The History of Paper money in China - Chinese Currency by J. Edkins.
Paper and Silver Currency.
The nse of seals had extended much in China aboot two
centuries after Christ, and this led gradually to stamping silk
and skin for various purposes. Just at that time the manufacture
of paper was introduced from the West, and it was
found to be an article capable of many common uses. This
led the Taoists for example to multiply charms rapidly by
stamping them on paper to sell to the superstitious, either to
hang on their doors or to carry with them when travelling.
Commercial accounts were written on paper for convenience,
and merchants and shopkeepers provided themselves with
seals for stamping. They came into the habit also of stamping
the paper before or after they wrote their figures upon it.
This was the state of things when the establishment of the
Caliphate on the Euphrates gave an impetus to eastern trade.
The Chinese in the eighth and ninth centuries made much
more silk than before for foreign countries. The spread of
the silk mnnufacture in Western regions did not put an end to
the demand for the silk goods of China or for the unwoven
silk. Neither Europe nor Western Asia could manufacture
enough of their own silk to meet the demands of the market.
The historian Robertson says of this period that the silk of
China was purchased in Shensi, the westernmost province of
that empire, and conveyed thence by caravan in a march of eighty or a hundred days to the banks of the Oxns, where it
was embarked and carried down the stream of that river to
the Caspian. After a dangerous voyage across that sea and
ascending the river Cyrus as far as it is navigable, it was
conducted by a short land carriage of five days to the river
Phasis, which falls into the Black Sea. Thence it was taken
by ship to Constantinople. While such was the activity of
trade by land there would naturally be a corresponding
expansion of seaborne traffic from the seaports of China to
India and farther west. The three centuries of the Tang
dynasty at the same time gave opportunity to home commerce
to grow in proportion. Trade flourishes when an empire is at
^
peace. It was these circumstances combined which led to the
invention of paper money in the Tang dynasty, and it was to
the Chinese merchants and statesmen particularly of the
ninth century that the credit is due in the first instance of
employing paper money in the form of drafts payable at
certain cities.
Those who wish to master this subject will find much to
interest them in Vissering's work which received the Julien
prize a few years ago. A few years ago the Peking Oriental
Society published a paper (taken chiefly from a work by
Wang Liu, published in 1831) by the lamented Japanese Minister
to China, Shioda Sabnro, on the same subject. This
paper is of very great value. It brings out clearly the point
that silver was not employed as money before the Tang
dynasty, and that it was then introduced. Reference is here
made to the work called Ji-chi-lu, by Ku Yeu-wn,* who died
two centuries ago, where it is said that before the Tang dynasty
copper cash was the medium of exchange between government
and people, and silver had never come into use. At that time
silver was already introduced in South China, meaning by
that term Canton and Kuaugsi. It is a curious fact that at about A.D. 500, according to Chinese history as examined by
EAI Yen-wu, there were in regard to money circulation three
belts of country. In the extreme south gold and silver were
in use; Canton being the centre of trade. In middle China, all
along the Yaugtse into Szechuan, copper cash were used
everywhere as the medium of exchange. All this belt of
territory with Canton, Kuangsi, and Tongking were then
ruled from Nanking as the centre. In the north, which was
under Tartar administration, copper cash and grain were
employed as a double medium of exchange. The effect of
Tartar control was to favour barter and keep back the onward
advance of monetary conveniences. Even now soldiers are
paid in grain when they are upon the old regime, but the new
drilled troops are paid in silver. It is noticeable here that
silver began to be a currency in South China first and at a
time when China sent her prefects regularly to rule in Cochin-
Chinese and Cambodian cities. Gold in ancient China was v,
much used on account of its great abundance. But silver
'
began to enter China because it is produced abundantly in
Burma and because it was a circulating medium in India and
further west. The silver which circulated by weight in Canton
in A.D. 500 would be partly Burmese and partly what
Arabian merchants and others brought from distant ports.
