Cornell Studies in Money

Austin Dean

• Publisher: Cornell University Press
• Year: 2020
• ISBN:
  9781501752414
• Topic: History
• Subtopic: Chinese History
• Index: History

In the late nineteenth century, as much of the world adopted some variant of the gold standard, China remained the most populous country still using silver. Yet China had no unified national currency; there was not one monetary standard but many. Silver coins circulated alongside chunks of silver and every transaction became an "encounter of wits."

China and the End of Global Silver, 1873–1937 focuses on how officials, policy makers, bankers, merchants, academics, and journalists in China and around the world answered a simple question: how should China change its monetary system? Far from a narrow, technical issue, Chinese monetary reform is a dramatic story full of political revolutions, economic depressions, chance, and contingency. As different governments in China attempted to create a unified monetary standard in the late nineteenth and early twentieth century, the United States, England, and Japan tried to shape the direction of Chinese monetary reform for their own benefit. Austin Dean argues convincingly that the Silver Era in world history ended owing to the interaction of imperial competition in East Asia and the state-building projects of different governments in China. When the Nationalist government of China went off the silver standard in 1935, it marked a key moment not just in Chinese history but in world history.

1

A PRIMER ON THE QING DYNASTY MONETARY SYSTEM

Despite their privileged position in China during the latter part of the nineteenth century, foreigners liked to complain. The Chinese currency system—filled with different “ghost money” units of account (xuyinliang), copper coins of varying quality, silver in the form of ingots and coins from Latin America, and notes from various financial institutions—caused particular consternation. As “A Merchant” wrote to The Economist in 1858, there was “unanimity of all parties” as to “the inconvenience and confusion caused” by the plethora of coins and exchange rates in China.¹ Another foreign observer commented that the “eccentricities” of the Chinese coinage system “would drive any Occidental nation to madness in a single generation.”² Such thinly guised contempt elided or ignored the historical and political underpinnings of the Qing monetary system.

To understand debates and conflicts about Chinese monetary reform from the 1870s to the 1930s, it is first necessary to explain the contours of the currency, credit, and payment ecosystem in the middle of the nineteenth century. This chapter highlights the relationship between copper and silver, stresses the decentralized nature of Qing dynasty monetary institutions and practices in the middle of the nineteenth century, and introduces how and why these monetary arrangements began to be questioned in the late Qing.

The Qing Dynasty Coinage System

Copper and silver served as the foundations of a bimetallic system. Copper coins (zhiqian) with a hole in the middle so they could be strung together originated in the Qin dynasty (221–206 BCE), and from that period onward, successive imperial governments minted them. These coins circulated not only in China but also in Japan, as well as in Southeast Asia. Even before the widespread use of silver, China was integrated into the expanding economic and trading networks of Asia. In the Qing dynasty, particularly in the eighteenth century, most of the raw material for copper coins came from Yunnan Province in the southwest of the country.³

To turn this copper into coin, the Qing maintained two mints in Beijing as well as provincial mints under the supervision of bureaucratic appointees.⁴ Provincial governors in the Qing dynasty had mints to produce copper coinage and mechanisms to introduce the money into circulation.⁵ During the late imperial period, dynasties cast copper coins using a method known as sand casting. First, an “ancestor coin” (zuqian) was carved from pure copper and used to cast a “mother coin” (muqian). The muqian coins were then used to form the molds that produced zhiqian.⁶ The entire process of casting these coins was quite labor intensive and costly. Given technological constraints and the geographic extent of China, it was not possible or advisable to centralize the casting of these copper coins. In monetary matters, the Qing system had “structural uniformity with local variations” as provincial officials could carry out policy—after consultation with the central government—that was independent of other areas.⁷ The decentralized nature of Qing minting policy posed challenges for late nineteenth- and early twentieth-century figures that sought to implement currency reform as the power of the Qing central government waned.

