No. 51.
Mr. Denby to Mr. Bayard.

No. 115.]

Sir: On receiving a copy of the late Report of the Director of the Mint I noticed that there was no communication therein relating to the money of China; I therefore directed the secretary of this legation to prepare a report on that subject. He has discharged this duty very thoroughly and with ability. I transmit herewith the memorandum prepared [Page 79] by him. * * * There are vast numbers of private banks and exchange shops in China. The value of ordinary cash varies daily. For some weeks now the Mexican dollar has only been worth at Peking from 85 to 90 cents reduced to cash. Slight depreciation in ordinary trade is not regarded, but when the depreciation reaches 10 per cent, a demand in all transactions is made and enforced for payment of the deficit. It is anticipated that the demand for silver caused by the revival of the spring trade will enhance its value and bring the Mexican back to par.

I have, &c.,

[Inclosure 1 in No. 115.]

From the earliest times (circa 1000 B. C.) the Chinese have made use of copper coin to the nearly complete exclusion of gold and silver, although these two last metals have at different times been used, but rather as bullion, just as silk and grain have been. The copper cash in fact is the monetary unit of China. The issue of this copper coin was never limited by law, but was cast in large or small quantities, according to the requirements of the Government. The value of the piece of money was determined not by its relative value to any other precious metal, but by its purchasing value determined in grain, cloth, &c. As, however, the Government officers were then as now paid partly in grain, the use of money was at first very limited. Years Of famine gradually increased its quantity, as it was supposed that by throwing quantities of cash in the market the sufferings of the people might be alleviated.

In the sixth century B. C. a fractional copper currency was made by casting large copper cash, the value of which was fixed at 50 of the small ones.

In the third century B. C. we hear of serious troubles, which occurred through the Government endeavoring to make the value of the fractional coins equal to that of the large ones.

In the reign of Han Wenti (B. C. 179) the Emperor, to put a stop to false coining, which has always been an easy operation in China on account of their system of casting, left the people free to cast their own money. This measure proved, however, entirely inadequate, and the decree was soon repealed. In fact, counterfeiting was carried to such an extent that the people in parts of the Empire gave up using coined money and returned to barter. In the reign of Weuti (B. C. 117) a state mint was established at the capital, and all the metallic currency previously in use was withdrawn and recast. Moreover, as a means of stopping counterfeiting, the most expert forgers were taken into Government employ to work in the mint.

The amount of money coined from this date down to the commencement of the Christian era is stated to have been 280 billions of cash.

In the sixth century A. D. we hear of an attempt to supersede copper money by iron money, but after ten years’ trial it had to be discontinued, the Government and private individuals having cast such vast quantities of it that it retained no value. At about the same period one of the emperors of the northern Wei dynasty fixed a standard for money by decreeing that two thousand pieces should be equivalent in value to one piece of silk, which commodity had nearly a uniform value throughout the realm. This is a remarkable attempt to solve a much-vexed question, which has frequently received the attention of political economists in other countries.

In the early part of the ninth century an attempt was made to issue paper money in the form of certificates of deposit. This plan did not, however, succeed, most likely owing to the credit of the state not being good enough to attract depositors.

In the tenth century a double standard was tried. A subsidiary coin of iron, varying from one-tenth to one-fifth of the value of the copper cash, was issued by the Lung emperors.

The nature of the metals used in these coinages became rapidly a source of trouble and difficulties. No constant legal ratio could be kept between them. Counterfeiters, speculating on the constantly varying rates, coined the cheaper currency in order to exchange it for the dearer, and generally the difference between the two was from 100 to 200 per cent. As a remedial measure the Government ordered that in certain parts of the Empire only copper money should be a legal tender and in others only iron money. By this means speculation was greatly diminished, but the system was far from being an unqualified success.

Through the exportation of money from China, which at this time had become very heavy, the currency in circulation was no longer sufficient for the requirements of the state. The standard was lowered, and China had again recourse to paper money to supply her wants. Originally in the nature of government bonds redeemable in three years they were secured by cash in the treasury. The issue of notes was gradually increased to such an extent that they became greatly depreciated and finally brought about the bankruptcy of the state.

[Page 80]

Passing over the next few centuries, during which the Mongol and Ming dynasties applied the same methods with like ruinous results, we will briefly examine the monetary system of the present dynasty. The imperial statutes (Ta Ching lii li) regulate the mode of casting cash and the number of mints. The latter are under the control of the provincial governors, subject to the orders of the board of revenue (Hu Pu), which controls the amount of currency to be put in circulation, so that “the successive supplies of coin may be issued according to the market prices of gold, silver, grain, and other articles in general use and consumption.” (Book IV, section 118.)

The copper cash, which are still, under this dynasty, the only coin in circulation, have not escaped the fate of those of earlier dynasties; they have been so debased that at times, as under the Tao Kuang reign (1821–51) it would not even remunerate forgers to counterfeit them.