The Arabian trade would certainly have a share in the introduction
of silver by weight into the commerce of China in its
southern provinces. We find many proofs of the activity of x/
the Arab merchants from the Han dynasty downwards. This
is probably another instance of it. The Mei-liug mountains, on
the north of Canton province, at that time separated the belt
of country which traded by weight from the belt of country
which traded with the help only of copper coins, and this was
noticed by the celebrated author Han Wen-knng in a memorial
he sent to the Emperor about A.D. 800. Yuen Chen, another
great statesman, mentioned at about the same time that salt and pieces of silk were used as money in Szechuan. Cinnabar
and quicksilver, be added, were used as money in Kuangsi,
as also pieces of cloth and silk. At that time any valuable
article which had a known price in the market could be
bartered like coins elsewhere. It was in this way that silver
came into extensive use. It was of a fixed value according to
weight, and the silver mines of Burma made it very convenient
when the influence of the Chinese government extended to
that region. Another step in the use of silver was taken when
in A.D. 1035 it was commanded that the provinces of the
empire should not in future be expected to pay taxes in the
same form. Most portions of the empire would pay in copper
cash. Fukien, Canton, and Kuaugsi might send silver ; Kiaugsu
and Chekiang could contribute silk. This is the first
instance of the payment of taxes in silver being recognised in
an edict, and it was 854 years ago. Since that time the
influence of silver has been increasing to the present day, for
during this century the change of grain to silver in the contributions
of the people to the expense of the government has in
many localities been made for the first time. A change back
again from silver to grain or from silver to copper is never
known.
For eight centuries the use of silver by weighing it, as a
circulating medium, has been increasing in China, and it has
known no check but the introduction of the dollar. The
dollar, however, has only perhaps represented in the amount
of its circulation a contemporaneous growth of new trade.
The sycee in use as money has certainly not diminished in
quantity oa account of the large import of Mexican dollars
which China now requires, for these dollars, when cheap, are
often melted down into sycee. A thousand years ago the
ople in Central China kept their accounts in copper cash,
which at that time would in the market procure a much larger
amount of clothing and provisions than now, and the inconvenience of copper ou account of its relative weight would not
be so much felt. They did not then change cash into silver
in totalling up their daily and annual entries, because the
change from copper to silver as a standard of value had not
yet been made. Arabian trade brought to China the use of /\
silver by weight as European trade at a later period brought
the dollar. In both cases the flow of silver has been traceable
from south to north in successive zones of country. The
convenience of a paper currency made itself felt much sooner
in China than in any other country because of the early use of
engraved seals, the immense internal trade, and the commercial
instinct of the people.
Want of Control over the Circulating Medium.
About seventy years ago a student of Chinese history in
Soochow, already referred to, made some deep researches into
the question of the currency. The currency was then becoming
more and more out of the reach of government control.
Foreign trade was increasing. The government had for nearly
two centuries left silver to work its own way as money paid
by weight, and received it in payment of taxes from each
arrondissement Only the copper cash were issued by the
government. For silver there was no mint and never had been
but once, and that for a short time, yet this metal had grown
to be one of the most important elements in domestic as well
as foreign trade. It was the same with paper. Paper notes
representing money were issued by private capitalists in all
large cities, and the government had no interest in them.
Their success as a circulating representative of silver was
entirely at the risk of the native bank. Silver and paper both
represented money in all the large transactions of trade. The
small market negotiations in copper cash which belong to the
daily life of the people, and which, while as transactions they
are counted by millions, are always small in bulk, were the only trading operations of which the government issued the
circulating medium. How strikingly different was this state
of things from that which exists in the West, where gold,
silver, copper, nickel, and stamped paper, are all issued by the
governments as money. Our author knew nothing of this, of
course, but he was still able to cast his eye over a wide range
of financial facts. China had had a long history of financial
experiments and a succession of prosperous and disappointing
experiences. With the national annals before him, each
dynasty having its special chapter on finance, it never struck
him that China was, or could be, deficient in financial knowledge
or unable to meet the new conditions of the time. He
attempted to show that a change in policy was required in
finance, and the conclusion he arrived at, and which he tried
to prove by argument, was that a government paper currency
ought to be again issued and the use of silver prohibited.
The people should attend to agriculture rather than to
trade. This was their proper occupation, and would lead
them to a spirit of contentment. The circulating medium of
trade ought to be in the hands of the prince as a source of
revenue.
The reasons, he said, why the monarch cannot easily
control the currency or derive revenue from it are five-fold.