Silver was the other important monetary metal and flowed into China in large amounts during the silver century, the period from 1550 to 1650. Silver was not unknown in the Chinese monetary system before this period and had circulated in the form of ingots during the Yuan dynasty (1271–1368). During the silver century, the metal came to China from Japan and then from Latin America, particularly after the establishment of Manila in 1571 and the growth of Pacific trade. The exact reason why large amounts of silver flowed into China remains a matter of debate. Some scholars hold that the balance of trade favored China and that silver covered this gap. Others argue that because silver was more highly valued in China than in any other part of the world, it naturally moved there. Richard von Glahn points out that in the early sixteenth century, the gold-silver ratio in China stood at 1:6 while in Europe the rate was 1:12, in Persia 1:10, and in India 1:8.⁸ Merchants took silver from where it was less valuable, first Japan and then Latin America, to where it was more valuable and profited from this transaction.

The influx of silver changed Chinese society and assisted the ongoing commercialization of the economy, particularly on the east and southeast coasts. As merchants and traders amassed great fortunes, conservative voices lamented a world that was quickly abandoning traditional virtues in favor of pernicious and ubiquitous vices: collecting precious works of art, consuming luxury articles, and spending money on sex.⁹ The late Ming magistrate Zhang Tao complained, “The lord of silver rules heaven and earth.… Avarice is without limit, flesh injures bone, everything is for personal pleasure.”¹⁰ It was a society increasingly integrated into the world economy and far removed from the autarchic, pastoral, and self-sufficient economic ideal of the Ming dynasty founder Zhu Yuanzhang. At the beginning of his reign, Zhu had attempted to enforce the circulation of a nonconvertible paper currency instead of copper coins and silver.¹¹ It did not work. The early Ming emperors printed far too many notes, their value eroded, and the importance of silver increased.

The circulation of silver changed the Ming fiscal system and initiated discussion about the role of the market and the state in the monetary economy that continued in the Qing. In the sixteenth century, the Ming dynasty shifted from collecting taxes in kind and in labor to collecting them in silver. Even if peasants only had income in copper coins, they had to use these to procure silver. Known as the “Single-Whip reforms,” the policy changed the relationship of the government to individuals and acknowledged the increasing role of silver in the monetary system. But these transformations also created anxiety. Officials in the latter part of the Ming were concerned about the dynasty’s reliance on silver because there were sparse supplies of the metal in China. The famed minister Zhang Juzheng, who had played an important role in the Single-Whip reforms, worried that “silver exists in meager quantities, while copper is relatively abundant. Both the public purse and private citizens depend on silver to meet their expenditures. Thus both also constantly dread an insufficiency of silver.”¹² Others fretted that with the influx of foreign silver, the dynasty had effectively relinquished control of the monetary system.¹³ China’s dependence on silver from abroad made it a “vulnerable empire.”¹⁴

Thus, in the Ming and Qing dynasties, the key relationship in the monetary system lay between copper cash and silver in its various forms and how the government did and did not try to manage that ratio. Copper cash was more widely used in smaller-volume local trade while silver was more important for interregional and international trade. Copper coins were strung together, and the “benchmark” was that 1,000 coins, a chuan, equaled one Chinese ounce (liang) of silver, approximately 37.3 grams of the metal. This unit was the kuping, or treasury, ounce.¹⁵ This one liang of silver satisfied a unit of account known as a tael. Going forward, I use the term liang to refer to weight and tael to refer to a unit of account. Each individual copper coin originally weighed 1 qian, which was 0.1 of one liang. So one copper coin weighing 0.1 liang, or 1 qian, was worth 0.001 taels because it was the result of multiplying 0.1 and 0.01 (the second number coming from the traditional relationship between silver and copper of 1:100). Thus, a string of 1,000 copper coins could satisfy a debt of 1 silver tael (see table 1).¹⁶

Several factors complicated these basic principles. First, the Chinese monetary system at this time had a split between the unit of account, the tael, and the medium of exchange, silver coins or copper cash. Today in the United States, a dollar circulates, and it is also a unit of account; prices are quoted, and your bank account is denominated in dollars. There is no need to convert between the dollars in your wallet and the unit quoted on a menu. But that was not the case in China during the nineteenth century: it took more than one Mexican silver dollar to satisfy a tael unit of account. Second, there were numerous tael units of account throughout China, each with a different fineness and weight: the kuping (treasury) tael, the tael used in the Imperial Maritime Customs Service (haiguan yinliang), and tael standards in cities and market towns. For instance, merchants in Shanghai codified the Shanghai tael (Shanghai guiyuan) in 1857, a unit of account that increasingly served as the fulcrum of the Chinese financial landscape.¹⁷ The historian Dai Jianbing has estimated that by the late Qing dynasty there were at least 170 different tael standards in common use across China.¹⁸ These abstract units of account meant that settling a debt depended on how much of a certain tael a silver coin could procure at a certain time.¹⁹ Importantly (and this point is crucial), these different tael units of account grew out of commercial custom and the growth of the market economy, not governmental decree. Although China used silver, it was not on a single silver standard that was accepted throughout the country and enforced by the government.

