetary system, it is in the sense
of possessing certain basic common features established by edict, by a com-

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44 Money and Monetary Policy in China
mon source of monetary ideas, by similar training of officials, and by the
frequent transfer of officials from one post to another. Bankers who might
be called upon to advise or petition officials had contacts in other provinces
and might recommend measures generally accepted over a large area. But
to describe the specific situation in, say, Canton and to examine monetary
policy there is not to afford a basis for generalization for the situations and
policies in other provinces which differed with the differing needs of the local
economies, the abilities of the local officials, and the resources available
locally for maintenance of the coinage. China had a monetary system with
several local subsystems in the provinces of China proper and even more
widely differing systems in Tibet, Sinkiang, and Korea — these latter being
beyond the scope of this book. Only those features of the monetary system
which were within the imperial jurisdiction are capable of being considered
common to China; monetary policy in a particular area is thus partly im-
perial and partly local in origin and purpose.
A rough European parallel can be made by comparing the initial monetary
edicts of the Ch'ing dynasty with the currency reform of Charlemagne. The
local European variations which later developed, and especially the degree
to which they developed in the Italian city states, are indications that the
original model had broken down. An important difference would be that
in China the imperial political power remained to prevent the grosser forms
of change, whereas in Europe it did not. In Europe, therefore, the changes
went further. However, in the sense that trade and papal business required
monetary contact between the various commercial centers in Europe, there
was a European monetary system with certain common characteristics. In
China, too, interregional remittances were necessary, and the payment of
taxes to Peking might be compared in its economic consequences with the
remission of funds to Rome. But the unifying effect on the Chinese monetary
system was minimized by the custom of holding some 75 to 80 per cent of
the national revenue in local treasuries and by the treatment of silver for tax
purposes as a commodity. This not only left untouched the local variations
but may even have encouraged them by requiring officials to set effective
exchange rates between local monetary silver and silver suitable for remission
to Peking.
A study of the Chinese monetary system, after having described the basic
model — including the essential relationships typical of the various systems
but abstracted from local details — must both recount the numerous local
variations in content and policy and direct itself primarily to the imperial
aspects of policy. The local details were not, as foreign observers thought,

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Principal Characteristics of the Chinese Monetary System 45
the aberrations of a national system permitted by a weak central authority,
but were rather natural and integral parts of a system in an empire in which
the local economies had not been, and probably could not be, integrated im-
mediately into a national economy. The disagreements between the Chinese
government and the foreign powers in monetary matters were based on this
misunderstanding—foreign insistence that China act as if the monetary
system were or ought to be a single unified system, and Chinese unwilling-
ness or inability to do so.
Governments in premodern times generally found it difficult to enforce
their currency laws, but if one single feature of the Chinese monetary sys-
tem were to be selected as unusual, it would be the complete inability of the
imperial government to maintain the standard of its coins or prevent counter-
feiting and general tampering with the coinage. This ineffectiveness was only
partly the result of the political system. The method of casting the copper
coin was primitive and less accurate than European methods. The resulting
faults in the legal coinage encouraged imitators and led to a progressive de-
terioration which the imperial government proved powerless to check. The
currency of substandard coins encouraged officials themselves to issue sub-
standard coins from the provincial mints, a practice which made the legal
coins suspect and later hindered the acceptance of a Chinese dollar coin.23
The legal inflexibility of the tax system forced the government to tamper
with its own copper-silver exchange rates; the shortage of revenue encour-
aged the government to initiate token currency plans which failed. Unable
to enforce its currency regulations except where economic conditions alone
guaranteed their success, the government's range of maneuver in monetary
policy was curtailed to an extent unusual in a metallic monetary system.
In the traditional system the Chinese government undertook responsibility
only for the coining of copper. Silver circulated in bullion form until the
introduction through foreign trade of the Spanish dollar. Typical of the
Chinese monetary system, therefore, was the existence of a silver coinage over
which China itself had no control, the supplies of which depended upon
the policies of foreign governments, especially of Mexico. The design and
sometimes the content of dollar coins varied with a change of reigns, the
need for currency reform in the issuing country, or a change of government
in the South American republics.24 This was confusing to the dollar-using
Chinese public, but the dollar changes had two more important effects. First,
dealing in dollars became an expert occupation, and exchange shops marked
or chopped the dollars to certify their status. This soon rendered the dollars
unrecognizable and led to their acceptance as dollar metal by weight. Sec-

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46 Money and Monetary Policy in China
ondly, and in a contrary direction, the Chinese reacted to change by showing
a marked preference for the older dollar coin to which they were accustomed
and the reliability of which had been tested. This preference might become
so marked that the exchanges would move as much as 25 per cent or more
over the intrinsic worth of the coin. In such cases the local monetary system
had effectively gone off silver. An alternative way of expressing these diver-
gent reactions to dollar changes would be to state that the Chinese at times
and in certain areas accepted dollar coins by weight only, placing primary
importance on the quantity of metal the coin contained; in other areas and
at other times the Chinese accepted the coins by count or tale without refer-
ence to intrinsic value.25
China's monetary systems were not, then, simple metallic systems which
operated on the classic principles of an international silver standard; a metal-
lic system need not be on a metallic standard. Hong Kong's exchanges were
based on the rate for bank notes, Shanghai's until 1857 on the rate for the
Spanish dollar, and Amoy's on a money of exchange.26 Only examination
of the local system at a particular time can determine the basis of the
standard; a generalization that China was on a silver standard, while satis-
factory for many purposes, may not explain the specialized problems ap-
pearing in a particular case.
In China money had no fixed relation to the unit of account and every
monetary transaction was to some extent an exchange transaction. The
amount of silver paid into a bank as being worth one tael was a fraction of a
per cent larger than the amount paid out by the same bank in payment of
a tael?1 The number of copper coins paid to satisfy a debt of "one thousand"
varied on the basis not only of the condition of the coin but also of the
relative economic power of the parties to the transaction. A debt of "one
thousand" might be paid with 1000 good copper coins if the creditor were
the government, whereas a food shop might expect in payment only 780
coins of inferior quality. Although there was a parallel in principle with
similar situations in European monetary systems, the Chinese case was
rendered more confusing by the unit of account and the coin having identical
names. Such a nominal identity in Europe had helped maintain a fixed rela-
tionship between the coin and the unit of account; in China it had not.
An "ideal" model can be constructed of the essential relationships among
China's units of account and between each unit of account and the appropri-
ate form of money, although this ideal model had broken down by 1845. The
ideal model is based upon the classic form of the bimetallic system and the

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Principal Characteristics of the Chinese Monetary System 47
breakdown occurred, as in Europe, when the official ratios no longer domi-
nated the market ratios, but, unlike early modern European experience, the
result was a parallel bimetallism rather than a de facto monometallic system.
The particular evolution of China's bimetallism may be a function of the
metals involved. In Europe silver and gold both served the wholesale sector,
and silver could be used for large transactions, although obviously at a rela-
tively increased cost. Should the official ratio be so far incorrect that despite
this cost it paid to export gold and import silver, the bimetallism would be-
come de facto monometallism. But in China copper could not serve the
wholesale market, and since copper and silver served different functions
there was no likelihood of replacing one metal with the other. When the
market ratio differed from the official ratio, the undervalued metal was not,
on this account alone, exported.
The ideal form and the parallel system which later developed will be out-
lined in the following section.
The structure of the Chinese monetary system. The ideal relationships de-
pend upon an understanding of Chinese monetary terminology, and although
certain details and arguments can be relegated to the appendix others must
be considered immediately. Chinese monetary units had names identical to
those of units of weight; therefore an ideal system would be one in which
the weight of the money agreed with the weight name of the unit of account.
But not only did the terms imply the weight of the metal being used in the
coin or as bullion, they also implied a fixed relationship between the two
metals used as money — silver and copper — consistent with the classic bi-
metallic form.
The relevant basic weight is the liang, sometimes referred to as the Chi-
nese ounce, which is divided into decimal units as follows:

1 liang = 10 ch'ien = 100 fen = 1000 li

The liang was given the European equivalent of 583.3 grains troy in the
treaties, but (as with the European pound) its weight in China varied ac-
cording to the place and the market. 28 Like the European pound the liang
was also a unit of account payable ideally with one liang weight of monetary
silver. (Liang has usually been translated as tael, qualified as "monetary
tael" [like pound sterling] when the unit of account is being referred to.
In this study the word will be left untranslated as "liang" when it refers to
a unit of weight and translated as tael when it refers to a unit of account.)
Ch'ien referred both to a unit of weight and a unit of account. It was also

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48 Money and Monetary Policy in China
the n a m e of the copper coin and as such has been translated universally as
"cash." Ideally one cash coin m u s t be valued by one ch'ien unit of account
and must weigh 0.1 liang, if it is to be terminologically consistent.
T h e ideal system can now be constructed if the price of silver in relation
to copper is given. T h e original ratio upon which the monetary system of
the Ch'ing was supposed to have been based was 1:100. M F r o m this it fol-
lows that a tael debt can be paid either by tender of a liang of monetary
silver or by 100 liang of copper coins. Since copper coins weighed 0.1 liang,
the debt of a tael could be satisfied with the payment of 1000 copper coins,
worth 1000 ch'ien. A s the ch'uan — the last unit of account which must be
introduced here — by definition was valued by 1000 ch'ien, in the ideal
system one tael was therefore equal to one ch'uan and one ch'uan could be
satisfied by payment of 1000 cash — or, of course, one liang of monetary
silver. 30 T h i s recalls the model described in F i g u r e 1.
Given the principal characteristics of the Chinese monetary system, the
ideal model can yield to economic pressure at any point — with the excep-
tion of the ch'uan-ch'ien relationship which has been defined as 1:1000. But
there is only one change which can be m a d e to offset the threat of a break-
down which will not itself change the model. If, for example, the price of
copper rises, then if no other change takes place the ch'uan will no longer
be equal in value to the tael, and it is this fixed relationship which gives the
model its classic bimetallic form. Yet if the weight of the cash coin is changed,
although the tael and the ch'uan can remain equal, the cash coin will no
longer be equal in weight to 0.1 liang and the terminological consistency
will be destroyed. However, as the cash coin was actually an alloy of copper
with zinc, lead, or tin and as the market value of the coin depended not on
that of copper but on that of the alloy, if the composition of the alloy could
be changed without changing the weight, the ideal model could be main-
tained. Such a delicate operation was not capable of execution in China—
or in any other pre-modern state.

T h e ideal relationship between the tael and the ch'uan can change, other
relationships remaining the same, because of a change in the market ratios
of copper and silver. T h i s can be caused either by a change in the supply
situation, as for example when the Y u n n a n mines were opened or Japanese
copper supplies cut off, 3 1 or by a change in demand, as for example if
transactions in that sector of the economy using silver as the customary
means of payment increase relative to those in the copper sector. T h e ideal
relationship can be maintained by controlling the sources of supply, by
consciously attempting to increase the use of one of the metals, or by using

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Principal Characteristics of the Chinese Monetary System 49
the ideal ratio in government payments in the hope that in the long run this
would dominate the market.
The Yiang-tael relationship involving the use of bullion would appear to
be more stable, but monetary silver was quoted at varying discounts or
premiums in relation to the tael unit of account and the quality of the
monetary silver might decline. Since the copper coins were of a fixed standard
for the Empire but the pure silver content of monetary silver varied with
the weight of the local liang and the customary fineness of monetary silver,
or sycee, 1000 copper coins should be worth one liang of but one variety
of monetary silver. But the copper coins in circulation were not of equal
quality and so their relationship with the ch'uan varied. And even when
the coins were of equal quality, the number given for a ch'uan would vary
with the economic power of the parties to the transaction. Some of these
variations might offset one another, but, given the possibility of variation
at so many points, it was unlikely that the ideal model would last long
despite the attempts of the Chinese government to maintain it.
Foreign criticism. Although the West had only just succeeded in solving
some of the monetary problems typical of a metallic system, nineteenth-
century observers of China had little sympathy with or understanding of
those characteristics of the Chinese monetary system which but a century
earlier had caused no adverse comment from the servants of the British East
India Company.32 Foreign merchants felt that their inability to comprehend
the Chinese system was forcing them to rely too much on the monetary
knowledge of their Chinese agents, or compradores.33 This the foreign
merchants resented and accordingly they pressed for reform and unification.
The specific problems which the foreigners chose not to comprehend or
selected for negative valuation were: (1) the changing relationship of the
copper coins to the silver bullion; (2) the failure of coins to pass at par
with their unit of account; (3) the variety of weights, coins, and consequent
exchange rates which increased the risk of doing business; and (4) the
apparent lack not only of official standards but of any official supervision of
the monetary system.
The foreigner expected to find or thought he ought to find a unified
national monetary system. Instead he found a system he might more use-
fully have compared with those of the Italian city states than with that of
contemporary Britain. The transactions which he considered ought to be
fixed payments were instead exchange operations which he did not fully
comprehend, control, or make calculation for. At the retail level he found
that the small copper coins were dirty, underweight, and inconvenient. The

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5о Money and Monetary Policy in China
justification of these complaints is not the issue; the significant point is
that the foreigner was complaining of those features which characterize a
type of monetary situation with which he was unfamiliar. H a d the princi-
ples of the system been understood, the objections might have taken a more
constructive form.
Many of the features of the Chinese system to which foreigners objected
were inherent in the nature of metallic money and could not be corrected
without a complete change of system. T h e changing relationship of the
copper coins to the monetary silver bullion, for example, is indicative of
the parallel form of bimetallism. De jure bimetallism itself was still common
in Europe, but there the breakdown of the classic form had led to a de facto
monometallic standard rather than the existence of two monetary systems
side by side. T h a t the coins did not pass at par in terms of their units of
account is in accord with a system in which money does not necessarily have
a fixed value in terms of that unit of account. T o consider the Chinese un-
reasonable because they set a price at "one thousand" but expected payment
of something less than a thousand copper coins is to confuse the unit of
account with the means of payment, that is, with money.
T h a t the variety of weights and units of account should have caused com-
plaint is typical of the foreigner insisting on reform in China even while
European countries were undergoing or resisting similar reforms. Britain
had just rejected the metric system. Avoirdupois and troy weights, varying
units of account and standards in different European countries and for the
several commodities — all these offered, and still offer today, parallels to
the situation in China. J u d g e d in abstract principle the multiplicity of units
did appear confusing, but each was limited either to a locale or to a use,
thus restricting the scope of each unit or eliminating the chance of con-
fusion. T h e r e were official standards, but these were neither widely dis-
tributed nor generally used except by the official organization which estab-
lished them. However, inaccurate measurement at least contributed to the
number of units.
T h e foreigner was then really complaining not so much of one or two
irrational or annoying features as of the metallic monetary system itself.
H i s complaints were focused on what appeared to be faults but which were
in fact characteristics typical of such a system — not really Chinese except
in their peculiar local application. N o t even the monetary reform of 1935,
when China abandoned silver and adopted a m a n a g e d currency, met the
foreign demands fully, and in the imperial period reform was even less
comprehensive.

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CHAPTER II

The Cash Sector

The cash sector has been described with such mysterious comments as,
"one was equal to two," and "a debt of 100 cash could be settled by 98
cash." Some considered the cash system a source of vast waste, a drain on
the economy of the country; others thought it reflected the Oriental con-
fusion of China itself. The British-owned North-China Herald expressed its
opinion with usual directness: "The cash system is typical of China and
highly suggestive of the improvements that need to be made before her
commerce can be delivered from the system of strangulation which now
affects it." 1
Certainly the cash system was not the simplest payment scheme which
man has devised, yet it operated on principles common to a metallic mone-
tary system which, once understood, go far to explain its apparently un-
reasonable aspects. So that these principles can be understood in their Chi-
nese context, however, the first step must be to describe the cash coin itself
and the methods and problems of its employment. Although there were
three basic cash systems in China, a preliminary description can, for the
most part, deal with those aspects common to all; where this is not practical
the ch'ang-ch'ien system will be assumed — the system common to almost
all China south of Chihli and the capital, in which one cash coin was in-
tended to satisfy a debt of one ch'ien unit of account. This was the system
assumed in the ideal model of the previous chapter.

Basic Characteristics

In the following three sections, three characteristics of the cash coins them-
selves and the consequences of these characteristics will be discussed. The
condition of the cash, their relatively low purchasing power, and the failure
of the Chinese to consider them a subsidiary coin were factors which, taken
together with the general principles of the Chinese monetary system, deter-
mined the development of the unique payments system applicable in the
cash sector.

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52 Money and Monetary Policy in China
Condition of the coinage. The traditional cash, intended to pass at one
(ch'ang-)ch'ien and referred to in this study as the standard cash, was a
round brass or bronze coin with the approximate diameter of nine tenths
of a Chinese inch and a square center hole. Its legal composition was
varied by imperial edict but in 1845 had stood unchanged since Chia-ch'ing
11 (1806) at 0.12 liang of 54 per cent copper, 42.9 per cent zinc, and 3.1 per
cent lead.2 However, according to empirical evidence, the coins of the Tao-
kuang period (1821-1850) varied from a composition of 79 per cent copper,
10 per cent zinc, 7 per cent lead, and 4 per cent tin to a bronze alloy of
copper with proportions of tin which ranged from 10 to 40 per cent.3 The
coins were inscribed with the names of the reign period and the producing
mint.
The imperial government attempted to insure that the cash produced met
the official standards. Models were first carved in ivory and presented to
the chief of the mint of the Board of Revenue.4 If approved they were
copied with a chisel in pure copper, and the copper models were used to im-
press the first molds in which the mu-ch'ien or "mother coins" were pro-
duced. These were sent to the various provincial mints and the authorities
there cast a number of yang-ch'ien or model coins which were then for-
warded to the Emperor for his approval.5 Nevertheless, as numerous reports
indicate, the coins were crudely cast and the alloy was inaccurately meas-
ured.8
In a coin of such little worth as the cash — it was worth less than a
farthing — this imperfection in itself would have been too slight to affect
its value relative to its unit of account. When coupled with the Chinese
inability to suppress illegal tampering and counterfeiting, however, the im-
perfections in the legal coins made it impossible to detect bad coins merely
from an examination of them. In periods of lax imperial supervision, the
official mints themselves would issue coins of less than legal weight,7 and
operators would begin their work of tampering with these in a progressive
form of deterioration. A foreign observer, taking the phrase "a handful of
cash" literallv, examined such a random sample and found it to include a
coin of the T'ien-hsi period (1017-1022), a seventeenth-century Japanese cash,
some forgeries, and a few contemporary coins.8 The two coins representing
the Tao-kuang period (1821-1850) were declared poor in content and execu-
tion relative to those of other reigns; the coins of the Hsien-feng (1851-1861)
and T'ung-chih (1862-1874) periods were equally poor. Of the eleven sam-
ples from the current Kuane-hsü period the foreigner was less critical. As
early as 1836 cash coins in Canton had been observed to be "sadly deterio-
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The Cash Sector 53
rated"; 9 a memorial from the imperial Board of Revenue in 1880 reported
all coins in the treasury to be substandard;10 and reports from foreign
customs officers and other observers indicated that before the partial cur-
rency reform of 1887 cash coins in circulation averaged significantly less than
the legal standard.11 After 1888 there was some improvement — Chungking,
for example, was reporting cash of legal standard — but any accurate general
appraisal is impossible.12 The standard of the coinage was most certainly not
restored before the new-type minted cash replaced the traditional coin after
1895.
This debasement of the cash was not without official opposition. A Shang-
hai observer reported in 1857 that the beheading of counterfeiters was not an
uncommon occurrence, 13 and the Collected Statutes of the Ch'ing Dynasty —
Precedents contains a separate section devoted to crimes against the cur-
rency;14 but the profits to be made from such activities were too great, and
the number of cash shops dealing in the coins — all of them potential sources
of debased and counterfeit cash — were too numerous and too important
in the retail economy to be suppressed.15 Since consistent measures proved
impossible, periodic campaigns would be initiated, but with the unfortunate
implication that they would be stopped if the officials were properly en-
treated. An 1835 memorial from a Canton censor states that there were in
circulation vast quantities of illegal cash and "we understand that there are
several private establishments for coining in Canton, known to all who
choose to know them." 16
The standard cash circulating were then a mixture of old and contem-
porary, worn and new, heavy and light, legal and counterfeit, Chinese and
foreign. If these coins were to circulate together in a full-bodied status,
it was impossible that they should all have the same market value. They
were accordingly graded and sorted in a variety of ways of sufficient com-
plexity to make each coin the potential subject of long and protracted de-
bate. In such a debate, the foreigner felt himself bound to lose — a further
stimulus to his reforming zeal. Although in theory the government should
have been able to circulate cash of the legal dimension through their ac-
ceptance at a premium in the grading and sorting system, this could only
have been done if the new coins were to be accepted at a value in the
market greater than one ch'ien. But this would have forced either an ad-
mission of the depreciation of the older coins or a complete recoinage, which
either the government would not afford or the people would not tolerate,
depending on whom the burden was to fall. A changed copper supply situ-
ation enabled a partial reform in 1887, but the eventual solution was the

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54 Money and Monetary Policy in China
abandonment of the traditional cash coin. For the most part a study of the
cash sector of the Chinese monetary system in the period 1845-1895 is the
study of a hopelessly debased coinage.
Low value and its consequences. The price of a bucket of hot water in
Shanghai was a quarter-cash, 17 but more frequently the problem of using a
coin of such little worth as the Chinese cash was to devise a practical method
of utilizing it for larger payments. The solution was to string cash together
through the center hole in "sub-strings" worth 100 ch'ien and of con-
necting ten of these sub-strings to make a string worth 1000 ch'ien. When
the low worth characteristic is combined for consideration with the de-
based quality of the coins themselves, the process of stringing the cash and
of making payments with them becomes sufficiently varied to require a
detailed explanation.
The cash coins were turned out of the government mints as individual
coins. If they were desired strung, someone had to do it and be paid for it.
But stringing involved more than placing cash of uniform quality and set
number on a string; someone had to consider the weight, thickness, diame-
ter, and origin of each coin before deciding to place it on a particular string.
This required an army of money changers, for example, those in the typical
cash shop or ch'ien-p'u.1& Sorting, grading, and stringing were, together with
the exchange of the strings for silver, usually the sole legal activities of these
shops, although some made petty loans and might develop eventually into
regular banking institutions. 19 For their services the cash shops charged a
few cash by subtracting them from the number placed on the string. If,
for example, a person were to present 100 cash coins and request a string
worth 100 (ch'an g-*) ch'ien, he would be returned a string containing 99 or
98 cash coins of a quality similar to those tendered.
If differences in quality of the coins are not considered, it is apparent that
the cause for the passing of less than full strings — that is, the payment of
less than 100 coins for a debt of 100 (ch'ang-~)ch'ien—lies in the need to
pay the money changer for his services. He deducted from the string rather
than adding a charge for his service, demanding, for example, 1010 cash
coins to return 1000 properly strung. This generalization tends to be con-
firmed by the fact that a debt of, say, 10 ch'ien would indeed be satisfied
with payment of 10 current but unstrung cash coins. Assuming that a string
containing 990 cash coins (one having been taken by the cash shop for each
sub-string or for each 100 cash coins presented for stringing) could now be
used in the market to settle a debt of one ch'uan, then the shopkeeper, hav-
ing placed his price at one ch'uan or 1000 ch'ien, would accept 990 strung

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The Cash Sector 55
cash in payment thereof. It is quite wrong to state, therefore, that 990 coins
would be accepted in this market in payment of 1000 ch'ien, because this
number of loose coins tendered would be refused. A parallel can be seen
in a coinage system in which there is a premium on the coin over its bullion
content. If the coin contained, say, 500 grains of silver alloy and was ac-
cepted in payment of the same debt payable in 505 grains of uncoined
monetary bullion, the situation would not require comment. A closer
parallel in the silver sector was the practice of the more wealthy Tainan
merchants, who packaged rolls of fifty dollars and sealed them with the
stamp of the firm, guaranteeing their quality. These rolls passed current at
a premium, which was paid for the merchant's guarantee, because the certi-
fied roll of dollars was now a more convenient method of payment than
the individual coins, the worth of which might be individually disputed. 20
Italian money changers in medieval Lucca used sealed purses of coins which
similarly passed at a slight premium. 21
The passing of fewer than 1000 coins in payment of a debt of 1000 ch'ien
is the result of a premium being placed on strung coins. Stringing was re-
quired more frequently than coining and was apparently paid for directly
by those using the strings. The cost of this system was, therefore, of more
direct concern to users than was the cost of minting coins, and the question
of who actually bore the burden of this cost was of more immediate interest.
Whether the cost was shifted forward or borne entirely by the person secur-
ing the string from the money changer would depend upon such factors as
the responsiveness of market curves and the bargaining ability of the persons
involved. It might be safe to assume that in any transaction in which a
foreigner was involved he bore — or thought he bore — the cost of the
stringing.
There were situations in which the economic power of one party was
overwhelmingly greater than that of the other. In the payment of taxes the
government was in such a strong position that the cost of stringing was
borne entirely by the person tendering the cash. This might involve the
taxpayer in a double cost, at least to the extent that he had borne the cost
of the original stringing. If the taxpayer took 1000 loose coins to the money
changer and received a string of 990 in return, he could use this to make
market purchases priced at one ch'uan but could not use it to pay a tax debt
of one ch'uan, for the government insisted on payment of 1000 strung cash
coins for every assessment of 1000 ch'ien. The taxpayer was thus forced to
tender additional loose coins, or "string money" — ch'uan-sheng ch'ien —
or to have a special string made up in which he paid the money changer

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5б Money and Monetary Policy in China
1010 cash for a full string of 1000 coins. But if the government owed a
debt of one ch'uan, it paid out a string current in the market, assumed above
to contain 990 coins. The government might even remit to a higher author-
ity at 990.22
There are two complications to consider if the degree of realism is to be
adequate for an appreciation of the actual operation of the system. First,
the coins were not all of uniform quality; secondly, several types of strings
were current in a particular locality.
In the market example above, assume that the 990 coins were all good
coins — "good" being a relative term, the exact dimensions of a good coin
depending upon the state of the coinage in the particular locality. In the
period of this study, "good" would not refer to coins of the full legal di-
mensions but rather to coins which were the best of those current, excluding
perhaps a few unusual coins which might approach legal dimensions. Now
if it is assumed further than on receiving his string of 990 good coins for
the 1000 unstrung coins tendered, the customer objects and demands a
greater number of coins, then if strings of 990 good coins are indeed cur-
rent in the market, the protest will fail unless the customer is willing to
sacrifice quality. Upon rejecting the string of 990 good coins he might be
offered a string of 995 coins which, however, contained several spurious,
foreign, or extremely thin coins to offset the cost of the extra five cash. Such
a string might pass current with the 990 good cash string for payment of
one ch'uan.
The 990 cash string would, however, be current only in certain markets,
while in other markets strings containing some other number of good coins
or some other number of coins of mixed quality would be current. Types
of cash strings varied in the number of cash they contained, in the propor-
tion of good coins they contained, or in both. The strings had their indi-
vidual names, which were colloquial and varied from place to place, but
each type of string was peculiar to a particular market and the tendering
of the wrong string would, if it were accepted at all, require an adjustment
which would be the consequence of individual bargaining. If, for example,
a string of 990 good cash were current in the meat market but a string of 985
mixed coins were tendered, the shopkeeper, refusing to accept it, might re-
quire the customer to purchase the correct type of string from the money
changer, or he might accept the string upon payment of a specially deter-
mined number of additional cash coins. Yet tender of this 985 string in the
fuel market, where, let us assume, it was current, would incur no penalty
and would be readily accepted.

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The Cash Sector 57
The cash shops or money changers had, therefore, an additional task.
They were required not only to string individual cash but to change the
composition of various strings to make them current. Thus the butcher in
the course of his business usually received strings of 990 good cash coins in
the above example, but if he wished to buy fuel he would require a string
of 985 cash of mixed quality. Although he might make an individual bar-
gain with the fuel dealer or might restring the cash himself, he would most
likely have recourse to the money changer. For stringing was something of
a skilled task requiring the recognition of each of the many types of cash
coins in the market, the detection of tampered coins and counterfeits, and
a knowledge of their current value. Even the physical stringing required
practice, for strings containing cash of differing sizes were carefully tapered
from one end to the other, and notches in the string signified the number
and type of cash involved.23
Cash—a full-bodied coin. Despite its small purchasing power, the cash
was not a subsidiary coin but was money in its own right. Subsidiary coins
— coins convenient for making payments in fractions of the principal coin-
age and so unimportant economically that their intrinsic value was usually
of no relevance — did exist in the silver sector of the treaty ports and the
Chinese mints produced them after 1889, but cash maintained their full-
bodied status. An attempt was made in the first years of the dynasty, Shun-
chih lO-K'ang-hsi 2 (1653-1661), to make the cash subsidiary to the tael,
with each cash coin worth 0.001 tael, but the ratio could not be maintained
and the cash coins bearing the inscription "i-li," or 0.001 tael, were with-
drawn. 24
The cash and silver systems were part of a parallel bimetallic system and
their relative values were determined by market forces. The changes in the
cash-silver exchange rate had to be taken into consideration in any com-
mercial venture, but, as the factors involved in the changes appeared esoteric
to the foreign merchant, internal trade was the more easily kept in the
hands of the compradore and the local Chinese merchant. There was thus a
corresponding loss of foreign control of the export trade, which not only
was a source of annoyance and complaint to the foreigner but also, by
keeping him economically separated from the point of production, made it
impossible for him to enforce his specific demands relative to the quality of
the product brought down to the coast for sale. These serious consequences
cannot be attributed fairly to the cash system alone, however, as the Chinese
had other, surer ways of maintaining control of their internal trade.
As the supply of cash coins was, in the short run at least, relatively un-

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58 Money and Monetary Policy in China
responsive to an increase in demand, the price of silver in terms of cash
was subject to both long run and short run influences. In the long run the
national factors affecting the price of copper at the mints, the state of na-
tional security, and the changing prices of copper and silver in external
markets would affect the supply of the metals and the coins and so their price.
Short run changes were caused by seasonal variations in the relative demand
for silver vis-ä-vis cash. For example, it was customary to repay loans on
the Chinese New Year. In anticipation of this the rate of exchange would
move heavily against silver as people attempted to secure cash coins in order
to settle their accounts.25 Since this increased demand for cash would be
nationwide, it would not be possible to import cash from a neighboring
community, and a higher price would have to be paid for the coins to induce
them from hoards or from the money changers who had been holding them
against such a rise in price. Money changers and cash shops were skilled
in such transactions and by their handling of the rates made a living while
performing an essential function in this type of monetary system. The profit
they made was limited by the ease of entry into the profession and the corre-
spondingly large number of cash shops in a community.

The Three Cash Systems

The three cash systems may be characterized by the number of ch'ien


units of account which could be ideally satisfied by the tender of one cash
coin. The qualifying "ideally" is added in order to anticipate the section on
small payments, because debts requiring tender of less than 20 to 25 cash
coins were usually expressed in the now familiar ch'ang-ch'ien system. The
ch'ang-ch'ien system was one, then, in which the tender of one cash coin
satisfied a debt of one ch'ien, or, to distinguish this unit of account from
the ch'ien units of the other systems, one ch'ang-ch'ien. In the chung-ch'ien
system, tender of one cash coin would satisfy a debt of two {chung-)ch'ien;
in the hsiao-ch'ien system, 6.25 (hsiao-) ch'ien or 100 cash coins would
satisfy a debt of 625 ch'ien. This implies that there were three different ch'ien
units of account, distinguished by the qualifying characters ch'ang, chung,
and hsiao (long, middle, and small). Should these prefaces be omitted, the
type of system can usually be determined by its location, for each is typical
of a particular area.
The basic differences had logical consequences. Assuming that the cash
coins were everywhere of equal quality and that the ideal exchange rate
between silver and copper existed, under all systems the debt of one tael

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The Cash Sector 59
would be satisfied by tender of 1000 cash coins. A string of cash is defined
as that number of strung cash coins which would satisfy a debt of 1000
ch'ien or one ch'uan, less any customary number in payment for the services
of the cash shop. In the ch'ang-ch'ien system, therefore, a string of cash
would contain 1000 cash coins less some customary amount; in the chung-
ch'ien system, however, as one cash coin satisfied a debt of two ch'ien, a
string of cash would contain but 500 coins (less service charge). A similar
adjustment must be made for the hsiao-ch'ien system. Thus an ideal model
showing the interrelationship of the three cash systems and tying them to
the silver sector should reflect the relationships of three sets of units of
account and the consequently different "strings," while the relationship
between the weight of silver and the actual number of full-weight cash coins
remains unchanged.
The ideal model revised,26 The ch'ang-ch'ien system in its ideal form is
identical with the cash sector model presented in the previous chapter (see
Figure 1). The chung-ch'ien system differs in that a single cash coin can
satisfy a debt of two ch'ien, as shown in Figure 2.

Figure 2. The chung-ch'ien system: ideal model

1 tael = 2 ch'uan - = 2000 ch'ien


I I.
1000 cash coins (i.e., 2 strings of cash)

Symbols: = is equal to
= is defined as
J. is satisfied by

Figure 2 is an ideal model in the sense that the number of cash coins
which would pay a debt of one tael is still in agreement with the weight
and value relationships established by the terms themselves. In the chung-
ch'ien model the number of cash coins required to satisfy a debt of one tael
remains the same as in the ch'ang-ch'ien model, but since each coin satisfies
twice as many ch'ien units of account, the model has had to be changed by
doubling the units of account equal to one tael. Note also that as a string
of cash was 500 (the number of cash required to settle a debt of one ch'uan),
if the actual exchange rate were, for example, such that 1 tael was satisfied
by 1500 cash, settlement would be with three strings of cash worth 3000
ch'ien or three ch'uan.
In the hsiao-ch'ien system, 1000 ch'ien can be satisfied by payment of but
160 cash coins; therefore 1000 cash coins would pay a debt of 6250 ch'ien.
But this would introduce the complications of payments of less than a full

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бо Money and Monetary Policy in China
string. To avoid this, consider the model in Figure 3 in which eight taels
are being equated.

Figure 3. The hsiao-ch'ien system: ideal model"

8 taels = 50 ch'uan = 50,000 ch'ien


I I
8000 cash coins (i.e., 50 strings of cash)
a
As an exception, in Heilungchiang one tiao could be satisfied by 100 rather than
160 cash coins, and the ideal model would have to be modified accordingly.

The three systems will now be considered in detail, but reference should
be made to these models. A model combining the three systems may be
found at the conclusion to this section.
The ch'ang-ch'ien system, which was typical of all China Proper, except
Chihli, Shantung, and Kansu, had two units of account, the ch'uan and
the ch'ien or ch'ang-ch'ien?1 One thousand ch'ien were equal in value to
one ch'uan. A debt of one ch'ien could be satisfied by payment of a single
standard cash coin; a ch'uan by 1000 such coins or by a lesser number as
customary in the particular market. In some localities the ch'uan was known
as the min, or tiao, or, as in Shanghai and Fukien, simply as i-ch'ien (one
thousand), but this was a matter of local custom. 28
The chung-ch'ien system, which was typical of Chihli, Shantung, Kansu,
and Kirin, also had two units of account, the ch'uan or tiao and the ch'ien or
chung-ch'ien. As before there were 1000 ch'ien in one tiao, but a single cash
coin could satisfy a debt of two chung-ch'ien, and 500 or some lesser num-
ber as customary in the market could satisfy a debt of one tiao. Thus if
the price were three tiao, 1500 standard cash or some slightly lesser num-
ber would be paid in settlement. The origin of this system, often confusingly
described as the system in which one equals two, 29 probably dates to the
existence of small cash coins cast in the K'ang-hsi period (1662-1723) which
were current at 2:1 in terms of standard cash.30 This explanation assumes
that in the capital and surrounding provinces the unit of account remained
tied to the smaller coin, which may have been relatively more common there,
but that in the rest of China Proper the ch'ien unit of account continued
to value the standard coin. In the chung-ch'ien system tiao, min, and \uan
all appear as alternative names of the unit of account payable by "a string
of cash," and ch'uan would appear to be a term usually reserved for use with
the ch'ang-ch'ien system.
The chung-ch'ien system was in use in the Peking commercial markets,

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The Cash Sector 61
where the unit of account was referred to as the ching-ch'ien or "metropoli-
tan cash." 31 The eccentricities of the Peking payments system in the period
of the Hsien-feng inflation (1853-1861) are considered in Chapter VI. The
so-called "big-cash," a product of this inflationary period, survived through
the period 1861-1887, and its use requires comment. The big-cash (ta-ch'ien)
coins were marked tang-shih or "worth ten" and were intended to be ac-
cepted for debts of 20 ching-ch'ien. By the end of Hsien-feng (1861) they had
depreciated and were accepted as worth two or three standard cash or five
ching-ch'ien32 A debt of 100 ching-ch'ien might be satisfied, therefore, by
payment of 20 big-cash. But their original face value affected the number
of big-cash per string — 50 for a full string and 10 in a sub-string.33 In Peking,
therefore, a debt of one tiao might be satisfied by payment of four full
strings of 50 big-cash each, whereas in other localities using the chung-ch'ien
system and standard cash coins, a tiao would require payment of five sub-
strings of 100 standard cash each.
The hsiao-ch'ien system was typical of Fengtien and Ying-kou and had
tiao and ch'ien — \uan-tung-ch'ien or tung-ch'ien — units of account, but a
debt of a tiao could be settled by the payment of 160 cash coins. The 160
coins were strung together, and there was thus no sub-string in the hsiao-
ch'ien system 34
The distinctions among the three systems may be clearer after reference to
the combined ideal model shown in Figure 4. These three systems are but

Figure 4. The three cash systems: ideal model


Silver sector Cash sector

ch'ang-ch' ten chung-ch'ien hsiao-ch'ien


8 taels = 8 ch'uan = 16 tiao (ch'uan) = 50 tiao (ch'uan)

8 taels = 8000 {ch'ang-~)ch'ten = 16000 (chung-ch'ien = 50,000 (jung—ch'ien


i 1
8 liang of 8000 cash coins
monetary silver J. or j,
8 strings of cash 16 strings of cash 50 strings of cash

starting points in any discussion of the cash sector. Already the Peking and
Heilungchiang exceptions have been noted. The figures below provide some
indication of the variation in the number of cash coins per tiao or ch'uan,
although each figure may be said to be a variation of one of the three systems
— ch'ang, chung, or hsiao 35

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Cash per tiao or ch'uan in selected towns
Manchuria
Fengtien (hsiao-ch' ien system) 160
Ying-kou (hsiao-ch'ien system) 160
Heilungchiang (hsiao-ch' ien system) 100
Kirin (chung-ch'ien system) 500
Chihli (chung-ch'ien system)
Huai-lai 330
Tientsin 490, 488, or 480
Chang-chia-k'ou 320
Shansi (ch' ang-ch' ien system)
Taiyuan 820
Feng-chen 960
Yang-kau (chung-ch'ien system) 320 (called min)
T'ien-chen 960 (a ch'uan equal to 3 min)
Ning-wu 900 (ch'uan)
Kuei-hua-ch' eng 1000 (ch'uan), 220 o r 5 0 0 (min)
Shantung (chung-ch'ien system) 490
Tsinan 490
Shensi 700
Kansu
Lanchou (chung-ch'ien system) 485
Szechuan
Chungking 984, 980
Honan
Nanyang 980
Hunan
Changsha 997, 960
Yo-chou 997, 960
Hsiang-t'an 980
Hupeh
Wuchang 980
Kiangsi
Anhui 990-974
Kiangsu
Fukien 1000

Such a tabulation is, however, of only limited use. First, the number of
cash per string is only one factor in the payments system; unless it is known
whether the strings were "full" or "empty" it is difficult to assess relative
differences. Secondly, quality of the coins to be strung might be responsible
for differences. And thirdly, the sources do not give dates for the informa-
tion, although it would appear to be based on surveys made during the fifty
years covered by this study. But during this period there were, of course,

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T h e Cash Sector 63
frequent variations, depending on the state of supply of coins in the local
market.
Smaller transactions. In the next two sections the generalized statements
about dealings in the cash sector will be supplemented first by a discussion
of transactions requiring the payment of less than a string of cash and
secondly by the introduction of Chinese terminology as applied to cash
transactions.
In the following example it is assumed that the area is one using the
ch'ang-ch'ien system and that the total of purchases in a particular shop is
valued at 125 ch'ien. The first 100 ch'ien would be satisfied with the pay-
ment of a sub-string of cash worth 100 ch'ien. This might involve the pay-
ment of 99 strung coins, or whatever figure was appropriate for the market.
The remaining debt of 25 ch'ien would be settled by the payment of 25 cash
coins of the same general quality as those found on the string. Thus, for
example, if four coins of the 99 strung were allowed to be inferior, presuma-
bly one coin of the 25 could also be below average. The more spurious or
counterfeit coins tendered, the greater the total number of cash coins which
would be required to pay the debt of 25 ch'ien. This part of the transaction
probably required more discussion than the tender of the full string which
had been constructed professionally. On seeing the type of cash to be tendered
in payment of the additional 25 ch'ien, the shopkeeper might have raised his
price in ch'ien, rather than comment on the poor quality of the coins and
demand more coins to meet the same debt. But whatever the manner of
expression, the conclusion is that the number of cash to be paid depended
upon the standard deduction for the string appropriate for the market and
on the agreement concerning the number of remaining coins to be paid.
In the above example, if all the coins were appropriate for the market, 124
would be accepted in payment of 125 ch'ien, providing 99 of these were
properly strung.
Small payments in the chung-ch'ien system were complicated by the fact
that for the smallest transactions quotations even in the chung-ch'ien area
were in ch'ang-ch'ien and were payable at par with current cash coins. The
usual method of expressing this was to state that for debts of over 20 cash,
two equals one! If the seller expected payment of 20 coins or less, he quoted
his price in ch'ang-ch'ien; if more than twenty coins were expected, he
quoted his price in chung-ch'ien, the system in which one cash settles a debt
of two ch'ien.3e Then a price of 50 ch'ien could be met with tender of 25
standard cash coins of dimensions customary in the particular market. If,

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64 Money and Monetary Policy in China
however, the price quoted were five ch'ien, five such coins would have to be
paid. But the dividing line, which in the above examples was met at 20, was
not everywhere the same, and any price of 50 ch'ien or less must be
examined with great care.
The hsiao-ch'ien system followes the chung-ch'ien to the extent that the
smallest prices may be quoted in ch'ang-ch'ien. Above this variable minimum
figure there was an additional problem. Except in Heilungchiang, 1000
hsiao-ch'ien could be settled by payment of 160 coins, but exact division can-
not be made of all prices between, say, 10 and 100 hsiao-ch'ien, and so
smaller payments were made according to the following conventional scale:37

Debts expressed in Actual number of Scale in


bsiao-ch'ien cash to be paid Heilungchiang
100 16 10
90-99 14 9
80-89 13 8
70-79 11 7
60-69 10 6
50-59 8 5
40-49 6 4
30-39 5 3
20-29 3 2
10-19 2 1

Chinese terminology. The purpose of this section is to summarize part of


what has been described above with the introduction of Chinese terminology.
For each of the three systems — ch'ang, chung, and hsiao — there were two
basic types of strings: the full string, tsu-ch'ien or man-ch'ien, and the in-
complete string, hsü-t'ou-ch'ien, or simply hsä-ch'ien.ss The full string was
composed of 1000, 500, or 160 cash coins depending upon the system. The
test of a full string was its ability to pay taxes at par, and therefore it was
usually composed of all good coins, or, if not, of more than 1000, 500, or
160 coins of mixed quality.
There were many kinds of incomplete strings, which were used for the
majority of payments in the cash sector. So many variations existed that it is
difficult to generalize, but a common method of designating a string was by
the number of cash in each sub-string.39 Thus the chiu-chiu-ch'ien or 99-
string might be a string of 990 cash, with 99 cash in each of the ten sub-
strings. If two cash had been subtracted from each sub-string, it would have
been a chiu-pa-ch'ien or 98-string.
These terms were equally applicable in the chung-ch'ien system. The

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The Cash Sector 65
chiu-chiu-ch'ien would still be a string in which one coin had been sub-
tracted from each sub-string — the string being composed, therefore, of 495
cash coins. Similarly, the 98-string would be a string of 490 cash coins. As
applied to the chung-ch'ien system, this may appear illogical since the im-
plication of chiu-chiu-ch'ien, for example, is that one ch'ien per 100 has been
subtracted, or in the chung-ch'ien system one half a cash per hundred chung-
ch'ien. This conclusion is correct but does not invalidate the remarks above
since there are 1000 chung-ch'ien to a tiao and so ten deductions of one half
a cash coin. But in Chinese ch'ien may refer to the coin rather than the
unit of account. If the phrase chiu-chiu-ch'ien is thus interpreted, and it
would appear reasonable that it should be, the same result follows.
These classifications are based only on the number of cash in the string or
sub-string and in themselves are incomplete. In certain areas the ten sub-
strings composing the string were not all composed of the same number
of coins. Such strings had individual colloquial names. But more important,
the classification by number does not cover variations in the quality of the
coins strung. In Kwangtung in the 1870's, for example, strings of cash were
classified according to the number of cash which would have to be added
to 1000 such coins if they were to be tendered to satisfy a debt of one tael.w

Case Studies

A complete account of the cash sector and its variations would require a
hsien by hsien survey for each of the fifty years covered by this study. But
there are already available contemporary reports on the monetary systems
of the treaty ports and of the provinces in which they were located.41 Any
description of the cash sector found in customs reports and treaty-port news-
papers and journals, however, refers to the system at that moment of time
only. Nor is it possible to accept uncritically the explanations given for the
peculiarities observed; they may be nothing but the attempt of some Chinese
informant, perhaps a merchant, to rationalize the system for the foreigner or
to agree politely with him that confusion prevailed. Nevertheless, these re-
ports do provide the basis for understanding local monetary systems.
Nanking. The Rev. Ε. T. Williams' report on the cash system of Nanking
covers the ground necessary for interpreting price and exchange data: an
exchange rate of 1500:1 between cash and the principal tael unit of account,
the nature of the cash coins circulating, the composition of the various strings
and sub-strings and their acceptability in given markets, and the description
of an imaginary money apparently unique to Nanking. 42

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66 Money and Monetary Policy in China
The composition of the cash strings was typical. The string used in the
silver market was composed of ten sub-strings: of these two contained 95
coins and were designated by a knot tied at the end of the string; the other
eight contained 98 coins. Thus the string contained a total of 974 coins —
of "good" coins, an adjective referring to a subjective judgment of the coins
considered as a set. In every sub-string there were, in fact, two or three small
or counterfeit cash, but this percentage was permitted. In making payment
for items requiring tender of more than one sub-string but less than one
complete string, sub-strings of 98 cash had to be used, except that for every
three or more sub-strings one 95-coin sub-string could be tendered, and for
every seven sub-strings or more two could be of 95 coins. For other markets
the quality of the coins varied, descriptive terms being applied to designate
the number of small coins in each group of ten; thus "i-chiu-ti" implied one
small coin for each nine good coins.
The hang-yin was a unit of account used for expressing debts arising from
marriages and funerals and in payments to yamen runners — the minor serv-
ants of local government offices.43 Despite inclusion of the Chinese term for
silver, the hang-yin could be satisfied by tender of whatever would satisfy a
debt of 700 ch'ien, a number which did not fluctuate with the ch'ien-tael ex-
change rate. This unit of account had become divorced from any direct rela-
tionship with silver and remained tied to the unit of account of the cash
sector; it had become, that is, an imaginary money.44
Wuhu. Similar in principle and yet varying in detail and terminology, the
composition of strings of cash in Wuhu provides a comparison to the
Nanking situation.45 The string used in the silver market also contained
974 cash, but these were distributed differently among the sub-strings, and
the sub-strings were arranged in pairs or "sections," two sub-strings lying
parallel to each other. The string of 974 cash was known as the "98-string,"
a term deriving from the fact that a 98-coin sub-string was required to meet
a payment of 100 ch'ien. Thus in reading of a "98-string" in some Chinese
market, one cannot be certain that the term applies to the complete string —
980 coins for a debt of 1000 ch'ien — without knowledge of the local system.
In Wuhu, and probably in Nanking, the "98-string" referred either to a sub-
string of 98 coins or to a string of 974.
Illustrative of the superior power of the tax collecting authority was the
likin string, composed like the 98-string of 974 cash, but all of these had to be
large and good, and 26 loose coins had to be tendered to make a "full string,"
the cost of constructing the string thus falling on the taxpayer. The "better

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T h e Cash Sector 67
class of trades" permitted a mixture of large and small cash, but all had to
be of Chinese origin; other markets permitted strings of varying quality
designated, as in Nanking, by the number of spurious coins in a set of ten.
Depreciation: Tamsui and Shanghai. There was built into the cash system
a natural tendency for an increasing percentage of cash to be small or
spurious and for the number of cash per sub-string to decline. Since the
money changers made up each string they could depreciate the currency
without actually tampering with the coin itself — although they were ac-
cused of this too — and thus escape general condemnation as counterfeiters.
In specific cases local magistrates ruled against certain practices with more
or less success, but the most effective check against these activities was the
protests of the customers. In Kiukiang, for example, the string was supposed
to contain 974 coins, but it was, in fact, often 970. If the customer was willing
to count his cash, he could successfully demand the four missing coins! 4 6
But time was with the money changers and, in the absence of legal output
from the provincial mints at least until 1887, the poor cash of yesterday would
be the good cash of today. Local officials would attempt to halt this counter-
feiting and tampering — a process similar to the addition of base metals in
larger proportions to the monetary silver alloy. Temporary success was pos-
sible and an energetic magistrate might succeed in stopping the circulation
of spurious cash if he were not thwarted by his local staff.47 This would
imply, however, a sudden decrease in the money supply, causing a sudden
movement in the ch'ien-tael exchange rate with consequent problems not
only to the cash shops and banks themselves but to all forms of business using
both copper and silver monies. Pressure would then be brought to bear on
the official concerned and the proclamation would be less vigorously en-
forced, if indeed bribery had not already curtailed its effectiveness.48
Perhaps the most dramatic instance of the success of such currency meas-
ures can be observed from the table of Tamsui ch'ien-Hai\wan tael ex-
49
changes during the period 1882-1891. In 1882 the cash were already so
debased that it took 2000 of them to equal in value one Haikwan tael. The
percentage of spurious coins increased until the exchange fell to 2840 in 1889.
The following year the average rate was, surprisingly, 1550. This sudden im-
provement in the cash position was due to a successful proclamation for-
bidding the use of spurious or debased coin. In 1889 the percentage of
"good" cash was estimated at 10 per cent, in 1890 at 70 per cent.
An example of an attempt to prevent the circulation of sub-strings con-
taining fewer cash coins is provided by a Shanghai magistrate who attempted

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68 Money and Monetary Policy in China
to force cotton merchants to deal in strings of 98 cash instead of 96. After
a short period in which trade was practically stopped, the magistrate was
prevailed upon to discontinue his efforts.50
The cash system is capable of endless such examples which are illustrative
of the basic principles. The more technical issues raised in the preceding
sections will be dealt with in the appendix.

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CHAPTER III

The Silver Sector

The low worth of China's only traditional coin, the cash, made its use in
larger retail and wholesale transactions impractical. Instead silver bullion
was current. A student of medieval coinage, aware of the complexities coins
add to the monetary system, wrote, "The most perfect instrument of pay-
ment would have been a system of account based only upon the weight of
fine metal." 1 A study of the bullion payments system of China will force
a reassessment of this judgment. Even in a simple bullion system, the unit
of account may fail to maintain a fixed value relationship with the weight
of metal after which it is named. The consequences of this variation and
other related problems are the subjects of the first part of this chapter.
In the eighteenth century European trading companies imported sufficient
dollars into China to make them a significant part of the money supply of
the Canton region. As more coins were imported their area of circulation
expanded, and they came to supplement and modify the traditional bullion
system. With a few exceptions dollars were not minted in China before
1889 and their supply and type were therefore beyond the control of the
Chinese authorities.2 Since their importance varied from town to town, de-
pending upon the trade these centers did with the port cities, the role of
the dollar in the local monetary systems also varied. The importance of the
dollar in certain south China cities was sufficient to cause the use of a
dollar unit of account, monetary bullion being quoted in terms of dollars of
account. Elsewhere prices were in taels, defined in terms of the weight and
fineness of silver bullion, dollars being accepted in payment at rates which
varied with the supply of and demand for the coin.
The second part of this chapter describes these problems and outlines the
role of the dollar in the monetary system of China. In both parts examples
are given which provide a model for further case studies. The more com-
plex systems in which the banks performed a contributory task are reserved
for the following chapter.

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7о Money and Monetary Policy in China

The Tael System

Tael, which is said to derive from the Hindu tola, is the standard trans-
lation for "liang," both when that term refers to a unit of account and to
a unit of weight.3 In the former case, to avoid confusion such terms as
"monetary tael" or "tael of account" may also be used, similar to the term
pound sterling. In this study, however, the term tael (italicized) always re-
fers to a unit of account, to the monetary tael; "liang" (not italicized) as a
unit of weight is not translated. But both tael and "liang" are the same
Chinese character; and, as with pound, the unit of account originally re-
ferred to the weight of monetary silver implied by its name, that is, a liang.
Thus an article priced at 50 taels would be exchanged in the ideal model for
50 liang of monetary silver. If this solved the payments problem, then bul-
lion would surely be the "perfect instrument" some have supposed it to be.
The inconvenience of dealing with bullion, however, suggests the use of
a special monetary form of bullion, which, while not as precise in form as
a coin, nevertheless creates some of the same problems. Then, too, in an
economy as localized as the Chinese, changes in the monetary demand for
silver would place a temporary strain on the monetary system which was
eased in ways not compatible with a simple silver standard. Finally, the
lack of standard weights and the primitive system of assay created their own
special problems. The use of bullion in the monetary system of Britain in
the latter part of the nineteenth century did not create problems of this
kind, but the essential difference would appear to be that in China bullion
was used for everyday business, both retail and wholesale; in the United
Kingdom bullion was usually reserved for use in the largest transactions, in
adjusting balances, and in international trade.
The monetary tael. The tael was, then, a unit of account. There were
many kinds of taels, each appropriate for a particular locality or market
within that locality. To quote prices, therefore, was to quote in a particular
tael which had its own name, even though customary usage might make it
unnecessary to state it. Thus tael prices in Shanghai were in Shanghai taels,
foreign customs duties were paid in Haikwan taels, taxes to the imperial
treasury in Kuping taels. Taels with the same name might not be payable
in the same quantity of silver, however, for even here the Chinese mone-
tary system remained a collection of differing systems. This complex pic-
ture may be simplified, however. The most important tael was that used in
the quoting of interregional or international rates of exchange. Foreigners

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The Silver Sector 71
often named this tael unit of account after the town to indicate its primary
importance; thus, in the examples below, the hsiang-p'ing tael was known
as the Nanking tael, the yang-li as the Hankow tael, and the yü-p'ing as
the Chungking tael. Other local taels can then be related to this basic unit
of account and the system set in order.
These many different taels can be classified as of two basic kinds — real
and imaginary. 4 By the very nature of the term, the tael (Chinese: liang)
valued a weight of monetary silver of a specified fineness, when silver was
quoted at par. If a tael was a real tael then the bullion it priced either existed
in the physical sense and was circulating in that community, or was con-
sidered the standard against which other silver was quoted. If a tael were
imaginary, then the monetary silver it defined did not circulate or was
not considered "standard."
The real tael defined the value of silver of a certain weight and fineness
considered standard in a particular market. When silver was at par, a tael
valued one liang of silver of this certain weight and fineness. The Nanking
tael or hsiang-p'ing tael defined a hsiang-p'ing liang (a certain weight, actu-
ally 554 grains) of silver .936 fine (a certain fineness).5 When silver was
quoted at par, a Nanking tael could be satisfied by payment of 554 grains
of silver .936 fine, that is, with one liang of standard Nanking silver. If the
particular sample of monetary silver tendered did not have a fineness of
exactly .936, its quoted weight was increased or decreased over its actual
weight to make up for the excess or deficiency of silver which the sample
contained. Not all silver would be exactly of the fineness of standard silver,
but it would be quoted at a premium or discount in relation to standard
silver to correct the difference.
An imaginary tael defined the value of silver of a certain weight and
fineness, but with this difference: No such silver circulated in the market,
and standard silver was defined in such a way that its relation to the unit
of account was other than unitary. In Shanghai, for example, the Shanghai
tael defined a ts'ao-p'ing liang of silver (a certain weight, actually 565.65
grains) of silver .9167 fine (a certain fineness). But Shanghai standard silver
had an arbitrary fineness of .935.® The relationship between the Shanghai
tael and the Shanghai sycee may be expressed as follows — a Shanghai tael
valued 0.98 liang of standard Shanghai sycee. If the actual silver in circula-
tion were more than .935 fine, a further modification would have to be made,
but the important relationship was between the imaginary unit of account
and the standard monetary silver for that market. The complications of the
Shanghai system are discussed in a later section.

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72 Money and Monetary Policy in China

The Hai\wan tael is an example of an imaginary money which had a


fixed relationship to another tael unit of account. For the purposes of this
chapter it may be said that the Hai\wan tael defined a quantity of silver
found by multiplying its fixed relationship with the principal trade unit of
account by the weight and fineness of standard silver as modified by the
relationship of standard silver with the unit of account. If the trade tael
was a real tael, then the relationship would be unitary, but in Shanghai, for
example, it would have been 0.98. The problem of the Hai\wan tael is
sufficiently complex to warrant its being the subject of an entire chapter
in this study. Essentially the tael was payable in a certain weight of pure
silver; in practice silver could only circulate in alloy, and the tael was pay-
able in a specified liang of a specified fineness, as customary in the particu-
lar market. There were thus two elements to the bullion valued by the
tael — weight and fineness — each with its particular name. The Peking tael
could, unless further specified, relate, for example, to a shih-p'ing liang of
\ao-yin (552.4 grains of silver 1.000 fine), a shih-p'ing liang of sung-chiang-
yin (552.4 grains of silver .980 fine), or an erh-liang-p'ing liang of sung-
chiang-yin (541.7 grains of silver .980 fine).7 Usually the tael was qualified
only by the name of the weight involved (the quality of the silver then
being known by custom) but, as in the Peking examples, both could be
given. In the Nanking example, only the weight name, hsiang-p'ing, was
necessary.
Monetary silver. Silver bullion in China was available in three main forms:
ingots, fragments, and bars. The first two are types of sycee or monetary
silver; the third, bar silver, was imported in this form and used almost ex-
clusively for international trade or, possibly, for hoarding.8 T o pass current
in monetary transactions, bar silver had to be converted into sycee ingots.
The most important form of silver bullion in China's monetary system
was the sycee ingot of approximately 50 liang, known as the "shoe of
sycee" and in Chinese called variously yüan-pao, tso-pao-yin, or tso-ma-t'i —
the last name, it is said, because of its imagined resemblance to a horse's
hoof, hence, in English, "shoe." 9 The chung-ting was an ingot of approxi-
mately ten liang; the hsiao-^'o or i(o-tzu, the small ingot of silver, might
weigh five liang or under. Colloquially these smaller ingots were sometimes
referred to as man-t'ou because of their resemblance to the shape of steamed
bread. When a payment required tender of portions of these ingots, the
correct amount would be cut off and weighed. Such a process would
eventually leave broken silver, sui-yin, or miscellaneous fragments, san-sui

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The Silver Sector 73
— one name for which, ti<hu or beads of silver, was again descriptive of
shape.10
This section is particularly concerned with the yüan-pao — the shoe of
approximately 50 liang of monetary silver — and its relationship to coinage.
The preparation of silver for circulation, that is, its reconstitution in the
form of the yüan-pao, had many of the characteristics — and problems —
of minting. Bar silver imported from the United Kingdom or the United
States did not pass current as a means of payment, although it might be
held by the banks if sufficient sycee or monetary bullion were already in
circulation. Thus exports of bar silver from Shanghai were re-exports. The
banks sent their bar silver to the Shanghai silver shops, lu-fang, to be
melted and molded into shoes of sycee, yüan-pao.11 The cost of this opera-
tion can be calculated by subtracting the amount of silver returned by the
lu-fang from the amount of silver sent to the lu-fang. Since bar silver was
quoted in Shanghai currency taels per 100 Canton liang (579.84 grains per
liang), whereas Shanghai sycee was quoted in ts'ao-p'ing liang (565.65
grains); and since bar silver was .998 fine while the sycee turned out by
the lu-fang was .985 fine, the following relationship between the two is
mathematically evident: 100 Canton liang of bar silver is equal to 103.9
ts'ao-p'ing liang of Shanghai sycee .985 fine, or 111.6 Shanghai (monetary)
taels. The cost of having 100 Canton liang of bar silver melted and reshaped
will be revealed if the value of Shanghai sycee returned from the lu-fang
is less than 111.6 taels. Empirical evidence indicates that for every 100 Canton
liang of bar silver sent to the lu-fang, only 110.9 taels would be returned.
This represented a nominal charge of 0.7 per cent for the services of the
silver shop. The word "nominal" is included because in fact the sycee would
be light in weight by 0.2 per cent and less pure by another 0.2 per cent.
Despite this the shoe would pass current at 110.9 taels. That shoes passed
current at a rate greater than their intrinsic worth is evidence that a premium
was placed on shoes over bullion, similar to that placed on coined as op-
posed to uncoined bullion or on strung as opposed to unstrung cash. This,
however, made no apparent difference to the domestic user, the additional
0.4 per cent cost of the lu-fang being borne by the person selling the sycee to
the banks for export in the form of "country silver." The total charge of
"coining" was, therefore, 1.1 per cent, of which 0.4 per cent was hidden by
the circulation of a debased bullion.12
The lu-fang, having manufactured a yüan-pao, marked it with the weight
in ts'ao-p'ing liang and the fineness in relation to the Shanghai standard of

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74 Money and Monetary Policy in China
.935. This mark was signed by the manufacturer and any fraud could be
claimed against him; in practice the shoes, although slightly debased, never-
theless circulated as marked. As a check the shoes were then sent to the
\ung-\u chü, or public assay office — "a sort of court of arbitration where
the arbitrators are known to be incompetent, but are the best to be had." 1 3
The weight and fineness of the shoes was verified by the \ung-\u's mark
and the shoe thus became current.14 As the \ung-\u was usually appointed
by the lu-fang or by the bankers' guild rather than by the Chinese authori-
ties, the evidence is that he erred, if at all, in favor of the lu-fang, but his
presence gave confidence to the users of sycee and prevented the grosser sort
of debasement which occurred in Hankow, Canton, and Tientsin. 15 Ex-
cluding any consideration of bias, the estimates of the \ung-\u, depending
upon relatively inaccurate weighing and assay methods, could not be as
accurate as those of the Calcutta mint, with which they were sometimes
compared. In Shanghai a touchstone was used and judgment given on the
basis of the color of the alloy; yet the result was sufficiently accurate for
the requirements of the Chinese monetary system.
The simple bullion now had a formal shape and a formal mark thereon,
declaring the value in terms of the unit of account at which it was to pass
current. As already noted, a slight premium was placed on the shaped
bullion to cover costs — a parallel with a coinage system. As the mint charge
for coining a British dollar in 1895 was 1 per cent compared to 1.1 per cent
for shaping the shoe of sycee,16 the Chinese attitude towards silver coinage
was probably not dictated by its cost.
Large payments in silver were made with boxes of 60 fifty-liang shoes of
sycee, the total weight of which would be over 3000 liang or 242.5 pounds
avoirdupois, requiring two coolies to lift each box.17 The expense of such
transactions encouraged the use of gold, when available, and furnished the
opportunity for remittance banks to minimize physical transfer of funds
between important commercial centers, providing at the same time a link
between the local monetary systems of China.
Payments in bullion. The tael unit of account valued a quantity of mone-
tary silver. When prices were quoted in taels, monetary silver — or dollars
at the market rate of exchange — was expected in payment, the actual quan-
tity depending upon the relationship between monetary silver, especially
the yüan-pao, and the tael unit of account. This relationship is the subject
of the present section.
Chinese official documents state the fineness of bullion in parts of 100
corresponding to the touch system, but in the market silver might also be

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The Silver Sector 75
quoted in terms of a standard silver. In the example of the Nanking tael,
standard silver would be .936 fine; in the case of Shanghai, although the
unit of account denominated a liang of silver .9167 fine, this would not be
standard, since the unit of account was actually imaginary — Shanghai
standard silver was arbitrarily established as .935 fine. The quality of mone-
tary silver in terms of a standard was quoted as a betterness per shoe of
50 liang. Thus if a shoe of exactly 50 ts'ao-p'ing liang were marked "2.65
premium" in Shanghai, the fineness would be .98455, since this is the result
of adding 5.3 per cent of .935, or .04955, to the standard fineness.18
A variation of the touch method was used in certain commercial centers
in the Yangtze valley. In Wuhu, for example, a 50-liang shoe of pure sycee
1.000 fine was said to be "thrzz-tael touch." This was the highest quality;
impurities were then subtracted from "3." In quoting the quality of mone-
tary silver 0.1 was subtracted from the arbitrary "3" for every 0.1 liang of
impurity per 50 liang. Thus two-nine (2.9) sycee was bullion with 0.1 liang
of impurity per 50-liang shoe or 0.2 per 100 liang and was thus .998 fine.
Silver .986 fine would be quoted at a touch of two-three (2.3). 19
The quality of monetary silver might be quoted, then, in one of three
general ways: directly in millesimal fineness or touch; in relation to a
standard; in relation to the impurity. These last two were always per shoe
of 50 liang, that is, per yüan-pao. Shanghai silver, even beyond the limits of
Shanghai, might be quoted in Shanghai style as so much better than .935
standard silver, but like all sycee it was subject to reassay and revaluation by
the local \ung-ku, if any, or by local merchants. This was one of the costs
of the system.
But eventually the significance of the quality rating depends upon the
relationship of the bullion to pure silver or silver 1.000 fine. No such silver
circulated in China, and, given the rough methods of assay, it is doubtful
if there was ever any accurate concept of chemically pure silver. In con-
sequence Chinese evaluations do not always correspond to Western assays,
and payments to the imperial treasury, demanded in "pure silver," were
made in silver less than 1.000 fine. If, therefore, the ultimate quality standard
is the actual sycee sent to Peking, ratings of other sycee will be higher than
a Western-style assay would indicate. Some writers have taken the quality
paid the emperor to be by definition 1.000 and have rated all other sycee on
this scale.20 It is more in keeping with commercial practice to base calcula-
tions on the Shanghai assays, since they could not differ greatly from the
foreign scale, given the flow of silver into and out of Shanghai and the
consequent need to maintain some correspondence in quality ratings.

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76 Money and Monetary Policy in China
Kuping taels, in which taxes were paid, and Haihwan taels, in which cus-
toms duties were paid, should be rated through the fixed formulas which
related them to local units of account. Quality ratings should take 1.000 to
indicate chemically pure silver, and other millesimal or percentage quality
rating scales should be changed thereto, providing the basis of the scale is
known.
Where a yüan-pao was assayed and found to contain silver of a purity
greater than standard, the premium was often added to the basic weight of
the shoe. In the previous example of the Shanghai sycee bearing a premium
of 2.65, and having a fineness therefore of .98455, if the shoe weighed exactly
50 liang it would be quoted at 52.65 liang. The heavier weight compensated
for the additional purity. If the unit of account valued a liang of standard
silver, such a shoe would be worth 52.65 taels?x But a tael might not value,
that is, might not state the market price of, a liang of standard silver, either
because the tael was an imaginary money, as in this Shanghai example, or
because sycee and the unit of account were not at par. The former case is
simply a matter of arithmetic; the latter has some economic interest.
Although a tael unit of account was defined in terms of a given quantity
of pure silver, either directly, through relationship to standard silver, or
indirectly through another unit of account, the fact remained that the tael
was a unit of account, sycee was money, and the relationship between them
was subject to change. The defined weight of sycee might or might not be
valued by its tael in the market, for sycee was from time to time quoted
at a premium or a discount. The unit of account in effect defined a normal
quantity of silver; the actual quantity depended upon the supply of and
demand for monetary silver. Having settled the price of a commodity at,
say, 50 taels, the next problem might be to fix the price of the silver to be
offered in payment.
There were several reasons why the tael price of sycee did not change
daily: first, the banks, with their transfer system working on a principle
similar to the checking account, provided temporary flexibility; secondly,
seasonal variations in demand for sycee could be at least partially anticipated;
and thirdly, the tendency for money and the unit of account to remain fixed,
reinforced by the taelAiang nomenclature itself, which implied a fixed re-
lationship, made it more likely that changes in the supply and demand for
silver should be manifested in the interregional exchanges or in the local
commodity price level, rather than in a changed relationship between money
and the unit of account. Some sycee contained gold impurities, and, where
this was suspected, would pass at a premium for this reason.22 But such

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The Silver Sector 77
sycee was then exported to Europe where the gold could be recovered. The
sycee was then purely a commodity of trade, and no longer part of China's
money supply.
The risks created by changes in the price of sycee were of the same nature
and order as those involved in contracting for forward delivery of a com-
modity without fixing the exchange. Thus if a merchant having funds in
Shanghai contracted for delivery of tea in Hankow six months forward but
failed to make any provision for having Hankow funds available at that
time, if the Shanghai rate on Hankow went against the former center when
funds were to be moved, or if, when transferring credits to Hankow at a
stable rate of exchange, sycee was found to be at a premium there, the con-
sequences to the merchant were the same. If this need had been anticipated,
silver might have been bought elsewhere and moved to the place of payment.
Liquidity crises could be caused by incorrect estimates of needs. If precau-
tions were not taken, a rise in the price of silver in the local center might
cause the merchant a loss, unless settlement could be delayed until funds
could be moved from a center in which the premium was lower. If the rise
in silver price merely reduced profits, the transaction would take place pro-
viding the profit still to be made was greater than that involved in use of
the funds for arbitrage. In the tea trade, although the price either of the
tea or of the sycee might not have been agreed upon in advance, the foreign
merchants might contract for tonnage on the ships and thus be under
pressure to buy rather than lose the cost of the freightage and possibly the
foreign market.23
There were two further causes for failure of the unit of account to value
one liang of the local standard sycee, and both have parallels in the cash
sector. First, different quantities of standard sycee might be expected in
payment of a tael in various markets, and secondly the sycee was liable to
debasement. In the first case if the price quoted was "one tael" the amount
of sycee to be paid, assuming sycee to be quoted at par, would depend upon
the custom of the market. Thus in Canton if cotton were quoted at one
tael, only 0.97 liang of current sycee would be paid; in retail shops 0.974
liang satisfied a debt of a tael?* To pay foreign customs duties, however, one
tael required payment of 1.07 liang of current sycee.25 In the last mentioned
example this difference can readily be ascribed to the fact that customs du-
ties were stated in terms of the HaiJtwan tael, that is, in a different unit of
account. But unless it is assumed that each type of payment has its own
unit of account, it is manifest that, just as the composition of a string of
cash varied according to the product purchased even though the price might

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78 Money and Monetary Policy in China
in all the cases be one ch'uan, the amount and even quality of the sycee
tendered in payment of a tael might also vary. However, the evidence avail-
able suggests that variations in payment of the same tael unit of account
were less frequent in the silver than in the cash sector. Recognized units of
account, as for example the Kuping and Hai\wan taels, would be paid in
amounts which differed from the local unit of account used in normal com-
mercial transactions. But the existence of local payments arrangements can-
not be ignored and their possibility cannot be disregarded.
These differences between taels enabled merchants and banks to receive
payment according to one rule and pay according to another.26 The local
authorities were able to collect duties on the higher Haikwan scale and re-
mit in Kuping or treasury taels?4 Local taxes would be paid in current sycee
plus a premium to give it the quality required by the Kuping standard, but
these receipts would be noted simply as taels, and to the extent the local
authority was ordered to retain its revenue and pay out on imperial in-
structions, it was able to profit by paying out at the local rate and keeping
the undisclosed difference.
Dealing in bullion was sufficiently inexact to affect the nature of the tael
system itself. The imperial government probably accepted silver ranging in
touch from 95 to 100 as pure, and the base of "fine silver" was, as has been
said, uncertain.28 This and the inaccuracy of assay made estimates of fineness
somewhat arbitrary and, if not settled by a \ung-\u, subject to negotiation.
But such inaccuracy encouraged debasement, and debasement created its own
problems. The more blatant forms, if practiced by a limited number of deal-
ers without the tacit approval of the proper guild, were similar in nature to
counterfeiting. Scooping out the center of a shoe and substituting base metal,
sweating, chipping, attempting to disguise the amount of impurities — all
these were attempted, and the consequence was in reality a counterfeit,
spurious, or imperfect yüan-pao. But the effect was less permanent because
it did not have the sanction of the bankers' guild, nor were the offending
shoes difficult to melt down for recasting as a current shoe with the proper
silver content. A coin once altered and detected must be taken out of cir-
culation if the currency laws are to operate; the making of the yüan-pao
has been compared with the casting of coins, but the process was less formal,
less bound by organizational and statutory complications. A defective shoe
could be taken back, remelted, and corrected on a private basis. The de-
basement problem was more serious when it was "official."
A degree of "official" debasement was covered by the premium placed on
monetary sycee as opposed to bar silver or unfashioned silver bullion. This

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The Silver Sector 79
was part of the cost of manufacturing the shoe of sycee. But in the absence
of an effective \ung-\u, and since the lu-fang or their equivalent in other
commercial centers operated without close government supervision, gradual
debasement might be expected. This might not be noticed for a relatively
long period since current shoes of incorrect quality could be brought back
to the maker, since inaccuracy might be used as an excuse, and since in
any case slight deviations made little difference if the shoe would pass as
marked. But if the debasement continued, it might be challenged either by
the tax collectors, thereby setting up a chain reaction of objections by other
users, or by merchants whose trade required their remitting the sycee to
other centers where it would be reassayed. Depending upon the economic
power relationship between payer and payee, the tael would be officially
devalued, the sycee brought back to standard, or a compromise concluded.
Debasement might be one method of expressing a movement of the ex-
changes and would be the equivalent of quoting sycee at a premium.
The use of bullion in the Chinese monetary system is therefore seen to
involve many of the problems normally associated with a coinage, although
their solution was less costly and easier to accomplish. The problems dis-
cussed will be more easily understood if examples are now presented to
illustrate them. The material is taken directly from contemporary reports,
with the terminology changed to fit the models established in this study.