Coppersmiths melt coin because they wish to use the copper in
making wash basins, tea kettles, and images of the gods.
This is the first interference with the monarch's authority.
In addition to this, lead and spelter are employed to make
spurious coin in the furnaces of law-breakers aiming at a
little profit. This is the second interference; and the third is
the extending use of foreign dollars. (It is worthy of remark
that through the whole of his book the author, writing in
1831, makes no allusion to opium; yet it is unquestionable
that the spread of Spanish dollars first and American dollars
afterwards was very much connected with the opium trade. At the same time he makes no allusion to the silk or the tea
trade. His point is simply that it is a loss to the Chinese
government not to have the profit arising from the control
of the currency. As to commercial questions he seems to have
no information, nor did he seek any.) His fourth reason why
the government fails to derive benefit from the circulating
medium is that the market price of silver is entirely in the
hands of the merchants. He would like the government to
regulate the currency by authority not knowing that it is
disastrous and vain for official authority to attempt to modify
prices. China has learned many lessons since the day when
this author lived. The fifth cause of the feebleness of the
government in regard to the control of the money market is
the fact that bank notes and bills of exchange are issued by
private capitalists.
Our author's advice to the government was to make a
law prohibiting the use of silver in money payments and at
the same time restore the issue of government bank notes
which had been so long discontinued. In his opinion this was
the only policy by which the five evils from which the
government suffered could be eradicated and the country made
prosperous. In support of this view he appeals to the history
of money in China. Ancient statesmen saw the propriety
of drawing a revenue of cereal products from one locality,
of textile fabrics from another, and of coined money from a
third. They did not see the need of a large issue of coins,
except occasionally, when floods and drought compelled the
adoption of this expedient. Nor did finance ministers in very
early times limit money to silver or to copper. Pearls and
jade, tortoise shell and cowries, bundles of silk and grasscloth,
served as money in China's ancient markets. About
B.C. 800 an old poem says, "A simple looking lad, you were
carrying cloth to exchange it for silk." The official master of
the market, says the comment, stamped the cloth for use in barter, and it was two inches in width and sixteen inches
long. The author adduces this as classical authority for an
issue of government bank notes. But as the poem mentions
merely barter, and the explanatory remark is that of an
author of A.D. 200, how can we know whether the market
officer stamped the cloth or not ? It may have been a simple
case of barter. Whatever is meant it would scarcely be by
stamping, for this mode of giving official validity was hardly
in use so early. Why, for example, do we find that the cash
f the Ch'in dynasty, B.C. 220, were issued without any
inscription upon them ? Books tell ns that the Han dynasty
onarchs were the first to direct characters to be inscribed
upon their coins. This practice commenced about B.C. 200
and was never afterwards neglected. He refers to another
example that of painted squares of white deer skin, which in
the reign of Han Wn-ti were used as money. They were
priced at four hundred thousand cash each, and were presented
to the Emperor by the high nobility or by his relatives at the
daily audiences or at high festivals, after which they could
pass into circulation for the amount mentioned. At that time
there was also a silver coinage, the silver being mixed with
tin as an alloy, on account of the whiteness of that metal.
This alloy of tin was doubtless intended to prevent all
attempts at melting the imperial coins. The melter could
only lose by the act, and if it was not worth his while he
would not place the coins in his melting pot This seems to
be a clear historical instance of silver coinage lasting for a
very short time. Neither the silver coins of Han Wu-ti, nor
the painted squares of white deer skin remained Jong in use ;
and the high value assigned to the deer skin would suggest
that it was something like the million pound bank note of
Samuel Eogers, which he displayed on the chimney piece of
his breakfast parlour. It was more an object of admiration
than of utility in an age of luxury and gaudy show. As to the origin of paper currency in China, we must look to an age later than the Han dynasty.
Ten Reasons for a Paper Currency.
In the Ming dynasty, about A.D. 1600, when the Board of
Revenue was desirous to return to the use of paper money,
the governor of one of the provinces stated in a memorial
what appeared to him to be the advantages of paper money.
The first was that it could be manufactured at the capital of
each province for use in that province. The second was that
it could circulate widely. The third was that it could be
carried with ease, being light. The fourth was that it could
be readily kept in concealment. The fifth was that it was not
liable to division like silver into different grades of purity.