In the Hsieu Teng reign (1851–’61), the central Government being cut off from its supplies of copper (which mostly comes from the central and southwestern provinces) by the Tao-Ping rebels, had recourse to issuing large coins equal to ten of the ordinary small cash. Iron and zinc coins were also cast in large quantities, and in 1854 large copper coins of the nominal value of 50, 100, 500 and 1,000 units were issued in the north. False coinage brought about a rapid depreciation of the larger coins, so that finally nobody would take them at any price. Those of a nominal value of 10 remained in circulation, and constitute to the present day the currency of the capital. Their value, however, has sunk to that of 2 of the small cash, and an ounce (tael) of silver exchanges for about 700 of them.

In 1853 paper currency was also revived. Notes of two kinds, cash notes and silver notes, were issued by the board of revenue, and forced into circulation. Their value depreciated so rapidly that in 1861 they were at a discount of 97 per cent.

At Peking and in many other cities throughout the Empire paper notes are issued by private banks—the notes circulating only in the locality where they are issued. As these banks are not under Government control and can issue notes far in excess of their capital, failures are of frequent occurrence. A certain number of them, however, are of old standing and of good credit, doing a large business as Government bankers, and also with the general public, from whom they receive large deposits.

One thousand of the nominal cash of Peking (or a tiao) are theoretically equal to 1 ounce of silver (or a tael). The real value of the 10–cash piece being only 2 cash, 50 Peking cash make a tiao, and a tael is counted as equal to from 12 to 14 or 14½ tiaos, according to the exchange which varies daily.

Twenty miles from Peking the big cash are no longer in circulation; small nominal cash are used, 1,000 of which make a tiao and 3,000 to 3,500 of which are equal to a tael of silver. The varieties of cash and their values are endless. Mr. E. Colborne Baber of her Britannic Majesty’s consular service, says (Journey of Exploration in Western Ssu Chúan, p. 104):

“Soon after leaving Hiu-li Chow we found small and debased cash in use, 1,400 of which the traveler may obtain for a thousand ordinary cash; when he finds it necessary * * * to get rid of the local coinage on leaving the district in which it circulates, he is obliged to pay 1,500 debased cash for a thousand current coins of the realm * * * At Ti-ke the circulating medium has fallen to a depth of degradation which almost outvies comparison. There the local cash exchange for silver at the rate of 40,000 per Chinese ounce; in other words, 150 of them are equivalent to 1 British farthing.”

If we examine, now, the facts in regard to the present use of silver, we find that the value, weight, and standard of the ounce of silver (tael) varies nearly as much as does the copper cash. These facts have been so fully set forth in Minister George F. Seward’s Memorandum on the Currency of China, and Mr. von Brandt’s Memorandum on Chinese Currency, that it is more than useless to dwell on the question. The following tabulated statement of the value of the several local taels, as compared with the Haikwan and Ku-ping scales will dispose of the question.

Locality. 100 Haikwan taels equal— 100 Ku-ping taels equal—
Newchwang 108.5.0
Tientsin 105.0.0 103.4.0
Cheefoo 104.4.0
Shanghai 111.4.0 101.6.5
Chinkiang 104.2.2
Hankow 108.7.5 101.6.5
Kiukiang 106.3.1
Ningpo 105.3.8
Foochow 101.4.5. 101.1.4
Amoy 110.0.0
Swatow 110.0.0
Canton 111.1.1
[Page 81]

I mast not omit to mention that these rates of exchange are arbitrarily imposed by the provincial authorities, or Government bankers, and are higher than they ought to be as compared with the Ku-ping or Haikuan taels, in which they make their returns to the board of revenue. In fact, the profits which the provincial authorities derive from this source are one of their chief perquisites, without which, they say, they could not live. The fear of seeing this source of revenue dried up if any uniform monetary system were introduced in China, is one of the chief if not the chief objection which the governing class have against such an innovation.

In 1877, while negotiations were under way for a settlement of the Yunnan outrage claims, negotiations which resulted in the Cheefoo convention lately ratified by Great Britain, the foreign representatives in China addressed to the Government an identical note, asking whether any steps could be taken to establish a mint and a currency of a uniform character. On December 19, 1877, the foreign office sent a reply which disposed of the question summarily. In it, it is stated, that “If China should decide upon a unit of money and establish a mint according to foreign fashion* * * the difficulties attending its general circulation would be very many, amounting, indeed, to insurmountable obstacles. Its establishment is not, therefore, considered practicable.”

This decision of the Tsung-li Yamên was unquestionably dictated by the reasons which we have stated above, for the fondness of the official class for the prevailing monetary system, or rather absence of system, appeared so definite that the German minister, Mr. von Brandt, writing on the subject in February 1878, says:

“The faint hope that the intricate question of Chinese currency might be settled has therefore to be abandoned, and it becomes the duty of those charged with the protection of the commercial interests of their countries to devise means by which the evils resulting from the present state of affairs may be, if not entirely removed, so at least mitigated, as far as possible.” (Memorandum on Chinese Currency, p. 1.)

Minister Seward, writing at the same time, is less despondent, and he thinks that “it may be predicted with safety that a coinage system will be adopted within a near period. I do not say within five or ten years, or attempt to anticipate the date. It is coming to be a felt want, and such wants create their remedy.” (Memorandum on Currency of China, p. 10.)

Eight years have passed since the mint scheme was abandoned, and nothing on the part of the Chinese Government can lead us to suppose that they are thinking any more seriously of establishing a coinage system than they were in the days of Gengis Kahn.

Secretary of Legation.