Han^ou/.29 With the exception of a few months in 1865, Hankow had no


\ung-\u, and there is clear evidence of the debasement of current sycee. The
tael used in markets dealing with foreign trade was the yang-li tael, 108.75
of which equaled 100 Hai\wan taels. Shanghai sycee circulated in Hankow,
but because of the lack of a \ung-\u there were cases of 2.8 sycee, that is,
sycee 5.6 per cent better than standard Shanghai, and 2.4 sycee, or 4.8 per
cent better, being accepted at the same rate, with the result that the 2.4 sycee
became standard. In 1864 the demand for monetary silver rose and inferior
sycee was shipped in from Shanghai, passing current at par. The 2.4 sycee
already in circulation was debased, and 1.2 to 1.7 sycee passed current.
Chungking.30 In Chungking the standard tael for foreign trade purposes
was the yü-p'ing or Chungking tael, 107.29 of which was equal to 100
Haibwan taels. Typically, the Chinese name of the tael was literally only
an indication of the weight defined by the tael, a specific fineness being as-
sociated with this weight on sight. There were three general classifications
of silver in the Chungking market: hsin-pao, lao-pao, and t'ao-ts'ao — new or
pure silver, old silver, and inferior silver. The first was standard; tender of

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8о Money and Monetary Policy in China
the second required the addition of " a f e w mace per 100," that is, a few
tenths of a liang per one hundred liang; if inferior sycee was offered, the
addition of three to four liang per hundred was required.
T h e yii-p'ing tael was one of at least seven monetary taels in Chungking.
F o r example, 100 yü-p'ing taels were equal to 101.43 mien-hua taels, the
unit of account used in the raw cotton trade. T h i s weight too must be
associated with a type of sycee, and the implication of the report is that new
silver or hsin-pao was again the standard.
Peking.31 T h e situation in Peking is illustrative of the combinations of
the two elements, weight and fineness, which m a k e u p the standard sycee
defined by the monetary tael or tael unit of account. There were four liang
weights in general use for sycee: the K u p i n g or Treasury liang, the \ung-ja,
the shih or market, and the сhing or metropolitan or "two-tael" liang (erh-
liang-p'ing), respectively 575.82 grains, 555.7 grains, 552.4 grains, and 541.7
grains. ( T h e addition of two liang in the hundred m a d e the metropolitan
liang equal in weight to the market liang; hence, it is assumed, the alterna-
tive name.) There were also three standards of silver: the \ao-yin of pure
silver, the sung-chiang-yin .980 fine, and the hua-pao of .992. T h e last is not
mentioned by Morse, who, dealing with the first two only, states that the
Kuping tael was always 1.000 fine but that the other three liang weights
could be combined with either the \ao-yin or the sung-chiang-yin, and there
were therefore at least seven monetary taels. T h e market and metropolitan
taels were subject to slight variation depending upon which of three sets
of weights — "equalized," "empty," or "mercantile" — was used. Still with-
out considering the hua-pao silver, this increases the number of monetary
taels to eleven.
Canton and Shanghai. In Canton the standard liang for weighing sycee
was the ssu-ma (usually written in contemporary reports as sze-ma), but
on occasion lighter scales were used, designated by their per mille propor-
tion to the ssu-ma scale. T h u s , for example, the 998 scale was 0.2 per cent
lighter than the ssu-ma; the 986 scale, 1.4 per cent lighter. 3 2
In Shanghai, as has been suggested in previous sections, the system of
calculation was both unusual and important, being in use not only in the
commercial center of China but also in the Y a n g t z e Valley and in certain
treaty ports. 3 3 T h e Shanghai currency tael had other names, some of which
are quite descriptive. Business houses often spoke of "taels of Shanghai
sycee" or " S h a n g h a i convention currency." T h e Chinese referred to it as
the "ninety-eight convention currency" or chiu-pa Ifuei-yüan, the "bean con-
vention silver" or tou-kuei-yüan, or simply "Shanghai sycee," Shen-yüan.3i

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T h e Silver Sector 81
The reference to "98" will be understood when it is remembered that
standard Shanghai silver was .935 fine. Given equal weights, debts expressed
in Shanghai monetary taels could be satisfied by tender of 0.98 of the amount
in standard Shanghai sycee. As the weight of the Shanghai monetary tael,
565.65 grains, was the weight of the ts'ao-p'ing liang used for weighing sycee
in Shanghai, a debt of 100 Shanghai monetary taels defined a debt of 100
ts'ao-p'ing liang of silver .9167 fine, and thus a debt which could be satisfied
by tender of 98 ts'ao-p'ing liang of standard Shanghai sycee, that is, sycee
.935 fine. Reference to "convention" in the title of the monetary tael may
be considered as a reminder that logically the 98:100 relationship is an
arbitrary one, whatever its historical reasons, since the unit of account,
being an imaginary money, could have had any relationship to standard
silver.
This description of the Shanghai system is so far incomplete because there
was no sycee of standard fineness in circulation. Assay by the Shanghai
\ung-\u might reveal, for example, that the sycee was .9868 fine or 5.5 per
cent better than the standard. As has been explained above, the \ung-\u
would mark "2.75" on the yüan-pao of 50 ts'ao-p'ing liang, and it would be
known as "2.75 sycee." Actually, 2.7 was a modal betterness, and sycee of
this quality was circulated throughout Shanghai's vast trading area. Indeed,
2.7 sycee or erh-ch'i-pao was the generic term for Shanghai sycee regardless
of the sycee's actual fineness.
If, then, two shoes weighing 50 liang of 2.7 silver were tendered, they
would be accepted in payment of a debt of 107.6 Shanghai currency taels.
This gives a ratio of 93:100, the modal ratio of the sycee actually circulating
to Shanghai's unit of account.

Dollars

The traditional silver bullion system was modified by the introduction of


dollar coins minted outside China and imported in the course of interna-
tional trade. However well the bullion system might work for payments
in which whole shoes of sycee were to be tendered, there was still a need
for a coin for smaller transactions. The cash was too small in value as a
single coin. In any large amount it became cumbersome and costly to move.
The debasement of the cash, the prevalence of counterfeiting, and the un-
certainty surrounding all dealings in them were further reasons why these
coins did not satisfy the demand for a convenient means of payment for
sums of less than 50 taels. The dollar in China was never, however, a sim-

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82 Money and Monetary Policy in China
pie subsidiary coin, taking a fractional value of the tael in accordance either
with an arbitrary decision — this is what the small retail trade sorely
needed — or even with its metallic content. On the contrary, the dollar
entered the monetary system because it was preferred to sycee for silver pay-
ments in general and was thus a rival of the traditional tael system of
China. 35
The nominal relationship between the tael and the dollar unit of account
throughout the nineteenth century was 72:100, a relationship based originally
on the fact that the dollar of fineness equal to the sycee in Canton weighed
0.72 of a Canton liang. In fact, inaccuracies of assay and weight make it
likely that this relationship was nothing more than an agreement between
the East India Company and the Canton merchants as to the rate at which
the latter would accept payments in dollars. The rate is then properly one
between units of account rather than between the amount of silver in a liang
of monetary bullion and the dollar coin. Actual payments in coin or bullion
were made either at market or at customary rates, a problem to be considered
later in this section. In the period 1845-1895 the dollar's original role as an
alternative and slightly preferred means of payment by the East India Com-
pany had changed, and the dollar played different roles in different centers.
The intention now is to state these various roles as they existed in a moment
of time rather than to present in detail their historical evolution.
Dollars in the tael system. European experience provides examples of the
dollar coin being quoted at rates which vary in terms of the local unit of ac-
count in Europe — pounds, shillings, and deniers; in China the unit of ac-
count was the monetary tael, the dollar coin being one of many types of money
in the monetary system. Some retail prices may be quoted in terms of the
coin, in which case the seller is taking on himself the exchange risk. But
for larger transactions quotations are in the unit of account, and dollars are
accepted at the rate of the day, if indeed they are accepted at all. This was
the situation in China after 1857 in many of the northern ports and in
Shanghai itself. The dollar played a subsidiary role to sycee, although it
was common tender and generally acceptable at market rates quoted in the
newspapers and at banks. It was not a subsidiary coin in the sense that its
assigned value was an arbitrary fraction of the unit of account, because the
price of the coin was affected by the demand for and supply of dollars.
In an extreme case, sycee was actually not available in the community,
and dollars were the only silver money. The tael unit of account in which
prices were quoted was then purely an imaginary money and all payments
in silver involved an exchange transaction. In the retail sector, however, it

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The Silver Sector 83

was customary to quote a price in the dollar unit of account. In such cases
the dollar-tael exchange rates would reflect the same forces which a quota-
tion of a premium or discount on sycee would have done had sycee been
in circulation.
Dollar systems. From this rather straightforward type of situation, more
complex models must be considered. The role of dollar coins provides a
complicating factor, especially so since the Chinese depended on the im-
personal forces of international trade to provide foreign dollar coins during
most of our period. For although dollars were minted from time to time in
nineteenth-century China and, indeed, the origins of China's national dollar
system are found in the first dragon dollars of 1889, until after 1895 the
supply of domestically produced dollars was insignificant. The minting
and taxation policies of silver-producing countries, changing Chinese public
attitudes to the dollar (for example, the method of handling the coin), and,
finally, the coexistence of the tael system, all had their effects. Lack of con-
trol of the source of supply and the minting policies were not factors pe-
culiar to China, but the various combinations of these factors produced vary-
ing and sometimes unique systems which will now be discussed in the
abstract.
There were many kinds of dollars in circulation in China, and this was
an additional complication. However, in the period to the mid-fifties the
Carolus dollar of Spain and thereafter the Mexican dollar may be con-
sidered standard coins; other dollars were related to these.
Since China could not control the supply of dollars, there was no question
of a stable price for dollars in terms of the tael unit of account, but the re-
lationship between the dollar coin and the tael unit of account was not
necessarily a direct one. If there were a dollar unit of account, it might keep
its relationship with the tael unit of account stable, while the price of
dollar coins would then vary in terms of the dollar rather than the tael unit
of account. That this should be logically possible is apparent not only from
the much discussed separation of the unit of account from money itself but
also from the fact that the dollar unit of account was defined by a particu-
lar dollar, the supply of which relative to other dollars would vary and
might even cease. Long before the supply of the standard dollar — the one
supposed to be defined by the dollar unit of account — had disappeared from
the community, it might have ceased being money and might even be
better thought of as jewelry. In a model system in which sycee and dollars
both circulate, the existence of two units of account tied to each other may
mean, therefore, that variations in exchange are stated in terms of a type

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84 Money and Monetary Policy in China
of dollar being at a discount or premium in terms of the dollar unit of
account. Of course, this can be reduced to a dollar coin-tael unit relation-
ship, and economically the effects are similar.
Ideally the situation is this. At first the dollar unit and the dollar coin are
at par, the dollar unit having the same name as the coin. Later, changes in
the supplying country, such as a change of reigns or a recoinage, will result
in a new dollar coming out to China as the supply of the old diminishes.
The new dollar will at first be quoted at a discount in terms of the dollar
unit of account. But at the same time the relationship of the old dollar may
also change vis-ä-vis the unit of account. The old dollar may be at a premium
which does not reflect its intrinsic value at all but rather an exaggerated
value put upon it in the market either because of its scarcity or because it
is in reality not being used as money but rather as a piece of jewelry which
is demanded at ever higher prices. Alternatively, the old dollar can take its
unit of account with it so that the unit of account is no longer a reflection of
the silver standard and the new dollars are quoted at ever higher discounts.
Since most dealings will be done in the new dollar, the exchange rate be-
tween, say, sterling and the unit of account will be a false one except for
those transactions, if any, which require use of the old dollar. The rising
exchange rate will be corrected by the increasing discount rate on the
dollar coin actually circulating.
The above supposes that a new dollar replaces the old. If this does not
happen, the unit of account will then be an imaginary unit of account, and
transactions may take place without tender of coin — or alternatively sycee
may be used. If sycee is used, this provides an example of the reverse of the
situation mentioned above in which the dollars were in circulation and prices
were still quoted in imaginary taels.
In both cases any new supply of the old dollar is impossible, and the unit
of account may become an imaginary money. The unit of account may,
however, subsequently be connected with the new dollar, perhaps very simply
by merchants agreeing to accept the new dollar at par in payment of debts.
The practical objection is, of course, that a transaction might have originated
when the dollar was at a discount, resulting in a loss if the dollar were to be
accepted at par. However, this difficulty can be overcome by exempting past
transactions and by making other adjustments in the transition period. The
essential point is that the dollar unit of account may undergo no change of
name and may adjust itself to new standard coins without the fact being
noted in the accounts. Thus changes in the exchange rates, otherwise inex-
plicable, become readily understood, and statistical series avoid the mistake of

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The Silver Sector 85

adding dissimilar units of account by noting the changes that have taken
place.
There is nothing to force this change in the standard coin. In Canton it
was done; in Shanghai it was not, and reform there turned to the tael as the
unit for trade; at Amoy the dollar remained an imaginary money and the
new dollar coins passed at varying discounts in relation to it.
Attitudes to dollar coins. Coins other than the standard coin suffered vary-
ing fates. If they were of intrinsic value greater than the standard, as was the
American trade dollar, their existence would depend upon their being given
a premium in the market over the standard coin. Otherwise they would be,
as the American trade dollar was, melted.36 If they were of less value, they
would be quoted at a discount — if indeed they passed current at all. These
statements assume, of course, that the Chinese accepted coins solely on the
basis of their intrinsic value. This was not always the case and, to the extent
that it was not, the above statements require modification. For, as has been
said, one of the factors complicating the role of the dollar coin in the mone-
tary systems of China was the varying attitude of the Chinese towards them.
The attitude of the imperial government — one at first endorsed by the
treaty powers, at least for duty payments — was that coins were to be priced
solely on the basis of their silver content. The imperial government expressed
its view that prices ought to be quoted in taels and payment made in dollars
on the basis of equivalent silver content.
Basically the Chinese did regard the dollar coins as so much bullion. But
coins take on a market value of their own, a premium based on their con-
venience. Convenience is, however, influenced by the degree of familiarity
with the coin, and thus the old may retain a special value in the market, even
an increasing one, when challenged by the new. Paradoxically, the desire to
have coins for their intrinsic value can turn into regard for the coin as a thing
in itself. If a certain coin is known to be reliable, this very reliability will give
it an additional worth. If a coin is regarded for its metallic content, an un-
blemished coin in a community where most coins are damaged may take on
a premium or carry the unit of account with it, until the relationship between
its intrinsic and its actual market value is broken. Since opinions as to re-
liability were subject to change, such market value of a coin might vary
from person to person or from time to time. And since the dollar perhaps
had to be sent into the interior to make payments, familiarity was not to be
limited to the relatively sophisticated populace of the treaty ports, but ex-
tended to those at the margin on whose acceptance the actual market price
of the dollar might eventually depend.37

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Although the ratings of the various dollars circulating in China did not
always correspond with the relative silver content, they must not be con-
sidered, therefore, as entirely arbitrary. T h e impression left by a comment
such as, "Another Spanish pillar dollar, bearing the stamp of the letter G ,
or G a , denoting that it was f r o m Guadalajara mint in Mexico . . . was often
received at a discount," is that the discount was the result of some whim or
money changer's trick. 3 8 Actually the G or G a coins were debased and recog-
nized as such both in N e w Y o r k and L o n d o n ; they always passed at a dis-
count. 3 9 But a typical report on dollars in Williams' Chinese Commercial
Guide cannot be so easily disposed of. Republican dollars passed more freely
than Spanish dollars in Chusan and N i n g p o , but certain coinages of the
latter reign of Carlos III called "old h e a d " dollars bore a premium in Canton
as high as 12 per cent if uninjured,40 Familiarity with the coin, experience
with its reliability, acceptability by the Chinese customs and tax authorities —
these were legitimate reasons for preference. T h e premium on the Carolus
dollar was granted "if uninjured," suggesting that the absolute guarantee of
silver content such a coin was known to provide was worth the premium, but
it also implies that the uninjured coin was becoming rare and being de-
manded on this account as well. It is not always possible to determine the
precise reasons for a coin's rating, but once the differential had been estab-
lished, there would be, of course, strong reasons why creditors would favor
maintenance of the differential.
Subjective evaluation of a coin can be nullified if the currency rules insure
acceptance of a coin which fulfills certain m i n i m u m requirements relative
to both weight and appearance. T h e dollar coin in China was, however, only
tolerated; and although it was accepted in payment of taxes in certain prov-
inces, the officials followed rather than set the rules of the market. T h u s
the likelihood of a coin being challenged was increased, and the rules set by
banks and money changers were liable to frequent and unpredictable change.
Dealing in dollar coin involved unusual risk. T o illustrate the problem, a
typical protest stunt was for a European accompanied by a witness to draw
out dollars f r o m a bank, walk outside, and transfer them to an accomplice
who then returned to tender them again; inevitably some of the coins would
be refused or accepted only at a discount. 4 1
Although rejection of dollar coins would be m a d e on the basis of weight
or surface blemishes, the action can be described partly in terms of the
supply of the coinage, thus tempering the charge of Chinese contrariness.
When the demand for a particular coin rose relative to its supply, the shroffs
were more particular as to the physical condition of the coin they would ac-

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The Silver Sector 87
cept at par. If, for example, the demand for Spanish dollars rose so that the
dollar unit of account based upon this coin was at a premium over the in-
trinsic value of the coin, shroffs would be so particular that in fact only a
small percentage of the Carolus dollars circulating could qualify for the
high premium. Coins with any blemish at all were quoted at a discount.
But this discount, it must be noted, was relative to the unit of account. That
a coin was quoted at a discount did not necessarily mean it was being ac-
cepted at a rate below its intrinsic value as silver, for otherwise it would
have been melted. The discount merely indicated that this particular coin
was not enjoying the full premium to which the unit of account had been
driven. If the premium on the unit of account fell, shroffs became easier as
to what coins they would accept at par. Thus the effect of the high premiums
registered in the exchanges was not necessarily transferred to the entire cur-
rency system. The major part of the currency was not subject to such wild
extremes as the exchanges might at times indicate.
These difficulties and risks were applicable only in cases in which the
dollar was being tendered for acceptance by count. Even then, if the trans-
action was small enough, as for example in a retail shop, the shopkeeper
could average his risk and reflect it in his prices, accepting at par most dollars
circulating in the town. For large transactions with coin there has always
been a tendency to accept by weight, and China was no exception.
Dollar bullion. This matter of reliability was a far-reaching factor in the
nature of the dollar's contribution to the Chinese monetary systems. It dic-
tated, given the Chinese experience in counterfeiting, the method of handling
the coin — the custom of chopping. The design of the coin was insufficient
to insure that it had not been tampered with and its silver content in some
way made deficient. The merchants and money changers undertook them-
selves to guarantee the coin by chopping it with their identification mark, a
process which, again paradoxically, removed a minute portion of silver and
defaced the coin. Eventually the coin was no longer recognizable as such,
and the dollar sector of the monetary system thus merged into the bullion
sector.42
Such a dollar coin might be no longer a coin, chopped and defaced as it
was. Persons desiring fractional parts of a dollar also destroyed the coin and
produced chips and bits of coins. All this was silver bullion of the fineness
of the original dollar coin and was consequently called "dollar silver" or
yang-yin,43 The method adopted for using chopped dollars depended upon
the traditional system of China — producing the last combinations to be
considered as basic to an understanding of China's currency systems.

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88 Money and Monetary Policy in China
The degeneration of dollar coins into dollar silver would not necessarily
result in the elimination of the dollar unit of account. Like the tael itself,
this dollar unit would now define a weight of bullion of a certain fineness,
a weight and fineness determined by the original ideal weight of the perfect
dollar coin. Thus, since the fineness defined by the unit of account was that
of dollar silver, the relationship between the dollar unit of account and the
monetary tael would be identical to the relationship between the weight of
the dollar and the local liang. This relationship between the dollar and the
tael was fixed at 1000:720, and a debt expressed in taels could also be ex-
pressed in dollars of account in this proportion.
But as in the monetary system in which actual dollars continued to cir-
culate, the dollar unit of account could become divorced from the dollar
bullion. Because in accounts the ratio was fixed at 100:72, it did not neces-
sarily follow that payments continued to be made in this ratio. In fact, pay-
ments in Canton were at one time generally weighed at $100 = 71.7 liang.44
Thus if a debt of $100 was owed, this might be written in the books as 72
taels and this amount demanded. In making payment, however, only 71.7
liang of dollar silver would be weighed out and paid over. Although a debt
of $100 was usually settled by weighing out 71.7 liang of dollar silver, special
circumstances might dictate otherwise. For example, payments to the East
India Company's treasury in Canton were generally weighed at 71.8 liang,
and tradesmen in Canton were generally paid between 71.5 and 71.7 liang
by the compradore.
If in such a system actual dollar coins survived, they might or might not
be accepted by count. If by count, there might well be a premium attached
to them, so that a debt of 100 dollars would be discharged by payment of
fewer than 100 dollar coins. This would be a natural consequence of the fact
that, if weighed, 100 dollar coins might weigh more than 71.7 liang.
Dollar-tael systems. A more complex development could occur when both
dollar bullion and coin were in circulation and when as a consequence there
were two dollar units of account, one tied to the tael the other to a standard
coin. The standard coin itself might have ceased to exist, and thus not only
would there be two dollar units of account, but both of these would be
imaginary monies. As a parallel, two or more tael units of account could
exist, one tied to each of the dollar units of account, the others defined in
terms of the weight and fineness of monetary sycee. The tael units tied to
the dollars of account are imaginary monies; those defined by specified sycee
may or may not be depending upon whether such sycee is in existence.
Such situations might theoretically evolve as follows. Assume it is em-

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The Silver Sector 89

pirically ascertained that the silver content of 100 dollar coins is equal to the
silver content of 72 liang of that dollar silver in circulation. Accounts are
kept in which the exchange is made between dollars and taels at this pro-
portion. In the case of bullion, we have seen that actual payments may be
weighed at differing proportions, and thus the dollar unit of account is an
imaginary money tied to the tael at 100:72. However, if there is still a stand-
ard dollar in circulation and if it is quoted at a premium in relation to
sycee but takes its own unit of account with it, there will then be two dollar
units of account: one with which 100 dollars = 72 taels, the other fluctuating
according to the market value of the standard coin. If then the standard coin
goes out of existence, this second dollar unit of account becomes an imaginary
money, the value of which in terms of the tael unit may vary with the foreign
or interregional exchanges. Other dollar coins may be quoted in terms of
this fluctuating dollar unit of account in discounts or premiums; they will not
be quoted in terms of the tied dollar unit. This is illustrated in Figure 5.

Figure 5. Accounting tael and dollar units

0.72x accounting taels 100 accounting dollars

χ dollars к, 72 taels
J, J, J,
у other dollars « χ standard dollars (e.g., 71.7 liang of dollar silver)

Symbols: ä ! is variably related to


= is defined as
J, is satisfied by

On the right side of the diagram 100 dollars or 72 taels have the same
relationship to the liang of dollar silver. But if the relationship between the
tael and the number of liang varies, a proportionate change takes place in the
relationship between the dollar unit of account and the number of liang. To
avoid confusion, this tied dollar unit of account is referred to in this study
as the accounting dollar when it is necessary to distinguish it from other
dollar units of account.
On the left side of the diagram, the center of attention is the dollar unit
of account which is in varying relationship with the previously considered
tael unit of account. The relationship between this unit and an unblemished
standard dollar, if any, is fixed by definition, but there are varying relation-
ships with other dollar coins. Now if accounts are kept in this dollar unit
of account and are then changed into tael units at the standard 100:72 ratio,
an entirely new tael unit of account is in fact being used. This is a tael unit

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90 Money and Monetary Policy in China
tied to the dollar and is analogous to the tied dollar unit on the right-hand
side of the diagram; therefore, in this work it is referred to as the accounting
tael in cases where such a distinction is necessary.
In Figure 5 the silver sectors of the Chinese monetary systems reach a most
complex form. The diagram expresses a complexity similar to that which
existed in Shanghai prior to the monetary reform of 1857, but the use of the
diagram is more general. Some aspects of the situation it oudines existed in
all the monetary systems of China; in reading a description of a particular
monetary system this outline might be kept in mind.
In theory it is possible to complicate the situation further by positing addi-
tional tael units of account defining other types of sycee, and this would
lead to further accounting dollars differing not only among themselves but
also with the dollar unit of account. In practice this is unnecessary since
normally there was one tael entering into international or interregional trade.
Examples have already been given of the advantage the Chinese govern-
ment took of the varying numbers of cash per string or the amount of pure
silver in a liang of sycee. Such manipulations were not, of course, confined
to the government. An American merchant in Shanghai wrote that he paid
duties in Shanghai currency taels, charging customers in Shanghai dollars at
the rate of 100:72.45 In the terminology of the diagram this is what had hap-
pened. The duties were expressed in Hai\wan taels and converted by a fixed
multiple to Shanghai currency taels. The duty was then paid by the merchant
as agent for his constituents in sycee, say 72 taels. The customer was debited
100 dollars, but since dollars were then at a premium in Shanghai, 100 dollar
coins would exchange for more than 72 taels, and the merchant-agent
profited. Indeed at one period the customer owing 100 dollars would have
had to pay the merchant 100 taels, such was the magnitude of the premium.
What the merchant had done was to convert his duty payments into ac-
counting dollars, but he charged his constituents in Shanghai dollar units of
account. He based his calculations on the fixed exchange rate and demanded
payment on the basis of the flexible exchange rate. Under this system he
could not lose, for if the dollar were to be quoted at a discount against sycee,
he would have claimed payment at the 100:72 ratio. The names which have
been given here to avoid confusion were not, of course, in use in Shanghai,
and Western merchants could play on the resulting ambiguities.

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C H A P T E R IV

Banking and the Monetary System

In the previous two chapters the description of the Chinese monetary sys-
tem has been confined to its metallic forms — copper coins, silver coins, and
bullion. These formed the basis of the currency system but were inadequate
for the growing requirements of China's economy, especially in those areas
affected by foreign trade. Native and foreign banks provided two forms of
bank money — notes and current accounts — which gave a certain flexibility
to the money supply and, equally important, made monetary payments more
convenient by minimizing the complexities of the coinage system.* But the
banks did more than this; they also provided a credit system, made it pos-
sible to remit funds to other major commercial centers in China, performed
certain financial tasks for the government, and linked China with the inter-
national money markets of New York, London, and Paris.
This chapter will describe first the banking system and secondly its con-
tribution to the money supply. T h e description of China's monetary system
will then be complete and the remainder of the chapter will comment on its
operation and summarize its forms.

T h e Banking System

T h e purpose of this section is to describe the banking system of China in


the period 1845-1895 and to note briefly the traditional credit institutions.
T h e banks may be classified as foreign or exchange banks, official or gov-
ernment banks, and native banks, of which there were two basic types, re-
mittance and local. As the principal focus of this chapter is on the role played
by banks in the monetary system, this first part is intended to be merely a
summary of the general characteristics of the banking system as an intro-
duction to its monetary role.

* I n the years immediately following the 1842 treaty, the larger foreign mercantile establish-
ments offered some measure of banking services. Jardine Matheson, for example, issued dollar
notes which circulated locally; even more common were deposit and remittance facilities.
Such activities were limited, however, and ceased to be available to the general foreign com-
munity with the coming of the exchange banks.

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Remittance ban\s. Interregional trade in tea, silk, dyestuffs, cotton, and


grain was of sufficient quantity to seriously tax the capabilities of a wholly
metallic currency system. The imperial revenues had to be remitted to Peking
or transferred for use in other provinces, and official salaries had to be trans-
mitted to the official or sent by him to his family in his own province. But
in an empire as imperfectly policed as China, with transport facilities a bur-
den on trade itself, the movement of large sums of bullion was dangerous
and costly. The Taiping rebellion (1850-1864) merely reinforced a trend
which had begun at least by the beginning of the nineteenth century — the
increasingly important role of remittance banks in the transferring of both
mercantile and official funds.
The term "remittance bank" in China has come to be thought of as synony-
mous with "Shansi bank," since by far the most important and most numer-
ous of the remittance banks were operated by men from the province of
Shansi.1 There were, however, banks with local origins specializing in re-
mittances. Of the six remittance banks in Foochow in 1891, for example,
five were Shansi banks and one was owned by a Chekiang man; of the
thirteen such banks in Newchwang, ten were Shansi and three were owned
by natives of Chihli.2 But these local banks appear to have been single office
companies, whereas the larger Shansi banks may have had up to thirty
branches in the commercial centers of China.3 They were, therefore, of con-
siderable importance both to the monetary system and to the economy as a
whole.
The origin of the Shansi banks cannot be traced with any certainty before
1831, when a Shansi merchant, Lei Lii-t'ai, changed his Tientsin dye shop
into a draft bank, the Jih-sheng-ch'ang, for remitting funds between Tientsin
and Chungking, the source of his dye materials.4 It is assumed that the need
for such a business had become apparent from his own experience as well
as that of other Shansi merchants who followed his example. By the middle
of the century three groups of Shansi banks were noted, deriving their names
from the districts in which the owners, who are presumed to have obtained
their capital in trade, resided — Ch'i-hsien, T'ai-ku, and P'ing-yao.6 They
commanded a capital of from 100,000 to 500,000 taels and cooperated with
each other in crises so that, at least until the Boxer uprising of 1900, they
remained in a strong financial position, there being no record of failure
among them.6
The principal function of these banks was, obviously, remittance business
at rates which varied from 2 to 6 per cent. The banks in Chungking, for
example, were prepared to draw on agencies at Canton, Changsha, Foochow,

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Banking and the Monetary System 93
Hankow, Kueiyang-fu, Nanchang, Peking, Shashih, Shanghai, Tientsin,
Yunnan-fu, and Wuhu. 7 The Shansi banks were, however, better repre-
sented in the north of China than in the southeast. This may have been a
reflection of the stronger local loyalties typical of the southeast, reinforced
by the different dialects spoken there. Especially in Swatow, the local banks
were able to minimize the direct contact between the Shansi remittance
banker and his local non-banking customer, preserving the position of the
local bank as an essential middleman in the transaction.8 The Customs re-
ported Shansi banks in Newchwang, Tsinan (Shantung), and Amoy.9
Shansi banks remitted funds for merchants, for the government, and for
officials in their private capacities. They sent funds to Peking from those
seeking to purchase rank, and they were responsible for handing over the
insignia sent down from the capital.10
From their role as remitter of official funds Shansi banks almost de-
veloped into government fiscal agents, holding government funds and dis-
bursing on the instruction of the local official. Certainly their connection
with the government was close, and this bond was maintained by their cus-
tom of lending to expectant officials, who, when successful, would return
the favor by giving the bank official patronage. However, the Shansi banks
were not alone in doing this, as the career of the nineteenth-century private
banker, H u Kuang-yung (1825 P-1885), reveals.11
The other activities of the Shansi banks depended greatly on time and
place, and generalization is more difficult. In Amoy, for example, the banks
at first dealt only with the government and officials, but by 1891 they had
begun to cultivate the business of the local merchants.12 In general they
tended to take the position of a bankers' bank, preferring to lend to the local
banks rather than to private customers directly. Considering the difficulty
outsiders had in obtaining accurate local information, this was quite natural.
As a consequence, however, the local banking system was considerably
strengthened, for in a crisis, which in a country as diverse as China might
well be only local or provincial in scope, the local banks were able to call
on the resources of the Shansi banks.
The Shansi banks' original capital came from trade, and their access to
government funds made it unnecessary for them to accept private funds on
deposit. They were at times reluctant to accept such deposits, and even when
they did so, they granted but 5 to 8 per cent per annum, a relatively low
interest rate in a country in which pawn shops probably charged 36 per cent.
The Shansi banks' reputation was such, however, that the lower rate of in-
terest was a reflection of the estimate of lower risk involved. A Chungking

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94 Money and Monetary Policy in China
report states that the Shansi banks lent " m o r e for friendship than for busi-
ness" at rates of 7 to 10 per cent per a n n u m . In other cities they appear to
have been willing to lend money on merchandise at rates up to 25 per cent,
but even then they had the reputation of requiring better security and under-
taking fewer risks than the local banks. 1 3
Certainly the Shansi banks did not involve themselves too closely with the
fortunes of the communities in which they had branches but considered
ordinary banking business as marginal, placing their primary reliance on
government business and remittances. Therefore, after 1900 when the cus-
toms revenues were hypothecated to pay indemnities and repay foreign
loans and consequently were deposited in foreign banks, when the Board of
Revenue itself was reorganized, and the imperial government founded its
own banking institutions, the basis on which the Shansi banks had been
operating was shaken. 1 4 Failing to reorganize their business, they fell with
the dynasty they served, and only a few survived the 1911 revolution.
T h e Shansi banks were family banks, the entire capital deriving f r o m the
resources of the family owners, who had, as was normal in China, unlimited
liability. T h e branch managers, who were responsible to the owners for the
conduct of the business during their three-year appointments, were paid on
a profit-sharing basis, a practice which persists in Chinese banking to the
present day. Payment, however, came only after a full accounting had been
rendered; meanwhile, it was reported, the managers' families were in virtual
captivity. 1 5 B u t it is probable that the family of a manager was not so much
held in de jure captivity as " a d o p t e d " temporarily by the owner, thus coming
under his total jurisdiction during the periods of the managers' absence. 1 6
Shansi bankers followed another common Chinese employment custom, that
of hiring men f r o m the province of the employer, sometimes from the same
city or village. Local loyalties were second only to family relationships.
Cooperation a m o n g Shansi banks led one foreign observer to state that
they practically formed a guild, agreeing to similar rates, working on similar
lines, suppressing violating firms, and providing mutual support. 1 7 Certainly
they opposed the entry of new banks into the remittance business and acted
in consort wherever their interests were involved. T h e Shansi banks them-
selves made little direct contribution to the money supply, for they accepted
but few current accounts and issued no bank notes, but they were a powerful
and important factor in the banking system of imperial China.
Local ban\s. T h e two principal categories of local banks may conveniently
be described as "money-lenders" and "money-changers." 1 8 T h e former were

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Banking and the Monetary System 95

larger and more important, and they more closely corresponded to the Euro-
pean concept of a bank. They, together with the Shansi banks, were referred
to by foreigners as "native banks." The money-changers varied from indi-
viduals with no fixed place of business stringing cash at a table set up by the
side of the street to more substantial enterprises which might accumulate
sufficient capital to make small loans or even accept deposits and eventually
become indistinguishable from a money-lender. In the more important com-
mercial centers, Shanghai for example, money-lenders might be classified by
the size of their capital, by their operations, and by their membership or non-
membership in the local bankers' guild.19 Although the money-changers per-
formed an essential role in the Chinese monetary system, the primary con-
cern of this section of the chapter is with the money-lenders.
The earliest reports from the newly opened treaty ports indicate the exist-
ence of banking institutions, but the impetus given by foreign trade and
the need to finance merchandise from and to the interior increased both
their number and size.20 This growth was furthered by cooperation among
the local merchants, the foreign compradores, and the foreign merchant
houses themselves, some of which were interested in native banks — Jardine
Matheson and Company being the principal partners in the Ewo bank.21
The compradores, many of whom came from Canton, gave support to local
merchants who turned to banking. They were assisted in finding funds by
foreign merchants.22 Other native banks made connections with the local
magistrates and minor officials as the Shansi banks tended to concentrate
on imperial government business.
The evolution of the banking system in China is a local story, with vari-
ations in each commercial center. The following description is an attempt to
generalize by characterizing the most important features. The pattern con-
sisted of a multiplicity of small banks, the larger of which were joined in a
bankers' guild. In Shanghai there were 120 native banks in the foreign settle-
ment as early as 1858.23 Of these some eight to ten were "large" banks with
a nominal capital of 30,000 to 50,000 taels; fifty were "small" banks with a
capital of only 500 to 1,000 taels; the remainder were in the 5,000 to 10,000
tael category. The money-lenders of Shantung were reported as having a
capital of 2,000 to 3,000 taels, whereas in Foochow there were sixty banks
with a capital of 20,000 to 50,000 taels?* Obviously the number of banks and
their capital were directly related to the importance of the trade of the treaty
port. The smaller ports were served only by banking agencies or even by
merchants performing some of the functions of bankers,

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96 Money and Monetary Policy in China
The banks were either family-owned or partnerships, usually managed by
an employee who was given sole responsibility during the tenure of his con-
tract. The banks made advances, undertook exchange business (either with
their own agents, through the Shansi banks, or through foreign banks), ac-
cepted deposits at rates of interest which do not appear to have exceeded
12 per cent per annum, and undertook personal loans. The large banks of
Shanghai, for example, made advances to junk owners on the security of
their vessels when they took the tribute rice north so that they might return
with cargoes of oil, peas, bean cake, and other products. The banks also
speculated in the exchanges, in gold, silver, and dollars, and later in both
merchandise and Shanghai shares. Some banks might specialize in advances
on certain types of merchandise, especially those involved in the opium trade,
and all had their local business connections which made such specialization
reasonable.25
The books of local banks are not available for study, but there is evidence
that deposits were not the major source of banking funds. 26 Banks relied on
their own capital and accepted deposits with a caution reflected in the rate
of interest, which was relatively low compared to the 8 per cent offered by
the Shanghai Municipal Savings Bank. 27 But all deposits, including those
payable on demand, received interest.
Bankers' guilds were common although not universal. Where they existed,
the credit of nonmembers suffered. Nonmember banks had to offer higher
rates of interest and undertake business that members would not consider 28
The guild decided the regulations under which the banks would operate;
the guild set both the length of the customary usance period on bills and
the daily exchanges. The exchange decisions might be sent by carrier pigeons
to the offices of the member banks! 29 But the power of the guilds varied and
was in part determined by the attitude of the local magistrate. The exchange
rate between cash and silver could, in some towns, be settled in advance, and
there were cases where local banks lent to the Shansi banks when they were
temporarily unable to meet a draft. Cooperating in crises, stabilizing the
methods of banking business, facilitating trade by the provision of credit, and
furnishing a link between the monetary systems of China — all these were
recognized functions of the native banks and their associations.
This at least was the ideal. In Shanghai the 1858 crisis was caused, for
example, by a decision of the local official, the taotai, to place an additional

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Banking and the Monetary System 97

duty of V/2 per cent on certain imported products in an effort to raise


200,000 taels of additional revenue. Merchants bought quantities of these
products forward, listing them in their current inventories to avoid the im-
port duty and financing these purchases through the local banks. Foreign
protests were successful in preventing the additional duty from being levied;
the merchants thereupon found it difficult to move their goods and sought
assistance from the banks. The banks, expecting the tribute junks back from
the north with cargoes, accommodated the merchants with bank bills. But
the junks were reported sunk in the Sino-British War then being fought in
the north. At the same time the banks had been buying dollars to send
to the tea areas in anticipation of a seasonal rise in the price of dollars, but the
Taiping rebellion made it impossible to get into the tea areas, and the price
of dollars failed to rise. Had, then, the banks' bills been presented and bul-
lion demanded, the local banks of Shanghai would have failed. They were,
however, given time by the holders of the bills to obtain funds in Ningpo
and Soochow, and the crisis was weathered.30
Failures could be avoided in a system as developed as that in Shanghai,
if tolerance was employed by all sides. It was customary to settle debts on
the Chinese New Year, but if this should mean a major banking crisis, some
exception might be made. Foreign mercantile houses and the foreign ex-
change banks were naturally interested in the smooth functioning of the
credit system; their influence and funds would be available through their
compradores. But in less developed systems and especially where foreign
trade and influence were not as dominant as in Shanghai, the ideal situation
remained an ideal. There were crises in Hankow and Amoy which were
not so easily resolved.31 Precipitated by the sudden action of an official, by
the failure of a single bank to honor its notes, or by unusual speculation in
commodities, there are instances of the collapse of the entire banking
structure.
After 1895 the local banks were challenged by the Sino-foreign banks
operating on European methods, but the local banks' connection with their
customers and their legitimate banking function permitted their survival
through the Republican period.
Foreign ban\s. Before 1895 the Chinese were entirely dependent upon
foreign banks (known as exchange banks) for their monetary relations with
the outside world. Under the "old Canton system" the East India Company
had the monopoly in the staples of the China trade and, together with the
agency houses engaged in the "country trade" with India, undertook their

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98 Money and Monetary Policy in China

own exchange operations.32 Under the 1842 treaty system the leading mer-
chant houses at first maintained their importance not only in the exchange
business but also as private bankers, thus providing a formidable barrier to
entry by smaller houses into the China trade. A prominent American mer-
chant, Edward Cunningham, described the situation as follows:

Twenty to twenty-five years ago the prominent houses, including one American,
did a flourishing exchange business — they acted as intermediaries between less-
known houses and British capital by buying drafts on the former on London and
giving them currency by their endorsement and then selling them to the holders
of British hard currency. One English bank had less business than some one of
the mercantile houses. As more banks came into the picture, commissions fell
until mercantile houses found it no longer paid to do business unless they had
tremendous volume — which they didn't.33

But as early as 1845 the Oriental Bank had a branch in Hong Kong and
was issuing bank notes denominated in Spanish dollars. The growth of the
exchange banks not only rationalized the banking business in the foreign
settlements, it revolutionized business methods and was, in the opinion of
a leading American merchant, the main cause for the failure of the older
established houses. "In the early days," he said, "every house was its own
bank, and it sought no facilities outside of its own resources. Consequently,
the old houses with large capital had a practical monopoly of the business."
But banks lent to everyone, and that, together with the substitution of steam
for sail, the coming in 1872 of the telegraph, the passing of local trade into
the hands of the Chinese, and the large expenses involved in maintaining
the grand style, forced retrenchment and more conservative methods of
business.34
Although the East India Company lost its trading monopoly in China, it
continued in the remittance business as a rival of the merchant houses, a
competition which was severely criticized by those advocating the complete
withdrawal of the company from mercantile activities. The merchants were
soon to have other rivals, however, for between 1845 and I860 branches of
Anglo-Indian or Presidency banks were established in Canton, Hong Kong,
and Shanghai. In 1840 an attempt was made by certain China merchants, of
whom Jardine was the chairman, to establish a Bank of Asia as an exchange
bank in India and China. By 1843 the project had failed to win the approval
of either the Indian government or the British parliament, but the issues
involved were neither simple nor clearly defined. Doubt was expressed as to
whether remittance between two countries was a legitimate banking opera-
tion, but the main objection was political and stemmed from the attempt of

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B a n k i n g and the M o n e t a r y System 99
the Indian government to maintain control of banks operating in Indian
territory. 35
By 1860 the Agra and Masterman's Bank (formerly the Agra and United
Service Bank, Ltd.), the Chartered Bank of India, Australia and China, the
Chartered Mercantile Bank of India, London and China (formerly the Com-
mercial Bank of India), and the Central Bank of Western India had also
reached China. 36 In 1864 the Hongkong and Shanghai Bank was formed,
opening for business in 1865 and incorporating in 1866. The announcement
that a Bank of China was to be formed, financed from Bombay with special
interest in the China trade, gave the impetus needed to the Hong Kong
merchant houses to form their own locally directed bank. 37 By then a ma-
jority of the merchant houses had accepted the inevitability of the exchange
banks and were resigned to losing their own banking functions. They recog-
nized the need to found their own bank if Indian domination was not to be
perpetuated, and the announcement of the plans for a Hong Kong mint was
a further inducement to establish a purely local bank on the eve of what
they hoped would be an era of sound money. The name of Jardine, Matheson
and Company, however, was not among the signers of the 1864 prospectus of
the "local bank." Incorporated under a Hong Kong ordinance with double
liability and a capital of $5,000,000, which was paid up within two years, the
Hongkong and Shanghai Banking Corporation was immediately required
to weather a financial storm which ultimately traced back to the failure of
Overend Gurney and the cotton speculation in India. At the beginning of
1866 there were eleven banks in Hong Kong; of these five failed, and the
success of the local bank was built to some extent upon their ruin.
One of the survivors was the Comptoir d'Escompte, founded in 1848, re-
organized in 1862; it was until 1889, the year the Deutsch-Asiatische Bank
set up in Shanghai, the only serious rival to British exchange banking in the
East. 38 In 1890 the Russo-Asiatic Bank was founded, followed by the Yoko-
hama Specie Bank, which established a branch in Shanghai, and after 1895
other powers sponsored banks to deal with the concessions which were part
of the new spirit of imperialism. At that time the Hongkong and Shanghai
Bank was the leading British representative, but in the era of free trade it
had many of the aspects of an international bank. The American firm of
Augustine Heard was a signer of the prospectus, and a representative of the
company sat on the Board of Directors until its failure in 1875. German and
Parsee houses were also represented, and the first chief manager was French.
The depreciation of silver after 1874 placed the Eastern banks in a difficult
position. To the extent that their operations were in silver currencies and

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ioo Money and Monetary Policy in China
their liabilities in gold, they were faced with a constant exchange risk which
they found difficult to cover. Nor could the extent of the depreciation of
silver have been foreseen, since it depended in part upon uncertain political
factors, for example, United States silver purchase and Indian currency poli-
cies. Failure to appreciate the danger of the falling price of silver was the
main cause of the failure of the already reorganized "New" Oriental Bank
and the forced reorganization of the Chartered Mercantile, although the
proximate cause was business failure. To be safe the banks had to cover their
silver position except to the extent that they could work with local silver
deposits.
By the end of 1891 the capital of the Chartered Bank of India, Australia
and China was all in gold and the Hongkong Bank had already been work-
ing on a gold basis. Indeed, although other banks were forced to write down
their capital, the Hongkong Bank's had increased to $10 million by 1891.
Until 1892 it was not successfully challenged in its position as the only
foreign-style local bank, although several proposals for new foreign banks
were advanced. A Bank of China, Ltd., with a nominal capital of 2.5 million
taels was actually announced in the North-China Herald of July 6, 1872. It
was to be formed under the British Companies Act of 1862 with a Board of
Directors in London and a management committee in Shanghai; by August
27, 1872, the idea had been given up.39 But in the optimistic years which
preceded the 1891-92 financial crisis two banking projects were initiated. The
Trust and Loan Company of China, Japan, and the Straits was founded in
1890 initially as an investment company, but in the depression it quickly
changed to general banking under the title, Bank of China, Japan and the
Straits.40 A desire to formally associate foreign and Chinese capital in a bank
led to the formation of the National Bank of China in 1892, but the initiators
of the project, the American firm of Russell and Company, long established
in the China field, failed in 1891.41 The project was nevertheless continued,
and both banks survived but did not prosper in the period through 1895.
The primary role of the exchange banks was the financing of foreign trade
and in this the Hongkong and Shanghai Bank took the lead, setting the ex-
change rates in Shanghai based on the London price of silver. The banks
accepted deposits in taels or dollars at 5 to 7 per cent for twelve months or a
maximum 2 per cent for current accounts. Quantitative analysis is not pos-
sible until the records of the banks can be examined, for the published ac-
counts give total figures for all branches whether in China or not. The
midyear account of the Hongkong and Shanghai Banking Corporation for
1886 shows, for example, total deposits of $69.7 million and notes in nominal

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Banking and the Monetary System ιοι
circulation of $4.4 million, but a portion of these were in Malayan branches.42
Shanghai and Hong Kong branches of the exchange banks lent against
local shares, and in some cases may have been directly interested in the joint
stock enterprises. The Hongkong Bank early became involved with indus-
trial projects in Hong Kong, information concerning which is available be-
cause of the failure of the projects and the subsequent explanations in share-
holders' meetings.43 Some information is available on the role of the Hong-
kong Bank in the underwriting of Chinese government loans. Of the 45
million taels the Chinese government borrowed prior to 1895, at least 17
million taels were marketed through the Hongkong Bank, the dominant role
of British finance being exemplified by the fact that only one of the larger
loans, the 1887 Summer Palace Reconstruction Loan for 5 million marks
(970,000 - 980,000 taels) was handled by a non-British institution. 44
A unique experiment was the municipal government's Shanghai Savings
Bank, proposed in 1865 and in operation at least by 1867.45 Considering that
the days of the merchant princes were over, the municipal council hoped
to stimulate thrift among wage earners, and with an interest rate at a high
8 per cent did encourage the deposit of 52,000 taels. The bank closed in 1868,
owing, it was said later, to an excessive interest rate no longer warranted by
conditions in Shanghai. In 1881 the municipal council voted to make a
second attempt, but the need was filled by the Hong Kong Savings Bank, a
department of the Hongkong and Shanghai Bank, which opened a Shanghai
branch in 1883 offering a more modest 3% per cent with a maximum deposit
of $1,200 a year or $3,000 in total.46
Other institutions. The Shansi banks did not enjoy a complete monopoly
of government business. First, local banks might win the patronage of the
officials and become the repository of government funds. Secondly, officials
might themselves sponsor banks, usually under private management, for
receiving specific tax monies or for performing some other limited fiscal or
monetary function. The Haikwan banks are perhaps the best known of these
semiofficial banks, although their status varied from port to port. Any official
connections were usually denied in periods of crisis. The Haikwan banks
were established to receive the customs duties which were paid according to
agreements made locally between the foreign consuls at the port and the
Chinese superintendent of customs. The bank itself did not undertake com-
mercial banking directly but, not being required to forward its receipts im-
mediately to official control, was able to make funds available either to a local
bank under the same management or to pawn shops and other credit insti-
tutions, often those in which the local officials had an interest.47

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io2 Money and Monetary Policy in China
The profits of the Haikwan banks were derived both from the temporary
use of government funds, from meltage fees, and from the difference be-
tween the rate of collection and the rate of remittance. The formation of the
bank varied in each port. In Chefoo, for example, it was owned by the super-
intendent of customs and "staffed by friends of the late taotai." In Hankow
there were two banks, the proprietor of one being the Lieutenant Governor
of Honan, Wang Wen-shao (1830-1908, born in Chekiang), who became
senior vice-president of the Board of Revenue in 1879 and president in 1898.
Other customs banks were owned by H u Kuang-yung, who purchased the
rank of expectant taotai. But as noted above, the official connection remained
legally uncertain. When the Hankow Haikwan Bank failed in 1868, owing
foreigners $40,000, the taotai refused to help in any way. The North-China
Herald asked, "Is the Bank like the Bank of England, a private bank simply
doing business for the government as part of its regular business, or is it a
government bank?" And it continued, "It was established by a former taotai
at the first opening of the port for the express purpose of receiving customs
duties on foreign trade," pointing out that the profits had always been ap-
propriated by the government. 48 The Governor General was reported to have
granted a license for the bank to two fictitious persons. The taotai appropri-
ated the bank's profits.49 Such loose and complex relationships are typical of
official involvement with economic enterprise and foreshadow the confusion
which typified the \uan-tu shang-pan system (official supervision and mer-
chant management) .50
Banks operating under similar principles had been earlier established for
the receipt of the salt tax and played a comparable role in the monetary sys-
tem. 61 In Peking four groups of semiofficial banks existed at some period in
the nineteenth century — the "five Yü banks" which failed in 1860, the "four
Ch'ien shops" and the "five T'ien shops" which failed after 1861, and the
"four big Heng banks" which survived the century. The Ch'ien and T'ien
banks had been responsible for undertaking the issue of government cash
notes during the Hsien-feng period (1850-1861) and suffered from the gen-
eral collapse of imperial credit. (See Chapter VI.) The Heng banks were
important in the latter part of the century as repositories of imperial funds
and issuers of cash notes in Peking. 52
Traditional credit institutions fall generally into two categories, pawnshops
and mutual financing associations. Pawn shops often were licensed and their
rate of interest restricted usually to a reasonable 3 to 4 per cent per month. 53
Illegal pawn shops operated at higher rates, as sufficient credit was not avail-
able at the official rates. Mutual financing associations were formed volun-

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Banking and the Monetary System 103
tarily and members contributed specified sums, borrowing in turn from the
association's capital either by lot or by bid.54
This survey of the banking system of China is an introduction to the
following sections of the chapter. The role of the banks, both local and
foreign, in the monetary system of China is one aspect of the banking system
which may be described with some completeness, although quantification is,
as usual, not possible.

Bank Money

Ban\ notes. Paper money has a long history in China. The country which
invented printing suffered the first hyperinflation, and the story of govern-
ment note issues is not a happy one.55 With the exception of a small issue
in the Shun-chih period (1644-1661) and the unfortunate experiments during
the Hsien-feng period (1851-1861), the Ch'ing government did not issue
paper money until after the establishment of imperial banks in the last
decade of the dynasty.56 In this section the issues of the native and foreign
banks only will be considered.
In their physical appearance foreign bank notes presented nothing unusual,
except that they included a Chinese translation of the name of the bank,
place of issue, and value of the note. Chinese bank notes were, however,
usually signed in ink at the time of issue and so marked that the stamp over-
lapped the counterfoil, from which the note was then detached.57
The inconvenience of coin and bullion as a means of payment in the
Chinese system and the shortage of cash which a continued illegal debase-
ment could hardly correct were two strong factors leading to the use of
native bank notes in China, but they were also factors preventing the com-
plete success of bank notes. The use of bank notes to avoid the inconvenience
of cash or string of cash only postponed the day of reckoning. In what quality
cash and in what type of string would the notes be redeemed? The uncer-
tainty of the encashment affected the facility with which the notes passed
current, although in cities such as Kirin or Foochow, where bank notes were
for a period the normal tender, the problem was less acute until a banking
crisis threatened to undermine the entire credit system. The shortage of
coin manifested itself in two ways: first, the banks were reluctant to redeem
their notes in coin or bullion to the entire value of the note, but instead
tendered part payment in the notes of other banks; 58 secondly, the insolvency
of a single bank might threaten the entire local monetary system by pre-
cipitating a run on the banks at a time when coin or bullion was not avail-
able.59

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104 Money and Monetary Policy in China
A bank would be unable to redeem its notes for the very reason that first
encouraged their issue — the shortage of hard money. If the manager were
sufficiently honest and quick thinking, he could apply to the magistrate to
have the official seals placed on the door of the bank, whereupon business
ceased and payment of 100 per cent on the notes might eventually be made,
although priority in the distribution of the bank's assets does not appear to
have been given to note holders. Failure to follow this procedure — and con-
tact with officials was to be avoided — led to serious riots as note holders
exerted their right to seize the property of the bank in lieu of payment.60
Nor was note issue restricted to the larger and more reputable banks. In
Shansi, for example, there were 73 cash shops issuing notes of 1,000, of 5,000,
and of 10,000 ch'ien.61 Failure of such concerns was frequent, and eventually
the magistrate might be moved to impose restrictions on the note issue and
require guarantors for the note-issuing banks.62
Bank notes were denominated in the local units of account: therefore,
notes payable in taels in Shanghai were payable in Shanghai taels; Tientsin
notes denominated in tiao were payable according to the chung-ch'ien sys-
tem; and Peking cash notes, at least until the 1887 currency reform, were
payable in ta-ch'ien or "big-cash." 63
The exchange banks issued notes under the terms of their charters or acts
of incorporation. Whereas the native banks were under no restrictions as
to the nature of the backing for their notes or the size of the note issue, the
foreign banks were in general restricted to a note issue the maximum limit
of which was equal to the paid-up capital of the bank and against which a
one-third reserve in specie was required.64 Notes were issued in both Hong
Kong and Shanghai, denominated in dollars and taels respectively, and by
1889 dollar bank notes were also issued in Shanghai. 65 They found quick
acceptance in Hong Kong and their use spread throughout south China, but
they were not so widely used in Shanghai, where the customs bank was
unwilling to accept them in payment of duties.66 Nevertheless they were in
sufficiently wide circulation in both Kiangsu and Chekiang provinces by 1879
to provoke China's newly returned minister to Britain, Kuo Sung-tao (1818-
1891, born in Hunan), to ask why, if the people were so willing to accept
one foreign innovation, they were unwilling to accept others.67
The failure of the Oriental Bank and the reorganization of the Chartered
Mercantile, which led to the withdrawal of their notes, coupled with the
increasing popularity of notes not only in Hong Kong and Shanghai but
also in Hankow and other treaty ports, led to requests by the exchange banks
that the limit on their note issue be raised.68 The Chartered Bank, which

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Banking and the Monetary System 105

followed the expedient of reissuing its holdings of Chartered Mercantile notes


until the latter reorganized as the Mercantile Bank of India, was especially
handicapped because the silver value of its note issue was calculated at a fixed
rate of exchange with the gold value of its paid-up capital, and silver was
depreciating. In 1894 the limit was raised in a revised charter from $4 million
to $5 million with a one-third specie reserve to be held against outstanding
notes in the place of issue.69 In 1898 the Hongkong and Shanghai Bank,
whose shareholders had unlimited liability for the note issue, was permitted
an "excess issue" to be fully covered by specie, and this set the pattern for
future increases of all banks permitted a note issue.70
With the exception of $226,000 worth of H o n g Kong one-dollar notes
issued by the Hongkong and Shanghai Bank in 1872, the exchange banks
were not permitted to issue notes of less than five dollars, and they were thus
unable to meet the need for small change in the treaty ports or to ease the
inconvenience of using dollar coins, the value of which, in terms of a dollar
or tael unit of account, depended upon the shroff, the Chinese teller. 71 But
for larger transactions the foreign banks provided two convenient forms of
payment — the checking account and the bank note. These instruments, to-
gether with their parallels in the native banking sector, furnished that degree
of flexibility without which the metallic monetary system of China could not
have worked.
Foreign bank notes passed current at least in areas in which their use was
familiar, but when they were cashed less bullion or worse quality coin might
be received than had been tendered when the notes had been originally pur-
chased. T h e notes of the native banks rarely passed current beyond the im-
mediate trading area of the town in which they were issued, and some, issued
by merchants, might pass current only in a particular street. 72 N o r did bank
notes always pass current at par. Since the size of the note issue was a de-
cision to be made by the bank, the supply was not infinitely responsive to a
change in demand. R. M. Martin, for example, commented in his manuscript
notebook,
The notes of the Bankers rise or fall in value according to the demand for them.
On our occupation of Ningpo, they rose in value as the people wished to carry
off their property — and as our troops did not think it worth while to seize pieces
of paper.
A premium might have to be paid for the convenience of the notes, or a dis-
count if the market was oversupplied or if the credit of the bank was in
question. 73 T h e notes of the foreign banks were payable on demand, but
some native bank notes were usance notes payable in five or ten days. 74

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ι об Money and Monetary Policy in China
Native bank notes did not all pass from person to person without formality.
In many cases the note had to be endorsed by the holder, who then became
responsible for payment should the bank refuse or fail. 75 And upon encash-
ment of a native bank note a specific fee might be required. 76 Yet despite
these qualifications, as with the current accounts, the economic effects of the
Chinese system were almost identical with those of the more usual methods
employed in nineteenth-century England.
Current accounts. Current or demand accounts fulfilled the requirements of
money. Through the use of the check or other transfer arrangement, they
were generally accepted as a means of payment. Fixed value in terms of the
unit of account was not essential in a premodem monetary system, but the
current account was more likely than bullion or coin to maintain this fixed
relationship, if only because prices were quoted in a unit of account which
defined exactly one unit of bank money. A variable agio was usually quoted
between the unit of account which valued a unit of bank money and bullion
or coin. The agio thus represented the difference between the assigned and
the market value of the bullion or coin.
Current accounts could arise from a tender of coin or bullion, from a trans-
fer from another bank, or from the granting of a loan to a customer. Native
banks in China do not appear to have solicited the deposit of funds on cur-
rent account as actively as they sought other forms of business, but they were
most anxious to acquire loans. In Swatow agents of the local banks sought
out potential customers and, on arranging the terms of the loan, presented
the borrower with a pass book, the amount of the loan being entered
therein. 77 The accounts were denominated in units of the local currency —
dollars, taels, ch'ien, or tiao — and transfers in the same community between
current accounts were made at par. If, for example, the price of a commodity
was $50, the purchaser would arrange to have the seller's current account
credited $50, the same sum being in consequence deducted from his own
balance. Withdrawal of silver or cash from an account might not, however,
be effected at par. In towns commonly using current accounts as the means
of payment, there was an agio between bank money and bullion or coin,
the latter being at a varying premium. 78 In withdrawing, for example, one
tael from an account, it was unlikely that a liang of the sycee current for
such payments would be received, but rather an amount which would de-
pend on the balance of the interregional payments and on whether more or
less extensive use of current accounts as a means of payment was being
made. The weight of sycee or the number of dollars or cash varied in terms
of the unit of account; the current account itself remained unchanged.

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Banking and the Monetary System 107
In the nature of Chinese current accounts there is nothing exceptional; the
method of their utilization as a means of payment, however, presents prob-
lems. Reference may be found in contemporary reports to checks and even
check books, but a foreign observer, particularly well acquainted with condi-
tions in south China, wrote in 1900, "The native banks do not appear to have
hit upon the device of cheques; a foreign bank in Hong Kong, the National
Bank of China [founded in 1892] having been the first to introduce these
convenient orders for money to the Chinese in their own language." 79 This
may be too sweeping a statement, for in the many local monetary systems of
China one, for a time at least, may have used the check. Precision is difficult
because the term "check" might be used loosely to refer to an instrument
which, while it served the same function, was not so simple a document.
Various substitutes or substitute methods were employed. The most common
method of payment, and Newchwang is a typical example, was by oral noti-
fication of the bank that a transfer from one account to another was to be
recorded, a fact which would be noted in pass books supplied by the bank.
In other cases a written order might be involved, but the parties would have
to appear at the bank so that the signature of the drawer could be verified.
The bank might then accept the order and it would pass current with a
status similar to that of a bank note.80 Nor is it clear whether the references
to checks are to sight bills, for the mention of interest suggests that some at
least were drawn at usance. It cannot be assumed, therefore, that the native
banks worked on a system identical to the modern checking account, but it
is certain that the economic effect of the Chinese system was little different,
although less convenient and in some cases more expensive.
The foreign or exchange banks held current accounts on which in the early
years they paid a maximum of 2 per cent interest; in other respects the ac-
counts were identical in operation to a modern checking system.
Newchwang and Ningpo. The transfer tael systems of Newchwang and
Ningpo — known as Цио-Ы-yin and \uo-chang respectively — have been
fully described in the customs reports and provide useful case studies, illus-
trating the fundamental similarity of such systems but giving notice of the
local variations. The use of bank money was encouraged by a temporary lack
of hard currency, but its obvious convenience often prolonged its use, even
when currency became available.81 Between 1898 and 1901, for example, some
14 million Hai\wan taels' worth of dollar and subsidiary coins, "hard sycee"
or hsien-yin, were imported into Manchuria; nevertheless, in Newchwang
nearly all local business was done through the agency of transfer money. 82
There were fifteen Newchwang local banks, or lu-jang, in which current

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io8 Money and Monetary Policy in China
accounts, that is, transfer money, could be established by the granting of
credit, transfer from some other account, or sale of hard sycee. Hard sycee
was accepted at a premium, chia-sai, of less than 2 per cent. Transfers be-
tween accounts were made at par on oral instructions; checks were not used.
Withdrawal of funds for hard sycee required a payment of a premium,
which differed from that received upon deposit. However, since transfer
money accounts received interest quarterly, on the day that interest was pay-
able transfer money could be withdrawn at par — at the sacrifice of interest
due. By 1901 this custom had changed so that an account which had not re-
ceived the interest payment (known as "hard transfer money") could no
longer be withdrawn at par; the premium required had become greater than
the interest payable.
The premium, agio or chia-sai, was also involved in certain interregional
exchange transactions. The exchange rate on Shanghai, for example, was
quoted in terms of transfer taels as a certain percentage or hui-shui, in favor
of Newchwang. With a hui-shui of 3.5 per cent, for example, 5500 New-
chwang transfer taels would buy 5692 Shanghai currency taels in Shanghai.
If, however, one had 100 shoes of sycee and wished to know the number of
Shanghai taels they would purchase at the day's rate of exchange, conversion
to transfer taels through application of the chia-sai would be necessary. Thus
with a chia-sai of 1.5 taels per shoe of 53.5 Hang, the 100 shoes weighing a
total of 5350 liang would receive a premium of 150 taels, or a total of 5500
transfer taels, and the number of Shanghai taels can be determined as be-
fore.
The currency of Ningpo comprised chiefly dollars, quoted in terms of an
imaginary unit of account, the Ningpo or chiang-p'ing tael. There was thus
no silver currency with any pretensions to a fixed value in terms of the unit
of account, and the advantages of a transfer tael system were obvious. The
problem of agio did not exist, for this would be included in the price of
dollars in chiang-p'ing taels, the unit in which the bank money was quoted
at par. As in Newchwang, checks were not used, but the customs report does
mention existence of individual "pass books" and a bank clearing system.83
The Ningpo system provides an illustration of the method of payment of
foreign duties assessed in Haikwan taels by the Imperial Maritime Customs.
One Hai\wan tael was worth 1.0583 chiang-p'ing taels, and this conversion
had first to be made. The importer could then pay the customs bank in
dollars at the day's rate of exchange. Usually, however, the importer made
arrangements with the customs bank for payment through the transfer tael
system either to the T'ung-ch'üan local bank in Ningpo or to the customs

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Banking and the Monetary System 109
bank in Shanghai. All three banks were owned by H u Kuang-yung, but
the Ningpo customs bank did not usually handle the payments itself, merely
notifying payment for legal purposes — for example, ship clearance — and
allowing the T'ung-ch'üan Bank to collect. If payment were made in Ningpo
the T'ung-ch'üan Bank informed the importer of the number of taels or
dollars to be paid, the latter being based upon a rate of exchange set by the
Bank. If the importer agreed on the rate, he authorized the T'ung-ch'üan
Bank to receive the equivalent from his account in transfer money denomi-
nated in chiang-p'ing taels. If the importer could secure a better rate for
dollars at some other local bank, he would transfer some lesser number of
taels from his own account to this local bank, instructing the bank to pay
the dollars to the T'ung-ch'üan Bank. The local banks might not actually
make the transfer at once, but would rather hold the sums due until called
upon to pay. Eventually the customs bank had to forward the revenue under
the instructions of the officials, and thus the T'ung-ch'üan Bank would at
some time demand that the local banks settle their accounts in sycee. This
was done by the local banks paying into the Shanghai customs bank at the
day's rate of exchange. The T'ung-ch'üan Bank earned its income either by
lending that part of the customs duties it actually held or by charging inter-
est to the local banks with which it had a credit balance created by delayed
transfer-tael duty payments.
Foochow. Although Harry Parkes was interpreter at the British Consulate,
Foochow, for less than a year, his report on the banking and monetary sys-
tem as it appeared in 1845 is one of the most intelligible and is wholly reli-
able.84 Bank notes of three types were issued — cash notes, dollar notes, and
sycee notes — varying in denomination from 400 ch'ien to several hundred
thousand, from one dollar to 1000, and from one tael to 100 taels; the cash
notes were most common. The circulation of bank notes depended, of course,
on the reputation of the banks; thus, those of the smaller banks would have
limited acceptance and would be returned to the issuing bank within a short
period of time. But circulation was also encouraged by the convenience of
notes over coin and by the insistence of pawn shops, sometimes closely con-
nected with the larger banks, that all payments be made in cash notes. The
notes commanded a premium over coin which was taken at the time of issue
in the form of a discount on current cash; cash notes were redeemed at par.
Parkes was especially impressed by the degree of cooperation among banks
and with the officials. The larger banks set the various rates and had men in
the markets reporting back on the changing situation; they reported on the
cash price of silver to the mandarins, who, Parkes said, were especially con-

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11 о Money and Monetary Policy in China
cerned with the falling silver value of the cash coin. The officials on their
part deposited tax monies with the larger banks, the provincial treasurer
accepting a bank deposit slip in lieu of bullion. The bank's receipt, however,
was for fewer taels than actually deposited. In this way the officials paid
the bank for such services as remelting and assaying and preparing the silver
for shipment to Peking. No figures are available to permit this transaction
to be analyzed, but this very imprecision suggests caution in interpreting con-
temporary reports relative to banks holding government deposits without
interest. This would depend upon the discount the bank was permitted and
the services to be rendered when government bullion was deposited.

Miscellaneous Problems

Gold. The Chinese monetary system was bimetallic, using both silver and
copper. Although gold has been highly valued throughout Chinese history,
it failed to qualify as money in the nineteenth century because it was not
generally tendered as a means of payment. It served as a convenient method
of storing wealth and of transferring funds, 85 and it was tendered in pay-
ment of imported goods, but in this last case its acceptance depended upon
its status as money in the exporting country rather than in China. 86 The
gold exported from Shanghai was in the form of Soochow or Peking bars
and was traced to its source either in the stores of wealthy families who were
taking advantage of the appreciation of gold against silver or in the smug-
gling trade between China and Russia, Manchuria, and Korea.87 Gold was
also sold in the shape of a small boat or as leaf, but even these forms were
not used for monetary payments.88 Until about the middle of the century,
sycee was found to contain 3 to 4 per cent gold and was valued accordingly.80
Specific references to the use of gold are found in the presentation of gold
medallions as gifts of Ch'ing emperors to high officials, in the gold coin of
the Taiping rebels cast in Nanking, and in the gold coin issued by Yakub
Beg between 1873 and 1877 modeled after Turkish coins.90 But a description
of the monetary system of China can safely limit its reference to gold to
these brief remarks. In the early twentieth century it was to play an im-
portant role in the international monetary speculations based on Shanghai,
but in the period of this study its role was confined to that of an expensive
commodity which was useful for limited non-monetary purposes.
Taxes and the monetary system. As early as 1869 Robert Hart (1835-1911),
the Inspector General of the Imperial Maritime Customs, saw clearly where
China's principal economic weakness lay. He wrote, "The first thing to be

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Banking and the Monetary System 111

reformed in China is its taxation. No government can exist without money


and China cannot improve so long as her officials have no better way of get-
ting funds than at present." 91 Hart did not suggest that the problem lay in
the revenues of China being in any sense fixed, because they obviously were
not. Certain basic tax rates had indeed been settled at the beginning of the
dynasty and could not, politically speaking, be changed. But the expenses of
the state had increased, and the government required and obtained additional
revenue. The problem was not with the size of the revenue but with the
system by which it was assessed and collected. The government had to de-
pend upon new tax sources — for example, likin or transit tax and foreign
customs revenue — which, except for these major additions, tended to be
subject to ad hoc decisions. The taxes set forth in official schedules should be
considered as tax amounts delivered in Peking in the form of pure silver
bullion. These requirements and others made possible a whole range of
additional fees, eventually surpassing in value the original amounts to be
paid. But such a system was uncertain and subject to abuse; most important,
it left untouched the problem of a thorough reassessment of the taxable
capacity of the country through revision of the basic tax schedules.
With the detailed problems of the tax system this study is not concerned,
but to the extent that the nature of the monetary system lent itself to the
abuses of tax officials, China's revenue collection provides a case study in the
complexities of that system.92 The levying of fees or "squeeze," in Chinese
lou-\uei, by officials on private individuals seeking their services was not in
itself illegal. For any important transaction these payments could become,
however, both a nuisance and an important expense. The East India Com-
pany had early complained of these "irregularities," although they were a
common feature of Chinese financial practice. After the treaties had granted
extraterritorial rights, foreigners were shielded from direct contact with such
practices. Even after permission was granted for foreigners to own land in
the interior, special provisions rendered them immune from the rigors of the
Chinese tax system. But when the Peking Syndicate was granted a railway
concession, the land was taxed in accordance with Chinese custom, and thus
for the first time foreigners were able to report in detail upon assessments as
they were actually levied on Chinese subjects.93 This report is an illustration
of the monetary system at work.
Foreigners had known that officials charged meltage fees to reduce local
sycee to Kuping sycee, even though such melting might not actually take
place.84 They also knew that the officials might collect in Kuping taels and
remit in local taels, keeping the difference, despite efforts of the imperial

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ii2 Money and Monetary Policy in China

government to prevent this.®5 But for the complexities of the tax on their
Honan railway land, they were unprepared.
In Hsun-hsien, it was relatively straightforward. The land tax proper was
0.0368355 taels per той on 1,585,623 той. The tax on this land (0.0368355 X
1,585,623) totaled 58.407 taels. To this was added an amount equal to 44
per cent of the land tax proper to cover inferior touch of the sycee tendered
plus meltage fees.96 A final addition was made to cover expenses at the rate
of 300 ch'ien per tael of land tax. The total tax payable was, therefore, 58.407
taels plus 25.699 taels plus 17,520 ch'ien or 15.587 taels, for a total of 99.693
taels or just over 170 per cent of the original sum. The report states that
the 44 per cent for inferior touch and meltage was quite arbitrary, and it is
known that monetary sycee of such low quality as such a payment would
represent did not circulate in China. The grain tribute was 0.005468 shih
per той on 1,493.75 той or 8.168 shih or piculs commuted at the rate of
6,400 ch'ien per picul or 52,275 ch'ien, the equivalent of 46.316 taels. The
ch'ien was payable in full-dimension or "good" cash coins. The market price
of grain was reported to be between one third and one fourth of the price
set for the grain tax.97
The situation in Hsin-hsien was complicated by the fact that the land
was held under two different forms of tenure to which different rates ap-
plied: the land tax proper on 1,203.512 т о й of common land at 0.0548392
taels per той was 65.9996 taels; on 105,845 той of military land at 0.044
taels per той it was 4.6572 taels. The total land tax proper was then 70.657
taels. This was changed into ch'ien at an arbitrary rate of 2,600 ch'ien per
tael or 183,710 ch'ien. But the land tax was payable not in cash coins but in
sycee and so this sum was converted back into taels at the market rate, giving,
for the year of the report, 166.2 taels. To this were added the expenses of
collection at 30 ch'ien per той of common land and 25 ch'ien per той
of military land, or 38,752 ch'ien equal to 35.06 taels. The total tax now
payable was 201.26 taels, which was 283 per cent of the land tax proper.
Grain tax at 0.01255 piculs was payable only on the common land and so
the total was 15.1075 piculs commuted at 6,000 ch'ien per picul, giving 82.02
Kuping taels. The total of tax and tribute came then to 293.82 local taels.
In this hsien there were evidently no meltage fees or unreasonable conver-
sion between local and Kuping standards, the excess tax being calculated
through false silver-cash conversion rates.98
This report read against the background of the Chinese monetary system
already furnished suggests caution in the handling of Chinese tax figures

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Banking and the Monetary System

and calls into question the neat accounts of the imperial revenue with which
contemporary writing abounds.
Subsidiary coinage. Except at the treaty ports China had no subsidiary
coins in any significant amount until the opening of the modern-style
Chinese mints after 1889. The people used cash, a full-bodied coin, the
changing exchanges between cash and silver providing an additional risk
to trade. Foreign merchants wrote to remind one another that changes in
the gold price of silver might be negated or reversed by changes in the
silver price of copper, and it was in cash that the laborers were paid." The
shortage of cash led the Chinese to seek substitutes in cash notes and
tokens;100 the inconvenience of cash led foreigners wherever possible to
avoid its use.* This section deals with foreigners' attempts to find a simple
means of payment, other than cash, especially for sums less than five dollars
(the value of the lowest denomination bank note in adequate supply).
As one Shanghai writer put it, "We have cash for our dealings with
poorer natives, dollars in our social and retail dealings, and taels for our
higher commercial affairs." 101 This may have been so, but few foreigners
understood the cash system, a comment typified by the custom of offering
a "handful of cash" to an outraged farmer on whose lands the foreigners
had been trespassing.102 The objection to the cash toll on the Soochow Creek
bridge in Shanghai was based on the statement that foreigners didn't carry
cash.103 Dollars also were objected to because of their fluctuating rates and
also the tendency of shroffs to make seemingly arbitrary decisions as to
their currency. The limited one-dollar note issue of the Hongkong and
Shanghai Bank was quite inadequate to provide a subsidiary coinage for the
treaty ports.
Two solutions were attempted, neither of which was entirely satisfactory.
First, the "chit system" eliminated the handling of coin and bank notes.
The salary of foreign employees was paid by check drawn on the Chinese
compradore, who then held the funds against which the employee wrote
"chits" — memoranda acknowledging debts for retail transactions. These
were accepted by the shopkeeper and passed for collection to the firm's
compradore. It often happened that the employee, keeping no record of his
* Tokens of wood, bamboo, or even copper were issued by merchants and performed
either a general or a specific function. Tokens with a general function had a very limited
range of circulation and might bear such a legend as, "Because of a shortage of cash, tokens
are temporarily used as a substitute." Tokens having a specific function, like our streetcar
tokens, were obviously receipts for payment and entitled the bearer to certain specified goods
or services, e.g., a pail of water.

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114 Money and Monetary Policy in China
expenditures, would find himself in debt to the compradore and would
have difficulty recovering, but the system was universal and eliminated the
need for almost all hard currency transactions. The need for the chit system
was minimized by the introduction into Shanghai by 1889 of bank notes
denominated in dollars, supplemented by fractional monies.104
There were, in fact, subsidiary coins in the treaty ports. Robert Fortune
reported that English shillings and sixpences were passing current in Amoy
in 1843, but they passed by weight.105 In 1868, however, the North-China
Herald stated that shillings were passing at 25 cents of a Mexican dollar.
"The important thing," the report said, "is not to have to use cash." 106 In an
effort to avoid this coin Shanghai had in circulation shillings, guelders, 24
kopeck pieces, half rupees, Spanish, Mexican and United States quarter-
dollars, and various other coins all current at Мех $0.25. Hong Kong ten-
cent pieces, however, sold at eight or nine to the dollar; francs were ac-
cepted at 20 cents but paid out at 25.107
After the opening of the Canton mint in 1889 the Chinese manufactured
their own subsidiary coinage in decimal parts of a dollar. In a metallic
monetary system subsidiary coinage is only possible if the amount in circula-
tion does not exceed the demand. But the fact that such coins could be
manufactured with the intrinsic value less than the face value provided an
ever-present temptation to over-mint, with its inevitable consequence, over-
supply. When this happened the value of the subsidiary coinage fell in
terms of the unit of account. Thus eventually a debt of 90 cents could be
satisfied by tender of nine ten-cent pieces, but a debt of 110 cents would
require more than eleven X.tn-cent pieces in payment.108 A dollar of subsidiary
coins was not equivalent in the market to a dollar paid by a dollar coin, and
hence a new unit of account was created, the small dollar, paid at par in
subsidiary coinage. This development postdates the period of this study, but
its origins trace back to the period 1889-1895.

The Chinese Monetary System:


A Summary

Chinese monetary systems may have been of infinite variety, but they can
be classified under major categories which describe the principal features
of the silver and the copper sectors, the contribution of the banking system
being included under one or both headings. An elementary classification
might be "a tael-chung-ch'ien system." Each section could be elaborated;
for example, the chung-ch'ien might be expanded to include the phrase

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A Summary 115
"using strings of 375 cash per tiao." The description in Chapter II provides
the outline for such extensions, but the silver sector requires an outline
summary here to take into consideration the complications created by the
contribution of the banking system. The banks supplemented the cash
sector currency, but in the tael sector they actually changed the nature of
certain local monetary systems.
Tael unit of account. The tael, the traditional unit of account, was used
in all towns except those in which the dollar coin had come to dominate
both retail and wholesale transactions. Wide use of the dollar coin was
insufficient to cause the change, and thus the tael continued to be used even
after a large proportion of the circulating media was dollars. The tael as a
unit of account was used throughout China except in the southern treaty
ports, that is, south of Ningpo after 1857 but including Shanghai before that
date.
The tael unit of account was either an imaginary money or was directly
represented by a physical means of payment. In outline the tael system may
be categorized as follows:

A. Imaginary tael systems


(1) A wholly imaginary tael system, in which the physical means of pay-
ment fluctuates in terms of the unit of account: e.g., a system in
which only dollars circulate but at rates which fluctuate in terms of
the tael unit of account, as in Ningpo.
(2) The indirect standard system, in which the physical means of pay-
ment has a fixed although indirect relationship with the unit of ac-
count, e.g., Shanghai after 1857.
B. Standard tael systems
(1) A system in which the unit of account is defined in terms of a
standard amount of silver in a form actually in circulation, e.g.,
Chungking.
(2) The transfer tael system, in which payments can be made with cur-
rent accounts but in which hard money varies in value in terms of
the tael unit of account, e.g., Newchwang.