The sixth was that it did not need weighing, as was the case
with silver, whenever it was used in a commercial transaction.
The seventh advantage was that silversmiths could not clip
it for their own nefarious profit. The eighth was that it
was not exposed to the peering gaze of the thief s rapacity*
The ninth was that if paper took the place of copper, and
copper ceased to be used for making cash, there would be
a saving in the cost of this metal to the government, or the
copper saved could be used in manufacturing arms for the
troops. The tenth advantage would be that if paper were
used instead of silver, the silver might be stored up by the
government.
Our author in citing these ten reasons for adopting a
paper currency adds that the last two are defective. In
adopting paper for the mercantile classes the copper coins
would remain in use to meet the necessities of the common
people. So also silver should continue to be used in making
ornamental articles and head gear of various kinds. It would
be a mistake to shut it up in the government treasury and
prevent its being accessible to silversmiths. There is a fallacy lying hidden in onr author's reasoning. He thought that the
authority of the government was all that was essential to the
successful establishment of a circulating medium, not reflecting
that if paper were so employed there was need of a corresponding
store of gold or silver in readiness to pay value for
the notes if the people lost confidence in them and wished for
their metallic equivalent. It does not strike him that the financial
credit of the government bank can be sustained only by
payment in gold or silver to discontented holders of paper.
He thought only of supplying the demand for ornaments and
not of a run on the treasury. In fact, China is too large a
country, and the merchants as a body too powerful by their
numbers, for the government to attempt successfully the prohibition
of silver, nor can it refuse to allow the issue of paper
money to private banks. The difficulty in establishing a
national bank is found in the fact that the government cannot
take better care of the interests of the mercantile classes
than each private capitalist can do for himself, and in the
difference which exists in the commercial conditions of the
various provinces.
In the ten reasons for adopting a paper currency when it
is suggested that each treasurer of a province should issue
bank notes, it may well be asked why not leave native banks
in possession of this privilege, which is not only a benefit to
themselves but to trade generally ? It is certainly a great
advantage to travellers that through the wide business connections
of the Chinese bankers, bills of exchange may be
bought in Shanghai and cashed in any of the provincial
capitals of the empire. Both to native and foreigner this
is an unquestioned benefit, and renders travelling ten-fold
easier than if the silver had to be carried in the traveller's
trunks. In the fifth and sixth reasons alleged for government
paper currency the Chinese writer touches upon two patent
and unanswerable objections to the present system. The silver is weighed at each transaction, and it is circulated in varying
states of purity. The scales with which silver is weighed
differ in each locality, and the traveller feels himself outwitted.
His money becomes less at each new point in his journey, and
a general feeling of dissatisfaction with the currency grows
upon him on his return ; however, he would naturally become
more reconciled to the tyranny of the scales had he silver left
to weigh, for when he arrives again at places of large trade, his
sycee weighs as much in proportion to bulk as before. The
scale differs to allow the money changers in towns of small
trade to pay their expenses, and when this is understood
the indignation of the traveller sinks somewhat. But there
is a worse trouble than the variation in the scales. It is
the variations in the purity of the silver. It becomes alloyed
in many ways and is reduced to purity only by re-melting.
Blacksmiths melt the silver and in all places of large trade
there are assaying offices which certify the purity of silver
for a small sum. Silver sent to Peking to represent taxes
has cut into it by the treasurer of the province the name
of the arrondissement from which it comes and of the
blacksmith who melted it. Only silver of first purity is
allowed to be sent to Peking. In this way the government
indirectly aids in rendering the silver which is in
circulation as money much more pure than it would otherwise
be, but the introduction of new silver into the money market
is the work of merchants alone. Also the law does in a direct
way by statute undertake to protect silver from the incessant
efforts of the unprincipled who for private profit in every
possible way try to diminish its purity. But it is so hard to
discover the evildoer that statutes are promulgated in vain
and the owner of the metal is in fact only protected by the
shroff and the assaying office. When it is considered how
much impure silver is in circulation there does seem strong
reason for a silver coinage. This would at once improve the standard and raise the average of pnrity. To reject the
precions metals as currency because their pnrity is tampered
with, in favour of paper, would be a mistake. The cure for
the evil is to maintain the efficiency of the statutes which aim
at the punishment of crimes against the currency. Mexican
dollars were some years ago much more uniform in value than
sycee silver, and the convenience of a coin is so great that it is
remarkable that the Chinese government does not follow
Japanese example and establish a mint.
