Proposal preview

Distinctive and Interlinked: Chinese Money and Finance under Globalization from Historic Perspectives

Compared with those of western countries,especially Europe,Chinese money and finance has been walking on a distinctive path of development, which is proven by the monetary structure change, the uniqueness of financial institutions and unique international chance as well as pattern of financial modernization. From a comparative perspective,this session will discuss the monetary structure changes in China, the turning point for financial modernization in the international context,and the features and patterns of finance structure and institution in China in the process of modernization. Thereby we will clarify the financial fountain of Chinese economic development and enrich the contents of monetary and financial theory.

In ancient China, copper coin had circulated for more than 2000 years as the dominant monetary form. At the same time, copper coins, silk and silver jointly formed a multicomponent structure that showed different proportions of its components at different times. Moreover, when the Western world entered the modern age, China was one of the few countries whose key currency was still occupied by silver. This session will discuss the characteristics of ancient China’s copper-coin-centered monetary structure as well as the silver-centered monetary system in modern times. Referring to modern currency structural system in western countries, we will investigate how these characteristics impact on China’s economic development and whether the different structure of the monetary system between the western and China was one of the factors that made China falling behind the West.

During the modern period, when most western countries entered the capitalism society, the financial system and institutions in China was still dominated by western colonists, embodying quite obvious dependency. Compared to Japan, the financial modernization of China was facing the adverse international opportunities, in which the Western countries inhibited the development of China’s financial independence. There are two questions need to discuss. First, the Integration of the traditional financial organizations such as banking houses (Qian zhuang), draft banks (Piao hao)and modern financial organizations. Second, the challenge faced China modern banking system in the process of imitating and competing with the Western ones which monopolized the Chinese financial market. The situation with complex organizational structure of financial systems and suppressed international opportunity specialized Chinese financial system and its own efficiency. All of these will be discussed from an international comparative perspective.

Organizer(s)

  • Ping HE School of Finance, Renmin University of China hp65017@hotmail.com China
  • Georges DEPEYROT Centre Nationale de la Recherche scientifique - Ecole Normale Supérieure georges.depeyrot@orange.fr France

Session members

  • Elya (Jun) ZHANG, University of Rochester
  • Jianbing DAI, School of History,Hebei Normal University
  • Liping HE, Business School, Beijing Normal University
  • Yu LUO, School of Finance, Renmin University of China
  • Yohei KAKINUMA, Teikyo University(Tokyo)
  • Xule ZHANG, School of Economics, Fudan University
  • Rixu LAN, School of Economics, Central University of Finance and Economics
  • Jianbo ZHOU , School of Economics, Peking University
  • Jinli KANG, School of History & Culture, Hebei Normal University
  • Li DIAO, School of Economics and Management ,Wuhan University
  • Yongzhi QIU, The Institute of Economics, Jiangxi University of Finance and Economics
  • Yongkai XI, School of History,Hebei Normal University
  • Lin FU, School of Economics, Central University of Finance and Economic

Discussant(s)

  • Akinobu KURODA Institute for Advanced Studies on Asia,University of Tokyo ankuroda@ioc.u-tokyo.ac.jp
  • Hongzhong YAN School of Economics, Shanghai University of Finance and Economics hzhyansx@163.com

Papers

Panel abstract

From a historic comparative perspective,this panel will discuss three issues as follow:⑴the monetary structure changes in China. The bronze coin, paper money, silver and gold monetary systems, and alternative currency will be dealt with separately from ancient China to present-day. ⑵The turning point for financial modernization in the international context. Foreign debt with the US, abolishing tael for silver dollars, Sino-Russian trade and monetary credit will be discussed. ⑶The evolution of the finance institution in China in the process of modernization. Buddhist belief and Chinese financial industry, the official-merchant capital and new banking system, the main body of financial market will be presented. All in all, the panel will clarify the financial fountain of Chinese economic development and renew today’s monetary and financial theory.