A specific monetary system might be placed in more than one category,


there being differences in the various markets. Thus interregional payments
might be made on the standard tael system, but payments for certain
products within the town made according to the indirect standard or the
transfer tael system. A tael unit of account might be used in some sectors of
the local economy, a dollar unit in others. A full description of all features

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116 Money and Monetary Policy in China
of a local monetary system could be quite complex, but fortunately the eco-
nomic historian is mainly concerned with the unit used in interregional pay-
ments, to which other units may then be related.
Dollar unit of account. The dollar unit of account was used to some ex-
tent in the retail sectors of systems which would normally be described as
tael systems. The use of the dollar unit of account in interregional payments
was confined to the treaty ports, which had early contact with foreigners
and in which the foreign merchant and banking houses usually had con-
siderable influence.
The major categories of dollar units of account are as follows:

A. Imaginary dollar systems


(1) Monies of exchange, in which the unit of account is kept at par with
a similar unit in another port at the expense of losing the fixed re-
lationship with local means of payment, e.g., Amoy. In Amoy the
Spanish dollar unit of account was kept at par with Hong Kong, but
coins were accepted by the Amoy branch of the Hongkong and
Shanghai Bank at a rate quoted daily.
(2) Fictitious coin systems, in which the standard dollar has either ceased
to exist or is used so rarely that it hardly performs the function of
money, e.g., Shanghai immediately prior to 1857.
B. Standard dollar systems, in which the unit of account is payable at par
by a standard coin which exists in sufficient quantity to be considered
normal tender, e.g., Wenchow.
C. Bank money dollar systems, in which the exchanges are quoted on the
basis of bank notes despite the definitive relationship of the unit of account
to a standard dollar coin, e.g., Hong Kong.
D. Dollar bullion systems, in which the dollar unit of account is defined as
a weight of silver of dollar fineness and payments are made by weight as
in the tael system, e.g., Canton.

The categories are again not mutually exclusive, and they changed over the
period of this study. For example, if the money of exchange is represented
by bank notes, the monetary system may be classified as having the charac-
teristics of both A ( l ) and C, each having relevance in its own sector. A ( l )
describes the interregional relationship of the unit; С describes the domestic
characteristic. Bullion may also be accepted by weight, and further combi-
nations are possible.
Contemporary foreign judgments on the Chinese monetary system were
harsh. To treaty-port observers it was costly, confusing, corrupting, and in

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A Summary 117
need of change. Certain costs are, however, inevitable in any payments
system, and the variations in the cash-silver exchanges to which the foreigners
so strongly objected would in other systems have been reflected in changes
of price or of interregional exchanges. That armies of money-changers were
kept employed is more a comment on the Chinese economy as a whole
than on the monetary system. That the system appeared confusing when
viewed from a nineteenth-century English standard is understandable, but
the confusions can be explained. They were the consequence of problems
inherent in a metallic system and of the local or provincial nature of Chinese
economic units. To blame the monetary system for corruption is a little
harsh. It undoubtedly did permit those with economic power to manage
the exchanges and the content of monetary payments in their own favor,
but this is not in itself corrupt. The Chinese monetary system is, in fact,
a fascinating example of a metallic monetary system in all its complexity.

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CHAPTER V

Ch'ing Monetary Institutions and Policy

A metallic monetary system if it is to be maintained requires the mone-


tary authority to administer a certain minimum policy. The supplies of
the monetary metals must be insured, the coinage kept standard, violation
of the coinage laws successfully prevented, and, in a bimetallic system, the
desired ratio must be maintained. If the authority cannot control the supply
of monetary metals, it must either alter the dimension of the coins and
administer an effective recasting, or revalue the coinage. If there is a
radical change in the requirements of the monetary system, the monetary
authority must initiate and implement a thorough monetary reform. Of
the three degrees of activity — administration of existing regulations, the
execution of minor changes, and the undertaking of major reform — the
Chinese monetary authority was best equipped for the first, attempted the
second, and failed completely on the third.
Monetary policy exists within an institutional framework, although in-
stitutions may change — the tendency to change being part of the institu-
tional framework itself. This chapter considers the formal constitutional
arrangements by which Ch'ing monetary policy was initiated and adminis-
tered and the men who, during the period of this study, were responsible
for the monetary administration of China. Secondly, it describes the tradi-
tional monetary policy which the Ch'ing had attempted to pursue prior to
1845. The chapters which follow in Part II are case studies in monetary
policy: first, the traditional policy in a period of crisis; second, a history
of the money in the treaty ports, where traditional policy and foreign in-
fluences were most in contact; then, a special case of this contact—the
Haikwan tael; and finally a chapter on the pressure for more thorough re-
form than the makeshift measures of the Hsien-feng period (1851-1861)
could provide.

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122 Money and Monetary Policy in China

The Institutional Framework

China was a Confucian state, but this must be understood in the sense
that Confucianism was primarily an attitude of government, which, al-
though discarded in operation, was the spirit behind the constitution and
dictated its verbal expression though not necessarily the actualities of gov-
ernment action. Confucius condemned government by statute, by imposi-
tion of pains and penalties; he advocated government according to the
principles of virtue, that is, the reduction of the common people to order
through observance of the Rules of Propriety. 1 The government of China
was then but a reserve against the decline of virtue; its function was to act
only when inaction had been unsuccessful. The duty of officials, from the
Emperor down, was to set an example of virtuous conduct and by this ex-
ample to rule. Should they fail, the natural order would be disturbed. If
the people failed to respond, disaster might follow. T o prevent disturbance
from whichever cause was the function of government.
T o supplement the example of virtue, therefore, the Emperor defined
right conduct, and this took tangible form in the edicts and the administra-
tive orders based on them. Should example alone fail to control the people,
these regulations stood in reserve. The Chinese government was a nerve
center, reacting to stimuli which were essentially deviations from a norm.
A deviation might be settled at the local level; if not, a memorial would
eventually reach the Dragon Throne, and the Emperor would authorize the
action required.
For an economy which was subject to many diverse local forces such a
government would long be adequate. A drought first had its effects in a
specific area, causing officials there to act. If they failed, the Emperor might
eventually be called to redress the balance — to remit taxes, to send relief
from other areas, that is, to restore the natural harmony. A contemporary
student of Ch'ing government wrote:

The central government of China, so far as a system of this nature is recognized


in the existing institutions, is arranged with the object rather of registering and
checking the action of various provincial administrations, than with that of as-
suming a direct initiative in the conduct of affairs . . . Regulations . . . are on
record for the guidance of every conceivable act of administration; and the prin-
cipal function of the central government consists in watching over the execution
of this system of rules.2

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Ch'ing Monetary Institutions and Policy 123
The survival of such a system depended, paradoxically, on its adaptability.
If the local stimuli became sufficiently great, they might force modifications
which destroyed the uniformity it was the function of the central govern-
ment to maintain. The central government then had the choice of losing
its raison d'etre or undertaking a thorough reform which redefined its
tasks. The imperial government of the Ch'ing was confronted with such
a choice in the years following the Taiping rebellion; that it failed to
adequately redefine its role is evidenced by the subsequent history of China,
especially the period of disunion following the 1911 revolution. To describe
these attempts at reform as a contest between the center and the provinces
may not be helpful. The central authority was not so much in danger of
losing power as it was of losing purpose. Traditional central powers could
still be enforced; the real problem was that new crises gave rise to actions
not recognized as traditional responsibilities of the center. The local govern-
ments solved these new problems in their own way; uniformity, and with
it the supervisory function of the central government, disappeared. In 1887
the central government was able to direct a currency reform with some
limited success, but the measures proposed were recognized as traditional
powers of the center. The demand being made on China, however, was for
national reform, and this required not the exertion of an existing central
authority but the creation of a new central power in spheres previously
reserved to the provinces. In Europe the course of this change was funda-
mental in determining whether the feudal agglomeration would break up
or be reknit in a centrally powerful national state.
Central government. The Emperor was neither of the central administra-
tion nor of the provinces. H e stood alone, his own prime minister. He was
the source of authority; but he could not successfully deny the logic of
increasing provincial initiative unless his advisers from the central ad-
ministration were able to offer a workable alternative. The Emperor was
served by two advisory bodies, the Grand Council and the Grand Secretariat,
the former being the effective advisory group in the nineteenth century;
he was informed by the censorate. His central administration was carried
out by six administrative boards: the boards of Civil Office, Revenue, Cere-
mony, War, Punishment, and Works. After the Second Sino-British War,
he was advised in foreign affairs by officials of the Tsungli Yamen.
The central government was, at the same time, a local government for
the capital, responding to the stimuli of the metropolitan area in the same
fashion that t h · provincial authorities responded to their local problems.

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124 Money and Monetary Policy in China
The affairs of the Shun-t'ien prefecture, the administration of Peking itself,
were partially the concern of agencies which were otherwise imperial. In
these areas they might initiate action; on affairs of greater scope they
awaited reference from the Emperor. For the Grand Council and the six
boards were responsible only for those problems which had been referred
to them by the Emperor; they were not executive bodies carrying out na-
tional policies. The Emperor might not only call for advice on the Grand
Council but on any combination of councilors, members of boards, pro-
vincial authorities, and censors, that he thought suited the occasion. The
six boards administered the laws as they existed, but this did not provide
them with executive authority. In supervising the law they could provide
their interpretation, which, if not accepted by the provinces, could be
memorialized to the Emperor. But the decision was the Emperor's and his
edict was directed to the provincial authorities, not to the six boards.
The Ch'ing was an alien dynasty of Manchu conquerors, and the central
government of China was affected by the desire of the Manchus to main-
tain their power. Thus a balance in personnel was attempted. In the Grand
Council this balance was kept but not systematized; in the six boards the
chief positions were evenly divided between Manchu or Mongol and
Chinese.3 Provincial appointments were made with this balance of power
in view, but in the latter part of the nineteenth century, the number of
Chinese high provincial officials increased at the expense of the Manchus.
The inability of the Chinese state to readjust and to reassign spheres of
provincial and central government power was at least partly the consequence
of the problem of maintenance of Manchu supremacy and the inability of
the Ch'ing, being alien, to rally the country by a call to nationalistic emotion.
The Board of Revenue * The duties of the Board of Revenue have been
translated as follows from the Collected Statutes of the Ch'ing Dynasty·.

To assist His Majesty in his duty of providing for the myriads, the ministers and
vice-ministers shall control the land; keep a record of the territories of the Em-
pire and the boundaries of the provinces; and take a census of the population.
In all collections of taxes and excises, payments of nobles and government em-
ployees, auditing of accounts of the provincial and central treasuries and granaries,
transportation of taxes and tributes, officials shall submit their accounts and plans
to this department: its ministers and vice-ministers together with their staff shall
decide on the cases and enact their decisions except in very important cases which
shall be reserved for the decision of the Emperor.4
* For a complete account of the Board of Revenue, especially its economic activities, see
the recent article by Ε-tu Zen Sun, " T h e Board of Revenue in Nineteenth-Century China,"
Harvard Journal of Asiatic Studies, 24:175-228 (1962-1963).

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Ch'ing Monetary Institutions and Policy 125

The definition of "very important cases" changed in a way which lessened


the responsibility of the Board of Revenue. Other specific duties of the
Board were supervision of the coinage; direction, control and custody of
customs houses, granaries, and treasuries; commercial regulations, passports;
the initiation of agricultural ceremonies; the protection of forests and the
encouragement of silk culture; and, with the Board of Works, responsibility
for standard weights and measures. The Board of Revenue presented all
financial officials to court. It also, surprisingly, reviewed all civil cases, had
concurrent jurisdiction with the Board of Punishment if in the trial bodily
punishment was applied in interrogation, and constituted a special court
for the adjudication of suits among Manchus relating to landed property.
These duties were varied enough, and S. W. Williams' Gilbertian touch
should be ascribed rather to the treasury of the Imperial Household. He
wrote,

One minor office prepares lists of all the Manchu girls fit to be introduced into the
palace for selection as inmates of the harem, a duty which is enjoined on it
because the allowances, outfits and positions of these women come within its
control.5

The Board of Revenue was then the board responsible for economic ad-
ministration. Its Chinese name, Hu-pu, suggests that it was originally estab-
lished to register households {hu); from this it may logically be assumed
to have derived the fiscal duties, control of the currency following as a
consequence of its tax collecting functions. The Board of Revenue was
potentially of the utmost importance, but a full study of all its manifold
duties and activities would be beyond the scope of this study, which must
now confine itself to monetary affairs.6
As with the other boards, the Board of Revenue had two presidents —
shang-shu — one Manchu and one Chinese, and four vice-presidents — shih-
lang— two senior and two junior, designated "left" and "right" respectively.
One senior and one junior vice-president were Manchu, the other two
Chinese. Chinese bannermen might be appointed to either Manchu or
Chinese offices, but usually to the former; 7 Mongols could be appointed to
Manchu positions. These six persons constituted "the Board" in the sense
of the board of direction of the departments and offices under it and within
the wider definition of "the Board of Revenue." Senior to the presidents
and listed under the Board of Revenue section of the personnel lists was the
Supervisor, whose duties, \uan tsung-li hu-pu shih-wu, implied a general
responsibility for the affairs of the Board, although the Board itself retained

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12 6 Money and Monetary Policy in China
direct and specific responsibility. Under the Board in the narrow sense were
the administrative offices, the bureaus, ssu, and the special departments, of
which the Office of the Mints of the Board of Revenue, ch'ien-fa t'ang, is of
the greatest interest here. There were fourteen bureaus within the Hu-pu,
each named after the province or provinces whose accounts they audited.
Each bureau was responsible first for the tax returns of the area assigned
to it and secondly for other duties assigned on a functional basis to a
territorial office. Since the organization of each bureau was similar, it has
been thought that this uneven distribution of responsibility was inefficient.
It might have been satisfactory if only passive supervision was expected.8
The Kwangsi bureau, for example, was responsible for the auditing of the
Kwangsi land tax accounts and the customs revenues — and for the direction
and administration of the mints in Peking, the regulation of the coinage,
and the regulation of mining enterprise.
The special departments of particular interest were the ch'ien-fa t'ang, the
Peking granaries, ts'ang-ch'ang, and the three treasuries, san-1(u ya-men.
The three treasuries — bullion, stationery, and court regalia — appear to have
had a varying relationship with the Board of Revenue, although until 1889
its four supervisors were appointed by the Emperor on receipt of a memorial
from the Board of Revenue, the supervisors being listed under the Hu-pu
ya-men. After 1889 the supervisors were listed separately under the san-](u
ya-men, but the significance, if any, of these changes is not apparent.9
The Pe\ing mints. There were two imperial mints in Peking, or two sets
of mints. The mint of the Board of Revenue, pao-ch'üan-chü, for example,
had four different locations or factories, each in the charge of an overseer,
under the supervision of the two junior vice-presidents of the Board of
Revenue.10 It is simpler to consider these four locations as branches of a
single mint working under central direction — the ch'ien-fa t'ang. The second
mint, the mint of the Board of Works or Kung-pu was known as the pao-
yüan-chü and was the responsibility of the two junior vice-presidents of that
board.11 It appears probable that the Kwangsi bureau of the Board of
Revenue was generally responsible for both mints, but that the effective
administration was in the hands of the controlling board.
It is essential to an understanding of Chinese government to recognize
that there were other mints in the provinces under the direct administrative
responsibility of the lieutenant governor or financial commissioner, pu-cheng
shih-ssu or fan-ssu.12 These mints were listed in that section of the Statutes
devoted to the duties of the Kwangsi bureau of the Board of Revenue,13
and they thus came under its national scrutiny, but the Board had no

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Ch'ing Monetary Institutions and Policy 127

executive or administrative control over any mint other than the Peking
pao-ch'üan-chü. The junior vice-presidents of the Board of Revenue were
thus not national currency officers but supervisors of a local mint, for the
Peking mints coined primarily for the purposes of the capital and Shun-t'ien
prefectures; even neighboring Chihli Province had its own mints.
The Statutes state that the two junior vice-presidents were mutually re-
sponsible to the Board for the management of the pao-ch'üan-chü and for
supervising the casting of cash according to the regulations. The government
shipments of copper and lead were directly delivered to the Office of the
Mint according to a fixed amount, which might be varied by official decision
memorialized to the Emperor and approved by him. The fineness of the
copper was to be 10 parts in 10, but copper over 95 per cent pure was to be
accepted as pure; over 90 per cent at 95 per cent, 85 per cent at 90 per cent,
and 80 per cent at 85 per cent. The lack of purity was to be made up by
increased weight, and copper with a purity of less than 80 per cent was
not accepted. These shipments were checked by the junior vice-presidents
and certified; they took steps to notify the provincial authorities of deficien-
cies, for this would be a routine matter covered by existing regulations.14
The number of coins cast monthly, the method of paying, and the amount
to be paid the workers varied according to the economic situation, but they
are recorded in the Statutes with the more minor details added as com-
mentary and supplemented in the Statutes — Precedents,15 There are details
as to the method of casting, polishing, and checking on the workmanship
involved; on saving the waste metal from each casting; and on drawing up
an annual report to be memorialized by the junior vice-presidents. But
again, these provisions relate only to the pao-ch'üan-chü and, where specific
reference is made, to the pao-yüan-chü; they are not regulations for Chinese
government mints in general. However, these detailed instructions might
be accepted as examples for other mints, which then would be expected to
conform in general to the Peking regulations, specific problems and ex-
ceptions being dealt with on the basis of memorials received from the pro-
vincial authorities by the Emperor and perhaps referred to the Board of
Revenue for their opinion.
The statutory provisions for the pao-yüan-chü were similar although less
detailed. There is an additional provision that the production of the mint
when officially checked and approved should be turned over to the Board
of Revenue in its fiscal, rather than its monetary, capacity. The supervision
of the pao-yüan-chü was the mutual responsibility of the two junior vice-
presidents of the Board of Works — not, of course, of the Board of Revenue.16

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128 Money and Monetary Policy in China

Provincial administration. T h e provincial government consisted of the


following officials: a governor or governor general, who, if the former, might
be subject to a governor general in charge of two provinces with whom he
had jointly to memorialize on important matters; the financial commissioner;
the judicial commissioner, an-ch'a-shih; the salt comptroller, yen-yün shih-
ssu; and the grain intendant, liang-tao. T h e administration was known col-
lectively as tu fu ssu tao}1 Originally, the governor had not been an official
permanently residing in the province, but had toured from province to
province more as a censor, a position which he continued to hold concur-
rently.
T h e financial commissioner was, as has been said, responsible for the
mints. 18 H e had been under some direct control of the Board of Revenue,
especially in financial matters, but this direct link had been severed by the
end of the Taiping rebellion, when the provincial administration had been
tightened and placed under more direct control of the governor. 19 T h e fi-
nancial commissioner was directly responsible only to the governor, and
the latter communicated directly with the Emperor. Censors or the Board
of Revenue might denounce deviation from the established rules, but the
governor could usually support the deviation as locally necessary, and the
Emperor had little practical alternative but to approve if the evidence avail-
able— and it usually came from provincial sources — gave prima-facie sup-
port to the provincial position.
Local magistrates too had their area of discretion. Local banking crises,
use of counterfeit money, the introduction of dollar coins — these were
stimuli which forced the reaction of the state. But the reaction might easily
come directly from the magistrate and penetrate no farther. His assessment
of the importance of the measure he proposed was based on the potential
repercussions of the measure or its failure and would determine the official
level to which the matter might be sent; if important enough it would reach
the Emperor.
The process of monetary policy. T h e formal institutional arrangements
have their counterpart in the formal description of the process by which
monetary policy might be formulated. The authors of Present Day Political
Organization of China, written after the reform of the board system in 1908,
referred to "the former practice of administration of metropolitan affairs
only [by the central government] and leaving of the greatest initiative in
provincial affairs to Governor-generals and Governors." 20 Or, to present an
alternative comment, " T h e Board of Revenue was in charge of financial
affairs of the Empire, but extraordinary, emergency or policy measures were

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Ch'ing Monetary Institutions and Policy 129

often brought directly to the attention of the Emperor by the central and
provincial officials." 2 1 Of the two statements, the latter is more in the spirit
of Chinese tradition, marred significantly by the use of "but" instead of
"and." T h e initiative of central and provincial officials was quite compatible
with the role of the Board of Revenue as guardian of legal correctness in
the economic sphere; the confusion arises if the role of the Board is sup-
posed similar to that of a financial or economic ministry.
T h e presidents of the Board of Revenue were not the economic ministers
of the Chinese Empire; they were the chief administrators of those matters
referred to the Board. In Capital, Marx quotes a reference to a Chinese fi-
nance minister, but there was no finance minister. 22 As officials dealing
daily with economic affairs, the presidents might be inspired to memorialize
on economic problems; they might be required to do so at the express re-
quest of the Emperor, but they had no monopoly position as the sole eco-
nomic advisers, and even in matters relating to the coinage they might not
be consulted.
T h e following hypothetical monetary policy problem illustrates the work-
ing of the Ch'ing government; later, historical cases will be cited.
If the supply of copper failed in a certain province so that it was impossible
for the copper content of the cash to be maintained, the governor and the
financial commissioner might memorialize the Emperor. In the memorial
they would state the new situation, the impossibility of continuing the old
system, and then would either propose an alternative or state that they had
already effected the change. The Emperor would receive the memorial and
might take one of two general courses. H e might make a noncommittal but
permissive endorsement, the equivalent of "Noted" or "Seen," chih-tao-
liao.23 This was effective approval of a policy already inaugurated, the re-
sponsibility for which remained with the memorialists. Alternatively the
Emperor could refer the memorial for more formal advice than he could
obtain from brief oral comment from his councilors or other private ad-
visers. In the example cited here, he would most likely refer the memorial
to the Board of Revenue with the comment, "Let the Board of Revenue
deliberate and memorialize." But he need not do so; he might refer it to
the grand councilors and the Board in conjunction ("Let the grand council-
lors deliberate and memorialize jointly with the Board in question"), to the
Supervisor of the Board and the Board of Revenue, or, especially in the
Hsien-feng period, to the imperial princes and other close personal ad-
visers. For matters relating to the coinage, both the Board of Revenue and
the Board of Works might be consulted. T h e advice of the selected advisers

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130 Money and Monetary Policy in China
might not be accepted — their memorial might be merely "noted" — but
the provincial authorities would be answered.
In 1745, for example, Ch'en Hung-mou (1696-1771), governor of Shensi
(1743-1746 and later periods), memorialized requesting that the weight of
cash be reduced to 0.1 liang because the coins were being melted. A rescript
of the Emperor instructed him to increase the use of silver and decrease the
use of cash, presumably by making more government payments in the
former, but instructed him not to change the coinage. In the memorial the
governor recalled this correspondence and again asked for permission to
change the coinage. As this illustrates, the business of government was
continuous, and an edict or rescript did not end the affair. 24
Such action was most likely in memorials from officials in responsible ad-
ministrative positions, whose recommendations arose in the business of
government and had to be acted upon. The imperial response might be no
more than to approve what had been done or authorize action to be taken
on the responsibility of the memorialist, but the Emperor's approval would
have been asked and effectively received. The memorials of other officials,
censors and those memorializing on matters not within their immediate
responsibility, might not receive such satisfactory response. All memorials
were seen and marked by the vermilion pencil in proof that they had
reached the Emperor, but a comment of "noted" on a long and brilliant
proposal for currency measures was no doubt deflating. Thus advice could
come from any official, but it would be more likely to be seriously con-
sidered if it came from a responsible and relevant source.25
Monetary advice might be tendered by any official, and the Emperor might
seek advice on it and issue his instructions after consulting any other official,
but in practice the system was more predictable. The most that memorialists
without official responsibility could hope for would be to have their memorial
referred to the relevant board; a censor could hope for an official investiga-
tion. 26 The initiative of the provincial authority would normally be sub-
jected to the comments of the Board of Revenue, considering the problem
in the context of imperial uniformity — although not necessarily insisting on
the maintenance of that uniformity. Or if the initiative called for more
thorough policy consideration, the grand councilors could be referred to,
either alone or in consultation with the Board of Revenue or designated
members of that board.
Proposals relating to the economic problems of the metropolitan district
might originate with any official resident in the capital or with members
of the Imperial household, but in economic affairs the Board of Revenue

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Ch'ing Monetary Institutions and Policy 131
would most likely become involved. The decision of the Emperor would be
directed to the local prefecture authorities and to other officials responsible
for direct administration in the capital, including the officials of the Board
of Revenue.
These arrangements were practical for the maintenance of a prevailing
system and for response to minor stimuli, but not necessarily for major
reform. It cannot be ignored that, since every official of sufficiently high
rank was a potential monetary adviser, none was especially responsible for
monetary affairs viewed in their entirety. The Board of Revenue was re-
sponsible for monetary affairs referred to it; but so were the provincial
governments. The anticipation of nationwide crises was within no single
jurisdiction. If a major crisis provoked a radical proposal from a province,
the Emperor might refer it to the Board of Revenue. On what basis, how-
ever, could the Board rule, other than on precedent or reasonableness? If on
the former, the advice might be rendered ineffective by its sheer impracticabil-
ity under new conditions; if on the latter, it might only confirm the provin-
cial authority's request, since the information available to the Board would
be that furnished by the memorialists. The Board was nowhere equipped
to give independent advice or to work out new policy. Iniative had to come
from the source of the stimuli, and that was in the provinces; thus national
leadership could not be expected from the boards as constituted.
An 1892 treatise explains the situation thus:

The Board of Revenue president can't give orders to the Viceroy. He too must
submit a memorial to the Emperor. Whose advice does the Emperor take? A
strong viceroy can do what he pleases by thwarting all the measures of the minis-
ters . . . so the Board of Revenue, nominally the central organ for finance, be-
comes only a decoration in Peking.27

This account, although in a sense accurate, reflects the foreigner's presup-


position of a central government with powers typical of those held by such
governments in Europe. The use of the word "minister" is the key; "minis-
ter" is a good term to apply to the presidents of the six boards, providing the
image of a European secretary of state presiding over an executive depart-
ment is not supposed the normal or proper role for such a man. Then, too,
what is the meaning of "strong" when used to describe a provincial gover-
nor? If by "strong" is meant "independent," the analysis is unsound; if "of
forceful personality" or "with friends in Court" is implied, the term may
stand. If the governor was "strong," one might well ask why. Inevitably
the conclusion must be that the power of the provincial authorities vis-ä-vis
the central boards in our period arose from the growing importance of

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132 Money and Monetary Policy in China
those tasks traditionally provincial, and not from a form of feudal independ-
ence.
This conclusion does not lead to the inevitability of the failure of na-
tional reform. The central government existed and had channels for making
its opinion known and obeyed to the last; it was the failure to formulate
effective policy, not the failure to secure obedience, which was characteristic
of the central government and its monetary policy during the years following
Hsien-feng. If, that is, the role of the boards could have been redefined and
the boards themselves reorganized without the demoralizing effect of yielding
to foregin demands, the basis for power would still have been there. That
this was not done, perhaps could not be done, is the story of the decline of
the Ch'ing; it was the cause of that decline, not the effect of it. To some
extent the history of the monetary sector illustrates and explains this failure.
But the ability of a government to change depends upon the people who
compose it, and Ch'ing government was above all personal. The next prob-
lem, therefore, is to consider officials and their relationship to Ch'ing mone-
tary matters in the period of this study.
Personnel. Addressing a 1961 meeting of British civil servants, Professor
Paul Samuelson is reported to have said that economics is merely common
sense, but common sense which can be applied successfully only by econo-
mists. An economist would be unwise to argue with this conclusion. Fair-
ness requires the admission, however, that Britain's progress has been
significant since adoption of the Confucian examination system in the early
nineteenth century. Similarly, the facile criticism that Chinese officials re-
ceived no formal training in economic administration, that they were
"generalists," provides little clue to their role in establishing monetary policy,
or to the broader problems of economic development. Indeed, a sampling of
chou and hsien magistrates for the year 1850 shows that only 65 per cent
achieved their positions through passing the examinations, although this
is at best negative information. 28 A study of officials in the Ming dynasty
(1368-1644) resulted in the conclusion that "this conception of the 'general
purpose official' was substantially modified in the higher grades of the
civil service and particularly in ministries like . . . Finance . . ." 2 9 No
such study has been made for the Ch'ing dynasty, but on the basis of the
period 1845-1895 in the Board of Revenue, the tendency to specialization is
confirmed. The leading economic officials of the Empire appear in general to
have had experience. But this conclusion is quite preliminary and unsatis-
factory. Identification of these leading officials and a reading of their biogra-
phies and collected memorials, where available, unfortunaely adds very little

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Ch'ing Monetary Institutions and Policy 133

that is definite to the preliminary generalization. The duties of the Board


of Revenue, for example, were many and varied. Even though an official
may be identified as serving a number of years on the Board, it is not yet
possible to determine his particular interests or duties, whether he actually
performed his duties or acted merely in an honorary capacity, or whether,
indeed, his principal activities did not lie, despite his membership, outside
the scope of the Board. That officials did submit monetary policy proposals to
the Emperor is well documented, and specific examples are provided in the
chapters which follow. But the background of these apparently isolated
contributions has not yet been ascertained.
There was, however, considerable opportunity for officials to become
familiar with monetary matters during their careers. In provincial posts, so
frequent would be the stimuli that decisions could not be easily avoided.
Here the official could receive the advice of local gentry and merchants,
advice which it was as well to evaluate. Certain instances of such situations
are clearly documented, but again no generalizations are possible.30 A metro-
politan official could gain experience in one of the bureaus of the Board
of Revenue, proceed from there to a relevant position on the Board itself, and
finally rise to the Grand Council or to a supervisory position over the Board.
Examples can be documented of such progress, but no conclusions can be
drawn.
Indeed, Peking officials were not themselves immune from foreign instruc-
tion! The British in Peking attempted upon arrival to convert Prince Kung
to free trade or at least to low tariffs: "The prince, having no ideas what-
ever on the subject, his mind at once grasped that which is undoubtedly
most in accordance with reason, whereas the experienced and intelligent
statesman holds on to traditional belief — to taoli, in fact." 31
This unsatisfactory situation suggests, first, caution in the usual criticism
of the Confucian attitude, because this was often replaced in practice by a
more pragmatic approach; and it suggests, secondly, that much remains
to be learned about the role of officials as individuals in government.

Traditional Monetary Policy

By 1845 the monetary policy of the Ch'ing dynasty was evident in both
the existing monetary system and in the body of precedents which compilers
considered significant monetary decisions. This system and its "constitution"
are traditional relative to the dynasty; before the Ch'ing there had been
considerable variation, and it would be a serious misconception to suppose

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134 Money and Monetary Policy in China
a stable and unchanging monetary system prior to the impact of the West.
In the nineteenth century the traditional system, as here defined, was being
subjected to both internal and external pressures, forcing decisions on per-
sons and institutions not ideally suited to the determination of a new course
dependent upon technical and specialized knowledge. The increasing cost
of production in the established copper mines of Yunnan, the debasement
of the coinage, the opening of ports to foreign trade and the consequent
increased use of dollars and bank money, the fiscal crisis of the Hsien-feng
period, and finally the steady foreign pressure for national monetary re-
form (for example, for a modern-style mint) — these were all forces im-
posing themselves on the traditional monetary system and modifying it.
These problems are considered in the following chapters; the task here is
to reconstruct the Chinese concept of the traditional system by noting those
historical events considered worthy of record in the Collected Statutes and
Precedents of the Ch'ing dynasty.32
The monetary history of 1644-1850 may be divided roughly into three
periods: the establishment of the Ch'ing monetary system in the Shun-chih
(1644-1661), K'ang-hsi (1662-1722), and Yung-cheng (1723-1735) periods;
the maintenance of the system in the Ch'ien-lung period (1736-1796); and
the partial breakdown in the Chia-ch'ing (1797-1820) and Tao-kuang (1821-
1850) periods. It is useful to follow this outline even for the special and
limited purposes of this section. The details which follow deal, of course,
almost exclusively with the cash sector. The Ch'ing government in the tradi-
tional system did not concern itself with the monetary, as opposed to fiscal,
problems arising from the use of silver. Only in the nineteenth century, in
the period with which this book is primarily concerned, did increased use
and consequently more frequent problems force silver and, to a growing
extent, the banking system within the scope of central government attention.
The establishment, 1644-1735. Before the Manchus conquered China they
had already established a coinage; in 1616 cash had been cast in Mukden
with both Manchu and Chinese characters, a pattern to be followed in most
later models of the traditional cash. Big-cash or coins of more than one-
ch'ien denomination were also cast, but this was temporarily abandoned
after 1644.33
With the establishment of the Ch'ing on the throne of China, the two
metropolitan mints of the boards of Revenue and Works were set up, and
cash cast to weigh 0.1 liang of 70 per cent copper and 30 per cent zinc. The
exchange rate with silver was, however, 700 coins to one tael. From the
beginning the ideal model developed in chapters I and II was not an

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Ch'ing Monetary Institutions and Policy 135
accurate portrayal of the monetary system. By 1651 when the exchange rate
became officially 1000:1, the weight of the coin had already (in 1645) been
changed to 0.12 liang. The weight was increased again in 1651 and 1657
to 0.125 liang and 0.14 liang respectively.34
A significant monetary event in the Shun-chih period was the attempt in
1653 to introduce a truly subsidiary cash coin weighing the standard 0.125
liang but clearly marked i-li or 0.001 taelF" This move coincided with an
attempt to improve the workmanship of the casting and a warning to the
official mints to cease the issuance of debased coins. Provincial mints were
temporarily closed, although the sources do not indicate how many were
actually closed and for how long. Big-cash subsidiary coins were also cast,
and a coin with the face value of 0.1 tael circulated in the capital. The
experiment was not, however, successful and the i-li cash were soon circulat-
ing at market rates; their production ceased by 1660 and they were ordered
destroyed in the second year of the K'ang-hsi period (1663).36 There were
four other styles of Shun-chih coins, but they were all single cash and their
difference has no economic significance. One type, using both Manchu and
Chinese to record the name of the producing mint and the reign period,
had become standard by the Yung-cheng period.37
To help meet the heavy expenditures involved in the final defeat of
Ming forces in the south of China, the new Ch'ing administration made a
temporary issue of government paper currency between the years 1651 and
1661. Not more than 128,172 ch'uan were reported issued annually, and
the issue ceased with the detention in Burma of Chu Yu-lang, Prince Yung
Ming (1623-1662), a grandson of the Ming Wan-li Emperor (reigned 1573—
1620), which marked the end of the campaign.38 Imperial government notes
were not issued again until 1853.
In 1684, the twenty-third year of K'ang-hsi, the weight of the coins was
reduced to 0.1 liang and the composition changed to 60 per cent copper and
40 per cent zinc. The annual quota of the Board of Revenue mint was raised
from 30 mao, plus 3 mao for the intercalary month, to 40 mao — a mao
being defined as 12,880 ch'uan of 1,000 coins.* In 1702 the weight of the
coin was raised again to 0.14 liang. The quota was raised to 41 mao in 1726
— the first change of the Yung-cheng period. The following year the com-
position of the coins was changed with a further decrease in the copper
proportion — from 60 to 50 per cent. An additional quota of 9 mao a year
* In the sense used here the words "ch'uan" and " m a o " refer to a definite number of coins.
They are not units of account. In order to remain consistent throughout the study, neither
"ch'uan" — in the present sense — nor " m a o " is italicized. See the Appendix.

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136 Money and Monetary Policy in China
was ordered from the pao-ch'üan-chü, to be made from an accumulation
of brass alloy and ornaments in stock. In 1734 the weight of the cash was
reduced to 0.12 liang.
Since 1644 there had been recorded, therefore, six official changes in the
weight of the coin, two in their composition, and three in the quotas for the
Board of Revenue mints, with scattered references to the closing of various
provincial mints and to the increase in the number of mints from twelve
in the Shun-chih period to a maximum of twenty-one in the K'ang-hsi
period. These changes are at least evidence of an active monetary policy.
Each change in the weight of the coins required decisions with regard to the
old ones still in circulation — the exchange rate at which the old would
be temporarily accepted, the final order to demonetize them, and the promul-
gation and enforcement of instructions for their melting and destruction. 39
These measures would be costly, and the inference to be drawn is that the
government had some policy or policies for the success of which these ex-
penditures would be justified.
T h e dominating policy after Shun-chih 4 (1647) would appear to be the
maintenance of a relatively stable exchange between cash and silver, a
reflection of the government's primary concern with fiscal policy. In 1647
the official rate was declared to be 1000:1, but from this it would be wrong
to conclude either that the market rate was identical to this official rate or
that the government was unaware of the difference. The 1000:1 rate was the
exchange rate at which the government kept its accounts and was the ideal
against which the actual market rate was judged. Government payments
and receipts were officially at this rate, although there is evidence that where
the market rate diverged too greatly, officials managed the rates to their own
advantage. 40 In setting this as the standard of monetary policy the govern-
ment had to abandon the ideal model except where market forces appeared
to allow it. Thus at the beginning of the dynasty the coin was the ideal
weight, 0.1 liang, but the exchange rate was 700:1; between 1684 and 1702,
however, the coin weighed 0.1 liang and the official rate of exchange was
1000:1, perhaps the only period in the history of the dynasty in which this
was true.
By assuming that the standard of Ch'ing policy was to keep the market
rate close but not identical to the official rate, precision is lost and the stimuli
which resulted in action at any particular time must still be determined. An
edict of Yung-cheng 11 (1733) summarizes the reasons for previous changes
thus:

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Ch'ing Monetary Institutions and Policy 137
The heavy weight of copper used leads to melting down and to the manufacture
of spurious coins. It is wise to change the dimensions from time to time so that
the silver price of cash can be maintained and, moreover, corruption may be
stopped. In the first year of Shun-chih [1644] each coin weighed 0.1 liang; in the
second year [1645] 0.12 liang; in the fourteenth year [1657] 0.14 liang; and in
K'ang-hsi 23 [1684] because illegal melting was increasing, the weight of the
coins was changed to 0.1 liang. Because there was illicit casting, the weight was
later changed, in K'ang-hsi 41 [1702], to 0.14 liang. Now cash are expensive again
and there is counterfeiting . . . What do you think of a proposal to return to
the 0.12 liang weight of Shun-chih 2 so that counterfeiting would be rendered
unprofitable?
Let the nine chief ministers of state consider this and memorialize. 41
Without questioning in this study the correctness of the measures adopted,
it may be safely concluded that one principal stimulus to imperial action
was the poor state of the coinage, recognized as the consequence of economic
forces (especially the copper supply), which made violation of the currency
laws profitable. 42
T h e changes so far considered were in response to apparently long-run
trends in the supply situation. A n experiment begun in the capital in 1734
and discontinued in the third year of Ch'ien-lung (1738) was designed to
prevent the daily fluctuations in the market rate of cash caused by short-run
factors. Cash exchange shops under government control attempted to
stabilize the market rate, not at an arbitrary official rate, but at a reasonable
average market rate consistent with the requirements of legitimate trade. 43
A second principal aspect of Ch'ing monetary policy may be stated as an
attempt to maintain the coinage, consistent, of course, with the basic de-
cision to keep the market cash-tar/ exchange rate sufficiently close to the
official rate of 1000:1 that the fiscal policy was not endangered. T h e supply
of copper was perhaps the most important single factor with which the
government had to deal. T h e supervision of the Japan copper trade and the
development of domestic sources were the basis of the government's solu-
tion to the supply problem, but in implementing its general monetary
policy the Ch'ing undertook to change the usage, size, composition, and out-
put of the coins whenever this was recognized as being required to meet
policy objectives. T h e policies were from the beginning only partially suc-
cessful. Official copper merchants failed to meet their quotas or sold illegally
on the open market; corrupt mint officials, local magistrates who connived
with counterfeiters, and simply poor workmanship were not failings re-
served for the last years of the dynasty. T h e distinguishing feature of this
first period of Ch'ing monetary policy appears to be the frequency of Λ ς

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138 Money and Monetary Policy in China
changes, suggesting that efficient officials were reporting the need for such
changes and that the central authorities were responding with specific in-
structions rather than with exhortations to the people to obey the laws.
By the end of the Yung-cheng period in 1735 a domestic supply of copper
had been developed and the pattern and size of the coin had been set for the
next hundred years.
Maintenance, 1736-1795. Variation in the weight of the coinage as an
instrument of monetary policy was not attempted in the Ch'ien-lung period,
although a special "yang-ch'ien," weighing 0.16 liang, was cast for the use
of the eunuchs of the Imperial Household from Ch'ien-lung 17 (1752).
It was composed of 60 per cent copper and 40 per cent zinc and carried a
suitable premium. The output of the metropolitan mints was increased from
time to time, reaching a maximum of 76 mao in 1760; thereafter output
was decreased — to 25 mao in 1794. In 1740 the composition of the coinage
was changed to authorize, for the first time, the casting of bronze or "green"
cash of 50 per cent copper, 41.5 per cent zinc, 6.5 per cent lead, and 2 per
cent tin. The percentage of copper in the brass or "yellow" cash was re-
stored from 50 to 60 per cent, presumably in the same year as the first
manufacture of the special yang-ch'ien, and in any case before 1794.
The goals of Ch'ing monetary policy remained unchanged in this period.
The supply of copper was under better control. In attempting to keep the
exchange rates stable, the government depended on general policies. The
first, control of output, is evidence that the Chinese monetary authorities
understood the relationship between the quantity of money and its market
value; the second, instructions as to the use of the coin, shows a more
subtle appreciation of monetary relationships. Neither of these policies was
entirely successful, and counterfeiting and melting of the coins continued.
It was to prevent melting that the bronze cash were in fact introduced,
since the melting of the tin alloy was claimed to be a more costly task if
the manufacture of copper utensils was the ultimate purpose.44
The records of cash-silver exchange rates are incomplete, but on the
basis of the data available it would appear that the market value of cash
fell from about 800:1 at the beginning of the period to about 1100:1 by
Ch'ien-lung 35 (1770), and as this occurred in a period of ample copper sup-
plies and increasing mint outputs the Ch'ing government concluded that
in order to reverse the trend the output of cash should be cut.45 Between
1769 and 1771 the number of furnaces operating in the Kwangsi, Kweichow,
Kiangsu, Kiangsi, and Shantung mints was decreased, and in 1773 the
quota of the metropolitan mints was cut for the first time 4 8 The records

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Ch'ing Monetary Institutions and Policy 139
suggest that the market value of cash reacted, emphasizing again that the
monetary policy was more an attempted stabilization at customary rates
than maintenance of an "ideal" 1000:1, for between 1775 and 1794 the rate
appears to have been between 850 and 950 per tael.
T h e assumed relationship between the mint output and the silver price
of the coinage is clearly indicated in an edict of 1771, in which the Ch'ien-
lung Emperor noted that several requests had been received from the
provinces for decreasing the number of furnaces operating. H e then pointed
out that such proposals not only would cut mint output but would also
make it difficult to restore production on short notice if this should prove
necessary. T h e Emperor foresaw that dealers might take advantage of this and
that speculation might drive the price of cash up. Therefore, the governors
were ordered to deliberate on the problem before the requests of the prov-
inces were acted upon. 47
T h i s is an example of Ch'ing monetary administration at work. T h e
provinces had their local monetary problem, the fall in the market value
of cash, which they reported to the throne together with their suggested
remedy, the reduction of production. T h e Emperor was made aware of the
dangers inherent in the proposed solution — the restriction of output — and
therefore gave conditional approval, the conditions being clearly stated.
Responsibility always rested with the memorialist, but in this case the official
was warned of a specific pitfall. In 1786 the Emperor noted that the market
value of cash had fallen in the provinces and issued instructions for a
quarterly report on the monthly market values to be sent to Peking. 4 8 T h e
central monetary authority was attempting to keep control of policy by
ordering investigations and judging the proposals of the provincial authori-
ties.
Perhaps the most interesting aspect of Ch'ing monetary policy was the
attempt to control the market value of cash by designating the uses to
which it was to be put, limiting or enlarging these uses in reaction to
changes in the market silver price of the coins. T h i s was not, of course, a
policy of day-to-day change — Ch'ing administration was too ponderous
for that; nor is it possible to assess the success of the measures, since accurate
price data are not available. T h e importance of this policy is that it reflects
at one time both the capabilities and limitations of the Ch'ing state. T h e
central government was able to establish and promulgate a sound economic
policy and to insure initial implementation at least in some areas, but it
was not capable of constant supervision, for this would imply the existence
of more modern administrative methods, including accurate statistical re-

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140 Money and Monetary Policy in China
porting. The policy did not originate in the Ch'ien-lung period, but it
received full expression in an order based on an imperial edict and dated
1744:

With the exception of those previously authorized to disburse cash, when an


official must receive or pay out public monies, he must now use silver; he must
not again use cash as a substitute. If provinces undertake to construct or repair
irrigation and other public works, the money they pay out should be treasury
silver except for workers' wages. If in paying for supplies cash is included, the
officials ought to investigate and stop such a practice. As for what the people use
daily, they ought to use silver, except for payments for odds and ends, cloth, silk,
leguminous plants, and grain for which the use of cash is authorized. As for
wholesale transactions, order them to use silver; they must not use cash. Issue
these orders to the local officials of all provinces and have them carried out with-
out exception.49

In the monetary sector the Ch'ien-lung period was one of relative stability
in which the system inherited from the founders of the dynasty was carried
on and preserved. There is evidence, of course, that local variation in the
weights of the coinage became apparent in this period, and it is certain that
there were violations of the currency laws — as there had been, indeed, from
the very beginning. This was also a period of active monetary policy,
through which crises were met by central direction and the Ch'ing tradi-
tional monetary system was maintained.
Partial breakdown, 1796-1850. Monetary policy in the Chia-ch'ing period
might still be described as "active" in the sense that measures were taken
to maintain the traditional system, but difficulties encountered in the supply
of the monetary metals and the consequent violation of the currency laws
led to a partial breakdown in the traditional system by 1850. In the first
year of Chia-ch'ing (1796) the market value of cash was reported to be
rising and the quotas of the various mints were increased, that of the Board
of Revenue by 10 mao.50 Shortages of copper and lead caused reductions
in 1804 and 1805, but by the end of the period the quota had been raised
again to 72 mao. There is serious doubt, however, as to whether the quotas
were fulfilled, and the statistics cannot be relied upon. The composition of
the coinage was changed slightly, with both brass and bronze coins cast. By
1800 foreign copper was being used in nine provinces, and provincial
weights and compositions varied from those of the metropolitan mints.
The Tao-kuang period was characterized by increasing supply problems,
by a fall in the market value of cash, and by an increase in counterfeiting
and use of foreign cash, mainly from Annam and Japan. This would ap-

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Ch'ing Monetary Institutions and Policy 141

pear to reflect the increasing corruption and inefficiency of the officials, a


phenomenon described in general histories as being at least partially the
result of the influence of Ho-shen (1750-1799), who was, in effect, the chief
minister of the Ch'ien-lung Emperor. But economic factors were involved,
and there is evidence to show continued official interest in the traditional
goals of monetary policy. The main failure was the unwillingness to accept
the new supply situation and to reduce the weight of the cash coin corre-
spondingly. Since the government failed to take the proper action, the
private coiners increased the scale of their counterfeiting with the result
that inferior and substandard coins were in general circulation.
The most serious threat to the traditional monetary system was reflected
in the changed exchange rate of cash for silver. In the eighteenth century
the rate appears to have fluctuated between 700 and 950, although lower
market values for cash were recorded. By 1850 the market value of cash had
fallen to 1300 or 1500 to the tael, creating disturbances over tax payments
and consequent readjustments in monetary and fiscal practice. There have
been two general explanations of this: first the deterioration of the coinage,
and secondly the export of silver, but both have their difficulties. In the first
case, since the supply of copper was severely limited, one would expect that,
even with a debased coinage, the exchange rate would at least have been
maintained. Nor can the export of silver provide a satisfactory explanation,
since the scattered statistics available suggest that the rate in Canton, the port
from which the sycee was being exported, remained close to 1000, while the
fall in the value of cash in other provinces predated the export of silver.
Since this involves the "opium question" the explanation has aroused con-
siderable interest, for if it is assumed that the fall in the value of cash was a
bad thing, here is another evil which can be ascribed to the import of
opium and, therefore, to the West.
There are two general types of sources for learning the silver price of
cash during the first fifty years of the nineteenth century. The first is the
writings of foreign observers, who were mostly confined to Canton and
who restricted their observations to that port and later to the new treaty
ports. A wider range of Chinese quotations have been collected in such
works as Peng Hsin-wei's and Yen Chung-p'ing's, but even they provide no
basis for establishing the timing of a nationwide trend. They are more de-
structive of explanations than constructive. A Hopei shop kept a record
from 1798 to 1850 which confirms a fall in the average market value of
cash after 1830 (approximately the year in which the outflow of silver is
supposed to have begun) from 1,365 to 2,230. Unfortunately for the silver-

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142 Money and Monetary Policy in China
drain theory, this fall was merely a continuation of a trend observable from
1804 when the rate stood at 920. It passed the 1,000 mark in 1808 and
reached 1,266 by 1820.51 More random observations taken in north China
confirm that the fall in the market value of cash preceded 1830. Equally
damaging to the standard explanation are the observations of foreigners
who reported, for example, a rate of 1,240 in Fukien during 1824 and 850
cash per tael in 1834 in Canton.52 Four years later a rate of 1,600 was
quoted with the comment, "False coinage, and the introduction of baser
pieces from Japan and Cochin-China have greatly depreciated the cash, so
that 1,600 pieces of smaller size and baser alloy are often paid for one tael.
The [market] value in fact is fluctuating, depending on the demand and
quantity in the market." 53
A report published in 1849 stated that the rate for Spanish dollars varied
between 800 and 1020, depending upon the quality of the cash.54 A sufficient
explanation of the general trend to an exchange rate of 1500:1 is, therefore,
the debasement of the cash. A primary role for silver export cannot be ac-
cepted for two reasons: first, the fall in the market value of the cash does
not coincide with the assumed dates for the export of silver, and secondly
there is no countermovement in the exchange rates when this outflow is as-
sumed to have been reversed. There is a statistical problem in estimating the
actual amount of the net silver outflow, but it would appear certain that
silver was exported from 1830 until at least 1845.55 If debasement is to be
accepted as an explanation of a general trend, however, it may appear that
this would have to be sufficient to counter the increased price of copper fol-
lowing the reduced output of domestic mines. This is a reasonable but in-
accurate view. When the copper supply fell, the mints closed or reduced
their quotas, but the stock of cash in the community was not thereby fixed.
First, this stock was then debased and in the process the supply of copper
coins was increased. Secondly, the supply of coins was further supplemented
by inferior cash from Cochin-China and Japan which in some areas pre-
vented any shortage from stabilizing the price. Cash notes were also in use
in this period. Some officials ascribed the fall in cash to this use of notes, but
the accepted Chinese view was that, if the notes were truly convertible, they
merely supplied a need and were to be praised for their convenience.56 Along
the south China coast, moreover, the situation was complicated by the re-
ported purchase by the government of over a million catties of copper for
the manufacture of guns. Local events may account for the surprisingly high
market value of cash in the area of silver export.
This crisis of the exchange rate was serious if only because the Chinese

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Ch'ing Monetary Institutions and Policy 143

government had set its monetary policy on the basis of stable exchanges. T h e
fall in the market value of cash was a failure of policy. The Ch'ing adminis-
tration failed to organize the mining industry in such a way that production
could be maintained. The system of officially supervised companies forced
to sell at a controlled price to the government did not encourage prospecting,
and the internal disturbances hindered the transport of the metal still being
mined. 57 Having failed here, the Ch'ing administration was unable to take
the drastic action necessary to maintain the coinage or reform the currency
system. It was then that the system of subsidizing the casting of coins from
provincial funds was exposed as a weakness in a time of financial stringency;
but, in any case, had standard coins been issued, they would not have passed
at a sufficient premium to keep them from the melting pot.
The casting of big-cash or cash of greater than one ch'ien denomination
was suggested, but in the Tao-kuang period no official in a responsible posi-
tion favored this as an empire-wide change in the monetary system. 58 It was
to be forced on the government during the financial crises of the Hsien-feng
period, and this is the subject of the following chapter. T h e officials of the
Tao-kuang period had also to rule on the import and use of dollar coins, but
consideration of this modification of the traditional system is reserved for
Chapter V I I , which considers treaty port monetary history.
This, then, was the traditional monetary system of China on the eve of
the Taiping rebellion and of foreign influence: a cash coinage debased
through the dual influence of dishonest officials and the failure of the copper
supply, an undeveloped silver sector dependent for its monetary uses on the
private lu-fang and on other mercantile arrangements, and a monetary policy
which was theoretically capable of dealing with these problems but which
could not be enacted with the frequency the situation required nor enforced
with the rigor the situation demanded. T h e breakdown was only partial in
that some mints may have been open and coins cast, that cash did circulate,
and that the currency laws were periodically enforced. Ch'ing monetary
policy had been effective for over 160 years; it had now to be modified to
meet new requirements.

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CHAPTER VI

The Hsien-feng Period — A Case Study

The fiscal and monetary difficulties which were already apparent in the
Tao-kuang period reached a climax in the third year of the Hsien-feng period
(1853), the year in which the Taiping rebels reached Nanking and there
established a capital. The imperial government met the resultant fiscal prob-
lems with the institution, among other things, of an ambitious monetary
policy within the traditional system. The measures designed to preserve the
traditional system, however, further weakened it, so that later in the century
monetary reform was possible only if some concession were made to foreign
ideas. But the traditional system itself survived to the Boxer Protocol and
to the reforms in the imperial administration which preceded the fall of the
dynasty. This study of the Hsien-feng inflation is a case history of Ch'ing
monetary policy at its most active — at, perhaps, the limits such policy might
reach. It was doomed to failure. The conditions which made the policy neces-
sary made unlikely the concurrent execution of an adequate fiscal reform.
Total breakdown of the currency was prevented at the expense of loss of uni-
formity, loss of faith in the imperial credit, and the inevitable local search
for a substitute to traditional solutions. Since, however, the primary crisis
was fiscal, the cost may have been worthwhile — may even have saved the
dynasty.
The traditional system was already in a period of partial breakdown when
the Hsien-feng Emperor ascended the throne in 1850. The debasement of
the coinage had upset the stability of the exchanges and, except in areas of
local cash shortage, the silver price of copper cash had fallen. The diversion
of copper from the government to counterfeiters and exporters had forced
the closing of certain provincial mints, and it is unlikely that any mint had
been casting its official quota at the official weights for several years. The
fiscal system was threatened by corruption, by the increase in salt smuggling,
and by a fall in the total legal collection of the land tax at a time when in-
creased defense expenditures were necessary. Of the 1500 hsien in China some
398 delayed payment of land taxes in 1846, 101 were authorized to forego

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T h e Hsien-feng Period—A Case Study 145
1
payment, and 28 were recorded as "procrastinating." These figures increased
in the following year and remained at a high level for the last three years of
the Tao-kuang period. A deficit of nine million taels in the Treasury dis-
covered in 1843 was repaired, but in 1850 the Hsien-feng Emperor found a
credit of but 500,000 taels? Already memorials had been sent to the Emperor
suggesting the casting of big-cash of such dimensions as to involve, in effect,
a debasement of the coinage. But, with the exception of a 100-ch'ien cash
circulated in Shantung in 1842, no action was taken.
In 1852 the Yellow River changed its course, and the Taipings approached
Nanking. Expenditures on river conservancy and military operations reached
20 million taels. The rebellion had already cut off the supply of copper from
Yunnan, and the imperial revenues in all central China were in doubt. It
was in this atmosphere that the monetary and fiscal debates which had begun
in the Tao-kuang period were concluded by a series of decisions affecting
the coinage, the copper supply, the issue of government notes, and the tax
structure.
This chapter, which is an account of the monetary decisions and their
significance, is divided into three sections: the first is a chronology of the
measures enacted; the second, a discussion of the principles involved in their
institution and failure as seen by Chinese officials; the third, an account of
the monetary system at the end of the Hsien-feng period, an account which
serves as a basis for the discussion of reform which is the subject of the final
chapter of this study.

The Course of Monetary Change

Copper supply. During most of the Ch'ing dynasty the problem of the
copper supply was complex, involving the method of production, the supply
routes, mint prices, the availability of foreign copper, and the capital available
for exploitation of the mining industry. The shortage of supply in the Tao-
kuang period must be explained in terms of all these factors; that in the
Hsien-feng period by the mere fact that the supply route had been severed.
In the first year of Hsien-feng it might make sense for the Emperor to com-
plain of delays in delivery,3 but by the third year the total loss of Yunnan
copper was recognized. Two policies only were available to the imperial gov-
ernment. The first was to encourage other sources of supply to be used by
the provinces exploiting them. The second was to use the copper already
available in a more economical way.

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146 Money and Monetary Policy in China
As an example of the first, an imperial edict was issued in 1854 in answer
to a memorial of Shensi Governor Wang Ch'ing-yün:*

As for the lead and copper mines in the vicinity of Nan-shan, the people are
authorized to mine, but this does not authorize the congregating of tramps and
wanderers. As for traitors and treacherous villains they are to be sought out.
LET Wang Ch'ing-yün carefully determine the rules and regulations and take
part with his subordinates in the conduct of a judicial investigation in order that
cash may be cast and yet corruption avoided.4

Quite obviously such measures could only be suggested in localities where


there was some mining potential.5
Nor was the free import of copper during this period a practical policy,
since imperial funds were fully committed, copper had a higher silver price
in southeast Asia, and copper cash were being exported from Shanghai and
other treaty ports.® In 1861, however, the Chinese superintendents of mari-
time customs were ordered to disburse silver from the foreign customs reve-
nue for the purchase of Japanese copper, to be forwarded to the metropolitan
mints. This came too late to affect the course of the inflation.7
The imperial government had to place primary reliance on a more eco-
nomical use of existing supplies of copper, which it attempted in two ways.
The first was the melting down of copper utensils considered to be larger
than necessary; the second was the melting down of standard cash. In both
cases the copper so obtained was used to cast big-cash, that is, coins of a
greater denomination than one ch'ien,8 Enforcement of such a general pro-
hibition at a time when the market price of copper was at least twice the
mint price would be extremely difficult. Brass utensils might indeed be melted
down, but the copper would be sold to counterfeiters, who quickly saw the
profits to be had from the new big-cash system. In 1853 another edict de-
creed that the previous edicts must be enforced but warned against petty
officials annoying or irritating the people, presumably by making searches in
which the primary purpose was the obtaining of bribes. Again in 1860 brass
vessels, but now also those of iron, lead, and tin, were ordered sold to the
Board of Revenue. And these edicts designed chiefly for the metropolitan
area were duplicated in the provinces, receiving enforcement of varying rigor
* Wang Ch'ing-yün (Fukien, 1798-1862) came from a family of once wealthy merchants
and is best known as the author of a standard history of Ch'ing finance, Shih-ch'ü yü-chi.
He showed considerable interest in economic affairs; as educational commissioner in Kweichow
(1837-1840) he encouraged local industry; and in 1844 he memorialized for permission to
have big-cash cast. From 1851 to 1853 he was a first vice-president of the Board of Revenue
and worked in cooperation with former Board president Ch'i Chün-tsao, then a grand
councillor,

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The Hsien-feng Period—A Case Study 147
but with little significant effect on the monetary problems they were intended
to solve.
Standard cash. Aside from all other considerations, the casting of big-cash,
weighing less proportionately than implied by the denomination, would lead
to the expectation that standard cash could not long survive. If counterfeiting
could not be controlled in the Tao-kuang period, it was most unlikely that
it could be controlled under conditions of increased profit at a time when
the government had more serious matters with which to concern itself. The
official mints themselves melted down part of their stock of standard cash,
and there is evidence of such widespread counterfeiting that illegal melting
of standard cash must be inferred. 9 There is also evidence that standard cash
were hoarded or buried, although the silver dollar better served this purpose.
In 1853 the official weight of the cash cast in the mints of the boards of
Revenue and Works was reduced from 0.12 liang to 0.1 liang, the first official
weight change since 1734.10 The weight for cash cast in the provincial mints
was not changed, a fact of subsequent rather than immediate significance,
for standard cash were probably not being cast outside Peking. The quotas
of the Peking mints were reduced annually, with a larger proportion being
devoted to the casting of big-cash. In 1857 the first change was for a decrease
in the monthly quota from 5 mao, of which half were 10-denomination cash
and half standard, to 3.5 mao of which 1.5 only were standard. Later in the
year, the casting of standard cash was stopped and the entire quota devoted
to the big-cash. This remained the situation until after the Hsien-feng period.
Big-cash. The initiative for big-cash came from the provinces and was, in
effect, an official debasement. De jure the big-cash were token coins in that
they were intended to be exchangeable for standard cash at the ratio implied
by the denomination of the coin; de facto they were full-bodied coins since
they passed current at less than the face value and since they were not, except
in unusual circumstances, exchangeable at par with standard cash. In this
section the chronology of the big-cash will be given, reserving to subsequent
sections the account of other imperial measures — the iron cash and the offi-
cial paper money.
The first big-cash of the Hsien-feng period were cast in the Fukien mints
of Governor Wang I-te, presumably in late 1852.11 Brought to the notice of
the Emperor by memorial, the casting of big-cash had the support of central
government officials and censors, including Wang Mao-yin, who saw a mod-
erate casting of big-cash as the solution to the shortage of copper. In mid-
1853, the metropolitan mints began casting a monthly quota of 2 mao of
10-ch'ien brass cash weighing 0.6 liang, and one mao of 50-ch'ien bronze cash

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148 Money and Monetary Policy in China
weighing 1.8 liang — the coins being marked "chung-pao" in contrast to the
standard "t'ung-pao." Although the proportion of copper was 70 per cent
rather than 54 per cent, the lower relative weights represented a significant
de facto debasement.
The success of the first big-cash prompted certain imperial officials to urge
the casting of coins of 100-, 500-, and 1000-ch'ien denominations to be known
as "yüan-pao" and to weigh 1.4 liang, 1.6 liang, and 2 liang respectively. This
required a further debasement of the 10-ch'ien and 50-ch'ien coins to 0.44
liang and 1.2 liang respectively. These proposals did not have the unanimous
support the earlier ones had received, if only because it was apparent that
counterfeiting of the larger denomination coins could not be controlled. In
the following year, 1854, the wisdom of these objections was recognized, and
the casting of 500- and 1000-denomination big-cash stopped. In 1855 the cast-
ing of 100- and 50-denomination cash was stopped, and from that year until
1886 only the 10-ch'ien big-cash appear to have been cast at the metropolitan
mints. Further decreases in the weight of this coin were authorized in the
T'ung-chih and Kuang-hsü periods.
The data cited refer only to the metropolitan mints; the histories of big-
cash in the provinces varied considerably from this and from each other (see
Table 1). The monetary measures of the imperial government sought uni-
formity; lack of uniformity did not illustrate lack of power but reflected
rather the disrupting economic forces generated by so widespread a rebellion.
Peking reacted to the requests of the provinces to permit changes in mint
practices on the one hand and to meet the specific requirements of the metro-
politan area on the other on the basis of the situation as described by the
memorialists. But, typical of the theory underlying such situations, the im-
perial government expected that some reconciliation could be brought about
between the apparently divergent requirements — that impartial investiga-
tion would reveal a series of common regulations which could be uniformly
applied.12 Furthermore, all the measures concerning big-cash were considered
emergency provisions — necessary but undesirable and temporary departures
from the norm established by the dynasty.
A glance at Table 1 illustrates the diversity which probably existed. For
example, only one mint outside the capital cast cash of 500 or 1000 denomi-
nation.13 To understand the economic and political changes which occurred
during the last years of the Ch'ing, it is essential to appreciate that this
diversity does not represent loss of political power to the provinces; indeed,
the sequence of events and the consequences may be considered as typical
of the traditional system. Peking sought uniformity. The Board of Revenue

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T h e Hsien-feng Period—A Case Study 149

Table 1. Denominations of Hsien-feng copper and iron cash by province

Denomination (_ch' ten)

500 or
Province 1 5 10 20 30 40 50 100 200 1000

Peking XX X XX — • — — X X X X
Chihli XX X XX — — — X X — —

Shantung X — X — - — X — — —

Kiangsu X XX XX X X — X X — —

Chekiang X — X — — X — — — —

Kiangsi X — X — — — X — — —

Fukien XX X X X — — X X — —

Hunan X XX XX — — — X — — —

Honan XX — X — — — X X — —

Shansi X — X
Shensi X — X — — — X X — —

Kansu — X X — — — X X — X
Szechuan X — X — — — X — — —

Yunnan X — X
Kweichow X — X — — — X — — —

Hupei X — X — — — X X — —

Hunan X
Kwangtung X

Source: Bushell, "Coins of the Present Dynasty," p. 201.


xx = iron and copper. χ = copper only.

was instructed to memorialize a practical scheme, but none was found. T h u s


the central authorities had to permit the diversity which arose from differing
local stimuli. Throughout these monetary experiments, the intention of the
Emperor to keep control of the measures proposed and approved for the
provinces and to maintain the Board of Revenue in its role as guardian of
the Empire's currency unity is clear. Only when practical uniform measures
could not be found was diversity permitted.
Iron cash. Perhaps the least successful measure undertaken by the authori-
ties was the casting of iron cash. T h e physical problems involved in using
iron as money were sufficient to account for this failure, for a rusty, heavy
iron coin can hardly be popular. 14 The original memorial came in 1853 from
Ha-fen, Governor of Shantung, and was referred to the Board of Revenue
for a recommendation. T h e imperial instructions made it clear that iron cash

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150 Money and Monetary Policy in China
could not be authorized solely for Shantung, but had to be considered and
approved on the expectation of empire-wide adoption.15 The Board approved
and in August 1853 began the casting of iron cash in Peking with a 10-ch'ien
coin. In 1854 one- and-five-denomination coins were added, the onz-ch'ien
coin weighing, significantly, 0.12 liang, which was still the legal weight of
standard copper cash in the provinces.
The iron cash at first passed at par with the copper coins, but by 1856 they
were at a discount. In 1857 Tsai-yiian (d. 1861), the Sixth Prince I, memorial-
ized that there were too many iron cash in the capital and that the office of
issue had in stock an amount with the nominal value of 1.8 million ch'uan,
and that when the stock in the banks was considered there were over 5 mil-
lion strings of 10-ch'ien iron cash.16 Circulation had virtually ceased and the
casting of iron cash in Peking was stopped in 1859, by which time Su-shun
was already President of the Board of Revenue.
Either lead or smelter cash were also cast by the metropolitan mints for a
few months in 1854. They were supposed to weigh 0.12 liang.
Government notes. The issue of Hsien-feng paper money was authorized
some three months after the first big-cash were cast in Peking, in the fateful
year of 1853. Basically there were two types of notes, those denominated in
ch'ien, the ch'ien-p'iao or ch'ao-p'iao, and those denominated in taels, the
yin-p'iao. The former were issued in denominations ranging from 500 to 1
million ch'ien; the latter, from one to 50 taels. In Peking the units were
ching-ch'ien and "two-tael scale" respectively. The introduction of paper
money to the provinces was spread over a period of two years, but even then
the original regulations intended by the imperial government could not be
fully implemented. 17
In the capital the silver notes were issued as a direct responsibility of the
Board of Revenue, the cash notes through official banks — the Yii, Ch'ien,
and T'ien groups (see Chapter IV) —which were in effect fiscal agents of
the Board of Revenue. The silver notes, redeemable in big-cash with varying
proportions of standard cash and cash notes, had fallen to one-twentieth
their face value in terms of silver by 1859; in fact, after 1856 further issues
were in cash notes which survived until 1861 and passed at par with big-
cash until the middle of that year.18 At the same time the increased circula-
tion of notes and collusion between official bankers and Board officials put
the entire basis of the issue in question. The issue of ch'ien-p'iao alone is
estimated to have reached over 15 million {ching-)ch'uan in Peking, and
there were further issues in the provinces.

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T h e H s i e n - f e n g P e r i o d — A Case S t u d y 151

T h e ability of the government to circulate its notes in the provinces was


limited. Provided the provincial authorities forwarded the proper propor-
tions of revenue or were excused therefrom, the Board of Revenue had no
reason to insist that remedies suitable for adoption in Peking, where banner-
men and officials provided opportunities for putting the notes into circula-
tion, should also be adopted fully in the provinces, where merchants had
their own means of overcoming a shortage of metallic currency. Imperial
thinking on the theoretical role of the central government was not, of course,
so sharply defined. T h e 1854 edict quoted below reflects the frustrations of
the center — the desire for uniformity and the practical obstacles to its
achievement, obstacles which appeared at times to be caused by provincial
officials but which were often the reflection of economic realities.

The Board of Revenue has already memorialized to order each province to


open an official cash office and issue official notes [kuan-p'iao], to increase the
casting of copper and iron cash and the various denominations of big-cash. Upon
receipt of this memorial We thereupon issued an edict fully authorizing this.
Because there is a shortage of funds, the currency system depends entirely on
the circulation of [both] standard cash and other forms of money [interchange-
ably and] without obstruction, so that [the supply of money] will be sufficient for
the Peoples' livelihood [min-sheng] in difficult times.
A long time has passed and We have only received memorials from the gov-
ernors-general and governors of Fukien, Shansi, and Shensi to state that they have
acted in accordance with the edict. As for the rest of the provinces, they have by
no means as yet done so. These governors-general and governors, if they had
with full devotion managed these affairs, what need would there be for a year's
delay? Are not the regulations settled? Fukien is well known to be a barren
place and yet the regulations are already in effect there. Even if the situation is
not the same in each province, it cannot be so difficult to establish the law and
arrange these affairs. In general, delinquent local officials fear difficulties and live
in improper ease, idle and negligent, procrastinating. They are really to be bit-
terly hated.
L E T each province's governor-general, governor, and military commander, and
the governor of the imperial prefecture take official notice of the original me-
morial of the Board of Revenue and take part with their subordinates, deliberat-
ing over the local circumstances, then quickly establish an official currency of-
fice [\uan-ch'ien chu\ and also devise means to raise funds to open mints to in-
crease the casting so that the legal cash and cash notes, the one supplementing
the other, are issued. At the same time deliberate on the rules and regulations
and memorialize on what is being done. If there is any able official who has made
progress through conscientious effort, authorize him to memorialize the facts.
Through this reward, We give encouragement. 19

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152 Money and Monetary Policy in China

Monetary Policy and Its Failure


The conservative approach. The obvious reasons for the failure of the
government's monetary measures in establishing a stable alternative to the
standard cash system may lead to a misunderstanding of the Chinese officials'
theoretical grasp of the problem. The issuance of 500- and 1000-denomination
big-cash had to be stopped within a year; the market value of the 10-denomi-
nation cash had fallen to one-fifth its face value by 1858; the 10-denomination
cash alone circulated at the end of the Hsien-feng period, and then only
within the environs of Peking. The disruption which this monetary depreci-
ation created in the economy and the consequent attempts to enforce the
currency regulations caused farmers to hold back supplies from the capital,
and shopkeepers to hoard their stocks. Yet Chinese officials were aware that
all this might happen.
The question debated in Peking during 1853 and 1854 was not whether
the measures they were adopting were potentially disruptive and inflationary
— the officials knew they were — but exactly how far they could go, how
much they could get away with. The problem facing the Emperor's advisers
was both monetary and fiscal; monetary in the sense that the physical sup-
plies of monetary metal were not reaching Peking and some substitute had
to be found, fiscal in the sense that the government had to have a greater
command of real goods and services. The monetary problem alone suggested
that the new measures should be initiated under strict safeguards as to the
quantity of money issued. The fiscal problem suggested that the issue should
be pushed as far as possible without causing the people to lose faith in the
currency, thus causing its real value or purchasing power to fall faster than
the increase in supply. Encouraged by the success of the first limited meas-
ures, those who saw the fiscal problem as dominant urged increased issues of
notes and higher denomination big-cash. Their advice was accepted, perhaps
had to be accepted, despite the obvious risk to the monetary system. In con-
sequence the campaigns against the Taiping were financed, but at the cost
of both monetary and fiscal disorganization.
Chinese history itself furnished the necessary lessons, and memorialists ad-
vocating monetary change before 1853 had to prove how their schemes would
overcome the difficulties which had led to inflation in the T'ang, Sung,
Yiian, and Ming dynasties. The limited and therefore apparently successful
note issue of the Shun-chih period (1644-1661) provided a conservative
precedent.

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The Hsien-feng Period—A Case Study 153

If big-cash were to be successfully circulated, the officials realized that the


face value and the market value should not be allowed to diverge.20 To pre-
vent this divergence the issue would have to be limited, the big-cash would
have to be accepted by the government at par, and the content of the big-
cash would have to approximate as closely as possible the relative quantity of
the standard coins if counterfeiting were to be of minimum attractiveness.
But to limit the issue and to manufacture coins with a high copper content
would also limit the profit to the government. If the coins were so issued
and their proportions so designed that potential profit to the government was
maximized, the officials would be reluctant to accept them in payment of
government revenue.
The initial regulations approved in 1853 set a weight of 0.6 liang for the
10-denomination cash, representing a copper content one-third less than ten
standard cash coins, but, compared to later issues, the debasement was rela-
tively conservative. The mao was fixed and the maximum denomination set
at 50 ch'ien. But the key regulation, and one which was typical of all Hsien-
feng attempts to keep the new currency in circulation, was one fixing the
proportion of big-cash to standard cash which was to be accepted by the
government in payment for public works, soldiers' pay, and official salaries.
These proportions varied officially according to the payment involved. The
Manchu bannermen were to be paid, for example, at a ratio of 8 parts ordi-
nary cash to 2 parts big-cash; the members of the department of the Imperial
Household, 100 strings of 10-cash coins and 1000 strings of standard cash for
each 2000 ch'uan disbursed.21 The proportions also changed over the Hsien-
feng period; as the government found that the circulation of big-cash was
meeting with obstruction, they changed the total acceptable in payments.
The proportions also had to be adjusted as the available quantity of standard
cash fell, and the ratios had to be fixed between big-cash and government
notes.
The approach to the issue of government notes was even more cautious.
Wang Mao-yin,* then an imperial censor, memorializing in 1853 with Hua-

* Wang Mao-yin, the only Chinese mentioned in Marx's Capital, was so obscure a figure
that much research was done simply to discover his identity. Quite independently of this
reference, however, Wang's career is not without relevance to this study. Born in Anhui in
1798, he became a junior vice-president of the Board of Revenue for less than a year, from
December 1853 to April 1854. He had, however, considerable interest in monetary affairs, as
his numerous memorials on the subject bear witness. From 1832 to the death of his father
in 1849 Wang was an official in the Yunnan and Kweichow bureaus of the Board of
Revenue; in 1851 he was appointed to the Kiangsi bureau and later in the year was made
censor in Kiangsi province. His memorials urging a conservative monetary policy led in 1854
to his transfer to the Board of War. He died in 1865.