Since the above was written government mints have been
established and Chinese-made dollars are in circulation.
The Origin of Paper Currency in Seals.
The introduction of paper currency in China is very
closely connected with the ancient history of printing. Those
native authors who have referred to early passages which
speak of the employment of seals by officers to give a money
value to certain articles as the real commencement of paper
currency have done quite right. Grass cloth, silk, and paper
all admit of an impression being made on them with ink or
with vermilion. In fact, vermilion mixed with oil was perhaps
the oldest printer's ink, and the impression of the seal made
of jade, copper, silver, gold, or wood was, if we allow the word
block to include stone and metal, the oldest block printing.
The Chinese saw seals from Western Asia, and they made
them themselves with their own writing cut npon them to
be used in giving validity to official documents, as also to
employ them as amulets to protect them from imaginary evils.
The seal was not only used to stamp charms, but the handle
was a tortoise, a tiger, or some other emblem of longevity or
power, in order that it might have a defensive effect against
evil. These ideas imported from Western Asia with the seals
were as willingly adopted by the Chinese for imitation as the
more reasonable idea of employing the seal as a manifest proof of the genuineness of documents. Among the more
important of the improvements introduced and additions made
to the Chow legislation by the founder of the Ch'in dynasty
was the extensive use of seals. The progressive spirit of that
dynasty is unquestionable. This is shewn by the fact that
many features of the Ch'in legislation were adopted by the
Han Emperors. Among them was that of giving a seal to
every officer. The silver seals now called Kuan-fang of
officers of the first and second rank, and the copper seals of
Taotais are the continuation of an old rule which has come
down from B.C. 221. The system has been found most useful,
because the seal was the sign of delegated authority and
of the fact that the viceroy instead of being himself a
monarch was the representative of the imperial head of
the state. The seal was the visible sign of the change
from feudalism to centralisation. From that time it gradually
became a fixed idea with the Chinese that they must have a
seal impressed on every writing as a proof of property or
genuineness. All scholars and firms at the present time have
a seal, and seals are placed on books, drawings, and letters,
to an extent which is quite remarkable. Since this custom
can be traced back to the Han dynasty it becomes easy
to understand that the way was open, whenever any one
chose, to change a seal by cutting it in relief instead of
internally, into a block suitable for printing blank forms and
books. The multiplication of copies by stamping followed
readily from the use of a stamp to give validity, and a stamp
of four or eight or ten characters might readily be expanded
into twenty or fifty. So then we have in the early use of
seals the ideas of official validity, of superstitions efficacy, and
of the possible multiplication of copies, beside the use of the
seal as given to every official appointed by the Emperor.
Some one may ask what have superstitious observances
to do with the origin of printing and of paper currency ? To this the reply may be given that superstition makes a crtstom
popular and often helps a good notion to spread rapidly. The
Taoists were accustomed to cut seals of the wood of the
jujube tree four inches square, or three and a half of our
inches, and circulated them among the people to check evil
influences. They taught the people to believe that there were
evil influences in the air always ready to affect them mischievously,
aud then they provided them with guardian
charms to secure them from the harm which they themselves
had taught them to fear. They are not alone in thus acting,
for in other countries it has happeued^that superstition has
been ingeniously made a source of pecuniary profit by not a
few. The occasions when the use of seals as proof of genuineness
were required were of course very numerous. It is
mentioned for instance that generals had their orders cut on
seals for rapid circulation among the troops under their
command. In such a case in the third and fourth centuries
the writing in camp orders would be white, while the ground
was black or red. All the seal cutting and the circulation of
charms aud of mirrors with lucky sentences and animal shapes
engraven on them were in every case so much preparation foi?
the success of paper currency when the time should come.