1st half

The silver question in Asia and the DAMIN program

Georges Depeyrot (Centre National de la Recherché Scientifique)

The silver question in Asia and the DAMIN program Georges Depeyrot (Centre National de la Recherché Scientifique) During the years 2012-2015, the Centre National de la Recherché Scientifique funded a large initiative to determine the consequences of the new silver and the shift from bimetallism to gold standard on the monetary circulation. Within the program, meetings were organized once to twice a year. The transformation was a changing point linked to the first monetary globalization. Thus, it was critical to organize meetings to compare the situations in each country as well as the general interpretations extracted from the situations at the main International Monetary Conferences. One of the crucial questions to understand was the relation between the silver crisis and the situation in Asia. Many International Monetary Conferences sought to send large amounts of silver to Asia in order to reestablish the traditional relation between gold and silver and to...

The silver question in Asia and the DAMIN program Georges Depeyrot (Centre National de la Recherché Scientifique) During the years 2012-2015, the Centre National de la Recherché Scientifique funded a large initiative to determine the consequences of the new silver and the shift from bimetallism to gold standard on the monetary circulation. Within the program, meetings were organized once to twice a year. The transformation was a changing point linked to the first monetary globalization. Thus, it was critical to organize meetings to compare the situations in each country as well as the general interpretations extracted from the situations at the main International Monetary Conferences. One of the crucial questions to understand was the relation between the silver crisis and the situation in Asia. Many International Monetary Conferences sought to send large amounts of silver to Asia in order to reestablish the traditional relation between gold and silver and to develop a monetary system similar to those used by colonialist countries. The first goal was to collect and make all the data available for the academia. The analysis was done using the publications of more than 50 volumes from the series Moneta (www.moneta.be). This allows for a new perspective regarding the European economic policy. All the videos from the meetings are now available on http://urlz.fr/6RpU In this conference, we will present the published volumes and the main conclusions gathered.

Theoretical and Empirical Research on Trade, the Silver "Double Surplus" in Modern China (1871-1935)

Jianbing Dai, Yongkai Xi( School of History,Hebei Normal University)

Contrary to the explanation that fluctuations in exchange adjusted the trade balance suggested by the general economic theory, silver import excess and foreign trade deficit occurred simultaneously in modern China from the late 1870s to the 1930s. This strange phenomenon is due to the influx of silver supply from abroad, a core (maybe ‘common occurrence’ would be better?) of the currency system at the time. At the time, as the silver exchange rate decreased, the deficit would increase and vice versa. Silver supply from other countries made the silver circulation closely related to the world silver price. In general, when the international silver price increased, the silver flowed out and then the price would decrease leading silver to flow in. The silver flow influenced the currency supply and foreign trade in China while the nominal exchange rate in modern China fluctuated with the world silver price. However, the real exchange...

Contrary to the explanation that fluctuations in exchange adjusted the trade balance suggested by the general economic theory, silver import excess and foreign trade deficit occurred simultaneously in modern China from the late 1870s to the 1930s. This strange phenomenon is due to the influx of silver supply from abroad, a core (maybe ‘common occurrence’ would be better?) of the currency system at the time. At the time, as the silver exchange rate decreased, the deficit would increase and vice versa. Silver supply from other countries made the silver circulation closely related to the world silver price. In general, when the international silver price increased, the silver flowed out and then the price would decrease leading silver to flow in. The silver flow influenced the currency supply and foreign trade in China while the nominal exchange rate in modern China fluctuated with the world silver price. However, the real exchange rate does not fluctuate as much to influence the export trade on a large scale. Thus, the silver import excess and foreign trade deficit both appeared. Empirical analysis shows that the import is influenced by silver flow, while the export is influenced by the actual exchange rate and income from abroad.

The 1979 Jackson vs. PRC Trial and China’s Fresh Start of Foreign Borrowing

Elya(Jun) Zhang(History Department, University of Rochester)

After the Sino-U.S. normalization in 1979, Alabama engineer Russel Jackson gathered 243 plaintiffs in a class action to sue the PRC for non-payment of the defaulted 1911 Hukuang bonds and obtained a favorable ruling in an Alabama court. For the first time in its history, the sovereign nation of China subjected itself to the rule of a foreign court, appealed the case, and won. The trial itself set a number of legal precedents, but in a series of plot twists, the Jackson trial precipitated not just China but also the Soviet Union on a path to resolve its never-quite-forgotten-nor-forgiven debts from the old regime. Interestingly, the U.S. Supreme Court would be the final magic finger that officially closed the book on a century of American lending to modern China.