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154 Money and Monetary Policy in China
sha-na (Mongol, 1806-1859), a former Board of Revenue vice-president (1845-
1849), saw the silver notes or yin-p'iao as a means of overcoming the shortage
of silver, providing their issue was limited to 20 per cent of any government
payment — exceptions being made for soldiers and imperial princes who
would be paid wholly in metallic currency. The notes of private banks were
to be stopped to prevent any general overcirculation of paper money or
threat to the credit of the government notes through the failure of private
banks.22 And, in any case, the issue of government notes was to be an ex-
periment confined to the capital.23 Although private notes were allowed to
remain in circulation, the proposals of Wang and Hua-sha-na were, in prin-
ciple, accepted. The notes were to be issued through government-supervised
banks which would be responsible for redeeming the notes in the correct pro-
portion of standard cash, big-cash, silver, or other government notes estab-
lished by regulation.
Since all these monetary measures met a real and obvious need, they were
accepted. But almost immediately the government abandoned the conserva-
tive approach, not, however, without the protests of those who foresaw the
consequences of going too far.
Second stage. Before the end of 1853 the imperial princes, Hui and Kung,
had been authorized to set up mints and cast big-cash of 500 and 1000 de-
nomination, and the weight of the 10- and 50-denomination cash had been
reduced. This edict provoked an immediate and brilliantly expressed response
from Wang Mao-yin, then a junior vice-president of the Board of Revenue
and hence in charge of the Board's mints. He wrote, in part, as follows:

If the state decides a cash coin has a denomination of 100, then it is 100; 1000,
then it is 1000. W h o would dare to disobey? T h e measure is successful. Yet al-
though the official is able to determine the price of cash, he is not able to limit
the price of commodities. As for the 1000-cash, people would not dare to use it
as a 100-cash. But as for goods valued at 100 ch'ien the people would have no
difficulty in considering them worth 1000 ch'ien.2i

This concise and reasonable conclusion parallels that of Adam Smith in sup-
port of the legislation requiring paper money emitted in the American colo-
nies to be assured legal-tender status:

A positive law may render a shilling a legal tender for a guinea; because it may
direct the courts of justice to discharge the debtor who has made that tender. But
n o positive law can oblige a person who sells goods, and who is at liberty to sell
or not to sell, as he pleases, to accept of a shilling as equivalent to a guinea in the
price of them. 25

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T h e Hsien-feng Period—A Case Study 155

In a subsequent memorial in early 1854 Wang Mao-yin notified the Em-


peror that he was attempting to comply with the imperial will relative to
the casting and issue of the higher denomination big-cash, but that he had
not completed the preliminary steps and was having difficulty obtaining
copper. The real problem, of course, was that Wang did not approve of the
edict. In fact, he informed the Emperor there was still time to change the
regulations and prevent the issue of 100-, 500-, and 1000-denomination cash.
He stated four specific problems: first, the slight differential between the
weights would make it difficult for the "stupid" people to know which coin
was which; secondly, there would be a serious problem in paying small debts
if production were concentrated on the bigger coins; thirdly, without re-
ducing the proportions of notes and standard cash being paid out, the big-
cash could not be put into circulation; and fourthly, and most important,
by counterfeiting big-cash people could offer them to the government and
demand silver at sufficient profit to enable them to buy even more standard
cash to melt down, counterfeit, and buy silver again.26 At a time when silver
was required to pay for military expenses, this was a serious charge. But in
April 1854 Wang Mao-yin was transferred for his troublesome memorial, and
the issue of the larger denomination cash was ordered.27
Parallel to this rejection of conservatism in the issue of big-cash was the
almost immediate modification of the government's note issue regulations.
The official banks in Peking were, in fact, permitted to finance the govern-
ment by meeting military and civil payrolls in accordance with set propor-
tions among notes, standard cash, and big-cash. But the reserves against the
notes proved inadequate and the accounts of the Board of Revenue and the
banks, when checked upon the instructions of Su-shun, showed discrepan-
cies.28 The government had in reality abandoned any policy but one of keep-
ing the notes in circulation by the terms of various punitive edicts. Note
issue depended upon fiscal needs and upon the ability of the banks to maxi-
mize their use relative to hard currency, making their redemption as diffi-
cult as possible. In addition the Emperor extended the use of notes to the
provinces after a trial period in the capital of less than a year.
Later developments. The very measures designed by the government to
keep the new monies in circulation raised problems of their own. The meas-
ures to prevent counterfeiting gave petty officials the opportunity, on the pre-
text of looking for counterfeit coin, of searching merchants and peasants
entering the city. One result was that the big-cash were avoided when pos-
sible and another that traders hesitated to bring goods to the city. Eventually

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156 Money and Monetary Policy in China
the difficulty of encashing government notes led also to their rejection. The
regulations setting down the proportions at which notes and big-cash were
to be tendered in any payment were disregarded by local officials, who might
demand payment in full-weight coin or bullion, but forward the funds to
the imperial treasury in the proportions allowed. Contractors undertaking
public works found that they could not obtain supplies or pay wages except
with standard cash, or, after standard cash had gone out of circulation, with
the depreciated big-cash. 29 Those with bargaining power used it to raise the
proportion of the better money to be paid, with the natural consequence
that the people were reluctant to accept big-cash or notes and avoided such
payments whenever possible. T h e Emperor could only repeat the regula-
tions and demand that they be obeyed.
T h e coherent monetary reform which had been planned in the first years
of the Hsien-feng period by several of the Emperor's advisers had degener-
ated into an attempt to force a depreciated currency on the people while
placing obstacles in the way of its return to the government. T h e first
measures had been proposed by monetary experts such as Chu Tsun,*
W a n g Mao-yin, W a n g Ch'ing-yiin, and Ch'i Chiin-tsao,f and had been
referred by the Emperor to the Board of Revenue for advice. 30 Usually such
a reference included the name of Ch'i Chiin-tsao. But even within the Board
there were soon differences, with W a n g Mao-yin memorializing against the
recommendations of the Board, in effect submitting a minority report. By the
end of 1854, the names of the imperial princes are more frequently found on
monetary memorials, and it is apparent that the casting of the new big-cash
and iron cash was being undertaken in mints which did not come under
the supervision of the boards of Revenue and Works. 3 1

* Chu Tsun, a Hunanese and chin-shih of 1819, was, like W a n g Mao-yin, interested in
monetary problems despite only a short term on the Board of Revenue — as first vice-president
from November 1855 to November 1856. Chu opposed legalization of opium in 1837, was
degraded in 1846, but was promoted to chief superintendent of the metropolitan grain depots
in 1849. In this position he was ex officio a titular vice-president of the Board of Revenue.
In 1846 he memorialized the Throne on the falling value of cash, correctly ascribing the
trouble to the debased state of the coinage. He died in 1862.
t Ch'i Chiin-tsao (Shansi, 1793-1866) had been junior vice-president of the Board of
Revenue, 1837-1838, senior vice-president 1838-1839, and president 1841-1850. As a grand
councillor he was supervisor of the Board at least through 1855. Ch'i thus remained interested
in monetary affairs after his relinquishment of the post of president, and his name is as-
sociated with those in favor of using government notes and big-cash to meet the financial
difficulties of the period. In this he was assisted by W a n g Ch'ing-yün. His biographers state
that Ch'i was early in conflict with his "Board colleague" Su-shun and that arguments with
him over currency measures led to Ch'i's resignation in 1855. But Su-shun first joined the
Board as senior vice-president on December 29, 1855. That the two did not agree is sug-
gested, however, by the fact that Ch'i was recalled to office following the 1861 coup d'etat.
H e then served as president of the Board of Ceremonies.

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The Hsien-feng Period—A Case Study 157
One by one these subsidiary projects had to be abandoned, while in the
provinces the governors undertook their own monetary measures, resisting
successfully the attempt of the imperial government to obtain their bullion
by payment in paper notes. The imperial government failed in its basic
policy of keeping the several varieties of money in circulation at par.
Opposition to the extraordinary currency measures continued despite the
dismissal of Wang Mao-yin and the support the new measures found with
imperial princes. Weng Hsin-ts'un* and Po-chiin,f both appointed Board
of Revenue presidents in 1856, typified this opposition. 32 The growing power
of Su-shunJ was, however, too much for them, and both were dismissed in
October 1858 3 3 When Su-shun assumed the presidency in early 1859, how-
ever, he made a determined effort to improve the monetary situation, and
his opposition to Weng and Po-chün appears to have been concerned more
with political power than economic policy. Su-shun, perhaps the most influ-
ential statesman in the latter part of the Hsien-feng period, was a confidential
adviser to the Emperor, who had virtually resigned his powers to Tsai-yiian
and Tuan-hua, elder brother of Su-shun. The measures Su-shun attempted
were mainly disciplinary in nature, however, and could not begin to cope

* Weng Hsin-ts'un (Kiangsu, 1791-1862) succeeded W a n g Mao-yin as junior vice-president


of the Board of Revenue in 1854 but remained in office only four months. H e had held the
same position in 1850-1852. Like Wang, W e n g opposed the issue of government notes and
big-cash as a means of raising revenue and was denounced by the Throne for his uncooperative
attitude. Cashiered after a brief tenure as president of the Board of Works in 1854, he was
nevertheless promoted to Board of Revenue president in December 1856. Continuing his
opposition to unorthodox monetary policies, he came into conflict with Su-shun, then senior
vice-president, and was dismissed in 1859. Subsequent efforts to impeach him failed. His son,
W e n g T'ung-ho, was Board of Revenue president, 1886-1898.
t Po-chün, a Mongol and chin-shih of 1826, had been a senior vice-president of the Board
of Revenue, 1846-1849, and was a grand councillor concurrently with his position as Board
president. His appointment as president may have been partly the result of his memorial
warning of the evil effects likely from the overcirculation of big-cash. T h e enmity of Su-shun
led subsequently to his execution in 1859 on a charge of corruption not connected with his
Board duties.
t Su-shun (imperial clan 1815P-1861) first gained influence while holding a succession of
increasingly important civil and military posts from 1849 to 1857, in which year he was ap-
pointed president of the Censorate. On the death of the Hsien-feng Emperor, Su-shun became
a regent but was overthrown and executed in the 1861 coup d'etat. T h e fact that h e advised
against making terms with the British forces made it easy for him to be labelled as evil by
the opposing faction, represented to foreigners by Prince Kung, I-hsin (1833-1898), and the
Tsungli Yamen.
The biographies of Su-shun suffer from a characteristic even older than the writings of
historian Ssu-ma Ch'ien: adverse comments on the subject of the biography are placed in
other people's biographies. Thus the comments on Su-shun's "back-biting" of his colleagues
is in the biography of Ch'i Chün-tsao. This style of biography is described by Burton Watson
as concealing yet revealing, honest yet generous: " H e concealed the fault in the biography
of the subject but disclosed it in the biography of someone else" (Ssu-ma Ch'ien, Grand His-
torian of Ancient China, New York, 1958, p. 96).

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158 Money and Monetary Policy in China
with the basic economic problems. Su-shun stopped the casting of iron cash
which had in any case become worthless, and passers-by are reported to
have thrown them in his face, presumably because the government would
not accept them back at par — or at any price. He then investigated the
official note-issuing banks and found discrepancies in the books; he cashiered
the secretaries of the Board for their complicity; and he arrested over 100
"notables and rich merchants" involved in corruption. In late 1859 there was
a fire in the Board of Revenue, destroying part of the records. Su-shun, sus-
pecting those implicated in the corruption as having been responsible, ordered
further arrests. Such policies and his obvious ambition were not features
likely to make him a popular figure, and his role as regent preceding the
coup d'etat engineered by the Empress Hsiao-ch'in (1835-1908), Tz'u-hsi,
insured that his acts would not receive a favorable recording in official his-
tories. Certainly his reform measures appear to have been vigorous, but more
in the Manchu military than in the Chinese civil tradition. In fact, his actions
had little impact on the course of the inflation, and by the end of 1859 only
depreciated 10-denomination cash and cash notes, or ch'ien-p'iao, were in
circulation in the metropolitan area. As Wang Mao-yin had warned, the
government had made the monetary regulations profitable but had not de-
vised means to make them incorruptible.34

The Peking Monetary System in 1861

Su-shun's heavy-handed policy did not, then, prevent the further deprecia-
tion of paper money in Peking. By early 1861 the rate of exchange was 15
tiao or 15,000 ching-ch'ien to the dollar?5 Elsewhere the equivalent exchange
rate was 1,500 ch'ien or 3,000 ch'ien to the dollar, depending upon the cash
system in use. Indeed, the course of the depreciation can be explained in
terms of the changing relationship between the standard chung-ch'ien unit
of account, typical of the Peking system prior to the Hsien-feng inflation,
and the ching-ch'ien unit as it actually existed at any given time during the
inflation. The relationship between the two systems hinged on the market
value of the 10-denomination big-cash coin then in general use only in the
metropolitan area and on which the value of the paper money ultimately
depended. The depreciation of the big-cash (ta-ch'ien) relative to standard
cash and the fact that the big-cash carried its unit of account with it explain
the divergence of the chung and the Peking or ching systems. Figure 6, using
the actual values for early 1861, illustrates the relationship of the ch'ang and

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i6o Money and Monetary Policy in China
chung cash systems with the Peking or ching variation. The model is con-
structed to focus on the crucial market relationship between standard cash
and big-cash coins. The model also describes relationships among the various
units of account and monies within the Peking system.
For the brief period during which big-cash passed current at their face
value, one 10-denomination big-cash would, of course, have settled the same
debt as ten standard cash coins. In Figure 6 it is clear that the big-cash are
not passing at their face value and that, indeed, they would settle the same
debt as but two standard cash. Consequently, one 10-denomination big-cash
coin would setde a debt of two (ch'ang-)ch'ien or four {chung-}ch'ien (see
Chapter II if the ch'ang-chung relationship is unclear). This represents a de-
preciation of one fifth.
A tiao (or ch'uan) is defined as equivalent to 1000 ch'ien of the same sys-
tem. A string of cash contained that number of cash sufficient to satisfy a
debt of one tiao. Thus in the ch'ang-ch'ien system, where one cash coin satis-
fied a debt of one ch'ien, there were 1000 coins to a string; in the chung-
ch'ien system where one satisfied two, there were 500 coins. Consequently, in
the Peking system a string containing 10-denominaiion big-cash would con-
sist of 50 coins, for 50 times 10 indicates that 50 coins would satisfy the
equivalent debt of 500 standard cash or 1000 chung-ch'ien or one tiao. With
the depreciation of the big-cash, however, while the 50 coins continued to
satisfy a debt of 1000 ch'ien and one tiao in the metropolitan area, they did
not satisfy the same debt as 500 standard cash — the chung and the Peking
systems had diverged. The 50 ten-denomination big-cash satisfied a debt of
1000 ching-ch'ien or one tiao of the Peking system.
In Figure 6 a debt of one dollar could be settled by tender of 1,500 standard
cash — had they existed — or 750 big-cash coins; a debt of one dollar was
thus equivalent to a debt of 3,000 chung-ch'ien or three tiao. But such a debt
could also be settled by tender of paper money, cash notes, with face value of
15,000 ch'ien. Obviously some explanation must be found for this apparent
discrepancy, and indeed the answer is implied in the findings of the preced-
ing paragraph.
In Peking the cash notes were redeemed in 10-denomination big-cash. This
suggests that the face value of the cash notes and the face value of the big-
cash would maintain their relative equivalence. And, consequently, the value
of the cash notes in terms of, say, ch'ang-ch'ien would move with that of
the big-cash. This is indeed what happened. The big-cash coins continued to
be accepted at their face value in terms of the Peking units of account, that
is, a ten-denomination big-cash settled a debt of 20 ching-ch'ien. The "ten,"

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T h e Hsien-feng Period—A Case Study 161
however, no longer referred to ten ch'ang-ch'ien, since the coins were de-
preciated, but by definition they were worth ten of some kind of ch'ien. To
avoid confusion we have introduced the term ta-ch'ien as the appropriate
name of this unit of account, even though the term was not used in this
sense by the Chinese. Since the Peking system was a modified chung-ch'ien
system — that is, one coin settled a debt of two ch'ien—one ta-ch'ien was
equivalent to two ching-ch'ien. In Figure 6 the 750 big-cash are worth 7,500
ta-ch'ien or 15,000 ching-ch'ien. Now the cash notes were denominated in
ching-ch'ien, for it is evident that since they were redeemable in big-cash the
market would place them in the same relationship to the dollar as the big-
cash. In 1861, 750 big-cash were required to settle a debt of one dollar; one
dollar was thus equivalent to 15,000 ching-ch'ien; a debt of one dollar could,
therefore, be settled by tender of cash notes with a face value of 15,000 ching-
ch'ien. The Peking notes had depreciated with the big-cash in which they
were redeemable and were worth but one tenth of their face value in ch'ang-
ch'ien, one fifth in chung-ch'ien, or par in ching-ch'ien.
Development of the model. The unique features of the Peking system,
which were to remain as long as the big-cash coins were used, developed
from the type of chung-ch'ien system illustrated in ideal form in Figure 2.
The previous discussion of Figure 6 may be clearer, therefore, if we repro-
duce Figure 2 with those modifications appropriate to the actual situation in
Peking immediately prior to the depreciation of big-cash. These modifications
consist of the inclusion of a ta-ch'ien unit of account and the new money
forms — big-cash and cash notes. The revised model is shown in Figure 7.

Figure 7. The Peking monetary system, c. 1853

1 tiao = 1000 chung-ch'ien ä! 1000 ching-ch'ien (= 1 Peking ttao)

500 ch'ang-ch'ien 500 ta-ch'ien


I 1 I
500 standard 50 10-denomination = 100 10-denomination
cash cash coins cash notes

Cash notes were issued in several denominations. The 10-denomination was


chosen for Figure 7 to permit illustration of the fact that 50 coins were
equivalent to 100 notes of the "same" denomination. Actually, the big-cash
were intended to have a denomination in the ch'ang-ch'ien system, and, in
a sense, the ta-ch'ien unit remains part of this system. The cash notes, on the
other hand, were denominated directly in the ching-ch'ien system.
The equality of the chung-ch'ien and ching-ch'ien in Figure 7 depends

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i62 Money and Monetary Policy in China
upon the big-cash being accepted at their face value in ch'ang-ch'ien. When
the big-cash depreciated, the equivalence of the chung and the ching systems
ceased and a new tiao, a Peking tiao, had to be introduced. All values for
Peking units and monies changed in the same proportion as the depreciation
of the big-cash. A depreciation of one fifth is illustrated in Figure 6.
In dealing with Peking price information during the Hsien-feng period,
extreme caution is essential. Prices were sometimes quoted in the old or
standard chung-ch'ien system, although usually in the new or Peking varia-
tion, the ching-ch'ien system. Similarly, payment of paper money with a face
value of, say, 1000 ch'ien should not be confused with payment of 10-denomi-
nation big-cash with a face value of 1000 ch'ien. Then, too, other denomina-
tion big-cash and iron cash were temporarily in circulation — all require
analysis similar to that given the more common 10-denomination coin.
Finally, the Peking monetary system was confused further, although for a
very brief period, when the cash notes depreciated in terms of the ching-
ch'ien unit of account.
Further depreciation of notes, 1861. In the confusion preceding the death
of the Hsien-feng Emperor, the value of the government notes depreciated
in terms of their unit of account. Eventually they were refused in payment
of wages, and holders of the notes assembled in front of the issuing banks
to exchange as many notes as possible. Government officials and foreign
holders managed to exchange their notes at par in big-cash, but ordinary
holders had to bid competitively for hard currency, the person willing to
surrender the largest number of notes for a given quantity of big-cash having
his bid accepted.36
The fiscal requirements of the government had led during the 1850's both
to a progressive debasement of the coinage, the big-cash, and to the issuance
of paper money. Until mid-1861 there is evidence, however, that paper money
was not issued in excess of what people were willing to accept at par relative
to the big-cash. There was no general flight from paper money to coin, al-
though there were flights from issues of specific banks. But the use of paper
money in a metallic system depends upon a demand which can change sud-
denly in favor of the coin. By August 15, 1861, such a change had begun and
a debt of 1000 ching-ch'ien, which could be settled by 50 big-cash of 10-
denomination, required tender of 167 cash notes of 10-denomination: cash
notes were no longer passing at par in terms of their unit of account. To
this extent Figure 6 would require modification, showing the relationship
between the two monies — big-cash and cash notes — as being variable rather

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The Hsien-feng Period—A Case Study 163
than proportional. The period involved, however, was short, for the notes had
lost their monetary status by September 1861.37
The government had long maintained an official rate of 1000 cash to one
tael for fiscal purposes. As the big-cash depreciated and the silver price of
cash fell, it was to the advantage of the government to maintain the old rate
in paying out cash. Since actual rates of payment might not be those officially
in force, it is impossible to determine to what extent the government profited
by this. However, in 1859 the government officially changed this traditional
rate for payments in the capital, establishing the ratio of 4 metropolitan- or
ching-tiao per tael.38 The change represented an official devaluation of the
big-cash by 50 per cent, but as the big-cash had depreciated to one fifth its
face value, a payment of 4 tiao per tael was still the equivalent of but 400
standard cash per tael.
This cash-silver rate was one point at issue between the Board of Revenue
and the official banks. The banks, having in effect lent to the Board by
undertaking the payment of soldiers and officials, were being required to
bear the exchange loss caused by the depreciation of big-cash in terms of
silver.39 Being unable to sustain this loss, the government banks failed to
redeem their notes. The notes of several private banks, of which there were
511 in Peking in 1859 — 389 of which had no guarantors — remained in cir-
culation at least until the currency reform of 1887.40 Since the official records
mention exchange rates as high as 20,000 ching-ch'ien to the tael in 1861, it
may be assumed that in making payments considered essential to the regime
cognizance was taken of the market rate.41

Monetary policy in the Hsien-feng period changed from cautious adoption


of reform to extravagant issues of debased coins and inadequately backed
paper notes. Many of the innovations were negated by refusal of the public
to use the monies. The attempt to enforce the currency laws by police action
despite contrary market forces and without correction of the causal factors
hastened the failure of all but the 10-denomination big-cash and the cash
notes. Su-shun's sudden and harsh measures, while perhaps legally justified,
could not correct already existing faults without endangering the credit of
both government and government-supervised banks. Repression as an eco-
nomic policy failed in Peking in 1860-1861 as it did in Shanghai in 1948.
Fiscal reform was the primary economic need of the government, but a
period of military crisis was not an auspicious moment to effect it.

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CHAPTER VII

Treaty-Port Monetary Problems

In the imperial government's view its responsibilities in the monetary sec-


tor of the economy were limited to the provision of a copper coinage and
general supervision of the currency laws. Only in the metropolitan area did
it concern itself with the details of monetary administration; the monetary
adventures of the Hsien-feng period which attempted detailed reform be-
yond the capital were exceptional, prompted by fiscal necessity. To the extent
that local conditions made the acceptance of imperial initiative impractical,
the edicts were unenforceable. The two previous chapters have described
Chinese monetary policy from an imperial viewpoint. In this and the follow-
ing chapter on the Haikwan tael the viewpoint is shifted from the empire-
wide to the local and from that of the Chinese official to that of the foreigner
and Chinese merchant. The details of the monetary systems of China were
worked out at the local level, and the system in each community could be
studied and its history written. It is in the treaty ports, however, that the
problems and developments of most significance in the economic history of
China take place, and the present chapter is concerned with specific aspects
of this history.
The interest of foreigners in the local monetary system was based on two
differing and sometimes contradictory requirements: the first, a need for an
adequate and stable medium of exchange for wholesale foreign trade trans-
actions; the second, the need for a convenient method of making everyday
payments occasioned by the ordinary requirements of living. The most influ-
ential of the foreign community were more concerned with the first than
with the second requirement and, in the early days of the treaty ports, perhaps
until the late sixties, the needs of the China trade received almost exclusive
effective attention. The American merchant A. F. Heard expressed this
early view with the comment, "We are only here in miserable exile." ( T o
this a local editor replied that he stood for a better Hong Kong.) In con-
trast the China Mail of 1869 wrote, "The middle class is growing and it is
victimized by a poor coinage system." 1

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Treaty-Port Monetary Problems 165
As foreigners gained access to the interior and envisioned expansion of
the China trade which would embrace the inland provinces, the distinction
between the requirements of the China trade in the treaty ports and general
monetary reform became less clear. To the extent that retail trade was
hampered or thought to be hampered by the nature of the currency system,
foreign merchants became interested in total monetary reform. This interest
was only sometimes tempered by the realization that national reform was
a more formidable task than obtaining a favorable hearing in the Tsungli
Yamen.
The confusion in the traditional monetary system created by the Hsien-
feng administration forced the imperial government to attempt reform within
the traditional system. At the same time foreigners were attempting to bring
about a national monetary reform to include the silver sector, with a national
issue of dollar coins and standardized weights for monetary silver. The course
of these reform movements and their interplay are the subject of Chapter IX,
and it is there that the Chinese and the foreign approach to monetary policy
can be considered together.
In this chapter, however, episodes in local monetary history have been
selected to illustrate the role of the state in specific local economic problems.
The episodes are selected from treaty-port histories because of their general
interest to economic historians and because they illustrate the extent to which
foreign influence could effect change in the Chinese local economy. These
changes did not, however, satisfy foreigners when they came to think of
economic problems as national and of reform as consequently belonging to
a national rather than a local authority. While the treaty ports remained
isolated trading stations along the China coast and were the only points of
contact between foreign merchants and the Chinese economy, change was ac-
cepted as a local affair. The branch managers of merchant houses, the ports'
consuls, and the editors of the local newspapers urged changes which ap-
peared to benefit the trade of the particular port. Even then the number and
influence of foreign residents were insufficient to cause a change of money in
the retail sector.
Local monetary reform for the wholesale foreign trade sector would not
satisfy foreigners for long. The assumption underlying the economic provi-
sions of the commercial treaties the foreign powers made with China was
that a national economy existed, especially a national monetary system. That
this was a faulty assumption did not become immediately apparent even
when the methods of paying customs duties had been compared by the
treaty-port consuls and foreign merchants. Variations were ascribed to Chi-

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166 Money and Monetary Policy in China
nese corruption, irrational local customs, or unfair trading practices. Argu-
ments relative to payment of customs duties, and on the exact nature of the
customs unit of account, the Hai\wan tael, could not be resolved on a uni-
form basis until the monetary system was similarly standardized. What be-
gan as an attempt to eliminate local differences in duty payments, regarded
as unfair and unwarranted levies made by local bankers or officials, had to
develop into foreign insistence on national monetary reform. The course of
these discussions on the nature of the Haikju/an tael and the growing re-
alization of the extent of the problem involved is the subject of Chapter VIII
and is consequently both a logical extension of the present chapter and an
introduction to the final chapter, which deals with reform.

Local Monetary Policy

The scope of local policy. The nature of the monetary problems confront-
ing local officials has been suggested in the descriptive chapters of Part I of
this study. Except to the extent that proximity to foreign trade made pos-
sible the export of cash coins from time to time, the cash sector of the treaty
ports differed little from that of interior cities. Even here, movements of cash
from one city to another in China resembled, as far as the local systems were
concerned, movements of coin or bullion in international trade. In the silver
sector, however, the imposition on the traditional Chinese system of the
dollar coin and the need for greater precision in the silver sector as a whole,
since transactions in silver — either bullion or coin — might subsequently be
judged by the more exacting standards of international trade, were unique
features. As for policy, some decisions could be reached on monetary mat-
ters between the Chinese and foreign merchants, and the local Chinese of-
ficials need not necessarily become involved. But the history of the treaty
ports indicates that the officials did become involved, first because they were
at times directly appealed to, secondly because the imperial revenue was in-
volved in certain decisions, and thirdly because arguments were potentially
dangerous to the peace of the community and ought, therefore, to be avoided.
Whatever their scholarly leanings, local officials had to concern themselves
with technical monetary matters.2 To the extent that they made arbitrary
decisions or issued purely exhortatory or repressive proclamations they were
in the long run unsuccessful. Treaty-port monetary policy was the conse-
quence of agreement between official and consul, Chinese merchant and
foreign merchant. When all agreed, success was assured; when they differed,
success went to the view most in accord with economic reality, except in

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Treaty-Port Monetary Problems 167

those cases in which foreign policy was paramount or in which the real solu-
tion lay in national reform. That was beyond the reach of both treaty-port
residents and local officials.
Specifically, the monetary problems which might come to the attention of
consuls, officials, and merchants included those relating to the coinage, the
deterioration of sycee, the activities of the banks, and payments to the gov-
ernment. A contract between foreign merchants might specify the means of
payment, but if a new coin had been introduced into the monetary system
dispute could arise over its tender in payment of the contractual obligations.
In a specific case the consular courts might be appealed to. T h e judicial de-
cision would be binding in that particular case, but it might also set a new
payments pattern by reflecting the changed economic situation. Then a con-
firming proclamation by the local Chinese officials would be of assistance in
establishing the consul's decision. Consul and local official could together in-
fluence the acceptance of a new coin by presiding at an official assay and
publishing the results. Such a proclamation would have increased economic
effect if it were coupled with provisions for payment of government taxes at
rates agreeing with the assay. Full effectiveness depended, however, upon
the compliance of the merchants, both foreign and Chinese, who would, of
course, be influenced by their own requirements. Official proclamations or
court decisions might not be openly or directly flouted, but they could be
avoided, for example, by terming contracts in appropriate ways. T h e official
rates of exchange between English silver coin and dollars were nullified in
H o n g K o n g by drawing contracts specifying payments in Spanish dollars
which, being a foreign coin, gave the transaction the legal characteristics of
barter and thus escaped the terms of the official ordinances. 3 T h e activities
of the banks were also subject to court review, and liquidity crises could be
followed by closer supervision of the Chinese banks by the local officials,
anxious to avoid disturbance, and by merchants convinced temporarily of the
need for such regulations.
Local monetary policy in the treaty ports was centered, therefore, on the
designation of current coin, the setting of the rates at which such coins should
be current, the maintenance of standards, the regulation of banks, and the
maintenance of the cash coinage system of the empire. Decisions in which
the local official was involved might be reported by him to higher authorities
and eventually referred to the Board of Revenue. Imperial monetary policy
touched the treaty ports to the extent that the traditional concepts were
changed by the introduction of the dollar, by the movement of silver, and
by the requirements of the cash coinage.

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168 Money and Monetary Policy in China
The dollar. A basic task was to formulate a policy with regard to dollar
coins; the second was to deal with the complications arising from the intro-
duction into China from time to time of new types of dollar coin. Local
acceptance of the dollar at a premium over its silver content had been well
established in Canton during the eighteenth century, but the quoting of
prices in numbers of dollars as opposed to weight — that is, the use of the
dollar as a coin with a considerable premium — resulted in some export of
sycee in exchange for the dollar.4 On this basis objections to the use of the
dollar were memorialized to the Throne. The emperor decreed that dollars
should be accepted by weight only, adding typically, "Thus the crafty and
deceitful character of foreigners will be checked." 6 To the extent that dollars
had been destroyed as coins by the practice of chopping, the decree was ef-
fective, but clean dollars continued to be taken by count and at a premium.
By 1836 dollars were common in China south of the Yangtze, and were ac-
cepted as curiosities as far inland as Hunan.® Their use was too widespread
for any general prohibition to be effective. Like the China trade itself, dollars
had been interwoven into the economy of south China, and their prohibition,
if enforcement had been attempted, would have created a disturbance —
which the government sought to avoid. The actual method by which the
dollars were tendered in the local system varied from port to port and has
already been considered in the description of the silver sector in Chapter III.
Dollars having been generally accepted in the Chinese monetary system,
it became the problem of local officials, consuls, and merchants to determine
which dollars to accept and under what conditions. In Canton the solution
had been to have one dollar as the standard, payable at par with the dollar
unit of account, with other dollars at varying rates in terms of the unit of
account. Since dollars were not minted in China in significant amounts, the
supply of a certain kind of dollar was determined, partially at least, by the
minting policy of a foreign country. When in 1792 "old dollars," the stand-
ard coin in the Canton trade, were no longer available in sufficient numbers,
the "head dollar," the coin actually current, was still passing at a 2 per cent
discount. By agreement between the East India Company and the Hong
merchants, the accounts were changed and the "head dollar" became stand-
ard. 7 By 1845 the dollar unit of account had become associated with the so-
called "Spanish dollar," the dollars of Carolus III and IV, but these too were
soon in short supply. With the independence of Spain's American colonies,
new dollar coins, "republican dollars," of which the Mexican dollar was the
most important, as well as the Spanish "Ferdinand dollar," came out to China.
They, like the "head dollar" in 1792, were first accepted at a discount, and

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this coupled with the shortage of standard dollar coin fostered a movement
among the mercantile community to make the Mexican and certain other
dollars current at par. But it was no longer as simple as it had been when
the East India Company and the Hong merchants could reach a private
agreement which would be sufficiently important to secure its success. Now
there were many merchant houses, trading from different countries, and
therefore in differing economic relations with the dollar-producing areas.
Nor was there any single Chinese merchant group sufficiently powerful to
reach an agreement with the foreigners. The process of change was more
complex: in Canton it resulted in a change in the unit of account and its
standard coin; in Shanghai it caused the abandonment of the dollar unit of
account in favor of the Shanghai tael.
The change from the Spanish dollar of account in Canton and Shanghai
is the subject of the following sections, which provide a case study of the
working of the treaty-port monetary system and of the interplay of the vari-
ous economic and political forces. This, read with the descriptions of the
treaty-port monetary system contained in chapters III and IV, should pro-
vide the basis necessary for an understanding of the local systems and their
role in the empire-wide monetary system. T o discuss every phase of monetary
history in every port and city would, as has been said from the beginning, be
an unending task quite unnecessary for the purpose of this study. However,
the peculiarities of the Hong Kong monetary system, complicated by the
measures of the colonial government, are of sufficient importance to warrant
specific examination in the concluding section of this chapter.

Abandonment of the Spanish Dollar—Canton, 1853

The abandonment of the Spanish dollar as unit of account and standard


dollar, effected in Canton in 1853, was first urged by foreign merchants in
1835. Although a policy favoring acceptance of all dollars of equal fineness
at par was first advocated as early as 1825, the Chinese had a preference for
the Carolus dollar, and, in the absence of precise laws on the nature of cur-
rent coin, Chinese money changers continued to discriminate against other
dollars.8 As long as the supply of Carolus was adequate, the most important
consequence of this policy was that other dollars were re-exported to India
rather than accepted at a discount. The merchants were quite able to supply
themselves with standard dollars and to calculate on the basis of them.
The first strain on the supply of Carolus came with the British settlement
of Hong Kong and the consequent increased use of dollars and the concur-

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rent shipment of 900,000 dollars by the British authorities to England. 9 The


premium on the Carolus increased, and thus the problem of having the new
republican dollars accepted at par was not one of eliminating an unfair dis-
count which prejudice had assigned them but of either demonetizing the
Spanish dollar coin or eliminating the premium which it enjoyed.* Since
holders of the Spanish dollar had paid the premium, they were naturally re-
luctant to see it eliminated except under conditions which compensated them
for any loss. T o arrange for this was not a simple matter in a community in
which two jurisdictions — consular and Chinese — existed, both having
powers the effectiveness of which was difficult to predict in any given situa-
tion. The procedure required an adjustment of accounts, the designation of
a new standard coin, and the acceptance of a new unit of account which
exactly valued it.
The initial reluctance to accept a new and untried dollar was reasonable.
Even if the assay proved its content, there was no evidence that this content
was typical or that the coin would not be soon debased. It might be argued
that after a period a continuation of the discount on the new dollar was un-
reasonable, but by this time complications had arisen which divided the com-
munity. The use of several types of coin at various rates required constant
exchange transactions within the local economy, and each brought a legiti-
mate income to the banks and money-changers. But as the standard dollar
became scarce, the basis of the monetary system became less certain, and
money-changers were increasingly arbitrary in their acceptance of even the
standard coin at par with the unit of account. A simplification of the mone-
tary system would result in a fall in their income. Similarly, government
tellers or shroffs were able in a complex system to accept or reject coins almost
at will, and they too were reluctant to end the opportunities for arbitrary de-
cision. The combined will of the political and mercantile community was re-
quired if reform was to be effected.
In 1853 the currency discussions in Canton reached their climax, and in
July the British merchants wrote their acting consul, D. B. Robertson, stating
their agreement that all dollars of equal purity with the dollar of Carolus III
should be accepted without discount. 10 This did not necessarily eliminate the
premium on the Carolus dollar, for, since such continued to be placed on it
outside Canton, a higher price would be paid for these dollars for export
into the tea and silk districts and to Shanghai. The Carolus dollar had, in

* In a system in which money and the unit of account have no necessarily fixed relation-
ship, "demonetization" cannot be understood literally. Thus "demonetizing" the Spanish
dollar coin might not end its role as money. If the coin continued to be generally acceptable,
it would continue to be money. "Demonetization" has here rather a legal significance, indicating
that the courts would no longer enforce the coin's acceptance at par with the unit of account.

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effect, been demonetized and its premium in Canton depended upon its
premium elsewhere in China. T h e banking houses had publicly declared
their decision to accept and pay at par, and the American and British con-
suls permitted their countries' ships to leave port without the "grand chop,"
or Chinese official approval, if duties had been tendered in Mexican dollars. 11
T h e resolution of the foreign mercantile community was forwarded to Im-
perial Commissioner Yeh Ming-ch'en (1807-1859, born in H u p e h ) who ap-
proved it. In September Yeh ordered the decision proclaimed by the local
magistrates. 12 T h e decision was, in fact, in accord both with imperially ap-
proved policy that the dollar should circulate according to its silver content
and with a similar provincial decision of 1825. If the decision of 1853 was
effective whereas the one of 1825 had failed, it was because an official edict
had been insufficient in the face of economic realities. Even in 1853 there
were difficulties. Indian merchants preferred the Carolus dollar but were
forced to change when the Chinese refused to pay for cotton except in
Mexican dollars at par. 13 After the magistrates had issued the proclamation,
and despite the reported desire of the Chinese merchants to cooperate, gov-
ernment shroffs and many bankers "clearly connected with the government"
were still resisting. If they were successful the measure could fail again. At a
meeting of foreign merchants, with Harry S. Parkes, then temporarily in
charge of the British Consulate, presiding, the situation was reviewed as
follows:

The opposition of Bankers or Shroffs, on whose advances all native commercial


operations are more or less dependent, many of whom being connected with, or
in the employ of the Government, could bring no mean influence to bear against
a measure which was calculated to deprive them of the profits hitherto accruing
from the conversion of Mexican dollars into sycee.14

But the economic power of the foreign and Chinese mercantile communities
backed by another proclamation f r o m the officials was sufficient to overcome
the resistance of the shroffs and bankers. In October 1853 the Spanish dollar
unit of account was abandoned and the Mexican dollar became the standard
coin. Exactly a year later, H o n g K o n g made de facto a similar decision de-
spite the complications to be discussed below. 15 A combination of forces had
made possible a change similar to that of the simpler days of 1792.

Abandonment of the Spanish Dollar — Shanghai, 1857

Although dollars were known in the north of China, Shanghai marked the
northern limit of their use as the standard of payment and of the use of a
dollar unit of account. 18 T w o factors complicated the Shanghai problem:
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172 Money and Monetary Policy in China
first, dollars were less firmly established there as a means of payment, and,
second, there was question as to the adequacy of the supply of dollars, whether
Spanish or Mexican. As the North-China Herald expressed it, "Uncle Jona-
than is bound to get Mexico one of these days" — and what then ? 1 7 Although
in the first discussions of change it was assumed that the Mexican dollar was
the goal of any monetary reform, the advantages of a tael unit of account
became increasingly apparent. In 1858 the Shanghai community adopted the
Shanghai tael, and dollars were allowed to fluctuate in terms of this unit of
account.
The dollar system to 1857. The decision made in Canton applied, of course,
only to Canton. Its initial effect was to ease the Carolus dollar supply situa-
tion in Shanghai where that dollar continued to enjoy a premium over
Mexican dollars. The forces which had initially caused a shortage of Carolus
dollars reasserted themselves, however, owing primarily to the insistence of
the silk districts, with which Shanghai had an increasingly unfavorable
balance of trade, that payment should be made in Carolus dollars. As no new
dollars of this type were being minted and as the holders in the silk dis-
tricts are reported to have buried them as a precaution against the disturb-
ances caused by the Taiping rebellion, the exchange on London rose from
five shillings and seven pence (5/7) in 1853 to a record high of seven shillings
and nine pence (7/9) in 1856, while the Hong Kong exchange was within
a few points of five shillings.18 Shanghai had gone off silver, and the ex-
changes reflected the premium on Carolus dollars caused by their increasing
scarcity owing to their export to the interior.
On October 25, 1856, the premium on the Carolus dollar over its silver
content had reached the point at which one such dollar was worth a Shanghai
tael. At the same time Mexican dollars were passing at a 34 per cent discount
relative to the Carolus dollar. So scarce were the Carolus that they were not
used in ordinary transactions but solely for export to the silk districts. The
unit of account, usually referred to in contemporary literature as the Shang-
hai dollar rather than the Spanish dollar, had become in effect an imaginary
money, a unit of account with which the means of payment fluctuated ac-
cording to market forces. A model of the Shanghai dollar system for October
25, 1856, Figure 8A, shows these various relationships.
The Shanghai system in 1857. Although the course of the change from
the dollar to the tael system is of primary interest as a case study in a local
monetary system, the history of the change will be more meaningful if the
extent and nature of the change is understood. The model, Figure 8в, pre-
sents in diagrammatic form the Shanghai monetary system in 1857 and after.

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Treaty-Port Monetary Problems 173

Figure 8. The Shanghai silver sector

A. The dollar basis, 1856


72 accounting taels* 139 accounting dollars

100 SHANGHAI DOLLARS « 100 Shanghai tatls


I i i
100 Carolus dollars к , 151 Mexican dollars 98 liang of standard Shanghai sycee

в. The tad basis, 1857


91.24 Kuping = 139 accounting = 89.7 Haiku/an
tads dollars tads

133.56 Dollars ss 100 SHANGHAI TAELS


X J* Ί
133.56 Mexican « 132.19 Carolus 98 liang of standard
dollars dollars Shanghai silver
Symbols: яй is variably related to
= is defined as
J. is satisfied by
a For an explanation of accounting tads and dollars, see Chapter III and Figure 5 .

The Shanghai tael was now the standard unit of account against which the
exchanges were quoted, and it was the focal point of the monetary system.
The values selected are representative of rates in 1856.
Figure 8b shows that the premium on the Carolus dollar had been very
much reduced, and that although dollars continued to have the same general
variable relationship to the tael unit of account as before, the fact that the
Shanghai tael was now the standard unit had far-reaching monetary conse-
quences.
Adoption of the tael. As indicated by Figure 8A showing the Shanghai sys-
tem in 1856, there had been a tael unit of account before the abandonment
of the Shanghai dollar. In fact, some markets not involving close contact with
foreigners and their trade continued to base quotations on the tael even after
the introduction of the dollar unit with the opening of the port. The objec-
tions which foreigners had to adoption of the Mexican dollar and the diffi-
culties in adjusting accounts to prevent losses both suggested universal
adoption of this tael unit of account. That the state had the right to "cry
down" a coin might be theoretically granted, but the concept of the unit of
account representing either a fixed quantity of silver or a particular coin had
become the basis of mercantile operations. A contract payable in Shanghai
dollars was payable only in the Carolus dollar or in other coins at a rate
agreed upon by the creditor.19

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174 Money and Monetary Policy in China
The adoption of the tael was not accomplished on a set day, and there was
no official date for the transfer.20 As early as June 1856 the native banks on
their own initiative were turning from dollars to sycee and issuing bills pay-
able in Shanghai currency taels.21 In November 1856, a Times correspondent
reported that shirtings were being sold in Shanghai against sycee or were be-
ing bartered.22 In December, exchange quotations could be obtained against
sycee, although this was not the normal practice until March 1857. Writing in
May 1857, A. F. Heard told his brother in Hong Kong, "In Shanghai all
payments are being made in sycee," but he asked, "What do you think of
changing our accounts from dollars to taels, this being the currency to all in-
tents and purposes and conveniently it happens now to be in a par?" 2 3 Heard
still found objections to the change — the difficulties of changing one's way
of thinking, the difference in the taels of the various ports, and the possibility
of returning to a dollar unit of account if the Hong Kong mint should ever
be established. But in June he reported that bets were being paid in sycee;
there was no further question of a return to the dollar unit.
With the tael unit of account established, the import of an estimated
^4,613,000 worth of silver to China in 1857, some 40 per cent more than in
1856, helped to ease the exchanges, despite a temporary rise in April as the
silk buying season began.24 The money-changers and shroffs, or Chinese
tellers, further eased the situation by being less fastidious about the coins
which they were willing to accept at par.25 The Mexican and other dollars
continued to play a role in the monetary system of Shanghai, but they were
subsidiary to the monetary sycee which now formed the basis of the larger
payments. In the course of time, principally with the development of modern-
style Chinese banks in the twentieth century, the tael system in Shanghai
was modified in practice until it became similar to that of the modern Euro-
pean bullion standard. This change was gradual and was stimulated by the
costs and other inconveniences of handling bullion. It was made possible by
the later acceptance by the Chinese in Shanghai of the bank notes of foreign
and foreign-style banks.26 Nevertheless the basis of the Shanghai exchanges
remained silver, and bank money never played the essential role it did in
Hong Kong. 27
Tael or Dollar: the debate. Shanghai had moved from a coinage system
to a bullion system. To many this appeared a retrograde step and was de-
nounced as such. This was a problem discussed in the abstract in Chapter I;
coins are useful, but they create their own problems and in Shanghai their
disadvantages did outweigh their advantages.
The adoption of the tael was not, therefore, without argument; in fact, the

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Treaty-Port Monetary Problems 175
most popular suggestion during late 1856 would appear to have been that
Mexican dollars, then passing at a discount varying from 25 to 33 per cent,
should be accepted at par for payments expressed in Shanghai dollars. Such
a move, it was argued, had proved successful in Canton and Hong Kong
and, if only for the sake of uniformity, Shanghai should follow. There were,
however, several objections to this solution. First, the supply of Mexican
dollars might not prove adequate if another port used them, and, in any case,
they were liable to the same objection as the Carolus — their supply depended
upon the action of a government beyond the control of the China merchants.
Secondly, to adopt the Mexican would be to cry down the Carolus dollar, an
objection which had been overcome in Canton by adjustment of accounts
and by de facto abandonment of the coin as current money. But Shanghai
still needed Carolus dollars if only as a commodity to be traded with the
interior. Thirdly, who was to enforce the acceptance of the Mexican dollars
at par? 28 None of these objections had prevented the Canton reform, but the
mercantile community were not in unanimous agreement in Shanghai and
eventually the move to adopt the Mexican dollar failed.
The fear of a sudden cessation of a dollar supply was real, but it might be
overcome, it was argued, by the establishment of a mint in Hong Kong. De-
spite the opposition of the American Consul, the other American merchants
in Shanghai wrote the Governor of Hong Kong in support of such a mint.
So urgent was the monetary crisis and so serious was the shortage of current
coin, however, that it became obvious a mint could not be established with
sufficient rapidity to solve the immediate problems in Shanghai.29 Adoption
of the Mexican dollar might still be defended as a more convenient interim
money until the Hong Kong mint should be established.
The second objection — the loss to holders of debts expressed in Shanghai
dollars — was a short-term one. Adjustment might have been made as in
Canton. A committee was set up by a group of foreign merchants, claiming
to represent the majority of the business houses in Shanghai, to settle on the
rate of exchange between the Carolus and the Mexican, so that on a certain
date all accounts could be changed and debts adjusted accordingly. The com-
mittee met on February 6, 1857, and fixed the rate at $100 Mexican to $75
Carolus, but as the entire foreign community was not in agreement, the con-
suls were forced to insist on repayment of debts in Shanghai dollars?0 Sev-
eral native banks unable to obtain Carolus dollars to pay at par, and having
failed to anticipate the need to repay in Mexicans at so high a discount,
failed.31
The third objection was especially relevant in view of the disagreement

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176 Money and Monetary Policy in China
within the foreign community. It might be argued that the premium on the
Carolus was unreasonable, but the fact was that the solution to this problem
lay outside Shanghai in the area where the premium was actually set. The
Chinese did not and seemingly would not accept the Mexican dollar at par.
The Soochow magistrate, acting on the advice of the taotai, the son of a
rich Foochow merchant, issued proclamations declaring that the Mexican
dollar was to be accepted at par. 32 The taotai himself went further, ordering
that taxes be payable "without loss" in Mexican dollars. By November 29,
1856, he had established three exchange shops in Shanghai for the exchange
of Mexican dollars and Carolus dollars at par, and initial success was re-
ported. 33 The weight of government authority appeared to have been thrown
in favor of the adoption of the Mexican dollar. Such intervention in Canton
had assured the success of such a change, yet it failed in Shanghai.
The failure of the local officials in Shanghai was the consequence of two
factors. First, of course — unlike Canton — unanimity had not been reached
in the foreign community, the Chinese merchants did not wholeheartedly
support a change of dollars, and a practical alternative was being considered.
Secondly, the officials were inconsistent. At the same time they were attempt-
ing to make Mexican dollars pass at par, they were also urging the use of
sycee or monetary silver and were experimenting, unsuccessfully, with a coin-
age of pure silver weighing one ts'ao-p'ing liang (565.65 grains). In Decem-
ber 1856 Shanghai sycee was quoted in payment for exchange and opium, and
it was obvious that the trend was towards the use of the tael. This provoked
the advocates of the dollar to an attack on the tael system — that is, on a
bullion system — and led to its defense by others.
The first reaction among most Europeans in China when they realized
the possibility of a tael unit of account was sharp and negative. The North-
China Herald called the proposed sycee currency "a joke." 34 Another corre-
spondent referred to it as "clumsy." 35 The feeling certainly was that sycee
was not a currency at all, and that its adoption would be retrograde. 38 Some
of those who did accept the idea assumed that a tael coinage would soon
follow, while others assumed adoption of the tael to be an interim measure
until a Hong Kong mint should open.
A few observers saw advantages to the use of sycee and a unit of account
based on it. First, the unit would be related directly to silver rather than to
any coin the supply of which was potentially uncertain and the price of which
might fluctuate in relation to the price of bullion. That the Mexican dollar
during 1857 did fluctuate some 6.5 per cent was used, unfairly, as vindication
of this point of view 37 — unfairly because once the tael had been adopted, the

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Treaty-Port Monetary Problems 177
dollar played a quite different role in the monetary system, and its price could
not be assumed identical to what it might have been in other circumstances.
Secondly, the market value of the Shanghai tael in March 1857 as in
October 1856 was at a par with the Shanghai dollar, making the change-over
in accounts quite easy. Thirdly, it was known that the Chinese, with the ex-
ception of those in the silk areas, who continued to demand Carolus dollars
until the end of the century, would be willing to denominate their accounts
in Shanghai currency taels and accept sycee in payment—many were, in
fact, already doing so.
The rising exchanges and the confusion caused by dealing with an almost
nonexistent dollar forced the mercantile community to take some action.
Since unanimity could not be achieved, the complications of changing to
another dollar were too great, even if it could have been proved that this
was in some sense the will of the majority. The easiest way out, and one
which required no official intervention but was yet within the trading tradi-
tion of Shanghai, was to adopt the Shanghai tael. This was done in March
1857. Bullion had defeated coin.
Shanghai currency tael — origins. Shanghai had adopted the tael, but it is
not quite clear exactly what it was, and its defining developed a precision
which it may not have had in 1857. The origin of the Shanghai currency tael,
with its unusual 100:98 relationship to standard monetary sycee, coupled
with the nonexistence of silver of standard fineness, is difficult to trace be-
cause contemporaries failed to describe their new currency when it was first
adopted. An 1894 commentator wrote, "People knew the fineness and con-
tents of the dollar, but when the change to sycee was made, no such care-
ful attempt was made. Consequently everyone today differs." 38 None of
the Shanghai correspondence of A. Heard and Company — and it is com-
plete— even mentions the composition of Shanghai monetary sycee or its
relation to the tael unit of account. Nor are these aspects mentioned in the
numerous, and heated, letters which were printed in the North-China Herald
during the crisis of 1856-1857. The Times correspondent did not consider it
necessary to report them.39 The proper conclusion may be that this omission
was caused by the lack of ambiguity, and that the facts were well known.
In any case, it remains to explain the 98 relationship, the seemingly arbitrary
fineness of standard Shanghai silver, and the identity of the imaginary fine-
ness of silver denominated by the Shanghai currency tael with that of the
rupee and British sovereign, that is, .9166 fine. These relationships were
described in Chapter III; the concern here is with their origin.
There is considerable disagreement over the history of the Shanghai tael.

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178 Money and Monetary Policy in China
Some writers have said simply that the 100:98 relationship was a conven-
tion. There are, however, three common explanations: 40 (1) paper instru-
ments of credit circulating in Shanghai before 1857 passed at a 2 per cent
discount relative to cash; (2) the Newchwang bean merchants, anxious to
leave Shanghai on short notice, used to sell their sycee in such a hurry
that they were willing to accept a 2 per cent discount on it; (3) the
Newchwang bean merchants' sycee, which they brought with them, con-
tained 2 per cent less pure silver per unit of weight than the Shanghai sycee
and passed at a 2 per cent discount, and the use of this bullion spread.
The most definite statement is provided by Edward Kann 4 1 supported by
D. K. Lieu. 42 In the pre-treaty days, the principal business section of Shang-
hai was in Nantai, where sycee of .935 fineness did circulate; the sycee of
the bean merchants gradually replaced this sycee not only in the bean
market but in all mercantile transactions. T h e reason for this is unknown,
but the l l / 1 2 t h s silver l/12th alloy has been found a convenient combina-
tion elsewhere. In the absence of reliable contemporary statements, the
most reasonable conclusion is that the omission of the 98:100 relationship
from all discussion is caused by the fact that the term "tael of Shanghai
sycee" caused no ambiguity at the time, either because sycee of .9166 fine-
ness was the only generally accepted sycee then circulating in Shanghai,
or because in the recent past such a sycee had circulated exclusively for a
sufficient time to make the unit of account which denominated it the unit
for all transactions not stated in terms of the Shanghai dollar. T h e introduc-
tion of the 2.7 sycee, erh-chi-pao sycee, either was too limited in its use at
first or came too late to affect this unanimity of understanding.
A fourth suggested solution is based on an 1820 letter of Canton H o n g
merchant Conseequa to the Select Committee of the East India Company,
the phrase "98 Tis. being considered a hundred" actually appearing therein
without qualification as being the custom of the shopmen. Morse questions
whether this may not be the origin of the Shanghai convention. 43 It is
difficult, however, to place this isolated instance of a Canton business transac-
tion in relation to the situation in Shanghai more than thirty years later.
The phrase quoted can be interpreted to read, "98 liang of market sycee
being considered payment for 100 taels of the local unit of account." The
tael unit of account has not always measured a fixed amount of silver,
that is, there are examples of the market price of a fixed weight of market
sycee varying in terms of the local unit of account. When, for example,
Shanghai-based A. F . Heard asked his Foochow colleague in 1857 for a
conceptual explanation of sycee's being at a discount there, the latter re-

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Treaty-Port Monetary Problems 179
plied: "That is, if I owe a man 10,000 taels and wish to pay him sycee I
must give him 10,204.0.0 taels [liang] which amounts at 2 per cent discount
to 10,000 taels . . . It is now however at a premium." 44 At this time pre-
sumably the relationship of sycee to the unit of account in Shanghai was
not subject to such variations; otherwise Heard would not have required an
explanation. This could also explain the Conseequa letter. Another inter-
pretation might add weight to the argument that the 2 per cent difference
was for cash payment, but again there is no evidence. In view, therefore, of
the evidence in favor of Dr. Lieu's explanation, the connection between the
Conseequa letter and the Shanghai convention must be rejected.
Later dollars. The conversion of Shanghai to the tael did not end the
role of the dollar, either in Shanghai or in China, and the critics of the
dollar system were correct in predicting a shortage of Mexican dollars.
Various other dollars were at one time or another introduced into Shanghai
with varying success. The Hong Kong mint coined some two million Hong
Kong dollars between 1866 and 1868, when it closed. The Japanese bought
the machinery and established a mint in Osaka, which issued the Japanese
silver yen of 374.4 grains of silver, slightly less than the Mexican's 377.25
grains. For this reason the coin was at first unsuccessful and was temporarily
replaced in 1875 by the heavier Japanese trade dollar, but these heavier
dollar pieces not only failed to displace the Mexican in Japan but were
exported, while the lighter Mexicans were imported. In 1878 the Japanese
reverted to the lighter weight and eventually found success. The silver yen
was in circulation on the China coast, in Hong Kong, and in southeast Asia.
Between 1871 and 1897 more than 165 million silver yen were produced of
which over 110 million were shipped abroad.45
The Mexican dollar itself caused difficulties when the design was changed
in 1868 following the restoration of the Republic. The new Mexicans were
then officially assayed in Shanghai in 1872 and found to be 1 Уг per cent
better than the old.46 In 1885 the Saigon dollar, or piastre de commerce,
weighing 420 grains with 378 grains of pure silver, was first minted, and
13 million were issued in the next ten years. But its heavy weight caused it
either to be hoarded or melted, and in 1895, the year in which the first
British dollars were minted in Calcutta, the piastre's weight was reduced.
Perhaps the most interesting of these coins was the American trade dollar,
420 grains .900 fine. It was, in fact, the prototype of the Saigon dollar. First
authorized by Congress in 1873, the American trade dollar was intended
to provide a use for America's excessive silver production and was to rival
the Mexican dollar through its slightly superior weight. It was originally

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18 о Money and Monetary Policy in China
intended that the cost of laying down the American trade dollar in China
was to be covered by the margin provided by the 8 per cent export duty
the Mexican government levied on uncoined silver.47 The intended superior
workmanship and reliability were also expected to endear the American
coin to the Chinese.48 In 1876 a joint Congressional resolution clarified the
status of this dollar: it was not legal tender in the United States and was
coined for export only. There was nothing on the coin, however, to indicate
that it was other than legal tender of the United States worth one dollar,49
The American trade dollar was introduced during a period of heavy
silver import into China, and the San Francisco mint was reportedly coin-
ing trade dollars at the rate of some 20,000 daily, although it is not possible
to determine their eventual destination. American and continental sources,
however, reported that the reception of the trade dollar in China was en-
couraging and even that it was passing at a significant premium. The dollars
had received, of course, the customary official Chinese sanction following an
official assay and declaration as to the rates at which they would be ac-
cepted in payment of duties.50 Encouraged by this reported success and by
the example of Austria's Maria-Theresa dollars — supplied, however, prin-
cipally to Egypt — a proposal was considered in Germany for a handles-
piaster of superior fineness (.995 as opposed to the trade dollar's 900), thus
taking advantage of China's demand at a time when Germany was melting
silver thalers and converting to a gold coinage.51 Reports from China did
not warrant such optimism. Although the trade dollars did gain some ac-
ceptance, their heavier weight marked them for eventual melting and their
premium was inadequate to prevent this. In 1874 the Hong Kong Chamber
of Commerce, in response to a request from the colonial government rela-
tive to the admission of Japanese silver yen and American trade dollars as
legal tender, resolved to advise the government to delay any such move
but to press for the minting of a British dollar.52 National feeling as well as
the long-stated desire for a coin over which the local government would
have some control was an important factor here. Meanwhile conflict over
the status of the trade dollar had arisen in the United States and the coin
was withdrawn in 1887.53 Those trade dollars remaining in China were
soon melted down*

* The trade dollar's main problem arose not in China but in the United States. With the
depreciation of silver, although the intrinsic value of the trade dollar was greater than that of
the standard dollar, the trade dollar was worth but $0.86 in 1884, whereas the standard
dollar was legal tender for one dollar unit of account. Thus one silver coin of the United
States was valued less than another silver coin although the former contained more silver.
Domestic holders of the trade dollar — about one fifth of the 35,960,446 minted remained in
the United States — insisted that the Treasury should accept them at par as a moral if not

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A numismatic history would require further details. A history of China's
international monetary relations would require further explanations. This
study is neither, and a detailed economic history of these coins, which would
not be without interest, cannot be undertaken here.

Hong Kong, A Monetary History

The historical selections in this chapter are illustrative rather than typical.
Certain aspects of Hong Kong monetary history make it of interest here:
first, there was an unusual political relationship caused by the exclusive
jurisdiction of the Crown; secondly, there was a complication in the mone-
tary system caused by an attempt to make Hong Kong currency conform
to a British colonial pattern. Political power was not necessarily the deciding
factor in the success of monetary policy; the British authorities in Hong
Kong did not have to consult a local Chinese magistrate or receive approval
for their proposals from a Chinese governor general, yet monetary policy
in Hong Kong could not ignore the position of the Chinese government —
if only for economic reasons. The Chinese mercantile community, closely
connected with the trade of neighboring China, could use their economic
power and influence to upset a colonial decision. If the Hong Kong govern-
ment was not in complete economic control, it is certain that the home
authorities, attempting a reform on general theoretical principles, would
meet with even less success. These related problems are considered in the
sections which follow.
Establishment of the currency. The first currency proclamation, issued by
the chief administrator of Hong Kong, Sir Henry Pottinger (governed
1841-1844), in March 1842, was part of a plan to regulate transactions in
the bazaar or native retail market and cannot be considered as a definition
of the Colony's monetary system.54 Mercantile transactions were, in fact,
specifically excepted from its terms. Recognizing the existing trading prac-
tices on the China coast, the proclamation designated as legal tender for
bazaar transactions the Spanish, Mexican, and other dollars of comparable
weight and fineness, the rupee coin of the East India Company, and Chinese
cash, and it provided for fixed rates of exchange between the various coins
a legal obligation, and the Secretary of the Treasury in his 1884 report stated that if given
the right to accept these coins at a dollar, the excess silver they contained over the standard
dollar would pay for reminting them into the standard dollar. T h e American trade dollar
was retired by an Act of Congress, February 19, 1887, which became law without the signa-
ture of the President. Holders were given six months to present them for redemption, and
those coins so presented were to be recoined into standard dollars but not to count against
the legal amount of silver bullion purchased by the Treasury.

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182 Money and Monetary Policy in China
made legal tender in a market of controlled prices. All dollars were to be
accepted at par if of the proper weight and standard, even if chopped or
marked by Chinese banks and money changers. The rates of exchange set
were $1 to 2J4 rupees or 1200 cash; all other coins were to be treated as
commodities and traded at market rates. The government undertook to
sell cash at the designated rate in lots worth $50.00.
This proclamation is especially interesting because it represents reversal
of priority. Mercantile requirements in the China trade had usually the
first place of concern, if only because the more important merchants were
also spokesmen for the community. But the Hong Kong government did
not consider itself to be solely the agent of the merchant houses, and legisla-
tion resulting from such an attitude, although not always realistic, was at
least well-intentioned.
At the request of Jardine, Matheson and Company, Dent and Company,
and other leading merchant houses, the government followed this first
proclamation with one of wider scope.65 The Mexican dollars were made
standard for all government and mercantile transactions in Hong Kong
and wherever British troops were stationed in China — unless at the time of
the transaction it was expressly stated to the contrary. The shortage of
Carolus dollars was already being felt, and the unreasonable discount on
Mexicans was objected to. The merchants correctly supposed that the use
of Mexicans by the Hong Kong government would help in making them
acceptable at par, but to protect themselves the escape clause had been in-
cluded. The monetary system of Hong Kong was established, therefore, on
a silver basis with the Mexican dollar as the standard coin payable at par
with the unit of account, the Hong Kong dollar.
Sterling interlude. Monetary matters have always been reserved in colonial
administration for the approval of the Secretary of State, and the two procla-
mations cited above were issued subject to this reservation. Colonial monetary
administration in the West Indies had in 1838 undergone thorough reform,
and the Colonial Office was concerned with unifying the monies of the
British colonies, without regard, it would appear, to the accustomed habits
or prejudices of the people.56 When, therefore, Sir John F. Davis (governor,
1844-1848) was instructed in 1845 that the two previous proclamations had
been disallowed and that gold, silver, and copper coins of the United King-
dom were to circulate at par with a pound sterling unit of account in Hong
Kong, the business community is said to have received the news with "bland
astonishment." 57 Not only was the basis of the Colony's monetary system to

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Treaty-Port Monetary Problems 183
be sterling, but the rate of exchange between the dollar and sterling was
set at $1 = _£0.4.2, a rate which undervalued the dollar.
The government kept its accounts in pounds, shillings and pence, but
there is no evidence that any nongovernmental agency or business did so.
The government had intended in 1842 that all dollars should pass at par if
of the correct weight and fineness. There is no evidence that they did so.
For all practical purposes the currency of H o n g Kong from 1845 to 1863
was de facto identical to that of Canton.
The repudiation of the original proclamations removed all legal support
from those who wished all types of dollars to circulate at a par. The effects
of the 1845 proclamation itself were avoided by stating contracts in terms
of dollars. The Oriental Bank, for example, announced, "The Bank pur-
chases and sells bills on England at short sight for Mexican dollars, rupees,
and English money at the exchange of the day for the above coins." 68 T h e
Bank issued notes in H o n g Kong payable on demand in Spanish dollars.
T h e H o n g Kong government avoided the problem by denominating pay-
ments in sterling, converting at the official rate of 4/2, but accepting sterling
payment only at the rate at which H o n g K o n g civil servants were paid,
that is, closer to the market rate of 4 / 8 ; in the case of Crown rent, already
denominated in dollars, payment was accepted in sterling only at the higher
rate. In consequence, there were few payments in sterling and the effects
of the Colonial Office ruling were minimized. 5 9
In 1853 a Royal Proclamation declared silver to be limited legal tender
to the amount of ten dollars only, and in 1857 in accordance with general
colonial policy the Australian sovereign was made legal tender. 60 But all
this passed the business community by. They were involved, as were their
colleagues in Canton, in attempts to avoid the premium on Carolus dollars
by having Mexicans pass at par, a task not made easier by the forced position
of a government unable to regard dollars as the basis of the monetary system.
The H o n g Kong Commissariat was accused of making the task of the
reformers even more difficult by itself being overly selective with respect to
dollars tendered. 61 De facto currency reform in H o n g Kong was made pos-
sible only by the 1853 abandonment of the Carolus dollar in Canton, and
in 1854 the following statement was issued by leading H o n g Kong houses:

Whereas it appears to be for the interest and convenience of this community


that the currency of Hong Kong be as far as possible assimilated to that of
Canton: therefore,
We, the undersigned, hereby declare our intention to receive and pay all dollars
of Mexico, South America, and others being of a purity not inferior to that of
current Spanish dollars at par. [signed, October 12, 1854]62

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184 Money and Monetary Policy in China
An important policy principle had been declared: The currency of Hong
Kong ought to correspond as closely as possible with that of Canton.
The return to silver and the mint. The unsatisfactory condition of the
Hong Kong monetary system did not escape comment, and Sir John
Bo wring (governor, 1854-1859) made suggestions which were not, how-
ever, accepted by the home government.83 By 1860, the Secretary of State
had accepted the fact that the unit of account in Hong Kong ought to be
the dollar and that the currency ought to be silver. The accounts of the
government reverted to a dollar unit in 1862. The subsidiary coinage of the
Colony received attention between 1862 and 1864 and in this latter year the
first shipment of new small change, bronze one-cent pieces and silver ten-
cent pieces, arrived in the Colony. The reversion to an official silver system
in which the Mexican dollar was legal tender and accounts were kept in
Hong Kong dollars did not require much adjustment in the Colony's eco-
nomic life. The promoter of the reforms, Sir Hercules Robinson (governor,
1859-1865), stated that in 1860 of a total revenue of £94,000 only £1,600 had
been received in sterling. When in 1864 British coins were called in at the
official rate of exchange, the total redeemed amounted to but £289.7.6. The
economic edicts of mandarins, whether British or Chinese, were not effec-
tive in China unless they took some notice of economic realities.
The return to the dollar did not solve the currency problems of Hong
Kong. Increased trade with Japan had caused a rise in the demand for
dollars which were quoted at a premium over their intrinsic silver value.
Encouraged by this, Robinson urged the home authorities to authorize the
construction of a mint in Hong Kong for the minting of a Hong Kong
dollar and subsidiary coinage. The plan was a grand one; the physical
plant and the preparation of the site cost some £140,000 while the annual
budget was estimated at HK$80,000. With a seignorage set initially at 2 per
cent, at least 4 million dollars — or some appropriate combination of dollars
and subsidiary coins — had to be minted to cover recurrent expenses. It
was an expensive undertaking for a Colony of merchants and bankers
extremely sensitive to the possibility of increased taxation.
The originator of the project, Governor Robinson, was transferred in 1865,
and a temporary administrator, W. T. Mercer, was responsible for setting
up the mint. It began production in May 1866, just two months after the
arrival of the new governor, Sir Richard G. Macdonnell (governor, 1866-
1872). The mint ran into a series of physical and, typical of Hong Kong,
personal difficulties.64 The operation of a mint with untrained Chinese em-

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Treaty-Port Monetary Problems 185

ployees created problems, and the organization of the manufacturing process


was found defective. In consequence, instead of the promised 10,000 to
20,000 dollars a day, only 18,000 were manufactured in the first three weeks
of operation. The governor lost faith in the Master of the Mint.
The Hong Kong community began to react. In principle all were in favor
of a clean or unchopped dollar, the supply of which was under the control
of a stable government. But the cost now appeared high and the difficulties
seemed to be increasing. First, although the manufacture of dollars was
under the control of the government of Hong Kong — provided silver were
brought to the mint — under changed conditions silver might not be
brought there. Japan was now importing more goods and the demand for
the dollar and hence its premium had fallen. 65 Within the first week over
one million ounces of silver had been brought to the mint, but this was at
least partly to take advantage of the initial waiving of seignorage which
the governor had decreed. Secondly, Hong Kong merchants began to re-
member that the currency of Hong Kong could not successfully differ from
that of China. Output and consumption statistics also proved that with
the increasing use of bank notes in Hong Kong, the Colony itself could
not absorb the entire output of the mint. 86 China had to adopt the Hong
Kong dollar coin if the mint were to pay its way, and realists among the
mercantile community doubted that this was likely despite the encouraging
support from British and American merchants in Shanghai and approval
by the home government for a dollar currency for the Straits Settlements.
As the China Mail commented, "We cannot force our opinions on China —
thanks to the British ministers. We could force the exchange of Hong Kong
for Mexican dollars in Hong Kong. This would set up trouble but would
be worth it." 6 7 It was likely that the mint might fail financially, and the
Hong Kong taxpayer did not intend to pay for currency reform in the Far
East.68
Various expedients were attempted to keep the mint open. Free coinage
was continued in the hope that the exchanges might change and that silver
would be brought to the mint. Consequently, the Hong Kong dollars began
to be melted because the Chinese now had a cost-free guarantee of the
purity of its silver, thus making it ideal for bullion! Although the seignorage
was waived or set at the reduced rate of 1 per cent, the costs were still high,
for minting involved loss in the pre-melting stage and the delays caused
initially by technical faults in the minting process had all to be counted.
The Hong Kong government was authorized in 1868 to close the mint. 69

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18 б Money and Monetary Policy in China
In the public discussions that followed it appeared that no group had been
willing to take over the risk involved in keeping it open, although the
Hongkong and Shanghai Bank would have done so had it been granted
exclusive note-issuing rights in the Colony for a five-year period. As this
would have violated the rights of the Oriental Banking Corporation, the
offer could not be accepted.70 The mint was dismantled and the machinery
sold to Japan for $60,ООО.71
Whether it is correct to write of the failure of the mint is not certain.
The mint turned out a dollar which was accepted by the Chinese and the
need for which was readily acknowledged. The cost of minting might have
been kept below the cost of preparing shoes of monetary sycee. If the govern-
ment or some mercantile group had been willing to subsidize the operation, it
would certainly have prospered during those periods in which silver was
being brought to China, and, once the dollar had been well established,
bullion already in China might have been offered for coining. But there
was a risk involved. Hong Kong was being asked to finance an undertaking
which was designed to provide a coinage for the entire Far East. The
expenses might have been covered during periods of full production, but
the danger of being required to meet fixed costs during periods of inactivity
of uncertain duration was greater than any group in Hong Kong wished
to undertake without commensurate advantages. Only the promise of the
Chinese and Japanese governments to make the coin sole legal tender
would have removed this risk of underemployment; China was not ready
to make such a decision and Japan wished to buy the machinery for itself.
The Hong Kong community would not take a long-run view of the prob-
lem, and their decision to sell would appear to have been wise in the short
run. The success of the Japanese silver yen suggests, however, that the
Hong Kong dollar might have had unlimited success had the experiment
been continued for a sufficiently long period and had not Japan herself
undertaken to mint a dollar-type coin — two serious qualifications.
From 1868 to 1895. The currency history of Hong Kong in the period
from the closing of the mint to 1895 offers nothing of unusual interest. The
shortage of dollar coins caused an inconvenience which the banks were
not permitted to mitigate by the issuance of one-dollar bank notes. Hong
Kong dollars were accepted by count, Mexican dollars by weight, and others
at fluctuating rates. Agitation for a new British dollar began as early as 1874,
and the eventual acceptance of the Japanese silver yen and the American
trade dollar did little to improve the situation.72 The Straits Government

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Treaty-Port Monetary Problems 187
supported the Hong Kong request for a British dollar, but the cost of
minting still made its immediate success doubtful, and the 1877 report of
the Royal Mint stated that Mexican dollars were available in London if the
exchange banks would buy in anticipation of the season.73 The depreciation
of the gold price of silver made an over-bought position extremely hazardous,
however, and the dollar supply in Hong Kong remained unsatisfactory.
The closing of the Indian mints to free coinage and the subsequent steady
decline in the price of silver made it possible for the Calcutta mint to under-
take the coining of a new British dollar in 1895.74
The demands for a British dollar were not solely the consequence of the
shortage of a means of payment. It was an objection to the necessity of
passing "chopped" dollars, and it was expected that regulations would pro-
hibit the passing of a chopped British dollar at par. The objection to a
chopped dollar currency was in turn the consequence of its having to pass
by weight rather than by count, thereby in effect creating a bullion system.
In 1877 when British merchants in Hong Kong petitioned the government
for a British dollar, they also agreed to refuse acceptance of chopped cur-
rency, hoping thereby to stop the practice. 75 However, the Chinese forced
the issue by boycotting firms refusing to accept the chopped currency, and
the Hongkong and Shanghai Bank broke the united British front by meeting
the Chinese demands. Two factors contributed to the failure of the British
resolution. First, the sentiment that "we didn't come here to reform the
currency, but to make as many dollars in as short a time as possible and get
away with them" still represented those most influential in the Hong Kong
Chamber of Commerce. 76 Secondly, current accounts and notes were meet-
ing the needs of most foreigners, and the problem might have been solved
altogether if the issue of one-dollar notes had been continued. The interests
of trade dictated accepting the currency traditions of the Chinese merchants,
and the interests of the British as residents of Hong Kong were partially met
by bank money. The impetus to reform was not sufficiently great, therefore,
to overcome Chinese objections — short of the actual minting of a new
British dollar.
Bank note circulation increased in Hong Kong, but with the failure of
the Oriental Bank and the reorganization of the Chartered Mercantile, only
the Chartered Bank and the Hongkong and Shanghai Bank were issuing
notes in 1895, a situation confirmed by a controlling ordinance of that year. 77
If the history of other treaty ports appears to be slighted in the foregoing
account, it is because the detailed currency history of each individual port

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18 8 Money and Monetary Policy in China
would serve no useful function in a study undertaking to survey the mone-
tary system of the Chinese Empire over a fifty-year period. When economic
histories of the ports are written or a specific local economic matter is
considered, the illustrative episodes described in this chapter may be useful
guides to the study of any local monetary problem involved.

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CHAPTER VIII

The Hai\wan Tael

This is first of all a case study of an imaginary money from its legal
inception in 1842 to its discard in 1933. Perhaps more important for an
understanding of Chinese nineteenth-century economic history is the fact
that the Hai\wan tael provides a case study of the conflict of foreign and
Chinese concepts of the economic role of the state set against the background
of the provincial nature of the Chinese economy. The Haiku/ati tael was
designed as a unit of account for the payment of customs duties; the for-
eigners intended it primarily as a convenience to themselves, to end the
apparently arbitrary methods of duty assessment, but after the 1860's the
attempt to define the Hai\wan tael in uniform terms in relation to actual
silver payment became representative of those periodic attempts of foreigners
to encourage a national reform. Despite the fact that the foreign customs
administration was in the hands of a unified national service, the Imperial
Maritime Customs, under the direction of a British subject, Sir Robert Hart
(1835-1911), uniformity was not achieved. This is directly relevant to an
understanding of other reform efforts, complicated as they were by non-
economic factors.
Customs duties became an important part of the imperial revenue, and
foreigners and Chinese alike were concerned with the amounts of customs
duties to be paid.1 The duties were denominated in taels, the weight of
which, after the treaties, was specified as 583.3 grains troy 1.000 fine, that is,
chemically pure silver. As no such silver circulated, arrangements had to
be made for payment in terms of bullion which did circulate. These arrange-
ments were made locally, and they came to vary from port to port. The
monetary preconceptions of foreigners forced a fixed relationship between
the Haikwan or customs unit of account and the merchants' unit of account,
but only on a port to port basis. By the time the Imperial Maritime Customs
made its survey in 1878, the Hai\wati tael unit of account denominated not
one but many varying quantities of silver. Yet the concept of the Hai\wan
tael, in the sense that one specific quantity of silver was designated, sur-

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190 Money and Monetary Policy in China
vived. These contradictions make sense only because the Hai\wan tael was
an imaginary money in which the customs duties of China were denomi-
nated, but the settlement of which depended on local agreements, these
being the subject in many instances of bargaining, complaints, consular
intervention, and, eventually, settlement.
How such a situation should first have arisen and then been tolerated is
the main theme of the following sections.