Silver took many forms: ingots (yuanbao, also known as sycee), smaller fragments of silver (yinding), and coins from parts of Spanish Latin America and later from Mexico. Silver dollars, depending on the tael standard, contained about 70 percent of one liang of silver. Or, in other words, one liang of silver equaled about 1.4 imported silver coins.²⁰ The rate of exchange between coins and a certain tael unit of account, known as the yangli, changed based on supply and demand. For example, in the area around Shanghai, silver dollars generally increased in value; that is to say, each coin bought more of the Shanghai tael during the spring because they were necessary to buy silk and other agricultural products in the surrounding region.²¹ It was also possible for foreign coins to circulate at above the value of their bullion due to the convenience of handling and exchanging them. With many coins in circulation, a genre of pamphlets and advice manuals appeared that instructed merchants on how to identify and evaluate silver coins to determine if they were real.²²

The economic historian Akinobu Kuroda described these basic monetary arrangements as “currency circuits.” This term did not mean there was a “segregation of markets but rather the multiplicity of interfaces.”²³ The central problem was “the difficulty of harmonizing heterogeneous demands for money and uneven supplies of currency.” With different seasonal demands for different types of money, and with the varying qualities of that money, it made sense for different commercial centers to maintain a ghost unit of account, the tael.²⁴

Another complication arose from the relationship between copper and silver. Though in idealized form 1,000 copper coins could procure one ounce of silver, that rate was not steady. In the lexicon of Qing-dynasty political administration, silver could be expensive and copper cheap (yingui qianjian), meaning that it took more copper coins to buy one ounce of silver; or silver could be cheap and copper expensive (yinjian qiangui), meaning that it took fewer copper coins to procure one ounce of silver.²⁵ The Qing dynasty did not explicitly try to maintain the official rate of exchange at exactly 1,000:1, but it did seek to maintain the stability of the exchange around that number. Because the government only minted copper cash, that is how it approached keeping the market rate close to 1,000:1. The chief tool was to start or stop minting to increase or decrease the amount of copper coins in circulation. Furthermore, the weight of copper coins could be increased in times when the value of copper in terms of silver fell; when the value of copper rose, the weight of the coin could be decreased.²⁶

The Qing government was not the only monetary actor. Copper and silver could be counterfeited, melted down, trimmed, hoarded, and used in speculation depending on their respective values.²⁷ At a rate of, say, 900 copper cash to one silver tael, copper coins were likely to be melted down and counterfeited, in the hopes of taking advantage of high copper prices by making and passing off an inferior coin. Of course, Qing law prohibited counterfeiting and the making of “small coins” (xiaoqian) that had a lower copper content than standard coins. Some Qing officials realized that prohibiting the circulation of small coins created other problems by further reducing the already limited supply of coinage in a locality.²⁸ In this situation, Qing...

Table of contents

• List of Figures and Tables
• Acknowledgments
• Notes on Terms, Currencies, Weights, and Measures
• Introduction
• 1. A Primer on the Qing Dynasty Monetary System
• 2. Silver Begins Its Fall
• 3. Provincial Silver Coins and the Fragmenting Chinese Monetary System, 1887–1900
• 4. The Gold-Exchange Standard and Imperial Competition in China, 1901–1905
• 5. Money and Power on the World’s Last “Silver Frontier”
• 6. The Shanghai Mint and Establishing a Silver Standard in China, 1920–1933
• 7. The Fabi and the End of the Global Silver Era, 1933–1937
• Conclusion
• Appendix
• Chinese and Japanese Character List
• Notes
• Bibliography
• Index