Another shortcoming of practically every scheme that has been proposed in recent times is that little attention has been paid to the regulation of currency, as it affects local exchanges. No doubt foreign trade and foreign intercourse have a deservedly higher importance than local trade; but a little thought ought to show that no proper regulation of currency is possible if sufficient heed is not given to the situation as it affects purely local interests. There is no use having a dollar which is worth two shillings in the ports, if the Newchwang and Chengtu exchanges remain as they are or fluctuate as they do. The fixing of the price of the national dollar in terms of gold, or even the definite fixing of the dollar in terms of small money, would not help the position, as regards local exchanges.

It is a common belief, and one which has a thorough grip of young China and all inexperienced foreigners, that an adequate supply of metal would solve the whole problem of currency reform. The less optimistic people do not go far as that; they believe, however, that the supply of metallic currency is the fundamental of all reform; and, unfortunately, foreigners who have proposed schemes of reform have been principally guilty of fostering this opinion among the Chinese. It is notorious that ever since Chang Chih-tung established the first mint in Canton in 1890, millions and millions of dollars have been thrown out, of nearly as high a standard as a Mexican dollar - viewed merely from the coinage point of view. These coins were put into circulation in all parts of China from Chihli to Kwangtung. Not one of them really became popular, and one and all of them, including the issues of 1913, are being thrown into the melting pot; ever since the commencement of the European war in 1914 more than $10,000,000 including some small coins - every one of them the product of the provincial mints - have been melted in Shanghai alone, to swell the total of sycee in the banks. It may be averred that these issues were not properly regulated or properly distributed. All the same they would not have been returned to the melting pot, if the metallic standard alone were sufficient to regulate currency. The progress, even the very existence, of a country depends upon the increase or maintenance of its national wealth; and the value of such wealth is usually measured by the purely quantitative calculus of money. The basic concept of value, cost and utility are made subject to this idea, i.e., that the primary significance is a monetary one. This error, which is quite common among all nations, and in which the study of motive, interests and ideas have no place, has been amplified by Chinese economists and reformers. They proceeded from the purely commonsense point of view that a simple barter was not possible under changed circumstances, and that metallic money or paper representing money was necessary to complete purchases. Of course, they have had a painful experiences of paper money without reserves of silver or other coins; hence they jumped to the conclusion that good silver and copper coins in sufficient quantities for the use of buyers and sellers were necessary for China. They pushed this theory to its logical conclusion that because money or metallic money was needed for trade, the amount of copper, silver or gold money should be in direct proportion to the total volume of trade. What they actually saw was this: when Chinese sold goods to foreign buyers there was an influx of silver and so the volume of silver in circulation increased; when the foreigners sold their goods to Chinese buyers the silver went back to the foreign banks and the circulation of silver decreased. They had also noticed that with every exchange with sycee, or other recognised mediums of coinage, there was always some discount to be paid by one party or other - a position unheard of in modern European countries, except when international trade settlements have to be made. However much the Shansi and native banks facilitated the conduct of business there was little doubt that want of a reliable medium of exchange did hamper trade - at least contributed to reduce the volume of foreign and local commerce.

The only medium of unvarying value which Chinese have had from time immemorial is the cash; unfortunately it has proved too small for the purposes of foreign trade. To add to the confusion, several foreign dollars had been introduced during the long period of foreign intercourse with China. The situation, especially during the past thirty years has been as follows: The traders and merchants in the ports, and the foreigners dealing with Chinese, thought in terms of the artificial and the conventional taels of the different localities; the Government and the Provincial officials thought in terms of the Kup'ing taels and several Provincials taels, as distinct from the taels in the ports; the Haikwan was the money of the Customs; the people in the interior, and even in small places very near the ports, thought only in terms of the cash, which has remained supreme, in spite of all changes, and an almost unvarying standard from Tientsin to Canton; in spite of the circulation of the dollar, few except wage earners and small shopkeepers thought in terms of the dollar - except in a few places where convention held to the dollar; the circulation of the piastre in Yunnan or the rupee in some parts of Szechuan has not made people think in term of the rupee or piastre. Without a single exception, efforts of the reformers of currency in China have been towards establishing a standard, independent of all the existing ones. In the earlier Chapters I have given some of the chief proposals made towards reform. All these proposals were based on two underlying principles: the first was that the moment an artificial standard was fixed and a sufficient number of coins issued from the mints the currency problem was solved; and the second that foreign trade or even the actual life of the country depended altogether on a sufficient quantity of metallic money.