The Origins of the Hai\wan Tael

Those provisions of the Treaty of Nanking and the subsequent General


Regulations of Trade which dealt with duty payments were designed to
give the imperial government its "just due" and to eliminate abuses which,
the British claimed, typified the payment of duties under the old Canton
system.2 The provisions were not intended to introduce any radically new
method of payment, but rather to specify, and, by specification, to eliminate
chances for corrupting practices to develop. There was an intended con-
tinuity, and to understand the origins of the Hai\wan tael it is necessary
to inquire into the nature of duty payments before the treaties.
The evidence of European contemporaries is not consistent, despite the
importance of the subject to commerce. Reliance on the differing weights
and finenesses of monetary silver given in their works will do little more
than support the general but perhaps unwarranted conclusion that there
was confusion.3 The method of procedure here is first to determine why
there should be such disagreement among experts, then to begin the investi-
gation by an examination of Board of Revenue regulations relative to the
receipt of taxes, and finally to apply this information to the payment of
customs duties in the pre-treaty period. The customs tael will then emerge
as an imaginary unit denominating a fixed weight of pure silver, the obvious
predecessor to the Hai^wan tael of the treaties. The confusion of the for-
eigners' accounts will be attributed to their attempt to analyze payments
on the basis of European procedures without taking into account the flexi-
bility of the Chinese revenue system and the inaccuracy of measurement.
Inaccuracy of measurement. Standards did exist in China against which
it was theoretically possible to check those weights being used by tax col-
lectors. The creation of such standards was the joint responsibility of the
Board of Revenue and the Board of Works. These standards would not be
relevant for the liang used in the market, however, and in any case foreign-
ers had no access to the official weights. Even if the copies of the standard

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T h e Haikwan Tael 191
weights had been honestly made, they were bound to differ, given the in-
accuracy of measurement of the period. Accuracy is an attribute relative to
the technical knowledge of the time; tests of standard treaty weights made
during the nineteenth century revealed that the weights varied from 581.47
to 589 grains. 4
Commercial weights used by merchants in Canton would also vary, and,
without full knowledge of the various markets, it would be difficult to tell
whether any two weights were intended to be equal or whether the differ-
ence reported was an intentional one due to the different kinds of liang
weights used in two different markets. 5
When the problem of fineness is considered, the margin for error grows
considerably. The Chinese only estimated touch, and sycee checked at the
Calcutta mint showed finenesses which varied considerably from those as-
signed by Chinese merchants.6 Fineness was, in fact, a fit subject for bar-
gaining, and a higher touch might be granted to the silver tendered, in the
same spirit that a lower price might be offered for the goods for sale.7
The British Royal Mint was off on its assay of standard plate right into the
nineteenth century, and these assays were carefully done compared to the
usual Chinese method of comparison and surface examination. Similar prob-
lems faced the Continental Congress in formulating the new American
currency system.8
Any nice distinctions as to the weight of pure silver being tendered was,
then, out of the question, but if attempts were made to make such distinc-
tions and to build up an account of Chinese money on the basis of it, then
each writer was sure to differ at some point in his account.
Duties, an unknown quantity. The second factor making it difficult for
contemporaries to rationalize the duty-paying system was the reluctance
of the Co-hong merchants, through whom duties were paid, to give an
exact account of the system of duty paying. 9 When an account was given,
there were no means of verifying it. Taxes in this period were fixed, and
increases in revenue could come only through such devices as levying extra
charges for melting local taels into sycee acceptable to the Board of Revenue,
or by making extra charges to account for "inadequate" weights. 10 Local
officials depended for their living on payments made directly to them be-
fore the revenue was remitted to Peking, and there is no evidence that
these payments were considered illegal, despite the impression of the East
India Company to the contrary. 11 These charges on the foreign trade might
all have been approved, yet it was still difficult to determine exactly which of
them might properly be considered "duties" in the sense that this term was

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192 Money and Monetary Policy in China
understood by those negotiating the Nanking Treaty and the trade regula-
tions which followed it.
The accounts of the East India Company show that they paid a certain
weight of silver of local Canton fineness plus a percentage "to make it
sycee," and that an additional charge might be made to make up the
difference between local and Board of Revenue weights.12 Local Canton
silver was dollar silver; thus its fineness would approximate .900, although
dollars were accepted in payment of merchandise at rates varying between
.860 and .940 fine.13
Another serious confusion was terminological. "Sycee" silver was de-
fined by many writers as pure silver, and yet calculations would reveal that
it was not 1.000 fine.14 This has led some to suppose that the Chinese called
commercially pure silver "1.000 fine." As Europeans used the 1.000 figure
to refer to chemically pure silver, variations in estimates as to fineness, they
thought, might be accounted for in this way.15 But there is no evidence for
such a conclusion, and the variations can be accounted for by the factors al-
ready considered. That the term "1.000 fine" had a different meaning in
China must be rejected. The term "sycee" must be understood to have a
broad and a narrow signification: in its narrow sense it referred to silver
intended to be 1.000 fine and acceptable to the imperial treasuries; in its
broad sense, it referred to monetary silver of any fineness current in the
particular locality.
The calculation of the duties paid in pre-treaty Canton is better done
through Chinese documents than through the field reports of European
traders. Two approaches are possible: the one is comparable to the method
of the foreigners, that is, a field report; the other is a more thorough con-
sideration of the imperial financial regulations.
When in 1759 the East India Company sent James Flint north to Peking,
a full investigation was made of the Canton duty system by an imperial com-
missioner assisted by other high-ranking officials.16 In their memorials these
officers assumed, correctly, that $100 was the equivalent of 68 taels,17 Now
if the dollar is accepted as weighing 26.928 grams .892 fine, and if the 7 per
cent "to make it sycee" is added to any payments made on this basis, then
the tael in which the East India Company paid its duties must have been
one of 583.3 grains of silver 1.000 fine, or exactly the treaty weight.18 This
result, though interesting and not without significance, has been obtained
through careful selection of figures and through knowledge of exact weights
and finenesses. Thus, whereas the Chinese officials might have used this

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T h e Haiku/an Tael 193
combination of figures, it is unlikely that they did, and the Chinese field
report approach is also unsatisfactory.
The imperial regulations. Although there was approximately a 5 per cent
tolerance on the purity of copper sent to the capital, the rules of the Board
of Revenue state specifically that silver remitted must be tsu-se wen-yin or
pure sycee silver and that absolutely no tolerance in either weight or fine-
ness would be permitted. However, the rules also required that in delivering
the customs duties to Peking the local authorities should pay an additional
1.5 per cent, presumably to cover such a cost as transportation. Net shortages
which, after the additional payment, were found to be less than 1 per cent
could be made up on the spot without further proceedings.19 Thus the
additional 1.5 per cent would appear to be an attempt to insure full pay-
ment of the published duties in Peking and in a pure silver equivalent. The
procedure here outlined, when coupled with the relative uncertainty of
measurement, suggests it was designed to protect the imperial revenue. At
the same time, despite the exactness of the statement, it reintroduces a degree
of uncertainty as to how much would be required to satisfy the Board of
Revenue. The rules correspond to the East India Company's designation of
two additional payments — one to "make it sycee" and the other to over-
come any difference in weights. Foreigners who described tax silver as any-
thing from 97 to 100 per cent pure simply reflected the consequences of such
a payment system.
The uncertainty involved in tax or duty payment suggests an explanation
of the difference between the Hai\wan and Kuping tael. Since imperial
revenue was to be paid in pure silver of full weight delivered in Peking,
what room could there be for two units of account which must, it would
seem, denominate the same quantity of silver? Contrary to this assumption,
the evidence is conclusive that the quantity of silver accepted in payment
of one Kuping tael was slightly less than the amount accepted in payment
of one Hai\wan tael. The difference may have two origins: first, the Board
of Revenue required an additional amount of sycee to be paid — as already
noted — but this amount was 1.5 per cent for customs duties and land tax
and only 0.5 per cent for certain other tax payments; secondly, the foreign
merchants' continued insistence on precise measurement and their dislike
of extra payments may have tended to force the local officials to require
a larger payment in the first place to insure its acceptance as adequate by
the Board of Revenue in Peking. The Hai\wan tael may, therefore, include
a part of the fees which, for payments in Kuping taels, were additional. If

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194 Money and Monetary Policy in China
the silver accepted by the Board of Revenue could have been subjected to
precise measurement, the actual weights of pure metal would at first have
formed a frequency distribution approaching the normal with a clearly de-
fined mode. T h e development of the customs payments system would, then,
have changed this pattern so that a second focus would be revealed, indicat-
ing a second population with a mode slightly above that of the previous
population. Eventually, the existence of two populations was recognized
by the government and designated Kuping and Haiku/an respectively.
A survey of contemporary reports on the weight of silver required in
payment for each tael used in customs payments again reveals many varia-
tions, owing partly to inaccuracy of measurement and partly to failure to
differentiate between various kinds of taels. S o m e accounts give the weight
as high as 611.2 grains or even 614.4 grains, but the connection of these with
duty payments is not clear. 2 0 It would appear that the weight for customs
duties was set by 1813 at 579.8 grains, somewhat higher than the K u p i n g
weight, 2 1 and that the officials forced further weight increases until, by
agreement with the Co-hong merchants, the figure of 583.3 grains was ap-
proved, partly through the convenience of having an exact equivalence with
a simple fraction of avoirdupois weight. ( A Hang of 583.3 grains resulted in
a catty equal to 1 ! /з lbs. av.) A n 1836 visitor to Canton reports simply that
the liang weighed 583.3 grains, and makes no further comment. 2 2
O n the eve of the treaties there had emerged a tael unit of account espe-
cially designed for the payment of foreign customs. It was clearly intended
that 583.3 grains of 1.000 fine silver should be offered in payment of each
tael of customs duties. T h i s tael was an imaginary money and the im-
mediate forerunner of the Haikwan tael.

T h e Haikwan Tael of the Treaties

T h e British and Chinese negotiators after the First Sino-British W a r set


themselves the task of rationalizing the trading regulations, including the
payment of duties. T h e British were concerned with protecting the British
merchant f r o m a system which permitted the imposition of hidden and
potentially unlimited charges on trade; the Chinese with preventing bar-
barian trouble on the frontiers. A s far as customs matters were concerned,
the British and the other treaty powers were able to rationalize but half of
the problem. They succeeded in having the tariffs published so that all mer-
chants could tell the number of taels due the government, but they did not
succeed in setting forth clearly or uniformly what amount of silver or

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The Hai\wan Tael 195
other commodities would be accepted in payment of these duty or customs
taels.
Once having established the tariff, merchants could tell the number of
units of account that were owed, but, given the monetary system of China,
it did not follow from this that they knew how much monetary metal to
pay. It was in connection with this second aspect of the problem that the
foreigners were forced by circumstances to retreat from the demand for
precision and uniformity. The unit of account was satisfied by payment of
quantities of silver which varied from port to port and from time to time.
The Hai\wan tael, the name of the unit of account, was the name, then,
of an imaginary money and not of an exact quantity of bullion or a given
number of coins rendered in duty payments, despite its formal or de jure
definition.
The significance of the conclusion in the previous section, that the customs
payments were made in terms of a tael denominating 583.3 grains of silver
1.000 fine, is based, not on the use of the tael as a money, or even as a unit
of account, but on its use as a unit of weight, that is, the "tael" as "liang."
Here it is essential to recall that the Board of Revenue received silver bullion
by weight and regarded silver, in a sense, as a commodity.23 Yet in the
mercantile community silver had partly taken on the special features of
money. Since the customs duties were not all remitted to Peking, 24 it was
possible that two approaches to the silver tendered in duty payments should
develop: the first, that a definite quantity of silver bullion as bullion was
required; the second, that although silver was to be tendered, consideration
was to be taken of the local market value of silver. The provisions of the
original treaties and the changes made in subsequent treaties reflect this dual
approach to duty payments.
Treaty provisions. In general, the early treaties imply that if bullion was
tendered, it was to be tendered at 583.3 grains per tael. In relation to
coins, however, the treaties differed. The British insisted that they be ac-
cepted according to their silver content, the French that local conditions be
considered, and the Americans that the market rate of the day prevail.25
However, the British, with the other treaty powers, canceled any precision
they may have given to these provisions by allowing the consuls to establish
local rules with the Chinese customs superintendents in the ports.
Thus to the extent that the Hai\wan tael was considered a weight of
bullion of known touch or fineness, it was precisely defined in the treaties.
However, when the treaties were first put into operation, sycee was at a
premium, and a simple quantitative concept of duty payment could not

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196 Money and Monetary Policy in China
survive local pressures.28 The escape clauses of the treaties were made use
of, and various local arrangements were made* These will be considered
in the following section.
The treaties set up nothing more than a unit of account, yet the negotia-
tors thought they were also establishing a method of payment. This is the
basic source of confusion. Thus the treaties make no mention of the
Hai\wan tael until the International Protocol of 1901, although the term
was in use before that — almost from the beginning — to describe the
customs unit of account. The language of the original treaties is intended
to specify the material or method of payment, and thus in the Chinese
version is found the term wen-yin, and in the English the translation "sycee
silver." When the authorities recognized that they required first a unit of
account, and that actual payments would be made according to customs
already established, the term Hai\wan tael was introduced — the Chinese
term is often \uan-p'ing designating the weight alone. In the International
Protocol of 1901, the Hai\wan tael is clearly a unit of account, even unrelated
to duty payments, for it is used as a common denominator to fix the total
indemnity owing to countries in various currencies!
The Hai\wan tael and its money. Before 1901 the sense in which "Hai-
nan tael of the Treaties" was used was, therefore, a term to cover the
agreements by which duties were to be calculated. The increasing European
influence, at least in this section of Chinese financial affairs, caused the
assumption to be made that the Hai\wan tael must have a unique and
"real" equivalence in terms of silver, which equivalence was a proper sub-
ject of investigation. This attitude was certainly behind the foreign approach
to the subject, and attempts were made to fix this equivalence in subsequent
treaties. As already noted, the attempt failed, but the intentions, since they
were often the basis for negotiation on the European side, were important
and should be considered.
Posed in the European context the question becomes, what amount of
silver did the Hai\wan tael represent, if by Hai\wan tael is meant the
name of the monetary tael implied in the treaties — given the treaty defi-
nitions of the catty of weight: the British at V/} lbs. av., the French at
604.53 grams. Since there were 16 liang to the catty, the treaty taels of
weight were 583.3 and 583.08 grains respectively — a difference, it is true,
but not one of any practical significance.
* An example of such an "escape clause" is taken from the General Regulations of Trade —
the Supplementary Treaty made at Hoomunchai (Art. VIII, 3 ) : "English consuls will arrange
with the Superintendent of Customs at each port, what coins may be taken in payment and
what percentage may be necessary to make them equal to standard of pure silver."

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T h e Hai\wan Tael 197
The monetary tael was a two-part measurement. Not only the weight but
also the fineness of the silver had to be defined, and here the treaty provisions
lacked precision. The term "sycee" had, as noted, two meanings — one broad,
the other narrow. But even over the narrow definition there could be argu-
ment, for it was thought that the Chinese 1.000 fine might not be equivalent
to the European 1.000 fine. The Chinese term wen-yin referred literally to
the markings on monetary silver, but it is actually equivalent in meaning
to "sycee," with the possibility of a broad or narrow meaning. The British
at first used the phrase "standard or pure silver" for sycee, but "standard"
was never interpreted as "sterling," and the phrase, if it ever had any mean-
ing, must have been interpreted as "pure." 27
Sycee, in the broad sense of the term, was any monetary silver, and in
this sense it would be equivalent to the term "current silver" also used in
mercantile transactions on the China coast. An assay made at Amoy in 1878
showed that various kinds of "sycee silver" available in that port varied in
fineness from .976 to .927.28 The British mint assay of the sycee sent as
"ransom" for Chinese cities taken during the First Sino-British War gave
in 1842 the fineness of .978.29 Sycee silver was obviously of varied quality;
it hardly seems reasonable to suppose that the British could have had this in
mind when they used the term.
The Canton assay of 1843 was the independent control which makes pos-
sible confirmation of the assertion that the British treaty intended to call
for payment in silver 1.000 fine, that is, that "sycee" was used in its narrow,
and Western, sense. This famous assay arose from the provision in the
General Regulations of Trade that foreign money might be used in payment
of duties at a discount according to the metallic content of the coin. The
discount was to be the subject of agreement between the consul and
the Chinese superintendent at each port, and the Canton assay was the
first and most important of the attempts to establish this fixed discount.
A later assay at Amoy, for example, showed a different outturn, but the
British consul adopted the Canton assay in the interests of uniformity, and
the Treaty of Tientsin makes the assay part of the treaty arrangements thus:
"Duties are to be paid to Bankers in sycee or foreign money according to
the assay made at Canton on July 3, 1843." 30
Six separate types of money were used in the assay, but Mexican dollars
and "cut money" (dollars which were no longer recognizable as such but
which had not been melted down into bullion) were the most important
in Canton duty payments.
Five Mexican dollars were found to weigh 3.575 liang, and according to

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198 Money and Monetary Policy in China
the assay 111.900 liang of dollars were found equal in their silver content
to the amount defined by 100 Hai^wan taels. Thus, since Mexfl56.5 weigh-
ing 111.9 liang were accepted for 100 Hai\wan taels, the Hai\wan tael must
have been considered as payable in silver 1.000 fine. This is true because the
assumption results in a fineness for the dollar of .894, which is reasonably
accurate. Furthermore, the weight of Mex$156.5 at 26.928 grams per dollar
gives a treaty weight of 111.538 liang; a note attached to the report stated that
the scales used were 0.45 liang lighter per hundred than the Hoppo's scales
— the scales of the local customs in which duty payments would be made
— and the sum of these two gives a reasonable equivalence.31
Considering now the cut money, the assay found that for every 3.60 liang
of cut dollars, 3.18 liang was pure silver, and then ordered that 113.207
liang of cut dollars should be paid to meet a debt of 100 Hai\wan taels,
making the latter payable in silver 1.000 fine at the treaty tael weight of
583.3 grains.
To the British negotiators, then, the Haikwan tael was a unit of account
denominating 583.3 grains of silver 1.000 fine. This would hold whether
duties were paid in silver bullion or in dollar coins, and it would be con-
sistent with the point of view of the imperial treasury which required and
expected a weight of bullion in payment of taxes. It is consistent with the
British and official Chinese positions that dollar coins were to be accepted
on the basis of their intrinsic value only.
The French in their first treaty stood with the British in regard to the
payment of bullion, but on the question of payment in coin they differed
significantly. The merchant was to pay foreign money to the equivalent of
sycee, but in agreement with the local chief of customs and taking into
consideration the time, place, and circumstances.32 This was an obvious
opening for acceptance of dollars at the market rate of exchange.

Between the first treaties and those which followed the Second Sino-British
War, the local arrangements which were allowed under all the treaties
created a series of disputes which were resolved by establishing different
payments at each port. The British Treaty of Tientsin attempted to prevent
this trend by insisting on acceptance of coins according to the Canton assay;
the French and American treaties took the opposite position, with the
Americans actually stating that the market rate of the day was to prevail.
The American position was a reversal of Minister Robert McLane's de-
mand, made as recently as 1854, that silver — and even gold — be accepted
in duty payments according to its weight and fineness. Sir John Bowring's

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The Haikwan Tael 199
similar demand for acceptance by weight and carat was not surprising. The
Chinese reply to McLane stated, "As to future duties being payable in
either sycee or the equivalent in foreign silver, this has long been the
practice"; and to Bowring, "As to the payment of customs either in sycee
or foreign dollars, weight standards all have fixed regulations and cannot
be conveniently changed . . ." The replies are significant in that they in-
dicate the imperial government had concluded the matter and the details
were up to the local superintendents of customs.33
By 1869 when the British approved the Peking Convention, they had been
forced to accept the facts and to agree that the "custom house shall draw
up rules fixing the touch of sycee to be received in the payment of duties by
the bank at each port" (Art. X I V ) . This, in a sense, was a real capitula-
tion, since it would affect not only the rates at which coins were to be
accepted but would end the fiction of a precise relationship between the
Haikwan unit of account and the quantity of pure silver tendered in pay-
ment of it.
The Japanese treaty of 1871 illustrates the extent of the retreat in the
following words:

Inasmuch as the Custom Houses at the open ports of the two countries have
a fixed standard of weights and measures and of the quality of silver in which
the duty has to be paid, the merchants and subjects of the two countries must
conform themselves in whatever place, to the regulations there established and
not raise discussions of any kind.34

The local characteristics of the customs tael had received treaty approval.
The provisions of the French treaty were in accord with the practice of
those ports where dollars were the unit of account, the American treaty with
those where taels were the unit of account. The British found that their
concept of the relationship between the unit of account and money could
not be applied in an economy that was not integrated and which showed
such determined local characteristics and autonomous features as did the
Chinese. Later treaties were written in terms of the unit of account and not
in terms of a means of payment, for this was recognized as a matter to be
negotiated locally.

The Haikwan Tael in 1878

The failure of the treaties to establish a uniform method of duty payment


in the open ports was in some measure owing to the contradictions and
ambiguities contained within the treaty provisions. There were, in addition,

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200 Money and Monetary Policy in China
positive factors which caused the growth of local customs arrangements
which are a reflection of the nature of the Chinese economy in the nine-
teenth century. For whatever the provisions of the French and American
treaties and whatever escape clauses were to be found in the British treaties,
there is no doubt that the intention of at least the early British superin-
tendents of trade was to enforce uniformity. That they failed must be due
to the real nature of the economy with which they were dealing rather
than to any technical imperfection in the provisions of the treaties.
The influence of local factors. By 1878, when the foreign-staffed Imperial
Maritime Customs published a survey of the Haikwan banking system and
the local currencies of the open ports, local payment arrangements had
developed the force of law and were defended not only by the local consuls
but also on occasion by the ministers in Peking. The Canton assay, with
minor exceptions,35 was abandoned as a basis of payment, and agreements
relative to bullion, which may have been made at a time when sycee was
at a premium, resulted in quantities less than those implied in the treaties
or ordered by the Canton assay being offered in payment of the Haikwan
tael. As Shanghai became the most important of the treaty ports, so did its
payments arrangements come to be considered as the standard called for
in the treaties, and investigators based arguments relative to local payments
on the quantity of bullion paid in Shanghai — at least they did so when
local payments were higher than those of Shanghai.36 Thus the concept of
uniformity was not altogether lost, but it took its new focus on the Shanghai
arrangements rather than the Canton assay or the treaty provisions. The
pressure for return to the treaty standard came after the 1911 revolution
when the Maritime Customs was charged not only with the collection of
the revenue but also with its transmittal to Shanghai.
Perhaps the most obvious factor making for differences in the duty pay-
ments arrangements was the difference in the standard weights which,
under the provisions of the treaties, were sent from Canton to the newly
opened ports.37 Given the inaccuracy of measurement, it would be ex-
pected that these weights should vary, and, as already noted, they ranged
from 581.47 to 589 grains. When these variations were discovered, no at-
tempt was made to correct them, but rather a discussion ensued as to which
of them represented the "real" Haikwan weight, and merchants in ports
with an underweight standard naturally objected to any proposal to return
to a 583.3 basis. Inaccuracy of measurement was but one factor responsible
for differences; in addition, no bullion 1.000 fine circulated, money was
sometimes and in some places accepted by weight and at others by count,

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The Haikwan Tael 20 1

varying proportions of the customs revenue had to be remitted to Peking


where amounts would be checked against an imperial standard, and each
monetary transaction had the characteristics of an exchange operation.
These differences might have been compromised had the collection of
customs duties been undertaken by a unified national bureau. But here again
the division of responsibilities between the imperial government and the
provincial authority was clearly against such a provision, even though the
customs superintendents, as other provincial officials, were Court-appointed.
The centrally organized Imperial Maritime Customs was a foreign imposi-
tion and, in the nineteenth century at least, it did not actually handle the
revenue but only assessed the number of Haikwan taels due.*
The actual collection was undertaken by locally appointed customs bank-
ers, who usually continued the operation of their commercial banks prac-
tically in conjunction with their government enterprise. They regarded the
acceptance of coin or bullion in payment of debts expressed in the Haikwan
tael as an exchange operation. Taking one local unit of account as the basis
for an agreed relationship, payments made in terms of other units of ac-
count, representing sycee or dollars, would be taken at the market rate of
the day. Even the agreed local unit would be subject to subtle variations,
and bullion and coin were paid in and out at different rates.
Since all payments to the local Customs or Haikwan Bank were regarded
as exchange operations rather than the tendering of fixed quantities of bul-
lion or coin, the actual amount paid was subject to bargaining, and the
result would be a consequence of local rather than national conditions. The
treaties gave power to the consul to attempt a reform of this situation, but
he succeeded only in giving relative stability to exchange between the
Hai\wan tael and the local agreed unit of account; still unsettled was how
payment of the agreed local unit of account was to be made. This latter
problem was solved with varying success at the different ports, and it is
certainly true that in the period from 1842 to 1878 progress was made in
narrowing the area of bargaining and in fixing the relationship between the
agreed local unit of account and the means of payment.
The extra charges. Not only did the treaties fail to establish uniformity of
payment, they also failed to eliminate the extra charges which from time
* There has been some misunderstanding on this point. A t first, duties were payable to
customs shroffs or tellers under the direct control of the Chinese superintendent of customs.
This method was soon changed to collection by a Customs or Haikwan banker appointed in
each port. Only after the 1 9 1 1 revolution, w h e n the powers feared the fate of revenue
hypothecated to pay foreign debts, did the Maritime Customs take over the handling of funds,
including their remission to Shanghai for deposit in foreign banks,

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202 Money and Monetary Policy in China
to time had been levied on the Canton trade and which the treaties had
intended to eliminate. The treaties could not change the facts of business
life in China; they did not alter the relationship of Chinese merchant or
banker to the local mandarins, just as they could not change the currency
system. Meltage fees, differing weights, disagreements over fineness, arbi-
trary rates of exchange, interest charges, all these were part of the conflict
between the customs banker and the payer of the duties.38 The foreign
merchant with dealings in several ports might try to pass bullion or coin
current in one port at another, but the customs banker rarely had interests
in more than one port, and his reaction was provincial.
All of the charges made by the customs bankers as well as their methods
of accepting payment were within the traditional context of the Chinese
monetary system, and they would surprise only those who expected the
foreign treaties to reform the economy of the empire. Few practical mer-
chants expected this; what they obtained from the treaty was power to pre-
vent the additional charges and the payment regulations of the local Hai-
kwan banker from going beyond certain limits.39 At the extreme, where the
force of tradition unsupported by real economic factors directed a local
banking custom, determined foreign opposition could wring limited reform.
The solution: currency reform. The foreign merchants were not in China
to reform the currency. If the practices of the Haikwan bankers could be
kept within limits, few of these merchants were concerned with the fact
that the British concept of money had not been adopted throughout China,
though importers might harbor the more practical regret that the Chinese
did not adopt the use of other and salable British concepts. Ways could be
developed of covering the uncertainties of dealing with the Haikwan Bank,
not the least of which was dealing with Chinese merchants on a duty-paid
basis. Thus in the great staple items of the China trade, the Chinese mer-
chant dealt with the Chinese banker. In any case, the handling of bullion
and coin was the responsibility of the foreign merchant's Chinese shroff,
or teller, who was under the supervision of the company's compradore; as
long as the compradore system prevailed — and it owed its existence to
mercantile problems which ranged far beyond mere currency and duty pay-
ment matters — the foreign merchant was not usually concerned with the
details of payment.
Pressure for reform came not from the merchants as such, but from those
who sought wide-scale reform of Chinese political and economic institu-
tions, some of whom might well be merchants with a wider range of inter-
ests. But most foreigners who sought reform could gain access only to the

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T h e Hai\wan Tael 203
local officials, whose power was restricted; those few who had contacts in
Peking understood the power relationship and the impracticability of
nation-wide economic change. When China's foreign debts mounted and
her ability to pay them became of considerable importance to the foreign
powers concerned, talk of reform became more earnest, but reform itself was
delayed by the aftermath of the 1911 revolution.
The actual arrangements need not be given in detail since they are of
concern only if the trade of a particular port is being studied, and they
are, in any case, available elsewhere, but the general situation in 1878 may
be surveyed, first as it was in the northern sycee-using ports and secondly
as it developed in the southern or dollar-using ports, with a more detailed
look at Shanghai and Amoy.
Shanghai, northern, and southern ports. The rate of exchange between the
Shanghai currency tael and the Hai\wan tael was 111.4 to 100. The calcula-
tions on which this ratio is based are as follows: 40

weight on the local scales 100


Add: difference in weight between Haikwan
and ts'ao-f'ing liang 2.8
difference in touch between Shanghai
standard silver and Haikwan purity 6.168
melting fee 0.204
109-172
Divide by 0.98, to convert from standard fine-
ness to Shanghai currency taels 111.4

The liang of silver weight in Shanghai was the ts'ao-p'ing liang, which had
been standardized by local practice at 565.65 grains troy, thus differing from
the Haikwan tael weight by 17.65 grains. The difference allowed in the
formula is inadequate. If the weight of the ts'ao-p'ing liang is correct,
the weight of the Haikwan tael payment would be 581.49 grains, an amount
within the range of error found in the standard weights sent from Canton
to the treaty ports. Thus the weight error can be explained by inexactness
of measurement, especially when it is recalled that the ts'ao-p'ing liang was
itself subject to error. Standard silver in Shanghai was .935 fine, and the
allowance for difference in touch should, therefore, have been 7.17 ts'ao-p'ing
liang of standard Shanghai silver. As given by the allowance in the formula,
the fineness of silver used to pay debts in Hai\wan taels is .991. The ad-
dition of the meltage charge decreases the error somewhat, but, if the
Haikwan standard of 583.3 grains 1.000 fine is to be met, 110.29 ts'ao-p'ing

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2 04 Money and Monetary Policy in China
liang of standard Shanghai silver or 112.54 Shanghai currency taels would be
required.41
Later investigators, seeking the "real" Hai^wan tael, took the Shanghai
formula as correct or as an accepted definition of the Haibwan tael and so
worked back. The formula gives 577.399 grains of silver 1.000 fine. If the
investigator took the position that the treaties did define the weight de-
nominated by the Hai\wan tael as 583.3 grains, he gave the fineness denomi-
nated by the Hai\wan tael as .990. He also had the choice of recognizing
that "Haikwan silver" was rated in the Shanghai market at the equivalent
of .933 fine, and on this basis the weight denominated by the Haikwan tael
had to be 581.07 grains. Again this weight was within the range of error of
the original standards. When the search for uniformity was taken up in the
later years of the nineteenth century and first two decades of the twentieth
century, it was to the local formulas, and to the Shanghai formula in par-
ticular, that the investigators went, rather than to the provisions of the
treaties taken in their historical context. By the very nature of such action,
agreement on the quantity of pure silver denominated by the Haikwan tael
was impossible except by an agreement to accept the Shanghai formula and
an agreed ts'ao-p'ing equivalent.
Since one of the very first subjects of negotiation between the British con-
sul, Captain G. Balfour, and the Shanghai taotai was the rate at which duty
payments were to be made, a relevant question is, how did the difference
between the treaty ideal, which was still strong at the time of negotiation,
and the reported formula develop?42 By the time the 1878 survey was made,
many of the local arrangements had only the authority of precedent and
there was a tendency to explain them on the grounds of "old custom." Un-
doubtedly Balfour's negotiations under the treaty dealt with the rate at
which coins were to be tendered in payment and with the relationship be-
tween a standard local unit of account and the Hai\wan tael. Until at least
1858, money in Shanghai, both monetary silver bullion or shoes of sycee and
dollar coins, was scarce. The formula, at least as far as the allowance for
fineness is concerned, must depend, therefore, not on the original negotia-
tions of the captain who oversaw the Canton assay, but rather on a rela-
tionship established at some point during the violent monetary fluctuations
which Shanghai experienced in the fifties.
As Table 2 indicates, the northern ports, with the exception of Newchwang
and Ningpo, had rates for the Hai\wan tael below the rate of Shanghai. The
Ningpo rates reflect the fact that payments were usually made after the re-
ceipt was given in Shanghai or with bills on Shanghai, and thus interest and

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T h e Haikß/an Tael 205

Table 2. Actual silver payments per Haikwan tael at various ports

(a) (b) CO
Equivalent in
Grains of pure Shanghai currency
silver per taels at market
Port Haikwan tael Fineness exchange rate

Newchwang 589.6 1.011 113.6


Tientsin
foreigners 573.0 .982 109.7
Chinese 581.2 .996 110.8
Chefoo
foreigners 539.4 .925 109.8
Chinese 579.6 .993 111.0
SHANGHAI 577.4 .990 —

Ichang 566.6 .971 based on Hankow


Hankow 575-5 .987 111.5
Wuhu 578.1 .991 111.4
Kiukiang 599.6 .993 111.4
Chinkiang 576.1 .988 111.4
Ningpo — — 112.2 to 111.8

Sources: IMC, Reports on the Haikwan Banking System; Morse, Currency,


Weights and Measures. Figures in column (c) are adjusted to a standard in
which 1.000 is chemically pure silver. The Shanghai figures are based directly
on the Haikwan formula.

exchange are hidden in the rate quoted. That the rates for the Yangtze ports
were low is in part the result of the Shanghai rate being used as the basis.
In fact, some merchants felt that local Haikwan rates should not be more
than the Shanghai rate after taking into consideration the cost of laying
down funds in the particular port. The differing rates for foreigners and for
Chinese in certain of the ports would indicate the additional protection
which the treaty afforded the foreigner, who was better able to resist exac-
tion by the Haikwan banker. Dollars, except in Tientsin, were accepted at
the market rates in terms of the local standard unit of account. In an effort
to end months of disagreement, the Tientsin customs authorities formally
adopted the Canton assay for those coins included in that assay, but in prac-
tice there were still variations. In Newchwang strings of cash were accepted
at market rates in payment of duties; this was the only port reporting such
a practice in the 1878 survey.

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2 о6 Money and Monetary Policy in China
In considering the southern ports, Foochow, Tamsui, Такой, and Amoy
can be grouped together, as can Swatow, Kiungchow, and Pakhoi. In the
first group, Amoy provides material for more detailed study. The assay held
under the provisions of the treaty resulted in a slightly different outturn
than did that of Canton. The local rates were accordingly changed, in the
interests of uniformity, to agree with those of Canton. However, from the
first, the basis of payment by intrinsic value was challenged. The customs
shroff had to sell coins received at market rates or buy exchange on Canton
at market rates. Melting down the coin for sycee and shipping this to the
locations demanded by imperial orders would have resulted in a loss to the
banker. The foreign banks used a dollar unit of account — the Spanish dollar
—100 of which were equal to 72 taels. The Amoy or Spanish dollar was in
reality an imaginary money since the coins in actual circulation and in which
duties were paid were Mexican, Hong Kong, Japanese, and United States
trade dollars, the values of which fluctuated in terms of the dollar unit of
account. In the 1878 report these coins were accepted by weight; by 1891
they were accepted by the customs, as they always had been in other markets,
on the basis of narrowly changing rates if clean, by weight if chopped or
cut.43
The attempts of the first foreign merchants to accept all coins at par at
the Canton assay, or of the provincial authorities to reaffirm that duties were
to be paid in pure sycee, could not succeed against the monetary realities
which faced the customs shroff or his successor, the Haikwan banker.
By 1866 a pattern at the ports of Amoy, Foochow, Tamsui, and Takao
had emerged, which, although not corresponding to the Canton assay, was
equally approved by the British minister to whom recourse was made. The
discount on dollars was set so that payment of 110 liang of dollars should
satisfy payment of 100 Haikwan taels of duties. To establish the silver con-
tent of this sum of dollars, the weight of the local liang must be ascertained.
The Tamsui report of 1878 not only gave the 110 liang amount but as an
alternative required payment of $152.77. Taking the dollars at 26.928 grams
or 41.56 grains, this gives a liang of 577.21 grains. Thus in 110 liang of dol-
lars there would be 571.43 grains of silver 1.000 fine. Assuming the treaty
weight of the Haikwan tael in these ports, the fineness would then be .980.
At Swatow a rate of 111.11 liang of dollars was established in 1867, which,
by calculations identical with those above, gives a theoretical fineness of .989
for the Haik_wan tael. Kiungchow and Pakhoi follow Swatow in principle,
although the fineness of the Haikwan tael in Pakhoi appears to have been
approximately .985. In Canton there was a tael unit of account as the basis

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T h e Haikwan Tael 20у
of duty payments, but the dollars tendered in payment of it did not equal
the number required by the Canton assay.
If these diverse rates for the Haikwan tael can be explained on the basis
of the situation in each port, the growing importance of the customs revenue
may suggest a question as to why the imperial authorities tolerated what
was, in theory at least, a loss of revenue. Two factors are relevant here, one
of which has already been explained. All measurements were inaccurate, and
a 5 per cent tolerance in the receipt of silver would cover all the variations
considered. Secondly, the imperial accounts were kept in taels, the nature of
which was not specified. A distinction was made in the memorials between
wen-yin and "foreign silver" (yang-yin), that is, the dollar silver of Canton,
but not until after 1878 do the accounts appear to take cognizance of the dis-
tinction between the J(u and the kuan, the treasury and customs, weights.
Indeed, certain customs superintendents, in collusion with the Haikwan
bankers, made profit from this fact by collecting at the customs weight and
remitting at the treasury weight. Thus the imperial treasury accounts would
not be in a position to show the loss of revenue resulting from the less-than-
treaty standards of the Haiku/an tael.

The Haikwan Tael to 1933

The increasing importance after 1895 of China's foreign debt, the greater
proportion of which was in gold, made the customs unit of account of
great importance not only to the imperial government but even more to
the foreign powers. The bulk of the customs revenue had been hypothecated
for repayment of Chinese foreign loans and indemnities. Although only
minor changes were made in the local arrangements established by 1878,
the Hai\wan tael and the payments problem did come under close exami-
nation and certain adjustments were made.
The customs duties set forth in terms of Hai\wan taels in the treaties
were specific, but they had been made with a 5 per cent ad valorem concept
in mind and with the general assumption that in the long run China's re-
ceipts would work out at about this figure. While the expectations of the
negotiators were never fulfilled, the matter did not become of international
importance until China's gold indebtedness grew at the same time that the
gold price of silver fell. In terms of gold China's tariff represented a 3 per
cent or lower ad valorem equivalent. On three separate occasions, the In-
spector General of the Imperial Maritime Customs, Sir Robert Hart, pre-
sented memoranda to the powers recommending that the Hai\wart tael be

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208 Money and Monetary Policy in China

considered a gold unit of account and that, in effect, the customs revenue
of China be shielded from fluctuations in the gold price of silver.44 Hart
based his proposals on the spirit of the treaty tariffs, but he made them at
a time of political and military weakness in China — his third proposal was
to the international commission considering the post-Boxer tariff rates —
and the legal position of the foreign powers was unassailable.45 Almost in
mockery of his proposals, the final indemnity was expressed in Haikwan
taels, seemingly making the debt a silver one and thus shielding China from
the burden of silver fluctuations, but a specific clause stated that the debt
was payable in gold. The Hainan tael was serving merely as a common
denominator to enable the claims expressed in the various gold currencies
to be totaled. All that came of Sir Robert's recommendations was the set-
ting of a new tariff schedule which went part of the way in compensating
for the fall in the value of silver.
Rationalization within the treaty limits. The attempt to increase China's
customs revenue by making the customs unit of account denominate a fixed
quantity of gold rather than silver had failed. Attention was then focused
first on protecting the Haikwan tael as it was supposed to be and secondly
on gaining for China tariff autonomy. Tariff autonomy would permit China
to set up a gold unit of account to replace the Haikwan tael.
At the conclusion of the Boxer troubles, foreign powers urged on China
more than an indemnity; they demanded political and economic reform.
Not the least important of these reforms was the proposal for a new uni-
form dollar currency. In the 1902 commercial treaties with the United States
and the United Kingdom, China was insistent that the treaties include the
provision that, whatever the nature of the new currency, duty payments
would continue to be made in terms of the Haikwan tael. The clauses as-
sumed a unique relationship between the unit of account and the money
payments but were equally applicable in the real situation. In the British
treaty the specific provisions relative to the Haikwan tael appear in an annex
upon which the Chinese insisted after the basic treaty had been signed by
the plenipotentiaries.46 It read in part:

. . . all customs duties must continue to be calculated on the basis of the


existing higher rate of the Haikwan tael over the Treasury tael and that the
"touch" and weight of the former must be made good.
To this annex the British added their own:
. . . it is assumed that new national coins will be accepted in payment of debts
contracted in Haikwan taels but only at their proportionate value to the Haikwan
tael, whatever that may be.

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T h e Hai\wan Tael 209
This return to acceptance of coins on the basis of their intrinsic value was
based on the desire to protect the customs revenue of China at a time when
it was owed to foreign powers, but it was also made with the expectation
that once the rate of the new coin had been set on the basis of intrinsic
value, the coins would be accepted by count if they were "clean" or current.
The Hctt\wan tael became a center of dispute during the years 1916 and
1917 when a new effort was made to rationalize local arrangements, par-
ticularly in the dollar-using ports of the south. The problem of local vari-
ations attracted the attention of the Inspector General of the Maritime
Customs, F . A. Aglen, because his organization was now not only charged
with the collection of the customs revenue but also with its transmission to
Shanghai where it was deposited with foreign banks.47 In the process of
combining the accounts, it became apparent that under any single definition
the figures did not check.
Investigation by commissioners at the southern ports revealed that the
authority for the existing rates could not be fully determined, and that the
rates were inadequate.48 The dollar rate had been set before 1878 on the basis
of an agreed dollar unit of account. This unit of account had been ideally
represented by a particular dollar coin of given weight and fineness. But
dollars were not paid in by weight, and the lack of currency laws dealing
with silver dollars permitted the circulation of underweight dollars which
in a European economy would never have been considered current. There
were in addition many types of dollars other than the one on which the
original rate was based. Thus payments made on the basis of count had come
to give an inadequate quantity of bullion.
Inspector General Aglen stood on the treaties. He wrote,

It may therefore be laid down as a principle that the Customs can require pay-
ment of duties in sycee and need only accept dollar coins other than those specified
in the Canton Assay at their sycee value. In other words, the Customs can require
payment in all other dollars by weight and are not compelled to accept them by
count. 49

Yet, as stated below, he did not re-examine the question of exactly what
the treaties had intended by going into the historical sources. He relied on
recent empirical investigation. Some experts, for example, Edward Kann
and K. W . Shaw, did give the historical value of the Haikwan tael.50 The
subject continued to arouse considerable controversy among historians, mer-
chants, and officials.
T o his Swatow commissioner Aglen put the test question this way: "Is
the Chinese Government actually receiving at Swatow at present rates the

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2io Money and Monetary Policy in China

equivalent of the amounts in Hai\wan tael sycee it is entitled to by


treaty?" 51 The rate should have been such that, shipping charges apart, the
outturn of the silver dollars at Shanghai showed no loss by exchange. The
Swatow commissioner found it impractical to refuse to accept underweight
dollars, since there were too few full-weight coins. Similarly, it would have
been inconvenient to accept payment by weight rather than count since
there were six kinds of dollars circulating, all with different finenesses.
Therefore, over the objections of British and other merchants, the customary
rate was raised.52
This and similar moves toward uniformity did not bring the payment
of duties into equivalence with the ideal standard of the original treaties.
The Foochow commissioner, for example, assumed on the basis of actual
tests of standard weights made in Canton in 1905 and Shanghai in 1880
that the weight of the Haikwan liang was 581.83.53 The basis of these later
rationalizations was, as mentioned earlier, not the treaties in their historical
context, but rather the Shanghai formula. The historical continuity had, in
fact, been lost. This is clearly revealed in the efforts of currency expert
Η. B. Morse to pick up the historical trail, and his inability to explain the
principle of the various rates which he found along the China coast. The
investigations may, however, have revived speculation into the original
treaty intentions, although with little practical consequence.
The establishment of the Customs Gold Unit. With the renewed fall in
the gold price of silver during the 1920's, attention was turned towards the
possibility of China's going on gold. The Kemmerer Report recommended
a gold coin, the Sun.54 But, although China did not go on gold, as from
February 1, 1930, duties on imports were calculated in terms of a Customs
Gold Unit which was to denominate 60.1866 centigrams of gold, the weight
of the abortive Sun.55 The rate of exchange between the Hai\wan tael and
the Customs Gold Unit was initially 1:1.5. The Haikwan tael itself was
kept as a convenient means of explaining export duties.56 The Haikwan
tael was finally abolished as a unit of account in connection with the adop-
tion in 1933 of a standard dollar and the abolition of tael units of account.

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CHAPTER IX

Monetary Reform and the Mint Question

Monetary reform was the subject of serious consideration by both Chinese


officials and foreigners in the period following the Hsien-feng inflation.
This is perhaps as far as it is safe to venture in generalizations, for mone-
tary reform did not mean the same to Chinese and foreigners, nor within
the two groups were uniform opinions held. The need for monetary re-
form was manifest in the confused state of the cash coinage, the shortage
of dollar coins, and the depreciation of silver. These problems affected the
different groups in different ways. The imperial government was tradi-
tionally concerned with the state of the cash coinage and after 1861 was
specifically motivated by the confusion created by the big-cash, which still
circulated in the metropolitan area. The provincial authorities from time to
time gave thought to the need for improved currency in their areas but
were hampered by the difficulties of obtaining copper and were influenced by
the increasingly strong case for a silver coinage. The foreigners pressed for
a national silver coinage, although there were differences of opinion as to
the practicability of executing such a plan. The effects of the depreciation
of silver were not fully realized in this period; in fact, between 1892 and
1895 the fall in the gold price of silver was advantageous to China, pro-
viding protection to her new industries — protection which, by treaty, the
tariff could not give. Only after the Boxer indemnity had been set did
discussions on monetary reform include the possibility of a gold or gold
exchange standard, requiring a drastic revision of the country's monetary
system.1

At least until 1895 none of the proposals for monetary reform was particu-
larly revolutionary. The Chinese government was traditionally responsible
for a sound cash coinage. Silver coins had been cast in China before; the
idea was not tradition shattering. 2 In its physical aspects, monetary reform
was in reality monetary restoration, a task parallel to the "restoration"
being attempted in other sectors of the economy following the destruction

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2i2 Money and Monetary Policy in China
of the Taiping.* But to consider the monetary policy which followed the
Hsien-feng period as merely a policy of restoration would be to miss the
most interesting aspects, for no matter how much the government might
wish for a simple restoration, such a policy was not economically feasible.
Even in the traditional sector foreign methods could not be excluded. It
might only be a matter of transporting Y u n n a n copper from Shanghai in
the modern ships of the China Merchants Steam Navigation Company, or
the purchase of Japanese copper on modern commercial terms. But this was
change. W i t h costs of production high and provincial authorities responsible
for meeting them, the potential savings offered by adoption of the foreign
minting process — the establishment, that is, of a foreign-style mint — had an
increasing attraction and by 1889 had become an accomplished fact.
Once the use of modern techniques had been considered in relation to
the traditional sector, it was perhaps inevitable that the silver sector should
also be affected. T h e failure of the Chinese to mint dollars was based not
so much on principle as on such negative factors as lack of stimulus and
such practical factors as the lack of the proper machinery and advisers for
the use of that machinery. T h e self-strengthening movement brought ma-
chinery and foreign technical advisers; if the stimulus should be there, more
machinery — suitable for minting — could be ordered through the same
channels and the proper foreign technicians similarly secured. W h e n ma-
chinery had been used to mint traditional cash, it followed that Chinese offi-
cials might adapt it to the minting of dollars; the poor state of the coinage,
the shortage of foreign dollars, and the frequent suggestions of foreign
merchants and diplomatic representatives provided the stimulus. By 1889
China had one of the largest mints in the world.
W r i t i n g in 1899, one foreign observer was pessimistic about the chances
for reform in China, with one exception:

But there is one reform that seems feasible, indeed easy, and that a reform which
would greatly improve trade and would, it seems possible, have an excellent effect
on the national character — I mean a radical reform of the currency. 3

Thirty-six years later that radical reform had been effected: the silver
standard of China had been abandoned in the face of powerful economic
forces. Drastic reform was not necessary in the period 1862-1895; rationaliza-
tion was all that would be required. T h e rationalization process carried
* "Restoration" has a technical meaning in Chinese historiography; it is the name of a
stage in the dynastic cycle model. A declining dynasty has often, the theory states, shaken
itself and attempted to stave off destruction. This is the "restoration," a period marked by
renewed vigor of administration — in the Ch'ing during the T'ung-chih period.

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Monetary Reform and the Mint Question 213
the Chinese Empire one step along her slow path to modernization, reveal-
ing the problems and processes which should be relevant to the study of
modernization in other sectors of the economy. In 1871 Robert Hart wrote,
"The Chinese have no intention of establishing a mint; Peking is the last
place in China to take the initiative." 4 But the Chinese did establish their
mints, and the central government itself did eventually establish in Tientsin
a mint under its own direct control. The changes took time, and time, it
would appear, was a most precious commodity which the dynasty could
ill afford to waste.
This chapter is, first, an account of reform in the traditional sector, of
the merging of restoration and modernization in the production of the
cash coinage. It is, secondly, an account of reform in the silver sector, of
the process by which the Chinese government undertook an economic
task to which it had not specifically committed itself in the traditional
monetary system.

Reform in the Cash Sector

First and unsuccessful measures. The casting of standard cash coins had
practically ceased by the latter part of the Tao-kuang period (1821-1850).
There had been erratic production of big-cash and iron cash in the Hsien-
feng period (1850-1862). By 1861 iron cash were nowhere in circulation
and big-cash had been repudiated except in the metropolitan area. The em-
pire was using a highly debased standard cash currency; there was no
official casting at the legal standard. With the defeat of the Taipings in
1864 the attention of the government could be turned to restoration, and
two approaches to the coinage problem were soon attempted. The first
appears to have had its effective origin with Tso Tsung-t'ang (Hunan,
1812-1885), who, memorializing in favor of the construction of steamships
in China, pointed out that machinery suitable for the minting of cash coins
could also be installed in the shipyard.5 The second and more important
approach originated in Peking, where the needs of a currency to replace
the depreciated big-cash resulted in an 1867 edict requiring the provinces
along the sea coast and Yangtze River to forward standard cash to the
capital.® Although both these approaches failed to restore the currency
during the T'ung-chih period (1862-1874), they were the basis of the sub-
sequent reform of 1887 and the years which followed.
The official weight of the metropolitan big-cash in 1861 was 0.44 liang;
this was changed in 1867 to 0.32 liang and in 1883 to 0.26 liang.7 The big-

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2i4 Money and Monetary Policy in China
cash were passing as the equivalent of two standard cash: it is unlikely,
therefore, that the big-cash coins actually circulating were of the legal
standard, for the legal big-cash weights implied a standard cash of 0.22 liang,
0.16 liang, and 0.13 liang respectively, and elsewhere in China the coinage
was reported less than the legal 0.12 or 0.1 liang, the old and new standards
for the traditional cash. T h e central government, in its role as administra-
tor of the metropolitan area, regarded the casting of big-cash as a measure
forced by the shortage of cash and sought to restore the standard coinage
as soon as possible. T h e Board of Revenue advised that the reopening of
the metropolitan mints to the casting of standard cash was impractical on
the ground that too much time would be required before restoration of
the capital's coinage would be complete. T h e Board recommended instead
that the sea coast and Yangtze River provinces be required to forward cash
from the likin and salt revenues to the capital through Tientsin.
This recommendation of the Board was transmitted to the governors and
governors general concerned in the 1867 edict cited. T h e Board had con-
sidered the transport problem and wisely suggested that the cash be for-
warded by sea. Its reasoning was that copper could more easily reach the
southern provinces, be cast into cash there, and then transported as coin
to the centers where it would be put into circulation. T h e provincial tax
revenues, specifically those from likin and salt, would consist in part of
these cash coins, a portion of which would then be forwarded to the
Tientsin superintendent of trade, Ch'ung-hou (1826-1893), for eventual use
in the capital. Such a measure would encourage the circulation of coins
in the provinces and at the same time serve the requirements of the capital.
Here central initiative was to be responsible for provincial currency reform,
although the stimulus for the measure came from the local needs of the
metropolitan area. T h e detailed regulations relative to the collection and
forwarding of the cash were left, as usual, to the decision of the provincial
authorities, who were ordered to memorialize their decisions to Peking.
Chinese monetary policy was operating within the tradition of the dynasty.

There was one key problem which the edict did not and could not solve
— the supply of copper to the provincial mints. Even if transport could
have been arranged into the Yangtze valley, this would not have solved the
problem, since the Yunnan copper mines were not producing. In 1872 a peti-
tion was received urging that the Yunnan mines be reopened, 8 but as late
as 1883 a joint memorial from the Governor General and the Governor
of Yunnan stated that the mines were still suffering from damage done in
the Mohammedan rebellion, that labor was short, the smelters were too

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Monetary Reform and the Mint Question 215
heavily mulcted, and capital was in very short supply.9 Improvements were
slow even after the appointment as superintendent of the mines of the able
economic administrator, T'ang Chiung (Kweichow, 1829-1909). But these
developments could hardly affect the success of an 1867 edict, and although,
as the edict stated, there was copper in Hupei, the limited quantities there
required time to be developed.
Since native supplies could not be obtained, China would have had to
depend upon imported Japanese copper. But Japanese copper had to be
purchased on a commercial basis and, unless the provincial authorities were
to heavily subsidize the coinage, the weight of the cash would have had to
be reduced to some 0.085 liang. 10 Provincial funds were needed elsewhere
during the restoration period, and the Board of Revenue, having sanctioned
in 1853 change in the official weight of cash from 0.12 liang to 0.1 liang,
was not moved by references to the researches of a Hong Kong foreigner
who discovered the weight of T'ang dynasty coins to be 0.08.11
This does not mean that the 1867 edict was entirely ignored. In 1868,
800,000 liang of copper cash were sent to Tientsin for the capital, but this
was only a tenth of the amount estimated as required. 12 These were un-
doubtedly old cash which had been tendered in payment of likin and salt
duties, and their shipment does not indicate that new casting had begun.
Since the amount was inadequate for the needs of the capital, it was first
suggested that they be used in Tientsin, but, in 1871, 112,000 taels worth
were bought by Shanghai merchants and brought down for circulation in
that city. 13 Reform of the big-cash system was postponed.
The proposed T'ung-chih currency reforms were unsuccessful, not be-
cause of any weakening of central control over the provincial authorities,
but because the supply of copper was not adequate for the purpose. The
short supply of copper was a result of the failure of the central authorities
to maintain order in the mining areas or to pursue a vigorous mining policy,
and of a traditional reluctance to change the weight of the coinage — a
reluctance usually regarded as a virtue which princes seldom possessed. The
later reintroduction of the proposed reforms under different conditions
proved successful.
The 1887-1888 currency reform. In 1887 the Empress Dowager ordered the
casting of big-cash in Peking to cease, the provinces to open mints, buy
machinery, and cast standard cash, and the river and seacoast provinces to
forward sufficient cash to the capital to enable the replacement of the big-
cash.14 These instructions were partially carried out and provided the official
stimulus needed by the provinces to undertake a reform of their coinage.

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216 Money and Monetary Policy in China
Any success can be attributed more to a changed economic situation than
to an altered power relationship between capital and province.
The basis for the currency reform was a joint memorial from the Board
of Revenue and Prince Ch'un (1840-1891), the father of the Kuang-hsü
Emperor, requesting restoration of the capital's currency over a three-year
period. The Governor General of Chihli and the Governor of Kiangsu were
ordered to buy machinery and undertake the manufacture of standard
cash. The tribute provinces were ordered to remit strings of cash to Peking.
On receiving the objections of the provinces, however, the Board of Revenue,
acting independently of Prince Ch'un, memorialized for a revival of the
1867 plan under which cash were to be supplied by the river and seacoast
provinces, presumably without any provision for new casting. The Empress
Dowager, reminding the Board that they were the "focus on which the
coinage system converged," rejected the Board's memorial and demanded
that the currency reform be effected within one year. 15 It was perhaps over
the issue of reform that Board President Yen Ching-ming* had incurred the
Empress' displeasure and had been replaced by Weng T'ung-ho.f 1 6 Weng
and Prince Ch'un did not agree on financial matters, and the independent
memorial of the Board, made while Yen was supervisor, may also have
been a reflection of this rivalry. 17 But although it is obvious that personal
relations had an effect on the course of events, the Empress, having decided
on reform, was able to keep the metropolitan officials under control and to
enforce her will on the provinces.

The course of the change in Peking was far from smooth. The news that

• Y e n Ching-ming (Shensi, 1 8 1 7 - 1 8 9 2 ) was president of the Board of Revenue from March


1882 to January 1886. As Governor of Shantung in 1864 he would have been in close contact
with Ting Pao-chen (Kweichow, 1 8 2 0 - 1 8 8 6 ) , then financial commissioner and reputedly an
honest economic reformer. Yen himself was known as an able financial administrator, espe-
cially as president of the Board of Revenue. However, in 1885 while discussing the monetary
system at a court conference, Yen so displeased the Empress Dowager that he was dismissed
from the Grand Council and his presidency, although in 1886 he was appointed to supervise
the Board. Yen was concurrently a member of the Tsungli Yamen.
f W e n g T'ung-ho (Kiangsu, 1 8 3 0 - 1 9 0 4 ) remained Board of Revenue president to June 15,
1898; he had been a junior vice-president, 1 8 7 6 - 1 8 7 8 , and grand councillor, 1 8 8 2 - 1 8 8 4 ,
1 8 9 4 - 1 8 9 8 . Weng was the leader of the "southern party," a conservative in finance, opposed
to the provincial innovations sponsored by men like Chang Chih-tung, who represented the
"northern party." Chang, however, had the ear of Prince Ch'un. Weng has been cited as
personifying the issues involved in the central-provincial struggle for power, but in view
of the political factions involved, this is not at all certain. T o the extent that he was op-
posed to any modernization of the economy, he was typical of the more conservative scholars,
and his criticism of any such initiative, whether provincial or not, would stem from this
opposition. T h e defeat of China in the First Sino-Japanese War made him at least a temporary
convert to reform, but it is probable that he did not support the emperor's full reform pro-
gram and may have been dismissed from his presidency of the Board for this reason.

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Monetary Reform and the Mint Question 217
the big-cash were to be replaced had an immediate and unsettling effect
on the Peking exchange markets. The local tael was worth 14 tiao and was
therefore payable with 700 big-cash. The announcement of the projected
currency reform created a premium on notes, so that 9,000 ch'ien worth of
notes would settle a debt of 14,000 ch'ien, 14 tiao, or one tael.18 The model
in Figure 6 (Chapter V I ) indicated a 1:2 relationship between the ta-ch'ien
unit of account, which denominated the big-cash, and the ching-ch'ien,
which denominated the paper money. Therefore, a debt payable in 700
ten-denomination big cash should require tender of notes with a face value
of 1,400 ch'ien. The magnitude of the premium at which paper money was
passing in relation to big-cash is now apparent. Indeed, this "flight to paper"
is the reverse of the situation described in "Further depreciation of notes,
1861," at the end of Chapter VI.
That notes should be at a premium over big-cash requires an explanation.
In a metallic currency system an underweight coin may nevertheless pass
current at par if it is thought likely to pass unchallenged. The announce-
ment that big-cash would be exchanged for standard coins made it extremely
likely that, upon presentation of the coins for exchange, the government
shroff or teller would reject underweight coins. The first effect of this was
to make the worst of such coins pass at a discount; the second effect was
to make the use of paper notes more attractive. Providing the bank re-
mained solvent, paper notes eliminated the uncertainty to which big-cash
were now subject. But the bankers were concerned lest they should be
required to redeem their notes in standard cash at the original rate of ex-
change rather than on the basis of the existing market rate between big-
cash and standard cash. A 14-tiao note, if there were such a denomination,
would be redeemable with 700 big-cash, but if the original rate of exchange
were insisted upon, the bankers would be required to pay 7,000 standard
cash rather than 1,400. Bankers naturally tried to call in their notes while
still redeemable in big-cash and to limit their issue. The increased demand
for notes at a time of decreasing supply caused them to pass at a 36 per cent
premium over big-cash.
These attitudes were the consequence of speculation rather than certain
knowledge, and the metropolitan authorities attempted to assure the people
that legal big-cash of 0.2 liang minimum weight cast by the government
mints would be accepted at par and notes made redeemable at the rate of
two standard cash to one big-cash.19 Several edicts were issued warning
against speculators, rumors, and attempts to affect the exchanges, but the
confusion continued until the new standard cash were put into circula-

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2i8 Money and Monetary Policy in China

tion in 1888.20 The currency of the capital was once more the traditional
copper cash of China.
Provincial reaction. The first record of new cash being cast after the
Hsien-feng period actually precedes the 1887 edict of the Empress Dowager.
In 1885 the Governor of Fukien proposed the casting of a cash coin weigh-
ing 0.085 liang, composed of 50 per cent Japanese copper and 50 per cent
zinc. 21 In the memorial asking imperial approval he stated that standard
cash had not been cast since the Hsien-feng period but implied that bank
money had served the needs of the Foochow business community. A banking
crisis made it imperative that coins be cast, but the cost of production, the
details of which he submitted with the memorial, made it necessary to
reduce the weight. His memorial was referred to the Board of Revenue,
which disapproved the weight and referred to the standard of 0.1 liang
established for the metropolitan mints in 1853.22 The outcome of this dis-
agreement is important because it reflects on the relative power position of
the central government and the provincial authorities on a point of con-
siderable significance. Weight uniformity was a traditional central govern-
ment monetary policy, for the supervision of which the central government
was responsible — though frequently, unsuccessfully. The provincial author-
ity had made a clear case as to the cost situation, and refusal of the Empress
to approve the lower weight could lead to one of three possible actions —
defiance of the imperial will (cloaked, no doubt, to make it palatable in the
capital), compliance with the heavier weight requirement, or abandonment
of the casting project.
The recommendation of the Board of Revenue may have been referred to
the Governor of Fukien for comment, but in any case, in 1886 he decided
to cast the lighter coin and memorialized again for approval of an action
already taken. However, in 1887 the governor memorialized that production
of the light cash had ceased with the floods which destroyed the mint, and
that he was now casting cash weighing 0.1 liang in accordance with detailed
Board of Revenue regulations.23 This, he stated, entailed a loss, but the
increased weight did not make the cash so heavy that melting was en-
couraged. T h e imperial government had proved itself capable of maintain-
ing the traditional monetary policy. The provincial authority had been able
to comply, first, because Japanese copper had been available — and it is
relevant to note that Fukien was the first province to reopen its mints —
and, secondly, because the need in the community had been overwhelming.
The premium placed on cash covered the extra weight, and melting was
not, therefore, a problem.

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Monetary Reform and the Mint Question 219
During 1887, initial provincial responses were received to the imperial
currency reform edict. Hupei, Kiangsi, Chekiang, and Anhui were ordered
to report on the number of cash they could send without disrupting the
local market. Hupei agreed to send 20,000 strings (ch'uan) a month, and
the arrival of cash from Kiangsi and Chekiang was reported in Tientsin.24
Mints were opened in Hupei, Kiangsi, Chekiang, Shantung, Shansi, and
Shensi during the years 1887-1889, and these provinces undertook to obtain
Japanese copper, which they were permitted to import duty free, and made
inquiries about the cost of foreign minting machinery.25 The weight of the
new cash was standardized at 0.1 liang in compliance with the regulations
of the Board of Revenue, but the composition varied, as it had before, in
accordance with local supply conditions.26 Two furnaces were opened in
Tientsin and Paoting in Chihli, but casting continued according to tradi-
tional methods until the arrival of the machinery ordered from England.27
This burst of activity did not solve the country's currency problems, if
only because the requirements were so great that more time was needed.
But they did reflect on the ability of the governments, both central and
provincial, to undertake a coordinated reform within the traditional context.
Further success would have to await the improvement of the copper supply
from Yunnan.
Copper supply. With the exception of a few mines in the northeast and
center of Yunnan Province, the Mohammedan rebellion effectively prevented
mining.28 The rebellion was finally crushed in 1873, but a reorganization
of the mining industry did not occur until the 1887 reappointment of T'ang
Chiung to Yunnan. Typically, mining was undertaken by a capitalist or
proprietor who secured a mine superintendent or I(o-chang. The l(o-chang
hired up to fifteen workers and together they exploited the mine, selling
the mineral to the proprietor at an agreed price and sharing the profits.
The proprietor had then to process the ore, which was either pyrite or
oxide, and sell half to the government at the official price. The remainder
he could sell on the open market, but from these proceeds had to pay local
taxes and any irregular exaction which the local official successfully applied.
Emile Rocher, a mining engineer who worked in Yunnan, reported in 1880
that few were willing to risk their capital under these conditions and in
an area in which peace had not been fully restored.29 But in 1875 and 1876
regulations establishing a new route by which Yunnan copper was to be
transported to the Yangtze suggest that some production had begun and
that limited supplies may have been reaching the imperial mints.
T'ang Chiung set himself the task of encouraging larger scale operations

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220 Money and Monetary Policy in China

through joint-stock companies and through more thorough surveying of


the mining area. H e brought Japanese technicians to the province and they
reported the discovery of new veins of quality ore. 30 Shanghai newspapers
reported the formation of various groups to provide capital for the exploita-
tion of the mines, and the Emperor ordered the provinces to provide a
total of 500,000 taels for the purchase of copper from the new companies.
Of the sum first promised only 150,000 taels arrived, whereupon a further
one million taels were ordered, and over the years T ' a n g did receive a
steady supply of funds, although not without frequent appeals and edicts.
T h e results, however, were not encouraging. T ' a n g met with one delay
after another and was constantly harassed with the need to produce im-
mediate results as the provincial mints again attempted full-scale production.
Attempts to introduce machinery into the province were hampered by the
cost of transportation, the chance of damage to the machinery en route,
and the technical problems of operation. 3 1
By 1895 the problem had still not been solved, although the central gov-
ernment had perhaps done all it could within the traditional framework to
implement this important aspect of monetary policy. T o do more would
probably have required the government to undertake railroad and power
construction for this purpose alone. Securing copper from Japan was an
easier and, for the time being, a more practical solution. T h e Yunnan cop-
per mines could not be developed too far beyond the limitations of the rest
of the economy with which they had essential connections.
T h e central and provincial governments were pursuing a constructive
and active monetary policy. They were only partially successful, and even
within the traditional sector their measures utilized Western techniques.
T h e new provincial mints used some Western machinery and there was
serious inquiry about further use. T h e superintendent of the mines sought
to introduce Western techniques, and did bring trained Japanese to the area,
but he was hampered by real economic factors, too costly to surmount.
In the following section reform will be followed to the climax — the estab-
lishment of the Canton and Tientsin mints.

Reform in the Silver Sector

Foreign advice and Chinese reaction. T o agree, as all foreigners did, that
the Chinese currency system was in need of reform did not necessarily
result in agreement as to what that reform should be nor how it should
be executed. T h e failure of local monetary reform to provide an adequate

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Monetary Reform and the Mint Question 221
currency for the treaty ports had led to the ambitious H o n g Kong mint
project. Its closing suggested to the foreign residents that a convenient
currency, even in the treaty ports, depended upon the cooperation of Chi-
nese officials and their willingness to experiment with the minting of a
silver coin. Within the limitations of their jurisdiction the provincial officials
did cooperate. They officiated at joint assays of new dollar coins, assisted
in the measures required to enforce the abandonment of the Spanish dollar,
agreed to accept tax revenue in dollars and to permit dollars to circulate,
and issued regulations forbidding the counterfeiting of approved foreign
dollar coins. For many of these measures they sought and received imperial
approval. But such measures only touched the treaty ports and, to a lesser
extent, the provinces in which they were located; the foreigners sought a
thorough reform which would be national in scope and which implied the
minting of a dollar coin under modern conditions and central direction.
It was in their advocacy of this empire-wide reform that the foreigners met
with the rebuff which has created the incorrect impression that China was
not aware of the need for an improvement of the currency.
As early as 1853 there was a public meeting of foreign residents in Shang-
hai to urge an imperial mint. 32 In the negotiations over treaty revision in
1858 the Americans requested that the imperial government mint a dollar
coin to facilitate the payment of customs. 33 In 1867 the Tientsin community,
in a series of proposals relative to the negotiations for a new treaty sent to
Sir Rutherford Alcock, the British minister in Peking, stated:

We believe that both the government and the people would benefit by the establish-
ment of a fixed currency. This would necessitate the establishment of a
mint . . , " 3 i

Nearly ten years later, in 1876, the Shanghai Chamber of Commerce was
successful in having Sir Thomas Wade, the new British Minister, again
present the case in favor of an imperial mint to Chinese officials in the
capital. 35 A discordant note came from the H o n g Kong Chamber of Com-
merce, which met to consider the problem of reform at the request of the
Shanghai chamber. H o n g Kong opposed a Chinese mint on the ground
that the Chinese government could not be trusted to maintain the correct
standard of the coins. In any case, the H o n g Kong Chamber wisely noted,
the Chinese government would not act on the request of foreigners. 36 An-
other discordant note was struck by the Celestial Empire, a Shanghai news-
paper which advocated a less aggressive China policy than the North-China
Herald. It proposed simply an extension of the \ung-l{u or public assay

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222 Money and Monetary Policy in China
system and retention of bullion as the sole means of payment in the silver
sector. 37
Even more persistent than the foreigners' opinion on the need for an
imperial mint had been the official Chinese refusal to consider it.* In 1858
the Grand Council memorialized, "The American barbarians request to
mint silver coins: China has always used sycee silver and there is no need
of coins besides." 3 8 W h e n W a d e first approached Grand Councillor W e n -
hsiang (1818-1876) in 1861, the latter's objection was that the people would
not accept a government-sponsored change. In 1876, however, Wen-hsiang
was not quite so certain. "Fifteen years ago," he is reported as saying, "the
people would not have accepted a change, thinking the government made
something out of it. But the people have accepted Hong Kong dollar coins,
Japanese silver yen and United States trade dollars." 3 9 T h e official reply
received in 1877 from the Tsungli Yamen, the Chinese official body responsi-
ble for foreign affairs, did not reflect such wavering:

The Yamen has to observe that a difference exists between the monetary system
by law established in China and in other countries, and that the nature of the
case is such as to preclude the idea of uniformity . . . it now remains to be stated
that the establishment of a mint on the foreign system for the introduction of a
coinage by the Chinese government — which would be tantamount to inducing
the host to adapt himself to the convenience of his guest — would be productive,
there is serious reason to believe, of abuses so manifold in nature . . . that the
introduction of such a coinage cannot be undertaken. 40

But the Chinese were themselves already taking an initiative in response


to the wholly Chinese stimuli of actual monetary requirements.
Tso Tsung-t'ang had mentioned the use of foreign machinery for the
minting of coins as early as 1865, and the memorial in which this proposal
appears had been accepted. In 1887 the Empress Dowager ordered the pro-
vincial authorities to buy foreign equipment and to cast copper coins. In
the same year Chang Chih-tung's project to mint silver dollars was ap-
proved. Peking's rebuff of the foreign reform proposals was not a refusal
to reform the currency; it was not a refusal to use modern equipment. It

* T h e Chinese position was correct, from an economic point of view. T h e reasons for this
were considered in Chapter I. T h e Chinese fully understood the difficulty of producing and
maintaining a national dollar coinage, given the administrative customs of the empire. The
Western skeptics, too, w e r e closer to reality than the reformers and their demands. T h e "suc-
cess" of the Canton mint, described below, is, paradoxically, evidence in support of the
Chinese traditional objections.
Although the Dragon Dollar was historically the forerunner of a national currency, it did
not gain acceptance in the period of this study and was not responsible for the success of the
mint.

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Monetary Reform and the Mint Question 223

was the insistence that the traditional division of responsibilities between


the imperial and the provincial authorities remain unchanged. T h e central
government had never been responsible for actually providing the coinage
of any but the metropolitan area. The foreign demands would have re-
quired a fundamental revision in the monetary policy of the Ch'ing dynasty,
and as yet the Empress Dowager did not consider this necessary. The leader-
ship in the use of foreign machinery and in the establishment of a mint
for the coining of silver dollars came from the provinces. This must not
be considered as evidence of a new provincial power, but rather as a
manifestation of the traditional policy of the dynasty, approved and fostered
in Peking. More drastic reforms would be forced upon the Chinese govern-
ment, but not until 1902, after the Boxer debacle. 41
Chinese silver coins prior to 1889. Chinese silver coins minted prior to the
establishment of the modern Canton mint in 1889 may be roughly divided
into three categories: first, those minted for use beyond China proper, in
areas in which the traditional coinage system of China was not in full
force; secondly, imitations of foreign dollars cast without authority; thirdly,
silver coins cast in China proper which were in a sense predecessors of the
standard dollar cast in Canton. However limited this coinage may have
been, it provided a precedent; there was nothing sacred about the non-
minting of silver. In an empire which was reluctant to accept foreign in-
novations without criticism, this was useful.
T h e Lhasa mint was established by the Dalai Lama and the Chinese
resident in 1793 and cast coins of "pure silver" weighing 0.1 liang and 0.05
liang, resembling those of Nepalese origin which circulated in Tibet. It
would appear that the coins passed at a premium over their silver content,
since nine of the heavier and eighteen of the lighter passed current at a
tael; the seignorage was 10 per cent. 42
Tso Tsung-t'ang, Governor General of Shensi and Kansu, issued a silver
coin weighing 0.1 liang with the traditional center hole from his Lanchow
arsenal in 1876. This was followed in 1878 by a new silver coin, without the
center hole, for circulation in Sinkiang 4 3 In 1884 the Kirin arsenal struck
trial tael coins of chi-p'ing weight, but these were not approved by the
Empress Dowager. In 1885 four silver coins, weighing 0.1, 0.3, 0.5, and 0.7
liang, were minted to overcome the shortage of cash coins. Some 5,000 liang
of silver were taken from the military funds, minted, and paid to the
soldiers.44 They are said not to have been popular and were later melted
down, probably owing to the opposition of local merchants who issued their
own notes.

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224 Money and Monetary Policy in China
The premium placed on the Spanish dollar until 1858 was sufficiently high
that counterfeiters were naturally attracted. Counterfeiting a foreign coin,
however, was more difficult — and costly — than counterfeiting one of the
poorly made cash coins of China. That some of the Spanish dollars coming
out from Europe were counterfeit is known, but they were too well made
to be detected.45 Chinese imitation Spanish dollars made without govern-
ment approval were detected and, despite their slight superiority in silver
content, passed at a discount. In one case it was reported that the dies came
from Europe, and that over 100 workmen were employed in this unofficial
enterprise.46 The American Commissioner of Trade requested that these
dollars be made legal tender for the payment of duties, but the provincial
authorities refused.47
There were, however, official silver dollar coins. Dollar coins were cast
in Fukien during the Tao-kuang period (1821-1850). In 1837 such coins
were struck for the payment of troops in Taiwan and marked "72 by the
Treasury scales." A similar coin of slightly lesser weight was minted in
1845, and in 1853 a coin was minted, probably in Taiwan, again for pay-
ment of troops engaged in putting down a local uprising.48 In 1878 the Wen-
chow customs officer reported that dollars had been minted at T'aichow
and Wenchow, the latter being used as the basis for the formula in which
customs duties were paid.49 A minted silver coin was also reported pro-
duced in Kweichow in 1888.50
The early silver dollars were produced in such slight numbers that they
had no standing in their own right and passed at a discount in terms of
the better known foreign dollars. The question of their reliability and the
period of time during which they would continue to be minted undoubtedly
affected this discount.
Most currency reformers, both foreign and Chinese, urged a dollar coin.
The tael coin had its supporters, however, on the ground that such a coin
would seem less foreign, being based on a traditional Chinese unit of ac-
count— the obvious response being, of course, that the dollar was more
familiar as a silver coin. It was the dollar that the Canton mint produced.
However, in 1856 during the debates over the abandonment of the Spanish
dollar in Shanghai, trial tael coins were issued under the control of the
local taotai. They weighed a ts'ao-p'ing liang and were inscribed with the
name of the manufacturers.51 Their manufacture was not continued.52 In
1867 the Hong Kong mint produced an experimental tael coin which was
rejected by the imperial government.53 Although made expressly for China,

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Monetary Reform and the Mint Question 225
the coin bore the admirable sentiment, "Honi soit qui mal у pense," the
relevance of which the Chinese did not appreciate.
The Canton and Tientsin mints. The initiative of Chang Chih-tung, Gov-
ernor General of Liang-Kuang (Kwangsi and Kwangtung), lies not in his
establishment of a mint — he and other provincial authorities were ordered
to do this in the imperial edict of 1877 — but rather in his proposal that
silver dollars be minted in addition to the cash required by Peking. Nor was
Chang the first to mint silver coins by modern machinery in China, but
he appears to have been the first to propose a scheme which would, in effect,
give the Chinese dollar coin a potentially national circulation. Chang's spe-
cific proposals for a dollar coinage were unsound, his dollar as originally
designed failed to gain general acceptance, and Chang himself was trans-
ferred to Wuchang in 1889 on the very opening of his mint. These three
circumstances led contemporary observers quite reasonably to expect the
mint to close. They considered the incident another example of abortive
Chinese attempts to modernize. 54 Yet the Canton mint survived both faulty
planning and loss of patron, and this survival marks the beginning of modern
Chinese monetary history.
In 1887 Chang Chih-tung memorialized that he was setting up a cash
mint under the terms of the imperial edict, but he also requested permission
to mint silver dollars. H e touched on the poor state of the currency and
explained that Mexican dollars were circulating in Kwangsi, Fukien, Taiwan,
Shantung, Chihli, and several of the interior provinces, on the northeast
frontier, and wherever there were treaty ports. 55 From the beginning Chang
regarded his dollar as the forerunner of a national currency, making as a
condition of the permission he might receive his willingness to defer to any
national mint to be established by the Board of Revenue. 56 T h e Canton
dollar would, in effect, be a pilot scheme. In 1888 Chang memorialized the
details of his scheme. 57 The Kwangtung Provincial Treasurer, Kao Ch'ung-
chi, after contacting foreign consuls in Canton, had submitted a plan which
estimated total capital costs, current expenses, output, and bullion supply.
The weakness of the scheme rested in the excessive weight of 0.73 Kuping
liang, which would make the new dollars heavier than the Mexican. Despite
the difficulties encountered by the American trade dollar and the French
piastre de commerce, Chang hoped that a heavier dollar would be accepted
at a premium and would be more popular for that reason. H e had one
factor in his favor; he could grant the dollar the necessary premium when
accepting it in payment of taxes.

