The exigencies of the situation in China proved of no help towards the maintenance of a uniform currency. Apart from the fact that the people were by nature and training a race intensely fond of speculation, the Chinese had never a proper understanding of the value of money. The population of the country has grown enormously, without reference to the available opportunities of making money. Although the great majority of the people were engaged as tillers of the soil, a large number of people have had to follow the avocations of commerce. With the passing of each year the number of people engaged in trade has been increasing, while the volume of trade did not increase in the same proportion. It must also be remembered that with the general increase in population, and the retention of primitive methods of cultivation there was not much room even for a large addition to the number of cultivators. A number of causes, therefore, conspired to bring about the trade in money - thus defeating the very purpose for which money was instituted. The object of having a system of money in China, as in other parts of the world, was to have a medium by which the exchange of commodities could be facilitated. This implied, as a matter of course, that in view of the fact that the value of commodities varied often and for various causes, money or the medium of exchange should have a certain amount of fixity. We do not know if, at any period in the history of this country, there was any fixity as regards money. All that we know is that trade in this country, both internal and external, has always been double faced; business between one province and another, between even two districts in the same province, has had to be take count of not only the value of commodities but also the value of money. When a man from Shantung buys piece-goods in Shanghai he has not only to fix the value of the commodity he buys in money, but also the value of the money he has to pay in term of the local currency. The value of money or the tael is regulated by the weight as well as purity and local custom. It is well known that there is no coin known as the tael. A transaction in taels implies the use of the bullion in bars or sycee. Bar silver is the purest form of silver known in commerce and is practically negotiable in any part of the world. The use of bar silver would thus very nearly approximate the use of the standard coin; hence it is of no use for the purposes of the Chinese, except in very limited quantities. Practically every transaction in local or foreign trade is made through the medium of sycee or horse-shoes. The usual process is to melt the bar silver that comes to the ports and pass them through the moulds of sycee. The sycee is of varying weights, from one tael to fifty taels. The amount of alloy to be used in the manufacture of sycee or the purity of the silver bullion, varies with the usages in different localities. For instance while the silver in the Wenchow tael is 561.7 grains the silver in the Amoy tael is only 516 grains. And there is the touch, that is, the purity of the actual silver in the sycee. It is not unusual that the sycee of a place which has a larger proportion of silver may have less value than that of the sycee of another place which contains less silver, because of the difference in the touch. European countries or other nations that have come under European influence, have simplified this by means of coinage; in such countries the coins are minted by the government and they contain a fixed amount of metal of an invariable degree of fineness. Until recent years the Chinese Government had not even made an attempt to issue coins in silver in the manner in which it is done in other countries.
Foreign Dollars. It is purposeless to go into the early history of the currency in China, as this subject has already been dealt with by competent authorities like the late Mr. Edkins and Mr. H. B. Morse. There is confusion enough in local currencies. The variability of the monetary unit of the tael is due to the employment of uncoined silver currencies. But during the past hundred years there has been the additional difficulty caused by the introduction of foreign dollars. It is stated that the Portuguese and the Spaniards brought the dollar into China as early as the seventeenth century. Being practically the only coin the Chinese had ever seen the dollar soon gained great popularity; and when the East India Company began to trade with China, they had to import this dollar with which to pay their purchases of tea and silk. The introduction of the dollar was also made easier by the fact of Canton being the sole port open to the foreign trade for nearly a century since 1757. Of the several dollars that came into China the Carolus dollar of Spain was more readily accepted than any other coin. During the Napoleanic Wars about three-quarters of the trade of China was paid for in Carolus dollars. As usual the officials in this country were chary of the popularity of anything foreign; they took steps to stop the inflow of foreign dollars. At the close of the eighteenth century the officials ordered the silversmiths to make dollars like those made by the foreigners. Apart from the fact that the workmanship in the coins was not quite as good as that of the imported ones, the silversmiths began to use a large proportion of alloy in order to make as much profit as possible. It is stated that in some of the coins that were issued there were five parts of alloy to eight parts of silver. The inevitable result was that the coins depreciated heavily and the Government had to step in to stop private coinage. Further, all sorts of tricks were tried in order to delude the public; and business men were obliged to draw a line between the proper dollar and the imitation dollar; one of the steps taken was to chop the dollar with an impressed ideogram in order to give a guarantee of genuineness.
When this was repeated very often, the defaced coin in a few instances resembled a disc. These chopped dollars were first in circulation in Canton and later on they circulated in practically every part of south China. Carolus dollars were the only foreign coins accepted by the population in the eighteenth century - even up to the early decades of the nineteenth century. During the succeeding decades these coins commanded a premium of at least thirty per cent, until the Mexican dollar dethroned them from their high pedestal; about sixty years ago. Besides the Mexican dollar the other foreign coins which were more or less in circulation in South China up to 1840 were the Peruvian, Bolivian, Chilian dollars and the Indian Rupee. The South American dollars found their way to China mainly because they were driven out of their home countries by the circulation of depreciated paper currency. It is interesting to note that in 1842 the following were the relative values of the different currencies: in order to pay Tls. 100.00 of fine silver it was necessary to pay by weight 111.455 taels in Peruvian dollars, 111.900 taels in Mexican dollars, 112.150 taels in Bolivian dollars, 112.520 taels in Chilian dollars, 109.790 taels in Indian Rupees and 113.207 taels in chopped dollars. Although the Mexican dollar was steadily taking the place of the Carolus dollar in Shanghai as also in the Yangtsze basin, the Carolus continued to be the money of account; and hence there was the steady import of these dollars to settle balances. Enormous amounts were being imported; still, the supply of Carolus was not sufficient to meet the actual demand for silver. The ravages of the Taiping Rebellion restricted the consumption of imports, and notwithstanding increased importation of Carolus dollars collected from all parts of the world, these coins were at an extraordinary premium, which in 1855 amounted to 50 per cent. and in 1856 to 80 percent.; and Mr. Morse says: " the most curious spectacle was seen of exchange quoted at Canton at four shillings and eleven pence per dollar (Mexican of 416 grains) and at Shanghai at seven shillings and nine pence per dollar (Carolus of 402 1/2 grains)." *
* " Trade and Administration of China" by H. B. Morse. Pp. 165.
It thus became intolerable and gradually people began to give up the Carolus and take up the Mexican more and more. Although various attempts have been made to replace the Mexican dollar, so far it has never been displaced from general circulation. Many competitors of the Mexican have appeared in the field, but none have succeeded in gaining a footing in this country. The American "trade dollar" was introduced thirty years ago; the Congress at Washington was anxious that it should displace its rival by its weight - 420 grains instead of 416 grains of the Mexican. The Chinese are a shrewd people, and when they saw two coins put into circulation side by side, they naturally let the heavier coins go into the melting pot; thus every American dollar disappeared the moment it were put into circulation in this country. The Japanese dollar, or the yen, had a moderate measure of success; at first the coin was heavier and finer than the Mexican dollar and shared the same fate as the American "trade dollar"; but later, the establishment of a gold standard in Japan put an end to the use of yen which was no longer a monometallic silver coin. The British dollar issued from Hongkong circulates to a very large extent in Fuhkien and the two Kwangs. The French piastre is the coin of the Colony of Indo-China; and it has a great measure of success, especially in Yunnan and Kwangsi. The Indian Rupee is more popular than any other coin in the Western Borders of Yunnan and Szechuen, as also in Tibet.