After the Sino-U.S. normalization in 1979, Alabama engineer Russel Jackson gathered 243 plaintiffs in a class action to sue the PRC for non-payment of the defaulted 1911 Hukuang bonds and obtained a favorable ruling in an Alabama court. For the first time in its history, the sovereign nation of China subjected itself to the rule of a foreign court, appealed the case, and won. The trial itself set a number of legal precedents, but in a series of plot twists, the Jackson trial precipitated not just China but also the Soviet Union on a path to resolve its never-quite-forgotten-nor-forgiven debts from the old regime. Interestingly, the U.S. Supreme Court would be the final magic finger that officially closed the book on a century of American lending to modern China.

Paper Money in Pre-modern China: From Private Credit Currency to State Paper Money

Ping HE(School of Finance, Renmin University of China)

China is the first country in the world to invent paper money. The transformation of money from the physical currency to paper money was a huge leap in the history of currency usage. Triggered by Bitcoin, the new currency form of the central bank’s digital currency is also occurring. To understand the nature of money and today’s monetary theory, it is important to examine the circulation practice of China’s banknotes in historical periods and the related institutional construction. This paper will address the following questions: Why was paper currency initially invented in China? Upon invention, why did paper currency not become universal in pre-modern China? Why was the development of paper currency interrupted and even ceased to exist in the Ming and Qing period? What consequences did paper currency have on China’s financial reforms?

China is the first country in the world to invent paper money. The transformation of money from the physical currency to paper money was a huge leap in the history of currency usage. Triggered by Bitcoin, the new currency form of the central bank’s digital currency is also occurring. To understand the nature of money and today’s monetary theory, it is important to examine the circulation practice of China’s banknotes in historical periods and the related institutional construction. This paper will address the following questions: Why was paper currency initially invented in China? Upon invention, why did paper currency not become universal in pre-modern China? Why was the development of paper currency interrupted and even ceased to exist in the Ming and Qing period? What consequences did paper currency have on China’s financial reforms?

The First Chinese Economic Impact on Asia

Yohei Kakinuma(Teikyo University,Tokyo,Japan)

This article argues that there was a multiple monetary economy not only during China’s Warring States, the Qin, and the Western Han periods, but also during the subsequent Eastern Han period and onwards. The study demonstrates that multiple currencies competed simultaneously yet inconsistently without fixed standards. Diachronic changes were subsequently explored revealing the increase of textile production and becoming a main source of revenue. The dynasty at the time did not permit Chinese coins to be taken abroad so coins remained as a regional currency, while textiles became the inter-regional currency along the Silk Road. The study concluded this as the first direct contact between Chinese economies and the rest of Asia and that the end of the Eastern Han period brought about a direct link between governmental finance and international trade. These events can be interpreted as the first steps of economic globalization in Chinese history.

This article argues that there was a multiple monetary economy not only during China’s Warring States, the Qin, and the Western Han periods, but also during the subsequent Eastern Han period and onwards. The study demonstrates that multiple currencies competed simultaneously yet inconsistently without fixed standards. Diachronic changes were subsequently explored revealing the increase of textile production and becoming a main source of revenue. The dynasty at the time did not permit Chinese coins to be taken abroad so coins remained as a regional currency, while textiles became the inter-regional currency along the Silk Road. The study concluded this as the first direct contact between Chinese economies and the rest of Asia and that the end of the Eastern Han period brought about a direct link between governmental finance and international trade. These events can be interpreted as the first steps of economic globalization in Chinese history.