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226 Money and Monetary Policy in China

The imperial approval was granted and the Canton mint issued its first
coins in 1889. They were all based on the 0.73 Kuping liang weight and
were unsuccessful. After being called in, the new coins were melted and
reminted on a 0.72 liang basis.58 A report on the operations of the mint by
the editor of the North-China Herald in 1892 was generous in its praises
for the mint's orderliness and efficiency. The mint was reported capable of
producing two million cash per day with an additional capacity for 100,000
silver pieces. But between May 1890 and December 1891 only 43,933 dollars,
the Kwangtung dragon dollars, had been minted: even the lighter dollar
had not, in fact, been a success.59 This may be accounted for by the re-
luctance of the business community to accept any new dollar, especially one
of Chinese origin, by the confusion over the change of weight of the dollar,
and by the reported practice of the mint of taking Treasury silver as 1.000
fine. The survival of the mint depended upon its minting of subsidiary
coins: 50-cent pieces with a fineness of .860, and 20-, 10-, and 5-cent pieces
with a fineness of .820. These were in demand along the China coast,
especially in Fukien where the shortage of cash had necessitated the circu-
lation of paper money of dangerously low denomination. Since these notes
were often issued by money-changers with little capital or reputation, there
were frequent failures and consequent suffering and disruption of trade.
Hong Kong subsidiary coinage had been introduced, but the Canton coins
were now ordered to circulate at par with those from Hong Kong, and
soon replaced them. 60 Thus through the profits to be made from the sub-
sidiary coins, the fineness of which was less than that of the full-bodied
dollar coin of .900, the mint survived until Chinese dollars gained greater
acceptance.
The Canton dollar was declared legal tender for the payment of customs
duties, and from the first it had a limited circulation. In 1890 silver dollars
were struck experimentally at the a senal of Taiyuan in Shansi but were
not circulated. 61 There was a coinage of dollars in Shantung in the same
year. But it was not until the Hupeh mint, another Chang Chih-tung
project, was approved in 1893 that it may be said the leadership of Canton
was being followed elsewhere in China. The Hupeh mint was established
at Wuchang and began operations in 1895.
The parallel founding of the Tientsin mint under the direction of the
Chihli Governor General, Li Hung-chang, was also a product of the 1877
imperial edict and the currency reforms which it inspired. Li enlisted the
aid of a former Fukien provincial treasurer, Ch'en Pao-ching, and in 1887
memorialized detailed plans for a modern mint using British machinery. 62

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Monetary Reform and the Mint Question 227

Unfortunately, technical difficulties arose over the punching of the center


hole; the machines could not be properly adjusted to prevent at the same
time the breaking of the coin itself. With the rising price of copper and
lead and the higher cost of transport of native ore to Tientsin, Li claimed
that his mint was in a less advantageous position than that in Canton and
received the imperial approval for closure. Cash continued to be cast by
the traditional methods, and the modern mint was not reopened until 1896.
Li had also intended to mint a silver dollar; the prototype survives in
collections, but the minting of China's first modern silver coinage was left
to Canton. 63
The qualified success of Canton and the failure of Tientsin cannot be
explained in political or institutional terms. These factors, indeed, pointed
to failure in Canton. Li Hung-chang's reputation as a modernizer was of
long standing; Chang Chih-tung was a scholar whom many thought im-
practical. But Li Han-chang (Anhwei, 1821-1899, elder brother of Li Hung-
chang), who succeeded Chang as Governor General of Kwangsi and
Kwangtung, carried through the plans of his predecessor, while Li Hung-
chang shelved his own plans for seven years even though the machinery had
been actually installed. A partial explanation may be found in the choice
of machinery, for the Canton mint was able to turn out traditional cash coins.
Another may rest with the willingness of the Kwangtung authorities to
subsidize the mint until the sale of subsidiary coinage should make the
operation profitable. Li Hung-chang, however, was authorized to use the
salt revenue to subsidize his minting of cash for the capital. Undoubtedly
the problem of bullion supply was one of the chief economic factors in-
volved, for Chang Chih-tung made plans for his copper and silver supply
to be bought as available in the cheapest markets, local or foreign, and the
cost of transport from Europe and from Yunnan would have been slightly
but significantly lower. Finally, Chang Chih-tung's silver coinage scheme
was more fully worked out and was not subsidiary to his copper cash under-
taking.

The establishment of the Canton mint was the climax of a series of re-
forms initiated under imperial instructions and executed within the frame-
work of traditional monetary policy. It was recognized as carrying within it
the seeds of a modern national currency policy, and it marked, in fact, the
beginning of that currency. But although the reforms of 1887 and 1888 can
be explained within the traditional framework, the actual measures were
evidence of the impact of foreign ideas. That such a combination of tradi-

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228 Money and Monetary Policy in China

tional policy and foreign ideas, evident, for example, in the use of steam-
ships to transport tribute grain, would eventually have led to a more uni-
fied direction of the modernization process is a supposition for which some
evidence has been presented. Certainly the currency reforms are proof that
the imperial will could be imposed as of old. If the efforts of the so-called
"restoration" government during the T'ung-chih period (1862-1874) failed
to accomplish its reform, whereas the later edicts of the same Empress
Dowager were successful in the Kuang-hsii period, the explanation is to be
found not in such catch phrases as "decline of the dynasty" or "provincial
foci of power," but rather in the changed economic conditions, including
the increased need for a sound subsidiary coinage, which made copper and
silver coinage again a practical proposal. With this conclusion the history
of the British Raj agrees; the Calcutta mint's British dollar postdated the
Canton and Hupeh mints and followed a further depreciation of silver in
world markets.

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CONCLUSION

The Monetary System


and China's Economic Development

Foreigners did not approve of the monetary system of China. Its com-
plexities annoyed them and its esoteric nature made them suspicious of it.
To the treaty-port merchant the monetary system embodied the worst fea-
tures of the Chinese character — may even have been responsible for them.
Arguments over petty payments would naturally make a people sly and
shifty. The risks involved in larger transactions would hinder the growth
of trade and would certainly check modernization of the economy. How,
for example, could there be a railway system if there were no currency which
one could use to buy a ticket? Paying in cash coins would create so many
arguments that you'd miss the train! 1
The Chinese monetary system was, however, a highly developed metallic
system of the type familiar to early modern Europe. Its peculiarities can
be systematized, many of its inconveniences guarded against or avoided.
Exchanges could be settled in advance, remittances made, bank money and
bank notes used. There were native banks to provide credit facilities for
domestic trade; there were exchange banks to connect China with New
York, London, and the markets of the world. New industry would find a
banking system adequate for meeting its immediate requirements. Funds
could be borrowed to pay for raw materials and could be borrowed again on
the security of the finished products. If the currency were sufficiently confused
to provide difficulties in meeting the payroll, this was overcome by such
devices as tokens, small notes, merchants' credits — a Chinese entrepreneur
capable of building a factory would, like his Western counterpart before him,
be capable of solving this minor problem!
This is not to suggest that the foreign criticisms were totally without
validity. The costs of the Chinese monetary system were unnecessarily high;
not every village had adequate credit facilities, not every community could

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230 Money and Monetary Policy in China
avoid the inconveniences of small cash coins by using bank money. But
foreign criticisms were not particularly helpful, because they either stressed
the confusion without being constructive, or suggested alternatives which
were unrealistic. The Chinese themselves were not insensitive to the faults
of the system; it was the Chinese, after all, who bore the main burden of
its inefficiencies — although this may not be immediately apparent in read-
ing Western contemporaries. And the Chinese, from the Throne to the
local magistrate, from the native banker to the taxpayer, devoted considerable
attention to reform of the system as it existed. Their efforts were often suc-
cessful, at least locally and for short periods. Total monetary reform was,
however, to be part of the more general change which came to China after
the period being considered here.
The role of the monetary system in the Chinese economy cannot be fully
appreciated without notice of the relation of China's silver currency to the
gold standard of Europe and the United States. A satisfactory account of
the silver exchanges would require an exposition fully as detailed as the
present study of China's monetary system, and it lies outside the scope of
the present work. However, it is apparent that the decline in the gold
price of silver after 1872 and especially after 1890 was bound to have a pro-
found effect. First, the fall in the gold price o£ silver forced sound exchange
banks to cover their silver position and to minimize investment in silver area
fixed assets, except to the extent that their deposit liabilities were payable
in silver. Secondly, a fall in the price of silver raised the price of goods
imported from gold standard areas, including those on a sterling-exchange
standard. Thus the closing of the mints in India to free coinage in 1893
gave, for example, the Shanghai textile industry a competitive advantage
which enabled it better to meet Indian competition. At the same time China's
exports became cheaper, and this encouraged the "muck and truck" trade
and the processing enterprises which, with their foreign machinery, made
the trade possible. The increased industrial activity in Shanghai between
1890 and 1895 may have been indicative of the changed attitude of Chinese
officials, but it is likely that the price of silver was a more important fac-
tor.2 These are subjects for a further study.
If the domestic monetary system was not a key factor in China's failure to
develop, it was most certainly of great significance in the economy. This is
the justification for the present study. Without an understanding of money
and monetary policy, analysis of other sectors is extremely difficult — per-
haps even meaningless. It may well be that, based on these foundations, a

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Conclusion 231
further monetary history can be undertaken — one focusing, for example,
on China's international economic relations or on the credit policies of her
native and foreign-style banks. Those concerned, however, with the problem
of development must now consider other factors, for an understanding of
which this study will have relevance. Such consideration will, moreover,
require several monographic studies; we are not ready to proceed as yet
with generalizations likely to withstand criticism. The sections which fol-
low are no exception. They are not based on the degree of research which
typified the main chapters of this study. They are purposely controversial.
They are intended to stimulate further research — if only to prove the con-
tentions wrong. W e shall first be destructive in criticizing the "institutional"
approach to development explanations; secondly, we shall suggest some fac-
tors which, from our readings done during the course of the main study,
appear to be significant in the nineteenth-century Chinese economy.

The Institutional Approach — A Criticism

That historical events take place within an institutional framework is a


commonplace generally accepted. However, in studying historical change
neither the institutions nor the economic philosophy is fixed, and they can-
not be assigned as causal merely because they provide the framework in
terms of which change is rejected. The rejection of change may rest not so
much on the strength of the institutions or the pervasiveness of the tradi-
tional outlook as on the weakness of the progressive forces within the
society. The real causal relationship may be hidden in the retention of
institutional formalities which no longer have power to affect the course
of events. The Canton trade may be discussed officially in terms of the
tributary system, but the actual role of this trade cannot be hidden by the
terminology used, and the actions of officials indicate that they realized its
economic importance not as tribute but as international trade, mutually
significant to both Chinese and foreigners.
The role of the institutional framework in economic development is
determined by the nature of the economic forces at work within the society.
Analysis is dependent upon a full understanding of these forces. Researches
into Chinese economic history have not been carried far enough to insure
such an understanding. But to the question whether economic or non-
economic forces were the deciding factors in change or stagnation, there
may be no satisfactory answer. The question may not even be an interesting

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232 Money and Monetary Policy in China
one, since the type of problem being solved and the sector of primary inter-
est may simply dictate where to look first rather than require a philosophi-
cally impossible decision as to the primary cause of many causes.
Lack of knowledge of the economic forces involved has resulted in the
citing of the same institutional features to explain opposing economic trends
— an indication that descripiton is being mistaken for analysis and that the
economic factors in the situation are either unexplored or neglected. Chinese
economic philosophy has been used to explain China's reluctance to modern-
ize and also the success of the Chinese in business. It has been used to
emphasize the concept of economic self-sufficiency, the virtues of agriculture,
and also the crass materialism which reportedly motivated the successful
Chinese entrepreneur.3
The same aspects of the Chinese family system may be used to explain
how the wealth of the Chinese is dissipated in its support or is concentrated
for widespread business operations.4 The corruption of officials may be used
to explain the insecurity of property or the efficacy of bribes in obtaining
business licenses,5 and if property is insecure it is not clear why its liquidity
would be a virtue. In Foochow, land was reported as a more popular invest-
ment than trade because it provided a way of avoiding the exactions of
local officials.6 The corruption of officials might just as likely cause a
preference for such fixed assets as machinery and factory buildings.
The majority of students of China are not economists. Quite naturally
the focus of their studies has been on the peculiar institutions of China and
the thought patterns of the Chinese. This approach may accentuate the
Chinese aspects of any economic problem, either by neglecting to note that
similar noneconomic conditions existed in countries which did modernize
or by failing to evaluate those few economic facts which are known.7 Thus
the Chinese system of inheritance is contrasted with English primogeniture,
although the English mercantile community of the eighteenth century did
not practice primogeniture.8 The economic effects of Chinese family relation-
ships are emphasized, although the importance of Quaker clan relationships
in the English industrial revolution would suggest potentially different
consequences.9 When in a recent study of the institutional aspects of the
nineteenth-century Chinese economy the author writes, "Employment of
the device of accepting partial payment from shareholders against the par
value of the shares for which they had subscribed should be noted as one
more indication of the great difficulties faced by an entrepreneur seeking
capital for a modern-type enterprise," 10 he is apparently unaware that this

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Conclusion 233
is a sound business practice used by foreign as well as Chinese companies,
including, for example, the Hongkong and Shanghai Banking Corporation.
As for neglect of the known economic or business factors, the Newchwang
bean press company is an excellent example. The first report on the com-
pany's activities ascribed its failure to the opposition of tradition-bound
mandarins and to the objections of the local guilds. Mentioned almost as a
footnote was the fact that the foreign machinery was not as efficient as
native methods. Ten years later a similar report retelling this story omitted
altogether reference to the unsuitability of the machinery and concentrated
only on "native opposition." 11
One basic problem of the institutional method and of the attempts of
sociologists to describe the factors responsible for the lack of economic
modernization in nineteenth-century China is that generalization appears
an essential element of these approaches. In the study of economic develop-
ment, class generalizations may not be helpful, since it is those exceptions
to the class pattern who are responsible for the peculiar reaction to economic
forces which is called "development." 12 Such generalizations conclude not
surprisingly that Chinese institutions were unfavorable to economic develop-
ment— but this might be said of the institutions of all pre-industrial socie-
ties. The question is not whether they were unfavorable but whether there
was motivation tending to cause a breakdown of those institutional patterns
unfriendly to development. Where development in fact took place, it is
possible to trace back to the point of breakdown, but where development
did not take place, potential points of breakdown are obscure and the very
concept tends to lack objectivity. Attention to those sectors of the economy
which are often slighted in descriptive essays, just because they are not
important in the traditional context, should provide an insight into the
complex negative relationships which may explain the failure to modernize.
In describing the course of China's nineteenth-century economy, it is only
natural that much should be written on the compradores, the merchants,
and the more famous of the native bankers — that is, on those responsible for
that sector of the economy which was the most important. But, in attempting
to explain the lack of economic change, any such exclusive attention is un-
wise. The impetus for change might reasonably be expected to come either
from individuals within the traditionally important sector who deviated or
attempted to deviate from the established pattern, or from new men who
sought through modernization to win economic power. The task of obtain-
ing information of this kind, unless contemporary examples in southeast

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234 Money and Monetary Policy in China
Asia are relevant, is formidable, but until the research is attempted there
is no need as yet to parody the poet and philosophize vaguely that some
Chinese Arkwright here may lie.

Economic Factors in China's Development

Production and unemployment. "To encourage agriculture and the mul-


berry tree," expresses the traditional Chinese attitude to production. If a
man does not plough the fields then there will be a man without food;
if there is a woman who does not spin then there will be a person who
will suffer cold. To the extent that the traditional philosophy placed the
merchant low in the social scale it was through fear that the attractiveness
of the profits to be obtained from trade would lure the farmers away from
their fields and so create famine. Nor were these merely slogans or timeworn
cliches. The Chinese economic historian Yen Chung-p'ing, for example, has
compiled a list of officials of the Ming and Ch'ing dynasties who promoted
industry in the area for which they were responsible.13 Not all the projects
were successful — promoting the silk industry, for example, in an area
where supplies were costly and the market slight would not be profitable —
but this does not detract from the accuracy of the conclusion that Chinese
officials were conscious of the need for production.
It does not follow from this that Chinese officials welcomed industrializa-
tion. Production served two functions: it provided the necessities of life
and it provided employment. Although unemployment might not be sup-
posed so serious a problem in a country in which the family was an im-
portant institution, there was a limit to the number of people a family
could or would support. If therefore an official was confronted with the
introduction of labor-saving devices, he had to weigh the matter in terms
of the effects to employment within his local district. In making his assess-
ment he had also to consider that the police powers of the government were
inadequate to cope with serious civil disturbances, and that any trouble re-
ported to his superiors would be considered against him. He could not, there-
fore, take a long-run view, assuming that those thrown out of work by the
new machines would eventually be absorbed into a new industrial society.
He had to prevent unemployment, had to prevent the young men from leav-
ing the community and taking to the hills as bandits.
A British student interpreter reported his failure to make the Chinese
understand that machinery could increase employment by, in this case, in-

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Conclusion 235
creasing the output of a coal mine and thereby increasing the number of
people required to carry the coal from the mine to the market. 14 Even had
there been machinery suitable for the mines, the increased production would
have disrupted the market, with effects which the local official could not
predict. It is significant that Feng Kuei-fen, in advocating the use of foreign
machinery in agriculture, argued that it was needed in the devastated areas
of central China because there was a shortage of agricultural labor there.15
Unemployment was an important factor in Chinese official reaction to
modernization. This attitude was aggravated by area specialization in domes-
tic industry. The use of machine-made products might, therefore, put a whole
district out of work, shake the foundations of the local financial system, and
send a ready-made group of rebels into the hills. The local official, anxious
for his district to remain at peace, was unlikely to encourage modernization
unless he could predict that the consequences would be almost immediately
favorable.16
More senior officials could take a wider view of the problem. The mod-
ernizers of nineteenth-century China — Li Hung-chang, Chang Chih-tung,
Tso Tsung-t'ang—had limitations on the extent to which they wished in-
dustrialization pushed, but they could see the beneficial effects of an increased
production, which they intended should replace foreign rather than domes-
tic, "native-produced" goods. Their problem was to prevent new industry
being under the control of foreigners who enjoyed extraterritorial rights in
China. Yet the Tsungli Yamen's official explanation for China's refusal to
permit the import of machinery by foreigners was that employment oppor-
tunities would be reduced.17 Their projects suffered, both in supply of capital
and in the standard of management, because of their prohibition of foreign
shareholders in the "official supervision and merchant management" com-
panies, and for their unwillingness to accept foreign technical advice or
management for a sufficient period of time to permit subsequent efficient
Chinese management of the concern.
Merchants and artisans in industry. Since the compradores, the Chinese
agents and managers of foreign companies in China, were of the merchant
class and the most knowledgeable in foreign business matters, they were
often called upon to manage officially sponsored enterprises. Their knowl-
edge of foreign trade and mercantile practice did not qualify them as manu-
facturing entrepreneurs, and they brought with them into industry attitudes
which were not so much Chinese as they were mercantile. As directors they
were interested in lending the money of the industrial enterprise to pawn-

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236 Money and Monetary Policy in China
brokers, were interested in fast turnover, in making profitable trading deals
through their connection with the manufacturing company, and in taking
their profits from the enterprise to use in trade.
The following account of Chinese industrial financing in 1883 may be an
unfair generalization, but that it was too frequently true would appear
certain.

A Chinese forms an association and draws up a prospectus in which a capital of


several lacs [100,000] of taels is set forth in the most lighthearted manner. Some
capital at all events is subscribed, and with it a site is purchased, generally from
one of the promoters who had bought the land previously at a lower price, and
is immediately mortgaged to pay the cost of earlier building operations, and
mortgages are heaped on mortgages as long as people can be found to lend
money.18

The merchant in industry tended to speculate. It was a feature which was


manifest in the history of shares on the Shanghai stock market and it may
have dominated the Chinese interest in such investment. Those desiring a
steady income could have purchased Shanghai municipal or Imperial deben-
tures, some 2.5 million taels' worth of which were listed on the Shanghai
market in 1895. But there were other reasons why merchants might fail in
industry. The 1882-1891 Decennial Report stated:

A spirit of industrial development has undoubtedly taken hold on the people


of these parts, but it does not appear yet to have been proved entirely successful
. . . I think I may say, without risk of being offensive, that some, at least, of the
concerns have not been conspicuous for the brilliancy of their management.19

Some failures were due to the uncritical use of Western methods. For
example, Malayan tin mining companies and Borneo plantations with head
offices in Shanghai did poorly.20 Often Chinese, using old methods and min-
ing alongside the modern Shanghai company, were successful. High over-
heads and deliberate dishonesty on the part of managers were two common
factors in company failures.21
The Chinese merchant, considering the possibility of establishing a modern
factory, lacked the technical ability to modernize, and his experience of
foreign attempts was not always encouraging. The typical forms of enter-
prise in the foreign sector of the Chinese economy were the agency house
and the trading company. These sponsored and became managers of the
new joint-stock companies. Except in a limited number of case studies, the
role of the agency houses as managers has not been the subject of research.
It is known that in some cases privately operated enterprises were sold as

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Conclusion 237
going concerns to the newly formed joint-stock company at considerable
profit to the former owners and new managers. That the management com-
pany may have made money while the ordinary shareholder made less than
expected is a subject for further study, but it is not the relevant point here.
The essential fact is that the Chinese view of Western manufacturing and
modern service industries was extremely limited and not altogether favorable.
The growing importance of Western imported manufactured goods would
be presented to the Chinese merchant as a trading rather than a manufactur-
ing problem; he had little opportunity to observe a Western manufacturing
entrepreneur. John and Ernest Major, who came to Shanghai in 1859 follow-
ing the closing of their silk filature factory in Italy through continued failure
of the crops in Europe, and who by 1895 were running a chemical works, a
silk-reeling establishment, a newspaper, a photolithographic publishing com-
pany, a soap factory, a match factory, and an oil press works, are a single
and fascinating exception. 23
Few foreign merchants were trained to provide the skills the Chinese
needed. This situation was described in 1908 as follows:
It is only in very recent years that great engineering firms in Europe and espe-
cially in England have made any real effort to cater for this great market and
its endless possibilities. Hitherto the practice, at most, has been to appoint as
agents firms with familiar names engaged in the silk, tea, or piece-goods trade,
as the case might be, without engineering knowledge or any special training, and,
therefore, unable to give the Chinese the information they required.23
Despite this lack of technical know-how, there is evidence to support the
thesis that the Chinese were sometimes too willing to adopt modern meth-
ods, convinced temporarily of their superiority but blinded by a speculative
situation as to the soundness of their economic and technical application.
A North-China Herald correspondent gave this report in the depression of
1885:
There are few more melancholy spectacles in Shanghai than the empty, useless,
and deserted structures, monuments of abortive enterprises which are dotted here
and there along the banks of the Huang-pu. There they stand, suggesting, at a
distance, the cheerful whirr of machinery, the busy hum of voices, but on nearer
view they are found to be nothing but the silent ghosts of factories — the graves
of enterprises which were strangled at their birth.24
Confronted with such a scene, we have little need to explain in institu-
tional rather than economic terms the Chinese investment in land, in pawn-
shops, and in other traditional outlets. Nor is it difficult to understand why,
in these circumstances, the development of Chinese industry had to depend

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238 Money and Monetary Policy in China
on the uncertain help and protection of the government and the huan-tu
shang-pan system. This would not have been a reaction peculiar to China.
The unsatisfactory performance of the merchant-compradore as a modern-
izer is not a Chinese phenomenon. The merchant class, as a class, have not
everywhere been leaders in industrial change. Evidence from Hong Kong's
prewar industrialization suggests that the artisan was an important source of
entrepreneurial talent, supplementing the contribution of individual mer-
chants. A collection of biographies of prominent treaty-port Chinese business-
men published in 1908 contains several "apprentice to factory-owner" stories *
Such men were sufficiently successful to be listed in a series of biographies,
but there may well have been others who played a more modest role and
from whose experiences some useful information relevant to a study of
China's economic history could be gained.25 Chinese laborers returning from
World War I set up machine shops in Shanghai which produced knitting
machines, small lathes, and modern bathroom boilers.26 Similar small con-
tributions may have been made elsewhere in China. That they did not suc-
ceed in modernizing the Chinese economy is obvious, but a knowledge of
their contribution, limited as it was, would be most helpful. The assumption
that modernization was to come only from the merchant class, despite his-
torical evidence to the contrary, has led to an overconcentration of study on
their efforts and has produced such incredible generalizations as the fol-
lowing:
It is unlikely that modern business in China could have sprung from the handi-
craft group. As a group artisans are primarily oriented not to the market, but to
their work. There is a staunch individualism about artisans that helps to provide
an environment in which the modern businessman can operate, but the gap be-
tween their roles is such that no ready conversion from handicraft to business
role is conceivable.27
Special problems. Each potential entrepreneur had to estimate the nature
of the economic problems peculiar to his proposed enterprise. The mod-
* Cheong Chi Pio, for example, born in Macao in 1853, was apprenticed at the age of
sixteen to a furniture manufacturer and general contractor. A foreigner gave him $300 to
start business on his own as ship's painter. He subsequently became a decorator and con-
tractor, expanding his business through advertising. He then was intrumental in founding
the Hongkew Iron Foundry in 1881, an ambitious undertaking which involved him in heavy
losses.
Yeh Ching Chong was born in 1840, the son of a poor Ningpo farmer. He began working
in an oil mill at one dollar a day but started business on his own in 1862. H e established
several silk filatures and a match factory in Shanghai and Hankow, and otherwise is re-
corded as having "promoted industry."
Soo Pao Sun, born in 1855, was apprenticed in a piece-goods store; at thirty-seven he was
prosperous and by 1907 had interests in a yarn factory and paper mills, as well as in his
shops and investment company.

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Conclusion 239
ernization of the Chinese economy could not be accomplished by the import
of machinery identical to that used in England, placed in a factory built
according to plans drawn up elsewhere. Perhaps the most obvious example
is the mining industry, where the conditions in which the ore was found
might differ from those in England. The cotton textile industry had to con-
sider the consequences of using native short staple cotton, of the Shanghai
climate, of the efficiency of Chinese labor, of the possible effects of the growth
of the Japanese textile industry.
Specifically in the cotton textile industry the following factors were listed
as working against the profitable operation of the mills: first, lack of working
capital, thus forcing the mills to cover their yarn sales immediately they were
made, as it would have been unsafe for them to risk the fluctuations of the
cotton market caused by the large exports of raw cotton to Japan; secondly,
a rise in the price of raw cotton owing to the increased demand — a 90 per
cent rise was experienced between 1904 and 1908; thirdly, the dumping of
Japanese and Indian surplus yarn; and fourthly, the high price of coal.28
It is reasonable to assume that each industry was faced with problems of
a similar nature. Their examination would be a contribution to the study of
the economic history of modern China.

The failure of China to modernize is at one level not difficult to explain.


Most countries did not develop. The foreign property-holders objecting that
tramcars along the Shanghai Bund would be noisy nuisances and the Chinese
peasant fearing the disturbance of that harmony of nature he called feng-shui
had much in common. Progress is not always obvious, even to a nineteenth-
century Englishman. Industrialization creates problems the extent of which
are unknown. The degree of coercion which has been required in the past
and is now required to force economic development suggests that its benefits
are not readily apparent or universally desired. Stagnation is a natural state.
That some people in certain countries have been caught up in a vision of
progress which included industrial development is equally obvious. However
soundly based in philosophical arguments this position may be, it is also
supported by strong economic forces which make such progress particularly
favorable to those advocating it. Adam Smith did not come from London.
The impetus to industrial change is economic. Economic forces work through
institutions, changing them and modifying them. A study of change has,
therefore, to be undertaken in terms of forces acting upon institutions. The
whole society is the object of attention — not a static society set into classes
sociologically analyzed with functions defined and tied to unchanging insti-

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240 Money and Monetary Policy in China
tutions, but a society always capable of change, subjected to natural forces
and conditions beyond its immediate control and to which it is free to react.
The study of the whole society should both precede the study of specific
forces and be later modified by it. The study of specific forces explains the
position of the whole society. Simple solutions must be avoided. The failure
of China to modernize is no more the result of the family system than of the
monetary system. Both must, however, be understood, and full understanding
includes an appreciation of their relative roles and importance. In a recent
review Professor E. G. Pulleyblank wrote:

The dominance of the Confucian view of society in China did undoubtedly in-
hibit growth and change as did that of the Christians in Europe; but the fact
that the breakthrough occurred in Europe rather than anywhere else is a unique
historical event which must be explained in terms of the peculiar concurrence of
the multiple circumstances that produced it and not solely by generalities about
the supposed inherent characteristics of European feudalism. . . , 29

or, from the point of view of China, the inherent characteristics of Chinese
society. Recognizing that the tendency to compare China and Japan is almost
as inevitable as it is of doubtful purpose, Ε. H. Norman in his important
study, Japans Emergence as a Modern Nation, wrote:

To pass judgment on the failure of China under the Ch'ing to achieve an in-
dustrial society and to contrast this with Japan's successful industrialization, the
student should by all means eschew such touchstones as patriotism and apply him-
self to a rigorous examination of the native characteristics of Chinese society, to
the inter-relationships of merchant-usurer-official-landlord. He should probe into
the reasons why merchant or state capital stopped so far short of developing into
industrial capital; he must study Chinese society as a whole.30

Before Chinese society can be restudied as a whole, a series of monographs


are required on specific topics in the Chinese economy. This has been one
such study.

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Appendix. Suggestions for Standardization

The purpose of this appendix is to offer suggestions for the handling of


Chinese monetary data. The appendix is divided into two major sections: the
first deals with problems which do not involve translation from the Chinese
language; the second section deals with Chinese terminology and its interpre-
tation.

Suggestions Not Involving Translation

1. Matters aßecting the entire monetary system: a. Generalization. Since


reliable statistical material is rare in China, the temptation to make the most
of an available series is great but should be overcome. In a table entitled
"China's Outflow of Silver and the Cash-Silver Exchange Rate," the Chinese
economic historian Yen Chung-p'ing presents the average annual exchanges
as calculated from the books of a Hopei shop for the years 1798 to 1850.1
Although the series — even if representative of China — does not prove the
proposition that the exchanges are positively correlated to the outflow of
silver, the scattered rates available from other centers indicate immediately
how unwise such generalizations are. The Chinese economy was not a na-
tional economy and cannot be treated statistically as such.
b. Simplification. To what extent can China's monetary system be simpli-
fied by disregarding differences between tael units of account or between
weights of coin? The error in combining taels would be at least 7 per cent,
and such a procedure would make it impossible to appreciate the most ob-
vious characteristics of the monetary system. Minor differences in measure-
ment and the disputes arising therefrom have to be disregarded, however,
since measurement techniques were not sufficiently accurate to make the
differences significant. Simplification can be achieved, if the information is
available, by converting various units of account into a single unit of account,
preferably the Shanghai currency tael.
c. Exchanges. During the eighteenth century the tael was worth approxi-

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242 Appendix
mately one third of a pound sterling and was so carried on the books of the
East India Company. Such a rate would involve errors up to 60 per cent in
the period 1845-1895. Especially after 1872 when the depreciation of silver
began, exchanges must be based upon current figures. This does not neces-
sarily mean the exchange of the day, however, because exchange rates both
with sterling and between silver and cash were seasonal. Whether an average
rate or a particular rate is required would depend upon the purpose of the
study.
2. The tael system: a. Fineness. "1.000 fine" should be used to mean, as it
does in the West, chemically pure silver. Contemporary reports differ as to
the basis of their fineness scale, and there is not always sufficient information
to make a conversion or even to know if one is called for* The nature of
the data, therefore, has to be mentioned if relative fineness is at all in ques-
tion.
b. Weight. A tael often defined a standard quantity of pure silver, ex-
pressed in terms of an alloy of a certain weight and fineness. It is often
useful to convert the usual expression into a pure silver weight if such mat-
ters as pars of exchange or relative silver content are at issue.
3. The cash system: a. Ch'ang-ch'ien. However clearly the three cash sys-
tems may be described, they present a problem to the reader not primarily
concerned with monetary matters — one which he may well overlook. There-
fore, all prices should be converted to the ch'ang-ch'ien system, except when
the difference is significant in the study. In any case, the system used should
be clearly identified and any conversion noted.
* An alternative basis is to take the purity of the Kuping tael as 100 touch. This system
has its locus classicus in the well-known chapter on currency in Morse, Trade and Administra-
tion. T h e thinking behind the Morse approach is this: the Chinese claimed that the Kuping
tael defined silver 1.000 fine; assay or indirect calculations based on the fixed relationship
between the Shanghai currency tael and the Kuping tael showed clearly that it was not;
either the Chinese were wrong or they didn't mean the same thing as Westerners do by the
term "1.000 fine"; but the Chinese must know what their own revenue is, or at least they
must have the right to call it what they will; therefore, the Kuping tael is 1.000 fine in a
Chinese sense, which "seems" to be less than 1.000 fine in a Western sense. Morse concluded
that the Chinese sense must be "commercially pure," on the grounds, one assumes, that it
had to have some sort of purity. T h e fallacy arises from the failure to consider whether the
Shanghai fixed exchange rate was correct, or from thinking that the assays were correct or that
the samples submitted were up to standard. These problems have been discussed in Chapter VIII.
Morse's procedure makes .987, the standard of the Kuping tael by the Shanghai formula,
equivalent to 1.000, and as a consequence calculations for other taels will show a higher
fineness than warranted by their silver content relative to chemically pure silver. Morse in his
currency studies uses the commercially pure basis for his calculations, but there does not seem
to be any advantage to this, especially since Shanghai merchants were well aware of the
real fineness of the silver circulating there. Therefore, despite the fact that many contemporary
writers followed Morse, the recommendation here is that where possible all fineness figures be
converted to a scale in which 1.000 represents silver chemically pure.

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Suggestions for Standardization 243
b. Silver exchanges. The cash price of silver was usually quoted in ch'ien
per tael, although in the hsiao-ch'ien system, quotations were often in tiao.
Quotations should be converted to ch'ang-ch'ien if this is possible.

Problems in Translation

1. The weight, unit of account, and money confusion. In Chinese, as in


English, a single term may mean a weight, a unit of account, or a real money.
In Chinese the problem is simplified to the extent that, with a few minor ex-
ceptions, tael is not the name of a coin. In the cash sector, however, "ch'ien"
does in fact have the three meanings: as a weight it was equal to 0.1 Hang;
as a unit of account, it was 0.001 ch'uan; as a real money, it was a cash coin.
This confusion can be minimized by observing the rules suggested below.
a. Weight. Where the character "liang" indicates a weight, do not italicize.
Romanize but do not translate. The liang was not exactly an ounce, and it
is, therefore, misleading to translate it as such. For decimal parts of the liang,
the Chinese had special names — "ch'ien," "fen," "li" — which have tradi-
tionally been translated into English as "mace," "candareen," and "cash,"
respectively. Since these translations are as unfamiliar today as the original
Chinese, there is no need to use them. Weights should be expressed as deci-
mal fractions of the liang: thus, "i-liang san-ch'ien wu-fen szu-li" becomes
simply "1.354 liang" rather than "1 ounce (or tael) 3 mace 5 candareens 4
cash" or even "1.3.5.4 taels," a variation sometimes found in treaty-port
writings.
b. Unit of account. Where the character "liang" is a unit of account, it
should be translated as tael, italicized. The two meanings of the word are
then split for the English reader. As for the units of account in the cash
sector, there would appear to be no need to translate them at all: thus ch'uan
and ch'ien should be used, reserving the term "cash" for the coin itself. How-
ever, where ch'ien is unambiguously qualified, as in the term ching-ch'ien,
it might be translated metropolitan cash, a unit of account, if this were
thought useful. The term hsiao-ch'ien as a unit of account should, in contrast,
be left untranslated, for the qualifying hsiao might otherwise refer to the
quality of a coin rather than to the cash-sector designation of the ch'ien unit
of account.
c. Money. Since the only coin cast in China in any quantity until 1889 was
the cash, the principal translation problem arises with this term, and where
"ch'ien" clearly refe-s to the actual coin, it should then be translated as
"cash."

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244 Appendix
2. String of cash. The terms ch'uan, tiao, min, and \uan, are often trans-
lated as "string" or "string of cash." There are two difficulties involved in
this translation: first, the word "string" has been used to refer to 100 cash
coins as well as to the larger string of 1000; secondly and more serious, the
term suggests something physical and encourages the concept that a ch'uan
is or ought to be 1000 cash coins on a string. But this is to confuse the unit
of account with money itself, and by emphasizing the physical aspect, this
translation may confuse the reader when an actual physical string of cash
contains fewer than 1000 cash coins, 500 cash coins, or 160 cash coins depend-
ing upon the cash-sector system operating. The term "string of cash" should
refer then only to a physical string passing current at 1000 ch'ien; a "sub-
string" differentiates the string passing at 100 ch'ien.
j . "Big" and "little" as qualifiers of "ch'ien." It is not surprising to find
that the qualifying characters "ta" and "hsiao" are merely relative, and the
context alone can determine the exact meaning of "ta-ch'ien" or "hsiao-
ch'ien." For example, the standard cash coin of current weight may be re-
ferred to either as "ta-ch'ien" if it is being contrasted with underweight coins,
or as "hsiao-ch'ien" if it is being contrasted with the Hsien-feng period cash
coins of greater than one-denomination.
a. The Hsien-feng period ta-ch'ien. In the third year of Hsien-feng (1853)
the Board of Revenue cast cash coins which were bigger than standard cash
coins and which were engraved "tang-shih," "tang-ch'ien," etc.; that is, their
intended worth in terms of ch'ang-ch'ien system ch'ien was marked. When
they depreciated, a coin with the notation "tang-shih," for example, was no
longer worth 10 ch'ien, and, therefore, a ta-ch'ien unit of account has to be
recognized. The general rule should be followed here: when the term refers
to a unit of account, leave it untranslated but italicized; when to a coin,
translate as "big-cash." As already noted above, the standard cash of a single
denomination was sometimes referred to as "hsiao-ch'ien" when it was being
contrasted with "big-cash." However, it would be most confusing to trans-
late this literally as "small-cash"; its correct translation in this context would
be simply "standard cash."
b. Current and spurious coins. There are circumstances in which the quali-
fying adjectives merely describe the relative size of standard cash coins.
"Ta-ch'ien" might then be translated as "standard cash," or "good cash," or
"current cash coins passing at par," or some such phrase as dictated by the
degree of contrast required. 2 "Hsiao-ch'ien" may be translated as "counterfeit
coin," "privately minted coin," "spurious coin," etc. "Spurious" may be the
most accurate translation unless specific information that the coins were

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Suggestions for Standardization 245

counterfeit is provided in the text, for this term can refer to worn coins which
should not be passing current and to foreign cash coins, as well as to actual
counterfeits.
c. Hsiao-ch'ien and ta-ch'ien as units of account. A third use of the term
hsiao-ch'ien is, of course, to refer to the ch'ien unit of account in the hsiao-
ch'ien system of the cash sector. It has been suggested that this term as a unit
of account be left untranslated. Use of the equivalent term tung-ch'ien might
avoid confusion over the meaning of hsiao, but it has the disadvantage of
being relatively obscure. One further word of warning is required. The term
hsiao-ch'ien sometimes rendered in English as "small cash" may refer to the
ch'ien of the chung-ch'ien system, contrasting it with the system under which
one ch'ien rather than two values a cash coin. It is important to know the
cash-sector system in force in the locality being discussed. Similarly, ta-ch'ien,
as in the phrase tiao ta-ch'ien, can mean ch'ang-ch'ien in a locality where the
chung-ch'ien system prevails.
4. Terms relating to silver: a. "Yang-yin" literally means "foreign silver,"
but it usually refers to silver of dollar fineness and, therefore, a more useful
translation when appropriate would be "dollar silver."
b. "Wen-yin" is often translated as "pure silver." Except where it is used
in the treaties, this term would appear, rather, to indicate silver acceptable
for monetary purposes, which may or may not be pure, and usually was not.
Therefore "monetary silver" would seem to be a more accurate translation.
The treaty meaning was under dispute, but it might be translated as "silver
of Haikwan standard" or, if actually specified in a particular treaty, "silver
of Kuping standard."
c. "Pai-yin" should be translated "silver," and not "white metal."
d. Sycee ("hsi-szu") may be left in its treaty-port form or translated as
"monetary silver." "Sycee" is also an acceptable translation for "wen-yin."
5. Terms relating to cash: a. "Ch'ien-ch'ien" should be translated as "zinc
cash" in contrast to "copper cash." The first character, "ch'ien," has been mis-
takenly translated as "lead," which would suggest the Chinese had lead coins.
"Smelter" has also been used and is acceptable. All Chinese coins, except
hung-ch'ien, or red cash, appear to have contained a large percentage of zinc,
usually 40 per cent or more. "Ch'ien" in this context is an abbreviation of
"pai-ch'ien" as contrasted with "hei-ch'ien"; hence the confusion. However,
there are times when this "ch'ien" refers in fact to lead, and again the con-
text alone can decide.
b. "Yang-ch'ien" has two meanings. Perhaps the more common is that of
"model" or "pattern cash," that is, either the model sent to the provincial

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246 Appendix
mints from the Board of Revenue or the cash minted from this model and
submitted to the Emperor for his inspection. However, it can also refer to
the special large-size cash coins cast for the Court and paid to the eunuchs.
c. "Chih-ch'ien" is a term which may be used to describe either a coin or
a unit of account. In the former case its official use was to contrast the cash
coin issued to the public with the yang-ch'ien issued to the eunuchs; there-
fore "legal cash" is not an adequate translation since the yang-ch'ien were
also legal.3 The phrase may also be used to describe particular types of cash
coin issued to the public: a coin of the proper dimensions, or a "good" as
opposed to spurious coin; and, a standard cash, or cash worth one ch'ang-
ch'ien in contrast to a big-cash or coin whose face value was greater than one
ch'ien. Although a chih-ch'ien was legally any coin issued to the public, it
would appear that, in practice, it was used to refer only to the standard cash
and not to the big-cash. When the term refers to a coin, therefore, "standard
cash" would appear to be the most satisfactory translation. As a unit of ac-
count the term is used as the equivalent of ch'ang-ch'ien, as in the phrase
"chih-ch'ien shih wen." Here chih-ch'ien cannot refer to standard coins since
ten ch'ien could be satisfied by tender of less than ten big-cash. It must be
translated, therefore, as "10 ch'ien"—a sum which can be settled by tender
of a varying number of actual coins whose total value is 10 ch'ien. From this
it also follows that "wen" cannot always be translated "coin." It is left un-
translated in this context, having literally the meaning "units" as "ch'ang-
ch'ien 10 units," which are not necessarily paid with ten coins.4 "Wen" should
not, of course, be confused either with the unit of account or with the name
of a coin; its literal meaning makes clear its function.
d. "Li" and "ch'ien" may both refer to a cash coin: the former to its ideal
rate of 0.001 tael and the second to its ideal weight of 0.1 Hang. In treaty-port
writing the term "li" is translated "cash" as part of the series of weight terms
— liang, ch'ien, fen, li, or tael, mace, candareen, cash. From this usage there
has, however, developed a custom of referring to the cash coin as a "li." This
is incorrect and is a confusion arising solely from the custom of translating
the decimal parts of a liang weight in such a way that ambiguity arises. The
cash coin was called in Chinese after its weight, ch'ien, not after its value, li.
In the Shun-chih period a cash coin was issued with the inscription "i-li" to
indicate that it was worth 0.001 tael, but the coins were still referred to in
Chinese by the character "ch'ien."
e. "Ch'ing-ch'ien" and "huang-ch'ien" refer to the composition of the
cash coins, which varied over the course of the dynasty: the former refers to

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Suggestions for Standardization 247

the bronze alloy cash, the latter to the brass alloy cash. 5 Both were legal
tender.
/. " M a o , " for monetary purposes, signifies a specific number of cash coins
to be minted within a period to be specified. However, the term " m a o " is
simply a number and in itself contains no time element. T h u s the mint of
the Board of Revenue may be ordered to cast 5 m a o a month or 70 mao for
the year. In the Statutes, varying definitions are given for the mao, but
throughout the nineteenth century it would appear to have been approxi-
mately 12,500 ch'uan. In this context, ch'uan is not a unit of account, but
refers to 1,000 cash coins, and thus m a o is defined as 12,500,000 cash coins.
T h i s is an exception to the definition of ch'uan given in paragraph 2 above,
and "strings of 1,000 cash coins" may be an appropriate translation. In certain
contexts m a o may be translated as " q u o t a , " thus avoiding clumsy wording. 6

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Abbreviations used in Notes
BGD British Government Documents
BPP British Government Documents, British Parliamentary Papers
CSK Ch'ing-shih \ao
CTLT Huang-ch'ao cheng-tien lei-tsuan
HT China, Ta-Ch'ing hui-tien
HTSL China, Ta-Ch'ing hui-tien shih-li
IMC China, Imperial Maritime Customs
J(N)CBRAS Journal of the (North) China Branch of the Royal Asiatic Society
NCH North-China Herald, or appropriate alternative title
Ch'ing biographies 1 / Ch'ing-shih \ao
Ch'ing biographies 2 / Ch'ing-shih lieh-chuan
Ch'ing biographies 5 / Hsü pei chuan chi

Reign Periods:
CC Chia-ch'ing (1796-1820)
CL Ch'ien-lung (1736-1795)
HF Hsien-feng (1851-1861)
KH K'ang-hsi (1662-1722)
SC Shun-chih (1644-1661)
TC T'ung-chih (1862-1874)
TK Tao-kuang (1821-1850)
YC Yung-cheng (1723-1735)

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NOTES
Introduction
1. This section will be a simple introduction to the Chinese economy to assist those
economists who have not previously studied the economic history of China. It is not
intended as a summary of the conclusions reached in this work nor as an original con-
tribution. Endnotes are limited to direct references, and much of the material is taken
from such standard works as Η. B. Morse, Trade and Administration of China (New
York, 1913); K. S. Latourette, The Chinese: Their History and Culture (New York,
1946); Stanley F. Wright, Hart and the Chinese Customs (Belfast, 1950); Walter H .
Mallory, China: Land of Famine (New York, 1928); and there is a further bibliography
of familiar sources in Latourette. Other works are cited in endnotes below, and much
use has been made of the papers presented at the 1956 Conference on the Chinese
Economy, Laconia, New Hampshire, to which specific reference will be made.
2. Ping-ti H o and Irene B. Taeuber, "The Growth of the Total Population of China,
1750-1850," Conference paper no. 7, 1956 Conference on the Chinese Economy, Laconia,
N.H., Sept. 1956, p. 47.
3. Latourette, pp. 559-560.
4. Ibid.
5. Mallory, pp. 29-30.
6. Hsü I-sheng, "Chia-wu Chung-Jih chan-cheng ch'ien Ch'ing cheng-fu ti wai-chai"
(Foreign debts of the Manchu government prior to the Sino-Japanese War in 1894),
Ching-chi yen-chiu (Economic research), 5:105-107 (1956). The depression of silver
makes it extremely difficult to convert the tael figures into a significant sterling total.
7. Sidney D. Gamble, Ting Hsien, a North China Rural Community (New York,
1954), p. 62.
8. See the review article by Albert Feuerwerker, "From 'Feudalism' to 'Capitalism'
in Recent Historical Writing from Mainland China," Journal of Asian Studies, 7:107—
116 (Nov. 1958).
9. See, e.g., the prohibition of the bean cake trade in the report of Lt. Col. Neale,
Η . M. Secretary of Legation, Peking, December 1861, in BPP, 1862, LVIII, "Manufac-
turing and Commerce and Trade of Foreign Countries," pp. 385-386.
10. The revenue figures are taken from a compilation made by Sir Robert Hart, the
Inspector General of the Chinese Imperial Maritime Customs, on the basis of the records
of the Board of Revenue. Thus the figures give an indication only of the reported or
statutory receipts of the imperial government. Sir Robert Hart, BPP, 1902, CXXX, 61,
"Memorandum concerning the Indemnity to be paid by China, presented to the Com-
mission Appointed by the Diplomatic Body to consider what resources possessed by
China should be Applied to the Payment of the Boxer Indemnity," China, No. 1 (Cd.
1C05), pp. 74-78. The memorandum was dated March 25, 1901.
11. U\in is the Anglicized version of li-chin, indicating a tax of one ch'ien per tael,
but this percentage was soon raised. See Edwin G. Beal, Jr., The Origin of Li\in (1853-
1864) (Cambridge, Mass., 1957).

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250 Notes to Introduction
12. See Harold C. Hinton, The Grain Tribute System of China (1845-1911) (Cam-
bridge, Mass., 1956).
13. For banks see S. W. Williams, The Chinese Commercial Guide, 5th ed. (Hong
Kong, 1863), p. 272.
14. The laissez-faire judgment is given, e.g., in Latourette, chap. 15, "Economic Life
and Organization."
15. By contrast with the laissez-faire characterization, Jerome Chih-jang Ch'en, "The
State Economic Policies of the Ch'ing Government, 1840-1895" (Ph.D. thesis, University
of London, 1956), supposes government policy to be mercantilistic. This term simply
cannot be applied to the policy of the Chinese state for reasons to be considered.
16. Chang Chung-li, "The Distribution of Income and the Savings-Investment Pat-
tern in Traditional China," Paper No. 6, 1956 Conference on the Chinese Economy,
Laconia, N.H., Sept. 1956, p. 9. See also his The Chinese Gentry: Studies on Their
Role in Nineteenth Century Chinese Society (Seattle, 1955).
17. Η. B. Morse, The Gilds of China (London, 1909).
18. The reading of four major works on Chinese trade would give a fair picture of
the problem through the years: Η . B. Morse, The Chronicles of the East India Com-
pany Trading to China, 1635-1834, 5 vols. (Oxford, 1926 and 1929); Michael Green-
berg, British Trade and the Opening of China, 1800-42 (Cambridge, England, 1951);
John K. Fairbank, Trade and Diplomacy on the China Coast: The Opening of the
Treaty Ports, 1842-1854, 2 vols. (Cambridge, Mass., 1953); and Morse, Trade and
Administration. Reference might also be made to Cheng Yu-kwei, Foreign Trade and
the Industrial Development of China (Washington, D.C., 1956), a work marred by its
intense nationalism.
19. Morse, "An Inquiry into the Commercial Liabilities and Assets of China in Inter-
national Trade," quoted in his Trade and Administration, p. 300.
20. See G. C. Allen and Audrey G. Donnithorne, Western Enterprise in Far Eastern
Economic Development: China and fapan (London, 1954), especially chaps. 3-5. If
milk and sugar are put in tea, taste and quality are irrelevant.
21. The fate of domestic industry is an example of the difficulty of attempting to
generalize about China's economy, when in fact the provinces or smaller districts
should be the focus for such studies. But for a summary see H . D. Fong, "Rural In-
dustries in China," Problems of the Pacific (papers from the 5th Conference of the
Institute of Pacific Relations; Banff, Alberta, 1933), pp. 310-311.
22. The impact of foreigners on China is best told in Ssu-yü Teng and John K. Fair-
bank, China's Response to the West: A Documentary Survey, 1839-1923, 2 vols. (Cam-
bridge, Mass., 1954).
23. Kuan-tu shang-pan. See Albert Feuerwerker, China's Early Industrialization:
Sheng Hsuan-huai (1844-1916) and Mandarin Enterprise (Cambridge, Mass., 1958);
Ellsworth C. Carlson, The Kaiping Mines (1877-1912) (Cambridge, Mass., 1957); and
Kwang-Ching Liu, Anglo-American Steamship Rivalry in China (Cambridge, Mass.,
1962).
24. Quoted in Mary C. Wright, The Last Stand of Chinese Conservatism: The T'ung-
chih Restoration, 1862-1874 (Stanford, 1957), p. 154.
25. Statistical information on listed companies is based entirely on the weekly
quotations found in NCH. All the figures have been compiled f r o m the raw data pro-
vided there. The categories have been defined for this study. The unlisted companies
have been compiled from various sources: NCH, the Decennial Reports of the Imperial
Maritime Customs, consular reports, and the lists of foreign companies in Arnold
Wright and H . A. Cartwright, eds., Twentieth-Century Impressions of Hongkong,

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Introduction 251
Shanghai, and Other Treaty Ports of China (London, 1908), and Yen Chung-p'ing et al.,
Chung-kito chin-tai ching<hi-shih t'ung-chi tzuMao hsüan-chi (Selected statistical data
for China's modern economic history; Peking, 1955). The combined list may still be in-
complete, but it seems to be more nearly complete than any other. There may be dupli-
cations and there is imperfect information on capital supply, employment, production —
in fact, on just about all the essential elements. However, merely listing the companies
would be a helpful first step, since attempts could then be made to find further informa-
tion about them. It is always possible that a thorough study of these companies may
be more rewarding from the development point of view than study directed at the
larger and more famous enterprises — though these cannot be slighted.
26. China, IMC, Decennial Reports on the Trade, Navigation, Industries, etc. of the
Ports Open to Foreign Commerce . . . 1882-91 (Shanghai, 1893), p. 341.
27. NCH makes frequent references to "many" failures. A quotation from that paper
illustrative of the tenor of these remarks is provided later. But there is nothing specific
as to the nature, intended size, source of capital, etc., of these companies, and, as to
their number, one is left wondering if the editor was given to the dramatic use of
language.
28. The number may, however, impress those of us who are used to concentrating on
the larger mercantile activities and on the larger textile undertakings which did not
flourish until after 1895.
29. China Mail (Mar. 7, 1871).
30. Ibid. (Sept. 1, 1871).
31. In a significant editorial summary describing the relationship of the Hongkong
and Shanghai Bank with the Indo-Chinese Sugar Company and other industrial enter-
prises in Hong Kong, NCH wrote (May 11, 1875, pp. 222-223) that the sugar company
appeared a reasonable proposition — Chinese sugar was in demand but was subjected
to faulty refining methods; but the Chinese in the company did not act honestly, taking
advantage of their position as directors to sell sugar at high prices to the company. The
investment in the sugar refinery, NCH continued, led the Bank to think of rice mills,
distilleries, godowns, piers. The Bank saw itself transforming Hong Kong, and now it
is surrounded by the ruin of the sugar company and the end of a dream; this may
delay future industrial enterprise.
32. China Overland Trade Report (Feb. 2, 1886), p. 9.
33. Li Chien-nung, The Political History of China, 1840-1928 (Princeton, 1956),
p. 103.
34. Nagano Akira, Development of Capitalism in China (New York, 1931), p. 35.
35. Carlson, pp. 17-21.
36. Feuerwerker, China's Early Industrialization, p. 222.
37. IMC, Decennial Reports, 1892-1901,1, 271.
38. BGD, Commercial Reports, 1872 (London, 1873), p. 203.
39. References to mining companies and projects are found in NCH and in the
Decennial Reports. T h e reaction of the government to mining depended upon the cir-
cumstances, but there was certainly no general disapproval as implied in Mary Wright,
p. 183. The example of government disapproval of the 1868 "gold rush" in the Chefoo
area of Shantung is not a good example, first because a "rush" would create those very
disorders which the government was always at pains to prevent, and secondly, the
gold was of low quality, making it doubtful if mining could pay at all. IMC, Decennial
Reports, 1892-1901, I, 47. If the government disapproved mining in the Chefoo area,
it may have been because there was nothing worth mining.

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252 Notes to Chapter I

CHAPTER Ι. The Principal Characteristics of the


Chinese Monetary System
1. The works were, of course, of varying quality. We drew heavily for our facts on
this secondary material, e.g., Η. B. Morse, Currency, Weights, and Measures in China
(Shanghai, 1906); and Edward Kann, The Currencies of China (Shanghai, 1927). These
accounts suffer, however, from lack of framework into which the facts might be fitted.
2. The following note, dated Genoa, January 14, 1156, is illustrative of the rela-
tionship between money and other commodities: "I, Rinaldo Guaxoni, promise you,
Lamberto Grillo, or your accredited messenger, £6 Vi in pepper or in coin to be de-
livered any time up to next Easter." Tr. from the Latin in R. S. Lopez and I. W. Ray-
mond, Medieval Trade in the Mediterranean World (New York, 1955), p. 145.
3. A similar confusion could exist in a metallic system, but for an opposite reason.
Whereas the focus in the modern system is the abstract unit, in early modern England
at least the focus was on the coin. Thus Sir James Steuart wrote: "The metals have so
long performed the use of money, that money and coin are become almost synonimous,
although in their principles they are quite different." Steuart here used "money" in the
sense of "money unit" or "money of account" and gave the following clear definition:
"Money, which I call of account, is no more than an arbitrary scale of equal parts in-
vented for measuring the respective value of things vendible . . . Money of account
. . . performs the same office with regard to value of things that degrees, minutes, sec-
onds, etc do with regard to angles . . . In all these inventions there is constantly some
denomination taken for the unit. In angles it is the degree . . . in money, it is the
pound, livre, florin, etc." Sir James Steuart, An Inquiry into the Principles of Political
(Economy: Being an Essay on the Science of Domestic Policy in Free Nations, 2nd ed.,
3 vols. (Dublin, 1770), II, 102-103.
Gouverneur Morris was familiar with Steuart, and students of American history will
recall the proposal submitted by Financier Robert Morris (but worked out by Gouver-
neur) to the Continental Congress, January 1782, that a new "money unit" be intro-
duced equal to 1/1440 of a dollar. This proposal was based on evidence that the value
of the penny varied in terms of the dollar unit of account of the several states, the
lowest common denominator being 1440. (Actually, this calculation ignored South
Carolina.) Morris also stated that there was no necessity that this money unit be exactly
represented by a coin. For a full account of the Morris proposal and Jefferson's more
practical counterproposal, see The Papers of Thomas Jefferson, ed. Julian P. Boyd
(Princeton, 1953), VII, 150-203. See also Jefferson's Autobiography (New York: Capri-
corn Books ed.), p. 65.
4. Edward S. Shaw, "Money Supply and Stable Economic Growth," in United
States Monetary Policy: Its Contribution to Prosperity without Inflation (New York,
1958), p. 50.
5. These terms are found in the following works: money unit — Steuart, Inquiry,
II, 102; Robert Morris, "Report to the President of Congress" (Jan. 15, 1782), in Jef-
ferson Papers, VII, 166-167; denomination of account —A. P. Usher, The Early History
of Deposit Banking in Mediterranean Europe (Cambridge, Mass., 1943); ghost money
— Carlo M. Cipolla, Money, Prices, and Civilization in the Mediterranean World: Fifth
to Seventeenth Century (Princeton, 1956); imaginary money — Luigi Einaudi, "The
Theory of Imaginary Money from Charlemagne to the French Revolution," in F. C.

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Principal Characteristics of the Chinese Monetary System 253
Lane and J. C. Riemersma, eds., Enterprise and Secular Change (London, 1953), pp.
229-261 (tr. and reprinted from Rivista di istoria economica, 1:1-35 [1936]); money of
account — Allen Evans, "Some Coinage Systems of the Fourteenth Century," Journal
of Economic and Business History, 3:481-496 (May 1931), and Marc Bloch, Esquisse
d'une histoire monetaire de l'Europe (Paris, 1954); this was also Thomas Jefferson's
usual term; hsü yin-liang — Chang Chia-hsiang, Chung-\uo chih pi-chih (China's cur-
rency system; Peking, 1925). See also Hans von Werveke, "Monnaie de compte et
monnaie reelle," Revue beige de philologie et d'histoire, 13:123-152 (1934).
6. Another reason for discarding terms including the word "money" has been
given by Professor Luigi Einaudi (p. 237): "Imaginary money — here is my thesis —
is not money at all"; and those terms which include the word tend to confusion. Usher,
pp. 201-203, also objects to the terms including the word "money" because of the con-
fusion created.
7. A Genoan example is given in R. S. Lopez, "Back to Gold, 1252," Economic His-
tory Review, 9:219-240 (Dec. 1956). Thomas Jefferson noted the relationship between
the weights of water and the dollar, and suggested a money unit based on the former.
See his manuscript notes on "The First State of the Report on Weights and Measures"
reproduced in Papers, XVI, 627.
8. William Lowndes, An Essay for the Amendment of Silver Coins (London, 1695),
reprinted in John Ramsay McCulloch, ed., A Select Collection of Scarce and Valuable
Tracts on Money (London, n.d.), pp. 169-258; John Locke, Further Considerations Con-
cerning Raising the Value of Money (London, 1695), p. 87.
9. James Pennington, Currency of the British Colonies (London, 1848), pp. 46-52.
10. Lopez, "Back to Gold, 1252," p. 231.
11. Nicole Oresme, "Traictie de la Premiere Invention des Monnoies," in A. E. Mun-
roe, ed., Early Economic Thought (Cambridge, Mass., 1924), pp. 88, 97.
12. The relevance of this to China is considered in the section below. Cf. Marc
Bloch, "Economie-nature ou economie-argent: Un pseudo-dilemme," Annales d'histoire
sociale, 1:7-16 (1939), esp. pp. 10, 14. M. Bloch is rightly critical of Bruno Hildebrand,
"Naturalwirtschaft, Geldwirtschaft, und Kreditwirtschaft," Jahrbücher für National-
ökonomie, Vol. 2 (1864). The discussion of barter and money exchange found in Eli
F. Heckscher, "Natural and Money Economy, As Illustrated from Swedish History in
the Sixteenth Century," Journal of Economic and Business History, 3:1-29 (1930-1931),
reprinted in Lane and Riemersma, pp. 206-228, is unsatisfactory in that it classes in-
direct exchange without the use of money as a form of barter. When the unit of
account is used, it is referred to as "money barter." But when the exchange is indirect,
if there is a commodity in the exchange which has some currency then it is money.
If the commodity has no currency but is valued in terms of the unit of account, then
the economic effect of the transaction is the same as if money had passed.
13. In 1291 the Florentine government fixed the exchange at 1 florin = 29 solidi.
Thus the florin unit account denominated, first, the value of one gold coin called a
"florin" and, secondly, 29 silver coins known as solidi. Or one could suppose there were
two units of account, the florin and the solidi at a ratio of 1:29, each unit valuing a
coin of the same name. When the price ratio changed in the market, the ratio of the
coins could no longer be maintained if both were to survive. T h e solidi unit of ac-
count as a consequence no longer in fact denominated 1/29 of a florin. But by law
the ratio was maintained and in consequence there were two units of account named
solidi, one denominating the value of a single solidi coin, the other the value of 1/29
of a florin. T h e latter unit became known as the solidi affiorino and was an imaginary
money. Thus the breakdown of the classic system may take one of several courses,

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254 Notes to Chapter I
but the important economic fact is the eventual relationship between the two metals.
Evans, p. 489.
14. HTSL gives figures for the official mint quotas which are often cited as mint
outputs without any evidence to support the conclusion that the two were identical.
(See Morse, Trade and Administration, p. 128.) A single reference will, however, give
an example of the error in assuming the two quantities equal: Chang Chih-tung (1837-
1909), governor-general of Kwangtung and Kwangsi, reported in K H 14 (1888) that
the Kwangtung mint had been closed for thirty years. CT LT, 58:10b. Nor is the sur-
vival rate of old coins known. In any case a figure for average money per head of all
China would be of little use in view of the local characteristics of the Chinese economies.
15. This implies first a rejection of Bruno Hildebrand's periodization into natural,
money, and credit economies and of Heckscher's modification of this concept from
"period" to "aspect." See Heckscher, pp. 206-209. T h e approach of Henri Pirenne, Eco-
nomic and Social History of Medieval Europe (New York, n.d.), pp. 103-141, is pre-
ferred. See also Bloch, "Economie-nature," p. 14, where he refers to the "natural econ-
omy" concept as artificial and dangerous.
16. E.g., Robert M. Martin, "China," a manuscript notebook in Houghton Library,
Harvard; Robert Fortune, Three Years Wandering in China (London, 1847), p. 373;
and Rutherford Alcock's report on Foochow for 1845 in BPP, 1847, XL, 77, "Returns
of the Trade of the Various Ports of China Down to the Latest Period," pp. 5-6.
17. Among the more famous accounts of life in the interior is Rev. Arthur H. Smith,
Village Life in China (New York, 1899); but there are more recent studies the validity
of which as generalizations on economic life in the nineteenth century may be accepted
if the obvious recent innovations are removed, as for example, Gamble's Ting Hsien.
The degree of change in self-sufficiency depends for its validity on the history of domes-
tic industry in China, so far inadequately studied.
18. "Under the Single-Whip Method, silver gradually replaced rice and wheat and
became the principal means of payment." Liang Fang-chung, The Single-Whip Method
of Taxation in China, tr. W a n g Yü-ch'uan (Cambridge, Mass., 1956), p. 3.
19. Hinton. See his index for references to commutation. A part of the grain tribute
had been permanently commuted by the nineteenth century, but proposals to commute
the entire tribute were disapproved. Peking had to insure its supply of rice even if
provincial authorities themselves preferred to commute the tribute and buy the equivalent
amount of rice for transport north.
20. ". . . opium order forms a temporary paper currency, by means of which given
amounts of money are represented, to be finally realized not in cash but in opium";
letter of S. G. Bonham to Viscount Palmerston, enclosure 5 in No. 5, Report of Ruther-
ford Alcock in BPP, 1849, XXXIX, 469, "Returns of Trade," p. 74. "Silk is used in
China largely as an instrument of exchange?" "Very largely"; from the testimony of
S. Gregson, deputy chairman of the East India and China Association, BPP, 1847, V,
"Report from the Select Committee on Commercial Relations with China, Minutes of
Evidence," pp. 24-25. Iron was used in the Hsien-feng period.
21. Testimony of George T. Braine, Dent and Co., ibid., p. 359.
22. E.g., the action of the Hankow officials in 1891, for which see IMC, Decennial Re-
ports, 1892-1901, I, 310-312.
23. Wen-hsiang (1818-1876), Hu-pu junior vice-president, 1859-1860, is quoted as
saying relative to the introduction of a Chinese dollar that fifteen years ago people
would not have accepted a change, thinking the government made something out of it
(NCH, Apr. 22, 1876, p. 389). S. W. Williams, Chinese Commercial Guide (1863), p.
265, puts it more bluntly: "The Chinese government can't punish counterfeiters and isn't
sufficiently honest itself."

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Principal Characteristics of the Chinese Monetary System 255

24. The French occupation of Mexico, for example, resulted in changes in the design
of the Mexican dollar. The new "Eagle dollar" was assayed officially in Shanghai and
found IV2 per cent better than the old, and was then accepted by the Customs in 1872.
NCH (July 13, 1872), p. 24; (Dec. 18, 1872), p. 532.
25. The idea that the dollar circulated by weight only is probably the result of
supposing such statements as "[Dollars] never passed into their hands by count, but
always by weight in Chinese liang or taels modified by touch" to be valid for all times
and places in China. The statement is found dated 1690 in Morse, Chronicles, I, 68;
see also Lien-sheng Yang, Money and Credit in China: A Short History (Cambridge,
Mass., 1952), p. 48. But under an 1811 date in Morse, Chronicles, III, 161-162, it is
stated that dollars were at a premium over sycee. As early as 1736 the Chinese had
expressed their preference for dollars as a means of payment over bullion {ibid., II,
351).
26. When one currency depreciates in terms of another in some foreign country, the
change is typically reflected in the exchanges. However, this can be avoided by the
interposition of an imaginary money, called a "money of exchange," which remains
stable in terms of the foreign unit of account. The depreciation is then reflected in the
changing relationship between the money of exchange and the unit of account used
to value domestic transactions. An example of such a money of exchange was the
Spanish dollar or dollar of exchange. It was first a unit of account valuing a coin of
the same name. When the coin's dimensions changed from 8 reals of old plate to 10
and later 10% reals, the foreign exchange rate continued to be quoted on the basis of
8 reals. P. Kelly, The Universal Cambist and Commercial Instructor (London, 1821),
II, 18. For reference to the Hong Kong example, see Edward Kann, "The Mystery of
the Hong Kong Dollar," Chinese Economic Journal, 6:9-32 (Jan. 1930). Shanghai is
discussed in our Chapter VII; for Amoy see Chapter IV. See also, H. Schmidt, Tate's
Modern Cambist, 17th ed. (London, 1880), p. 125; and William F. Spalding, Eastern
Exchange, Currency, and Finance, 2nd ed. (London, 1918), p. 338.
27. The Foochow Haikwan or Customs Bank, for example, paid out in yang-p'ing
liang, which were about 1/8 per cent lighter than the hsin-i liang, the unit of weight
in which it received payments. China, Chinese Customs Service, Documents Illustrative
of the Origin, Development, and Activities of the Chinese Customs Service (Shanghai,
1940), III, 363.
28. Lists of the varying weights and types of silver are available in Kann, Currencies
of China; Η. B. Morse, "Abstract of Information on Currency and Measures in China,"
JCBRAS, 24:46-135 (1889-1890); and in the reports of the Imperial Maritime Customs.
29. This follows indirectly from the decision to set 1000 cash coins equal to 1 liang
of silver. P'eng Hsin-wei, Chung-huo huo-pi shih (History of Chinese money; Shanghai,
1954), II, 485, 525. See also Morse, Trade and Administration, pp. 124, 144.
30. This is a description of the ch'ang-ch'ien system. In Chapter II the chung-ch'ien
and hsiao-ch'ien systems will be introduced, and it will be seen that the essential dif-
ference among the three is the number of standard coins required to satisfy a debt of
1000 ch'ien.
31. John Hall, "Notes on the Early Ch'ing Copper Trade with Japan," Harvard
Journal of Asiatic Studies, 12:444-461 (Dec. 1949); and L. S. Yang, pp. 38-39.
32. In his Chronicles Morse states that he has extracted all information of interest to
economic historians from the records of the East India Company. If this is so, and
the author's spot check of the archives would indicate that it is, the monetary system
of China is not subjected to particular criticism but is merely mentioned in the course
of business. In another work on this period, The Crucial Years of Early Anglo-Chinese
Relations, 1750-1800 (Pullman, Wash., 1936), the author, Earl H. Pritchard, has noth-

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256 Notes to Chapter I
ing relevant to say on the monetary system, which was presumably not an issue at the
time.
This lack of reference to Chinese monetary problems is partly a reflection of the
essentially monopolistic trade practices of the period. However, the East India Com-
pany was concerned with currency problems in Bengal, where the relationship was
more general. James Steuart wrote a comprehensive treatise on the subject, his treat-
ment being more constructive and thorough than anything written later on China.
See his The Principles of Money Applied to the Present State of the Coin of Bengal
(London, 1772).
33. See for example, BPP, 1867-1868, XXX, 535, "Reports on Trade by the Foreign
Commissioners at the Ports in China Open by Treaty to Foreign Trade for the Year
1866," p. 110. Lack of knowledge of "bullion" and of elementary Chinese were ascribed
as the causes of British dependence on the compradore system and the difficulty being
encountered in trading directly with North China rather than indirectly through
Shanghai.

CHAPTER II. The Cash Sector


1. "Shanghai within the Walls," NCH (Aug. 8, 1857), p. 7. A typical description
is that of the Rev. J. Elkins, NCH (1889), quoted in Kann, Currencies of China,
pp. 415-416.
2. The figures quoted are based on an edict in H T for CC 11 (1806), ordering a
return to the coinage of CC 4 (1799). This edict is quoted in P'eng Hsin-wei, I, 489;
see also H T , 21:21a-b. In H F 3 (1853) the weight was reduced to 0.1 liang.
3. S. W. Williams, Chinese Commercial Guide (1863), p. 266. See also, L. S. Yang,
p. 37, par. 4.25; and Kelly, II, 66-67.
4. The actual working of the monetary regulations is described in Chapter V.
5. S. W. Bushell, "Coins of the Present Dynasty of China," fCBRAS, 15:210 (1880).
For the special yang-ch'ien produced for the eunuchs, see ibid, and the appendix. See
also Wang Ch'ing-yün, Shih-ch'ü yü-chi (A Ch'ing financial history; 1890), 5:1b.
6. A. Wylie, "Coins of the Ta-Ts'ing or Present Dynasty of China," Journal of the
Shanghai Literary and Scientific Society, 1:44-45 (June 1858): "It is well known that
in different issues of the same coin from year to year, at the same mint even, there is
great variety, both in diameter and thickness and also in quality and colour of the
metal."
7. L. S. Yang, p. 32, par. 4.8. Such coins were known as chü-ssu (lit., "bureau
counterfeit"). See also NCH (Aug. 10 and 17,1850).
8. С. H. Brewitt-Taylor, "A Handful of Cash," China Review, 17:357-359 (May
and June 1889).
9. Canton Press (Apr. 7, 1836), p. 279.
10. Pe\ing Gazette 1880 (translated version by the NCH; Shanghai, 1881), pp.
208-209.
11. Cash found in the imperial treasury in 1880 weighed between 0.09 and 0.06 liang
and were declared not fit for circulation. Peking Gazette 1880, p. 214.
12. IMC, Decennial Reports, 1882-91, pp. 154-157. The difficulty in interpreting this
information is that weights are given per catty for 1000 cash; but what type of catty,
and 1000 cash coins or 1000 ch'ien? If the latter the individual coins would, of course,
weigh more, and so it would seem in this case that 1000 cash coins are being re-
ferred to.

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The Cash Sector 257
13. Demands for action against counterfeiters were frequent. In NCH there were
two references in 1857: an officer was awarded a peacock's feather for detecting thirty-
five counterfeiters, and makers of a lead cash were discovered (March 7, p. 100); a
large counterfeiting establishment was found and destroyed in Shanghai (Apr. 25, p.
154). See also Rev. Justus Doolittle, Social Life of the Chinese (New York, 1865), I,
351; and NCH (May 16, 1868), p. 236.
14. HTSL, chüan 220, ch'ien-fa chin-ling.
15. A 30 per cent net profit could be made by melting 1000 legal-sized cash and
counterfeiting 1500 current-sized coins. NCH (Dec. 11, 1858), p. 74. An account of
counterfeiting in Ningpo is found in Robert Martin, "China."
16. Canton Press (Dec. 5, 1835), p. 100.
17. NCH (May 6, 1887), pp. 485-486.
18. This is the Shanghai term, but terminology varied from place to place. See
Chapter IV.
19. This happened in Hankow. See IMC, Decennial Reports, 1882-91, pp. 177-178.
20. Ibid, p. 488.
21. In 1442 the weight and fineness of coins in Lucca were tested by experts and
put into sealed purses. Seals were of different colors to designate total weight and
fineness. "Red" sealed florins were valued at 1 per cent premium over loose ones.
"Payments of letters of exchange from all places were quoted in florins under seal and
[most frequently in florins sealed] with red wax." Giovanni di Antonio da Uzzano,
La Practica della mercatura scritta da Giovanni di Antonio da Uzzano nel 1442, in
Lopez and Raymond, pp. 149-150.
22. For string-money payments see, T'ung-tsu Ch'ii, Local Government in China
under the Ch'ing (Cambridge, Mass., 1962), p. 48. A transaction involving government
receipt of 1000 cash for 1 ch'uan and payment to higher headquarters of less than
1000 for 1 ch'uan is described in IMC, Salt: Production and Taxation (Shanghai,
1906), p. 55.
23. "Value of Cash," China Review, 2:130 (Sept. and Oct. 1873).
24. P'eng Hsin-wei, II, 487; CTLT, 58:3a-b; and HTSL, chüan 219, chih-sheng \u-
chu, SC 10.
25. Gamble, pp. 250-251, offers a case study, although one admittedly dated 1930—
1931. Contemporary newspapers explained New Year's financial crises almost annually,
however.
26. Unless otherwise stated, the information in this section is based on Wei T'ing-
sheng, "Ch'ing-chi Chung-kuo liu-hsing chih huo-pi chi ch'i yen-ke" (Currency in the
Ch'ing dynasty and its development), Ch'ing-hua hsüeh-pao (The Τ sing Hua journal),
1:153-220 (Nov. 1924).
27. For the use of the phrase chih-ch'ien in this context, see the appendix.
28. Min might be used as a synonym for tiao or might have a different meaning,
depending entirely upon local usage. See, for example, the tabulation in text following
note number 35. Min was also used as a synonym for ch'uan in the Kung-pu (Board
of Works) section of HT (chüan 62), but see L. S. Yang, pp. 34-35, par. 4.15, which
appears rather sweeping.
29. E.g., Wei T'ing-sheng, pp. 184-185, "l-wen tang erh-wen," but this is a most
confusing method of stating the situation.
30. An 1867 source states that a small coin, ching-tun, weighing from 0.08 to 0.10
Hang, was cast in the K'ang-hsi period. Two of these coins passed current for pay-
ment of one ch'ien, and to this the source ascribes the origins of the chung-ch'ien
system. A second, but less satisfactory explanation, is that after the recoinage of Shun-

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258 Notes to Chapter II
chih 2 (1645), two old coins were required to meet a debt payable by one new coin.
In any case there is contemporary evidence that the chung-ch'ien system was in existence
by 1765, as witness the statement ascribed to Fr. Gaubil's work of that date, "When
a Chinese says two, he means one in Peking."
The first explanation is found in Chung Ta-hun's memorial quoted in CTLT
58:8b-9, dated TC 6 (1867). I have been unable to discover the meaning of tun in
this context. For the second explanation, see CTLT, 58:3. Evidence that the use of the
chung-ch'ien system at least predates 1765 is found in Timkovskii's account of Peking
money, based, according to his editor J. von Klaproth, on a work of Fr. Gaubil (Paris,
1765). Egor F. Timkovskii, Travels of the Russian Mission through Mongolia to China,
and Residence in Peking, in the Years 1820-21 (London, 1827), II, 127, 195. There are
other explanations, e.g., E. Bard, Les Chinois chez eux, 2nd ed. (Paris, 1900), p. 149,
but they sound apocryphal.
31. Timkovskii, II, 206. According to this account, court officials and soldiers were
paid by the ch'ang-ch'ien system, which would appear to have been the official system
assumed, for example, in HT. In the Peking market, the ch'ang-ch'ien system was
referred to as the tiao ta-ch'ien when it had to be differentiated from the ching-ch'ien
system.
32. CTLT, 59:10b, gives the value of the big-cash unit of account or ta-ch'ien as
but one fifth that of the ch'ang-ch'ien in HF 8 (1858). See P'eng Hsin-wei, II, 543, for
the value of the big-cash in the T'ung-chih period.
33. D. F. Rennie, Peking and the Pekingese during the First Year of the British
Embassy at Peking (London, 1865), I, 82. See also the table in Morse, "Abstract on
Currency and Measures." But see L. S. Yang, p. 35, par. 4.16: it is possible that collo-
quially tiao referred to a sub-string of 10 big-cash, but no source is given; par. 4.17
would appear more nearly correct.
34. The term hsiao-shu-ch'ien may also have been used. See L. S. Yang, p. 35, par.
4.19.
35. Sources are Wei T'ing-sheng, pp. 185-187; and Morse, "Abstract on Currency
and Measures." This type of information is often found scattered in biographies and
diaries. For example, Timothy Richard reported on Manchurian currency in the 1860's
and in 1878, showing still further local variations. See William E. Soothill, Timothy
Richard of China (London, 1924), pp. 47, 107. Some travelers, however, were often
just overcome with the complexity of the monetary system and confined their remarks
to expressions of bewilderment, such as, "To anyone but a Chinaman, the money of
his country is a hopeless puzzle." F. H. Nichols, Through Hidden Shensi (New York,
1902), pp. 28-29.
36. NCH (Nov. 30, 1887), pp. 637-638. "In some districts one equals two over
twenty."
37. Wei T'ing-sheng, pp. 185-187.
38. Ibid., pp. 184-185.
39. But see the section Wuhu under "Case Studies" for the complications which
might be involved.
40. "Value of Cash," p. 130.
41. Such reports may be found in the British consular reports, in the IMC Decennial
Reports, and in Morse, "Abstract on Currency and Measures," pp. 46-135.
42. Morse, "Abstract," pp. 67-69.
43. Ibid., p. 69.
44. Cf. Foochow's imaginary money, the wen-\uang tael, which was payable by
800 good cash coins, thus guarding against fluctuations in the silver market. The unit
of account was used only in valuing land for sale. Ibid., p. 70.

