A young girl dressed in traditional Miao (Hmong) clothing and silver jewelry. She is wearing a horned-style headdress. The Miao are famous for the craftsmanship of their silver ornaments. PHOTO BY WANG YING.
Silver, originally used solely as ornamentation, was the most important currency of late imperial China, although it came mainly from abroad. A global silver shortage in the early nineteenth century almost overturned the Qing dynasty, which was temporarily rescued by an increased supply of silver due to the sale of silk and tea abroad. It was not until 1935 that the Chinese government controlled the monetary system by putting China onto the paper currency system.
Silver has been important in Chinese history, particularly for its use as money during the late imperial period. Before the fifteenth century, when silver became more important as money, people used silver mostly for ornamentation.
China’s main form of money during the imperial period was copper coins, which had been cast by the state since the late Warring States period (475–221 BCE). Around 1800 China’s copper coins were worth only about one hundredth the value of silver, with silver’s value relative to that of gold being between 1:14.5 and 1:15.1. The long-standing use of copper coins in Chinese history indicates that China engaged in small-scale commercial exchanges. On the other hand, China’s vast territory and diverse products in various regions necessitated money for large-scale exchanges. Gold or bronze of higher quality was used for storage of greater wealth and for exchange of larger scale from the Warring States period to the Han dynasty (206 BCE–220 CE). During the Han dynasty silver and deerskin also were used for storage of wealth. During the chaotic Southern and Northern Dynasties period (220–589 CE, known as China’s Dark Age), and Tang dynasty (618–907 CE) a barter economy based on woven products dominated because of the lack of trust entailed by the invasion of the northern intruders; the weak central government of Eastern Han, the Cao-Wei and the Jin Dynasty allowed many Non-Chinese tribes (referred to as the Sixteen Kingdoms of the Five Barbarians) to intrude on Chinese territory in the northwest. During wartime, production and exchange could not be engaged normally, because the money lent might not to be returned. From the Song dynasty (960–1279) to the early Ming dynasty (1368–1644) convertible paper notes were mainly used for large-scale exchange. From the middle Ming dynasty until 1935 silver replaced paper notes for large-scale exchange. Silver was weighed and not coined by the state before 1910.
China began using silver cast into ingots during the Yuan dynasty (1279–1368). Qing dynasty (1644–1912) evidence shows that the government stipulated in what shape silver could be cast. Bank shops, which are different from banks in that they are privately owned and do not accept non-security loans, cast silver into ingots. The name of the bank shop or of the craftsman who cast the ingot, rather than the likeness of a king or queen, was cast on the ingot. Because Chinese people referred to silver coins from abroad as “Buddha head” to denote a king’s likeness or “Two pillars” to refer to the “II” in the words “Charles II” or “Philip II” on a coin, we can see that Chinese people had a vague concept that silver coins symbolized adoxically, from the fifteenth century onward the Chinese government designated silver as the means to pay taxes, and silver was much used for long-distance trade or large-scale transactions, particularly after the late eighteenth century. The supply of silver was crucial to China’s economy. Both the bottleneck period caused by the dominance of Japan silver over Latin American silver for China’s supply in the mid-eighteenth century and the decrease of the Latin American silver supply in the early nineteenth century threatened the Chinese economy. The early nineteenth century crisis almost caused the overthrow of the Qing Empire as its revenues were decreasing because the copper coins earners could not earn enough to pay taxes, or commodities from afar were charged in the more and more expensive silver. Social conflicts between the people and the government, between tenants and landlords, between craftsmen and merchants all partly contributed to the outbreak of the Taiping Rebellion (1851–1864), the largest rebellion in China’s history. The Qing dynasty could not pay its soldiers and officials for three years after this civil war broke out. The backflow of silver from international sales of China’s silk and tea between 1850 and 1887 was crucial to easing this Qing dynasty crisis.
Transition to Paper
Because this silver backflow took place when more opium was being imported from India by China, the fluctuation of the global silver supply was more important than opium importation for the early nineteenth-century silver outflow. This situation triggered the First Opium War (1839–1842) between Britain and China. During the late nineteenth and early twentieth centuries paper notes issued by foreign banks in China or by China’s own banks shared more silver for China’s money supply. Against this background the silver outflow, due to the American Silver Purchasing Act of 1934, did not damage the Chinese economy as seriously as the one during the early nineteenth century. Nonetheless, the outflow of the 1930s hastened China’s transition from the merchant-controlled silver economy to the state-controlled inconvertible paper notes system in 1935.
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