Why Silver instead of Gold? A Critical Literature Review on Monetary System Choice in Imperial China

Liping HE(Business School, Beijing Normal University)

China moved to a monetary system that was dominated by the use of silver from early Ming through late Qing. Many scholars have interpreted the shift in monetary regime as a result of the three developments in imperial China: (1) hyperinflation in the earlier periods and its damaging effects on government manipulation of paper money; (2) persistent trade surplus that China had enjoyed since mid-Ming; and (3) an economy that had been largely based on self-sufficient peasant farming. Yet in fact the government in imperial China had never stopped its manipulative practices on money, and trade flows (including specie flows) between imperial China and the outside world had hardly been stable. Moreover, a largely self-sufficient peasant economic system may best support a copper-based monetary regime, but presumably not particularly pertinent to the issue of silver over gold. The present study gathers evidence from scholars’ work that shows: (1) foreign gold...

China moved to a monetary system that was dominated by the use of silver from early Ming through late Qing. Many scholars have interpreted the shift in monetary regime as a result of the three developments in imperial China: (1) hyperinflation in the earlier periods and its damaging effects on government manipulation of paper money; (2) persistent trade surplus that China had enjoyed since mid-Ming; and (3) an economy that had been largely based on self-sufficient peasant farming. Yet in fact the government in imperial China had never stopped its manipulative practices on money, and trade flows (including specie flows) between imperial China and the outside world had hardly been stable. Moreover, a largely self-sufficient peasant economic system may best support a copper-based monetary regime, but presumably not particularly pertinent to the issue of silver over gold. The present study gathers evidence from scholars’ work that shows: (1) foreign gold coins had become known to the Chinese probably from the Han Dynasty; (2) the use of gold as money scarcely emerged in the Tang Dynasty; (3) The Sung had shifted toward an all-round anti-gold policy which presumably had led to falls in the gold price relative to other specie monies; and (4) constant irregularities in imperial China’s policy toward foreign trade that may effectively made silver a better means of payments than gold in international transactions. In conclusion, the study suggests that the two factors – the cultural and ideological bias against gold and irregular foreign trade relations (or the lack of European-style international trade networks) – had contributed to the rise of silver in China’s monetary system when the country began to see trade flows increase from the dawn of the Age of Commerce, the forerunner of globalization during the 15th century.

Why Did Ming China Turn to the Silver Age?: A New Investigation Based on Institutional Factors

Yongzhi QIU(the Institute of Economics,Jiangxi University of Finance and Economics)

How did monetary silverlization occur in the Ming Dynasty? From the perspective of the long transition period from the Yuan Dynasty to the Ming Dynasty, the early Ming Dynasty developed a new state organization policy and allowed for a new development trend for the commercial market. The Ming administration reconstructed the relationship between the government and the economy using policies that originate from the various social and economic reforms used by the Mongol Empire during the Yuan Dynasty. The monetary system formed in the early Ming Dynasty and the broader "Hongwu" economic system seriously impacted the institutional basis and credit core of the two currencies of the state: copper cash and notes. A disordered supply of currencies in the upper institutional system and the rise of market forces led to chaos in the circulation of currencies. This is the main institutional factor that led to the currency transformation.

How did monetary silverlization occur in the Ming Dynasty? From the perspective of the long transition period from the Yuan Dynasty to the Ming Dynasty, the early Ming Dynasty developed a new state organization policy and allowed for a new development trend for the commercial market. The Ming administration reconstructed the relationship between the government and the economy using policies that originate from the various social and economic reforms used by the Mongol Empire during the Yuan Dynasty. The monetary system formed in the early Ming Dynasty and the broader "Hongwu" economic system seriously impacted the institutional basis and credit core of the two currencies of the state: copper cash and notes. A disordered supply of currencies in the upper institutional system and the rise of market forces led to chaos in the circulation of currencies. This is the main institutional factor that led to the currency transformation.