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The Silver Sector 259
45. IMC, Decennial Reports, 1882-91, pp. 246-247.
46. IMC, Decennial Reports, 1892-1901, 1, 345-347.
47. Doolittle, I, 351.
48. The Customs report on Wuhu describes how the amount of spurious cash in
circulation led to general complaints, then to official proclamations, a rise in the silver
prices, relaxed vigilance, and finally a return of the spurious cash, and a slower fall
in silver prices. IMC, Decennial Reports, 1882-91, pp. 248-249.
49. Ibid., p. 477. For a Shanghai example, see NCH (Jan. 10, 1878), pp. 25-27.
50. NCH (Nov. 30, 1887), pp. 637-638. For a description of cash in Shanghai, see
NCH (Aug. 8, 1857), p. 7, where the varying types of strings are described together
with their appropriate markets.

CHAPTER HI. The Silver Sector


1. Evans, p. 495.
2. For a list and description of Chinese minted coins in the nineteenth century,
see Edward Kann, A Catalogue of Modern Chinese Coins (Hong Kong, 1954).
3. Kann, Currencies of China, p. 59. The term "monetary tael" is sometimes used
to refer to the sycee rather than to the unit of account, and caution is required; see,
for example, C. Champkin, "Bullion Operations in China," ibid., pp. 505-510. See also
Morse, Trade and Administration, p. 145.
4. Another useful classification is made by Miyashita Tadao, "The Silver Tael
System in Modern China," Kobe University Economic Review, 2:11-32 (1956).
5. See tables in Morse, Currency, Weights, and Measures. The fineness given in
these tables is based on the assumption that the Kuping standard equals 1.000. See
appendix below.
6. Kann, Currencies of China, pp. 74-76.
7. G. Vissering, with Dr. W. A. Roest, On Chinese Currency: Preliminary Remarks
about the Monetary Reform in China (Batavia, Netherlands East Indies, 1912?), p. 152.
8. For an account of bar silver, see Kann, Currencies of China, chap. 1.
9. Cf. Sir Compton Mackenzie, Realms of Silver: One Hundred Years of Banking
in the East (London, 1954), p. 71. There is a picture of a shoe of sycee in Morse,
Trade and Administration, facing p. 147.
10. P'eng Hsin-wei, II, 500. For other terms see L. S. Yang, pp. 46-47, par. 5.23.
There were, of course, many local variations with colloquial names. A 5-liang ingot
in Ichang, for example, was called hsin-wu liang, and a 4-liang ingot, the ch'uan-ting.
IMC, Decennial Reports, 1882-91, p. 153.
11. Lu-fang were known as yin-lu in south China. L. S. Yang, p. 47, par. 5.25.
12. Champkin, in Kann, Currencies of China, pp. 505-507. This account is dated
1923 and the percentages are too accurately listed to be applicable to the period of
this study; yet the principles are undoubtedly the same and Champkin's account is
the most authoritative available.
13. IMC, Reports on the Hai\wan Banking System and Local Currency at the
Treaty Ports (Shanghai, 1879), p. 118. Customs reports refer to \ung-\u in Chefoo,
Ichang, Shanghai, Nanking, and Chungking.
14. This was not a universal practice. In some cases only the kung-\u's mark was
required; in others there might be no lu-fang mark, or no \ung-\u. For the latter case,
see "Memorial by the Tientsin Community to Sir Rutherford Alcock on the Approach-
ing Revision of the Treaty," NCH (Dec. 9, 1867), pp. 400-401. The community re-

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26О Notes to Chapter III
quested that the Chinese government require the lu-jang to certify the weight and
fineness on each shoe produced.
15. This practice should not be confused with the common taxpaying procedure
whereby an official would appoint an assayer, \uan yin-chiang, to certify the purity
of silver to be paid into the government treasuries. This and the abuses to which it
gave rise are described in T'ung-tsu Ch'ii, p. 135. For Hankow in 1864 see IMC,
Reports on the Haikwan Banking System, pp. 86-87; for Canton in 1825 see Morse,
Chronicles, IV, 112; for Tientsin in 1908 see letter of that year from H. F. Merrill to
Sir Robert Hart, in Hart Letters, MS Chinese 5(2), Houghton Library, Harvard.
16. Kann, Currencies of China, p. 139.
17. G. Pietsch, "Sycee: Weight, Value, Touch," in ibid., p. 474. This was originally
published as IMC, Customs Paper No. 47 (Shanghai, 1864).
18. Pascal Martin, "Memorandum, Statistical Department of the Imperial Maritime
Customs" (Shanghai, 1880), in Kann, Currencies of China, pp. 478-486. In Chinese
the premium figure was followed by the term pao: P'eng Hsin-wei, II, 501.
19. IMC, Decennial Reports, 1882-91, p. 247.
20. See, for example, Morse, Trade and. Administration, p. 148. This question is
technical and will be discussed in the appendix. Its role in confusing the investigation
as to the true value of the Haikwan tael is considered in Chapter VIII.
21. Pascal Martin.
22. Reports of sycee with traces of gold were quite common; see, for example, Sir
John F. Davis, The Chinese: A General Description of the Empire of China and Its
Inhabitants (London, 1836), I, 393.
23. This particular trade practice had almost ceased by 1869. NCH (July 8, 1869),
p. 359.
24. John Robert Morrison, A Chinese Commercial Guide (Canton, 1834), pp. 34-36.
25. Ibid., p. 22.
26. This might be done either by paying and receiving in openly quoted different
weights or by using different scales. In either case the difference was less than 1 per cent.
Examples may be found in IMC, Reports on the Haikwan Banking System, pp. 96-97.
The Tientsin Customs Bank made its profit on the difference between the rate at
which it collected duties and the rate at which it forwarded them to the Superintendent
of Trade. Ibid., pp. 7-8.
27. An example is given in a letter of H. F. Merrill to Sir Robert Hart, July 25, 1892,
in Hart Letters, MS Chinese 5(1).
28. The Haikwan tael actually denominated silver of less than chemical purity, and
the Kuping standard was below that of the Haikwan. Both were accepted by the im-
perial government, often as if there were no difference involved, although in 1851 the
the Board of Revenue rules specified for the first time payment in Kuping taels, and
following the first Sino-Japanese War the Japanese indemnity was denominated in
Kuping taels defined as being pure. Compare H F 1 and T K 16 in China, Hu-pu tse4i
(Board of Revenue rules), 12:15 and 3:7 respectively.
29. IMC, Reports on the Haikwan Banking System, p. 118.
30. IMC, Decennial Reports, 1892-1901,1, 154-157.
31. Vissering and Roest, p. 152; see also tables in Morse, Currency, Weights, and
Measures.
32. S. W. Williams, Chinese Commercial Guide (1863), p. 275.
33. Kann, Currencies of China, pp. 74-76, provides the best account of the Shanghai
tael. For other accounts cf. Morse, Trade and Administration, pp. 148-149; John P.
Young, "The Shanghai Tael," American Economic Review, 21:682-685 (Dec. 1931);

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The Silver Sector 261

J. C. Fergueson, "Notes on the Chinese Banking System in Shanghai," JNCBRAS,


37:55-82 (1906); Spalding, p. 329. Young's article, although written in 1931, is re-
markably consistent with earlier descriptions, indicating that there was little change in
this most important of commercial units of account in China until the 1933 currency
reform which abolished the tael and introduced the standard national silver dollar. De-
scriptions of the Shanghai tael will also be found in all the exchange guides dealing with
China and published between, say, 1850 and 1933. See the bibliography for references
used elsewhere in this study. The appendices to Kann, Currencies of China, reproduce
contemporary accounts which support Kann's own analysis.
34. Spalding uses "Shanghai convention currency"; the Heard correspondence most
frequently refers to "taels of Shanghai sycee" which refers not to the sycee but to the
taels, despite the form of expression; Shen-yiian is used in Hosea B. Morse, Currency
in China (Shanghai, n.d.), a reprint of an article in JNCBRAS (1907). T h e Chinese
terms are in Yang Yin-p'u, Chung-\uo chin-yung lun (Essays on Chinese currency;
Shanghai, 1931), pp. 83ff, and in L. S. Yang, p. 47, par. 5.24.
35. That dollars were a rival to the sycee system in that they passed at a premium rela-
tive to silver content appears to have been the only substantial Chinese official objection
to them. The Chinese demanded that prices should not be quoted in numbers of dollars
but only by weight according to fineness. "Report in Reference to the Circulation of
Dollars in China," August 1836, enclosure 8 in No. 90, BPP, 1840, XXXVI, "Corre-
spondence relating to China," p. 180. The full title of this report is, "Report by the
Commissioners of Finance and of Justice in the province of Kwangtung to the heads
of the Provincial Government requesting that their excellencies when replying to His
Majesty will recommend that the use of foreign money be still sanctioned . . ."
36. Kann, Currencies of China, p. 132.
37. In 1901 the Carolus dollar was still worth 1.23 Mexican dollars in the country
near Wuhu. IMC, Decennial Reports, 1892-1901,1, 387.
38. L. S. Yang, p. 49, par. 5.29. The discount was 4 to 5 per cent. Robert M. Martin,
China: Political, Commercial and Social (London, 1847), I, 177.
39. Canton Press (Mar. 5, 1836), p. 203.
40. Samuel Wells Williams, A Chinese Commercial Guide (Macao, 1844), p. 268.
The comments deal with the situation in 1842.
41. It was to prevent this that the Shanghai General Chamber of Commerce, Jan. 21,
1864, defined a "clean" dollar and ordered it accepted at par: NCH (Jan. 23, 1864),
p. 15. "If one bank rejects 50 out of 500 dollars tendered, another bank will accept 45
of them": NCH (July 17, 1868), p. 339. But this resolution was enforced for only "a
few years": NCH (July 13, 1872), pp. 28-29.
42. T h e practice of chopping was universal in Canton by 1799. Morse, Chronicles,
II, 324.
43. Other terms may be found in L. S. Yang, p. 48, par. 5.28.
44. This rate was effective in Canton, but the amount of dollar silver to be paid out
varied since the liang weights themselves varied. In 1844, $100 was weighed at 70 Hang
in Tientsin and Newchwang, but at 74.81 in Shanghai. S. W. Williams, Chinese Com-
mercial Guide (1844), p. 268.
45. Letter of A. F. Heard, Shanghai, to John Heard, Hong Kong, June 12, 1857,
Heard Collection HL-12, Baker Library, Harvard.

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262 Notes to Chapter IV

CHAPTER i v . Banking and the Monetary System


1. Shansi banks were known in Chinese as draft banks, p'iao-chuang or p'iao-hao,
or remittance banks, hui-tui-chuang. See L. S. Yang, pp. 80-84; P'eng Hsin-wei, II, 618-
619; and IMC, Decennial Reports. In Canton the banks were called hsi-hao (IMC,
Decennial Reports, 1882-91, p. 572). In Shansi a colloquial variation was hui-p'iao-hao
{ibid., 1892-1901, I, 245); in Shanghai, hsi-pang; and there were undoubtedly many
others.
2. IMC, Decennial Reports, 1882-91, pp. 14, 425.
3. L. S. Yang, p. 83.
4. P'eng Hsin-wei, II, 618-619. The Jih-sheng-ch'ang changed its third character
upon formally becoming a remittance bank; see the glossary. It had twenty-three
branches. For the standard histories of the Shansi banks see entries 6.3.1-2 in John K.
Fairbank and Kwang-Ching Liu, Modern China: A Bibliographical Guide to Chinese
Wor\s, 1898-1937 (Cambridge, Mass., 1950), pp. 257-258.
5. L. S. Yang, p. 82, par. 9.6.
6. Ibid., p. 84, par. 9.11.
7. IMC, Decennial Reports, 1882-91, pp. 115-116.
8. Only one Shansi bank, the Wei-t'ai-hou, survived in Swatow. IMC, Decennial
Reports, 1892-1901, II, 163-164. This may be ascribed to the greater experience of the
southerners as bankers, or to clannishness.
9. The Decennial Reports cover not only the treaty ports but also the provinces in
which they were located. This list may not be complete, however.
10. IMC, Decennial Reports, 1882-91, p. 115.
11. There are frequent references to Hu Kuang-yung in NCH, esp. Aug. 3, 1878, p.
114; in IMC, Reports on the Haikwan Banking System; in Charles J. Stanley, Late
Ch'ing Finance: Hu Kuang-yung as an Innovator (Cambridge, Mass., 1961); and most
important, in the Jardine Matheson and Co. Archives, Cambridge University Library,
England.
12. IMC, Decennial Reports, 1882-91, p. 518.
13. Ibid., p. 115. But in contrast see the report on Shanghai in which it is stated that
they received funds on deposit on a large scale: ibid., 1892-1901, I, 507. The general
tenor of the customs reports on the Shansi banks supports the description given in the
text, but there were exceptions, especially in the rates of interest involved.
14. L. S. Yang, p. 84, par. 9.11.
15. Ibid., pp. 83-84, and IMC, Decennial Reports, 1882-91.
16. IMC, Decennial Reports, 1892-1901,1, 507. "Managers are supposed to be adopted
members of the master's family."
17. IMC, Decennial Reports, 1892-91, p. 71.
18. The terminology is taken from ibid — chieh-tai-chuang and ch'ien-chuang. There
were, of course, many other names, e.g., yin-hao in Peking and Tientsin, lu-jang in
Newchwang, ch'ien-chuang in Hankow and Shanghai. See L. S. Yang, pp. 84-85, par.
9.12. A glance at the various names in the customs reports, in Yang, and in P'eng
Hsin-wei is sufficient to show that where a name is used in more than one town it
cannot be assumed that the functions of the banks so designated are the same. The im-
portant point is that there were three general classes of banks with an infinite potential
for variation and minor gradation. The names were local and were based upon local
relationships within the scale of activity.

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Banking and the Monetary System 263
19. See L. S. Yang, pp. 85-86, for a description of the five classes of Shanghai local
banks.
20. In 1845 Rutherford Alcock reported 100 banks in Foochow: BPP, 1847, XL, 77,
"Returns of Trade," pp. 5-6. Robert Martin, China, I, 171-180, described banking in
Shanghai in general terms. R. J. Fabridge of Gibb, Livingston and Co. in his testimony
on commercial relations with China stated, "We found there has been an inclination
on the part of the Chinese merchants to establish banks": BPP, 1847, V, "Report from
the Select Committee," p. 86.
21. NCH (Apr. 8, 1867), p. 2; NCH (May 6, 1867), p. 51.
22. The opening of the treaty ports brought not only foreign merchants but also their
Cantonese assistants, and thus one consequence of the first Sino-British War was the
increased commercial importance of Cantonese in the new ports. For a specific case
see Fairbank, Trade and Diplomacy, chap. 21, "Wu Chien-chang and the 'Cantonization'
of Shanghai 1852-53."
23. NCH (June 12, 1858), p. 182.
24. IMC, Decennial Reports, 1882-91, pp. 72, 425-426.
25. NCH (June 12, 1858), p. 182.
26. Robert Martin states that he minutely examined the books of a Shanghai bank,
but the opportunity was misused (China, p. 172). The British Museum Student's Room
has several Chinese MS account books but they all appear to be commodity inventories
of no monetary interest.
27. NCH (Dec. 23, 1865).
28. IMC, Decennial Reports, 1882-91, p. 379.
29. "Banking and Currency in China," The Bankers', Insurance Managers' and
Agents' Magazine, 56:426-427 (Sept. 1893); IMC, Decennial Reports, 1882-91, p. 289.
30. NCH (June 12, 1858), p. 182.
31. The number of "large banks" in Hankow fell from 40 in 1882 to 24 in 1891
owing to losses in the tea trade and to the tendency for the smaller tea hongs (firms)
to deal with the smaller banks. IMC, Decennial Reports, 1882-91, pp. 177-178. There
were fourteen failures among the local banks in Amoy over the ten-year period. Ibid.,
p. 517.
32. For a survey of foreign banking history in China see Allen and Donnithorne,
chap. 6, pp. 102-119.
33. NCH (July 26, 1873), p. 75.
34. Augustine Heard, Jr., "Old China and New" (MS dated February 1894 intended
to be read before the Mercantile Club, St. Louis, Missouri), Heard Collection, GQ-2.
35. BPP, 1843, XXXV, "Copies of Any Despatches . . . Relative to the Incorpora-
tion of a Public Bank in London . . . Relating to the projected Bank of Asia, from the
period of Its Projection to Its Abandonment," esp. pp. 20-21. This must require a qualifi-
cation to S. G. Checkland's generalized statement that Jardines and other great China
houses "together successfully resisted attempts to establish English Banks right up to
the fifties. In this they had the support of the East India Company." See "An English
Merchant House in China after 1842," Bulletin oj the Business Historical Society, 27:178
(Sept. 1953). It would be safe to assume that the China houses wished to control such
a bank; but further study of this problem is required.
36. Mackenzie, p. 56.
37. A. S. J. Baster, "The Origins of the British Exchange Banks in China," Economic
History, 3:140-151 (Jan. 1934). A "Bank of China, Ltd." was announced in the China
Overland Trade Report (Jan. 14, 1864), with a capital of 6,000,000 rupees, having the
same relation to the Indian government as the Presidency banks. The head office was

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264 Notes to Chapter IV
to be in Hong Kong. The Hongkong and Shanghai Bank project effectively blocked
the formation of this bank.
38. In 1872 a branch of the Deutsche Bank of Berlin opened in Shanghai but it was
closed in 1875 for lack of business. NCH (July 13, 1872), p. 29; ibid. (Apr. 8 and 15,
1875). The French Banque de l'Indo-Chine was primarily concerned with the area
south of China.
39. NCH (July 6, 1872), and (May 20 and 27, 1876), pp. 475 and 505-506.
40. NCH (Feb. 20, 1891), p. 191.
41. NCH (Sept. 11,1891), p. 339.
42. NCH usually published the annual and semiannual reports of the Bank.
43. NCH (Mar. 11, 1875), pp. 222-223.
44. Cf. Stanley, Late Ch'ing Finance, p. 100. The German firm of Telge and Com-
pany covered the exchange risk involved in the 1877 Third Western Expedition Loan,
for which the Hongkong and Shanghai Bank were agents.
45. NCH (Dec. 23,1865); ibid. (Apr. 27, 1867), p. 42.
46. NCH (Nov. 17, 1884); see also a note on the Hong Kong Savings Bank in my
Money in British East Asia (London, 1957), pp. 105-106.
47. See IMC, Reports on the Hai\wan Banking System, under ports mentioned.
48. NCH (Mar. 4, 1868), p. 98.
49. Ibid., p. 110.
50. For a detailed study see Feuerwerker, China's Early Industrialization.
51. IMC, Salt.
52. L. S. Yang, pp. 86-87, par. 9.18-9.20; P'eng Hsin-wei, II, 609; "Banking and Cur-
rency in China," pp. 426-427; Rennie, II, 6.
53. Hankow Times, quoted in NCH (Nov. 30, 1867), p. 388.
54. L. S. Yang, chap. 8.
55. Marco Polo's description of paper money in the Yüan dynasty (1280-1341) is
quoted in Morse, Trade and Administration, pp. 138-140, drawn from H. Yule, tr., The
Book of Ser Marco Polo (London, 1871), chap. 24. Other obvious references are Thomas
F. Carter, The Invention of Printing in China and Its Spread Westward, 2nd ed., rev.
L. Carrington Goodrich. (New York, 1955); Willem Vissering, On Chinese Currency,
Coin and Paper Money (Leiden, 1877); L. S. Yang, pp. 51-70; and Li Chien-ming,
"Price Control and Paper Currency in the Ming," in Ε-tu Zen Sun and John de Francis,
Chinese Social History: Translations of Selected Studies (Washington, D.C., 1956),
pp. 281-287.
56. L. S. Yang, pp. 68-70; P'eng Hsin-wei, II, 516-517. Bank notes were known in
Chinese as yin-p'iao or ch'ien-p'iao.
57. T. R. Jernigan, China's Business Methods and Policy, p. 98, quoted in L. S. Yang,
p. 69. The Harvard-Yenching Library has a collection of Ch'ing government and private
notes; see Η. B. Morse, "Chinese Bills, Notes, etc. Collected by Hosea Ballou Morse"
(covering letter dated Sept. 9, 1886), Harvard College Library.
58. Doolittle, II, 141-144.
59. For example, the failure of the Ch'un Feng Bank in Foochow, 1887, led to the
failure of several cash banks and forced the authorities to intervene. PG, quoted in
NCH (Apr. 29, 1887), pp. 468-469.
60. Doolittle, II, 142-144.
61. IMC, Decennial Reports, 1892-1901,1, 246.
62. Such intervention might take many forms — for example: restricting issues to
the larger banks — Foochow Herald (Feb. 26, 1882), quoted in NCH (Mar. 29, 1882),
p. 343; regulation through licensing; independent security — S. W. Williams, Chinese

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Banking and the Monetary System 265
Commercial Guide (1863), p. 272, and IMC, Decennial Reports, 1892-1901, I, 70-71.
63. S .W. Williams, Chinese Commercial Guide (1863), pp. 215 and 272. With refer-
ence to Tientsin he states, "Paper-money is usually reckoned at double the rate of the
[coin]." Big-cash will be considered in Chapter VI below.
64. Mackenzie, pp. 174-175.
65. NCH (Oct. 4, 1889), pp. 41M12.
66. Mackenzie, p. 59.
67. Kuo's statement is quoted in Li Chien-nung, p. 108.
68. IMC, Decennial Reports, 1882-91, p. 177; Mackenzie, pp. 174-175.
69. Ibid.
70. For a more complete account for the post-1895 period see my Money in British
East Asia, pp. 101-105,110-112.
71. H o n g Kong, Correspondence Respecting the Issue of One-Dollar Notes ( H o n g
Kong, 1884).
72. BPP, 1866, LXXI, 343, "Reports from Her Majesty's Consuls in China and Japan,
1865," ρ 255 (Newchwang); L. S. Yang, pp. 69-70. Notes issued by cash shops or
merchants might only circulate in a small area of the city or on the street where the
firm was located, hence the nickname, chieh-t'ieh-tzu or "street note."
73. Robert Martin, "China." Spalding, p. 300. H o n g Kong bank notes were at a
premium of 0.75-0.8% in 1876: China Mail, quoted in NCH (Mar. 9, 1876).
74. The usance period in Shanghai was five days. NCH (Mar. 5, 1874), pp. 191-192.
75. Choo Yun Chou v. D. Sassoon Sons and Co., reported in NCH (Sept. 17, 1859),
p. 27. On the day it was due the bill would be taken to the bank of issue and marked
"paid." The bill was not in fact paid but only accepted, payment being deferred until
10:00 P.M. of the same day. In this case the bank failed between the time of acceptance
and time for payment, and Choo Yun Chou was attempting to obtain the value of the
bill from the last endorser, D. Sassoon Sons and Co. Judgment went to Choo. See also
NCH (June 18, 1859), p. 182.
76. In Foochow, banks charged 2 ch'ien on issue and 8 ch'ien on encashment of a
one-dollar bill, or about 1 per cent. Alcock, in the 1845 "Returns of Trade," pp. 5-6
(BPP, 1847, XL, 77).
77. IMC, Decennial Reports, 1892-1901, II, 163-164.
78. "Agio is the difference in some countries between bank money and current
money, as in Hamburg, and, formerly, in Amsterdam . . . ." John H . Freese, The
Commercial Class-Boo\ (Baltimore, 1849), p. 71. Cf. Steuart's note on the florin banco
in Inquiry, II, 107.
79. James Dyer Ball, Things Chinese (London, 1900), p. 67. NCH (Mar. 5, 1874),
pp. 191-192, specifically refers to the nonexistence of checks in Shanghai.
80. IMC, Decennial Reports, 1882-1891, p. 267.
81. NCH (May 13,1876).
82. IMC, Decennial Reports, 1892-1901,1, 16-17, 28-30.
83. IMC, Reports on the Hai\wan Banking System, pp. 114-115.
84. Sir Harry Parkes, "An Account of the Paper Currency and Banking System of
Fuchowfoo," Journal of the Royal Asiatic Society, 13:179-190 (1852). T h e paper is
dated 1848.
85. Robert Martin, in "China," states that gold bars worth from $100 to $220 "cir-
culate" in China, but he does not explain what he means by this word, and there is
no evidence to support the conclusion that it was circulating in a monetary role. An
example of a transfer is given in an 1894 memorial noting that 4000 ounces of gold
were shipped by the Canton customs to the court in Peking annually for the Imperial

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2 66 Notes to Chapter IV
Household Department. Peking Gazette (Feb. 8, 1894), pp. 42-44. The use of gold as a
medium for the internal transfer of funds may have been declining, however. NCH
(Mar. 22, 1889), p. 334.
86. Fortune, p. 37, mentions the use of gold in Amoy to pay for cotton and opium
imports. For a general survey of gold in China see L. S. Yang, chap. 5, "Gold and
Silver," esp. pp. 43-48; and Kann, Currencies of China, chap. 10, "Gold as a Currency
in China," esp. pp. 263-271.
87. NCH (Mar. 22, 1889), p. 334.
88. Morse, "Abstract on Currency and Measures," p. 56. Morse's informant was the
Rev. P. Hoang, who gives the relative value of silver to gold in 1662 as 1:10 and in
1882 as 1:18. A more complete table is in L. S. Yang, p. 48, but the figures are not in-
terpreted.
89. Evidence of G. F. Mathison in BPP, 1837, XVI, "Report from the Select Com-
mittee on the Royal Mint, Together with the Minutes of Evidence," p. 117; and
"Memorial of Manufacturers and Traders to the Rt. Hon. Lords Commissioners of H.M.
Treasury," in BPP, 1849, XXVIII, "Report of the Commissioners . . . of the Royal
Mint," pp. 44-45, on the gold content of the silver recorded for the "ransom of
Canton."
90. Kann, Currencies of China, pp. 270-271; and Kann, Catalogue, pp. 425-426.
91. Letter of Sir Robert Hart to Customs Commissioner Ε. B. Drew, June 4, 1869,
Hart Letters MS Chinese 4(1).
92. For the various problems of local finance, see T'ung-tsu Ch'ii, esp. chap. 8. For
a most interesting survey of the Chinese fiscal system, see Charles J. Stanley, "Chinese
Finance from 1852 to 1908," Papers on China, 3:1-23 (1949).
93. George Jamieson, hand Taxation in the Province of Honan, Cd 2683-5 (London,
1905). The author was formerly British consul general in Shanghai.
94. Kinn Wei Shaw, Democracy and Finance in China: A Study in the Develop-
ment of Fiscal Systems and Ideals (New York, 1926), pp. 127-128.
95. Lo Yü-tung, "Kuang-hsü ch'ao pu-chiu ts'ai-cheng chih fang-ts'e" (Government
policies for meeting financial crises during the Kuang-hsü period), Chung-kuo chin-tai
ching-chi-shih yen-chiu chi-}(an (Studies in the modern economic history of China),
1:189-270 (May 1933), esp. p. 193.
96. А т о й varied in dimension from province to province but is taken here as
733/4 sq. yards or 6.6 т о й to the acre.
97. Jamieson, p. 5. A shih is a dry measure for grain approximating in weight a
picul of 133% lbs. Chinese official documents usually carried calculations to several
decimal points despite the general low standard of measurement accuracy.
98. Jamieson, pp. 6-7.
99. "Copper Cash and the Tea Trade," NCH (May 16, 1868), p. 223.
100. L. S. Yang, pp. 18-19, par. 2.30-2.31.
101. NCH (May 6, 1887), pp. 485-486.
102. Brewitt-Taylor.
103. NCH (May 6, 1867), p. 50.
104. NCH (Oct. 4, 1889), pp. 41M12.
105. Fortune, p. 37.
106. NCH (Apr. 24, 1868), p. 184.
107. NCH (July 17, 1868), p. 339.
108. For example, in 1920 a "big" dollar was worth 114 cents. Rev. С. E. Darwent,
Shanghai: A Handbook for Travelers and Residents (Shanghai, 1920). For later ex-
amples, see my "Essays in China's Recent Monetary History, III: Miscellaneous Moneys
after 1935," Far Eastern Economic Review, 16:325-327 (Mar. 18, 1954).

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C h ' i n g Monetary Institutions and Policy 267

CHAPTER v. Ch'ing Monetary Institutions and Policy


1. "The Confucian Analects," in James Legge, tr., The Chinese Classics (Oxford,
1893), I, 146. For a discussion, see Chen Huan-chang, The Economic Principles of
Confucius and His School (New York, 1911).
2. William F. Mayers, The Chinese Government, 3rd ed., rev. G. Μ. H. Playfair
(Shanghai, 1897), p. 12. This work was based on the Ta-Ch'ing hui-tien. The first edi-
tion, dated 1878, is less useful. Playfair was chief manager of the National Bank of China.
3. Fairbank, "The Manchu-Chinese Dyarchy in the 1840's and '50's," Far Eastern
Quarterly, 12:265-278 (May 1953); and Alfred Kuo-liang Ho, "The Grand Council in
the Ch'ing Dynasty," ibid., 11:167-182 (Feb. 1952).
4. Pao Chao Hsieh, The Government of China (1644-1911) (Baltimore, 1925), pp.
185-186.
5. S. W. Williams, The Middle Kingdom (New York, 1907), I, 422-423.
6. For an authoritative study of administrative terms, see Ε-tu Zen Sun, tr. and ed.,
Ch'ing Administrative Terms (Cambridge, Mass., 1961), esp. entries 588-598, 1098—
1107. The present comments are necessarily limited by the primary focus of this study.
7. Mayers, p. 18.
8. Ibid., pp. 18-20, 50-51; see also P. C. Hsieh, chap. 7, on the Board of Revenue.
9. HT, 24:3; and the so-called Red Books: Chüeh-chih ch'üan-lan (Peking, quarterly
1845-1900), and Ta-Ch'ing chin-shen ch'üan-shu (Peking, quarterly 1845-1900). These
are complete listings of officials.
10. HT, 24:3ff. Mayers, p. 50, and H. S. Brunnert and V. V. Hagelstrom, Present Day
Political Organization of China, tr., A. Beltchenko and Ε. E. Moran (Shanghai, 1912),
p. 121, both state that only one of the junior vice-presidents was appointed to supervise
the Coinage Office. The H T , 24:3ff, definitely states that both junior vice-presidents were
so designated, and the Red Books list them. The mistake may have had its origin in
the HTSL, chüan 214, tu-li ch'ien-fa, SC 1 (1644), in which it is stated that the Chinese
junior vice-president was responsible.
11. H T , 62:la-b. The origin of the two Peking mints dates to the founding of the
dynasty in 1644. CTLT, 58:3.
12. CTLT, 58:3b.
13. H T , 21:20b; P. C. Hsieh, p. 187.
14. H T , 24:3b.
15. HTSL, chüan 214.
16. H T , 62:l-lb.
17. Mayers, pp. 35-36.
18. CTLT, 58:3b.
19. For a summary see Stanley, "Chinese Finance."
20. Brunnert and Hagelstrom, p. 97.
21. Alfred Ho, p. 169.
22. Karl Marx (Capital, vol. 1, chap. 3, note 83), quoting Dr. K. Abel and F. A.
Mecklenburg, Arbeiter der kaiserlich russichen Gesandtschaft zu Peking über China
(Berlin, 1858), refers to "Der Finanz Mandarin Wan-mao-in [Wang Mao-yin]," but
Wang was only very briefly a junior vice-president of the Board of Revenue (December
2, 1853, to April 9, 1854). See Wu Han, "Wang Mao-yin yü Hsien-feng shih-tai ti hsin pi-
chih kai-ke" (Wang Mao-yin and the new currency system of the Hsien-feng period),
in his Tu-shih cha-chi (Collected historical studies; Peking, 1956), pp. 65-91, esp. pp.
66-67. Wang himself may have had an exaggerated concept of his position, for in a

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268 Notes to Chapter V
memorial he states that he is responsible for the coinage laws. This was true, but only
for the laws as they existed. His position did not entitle him to oppose currency
changes legally decreed on this basis, although as an official he was entitled to memorial-
ize on currency — or anything else. See his biography in CSK, 428:2a-b. See also
Chapter VI below.
23. For a fuller account, see John K. Fairbank, "A Note on Imperial Endorsements,"
in his Ch'ing Documents: An Introductory Syllabus, 3rd ed. (Cambridge, Mass., 1965),
I, 38f.
24. For the memorial, see CT LT, 58:5a-b.
25. This account is simplified to illustrate the formation of monetary policy. For an
account of the actual process of administration see John K. Fairbank and Ssu-yü Teng,
Ch'ing Administration: Three Studies (Cambridge, Mass., 1960).
26. There were two censors, chang-yin chi-shih-chung, assigned to the Board of
Revenue, but any censor might report on monetary matters. See Mayers, p. 24, for the
relationship of the Censorate, Tucch'a-yüan, with the six boards.
27. Translated in P.C. Hsieh, p. 208.
28. T'ung-tsu Ch'ü, table 4, p. 20.
29. О. B. van der Sprenkel, "High Officials of the Ming: A Note on the Ch'i ch'ing
nien piao of the Ming History," Bulletin of the School of Oriental and African Studies
(University of London), 14.1:114 (1952). For a more complete description of personnel,
see my doctoral dissertation, "The Monetary System of China, 1845-95, and Its Role in
Economic Development," on deposit in the Bodleian Library, University of Oxford.
30. As a single example, the NCH thought it relevant to comment that a monetary
proclamation of the Soochow magistrate was in consequence of advice he had received
from his superior, the Taotai Lan, son of a rich Ningpo merchant. NCH (Mar. 1,
1856), p. 122.
31. Rennie, I, 248.
32. HT and HTSL state the law and precedents; they do not provide and are not
intended to provide a complete history. CTLT is also selective. The purpose of this
section cannot be to give a complete and detailed history of Ch'ing money before
1845, a task deserving an independent study. The purpose here is to describe the char-
acteristics of the system, and for this purpose the sources are well suited.
33. P'eng Hsin-wei, II, 485-486.
34. HTSL, chüan 214; for specific reference see under proper date, as pages of this
work are not always numbered. See also P'eng Hsin-wei, ibid., and pp. 525-526, and
CTLT, chüan 58.
35. For an explanation of the distinctions between li and ch'ien, refer to the Appendix.
36. P'eng Hsin-wei, II, 486; CTLT, chüan 59.
37. P'eng Hsin-wei, II, 488.
38. CTLT, 60:1.
39. As examples of such regulations, consider: "Prohibit the use of old coins. The
ones sent to the Board shall be valued at 0.08 liang for each catty," HTSL, chüan 220,
ch'ien-chia, SC 3 (1646); "Change to the casting of new cash with each 1000 to exchange
for one tael. As for the old coins each 1000 should exchange for 0.7 taels, and, after
three years, the old coins should not be used," ibid., K H 41 (1702).
40. The workmen at the metropolitan mints, for example, were paid by the overseer
according to the market rate for cash. HTSL, chüan 214, ching-chü \u-chu, CL 6.
However, the official rate was certainly 1000:1, as for example: "Cash are considered
as the national currency [lit., "treasure"] and they must certainly circulate for the
profit of the people. Furthermore they must weigh the proper weight; then they can
be used conveniently by the people without fraud. If the value of the cash is too low,

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The Hsien-feng Period — A Case Study 269
the people trading with it are injured, and treachery and fraud arise. Hereafter, each
silver tael shall exchange for 1000 full-sized standard cash [ta chih-ch'ien]." HTSL,
chüan 220, ch'ien-chia, YC 7 (1729).
41. CTLT, 58:4b. The translations are free, and the terminology has been made to
correspond with that used elsewhere in this study.
42. This statement is based on John Hall, "Notes on the Early Ch'ing Copper Trade
with Japan"; Sasaki Masaya, "Ahen sensö izen no tsüka mondai" (Chinese currency
prior to the Opium War), Töhöga\u (Oriental studies), 8:94-117 (June 1954), English
summary in the files of Harvard's East Asian Research Center; and Kristof Glamann,
Dutch-Asiatic Trade, 1620-1740 (Copenhagen, 1958), p. 178. A fuller account of copper
supply and changes in the cash is found in my dissertation (cited in note 29 above),
chap. 8.
43. HTSL, chüan 220, ch'ien-chia, YC 12; CL 3. Failure is implied in these instructions
terminating the experiment: "As for the cash brokers, they are all got rid of, and the
cash-silver exchanges shall follow the free market forces. If it happens that depending
upon his reputation as a broker, anyone should interfere with them, the local official
should make a peremptory arrest, investigate, and punish accordingly."
44. CTLT, 58:5.
45. P'eng Hsin-wei, II, 529-530.
46. HTSL, chüan 219, chih-sheng ku-chu, CL 34, 35, 36.
47. HTSL, chüan 220, ch'ien-chia, CL 36.
48. Ibid., CL 51.
49. Ibid., CL 9. A further illustration may be found, for example, in HTSL, ta-fang
ching-ksiang, CL 25 (1760), in which an order was made to stop paying out cash; in
CC 4 (1799), this was reversed; also in CC 4, an edict relative to the proportions of
cash and silver for paying the bannermen.
50. In 1799 the following edict explained the situation: "Because in the past the
people's cash daily became cheaper, the mints were all ordered to decrease their quotas
and stop casting them. Later the provincial mints restored their quotas, but the capital
mints did not. Let the Board of Revenue mint in future, of the 35 mao which they
previously stopped casting, cast 17 mao for the time being; and of the 30 mao the
Board of Works mint reduced, cast 15 mao for the time being." HTSL, chüan 214,
ching-chü ku-chu, CC 4.
51. Yen Chung-p'ing et al., p. 37.
52. Davis, The Chinese, II, 388-398; Description of the City of Canton, pp. 80-81,
published jointly with Morrison's Chinese Commercial Guide.
53. Charles Gutzlaff, China Opened, rev. by Rev. Andrew Reed (London, 1838), II, 17.
54. Henry C. Sirr, China and the Chinese (London, 1849), II, 395.
55. For figures on the export, but including re-export, of silver from Canton, see
BPP, 1846, XXXI, 93, "Returns of the Value of Bullion Imported from China. . . ."
56. CTLT, 60:la-b.
57. Canton Press (Feb. 3, 1838), p. 22.
58. P'eng Hsin-wei, II, 489.

CHAPTER v i . The Hsien-feng Period — A Case Study


1. T'ang Hsiang-lung, "Hsien-feng-ch'ao ti huo-pi" (Currency in the Hsien-feng
period), Chung-\uo chin-tai ching-chi-shih yen-chiu (Studies in the modern economic
history of China), 2:3 (Nov. 1933).

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270 Notes to Chapter VI
2. Jerome Chih-jang Ch'en, "The Hsien-feng Inflation," Bulletin of the School of
Oriental and African Studies (University of London), 21.3:579 (1958).
3. See NCH (Aug. 31, 1850), p. 18; NCH (Sept. 7, 1850), p. 22.
4. CTLT, 59:5.
5. For biographical material on Wang Ch'ing-yün, see Arthur W. Hummel, ed.,
Eminent Chinese of the Ch'ing Period (Washington, D.C., 1943). The big-cash
memorial is quoted in CTLT, 59:1Ь—3b.
6. S. W. Williams, Chinese Commercial Guide (1863), p. 267, and NCH (Jan. 11,
1851), p. 94.
7. HTSL, chüan 215, pan-t'ung erh, HF 11.
8. See, for example, an edict of 1852, in ibid. See also Shanghai Almanac and Miscel-
lany, 1856 (Shanghai, 1856), unpaginated; and P'eng Hsin-wei, II, 489, who cites a
memorial of Chou Tsu-p'ei, Hu-pu president, March 1859-February 1861.
9. Even the mint of the Board of Works was reported casting cash of less than the
legal dimensions. CTLT, 58:6b.
10. Unless otherwise stated, the data for coins from the official mints are taken from
HTSL, chüan 214.
11. T'ang Hsiang-lung, p. 11.
12. See, for example, an edict in reply to Wang I-te's memorial, Tung-hua hsü-lu,
22:9a-b; CTLT, 59:3b. The two versions differ.
13. T'ang's article contains tables of the dates on which the provinces first imple-
mented the imperial instructions on the various forms of money. There is no indication,
however, as to how long the implementation lasted or how effective it was. Bushell,
"Coins of the Present Dynasty," p. 200, states, "In some mints coins were cast but were
not circulated. In others they were circulated for a short time and then withdrawn. In
the next, receipt of models were acknowledged and some pattern coins duly forwarded
for inspection of the Emperor, but no mint was opened."
14. An unfavorable report from Foochow on the iron cash issued there is typical:
"The government also issued iron cash, which at first was received as of equal value
with copper cash. But the iron coin soon was counterfeited in great quantities. It also
became rusty." Doolittle, II, 138.
15. T'ang Hsiang-lung, p. 17.
16. Ibid., p. 18.
17. D. J. MacGowan, "Contributions to the History of the Insurrection in China,"
Shanghai Almanac, 1856, unpaginated. This article contains detailed translations of
several of the most important edicts and memorials on the inauguration of the new
Hsien-feng monies.
18. T'ang Hsiang-lung, p. 13.
19. HTSL, chüan 219, chih-sheng \u-chu, H F 4.
20. MacGowan, part vi.
21. Ibid. The regulations were much more complex than suggested in, e.g., Jerome
Ch'en, "Hsien-feng Inflation." The specific percentages do not appear significant in a
general monetary history. The main point is simply that it was through this device
that the government hoped to keep all forms of money in circulation at par.
22. Ch'ing biographies 1/428/1, 5/11/2; Wu Han. Four other articles are listed in
the recent bibliography of articles on Chinese history, Chung-\uo shih-hsüeh lun-wen
so-yin, ed. Historical Research Project, Academia Sinica (Peking, 1957), II, 260, but
all predate Wu Han's.
23. CTLT, 60:8b; Wu Han, p. 74; MacGowan, part v.
24. CTLT, 59:4.

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Treaty-Port Monetary Problems 271
25. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations
(Modern Library ed., New York, 1937), p. 311.
26. CT LT, 59:6b-7.
27. CSK, 428:2b.
28. Ch'ing biographies 2/47/27b.
29. NCH (Nov. 5, 1859), p. 54.
30. Ch'ing biographies l/427/5b for Chu Tsun; ibid. 1/391/2, 2/46/1, and Hummel
for Ch'i; T. F. Wade, Note on the Condition and Government of the Chinese Empire in
1849 (Hong Kong, 1850), p. 49. See also the translation of Chu's 1846 memorial in
Jerome Ch'en, "State Economic Policies," pp. 340-351; the memorial is also quoted in
NCH (Nov. 5,1859), p. 54.
31. One such extraordinary mint was set up by Brigade-General Ch'ing-hsi (son of
Ch'i-ying, d. 1858) in Peking, 1854. See CTLT, 59:5. For Ch'ing-hsi, see brief note in
Hummel.
32. See Ch'ing biographies l/391/4b-6b, 14b, 2/45/42b, Hummel for Weng; 1/395/1,
2/40/42, and Hummel for Po-chün. A touching account of the execution of Po-chün,
with Su-shun as the villain, is given in E. Backhouse and J. O. P. Bland, Annals and
Memoirs of the Court of Peking (Boston, 1914), pp. 405-422.
33. Ch'ing biographies 1/393/1, 2/47/27b; Hummel; and Rennie, II, 125-166; Back-
house and Bland; and other references stemming from the diary of Ching-shan, for
whom see Hummel.
34. CTLT, 59:4a-b.
35. Rennie, I, 82. The model developed also depends on one big-cash of 10-denomina-
tion exchanging for two standard cash, for which see HTSL, chüan 1090, chen-tun
ch'ien-fa, H F 9.
36. Laborers refused payment in notes in July. Rennie, I, 296-297, 319-323, 329; II, 61.
37. Ibid., I, 347.
38. Peking Gazette, quoted in NCH (Nov. 5, 1859), p. 54.
39. Rennie, I, 347.
40. HTSL, chüan 1090, chen-tun ch'ien-fa, H F 9.
41. HTSL, chüan 220, ch'ien-chia, H F 11.

CHAPTER v i i . Treaty-Port Monetary Problems


1. Hongkong Mercury and Shipping Gazette (Aug. 31, 1866), and China Mail (Mar.
20, 1869).
2. Professor Mary Wright has stated (p. 170), "The Restoration leaders' [i.e., leaders
of the T'ung-chih period (1862-1874)] training did not teach them how to cope with
commercial matters, except in the most elementary way." But they could, and some did,
learn. They had advisers attached to the Yamen, and they also received representations
of the merchants. In any case, an increasing proportion of local officials did not come
through the examination system. See, for example: T'ung-tsu Ch'ii; Byron Brenan, "The
Office of the District Magistrate in China," JCBRAS, 32:36-65 (1897-1898).
3. See the Hong Kong Supreme Court decisions, Maclehose vs. Fryer and Co.,
China Mail (Apr. 8, 1852), and Lapraik vs. Duddell, ibid. (Feb. 9, 1854), p. 22.
4. Morse, Chronicles, IV, 60, 227. Canton Register (Aug. 18, 1830), p. 69. "Report
of the Commissioners of Finance and Justice to the Head of the Government of Kwang-
tung relative to foreign money," quoted in Canton Press (Feb. 25, 1837).

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272 Notes to Chapter VII
5. BPP, 1840, XXXVI, 5, "Report in Reference to the Circulation of Dollars in China,"
Aug. 1836; enclosure 8 in No. 90, "Correspondence Relating to China," p. 180.
6. Ibid.
7. Morse, Chronicles, II, 313, 324.
8. Canton Register (Jan. 20, 1835), p. 10.
9. Canton Press (Dec. 18,1841), p. 12.
10. BGD, Public Documents Relating to the Admission into Circulation of Republican
Dollars at Par with Spanish (Canton, 1853). See Fairbank, Trade and Diplomacy, II,
47-55, for a table of British consular officials and their stations.
11. Overland Register and Prices Current (Jan. 27, 1854).
12. BGD, Public Documents Relating to the Admission.
13. China Mail (Jan. 26, 1854), p. 14.
14. BGD, Public Documents Relating to the Admission.
15. Resolution of British Merchants in Hong Kong, quoted in China Mail (Aug. 19,
1854), p. 166.
16. Sir George L. Staunton reported, "Spanish dollars are common through all Asia;
and are equally well known to the pilot of Cochin-China . . . and to the shopkeepers
of Tong-Choo-foo where the Embassy landed near Pekin." An Authentic Account of
an Embassy from the King of Great Britain to the Emperor of China (London, 1797),
II, 267.
17. This was a common objection to the Mexican dollar and can be found in similar
debates over adoption of this coin in the Straits Settlements. See, for example, Charles B.
Buckley, An Anecdotal History of Old Times in Singapore (Singapore, 1902), p. 601,
who quotes NCH of 1854 on the subject.
18. Exchange quotations for this period are taken from the Times, NCH, and the
correspondence of A. F. Heard.
19. See Chapter I, and Locke, pp. 60, 87. The China Mail (Jan. 2, 1851), p. 2, com-
mented on the lapse of the royal prerogative relative to alteration of the coinage.
20. A French source states that May 1857 was the date when the tael was "officielle-
ment en vigueur," but this could mean nothing more than that the French consulate
made the change-over in May. See Ch. B. Maybon and Jean Fredet, Histoire de la con-
cession fran$aise de Changhai (Paris, 1929), p. 172.
21. Letter from A. F. Heard in Shanghai to Augustine Heard, Jr., in Hong Kong,
June 14, 1856, Heard Collection, HL-11. There was a short interval during which ex-
change quotations could be had against Canton taels, but the Shanghai tael, being the
local Chinese unit of account, was more practical.
22. A Times dispatch dated Nov. 15, 1856, published Jan. 2, 1857.
23. Letter from A. F. Heard in Shanghai to John Heard in Hong Kong, May 22,
1857, Heard Collection, HL-12.
24. Times (June 17, 1857), p. 10.
25. A. F. Heard to John Heard, letter dated May 22, 1857, Heard Collection, HL-12.
26. The standard work in English describing these twentieth-century problems is
Frank M. Tamagna, Ban\ing and Finance in China (New York, 1942).
27. Kann, "The Mystery of the Hong Kong Dollar"; and Kann, "The Strength of
the Hong Kong Dollar," Far Eastern Economic Review, 21:391-394 (Sept. 1956).
28. The controversy over the proposed reforms is fully illustrated in the editorials
and letters to the editor in NCH for 1856-1857. An annual summary of the currency
situation usually appeared in the first issue of the new year. A tael advocate collected a
sample of the letters and published them separately: "Philo Carolus" [James McDonald],
The Great Currency Question, or The Rise and Fall of Mexico (Shanghai, 1856). The

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Treaty-Port Monetary Problems 273
identity of "Philo Carolus" is given in Henri Cordier, Bibliotheca Sinica (Paris, 1904—
1908), III, col. 2269.
29. NCH (Nov. 29, 1856), p. 70. When the mint was established in Hong Kong in
1864 it was not successful.
30. NCH (Feb. 16, 1857), p. 114.
31. NCH (Nov. 8, 1856), p. 58.
32. NCH (Mar. 1, 1857), p. 122.
33. It is doubtful if these shops continued these operations once the tael had been ac-
cepted.
34. NCH (Sept. 27, 1856), p. 34.
35. NCH (July 19,1856), p. 202.
36. NCH (Sept. 13, 1856), p. 26. The American community stated that sycee had
none of the requirements of a currency.
37. NCH (Jan. 2, 1858), p. 70.
38. Celestial Empire (Oct. 19, 1894), p. 554.
39. Most of the Times China dispatches at this time were concerned with the Arrow
War which seems to have been going on around Canton. The reports were usually
compiled in Hong Kong, although there are several direct communications from
business correspondents in Shanghai. During the latter part of 1857, a Times special
correspondent, George W. Cooke, visited China. His dispatches are collected in his book,
China (London, 1858).
40. These are summarized in such works as those of Yang Yin-p'u and Chang Chia-
hsiang. Yang depends on Kann to some extent, but his own preference is for solution
(1), and this too is implied in the version of L. S. Yang, p. 47. The definite statement
in favor of solution (3) found in Chen Shao-teh, Etude sur le marche monetaire de
Changhai (Paris, 1932), is not supported by his sources, which, in any case, are
secondary.
41. Kann, Currencies of China, p. 81. His quoted source is identified only as a
"dusty chronicle," however. The appendices of Kann's encyclopaedic work contain
reprints of important discussions on the Shanghai currency tael.
42. Quoted in Kann, Currencies of China, pp. 504-505. In a letter to me, Dr. Lieu
quite reasonably pointed out that he could not recall the basis of a statement written so
long before, but that he had ascertained the facts before committing himself.
43. Morse, Chronicles, III, 374.
44. Letter from Everett in Foochow to A. F. Heard in Shanghai, Aug. 3, 1857, in
answer to Heard's inquiry of July 22, Heard Collection, HM-34 and HL-12 respectively.
45. Kann, Currencies of China, pp. 126-148. His Catalogue contains interesting
numismatic information.
46. NCH (July 13, 1872), p. 24; ibid. (Dec. 18, 1872), p. 532.
47. China Mail (May 31,1872).
48. Kann, Currencies of China, pp. 130-133. For a warning of the commercial im-
practicality of the undertaking, see Edward Cunningham's reply, NCH (July 26, 1873),
p. 75, to America's Shanghai consul, David H. Bailey, whose appeal for "Improved
Banking Facilities between the United States and China" was the subject of House
Document No. 150. Cunningham predicted that an American trade dollar would go
into the melting pot. The market, that is, would not assign it a correct premium and it
would be consequently heavier than other dollars for the same value.
49. United States, Senate, 53rd Congress, 2nd Session, Report No. 235, Coinage Laws
of the United States, 1792-1894, 4th ed. (Washington, 1894), pp. 69-70, 647-650.
50. Celestial Empire (Sept. 15, 1877), p. 243. For a conflicting report see "The Trade

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274 Notes to Chapter VII
Dollar," American Journal of Numismatics, 9:62-63 (Jan. 1875). The dollar certainly
was accepted and may have passed at a premium over Mexicans — during the period
of heavy silver import. But the coin did eventually disappear. For the official sanction,
see American Journal of Numismatics, 8:92 (1874). See also the proclamation of the
governor general of the Liang-Kuang (Kwangtung and Kwangsi) declaring that such
assays had been made of the Hong Kong dollar, the American trade dollar and the
Japanese trade dollar. The coins were protected against false reproduction or counter-
feiting. Similar proclamations were issued in Fukien and Chekiang following the lead
of Kwangtung. Overland China Mail (Feb. 5, 1874).
51. The Economist, 34:1399 (Dec. 2,1876).
52. NCH (Feb. 5, 1874), pp. 114-116.
53. See, for example, James C. Hallock, Jr., Refusing Its Own Coin: A Protest against
Repudiating United States Coin — Even Trade Dollars (Brooklyn, 1884), and Hallock,
ed., Repudiation of Trade Dollars (New York, 1887); United States Senate, Coinage
Laws, pp. 69-70.
54. Friend of China (Apr. 14, 1842), quoted in Canton Press (Apr. 23, 1842). See
also China Mail (May 1, 1845).
55. Friend of China (Apr. 28, 1842), quoted in Canton Press (May 7, 1842).
56. For the currency reform in the West Indies, see Pennington, pp. 46-52. On early
British colonial monetary policy, see H. A. Shannon, "Evolution of the Colonial Sterling
Exchange Standard," International Monetary Fund Staff Papers, 1:334-354 (April
1951).
57. The proclamation was based on an Order in Council of November 28, 1844.
58. A notice in China Mail (Nov. 21, 1850), p. 185.
59. Ibid. (Oct. 10, 1850), p. 162.
60. For this period see E. J. Eitel, Europe in China: The History of Hongkong (Hong
Kong, 1895); and R. Chalmers, A History of Currency in the British Colonies (London,
1893).
61. China Mail (Sept. 15, 1853), p. 150.
62. Quoted in ibid. (Oct. 19, 1854), p. 166.
63. The continuity of this account depends upon the detailed articles of G. B. Enda-
cott, "The Hongkong Mint and the Colony's Currency Problem," Far Eastern Economic
Review, 20:744-746, 794-795 (June 14 and 21, 1956). There are no notes in these articles,
but Mr. Endacott's familiarity with the colonial correspondence relating to Hong Kong
is amply proved in his A History of Hong Kong (London, 1958).
64. China Mail (Dec. 12, 1868).
65. An excellent summary of the premium problem is found in the China Overland
Trade Report (Mar. 15, 1866), pp. 11-13.
66. Hongkong Mercury (June 1, 1866).
67. China Mail (Jan. 8, 1868). See also Friend of China, Shanghai (June 7, 1867),
quoted in China Mail (June 14, 1867), p. 3; and China Mail (Jan. 24 and Oct. 8, 1867),
pp. 20-21 and p. 2.
68. The China Overland Trade Report, the overland edition of the Hongkong Daily
Press, opposed the mint as early as 1864 (Jan. 14, pp. 10-11) on the ground that Hong
Kong should not be made to bear the entire cost of a project designed to benefit the
whole Far Eastern trade.
69. An account of the Executive Council meeting at which the fate of the mint was
discussed is found in the China Mail (Feb. 25, 1868).
70. Cf. Endacott, "The Hongkong Mint."
71. China Mail (July 13, 1868).

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The Hai\wan Tael 275
72. See note 52. See also Overland China Mail (Feb. 5, 1874); "A Rival Trade Dol-
lar," American Journal of Numismatics, 11:89 (Apr. 1877); "The Trade Dollar," ibid.,
9:62-63 (Jan. 1875).
73. BGD, Royal Mint, Eighth Annual Report, 1877 (London, 1878), pp. 11-13.
74. See the historical sections of BGD, Report on the Hong Kong Currency, Cmd.
3932 (London, 1931) for the Hong Kong (Coinage) Order and the British Dollar
Order, both of 1895.
75. NCH (June 2, 1877), pp. 540-541, 543, quoting the Hongkong Daily Press.
76. NCH (June 9, 1877), p. 565; Hongkong Daily Press, quoted in ibid., p. 579.
77. An Ordinance to Regulate the Issue of Bank Notes, No. 2 of 1895.

CHAPTER viii. The Haifyvan Tael


1. Sir Robert Hart, Inspector General of the Imperial Maritime Customs, basing his
figures on the records of the Board of Revenue in the period just prior to 1902, stated
that 28 per cent of the revenue of the imperial government came from the maritime
customs — surpassed only by the land tax (30 per cent). The likin tax brought in 18
per cent and the salt gabelle 15 per cent. "Memorandum by Sir Robert Hart concerning
the Indemnity to be paid by China," (BPP, 1902, CXXX, 61).
2. Stanley F. Wright, China's Struggle for Tariff Autonomy, 1843-1938 (Shanghai,
1938), pp. 25-32.
3. See, for example, the conflicting evidence in the following: William Milburn,
Oriental Commerce (London, 1813), II, 472; Pierre-Frederic Bonneville, Traite des
monnaies d'or et d'argent (Paris, 1806), pp. 216-217; Pere Hugues Darier, Tableau du
titre, poids et valeur des differ с ntes monnaies d'or et d'argent que circulent dans le
commerce, avec empreintes, 2nd ed. (Geneva, 1827), pp. 33, 44; and various references
in Morse, Chronicles.
4. Wright, pp. 25-32.
5. The comprehensive list of taels included in Morse, Currency, Weights, and Meas-
ures, provides evidence of the number of taels in the larger centers, but there were
probably even more than he actually listed, although the others would be of relatively
minor importance. An example of how a monetary tael might changes in composition
is provided in Morse, Chronicles, IV, 112. In a letter from H. F. Merrill in Tientsin to
Sir Robert Hart, March 10, 1908, S/O No. 20 in Hart Letters, MS Chinese 5 (2), the
deterioration of the standard of sycee in Tientsin is detailed.
6. Bonneville, pp. 216-217. Sycee rated by the Chinese at .958 was checked by the
Calcutta mint to be .750. This is an extreme example, but there were many like it.
7. In 1753, for example, there is a case of bullion being taken by agreement at a
point above the assay — a result of considerable bargaining. Morse, Chronicles, I, 293—
294. See also, ibid., I, 224, and V, 131.
8. The assay was off 1% B. Henry Bingley, King's Assay Office, "Remarks on the
State of Gold and Silver Trial Plates," in BPP, 1837, XVI, "Report from the Select
Committee on the Royal Mint," Appendix 22, pp. 81-86. For the American dispute, see,
for example, Jefferson, Papers, VII, 173.
9. John R. Morrison, p. 31.
10. Kinn Wei Shaw, pp. 127-128. The "real duty" might not change. Instead, per-
centages were added on one pretext or another, but this did not make them any less
valid or legitimate. See John Morrison, p. 32.
11. The East India Company's impression was not without a basis in reason. James

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276 Notes to Chapter VIII
Flint, a former cabin boy dropped ashore off the coast of China to learn the language,
was ordered by the Company to trade at Ningpo in 1769, despite an imperial ruling to
the contrary. Refused facilities in Ningpo, Flint proceeded to Tientsin and succeeded in
memorializing the Throne for redress against actions of the Canton Hoppo, or Super-
intendent of Customs. Specifically, Flint mentioned official extortion and the new
charges on trade. An imperial commissioner and two other officials were appointed to
investigate; the Hoppo was suspended. As a result of the investigation the Hoppo was
sentenced, the new charges cancelled, and the Company informed that all their accu-
sations had been justified. However, in their report to the Throne the officials stated
that the Hoppo was punished for incompetence and failure to control his subordinates.
As for the new charges, the officials found them jully justified, criticising the Hoppo
only for his failure to memorialize the changes he had made.
There is evidence to support the thesis that the Hoppo was made a scapegoat, since
the extortion complained of was not, relatively speaking, excessive. But one conclusion
is certain — because the Company accepted the imperial commissioner's statement that
all their accusations had been proved and assumed that the Hoppo's policy had not been
approved in Peking, the incident did much to raise false hopes as to the probable suc-
cess of embassies to Peking. The incident was thus one basis of the stress later placed
by foreigners on the importance of direct access to the capital — and to the Emperor.
The subsequent imprisonment and banishment of James Flint by the Chinese authori-
ties should have provided a warning.
See the Report of the imperial commissioner and other officials appointed to investigate
the charges laid by James Flint of the East India Company against the Canton Hoppo
or Customs Superintendent, in Shih-liao-hsün-f(an (Historical materials published every
ten days; Peiping, 1930-1931), 4:119-125b, esp. 122b, 123. For the reaction of the East
India Company, see Morse, Chronicles, V, 82. See also, "Dispatch of the Select Commit-
tee to the Governor General of India," October 25, 1831, quoted in Morse, Chronicles,
IV, 319; and Hummel, I, 482, under Li Shih-yao (Chinese bannerman, d. 1788).
12. Morse, Chronicles, III, 230; John Morrison, p. 22; Milburn, II, 492, gives sample
accounts showing the addition to "make it sycee." Morse, Chronicles, I, 58, and John
Morrison, p. 32, give examples of the difference in weight. There was disagreement as
to whether the difference in weights was real or simply an illegal imposition. See
Milburn, II, 495. The memorial quoted in Shih4iao-hsün-l(an, 4:122 (see note 11) states
definitely and authoritatively that the weights did vary.
13. Darier, pp. 33, 44, and other works cited in note 3.
14. Such a phrase as "sycee or pure silver" suggests that these terms were synonymous
and without ambiguity — the phrase is in Morse, Chronicles, III, 101-102. A. Wilkin-
son, testifying before the Select Committee on Commercial Relations with China, stated
that the fineness of sycee varied from 94 to 98 touch. BPP, 1847, V, "Report from the
Select Committee on Commercial Relations with China," p. 107. However, the Amoy
Regulations of 1844 mention "sycee at par of a 100 touch" and "sycee of inferior touch."
See BPP, 1847, XL, 1, "Orders, Ordinances, Rules and Regulations," p. 35.
15. For discussion, see Appendix.
16. Flint's own account of his adventures is contained in Morse, Chronicles, I, 301-
305. A contemporary's opinion of him is quoted in the Canton Press (Jan. 26, 1839),
p. 21.
17. Shih-liao-hsün-Xan, 4:123b—124; e.g., $18 is given as equal to 12.1824 taels.
18. The former is the weight and fineness of the Carolus IV dollar (without pillars)
as given by Darier, p. 33. The fineness of Spanish dollars before the recoinage of 1772
was, however, .906, which would give a higher value for customs payments. This might

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The Haikwan Tael 277
in turn be modified by using 6 per cent, but obviously this is not a fruitful approach.
19. For the copper regulations, see HT, 24:3^4. For the Hu-pu rules see China, Hu-pu
tseJi (1838 ed.), 3:7; ibid. (1851 ed.), 12:15, 19b.
20. Calculations are based on figures contained in S. W. Williams, Chinese Com-
mercial Guide (1844), and Shih-liao hsün-l(an, 4:123b—124.
21. Unfortunately, the account of the evolution is found in later writings, e.g.,
Stanley Wright, pp. 25-32, and Pietsch. According to the latter work, the East India
Company agreed that the Haikwan tael should be 579.8 grains of silver, or 4 grains
more than the Kuping, which was supposed to be 575.8 grains, 1.000 fine. Morse makes
no reference to such an agreement in his Chronicles. Williams also mentions an agree-
ment by the East India Company with the Co-hong, this time dated 1770 and giving
the catty as 1% lbs. av. No source is given. S. W. Williams, Chinese Commercial Guide
(1844), p. 280.
22. C. Toogood Downing, The Stranger in China; or The Fan-qui's Visit to the
Celestial Empire in 1836-7 (Philadelphia, 1838), I, 183.
23. For example, the imperial government did recognize the difference between local
weights of bullion and the Kuping standard and attempted to prevent loss of revenue
through the provincial tendency to remit in local weights. This loss was referred to as
chien-p'ing yin Jiang. See Lo Yü-tung, pp. 189-270, esp. p. 193.
24. The percentage remitted varied from time to time and from port to port. For
example, Stanley Wright, pp. 25-32, states that in pre-treaty Canton 40 per cent was
remitted to the central government and 60 per cent retained by the province. The differ-
ences in percentage remitted could affect the local tael-Hai\wan tael rates. T h e
authorities in Hankow argued for a higher rate, explaining that the Shanghai formula
could not be taken as a basis since it was too low, and that Hankow had to remit to
Peking whereas Shanghai did not. IMC, Reports on the Hai\wan Banking System, p. 83.
25. The British position is found in the Treaty of Nanking, the Supplementary
Treaty made at Hoomunchai in 1843, and the Treaty of Tientsin; the American posi-
tion on coins was not taken until the American Treaty of Tientsin. Treaty references
may be found in IMC, Treaties, Conventions, etc. between China and Foreign States
(Shanghai, 1877 and 1917).
26. See the testimony of A. Wilkinson and others in BPP, 1847, V, "Report from the
Select Committee on Commercial Relations with China."
27. In the American Treaty of Tientsin (1858), Art. XXII, the Spanish Treaty of
Tientsin (1864), Art. XXIX, and in the British Treaty of Tientsin (1858), Art. XXXIII,
the term "sycee" replaces "standard of pure silver" as found in Art. VIII of the Gen-
eral Regulations of Trade.
28. IMC, Reports on the Haihwan Banking System, p. 194.
29. Calculated from figures in BPP, 1843, XXX, 717, "Statement of the Account be-
tween the Masters of the Mint and the Lords Commissioners of Her Majesty's Treasury,
An Account of the Sycee Silver Remitted from China."
30. The report of the Amoy assay, Consul Henry Gribble's letter to the Chief Super-
intendent of British Trade in China, is dated November 13, 1843. For Mexican dollars
the results were identical, but they differed for cut money. The outturn averaged 1.7
taels less than at Canton. BPP, 1847, XL, 1, "Orders, Ordinances, Rules and Regulations,"
p. 35. Adoption of the Canton assay was confirmed in the Amoy Regulations, October
29, 1844. The treaty reference is to Art. XXXIII of the British Treaty.
31. For the weight of the dollar, see Darier, p. 33. This also checks with the figure
given in Don Thomas de Marien у Arrospide, Tradado general de monedas, pesos,
medidas у cambios de todas las naciones (Madrid, 1789).

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278 Notes to Chapter VIII
32. Treaty of Whampoa, Art. XVIII (3).
33. Ch'ou-pan i-wu shih-mo (A complete account of the management of barbarian
affairs; Peiping, 1929-1931), HF, quoted in Earl Swisher, China's Management of the
American Barbarians: A Study of Sino-American Relations, 1841-1861, with Docu-
ments (New Haven, 1953), pp. 271 and 269 respectively. T h e replies are found in the
same work and are quoted in Swisher, pp. 282 and 280 respectively.
34. Art. XI, Treaty of Tientsin (1871).
35. E.g., Tientsin. IMC, Reports on the Hai\wan Banking System, p. 57.
36. E.g., the Hankow merchants urged parity of rates with Shanghai: ibid., p. 76.
See note 24.
37. "Weights in conformity to those hitherto in use at the Custom House of Canton
and duly stamped in proof thereof shall be sent to the Superintendents of Customs and
British Consuls" (General Regulations of Trade, Art. IX). Most treaties contained simi-
lar provisions. The weights were to be used to settle disputes.
38. Commissioner Detring to Hart, Tientsin, February 6, 1878, quoted in IMC, Re-
ports on the Haikwan Banking System, p. 7. H . F. Merrill in his letter to Commissioner
Drew of July 25, 1892, states that an official in the taotai's yamen also held a key post
in the Imperial Maritime Customs office and that this resulted in the possibility of
squeezes being levied on trade to a potential of 10,000 taels a year! Hart Letters, MS
Chinese 5 (1), pp. 493-494.
39. The differing rates for foreigners and Chinese at certain open ports would seem
to confirm this. See IMC, Haikwan Banking System.
40. See James Hart's report on Shanghai in IMC, Haikwan Banking System, p. 109.
41. Meltage charges hidden in the local formulas were not affected by the provisions
of Rule 9 of the French Treaty of Tientsin (1858) or the similar Rule 9 in the British
treaty.
42. For a report that this negotiation did take place see the memorial submitted by
the acting Nanking viceroy Pi-ch'ang and the governor of Kiangsu, Sun Shan-pao,
Ch'ou-pan i-wu shih-mou, TK, 70:12b—14, reproduced in Fairbank, Ch'ing Documents,
II, Document 2. The results are not given, however.
43. Material on Amoy is found in Fairbank, Trade and Diplomacy, I, 206-207, and
in IMC, Decennial Reports, 1882-91, p. 171, as well as in IMC, Reports on the Haikwan
Ban\ing System.
44. "Memorandum by Sir Robert Hart proposing the conversion of the Haikwan
tael into a gold unit," March 1896, reprinted in China, Chinese Customs Service, Docu-
ments Illustrative, VI, 584-586. Hart's position was that "in determining the number
of taels or fractions of taels to be inserted as the Duty to be paid by any specified com-
modity, what the Foreign negotiator chiefly had in view was a certain fixed amount
in foreign coin with which the tael amount was then supposed to accord" (p. 585).
This is a little strong, since it would be unreasonable to suppose that the British ne-
gotiators did not anticipate the possibility of fluctuations both in the exchange and in
prices. Hart's command of history could not be expected to antedate the inauguration
of the Imperial Maritime Customs, as his correspondence with Η . B. Morse on the
subject of the Haikwan tael clearly reveals. See Hart's 1905 correspondence, Hart Let-
ters, MS Chinese 4 (1), esp. letters of June 18 and September 10.
45. "Memorandum by Sir Robert Hart on a proposal to convert the Haikwan Tael
into a gold unit, submitted on the 30th of Мяу 1901 to the International Tariff Com-
mission at Shanghai," China, Chinese Customs Service, Documents Illustrative, VI, 610-
612.
46. The commercial treaty of 1902, annex A ( l ) and annex A ( 2 ) ; see also the Ameri-
can commercial treaty of 1903, Art. XIII.

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Monetary Reform and the Mint Question 279
47. For a general account of this new situation and its origin, see F. A. Aglen's Circu-
lar No. 2550 (new series) on "Revenue collection, dollar rates of exchange and remit-
tances: the Inspector General's review of principles underlying collation and remittance
of revenue," Peking, Aug. 4, 1916, in Documents Illustrative, III, 320-324.
48. The correspondence on Foochow and Swatow is preserved in enclosures which
follow Circular 2550, ibid.
49. Ibid., p. 321.
50. Kann, "Currency, Banks, Weights, and Measures," chap, xxii in The China Year
Book, 19H (Shanghai, 1933), p. 573; and Kinn Wei Shaw, p. 199. But others, including
Tz'u-yüan and Couling's Encyclopedia Sinica, do not give the historical value of the
tael. The Tz'u-yüan defines the key term wen-yin to be .9867 parts in 1.000. The ac-
curacy of Kann and Shaw and other writers may well have been the consequence of
the 1916-1917 investigations, for references in the twenties and thirties usually give the
historical value. The Tz'u-yüan and the Encyclopedia were published before the results
of the investigation could have been known.
51. China, Chinese Customs Service, Documents Illustrative, III, 337.
52. Swatow Commissioner to the Inspector General, May 30, 1916, ibid., pp. 335-
337.
53. Foochow Commissioner to the I.G., Nov. 3, 1916, ibid., p. 362. The tests referred
to are reported in IMC, Customs publication V, No. 84, p. 49, and No. 47, p. 49, re-
spectively. There is a report on the tests made in Shanghai in 1912 in Documents Il-
lustrative, III, 366-367.
54. E. W. Kemmerer, Project of Law for the Gradual Introduction of a Gold Standard
Currency System in China, Together with a Report in Support Thereof (Shanghai,
1930). For a summary of the report see Kann, "Currency, Banks, Weights, and Meas-
ures," pp. 559-561, from which I have taken my information on the report. On p. 573,
Kann discusses the position of the Customs Gold Unit.
55. China, Chinese Customs Service, circular No. 4025, Jan. 20, 1930, Documents
Illustrative, V, 261-267. For a summary history of the new customs gold unit, see my
"Essays in China's Recent Monetary History, I: The Customs Gold Unit," Far Eastern
Economic Review, 16:176-178 (Feb. 11, 1954).
56. Circular No. 4025, Documents Illustrative, V, 261-267.