Not only does the credit rich men possess contribute to that
success, but also the invention of blank forms rapidly multiplied
by printing. The blank form saves time in writing and
it also makes the document more uniform, more easily tested
and more readily accepted as valid when presented to a third
person. The dynasty of Ch'in Shi-huaug gave the use of
seals to China, and from that time forward the possession of
an official seal became essential to each office. The Haii
dynasty simply followed the Ch'in dynasty rule. When this
came to be the case the seal impressed with vermilion was
attached by regulation to every document issuing from each
officer, metropolitan or rural.
If tben the Chinese in the Hau dynasty had the common
ose of seals, large and small, and if paper was introduced
about A.D. 200 by Red Sea traders as we know, how long a
time might be expected to elapse before the use of paper
money and the era of the printing of books? In fact seven,
centuries passed before books were commonly printed, and
centuries before paper currency was adopted systematically by
the government. The Chinese, intelligent as they certainly
are, and lovers of every practical improvement as they plainly
are, were not at all in a hurry to print books, to save the
expense of copying, or to issue government paper money to
save the expense of copper or silver. What the Chinese
highly appreciate when adopted they are usually very slow to
adopt. This is true of gunpowder, which they only began to
nse about the twelfth century, although they had fireworks in
the sixth century. A small cause often retards the adoption
of remarkable inventions. In this case it seems to have been
the habit among workmen to cut into the material of the seal
instead of cutting the inscription in relief. When once the
thought occurred to some one that relief cutting would leave a
white ground with a red or a black inscription, the path would
be open for the invention of blank forms first and for the
printing of books afterwards. What Chinese authors tell us
is that seals in the Han dynasty and later left the characters
white when impressions were taken from them, and further
that in the Tang dynasty the characters in the impressions
from seals became red. The meaning of this statement
appears to be that the old seals were all or almost all cut in
intaglio and that about the beginning of the Tang dynasty
cameo cutting, or cutting in relief, became common. This
casual remark of a Chinese author throws light on the fact
that paper currency began in the Tang dynasty, and at the same1
time the period of printing books was brought so much nearer
because the artisans of that age began to engrave in relief.
There was iu fact government paper money about A.D. 806
and there were printed books about A.D. 920.
The History of Paper Currency.
The first attempt at paper currency in China, of which
any record remains, was in A.D. 806, when bills of exchange
were called "flying money/' Merchants in the capital could
by an ordinance, then first made, receive government bills in
return for the merchants' copper money. On arrival at any
provincial capital they could receive from the provincial
treasurer the amount stated on the bill. There was a return
to this system, which was a sort of banking facility offered to
the merchants by the government, about the year A.D. 960.
A bureau was instituted in Kai-feng-fu, then the capital, for
the transaction of this business.
In I03: Szechuen was suffering from the iron cash
coinage which the government from scarcity of copper was
forcing on the people there. The paper notes then put in
circulation at Cheng-tu by the government were meant as a
relief. They were to be returned once in three years. The
idea sprang up among the rich merchants and was accepted
by the government and the merchants conducted the business.
The limit of capital represented by the notes was 1,255,300
strings; a string being a thousand copper cash. In A.D.
1150 the Golden Tartars had just conquered North-China,
and about this time they adopted a currency in paper because
they found copper scarce. Copper, silver, and gold have
always been chiefly found in South China. A North-China
kingdom finds it convenient to use paper so far as possible
to prevent its being dependent on a southern neighbour.
From this time forward, during a century of the Golden
Tartars and another century of the Mongol domination,
strenuous efforts were made to maintain a paper currency.
Colonel Yule, Dr. Bushell, aud others have printed fac-similes of the notes of these periods. They are found, for example,
in Yale's Marco Polo and in the journal of the Peking
Oriental Society, published some years ago. .All the efforts
of the government did not secure the credit of the notes at
par. On the contrary, they became depreciated to an extreme
degree. This, however, did not prevent the government of
the Ming dynasty, which acquired the sovereignty in A.D.
1368, from continuing for a time paper currency, which was
finally abandoned as silver flowed into the country through
the foreign trade, which brought to the southern ports a
portion of the products of Mexican and Peruvian mines. It
was American silver that gave the death blow to paper
currency in China. The arrival of sufficient silver was the
real relief which Chinese trade required. Notes were finally
abolished about A.D. 1620. Thus the conquest made by
silver over paper occupied about a century, or a little more,
from the commencement of the trade of the Spaniards and
Portuguese with Canton.