2nd half

Abolishing Tael for Silver Dollars: The Beginning of China's Central Government Controlling Currency System

Xule Zhang (School of Economics, Fudan University)

From the Rules of the Currency System in 1910 by Qing Dynasty, to the Regulations of National Currency in 1914 by Beijing Government, and finally to the Rules of Casting Silver Standard Currency in 1933 by Nanjing Government, China witnessed the three stages of the abolishment of tael for silver dollars process. The 1910 Rules only proposed silver dollar to act as the standard currency without casting any new currency while the 1914 Regulations brought about actual currency casting, but still did not abolish tael. The result was that the use of silver dollar as the standard currency only stayed as a written law but not truly implemented. It was not until 1933 did the central government began to assert its control over the monetary system that resulted in the modernization of China’s monetary system and initiated its connection to the global monetary system.

From the Rules of the Currency System in 1910 by Qing Dynasty, to the Regulations of National Currency in 1914 by Beijing Government, and finally to the Rules of Casting Silver Standard Currency in 1933 by Nanjing Government, China witnessed the three stages of the abolishment of tael for silver dollars process. The 1910 Rules only proposed silver dollar to act as the standard currency without casting any new currency while the 1914 Regulations brought about actual currency casting, but still did not abolish tael. The result was that the use of silver dollar as the standard currency only stayed as a written law but not truly implemented. It was not until 1933 did the central government began to assert its control over the monetary system that resulted in the modernization of China’s monetary system and initiated its connection to the global monetary system.

The Ascent of the Alternative Currency:

Yu Luo (School of Finance,Renmin University of China)

An alternative currency is a medium of exchange that acts as an alternative or a complement to fiat money. The alternative currency is a cutting-edge monetary idea that is a worldwide practice. It challenges fundamental monetary theories and the convention that money is issued by the state only. This paper investigates the theoretical foundation and the practice of the alternative currency from the historical perspective. We explored recent the development of worldwide alternative currencies and classified them into four types; which are metallic currency, community money, mutual credit and cryptocurrency. Based on the analysis of the “dual anchor competition” model and monetary history, this paper reveals that the key determinant of different monetary systems is the trade-off between the power of state and that of the market. Key Words: Alternative Currency, Complementary Currency, Denationalization of Money, Dual Anchor Competition

An alternative currency is a medium of exchange that acts as an alternative or a complement to fiat money. The alternative currency is a cutting-edge monetary idea that is a worldwide practice. It challenges fundamental monetary theories and the convention that money is issued by the state only. This paper investigates the theoretical foundation and the practice of the alternative currency from the historical perspective. We explored recent the development of worldwide alternative currencies and classified them into four types; which are metallic currency, community money, mutual credit and cryptocurrency. Based on the analysis of the “dual anchor competition” model and monetary history, this paper reveals that the key determinant of different monetary systems is the trade-off between the power of state and that of the market. Key Words: Alternative Currency, Complementary Currency, Denationalization of Money, Dual Anchor Competition

The official-merchant capital and the new banking system of Modern Northern China

Jinli Kang(School of History & Culture, Hebei Normal University)

In the early Republic of China, a development peak in the national finance appeared. In a little over 10 years, a modern banking system had been constructed which included national, local, professional and commercial banks. However, contrary to the Zhejiang and Jiangsu area, the Northern banking income mainly came from official-merchant capital. This is an inevitable outcome as the finance developed based on weak common commerce and the underdevelopment of the market. This paper holds that official-merchant capital played a key role in wealth accumulation for the early development and construction of the national banking system. However, the practice that banking depends on privilege and government business led to the deviation from industry and business. This was not only problematic for the stability of banking system, but also made banking vulnerable and easily influenced by the political situation. Key words: Official-merchant capital, finance, super market advantage

In the early Republic of China, a development peak in the national finance appeared. In a little over 10 years, a modern banking system had been constructed which included national, local, professional and commercial banks. However, contrary to the Zhejiang and Jiangsu area, the Northern banking income mainly came from official-merchant capital. This is an inevitable outcome as the finance developed based on weak common commerce and the underdevelopment of the market. This paper holds that official-merchant capital played a key role in wealth accumulation for the early development and construction of the national banking system. However, the practice that banking depends on privilege and government business led to the deviation from industry and business. This was not only problematic for the stability of banking system, but also made banking vulnerable and easily influenced by the political situation. Key words: Official-merchant capital, finance, super market advantage