CHAPTER i x . Monetary Reform and the Mint Question


1. The gold exchange standard was proposed by J. W. Jenks, among others, and
opposed by Chang Chih-tung. Hummel, I, 31; Kann, Currencies of China, pp. 377-382.
Both Siam and the Straits Settlements adopted the gold exchange standard between 1903
and 1908.
2. L. S. Yang, p. 42, par. 5.8.
3. F. S. A. Bourne, "Possible and Impossible Reforms," JCBRAS, 33:6-7 (1899-
1900).
4. Letter to H. Kopsch, Aug. 15, 1871, Hart Letters, MS Chinese 4(1).
5. Tso Tsung-t'ang, Τso Wen-hsiang kung-tsou shu (Collected memorials of Tso
Tsung-t'ang; Shanghai, 1890), 33:2, a memorial dated June 25,1866 (TC 5).
6. Edict to the Grand Council, CT LT, 58:8, dated TC 6.
7. HTSL, chüan 214, tu-li ch'ien-fa; TC 6 and K H 9.
8. Quoted in NCH (Aug. 31, 1872), p. 169.
9. Quoted ibid. (May 18, 1883), pp. 556-557.
10. This is based on the 1886 calculations of the Fukien governor in his memorial

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28ο Notes to Chapter IX
quoted in the Peking Gazette (Sept. 3, 1885), pp. 127-129, by which time the supply
problem had been eased considerably.
11. Memorial of Chung Ta-hun, CT LT, 59:8b.
12. NCH (Nov. 21, 1872), p. 439.
13. Ibid.
14. Pe\ing Gazette (Jan. 14, 1888), quoted in NCH (Feb. 24, 1888), p. 209.
15. Peking Gazette (Feb. 6 and 7, 1887), pp. 16-17.
16. On Yen, see Ch'ing biographies, 1/444/1, 2/57/12b, and Hummel; on Weng,
1/442/3, 2/63/56, Hummel, and Ping-ti Ho, "Weng T'ung-ho and the 100 Days of
Reform," Far Eastern Quarterly, 10:125-135 (1951).
17. Hummel, I, 29.
18. Peking Gazette (May 8, 1887), p. 66. Shih-pao, Tientsin (July 1, 1887), quoted in
Chinese Times (July 9, 1887), p. 575.
19. Ibid. There was, for example, a rescript to a memorial of Hu-pu supervisor Yen
Ching-ming.
20. See the Peking Gazette for 1887-1888 for these reports.
21. Ibid. (Sept. 3, 1885), pp. 127-129.
22. Ibid. (Sept. 14, 1886), pp. 123-124.
23. Ibid. (Apr. 23, 1887), p. 57.
24. Ibid. (Apr. 22, 1887), pp. 56-57.
25. Ibid. (July 7 and Sept. 14,1887), pp. 103 and 144.
26. Shih-pao (Feb. 18, 1887), quoted in Chinese Times (Mar. 5, 1887), p. 280.
27. Peking Gazette (Oct. 8, 1887), p. 158.
28. Emile Rocher, La Province Chinoise du Yün-nan (Paris, 1880), II, 218-220.
29. Ibid., pp. 220-224.
30. Peking Gazette (Jan. 19, 1888), p. 11. Other references to T'ang in ibid, are found
on the following dates: July 1, 1888; Aug. 22, 1889; May 12, 1890; June 26, 1890; Feb.
22, 1891; Sept. 24, 1891; Aug. 6, 1892; Dec. 11, 1892; Nov. 8, 1893. There are also vari-
ous references in NCH for the same period.
31. In 1886 machinery lay awaiting transport at the head of the Yangtze navigation.
China Overland Trade Report (Feb. 2, 1886), p. 9. In an annual summary of events
for 1891, the London and China Telegraph stated that the Japanese experts had left
Yunnan and that the machinery was idle (Jan. 4, 1892, pp. 12-13).
32. Reported in NCH (May 7, 1853), p. 158.
33. As reported in a memorial quoted in Swisher, p. 472.
34. Quoted in NCH (Dec. 9, 1867), pp. 400-401.
35. NCH (Apr. 22, 1876), p. 389.
36. Overland China Mail (Nov. 9, 1876).
37. Celestial Empire (Feb. 7, 1878), pp. 126-127.
38. The memorial is cited in Swisher, p. 472.
39. NCH (Apr. 22, 1876), p. 389.
40. NCH (Apr. 20, 1878), p. 393. Reply dated Kuang-hsü 3/11/18.
41. No mention is made here of the great reform schemes of "Count" Mitkiewicz and
a Philadelphia syndicate, although their proposals created a sensation in the foreign set-
tlements. Mitkiewicz made contact with subordinates of Li Hung-chang, then Governor
General of ChihJi, and offered in effect to take charge of the modernization of China
in return for certain banking and industrial concessions. The schemes came to nothing.
NCH (Aug. 12, 1887), pp. 186-187; see also NCH (Aug. 5, 1887), pp. 147-148, and
Chinese Times (Aug. 13, 1887), pp. 661-663.
42. S. W. Bushell, "Additional Coins of the Present Dynasty," JCBRAS, 33:31 (1899-
1900).

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The Monetary System and China's Economic Development 281
43. Ibid., pp. 41-42.
44. Kann, Catalogue, pp. 113-114, 319.
45. Letter of Sir John Bowring to Lord Clarendon (Nov. 29, 1854), in BPP, 1857-
1858, XLIII, 693, "Supply of Silver in the Markets of China, and the Rules of Exchange
at Shanghai and Canton."
46. Sirr, II, 400. The dollars were assayed by the British Master of the Mint in 1854
and reported as having a gross weight of 411.5 grains. Letter of the Master of the Mint
to Sir С. E. Trevelyan (Aug. 21, 1854), in BPP, 1857-1858, XLIII, 693, "Supply of Sil-
ver in the Markets of China," p. 33.
47. Letter cited in note 45.
48. Kann, Catalogue, pp. 15-26.
49. IMC, Decennial Reports, 1882-91, p. 400.
50. Kann, Catalogue, pp. 15-26.
51. Ibid., pp. 315-318.
52. Wylie, pp. 84-86.
53. Report of the governor of Hong Kong to a meeting of the Executive Council, re-
ported in China Mail (Feb. 25, 1868).
54. For example, R. S. Gundry, China, Past and Present (London, 1895), pp. 147—
148, thought that Li Han-chang, the new governor general, was repudiating the under-
taking. A scathing report is also found in the London and China Telegraph (Jan. 6,
1890), pp. 16-18.
55. Quoted in NCH (Aug. 12, 1887), pp. 181-182.
56. Chinese Times (July 30, 1887), pp. 637-638.
57. CTLT, 58:10b-12.
58. See Kann, Catalogue, pp. 26-81, for Chinese silver coins prior to 1895.
59. NCH (Mar. 25,1892), pp. 396-397.
60. Celestial Empire (Nov. 10, 1893), p. 632.
61. Kann, Catalogue, pp. 26-81.
62. CTLT, 58:12a-b.
63. Kann, Catalogue, pp. 81-82.

CONCLUSION. The Monetary System


and China's Economic Development
1. Chinese Times (May 26, 1887), pp. 321-322.
2. See, for example, the study of comparative costs of Shanghai and English textile
mills in 1873 (exchange rate Ts 4 = / 1 ) and in 1893 (Ts 7 = / 1 ) by George Jamieson,
British Consul, Shanghai, in NCH (Nov. 16, 1894), supplement, p. iv. For a bibliography
of works on China's financial international relations, see, for example, Choh-ming Li,
"International Trade under Silver Exchange: China, 1888-1935" (Ph.D. Thesis, Uni-
versity of California, 1937). The question of the silver exchanges would have to include
a consideration of American, Indian, Japanese, and European currency history.
3. These are the contrasting themes in Mary Wright, The Last Stand of Chinese
Conservatism, and G. William Skinner, Chinese Society in Thailand: An Analytical
History (Ithaca, N.Y., 1957), pp. 92-93. On a less academic plane, we know from experi-
ence with old China hands that questions directed at Sinologues and businessmen will
elicit totally different responses. Nor can it be argued that the Sinologue is merely de-
scribing the Chinese ideal, for he will often insist that he is describing the empirically

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282 Notes to Conclusion
"real" character of the people and will claim that the observed materialism is a temporary
aberration.
4. A full-scale study of the Chinese family, such as that undertaken by Marion J.
Levy, The Family Revolution in Modern China (Cambridge, Mass., 1949), is not so
naive as to deny conflicting exceptions. But the very existence of even a single exception
tends to make the generalization useless for development analysis. Actually, conditioned
as one is to the stereotype, case studies continue to amaze one with the diversity of
Chinese family life they picture and with the presence of tensions which could and did
yield revolutionary patterns. (See, for example, the life histories in Fei Hsiao-tung,
China's Gentry: Essay in Rural-Urban Relations, Chicago, 1953.) Skinner, however,
contrasts the lack of family connections among the Thai, as a factor in their unwilling-
ness and inability to enter into economic competition, with the Chinese, who found
motivation in the existence of extended kinship groups.
5. See, for example, Fairbank, A. Eckstein, and L. S. Yang, "Economic Change in
Early Modern China: An Analytic Framework," Economic Development and Cultural
Change, 9:1-26 (Oct. 1960). The whole argument of the blighting influence of officials,
although reasonable, is as yet a little difficult to assess. The corruption of the officials
did not prevent the accumulation of wealth or the existence of rich merchants. Officials
must have known from experience the probable income of anyone engaged in a given
line of trade and assessed him accordingly, whether he engaged in conspicuous consump-
tion or not. One might argue that putting one's capital in a factory put it beyond the
reach of the official, who would, as usual, profit f r o m the income when realized. How-
ever, this would not hold in periods of civil strife or war-lordism, when officials were
known to confiscate such properties by one device or another. See, for example, H . D.
Fong, Industrial Capital in China (Tientsin, 1936), pp. 45-60. Treaty-port writers were
continually commenting on the ineffectiveness of the Chinese government, but was it
not just such a combination of corruption and ineffectiveness which helped the indus-
trial change in eighteenth-century England to gain momentum?
6. Consul R. Alcock, BPP, 1847, XL, "Returns of Trade," p. 5 (Foochow 1845).
7. This is not an argument that institutions do not affect the course of economic
events; it is a request for balance based upon the known facts of all sectors. Thus
Mary Wright makes a case for the Confucian influence on the decision of officials to
concentrate exclusively on the recovery of agriculture during the T'ung-chih Restora-
tion, but since they would have made the same decision on solely economic grounds,
the causal relationship remains unproved, though not disproved.
8. See, for example, W. E. Minchinton, "The Merchants in England in the Eight-
eenth Century," in The Entrepreneur (Cambridge, England, 1957), p. 29. Even en-
tailed estates might be so encumbered that the economic effects were the same as if the
inheritance had been divided. See, for example, D. Spring, "English Landownership in
the Nineteenth Century: A Critical Note," Economic History Review, 9:474 (April
1957).
9. There are many sources one might give for discussion of the role of dissenter
families in the eighteenth-century English economy; see, for example, L. S. Pressneil,
Country Banking in the Industrial Revolution (Oxford, 1956).
10. Feuerwerker, China's Early Industrialization, p. 212.
11. IMC, Decennial Reports, first for 1882-1891, pp. 24-25, and secondly for 1892-
1901, I, 22. The first report states that the local opposition was also due to the fear of
unemployment, a fear which foreign observers tended to list under "conservatism of
Confucian officialdom." But it also states that the machinery was not effective. Actually,
these two points are contradictory, but what is interesting is not the accuracy but the
fact that the subsequent report feels it sufficient to state that the closing of the mills was

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The Monetary System and China's Economic Development 283
due "chiefly to native opposition." Nothing was said about the machinery's ineffective-
ness.
12. Sometimes these generalizations do not appear wholly accurate, as, for example,
Mary Wright's claim (p. 192) that unless the compradore went overseas, he did not go
on to engage in industry.
13. Yen Chung-p'ing, "Ming Ch'ing liang-tai ti-fang kuan ch'ang-tao fang-chih-yeh
shih-li" (Examples of the promotion of industry by local officials in the Ming and
Ch'ing dynasties), Tung-fang tsa-chih (Eastern miscellany), 42.8:20-26 (1946).
14. BPP, 1864, LXIII, "Report by Student Interpreter Brown on the Coal Mines near
Peking," in 'Tapers Relating to the Affairs of China," China, No. 3, pp. 53-57.
15. Ying-shih Yü, "An Analytical Study of Feng Kuei-fen's Learning for Practical
Use to Society" (seminar paper, Harvard University, 1958).
16. The Hu-pao reported the case of the cotton gin at Pootung in 1890. A Chinese
factory had led to petitions being presented to the local authorities for its closing, but
when it was shown that 700 were employed, it was allowed to remain. NCH (Jan.
17, 1890).
17. NCH (Sept. 15,1893).
18. NCH (Sept. 28,1883), pp. 365-366.
19. IMC, Decennial Reports, 1882-91, pp. 338-339.
20. E.g., the shares of the Selangor Tin Mining Company were fully subscribed be-
fore the date of issue when the company was floated in 1882 (NCH, June 2, 1882, p.
583). By 1884 the original capital had been used up in the purchase of machinery
which by then was recognized as unsuitable. Attempts at reorganization having failed,
the company wound up in 1886 paying seventy-five cents per hundred-dollar share.
21. The Perak Sugar Cultivation Company was an exception and an example of
what might happen when there was a devoted estate manager and the shareholders
were willing to hold on (NCH, 1886, pp. 398-399). T h e shares of this company were
likewise bought up privately in 1882. In contrast, a Borneo company with head office in
Hong Kong found that its manager had been listing as assets at market value of sawn
lumber all the standing trees in the company's jungle concession!
22. Information on the background of the Major brothers was brought to the author's
attention by John McMaster, School of Oriental and African Studies, University of
London. McMaster obtained the information from the Shanghai 1859 letter box of the
Jardine Matheson papers in Cambridge University Library.
23. A. Wright and Cartwright, p. 594. This is a general complaint still made about
the agency house; that is, that they do not push all their lines but rely upon their most
profitable to pull them through. This is a criticism difficult to assess, but, relative to the
engineering lines prior to 1895, the evidence is in support of the critic.
24. NCH (Dec. 16,1885), pp. 674-675.
25. A. Wright and Cartwright, pp. 526ff.
26. D. K. Lieu, China's Industries and Finance (Peking, 1927), p. 8.
27. Marion J. Levy and Kuo-heng Shih, The Rise of the Modern Chinese Business
Class (New York, 1949).
28. James Kerfoot, "Cotton," in A. Wright and Cartwright, p. 302. Kerfoot was mana-
ger of Jardine Matheson and Company's Ewo Cotton Mills in Shanghai. The cotton
textile problem is extremely complex; it cannot be dismissed with quotations from
Chinese newspapers lamenting that Chinese cotton should be exported when it was
"the best of its kind in the world." See, for example, Feuerwerker, China's Early Indus-
trialization, p. 216.
29. E. G. Pulleyblank, a review of Karl A. Wittfogel, Oriental Despotism: A Com-

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284 Notes to Conclusion
parative Study of Total Power (London, 1957), in Bulletin of the School of Oriental
and African Studies, University of London, 21:659 (Oct. 1958).
30. Ε. H. Norman, fapan's Emergence as a Modern State (New York, 1940).

APPENDIX. Suggestions for Standardization


1. Yen Chung-p'ing et al., p. 37, table 30. Notes are restricted in the appendix to mat-
ters which are not documented elsewhere in this study.
2. In Kiukiang, for example, "ta-ch'ien" referred to the best of seven grades of
coin. The second was "chung-teng-ch'ien." IMC, Decennial Reports, 1892-1901, I, 345-
346.
3. H T , 24:4, for yang-ch'ien. Miyashita Tadao translates "chih-ch'ien" as "statutory
cash"; see his "The Silver Tael System in China," p. 13.
4. Jerome Ch'en in "The Hsien-feng Inflation," p. 578, states that the copper coins
were called "wen," that is, had the name "wen," but such a translation will not fit the
documents and is, therefore, incorrect. See also his "The State Economic Policies of the
Ch'ing Government, 1840-1895" (Ph.D. thesis, University of London, 1956).
5. L. S. Yang, p. 37, par. 4.25.
6. For example, t'ing-lu chien-mao may be translated as "to stop the furnace and to
reduce the quota" rather than literally as, "to stop the hearth and to reduce the [number
of] mao." L. S. Yang, p. 39, par. 4.30.

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BIBLIOGRAPHY

GLOSSARY

INDEX

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311

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GLOSSARY

an-ch'a shih ££ fc 'it. ch'ien-fa chin-ling


ch'ien-fa t'ang '/£.
Chang-chla-k'ou Ό
ch'ien-pi ^ f
Chang Chih-tung >fs]
ch'ien-p'iao
chang-yin chi-shih-chung 4·]
ch'ien-p'u
f Ep & f t chih-ch'ien
ch'ang-ch'ien
chih-ch'ien shih-wen -J- ^
ch'ao-p'iao ^ %
chih-sheng ku-chu jj. /jj}
chen-tun ch'ien-fa ^
chih-tao-liao tl 1
Ch'en Hung-mou fjfs. f u %%
chin-shih dt -i
chi-p'ing ί f £
Ch'i ChQn-tsao % % ching
ching-ch'ien
Ch'i-hsien Η ching- ch'uan s 4
Ch'i-ying 4 % ching-chO ku-chu
Chia-ch'ing * 41 Ching-shan
chia-sai (chia-se) ** L ching-tiao % Ϋ
chiang-p'ing V»
<<
-f
$ ft
ching-tun $ **
chieh-tai-chuang
ch'ing-ch'ien
chieh-t'ieh-tzu
4И ^ Ch'ing-hsi
chien-p'ing yin-liang 4 k 9}
chiu- chiu- ch' ien л- A.
chien-tu Io. ^
chiu-pa-ch'ien Л. ^
ch'ien ^
chiu-pa kuei-yüan A, *Л
ch'ien 4 5 (lead)
Chou Tsu-p'ei iU
Ch'ien (the four Ch'ien shops)
Chu Feng-piao ^ a **.
ch'ien-chia if
Chu Tsun * 4
ch'ien-ch'ien ^ 1 10
Chu Yu-lang ^ Щ (Ρ "" ®
ch'ien-chuang /Ji^
Yung Ming & )
ch'uan
316
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ch'uan-sheng ch'ien ^ j f ^ 4 ^ Ho-shen

ch'uan-ting )i| hsi-hao ® OIL


Ch'un, Prince Щ. ^ £ hsi-pang Ä Ц
chung hsiang-p'ing M f

chung-ch'ien ^ Hsiang-t'an

chung-pao \ ^ hsiao • b

hsiao-ch'ien • b ^
Chung Ta-hun 44. X

chung-teng-ch'ien Ц 4 ^ Hsiao-ch'in, Tz'u-hsi

chung-ting xj? hsiao-k'o -J*

Ch'ung-hou ^ /| hsiao-shu-ch'ien .1»

chO-ssu fa hsien t·

chüan ^ Hsien-feng
* ft

Conseequa (P'an Ch'ang-yao hsien-yin

M hsin-pao ^

hsin-wu liang $ff i . <$)


erh-ch'i-pao — ^
hsU-ch'ien
erh-liang-p'ing liang i ^ ip ^
hsü-t'ou-ch'ien ^ J|j ^
erh-pa-ti — /4
hstl-yin-liang Д
E w o (I-ho) fr
Hu K u a n g - y u n g tft А . Щ

fan-ssu
H u -P a o
i i il
Hu-pu f -Sp
fen
hua-pao Λ-L.
Feng-chen f 4 1
Hua-sha-na ^
Feng Kuei-fen jMl *
Hua-sheng (fang-chih tsung-ch'ang)
feng-shui
^ *
# ( Μ Й ^ )

Ha-fen Huai-lai ·\% £

Halkwan (Hai-kuan) >-4 Щ huang-ch'ien ^

hang-yin Hui ( P r i n c e of)

hei-ch'ien ДГ. i i hui-p'iao-hao | ^

Heng hui-shui >g

317
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hul-tui-chuang Kung-pu i 4f
hung-ch'ien kuo-chang ιä. Ψ*.
kuo-lu-yin i g . Ϊ& 4h
i-ch'ang-hsin
i-ch'ien - -ί
Kuo Sung-tao If % %
Kuping (K'u-p'ing)
i-chiu-ti - iL έ-i 4 *
i-li - it lao-pao
* t
i-liang san-ch'ien wu-fen szu-li Lei LU-t'ai
- i^l ί Л fr OD fe И Гг
1
i-wen tang erh-wen — X ^ Л Li Han-chang
Li Hung-chang
Jih-sheng-ch'ang a % -L
L i Shih-yao
a ^ I
Kao Ch'ung-chi liang
liang-tao
kao-yin % ίΐ
likin (li-chin)
k'o-chang ^ £ /I ^
k'o-tzu
* lou-kuei
lu-fang
kuan
Lun Hui
kuan-ch'ien-chü в
kuan-p'iao ψ
man-ch'ien
kuan-p'ing rr.
man-t'ou
kuan-tu shang-pan f
IM
mao
kuan-tung-ch'ien
mien-hua
kuan tsung-li hu-pu shih-wu
min
^ *ffl f 4f
min-sheng
kuan yin-chiang
mou
Kuang-hsQ
mu-ch'ien
Kuei-hua-ch'eng J f +L ^
Kung (Prince of) &
Nan-shan & «ь
kung-fa yi Ning-wu
kung-ku-chü

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pai-ch'ien fa Ssu-ma Ch'ien
5) A i i
pai-yin Q Su-shun
pan-t'ung-erh Jffi^ sui-yin
P'an Ch'ang-yao, see Conseequa Sun Shan-pao -1 %
pao sung-chiang-yin
pao-ch'üan-chü ^ ^ sycee (hsi-szu) if.
pao-yüan-chü 7% J j
ta ~K
Pao-yOn ^
ta-ch'ien
Pi-ch'ang %

ta-chih-ch'ien < Щ ί\
p'iao-chuang
p'iao-hao $Ж ta-fang ching-hsiang

η- &
T'ai-chou £
P'ing-yao
Po-chUn ^ T'ai-ku
tang-ch'ien •t i
pu-cheng shih-ssu ifc^lL*)
tang-fang

san-ch'i-ti ^J tang-shih *+

san-k'u-ya-men -j-Jf tang-ytleh-ch'u ^ Я


san-sui T'ang Chiung J%
shang-shu ^ Tao-kuang ^
Shen Pao-ching ^ ^ t'ao-ts'ao ^ ^f
Shen-yOan ^ taoli Jf
shih "if (a market) ti-chu >|]
shih £ (a dry me asure) ti-tzu Д
shih-lang -f^f gjJ tiao ^J
Shlh-pao ^ tiao ta-ch'ien
shih-p'ing-liang Ц- ^ T'ien

Shun-chih >1$ >4 T'ien-chen

Shun-t'ien (prefecture) ^ ( fa ) T'ien-hsi ^ ^

ssu ί) Ting Pao-chen

Ssu-ma 5) Л.Щ t'ing-lu chien-mao

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tou-kuei-yüan i- yang-ch'ien
Tsai-yüan Μ Yang-kao
f% %
ts'ang-ch'ang yang-li
te'ao-p'ing ?t * yang-yin У1 « L

tso-ma-t'i Yeh Ming-ch'en


t &Я
tso-pao-yin ккл 4i Yen Ching-ming fi\ Μ
Tso Tsung-t'ang yen-yün shih-ssu fki
tsu-ch'ien yin-hao Ш1
tsu-se wen-yin Д. L yin-lu
tu-ch'a-yüan yin-p'iao %
tu fu ssu tao Ying-k'ou
tu-li ch'ien-fa Yo-chou £ -Ж

Tuan-hua Yung-cheng % Ä

tung-ch'ien YU
4
Tung Hsün yü-p'ing
T'ung-chih fS) yOan-pao
t
T'ung-ch'üan
il &
t'ung-pao Ii f
Tz'u-yüan

Wang Ch'ing-ytln
Wang I-te £ Ш&
Wang Mao-yin ϊ Ä f t
Wang Wen-shao I
Wei-t'ai-hou
wen X
Wen-hsiang ХЦ
wen-kuang
Weng Hsin-ts'un ^
Weng T'ung-ho

320
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Index
Abbreviations, list of, 248 B a n q u e de l'Indo-Chine, 2 6 4 n 3 8
Accounting dollar, 8 9 - 9 0 , 173 Barter, 3 0 - 3 1 , 4 2 - 4 3 , 174, 2 5 3 n l 2
Accounting tael, 8 9 - 9 0 , 173 Big-cash ( c o i n ) , 61, 104, 1 3 4 - 1 3 5 , 143, 1 4 5 -
Agency houses, 90n, 95, 9 7 - 1 0 0 , 165, 1 6 9 - 1 7 1 , 150, 1 5 2 - 1 5 7 , 158, 211, 2 1 3 - 2 1 5 , 244,
1 7 4 - 1 7 5 , 182, 206, 236, 2 6 3 n 3 5 , 2 8 3 n 2 3 , 2 5 8 n 3 3 . See also Ta-ch'ien
n28 Bimetallism, 27, 3 9 - 4 2 , 4 6 - 4 7 , 50, 57, 121,
Agio, 1 0 6 - 1 0 8 , 2 6 5 n 7 6 , n78 253nl3
Aglen, F. Α., 2 0 9 - 2 1 0 Board of Revenue: a n d standard cash, 5 2 - 5 3 ,
Agra and M a s t e r m a n ' s Bank, 99 215; and Shansi banks, 94; functions and
Alcock, Sir R u t h e r f o r d , 221, 2 6 3 n 2 0 role of, 1 2 3 - 1 2 7 , 1 2 9 - 1 3 2 , 1 4 9 - 1 5 1 , 156,
American trade dollar, 85, 1 7 9 - 1 8 1 , 186, 206, 163, 167, 1 9 0 - 1 9 1 , 1 9 3 - 1 9 4 , 195, 2 1 6 , 218,
222, 225, 2 7 3 n 4 8 , n 5 0 244, 247, 2 6 0 n 2 8 ; organization of, 1 2 5 - 1 2 6 ;
A m o y , 12, 46, 85, 93, 97, 114, 116, 197, 203, staff of, 1 2 5 - 1 2 6 , 1 3 2 - 1 3 3 , 146n, 153n,
206, 2 6 3 n 3 1 , 2 6 6 n 8 6 154, 156n, I 5 7 n , 158, 216, 2 5 4 n 2 3 , 2 6 2 n l 0 ,
Amoy dollar, 46, 85, 116, 206 2 6 8 n 2 6 , n 4 0 ; m i n t s of, 1 2 6 - 1 2 7 , 134, 136,
A n h u i , 62, 153n, 219, 227 138, 140, 147, 153, 214, 2 6 9 n 5 0 ; a n d pro-
A n n a m , 140 vincial g o v e r n m e n t s , 128, 1 3 0 - 1 3 2 ; utensils
Assay: inaccuracy of, 35, 70, 74, 82, 1 9 0 - 1 9 1 , ordered sold to, 146. See also Board of
200, 204, 207, 2 6 6 n 9 7 , 2 7 5 n 5 , n 8 ; F o o c h o w , W o r k s ; Mint, traditional; Mao; Pao-ch'tian-
110; of new dollars, 170, 180, 221, 2 5 5 n 2 4 , chü
2 7 4 n 5 0 ; Royal Mint, 191, 197, 2 8 1 n 4 6 ; Board of W o r k s , 123, 125, 1 2 6 - 1 2 7 , 156,
A m o y , 197, 206; C a n t o n , 1 9 7 - 1 9 8 , 200, 157n, 190, 2 5 7 n 2 8 , 2 6 9 n 5 0 , 2 7 0 n 9 . See also
2 0 4 - 2 0 7 , 209; S h a n g h a i , 2 5 5 n 2 4 ; in tax Pao-yiian-chii
payments, 2 6 0 n l 5 . See also Kung-ku Bowring, Sir John, 184, 1 9 8 - 1 9 9
Augustine H e a r d and Co., 99, 177. See also Boxer uprising, 3, 92, 144, 208, 211, 222
H e a r d , A. F. British dollar, 74, 179, 1 8 6 - 1 8 7 , 228. See also
United K i n g d o m
Balfour, Capt. G., 204 Bullion, 3 1 - 3 4 , 3 7 - 3 9 , 45, 49, 69, 81, 103,
Bank m o n e y , see Bank notes; C u r r e n t accounts 1 0 7 - 1 0 8 , 1 1 1 - 1 1 3 , 116, 156, 1 6 6 - 1 6 7 , 174,
B a r k notes: in a metallic m o n e t a r y system, 34, 1 7 5 - 1 7 7 , 1 7 8 - 1 7 9 , 185, 187, 191, 1 9 5 - 1 9 7 ,
134; in Chinese m o n e t a r y system, 90, 1 0 3 - 200, 209, 222, 245, 2 5 5 n 2 5 , 256n33,
106, 174, 218, 230; of specific e x c h a n g e 2 7 3 n 3 6 . See also Dollar silver; Monetary
banks, 98, 183, 187; described, 103, 105; silver
issuance a n d r e d e m p t i o n , 1 0 3 - 1 0 5 , 109, 183,
2 6 5 n 6 3 , n 7 6 ; d u r i n g H s i e n - f e n g , 154, 163, Calcutta, 74, 179, 186, 228, 2 7 5 n 6
2 7 1 n 3 6 ; appreciation of, 217 C a n d a r e e n , 243, 246
Bank of Asia, 98 C a n t o n , 2, 12, 18, 42, 44, 53, 95, 202, 210,
Bank of China ( 1 8 6 4 ) , 99, 2 6 3 n 3 7 231, 2 6 1 n 4 2 , 2 6 2 n l , 2 6 5 n 8 5 , 2 7 6 n l l ; im-
Bank of C h i n a ( 1 8 7 2 ) , 100 port of dollars, 69, 82, 1 6 8 - 1 6 9 ; p a y m e n t s
Bank of C h i n a , Japan, a n d t h e Straits, 100 in silver, 74, 7 7 - 7 8 , 88, 116, 192, 2 6 1 n 4 4 ;
B a n k i n g crises, 77, 93, 9 6 - 9 7 , 104, 128, 1 6 2 - c h a n g i n g standard dollar, 85, 1 6 8 - 1 7 2 , 175,
163, 175, 218, 2 6 3 n 3 1 , 2 6 4 n 5 9 176, 1 8 3 - 1 8 4 ; cash-silver e x c h a n g e rate,
Banks and b a n k i n g system, 42, 67, 69, 74, 78, 1 4 1 - 1 4 2 ; assay, 1 9 7 - 1 9 8 , 2 0 4 - 2 0 7 , 2 0 9 ;
86, 9 0 - 1 1 0 , 134, 150, 163, 171, 217, 218, duty p a y m e n t s , 2 0 6 - 2 0 7 ; m i n t , 114, 2 2 0 ,
230, 2 6 2 n l , n8, n l 3 , n l 4 , 2 6 3 n 2 0 , n 3 1 , n 3 5 , 222n, 223-224, 225-228, 281n54
2 6 4 n 5 9 , 2 8 0 n 4 1 . See also B a n k i n g crises; C a n t o n liang, 73, 80, 82, 194
E x c h a n g e banks-, N a t i v e b a n k ( l o c a l ) ; Re- Canton tael, 2 7 2 n 2 1
mittance bank Capital, Marx's, 129, 153n

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3 2 2 Index
Carolus dojlar, 83, 86-87, 169-174, 182-183, Ch'en Pao-ching, 226
261 n37. See also Spanish dollar Chi-p'ing liang, 223
Cash, big-, see Big-cash Ch'i Chün-tsao, 146n, 156, 157n
Cash, iron, 147, 149-151, 158, 213, 2 7 0 n l 4 Chia-ch'ing period, 52, 134, 140
Cash, Japanese, 52, 140, 142 Chiang-p'ing tael, 109
Cash, standard: as "only" money, 25, 243; Ch'ien (unit of account), 27-28, 48, 59-64,
variations and imperfections, 26, 52, 56, 67, 104-105, 106, 143, 146, 147, 149, 153,
63, 129, 136-137, 141-142, 147, 211, 218, 217, 243-245, 257n30, 265n76. See also
223, 244, 2 5 6 n l l , 259n48, 268n39, 270n9; Cash, standard
in ideal model, 27-28, 58-63, 134-135; Ch'ien-lung Emperor, 139, 141
number in string, 30, 46-47, 55-57, 59, Ch'ien-lung period, 130, 134, 140
61-66, 77-78, 115, 153, 159-161; inter- Ch'ien-p'iao, 150, 158. See also Notes, govern-
regional movements of, 43, 166, 213; cast- ment cash and silver
ing of, 44, 52-53, 127, 135, 144, 147, 151, Ch'ien shops, 102, 150
213, 218, 268n39; described, 52, 134-135, Chih-ch'ien, 246. See also Cash, standard
138, 147, 245-247; crimes against, 52-53, Chihli, 5, 51, 60, 62, 92, 127, 149, 216, 219,
57, 136-137, 140-141, 147, 224, 244-245, 225
2 5 7 n l 5 ; purchasing power of, 52, 54, 81; China Mail, 164, 185
methods of payment with, 55-57, 62, 6 3 - China Merchants Steam Navigation Co., 10,
64, 112, 127, 217, 229; "good" defined, 56, 13, 18, 212
66, 112, 244; as subsidiary coin, 57, 135, Chinese New Year, economic consequences of,
246; debasement of, 66-67, 81, 134, 135, 58, 97. See also Banking crises
140-141, 144, 156x1, 213, 215; inconvenience Ching-ch'ien system, 60-61, 150, 158-163,
of, 103, 113-114, 229-230; discount on, 216-218. See also Chung-ch'ien system
109; use of, as instrument of policy, 130, Ching-tun, 257n30
140, 153, 270n21; history of, 134-143; Ch'ing-ch'ien (coin), 246-247
number in mao, 135, 247; import of, 166; Ch'ing-hsi, 271n31
legal tender in Hong Kong, 181-182; resto- Chinkiang, 205
ration of, in Peking, 213, 215-218; minting "Chit" system, 32, 113-114
of, with modern machinery, 216, 222, 225, Chopping coins, 45-46, 87, 168, 182, 187,
227; shortage of, 226; as translation of 261n42
ch'ien, 243. See also Big-cash; Ch'ien; Ex- Chou Tsu-p'ei, 270n8
change rates; String of cash Chu Tsun, 156
Cash shop, ch'ien-p'u, 54, 57-59, 67, 95, 104, Ch'uan (number), 135, 153, 247
264n59, 265n72. See also Banks and bank- Ch'uan (unit of account), 27-28, 48-49, 6 0 -
ing system; Native bank (local) 62, 243, 257n28. See also String of cash
Celestial Empire, 221-222 Ch'uan-sheng ch'ien, 55
Censorate, 123, 128, 153, 157n, 268n26 Ch'un, Prince, I-huan, 216
Central Bank of Western India, 99 Ch'un Feng Bank, 264n59
Chang Chih-tung, 18-19, 216n, 222, 225-227, Chung-ch'ien system, 58-64, 104, 114, 158,
235, 254nl4 162, 245, 257n30, 265n63. See also Ching-
Ch'ang-ch'ien system, 26-27, 51, 54-55, 5 8 - ch'ien system
60, 62-64, 158-162, 242-245, 258n31 Chung-pao, 148. See also Big-cash
Changsha, 92 Chung Ta-hun, 258n30
Ch'ao-p'iao, 150. See also Notes, government Chung-ting, 72
cash and silver Ch'ung-hou, 214
Charlemagne, currency reform, 44 Chungking, 53, 62, 79-80, 92-94, 115,
Chartered Bank of India, Australia, and China, 259nl3
99, 104-105, 187 Chusan, 86
Chartered Mercantile Bank of India, London, Cochin-China, 142, 2 7 2 n l 6
and China, 99, 100, 104-105, 187 Coinage laws, 33, 37, 42, 45, 121, 125-127,
Check (cheque), 107, 108, 265n79 128-130, 135-137, 140, 145, 163, 164, 167,
Chefoo, 102, 205, 251n39, 259nl3 169, 215, 217, 218, 247, 267n22, 270n9,
Chekiang, 104, 149, 219 n l 3 . See also Board of Revenue; Cash,
Ch'en Hung-mou, 130 standard; Counterfeiting

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Index 323
Coins, full-bodied: described, 31, 34, 37, 57; tions in, 195, 198-201, 2 0 3 - 2 0 7 , 2 0 9 - 2 1 0 ,
shoes of sycee as, 31, 73; and bullion, 3 1 - 277n24; hypothecated, 207, 209; denomi-
34, 3 8 - 3 9 , 74, 174-177, 225n25; tampering nated in Customs Gold Units, 210. See also
with, 32, 3 6 - 3 9 ; accented by tale or weight, Imperial Maritime Customs; Taxation
3 5 - 3 7 , 8 5 - 8 7 , 168, 187, 2 0 0 - 2 0 1 , 206, 209, Customs Gold Unit, 210
217, 255n25, 261n35; debasement of, 3 5 - 3 6 , Customs tael (pre-1842), 190-194, 195. See
170, 2 7 2 n l 9 ; destruction of, 3 7 - 3 9 , 206, also Haikjvan tael
218, 273n48; and bimetallism, 4 1 - 4 2 ; pre- Cut money, 197. See also Dollar silver
mium on certified, 55, 257n21; cost of, 74,
184-186; Chinese attitude toward, 74, 222; Davis, Sir John F., 182
disadvantages of, 103, 174, 176-177. See Debt, government, 6, 9, 101, 201n, 203, 2 0 7 -
also Dollar; Shilling; Silver coinage 208, 236, 264n44
Coins, subsidiary, 4 1 - 4 2 , 57, 8 1 - 8 2 , 113-114, Demonetization, 170, 268n39
135, 184, 226-227, 246, 2 6 6 n l 0 8 Dent and Co., 182
Coins, token, 9, 34, 45 Deutsch-Asiatische Bank, 99
Collected Statutes of the Ch'ing Dynasty, 124, Deutsche Bank, 264n38
134, 247 Dollar, 25, 37, 4 5 - 4 6 , 8 1 - 9 0 , 113-114, 147,
Collected Statutes of the Ch'ing Dynasty — 166, 210, 211, 2 2 1 - 2 2 8 : Chinese, 45, 69,
Precedents, 53, 127, 134 83, 2 1 1 - 2 1 2 , 2 2 2 - 2 2 8 , 254n23, 281n46;
Compradores: as potential modernizers, 14, import of, 37, 69, 81, 83, 143, 167, 172;
233, 2 3 5 - 2 3 6 , 2 8 3 n l 2 ; role in monetary role in monetary system, 8 1 - 8 3 , 108, 1 1 5 -
affairs, 49, 57, 88, 95, 113-114, 256n33 116, 167-168; in Europe, 82, 180; and
Comptoir d'Escompte, 99 tael, 8 2 - 8 3 , 8 8 - 9 0 , 168, 176-177, 192,
Confucianism, 122, 132-133, 240, 282n7. See 261n35; and dollar, 8 2 - 8 5 , 8 9 - 9 0 , 170,
also Political thought I80n, 185, 206; Chinese attitudes toward,
Conseequa, 178-179 83, 8 5 - 8 7 , 128, 143, 168-170, 174, 190,
Copper: in Chinese bimetallic system, 27, 4 7 - 222, 225, 255n25; standard, 8 3 - 8 5 , 89,
49; Yunnan, 48, 5 3 - 5 4 , 134, 145, 212, 2 1 4 - 115-116, 167-171, 175, 180n, 181-182;
215, 2 1 9 - 2 2 0 , 227; Japan, 48, 137, 140, degeneration to dollar silver, 87-88, 168,
145, 146, 212, 215; mines, 48, 134, 145- 171, 187, 197, 206; speculation in, 96; in-
146, 213, 2 1 9 - 2 2 0 ; supply as goal of mone- troduction of new, 167-176, 221, 255n24;
tary policy, 5 3 - 5 4 , 129-130, 134, 137-138, area of circulation of, 168, 225, 2 7 2 n l 6 ; in
140-143, 145-147, 152, 211, 2 1 4 - 2 1 5 ; price Hong Kong, 169, 171, 179-180, 181-187;
at mint, 58, 145, 146, 227; regulations, export of, 170; demonetization of, 170-171;
127, 137-138, 144, 193; melting utensils of, national, 83, 208, 210, 222n, 261n33; coun-
146; Hupei, 215 terfeiting of, 221
Dollar (unit of account), 37, 43, 69, 8 2 - 9 0 ,
Cotton, 171, 239, 266n86, 283n28
98, 100, 104-105, 106, 108-109, 114, 1 1 5 -
Counterfeiting, 32, 38, 5 2 - 5 3 , 81, 128, 137,
116, 158-160, 168-169, 171, 173-175, 1 7 6 -
142, 144, 146-147, 153, 155, 221, 223-224,
179, 180n, 182-184, 199, 206, 209, 2 6 6 n l 0 8
2 4 4 - 2 4 5 , 254n23, 2 5 7 n l 3 , n ! 5 , 270nl4. See
Dollar silver, 8 7 - 9 0 , 116, 171, 197-198, 2 0 6 -
also Coinage laws
207, 245, 261n44. See also Monetary silver
Country silver, 73
Dragon dollar, 83, 222n, 226
Coup d'etat of 1861, 156n, 157n, 158
Cunningham, Edward, 98, 273n48
Current accounts as money, 90, 106-109, 115, Eagle dollar, 255n24. See also Mexican dollar
134, 187 East India Company, 49, 69, 82, 88, 9 7 - 9 8 ,
Current silver, 197 111, 168-169, 178-179, 181, 191-193, 242,
Customs duty: denominated in Haikwan taels, 255n32, 263n35, 2 7 5 n l l , 277n21
70, 189-190, 196, 2 0 0 - 2 0 1 n ; payments in Economic advisers, see Monetary advisers
dollars, 86, 197-198, 2 0 5 - 2 0 8 , 209-210, Economic development: institutional factors,
226, 255n24, 2 7 6 n l 8 ; assessment and pay- 1, 17, 216n, 231-234, 2 3 9 - 2 4 0 , 282n3-n5,
ment, 108-109, 189, 191-194, 196-198, n i l ; and monetary system, 2 - 3 , 20, 229;
202-203, 209; and imperial revenue, 189, prior to 1895, 14-20; and economic forces,
201, 2 0 7 - 2 0 8 , 2 7 5 n l ; "extra charges," 1 9 1 - 232, 239-240, 282n5, n7, n i l ; and unem-
193, 2 0 1 - 2 0 3 , 2 7 5 n l 0 , 278n41; local varia- ployment, 2 3 4 - 2 3 5 , 2 8 2 n l l , 2 8 3 n l 6 ; ar-

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324 Index
tisans and, 235-238; lack of technical ad- Fukien, 60, 62, 142, 146n, 149, 151, 218,
vice, 236 224-226
Economy, Chinese: and failure to modernize,
1, 228, 238-240; 1845-1895, 4-20, 117; General Regulations of Trade, Supplementary
local nature of, 8, 20-21, 43-44, 70, 164- Treaty (Hoomunchai, 1843), 190, 196n, 197
167, 172, 189, 201, 254nl4; role of govern- Genoa, 3, 30, 252n2, 253n7
ment in, 8-12, 250nl5; monetary not Germany, 180
barter, 42-45, 283n28. See also Govern- Gold, 3, 9, 74, 76-77, 96, 99-100, 105, 110,
ment, central; Economic development; Mon- 113, 180, 182-183, 198, 207-210, 230,
etary system, Chinese 266n85
Emperor, role of, 122-124, 127, 129-131, 139, Government, central: as regulating authority,
149, 168, 226, 230, 270nl3 122, 149, 189, 200, 214, 267-268n22; or-
Empress Dowager Hsiao-ch'in, Tz'u-hsi, 158, ganization of, 122-128, 139, 144; as local
215-216n, 218, 222-223, 228 government for metropolitan Peking, 123-
Ewo enterprises, 95, 283n28. See also Jardine 124, 130-131, 137, 164, 214; limitations of,
Matheson and Co. 139, 151. See also Fiscal policy; Monetary
Exchange banks, 91, 96-100, 104-105, 174, policy
201n, 209, 230, 263n35 Government, central-provincial relations, 123,
Exchange rates; silver-gold, 9, 99-100, 105, 128-129, 130-132, 139, 147-151, 164, 214-
110, 113, 187, 208, 211, 228, 230, 242; 215, 216n, 218, 222-223, 228
Cash (copper)-silver, 43, 45, 48-49, 57- Grand Council, 123-124, 129, 133, 146n,
59, 65-67, 109, 112, 113, 134-142, 144- 156n, 157n, 216n, 222
145, 156n, 158-160, 182, 214,218,241-242, Guilds, 11, 74, 78, 94-96, 233
258n44, 259n48, 268n40, 269n43, 270nl4;
с h'ien—Haikwan tael, 67; Shanghai in- Ha-fen, 149
ternal, 77, 90, 108-109, 173-175, 177, 203- Haikwan banks, 101-102, 108-109, 200-201,
205, 210, 243n, 261n44, 277n24; dollar or 202, 206-207, 255n27, 260n26
tael-Haiku>an tael, 79, 90, 173, 198, 201, Haikwan silver, 204
203-207, 210, 277n24; in Hong Kong, 116, Haikwan tael: coverage in book, 3, 121, 189;
172, 181-182 denominates customs duties, 70, 189-190,
196, 200-201, 208; imaginary money, 72,
Factories, 2, 7, 15-16, 18-19, 236-238. See 189, 195; and its monies, 77-78, 107-108,
also Mint, modern 189, 195-198, 204-210, 260n28, 277n21,
Fen, 47, 243, 246 n24; in customs transactions, 108-109, 166,
Fengtien, 61, 62 189, 201, 207-208; origins, 190-194; as a
Ferdinand dollar, 168. See also Spanish dollar weight (liang) of bullion, 195-196, 203,
Financial commissioner, provincial, 127, 128, 207, 210, 277n23; foreign interpretations of,
216n 195-199, 208; denominates indemnity pay-
First Sino-British War, 2, 12, 194, 197, ments, 196, 208; proposed as gold unit, 207-
263n22 208. See also Exchange rates
First Sino-Japanese War, 14, 216n, 260n28 Handles-piaster, 180
Fiscal policy, 6, 9, 40, 93, 101, 111-112, 122, Hang-yin, 66
127, 136, 144-145, 146n, 150, 152, 155, Hankow, 19, 77, 79, 93, 97, 102, 104, 205,
162-163, 164, 195, 198, 207-208, 254nl9, 238n, 263n31, 277n24
268n40, 276nll. See also Customs duty; "Hard sycee," 107-108
Taxation Hard transfer money, 108
Flint, James, 192, 275nll Hart, Sir Robert, 110-111, 189, 207-208, 213,
Florence, 253nl3 275nl, 278n44
Florin, 253nl3, 257n21 Heard, A. F., 164, 174, 178-179, 261n45,
Foochow, 12, 18, 92, 95, 103, 109-110, 176, 272n21, n23, n25. See also Augustine Heard
178-179, 206, 210, 218, 232, 255n27, and Co.
264n59, 265n76, 270nl4 Heard, Augustine, Jr., 272n21
Foreign banks, see Exchange banks Heard, John, 261n45, 272n25
Fortune, Robert, 114 Hei-ch'ien, 245
France, 195-196, 199 Heilungchiang, 60-62, 64

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Heng banks, 102 lar, 85, 89-90, 116, 172, 206. See also
Ho-shen, 141 Money of exchange
Honan, 5, 62, 112, 149 Imperial household, 124, 130-131, 138, 153,
Hong Kong, 12, 13, 215, 221, 226; industrial 265n85
development in, 17-18, 238, 251n31; mone- Imperial Maritime Customs, 108, 110, 189,
tary standard, 46, 116, 182; bank notes in, 200-201n, 207, 209, 278n38. See also Cus-
98, 104-105, 174, 183, 185-187; exchange toms duty
banks in, 98-99, 183, 186-187, 264n37; Imperial Telegraph Administration, 13, 18
mint, 99, 174-175, 179, 184-186, 224-225, Indemnity, 6, 196, 207-208, 260n28
273n29, 274n68; monetary reform in, 164, India, 13, 97-100, 169, 171, 187, 230, 239
175; standard coin, 167, 169-170, 182; dol- Indo-Chinese Sugar Co., 17, 251n31
lars in, 169, 171, 179-187; monetary policy Industry, 13-19, 146n, 230, 234-238, 251n28,
in, 181-187; sterling in, 182-184; subsidiary 280n41, 283n20-n22, n28
coinage in, 226. See also Exchange rates Inflation, see Hsien-feng period
Hong Kong dollar (coin), 179, 185-186, 206, Interest, 94, 96, 100-101, 102, 105, 107, 108,
222, 274n50 202, 204-205, 262nl3, 265n74
Hong Kong dollar (unit of account), 182, 184 International Protocol (1901), 144, 196
Hong Kong Savings Bank, 101 Iron, 18-19, 43, 146, 238n. See also Cash,
Hongkong and Shanghai Banking Corpora- iron
tion, 17, 99-101, 105, 113, 116, 186, 187,
233, 251n31, 264n44 Japan, 13, 48, 52, 140, 142, 179, 184-186
"Honi soit qui mal у pense," 225 Japanese silver yen, 179-180, 186, 222
Hopei, 141-142, 241 Japanese trade dollar, 179, 206, 274n50
Hsiang-p'ing tael, 71, 72 Jardine, Sir William, 98
Hsiao-ch'ien system, 58-62, 64, 243 Jardine Matheson and Co., 90n, 95, 99, 182,
Hsien-feng Emperor, 144-145, 151, 155, 157, 263n35, 283n28. See also Agency houses
162 Jefferson, Thomas, 252n3, 253n7
Hsien-feng period; inflation in, 9, 102, 121, Jih-sheng-ch'ang, 92, 262n4
150, 152, 154, 158-163; condition of cash,
52; Peking monetary system during, 61, Kaiping Mining Co., 13, 18, 19
102, 158-163, 213, 244; paper money of, K'ang-hsi Emperor, 8
102-103, 145, 150-151, 158-163; monetary K'ang-hsi period: and subsidiary cash, 57, 135;
policy in, 129, 134, 145, 147-158, 163, and origins of chung-ch'ien, 60, 257n30,
270n9, n l 3 , n21, 271n31, n36; as a case monetary history of, 134-137
study, 144-163; big-cash depreciation in, Kann, Edward, 3, 178, 209
152, 154, 158-163; provincial monetary Kansu, 6, 60, 62, 149, 223
policy, 149, 151, 157 Kao Ch'ung-chi, 225
Hsin-hsien, 112 Kao-yin, 72, 80
Hsin-i liang, 255n27 Kemmerer Report, 210
Hsin-wu liang, 2 5 9 n l 0 Kerfoot, James, 283n28
Hsun-hsien, 112 Kiangnan, 15, 18
Hu Kuang-yung, 93, 102, 109 Kiangsi, 15, 62, 138, 149, 153n, 219
Hua-sha-na, 153-154 Kiangsu, 62, 104, 138, 149, 157n, 216, 278n42
Huang-ch'ien, 246-247 Kirin, 60, 62, 103, 223
Hui, Prince, Mien-yü, 154 Kiukiang, 67, 205
Hunan, 62, 149, 156n, 168, 213 Kiungchow, 206
Hung-ch'ien, 245 Kuan, 60, 244
Hupei, 149, 171, 215, 219, 226, 228 Kuan-p'iao, 151. See also Notes, government
cash and silver
Kuan-p'ing, 196
l-ch'ien, 60 Kuan-tung-ch'ien, 61
Ichang, 205, 2 5 9 n l 0 , n l 3 Kuan yin-chiang, 2 6 0 n l 5
Imaginary money; defined, 29, 253n6, 255n26; Kuang-hsii Emperor, 216, 220
tael, 71-72, 76, 82, 84, 89-90, 108, 115, Kuang-hsü period, 52, 61, 148, 215-220, 228
177-179, 189-190, 194, 206, 258n44; dol- Kueiyang-fu, 93

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Kung, Prince, I-hsin, 133, 154, 157n Mexican dollar (coin): as standard, 83, 171-
Kung-ku, 74, 75, 78-79, 81, 221-222, 259nl3, 176, 181-185; introduction of, 168-169;
nl4 passes at par, 169; supply of, 172, 225; new
Kuo Sung-tao, 104 designs and acceptance, 179-180, 255n24,
Kuo-chang system, 107-108 2 7 2 n l 7 ; in London, 187; payable for cus-
Kuo-lu-yin system, 107-108 toms, 197-198, 206; discount on, 261n37,
Kuping liang, 80, 194, 207, 224, 225-226 274n50
Kuping sycee, 111, 193, 226 Mexican dollar (unit of account), 114, 173-
Kuping tael, 6, 70, 76, 78, 111-112, 173, 193- 175
194, 208, 242n, 260n28, 277n23 Mexico, 45, 86, 172, 180, 183, 254n24
Kwangsi, 126, 138, 225, 226, 2 5 4 n l 4 Mien-hua tael, 80
Kwangtung, 17, 65, 149, 225, 226, 2 5 4 n l 4 Min, 60, 62, 244, 257n28
Kweichow, 138, 149, 215, 216, 224 Ming dynasty, 42, 132, 135, 152, 234
Mining; use of machinery, 4, 13, 19, 234-235,
Laissez-faire, 10-11 280n31; attracts rowdies, 4-5, 146, 251n39;
Lanchow, 18, 62, 223 transport problems, 7, 19, 143, 214; com-
Lead, 127, 138, 140, 146, 244 panies on Shanghai exchange, 15; copper,
Lei Lü-t'ai, 92 48, 134, 145-146, 214, 219-220; lead, 146;
Lhasa mint, 223 gold, 251n39
Li, 47, 57, 135, 243, 246 Mint, modern: absence of, 37; and cash, 53,
Li Han-chang, 227, 281n54 212, 225, 227; and subsidiary coin, 57,
Li Hung-chang, 13, 226-227, 235, 280n41 113-114, 226; H o n g Kong, 99, 174-175,
Liang (weight), 47-49, 61, 70-77, 88-89, 179, 184-186, 224-225, 273n29, 274n68;
107, 108, 134-137, 147-148, 150, 153, 173, Canton, 114, 120, 222n, 223-228, 281n54;
176, 178-179, 190, 195, 197-198, 203-207, foreign pressure for, 134, 221-222; Chinese
214, 215, 218, 223, 243, 246, 2 5 6 n l l , policy regarding, 213, 222; Tientsin, 213,
259nl0, 261n44 220, 225-228
Lieu, D. K., 178-179 Mint, traditional: methods used, 42, 52, 127;
Locke, John, 29 standards set for, 52, 127; price of copper
London, 86, 90, 98, 100, 172, 187, 230, 239 at, 58, 145, 146, 227; of boards of Revenue
Lowndes, William, 29 and Works, 126-127, 134, 136, 138, 140,
Lu-fang, 73-74, 78-79, 107-108, 143, 2 5 9 n l l , 142, 146-147, 149, 214, 217-218, 268n40,
n l 4 , 262nl8. See also Native bank (local) 269n50, 270n9; provincial, 127, 135, 138,
Lucca, certified coins at premium, 55, 257n21 142, 144, 146-147, 149, 215-216, 218, 223,
254nl4, 269n50, 2 7 0 n l 3 ; in Hsien-feng,
154, 156, 271n31; modern machinery in,
Macao, 42, 238n
212, 213, 215-216, 219-220, 222; estab-
Macdonnell, Sir Richard G., 184
lished by imperial princes, 154
Mace, 80, 243, 246
Mitkiewicz, "Count," 280n41
McLane, Robert, 198-199
Monetary advisers: officials as, 43-44, 130-
McMaster, John, 283n22
133, 152, 216, 267n22, 268n30, 271n2;
Major, Ernest and John, 237
bankers as, 44; referral to by Emperor, 129-
Malaya, 101, 236, 283n20, n21. See also
130, 151; imperial princes as, 154, 156-
Straits Settlements
157n, 216; foreigners as, 220-223, 225
Manchu, 124-125, 134, 153, 157n
Monetary policy: local, 42-45, 67-68, 128-
Manchuria, 62, 107, 110, 258n35
129, 139, 164-171, 176; late Ch'ing, 44, 52,
Mao, defined, 135, 247, 284n6. See also Board
103, 127, 129-132, 152-158, 164, 195, 2 1 1 -
of Revenue
216, 218-230, 259n48, 264n59, 268n40,
Maria-Theresa dollar, 180
269n43, n50, 270n21; foreign criticism of,
Martin, Robert M., 105
49-50; and dollars, 85-86, 198-199, 222,
Marx, Karl, 129, 153n
224-225, 261n35; and paper money, 103,
Mercer, W . Т., 184
135, 145, 150-151, 154-155, 156n, 264n63;
Merchants, see Agency houses; Compradores history of, 121, 133-143, 144, 152-158; hy-
Metallic currency system, 25, 34-37, 46, 50, pothetical case, 129-132; traditional, defined,
117, 121, 145, 151, 172, 174, 217, 230 133-134; through punitive measures, 155,
Metropolitan cash, 243. See also Ching-ch'ien

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Index 3 2 7

157-158, 163, 184, 217-218, 259n48; in banking system, 93, 94-97, 101, 107-110,
Hong Kong, 181-187; British colonial, 182- 230, 2 6 2 n l 8 ; source of funds, 96, 262nl3,
184. See also Monetary reform n l 8 ; and note issue, 104-106, 109-110, 154,
Monetary reform: in British territories, 29, 163, 175, 217; and current accounts, 106-
182-184, 187; foreign pressure for, 49, 121, 109; cooperation among, 109-110. See also
134, 164-166, 176, 189, 202-203, 211-212, Banking crises; Remittance bank
221-222, 224, 259n60; in cash sector, 104, New York, 86, 90, 230
108, 212, 213-219, 227-228; national, 132, Newchwang, 92-93, 107-108, 115, 178, 204-
152, 165, 202, 211, 221-222, 230; in Hong 205, 233, 261n44, 2 8 2 n l l
Kong, 183, 187; of silver coinage, 212, 221, Ningpo, 12, 86, 97, 105, 107-109, 115, 204-
224; national dollar, 222n, 224, 225; Chi- 205, 238n, 268n30, 2 7 6 n l l
nese concern with, summarized, 230. See North-China Herald: on cash, 51, 114; an-
also Monetary policy nounces Bank of China, 100; on Haikwan
Monetary silver: sycee as, 31, 107, 111-113, banks, 102; on Mexican as standard, 172,
167, 193, 195-197, 209, 222, 226, 245, 176; on Shanghai tael, 177; policy of, 221;
255n25, 273n36; survey of, 70-83; nomen- on Canton mint, 226; on Shanghai industry,
clature, 72-73, 79; form, 72-74; fineness, 237
statement of, 75-76, 80; and unit of ac- Notes, government cash and silver, 150-151,
count, 76-79, 172, 178-179, 195-196, 154-155, 157n, 158-163. See also Monetary
255n27; and dollar, 82, 84, 255n25; bank policy; Paper money
note redemption in, 107; tax payments in,
9, 112, 204; in monetary policy, 130, 134, "Official supervision, merchant management"
140, 143; wen-yin, 245. See also Dollar companies, 13-14, 18-19, 102, 143, 144,
silver; Silver; Sycee, shoes of 235, 238
Monetary system, Chinese: and economic de- Old Canton system, 2, 12, 82, 97-98, 190-
velopment, 2-3, 20, 229; compared, 25-26,
194, 202, 231, 2 7 5 n l l
44, 46-47, 49-50, 174, 230; foreign opinions "Old head" dollar, 86, 168-169. See also
on, 25, 49-51, 57, 94, 110-111, 116-117, Spanish dollar
164, 229-230, 251n28, 255n32, 256n33, Opium, 12, 43, 96, 141-142, 156n, 176,
258n35; ideal model of, 27-28, 46-49, 61; 254n20, 266n86
local nature of, 43-44, 62, 115-116, 164, Oriental Banking Corporation, 98, 100, 104,
198-199, 200-202, 222; and tax payments, 183, 186
45, 55-56, 64, 78, 86, 108-109, 189, 191- Overend Gurney, 99
195, 260n28; role of dollars in, 81-90, 165,
167-168, 174, 198, 201, 224, 255n2; con- Pai-ch'ien, 245
tribution of banks to, 91, 98, 230; of mer- Pai-yin, 245
chants, 91n, 97-98, 223; summary of, 114- Pakhoi, 206
117 Pao-ch'üan-chü, 126-127, 134, 136, 138, 146
Money: and unit of account, 26, 28-30, 170n, Pao-yüan-chü, 126, 127, 134, 138, 146
252n3, 253n7; defined, 28, 34, 39, 43, Paper money, 9, 90, 98, 103-106, 109-110,
252n3; and barter, 30-31, 42-43, 253nl2 135, 145, 150-151, 154-155, 156n, 157,
Money changers, 42, 58, 95, 137, 169, 174 158-163, 174, 183, 185-187, 217, 223,
Money of account, 252n3 254n20, 264n62, 265n63, n72, n76, 271n36.
Money of exchange, 46, 116, 255n26 See also Bank notes; Monetary policy;
Money substitutes, 43, 254n20 Notes, government cash and silver
Morse, Hosea В., 3, 80, 178, 210, 242n Parkes, Sir Harry S., 109-110, 171
Mu-ch'ien, 52, 2 7 0 n l 3 Pawn shops, 42, 101, 102, 109
Mukden, 134 Peking, 7, 8, 10, 12, 18, 93, 133, 139, 147-
149, 151, 154, 191-192, 194, 200, 213-215,
Mutual financing associations, 102-103 221-223, 225, 272nl6, 2 7 6 n l l ; tax monies
to, 44, 75, 127, 2 5 4 n l 9 , 265n85; cash sys-
Nan-shan, 146 tem of, 60-61, 150, 158-163, 211, 213,
Nanking, 65-67, 71-72, 74-75, 144-145, 215-218, 258n30, n31; taels, 72, 80; official
259nl3, 278n42. See also Treaty of Nanking banks, 102, 150, 154, 158, 163; cash notes,
National Bank of China, 100, 107, 267n2 102, 104, 150-151, 154-155, 156n, 157n,
Native bank (local): defined, 91, 94-95; in

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3 2 8 Index
188, 217, 271n36; government of, 123- in, 95-97, 265n79; 1858 crisis, 96-97; ex-
124; traditional mints, 126-127, 134, 136, change banks in, 99-100, 174, 201n,
138, 140, 147, 149, 154, 214, 217-218, 264n38; bank notes in, 104, 174, 265n74,
269n40, n50, 270n9, 271n31 n75; gold exports from, 110; subsidiary
Peking Convention (1869), 199 coins in, 114; trade with silk districts, 172;
Peking Syndicate, 111-112 monetary standard, 172, 174; duty payments
P'eng Hsin-wei, 3, 141 in, 200, 203-205. See also Exchange rates
Pi-ch'ang, 278n42 Shanghai dollar, 172, 177. See also Spanish
Piastre de commerce, 179, 225 dollar
Pillar dollar, 86. See also Spanish dollar Shanghai Municipal Savings Bank, 96, 101
Playfair, G. Μ. H., 267n2 Shanghai stock exchange, 15-16, 236
Po-chiin, 157 Shanghai sycee, 71, 79, 80-81, 173, 178. See
Political thought, 122-123, 132-133, 151, 240, also Sycee, shoes of
2 8 2 n l l . See also Confucianism Shanghai tael: share values in, 15; prices in,
Population, 4, 6 - 8 70, 174; described, 71, 72, 80-81, 177; and
Port Arthur, 8 its monies, 73-74, 76, 173, 177, 241; area
Pottinger, Sir Henry, 181 of use, 80; alternate names, 80-81, 178; and
Pounds, see Sterling dollar, 90, 172-177; and bank notes, 104;
Presidency banks, 98, 263n37 adoption of, 169, 172—1797 272n21; origins
Provincial administration: and new problems, of, 177-179; and Hai^wan tael, 203-205;
123, 157; described, 128; and currency re- and Kuping tael, 242n
form, 212, 214, 218, 222-228. See also Shansi, 5, 62, 92-94, 149, 151, 156n, 219,
Government, central-provincial relations 226, 262nl
Public assay office, see Kung-\u Shansi bank, 92-96, 101, 2 6 2 n l , n8, n l 3
"Pure" silver, 192-193, 197, 205, 226, 242, Shantung, 5, 10, 60, 62, 95, 138, 145, 149-
245, 260n28, 279n50. See also Monetary 150, 216n, 219, 225, 226, 251n39
silver; Silver Shensi, 5, 6, 62, 130, 146, 149, 151, 216n,
219, 223
Railroads, 2, 13, 15, 18-19, 111-112 Shashih, 93
Remittance bank, 74, 91-96, 101, 2 6 2 n l , n8, Shaw, Kinn Wei, 209
n l 3 . See also Native bank (local) Shih-p'ing liang, 72
"Restoration," 211-213 Shilling, 82, 114, 154, 167, 172, 182-184
Robertson, D. В., 170 Shroff, 32, 87, 113, 170-171, 174, 201n, 206,
Robinson, S<r Hercules, 184 217
Rocher, Emile, 219 Shun-chih period: subsidiary cash in, 57, 135,
Rupee, 181-183, 263n37 246; paper money in, 103, 135, 152; mone-
Russell and Co., 100 tary history of, 134-137, 257-258n30
Russo-Asiatic Bank, 99 Shun-t'ien prefecture, 123-124, 127, 130-131,
182, 211, 213-214, 217-218. See also
Saigon dollar, 179 Peking
Salt, 7, 9, 144, 214-215, 275nl Siam, 17, 279nl
Scholar-gentry, 10-11, 14 Silk, 7, 12-13, 43, 92, 140, 170, 172, 177,
Second Sino-British War, 12, 18, 97, 123 234, 237
"Self-strengthening," 13, 18, 212 Silver: export or import, 12, 73, 77, 141-142,
Senex, John, 25 146, 174, 180, 184-186, 241; as money, 25,
Shanghai, 12, 17, 163, 221, 224, 238n, 239; 27-28, 69, 195; in Chinese bi-metallic sys-
industry in, 16-17, 19, 230, 236-238, tem, 27, 47; in dollars, 37, 45; in subsidiary
283nl6, n28: counterfeiting in, 53; cash coins, 57; bar, 73; nomenclature, 79-80;
system, 54, 60, 67-68, 113-114, 215; tael speculation in, 96. See also Dollar; Exchange
system, 70-76, 80-81, 90, 115, 169, 172- rates; Monetary silver; "Pure" silver; Sycee,
179, 203-205; assay, 74-76, 2 5 9 n l 3 ; dollars shoes of
in, 82, 90, 115, 170-177, 205, 210, 255n24; Silver coinage, Chinese non-dollar, 176, 195,
standard dollar and sycee, 85, 169, 171-177, 223-224. See also Dollar
272n20, n21, 273n33, n36; Shansi banks Silver standard, 2, 37, 46-47. See also Stand-
and, 93, 2 6 1 n l , n l 3 ; native banks (local) ard silver

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Index 3 2 9

Sinkiang, 6, 44, 223 141-142, 145, 150, 163, 172-179, 190, 192,
Sino-foreign banks, 97, 174, 230 194, 197, 199, 201, 203-207, 210, 216, 220,
Small dollar, 114, 266nl08 241-242, 268n40; cash subsidiary to, 57,
Smith, Adam, 154, 239 135; defined, 70-71, 243; alternate names,
Soochow, 97, 176, 268n30 70; imaginary and real, 71-72, 115; values
Sovereign, Australian (coin), 183 and differing silver weights, 76-78, 178-
Spanish dollar (coin): type unspecified, 45, 179; and dollar, 82, 115-116. See also Liang
181, 224, 2 7 2 n l 6 ; Carolus, 83, 86-87, 169- T'aichow, 224
174, 182-183, 261n37; pillar, 86; old head, Tainan, 55
86, 168-169; Ferdinand, 168 Taiping rebellion, 4, 6, 9, 13, 15, 18, 92, 110,
Spanish dollar (unit of account), 98, 116, 123, 144-145, 152, 172, 212, 213
167-174, 183, 206, 224, 255n26 Taiwan 224, 225
"Squeeze," 111, 117, 146, 191, 232, 2 7 6 n l l , Taiyuan, 226
278n38, 282n5 Takao, 206
Ssu-ma scale, 80 Tamsui, 19, 67, 206
Standard silver, 7, 75-76, 79, 81, 115, 173, T'ang Chiung, 215, 219-220
177-179, 203, 204. See also Monetary silver Tao-kuang period, 52, 134, 140-143, 144,
Statistics, inadequacy of: monetary, 2, 26-27, 147, 168, 212, 224
42, 139-140, 2 5 4 n H ; natural disaster, 5; Tariff autonomy, 208. See also Customs duty
trade, 12-13; balance of payments, 13; pro- Taxation: land tax, 8, 112, 126, 144-145, 193,
duction, 13; business, 15n, 16, 250n25, 2 7 5 n l ; likin, 8 - 9 , 111, 214-215, 2 4 9 n l l ,
251 n27; employment, 16-17; price, 139- 2 7 5 n l ; other, 9, 42-43, 189-190, 214,
140, 162 2 7 5 n l ; remission of, 9, 122, 144-145; form
Sterling, 15, 30, 47, 182-184, 197, 242. See of payment, 42-43, 55-56, 64, 78, 86, 193,
also Shilling 195, 225, 2 6 0 n l 5 ; grain tribute, 42-43, 96,
Steuart, Sir James, 252n3, 256n32 2 5 4 n l 9 ; remittances to Peking, 44, 56, 75,
Straits Settlements, 186-187, 272nl7, 279nl 78, 93, 110, 111, 191, 195, 201, 216,
String of cash, 25, 30, 103, 216; premium on, 254nl9, 260n26, 277n24; and monetary sys-
26, 54-55, 63; in ideal model, 27-28, 5 9 - tem, 45, 110-113, 140, 166; and banks, 93,
63, 159; sub-strings, 54, 61, 66-68, 244, 95, 101, 110; and Board of Revenue, 124-
258n33; construction of, 54, 95; in pay- 125; and "extra charges," 191-193. See also
ments, 55-57, 62-63, 77-78, 153; defined, Customs duty
59, 244; local variations, 62; nomenclature, Tea, 7, 12, 13, 77, 92, 170, 237, 263n31
64-68; in duty payments, 205 Telge and Co., 264n44
Su-shun, 150, 155, 156n, 157-158 Textiles, 13, 18-19, 92, 230, 239, 251n28,
Sun (coin), 210 281n2, 283n28
Sun, Ε-tu Zen, 124n Three-tael touch, 75
Sun Shan-pao, 278n42 Tiao, 60, 61-63, 65, 104, 106, 115, 159-163,
Sung-chiang-yin, 72, 80 217, 243-245, 258n33
Swatow, 93, 206, 209-210, 262n8 Tiao ta-ch'ien, 258n30
Sycee, 192-193, 197. See also Monetary silver T'ien shops, 102, 150
Sycee, shoes of: as coins, 31, 73, 79, 81; in Tientsin, 10, 18, 62, 74, 92-93, 104, 205,
Shanghai, 72-76, 78-79; premium on, 73, 213-215, 220-221, 225-228, 256n63,
76-77, 195-196, 204, 2 6 0 n l 8 ; stating silver 260n26, 261n44, 2 7 6 n l l . See also Treaties
content of, 74-76, 81, 2 6 0 n l 8 ; debasement of Tientsin
of, 74, 78-79; inconvenience of, 81, 82; in Times (London), 174, 177
payment system, 108, 174, 273n36. See also Tin, 138, 146, 283n20
Monetary silver; Shanghai sycee Ting hsien, 6 - 7
Szechuan, 6, 62, 149 Ting Pao-chen, 216n
Tokens, 113n, 230
Ta-ch'ien (unit of account), 158-161, 2 4 4 - Transfer tael, 107-108, 115
245. See also Big-cash Transportation, 2, 7 - 8 , 13, 15, 18-19, 92,
Tael (means of payment), 176, 195, 223-225 111-112, 143, 214, 220
Tael (unit of account), 27-28, 48-49, 59-61, Treaties of Tientsin, 197-199
65, 69, 70-81, 104-108, 111-112, 114-116, Treaty of 1871 (Japanese), 199

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330 Index
Treaty of Nanking, 190, 192, 196 Wen, 246, 284n4
Treaty of Shimonoseki, 2 Wen-hsiang, 222, 254n23
Trust and Loan Co. of China, Japan, and the Wen-kuang tael, 258n44
Straits, 100 Wen-yin, 193, 196, 197, 207, 245, 279n50.
Tsai-Yüan, Sixth Prince I, 150, 157 See also "Pure" silver
Ts'ao-p'ing liang, 71, 73, 81, 176, 203-204, Wenchow, 116, 224
224 Weng Hsin-ts'un, 157
Tseng Kuo-fan, 14-15 Weng T'ung-ho, 157n, 216
Tsinan (Shantung), 93 West Indian currency, 29, 182
Tso Tsung-t'ang, 18, 213, 222-223 Williams, Rev. E. Т., 65-66
Tsungli Yamen, 123, 157n, 165, 216n, 222, Williams, Samuel Wells, 125
235 Williamsburg, Va., 25
Tuan-hua, Prince Cheng, 157 Wright, Mary C., 251n39, 271n2, 282n7,
Tung-ch'ien, 61 283nl2
T'ung-chih period, 52, 61, 148, 212n, 213- Wuchang, 18-19, 62, 225, 226
215, 228, 271n2, 282n7 Wuhu, 66-67, 75, 93, 205, 259n48
T'ung-ch'üan Bank, 108-109
T'ung-pao, 148. See also Cash, standard Yakub Beg, 6, 110
"Two-tael" scale, 80, 150 Yang-ch'ien, 52, 138, 245-246, 270nl3
Tz'u-yüan, 279n50 Yang-li tael, 71, 79
Yang-p'ing liang, 225n27
Yang-yin, 87, 207, 245. See also Dollar silver
Unit of account: in ideal model, 27-28, 47-
Yangtze, 7, 10, 75, 80, 168, 205, 213-214,
49; defined, 28-30, 252n3; and the stand-
216, 280n31
ard, 35; and coins, 36-37, 46, 170n, 247,
Yeh Ming-ch'en, 171
252n3; use of dollar, 69, 209; and its
Yellow River, 10, 145
monies, 76-77, 170n, 172, 194-195, 196,
Yen Ching-ming, 216, 280nl9
208; denominates bank notes, 104; and
Yen Chung-p'ing, 141, 234, 241
agio, 106; use in "barter," 253nl2. See also
Yin-p'iao, 150, 154. See also, Notes, govern-
Imaginary money; Money of Exchange
ment cash and silver
United Kingdom, 16, 70, 73, 154, 170, 182-
Ying-cheng period, 135, 136, 138
184, 195-199, 208, 232, 282n5
Ying-kou, 61-62
United States of America, 73, 100, 172, 191,
Yokohama Specie Bank, 99
195, 198-199, 208, 252n3. See also Ameri-
Yunnan: Muslim uprising, 6; mining in, 7,
can trade dollar
134, 280n31; copper from, 48, 134, 145,
212, 214, 219-220, 227; cash in Hsien-feng
Wade, Sir Thomas, 221-222 period, 149
Wang Ch'ing-yiin, 146, 156 Yunnan-fu (Kunming), 93
Wang I-te, 147 Yü banks, 102, 150. See also Peking
Wang Mao-yin, 147, 153, 157n, 267n22 Yii-p'ing tael, 71, 79-80
Wang Wen-shao, 102 Yüan-pao, 72-73. See also Sycee, shoes of
Weights: inaccuracy of, 190-191, 194, 200, Yiian-pao, 148. See also Big-cash
204, 207, 266n97; standard, 192, 210,
256nl2, 260nl4, 261n44, 278n37 Zinc, 134, 138, 218, 245

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HARVARD EAST ASIAN SERIES

1. CHINA'S EARLY INDUSTRIALIZATION: SHENG HSUAN-HUAI (1844-1916) AND


MANDARIN ENTERPRISE. By Albert Feuerwerker.

2. INTELLECTUAL TRENDS IN THE CH'ING PERIOD. By Liang Ch'i-ch'ao. Transla-


tion by Immanuel С. У. Hsu.

3. REFORM IN SUNG CHINA: WANG AN-SHIH (1021-1086) AND HIS NEW POL-
ICIES. By James Т. C. Liu.

4. STUDIES ON T H E POPULATION OF CHINA, 1368-1953. By Ping-ti Ho.

5. CHINA'S ENTRANCE INTO T H E FAMILY OF NATIONS: THE DIPLOMATIC


PHASE, 1858-1880. By Immanuel С. Y. Hsü.

6. T H E MAY FOURTH MOVEMENT: INTELLECTUAL REVOLUTION IN MODERN


CHINA. By Chow Tse-tsung.

7. CH'ING ADMINISTRATIVE TERMS. Translated and edited by Ε-tu Zen Sun.

8. ANGLO-AMERICAN STEAMSHIP RIVALRY IN CHINA, 1862-1876. By Kwang-Ching


Liu.

9. LOCAL GOVERNMENT IN CHINA UNDER T H E CH'ING. By T'ung-tsu Ch'u.

10. COMMUNIST CHINA 1955-1959: POLICY DOCUMENTS WITH ANALYSIS. With a


foreword by Robert R. Bowie and John K. Fairbank.· (Prepared at Harvard University un-
der the joint auspices of the Center for International Affairs and the East Asian Research
Center.)

11. CHINA AND CHRISTIANITY: THE MISSIONARY MOVEMENT AND T H E GROWTH


OF CHINESE ANTIFOREIGNISM, 1860-1870. By Paul A. Cohen.

12. CHINA AND T H E HELPING HAND, 1937-1945. By Arthur N. Young.

13. RESEARCH GUIDE TO T H E MAY FOURTH MOVEMENT: INTELLECTUAL REVO-


LUTION IN MODERN CHINA, 1915-1924. By Chow Tse-tsung.

14. T H E UNITED STATES AND T H E FAR EASTERN CRISIS OF 1933-1938 (FROM T H E


MANCHURIAN INCIDENT THROUGH THE INITIAL STAGE OF THE UNDE-
CLARED SINO-JAPANESE WAR). By Dorothy Borg.

15. CHINA AND T H E WEST, 1858-1861: THE ORIGINS OF THE TSUNGLI YAMEN. By
Masata\a Banno.

16. IN SEARCH OF WEALTH AND POWER: YEN FU AND T H E WEST. By Benjamin


Schwartz.

17. T H E ORIGINS OF ENTREPRENEURSHIP IN MEIJI JAPAN. By Johannes Hirschmeier,


S.V.D.

18. COMMISSIONER LIN AND T H E OPIUM WAR. By Hsin-pao Chang.

19. MONEY AND MONETARY POLICY IN CHINA, 1845-1895. By Frank. Η. H. King.

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Authenticated
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