The Evolution of Main Body of Financial Market in Modern China:Perspective Based on the Evolution of Financial Organizations

Rixu LAN, Lin FU (School of Economic, Central University of Finance and Economics)

Before modern times, China had formed a diversified body of financial organizations to meet the multi-level financial needs in the financial market. However, the evolution of the main financial organizations in China's market has shown a trend of binary progress. The original localization of financial organizations has had a clear differentiation; the piaohao and qianzhuang. During the modern transition, the piaohao has rapidly plunged into an industrial collapse. On the contrary, the qianzhuang has made great progress in the incorporation of modern elements. Additionally, modern financial organizations have also entered China through Western imperialism. Modern financial institutions are a combination of modern Western financial technology and elements from the traditional financial institutions. It is the balancing of the powers between the main institutions that allowed for prolonged stability. The ability to maintain the stability of the financial body relies more on industrial organizations than the government’s own official institutions. Key...

Before modern times, China had formed a diversified body of financial organizations to meet the multi-level financial needs in the financial market. However, the evolution of the main financial organizations in China's market has shown a trend of binary progress. The original localization of financial organizations has had a clear differentiation; the piaohao and qianzhuang. During the modern transition, the piaohao has rapidly plunged into an industrial collapse. On the contrary, the qianzhuang has made great progress in the incorporation of modern elements. Additionally, modern financial organizations have also entered China through Western imperialism. Modern financial institutions are a combination of modern Western financial technology and elements from the traditional financial institutions. It is the balancing of the powers between the main institutions that allowed for prolonged stability. The ability to maintain the stability of the financial body relies more on industrial organizations than the government’s own official institutions. Key words:Financial market body Traditional financial organizations Modern financial organization Modern China

Buddhist Belief and Chinese Financial Industry Development

Jianbo ZHOU(School of Economics, Peking University)

Buddhist temple finances from India rose and developed rapidly during the popular wave of Southern and Northern Buddhism, which became one of the earliest financial institutions relying on social capital lending in the history of China’s financial development. Not only has it expanded the boundaries of China’s financial market, it has also greatly promoted the progress of China’s financial industry. The latter not only took from the monastic finance the techniques of reducing the risk of borrowing through pledges and mortgages, but also learned from the traditional finances and royal laws to establish commercial credits and used the religious credit bonds to establish new commercial credits. The practice has greatly improved the competitive advantage and promoted the great development of the commodity currency economy in the Song, Yuan, Ming and Qing dynasties. It can be said that a Chinese financial history cannot be written without talking about Buddhism. Keywords: monastic...

Buddhist temple finances from India rose and developed rapidly during the popular wave of Southern and Northern Buddhism, which became one of the earliest financial institutions relying on social capital lending in the history of China’s financial development. Not only has it expanded the boundaries of China’s financial market, it has also greatly promoted the progress of China’s financial industry. The latter not only took from the monastic finance the techniques of reducing the risk of borrowing through pledges and mortgages, but also learned from the traditional finances and royal laws to establish commercial credits and used the religious credit bonds to establish new commercial credits. The practice has greatly improved the competitive advantage and promoted the great development of the commodity currency economy in the Song, Yuan, Ming and Qing dynasties. It can be said that a Chinese financial history cannot be written without talking about Buddhism. Keywords: monastic finance, local finance, commercial credit, competitive advantage

A Study on Sino-Russian Foreign Trade and Monetary Credit in Late Qing Dynasty(1862-1919)

Li Diao(School of Economics and Management, Wuhan University)

This paper examines the development of Sino-Russia tea trade in Hankow from 1862 to 1919, and how this trade influences Hankow’s tea market. Furthermore, we will trace foreign banks’ entry into Hankow following the tea trade, and how this phenomenon change the composition of capital market in mid Yangtze region.

This paper examines the development of Sino-Russia tea trade in Hankow from 1862 to 1919, and how this trade influences Hankow’s tea market. Furthermore, we will trace foreign banks’ entry into Hankow following the tea trade, and how this phenomenon change the composition of capital market in mid Yangtze region.

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