History of Chinese currency

As part of the Unification of China, Qin Shi Huang (Chinese: 秦始皇; pinyin: Qín Shǐ Huáng, 260 BC – 210 BC) introduced a uniform copper coin with the inscription "Ban Liang" based on the coins previously used by Qin. All other forms of local currency were abolished. The coins were round with a square hole in the middle which was the common design for most Chinese copper coins until the 20th century. Due to the low value of an individual coin, the Chinese have traditionally strung a nominal thousand copper coins onto a piece of string. Government taxes were levied on both coins and products such as rolls of silk. Salaries were paid in "stones" (石, dàn) of grain during the Qin and Han dynasties.

Tang merchants rapidly adopted forms of paper currency starting with promissory notes in Sichuan called "flying money" (feiqian). These proved so useful the state took over production of this form of paper money with the first state-backed printing in 1024. By the 12th century, various forms of paper money had become the dominant forms of currency in China and were known by a variety of names such as jiaozi, huizi, kuaizi, or guanzi.

During the early Song dynasty (Chinese: 宋, 960–1279), China again reunited the currency system displacing coinages from ten or so independent states. Among pre-Song coins, the northern states tended to prefer copper coins. The southern states tended to use lead or iron coins with Sichuan with its own heavy iron coins which continued to circulate for a short period into the Song dynasty.[6] By 1000 CE, unification (south of the Liao) was complete and China experienced a period of rapid economic growth. This was reflected in the growth of coining. In 1073—the peak year for minting coins in the Northern Song—the government produced an estimated six million strings containing a thousand copper coins each. The Northern Song is thought to have minted over two hundred million strings of coins which were often exported to Inner Asia, Japan, and South-East Asia, where they often formed the dominant form of coinage.

The Mongol-founded Yuan dynasty (Chinese: 元, 1271–1368) also attempted to use paper currency. Unlike the Tang dynasty, they created a unified, national system that was not backed by silver or gold. The currency issued by the Yuan was the world's first fiat currency, known as Jiaochao. The Yuan government attempted to prohibit all transactions in or possession of silver or gold, which had to be turned over to the government. Inflation in 1260 caused the government to replace the existing paper currency with a new one in 1287, but inflation that resulted from undisciplined printing remained a problem for the Yuan court until the end of the Yuan dynasty.

Silver sycee (yuanbao) ingots

The early Ming dynasty (Chinese: 明; pinyin: Míng, 1368–1644) also attempted to use paper currency in the early re-unification period. This currency also experienced rapid inflation and issues were suspended in 1450 although notes remained in circulation until 1573. It was only in the very last years of the Ming dynasty when Li Zicheng threatened Beijing in 1643 and 1645 that printing took place again. For most of the Ming China had a purely private system of currency for all important transactions. Silver, which flowed in from overseas, began to be used as a currency in the Far South province of Guangdong where it spread to the lower Yangtze region by 1423 when it became legal tender for payment of taxes. Provincial taxes had to be remitted to the capital in silver after 1465, salt producers had to pay in silver from 1475 and corvée exemptions had to be paid in silver from 1485. The Chinese demand for silver was met by traditional maritime silk road trade links, from either Quanzhou, Zhangzhou, Guangzhou, or Macau, with Manila in the Philippines as part of the Spanish East Indies who traded Philippine peso (Spanish silver dollars) for chinaware and other trade goods, after the Spanish colonial empire became established at Manila in 1571. The Spanish silver dollar were minted and mined from the Spanish Americas, in particular Potosí in Peru and Mexico. The trade of Spanish silver dollars with chinaware and other trade goods flowed through the Manila-Acapulco Galleon Trade from the Philippines to Mexico and vice versa within the Spanish colonial empire. It circulated as minted Spanish dollars sometimes stamped with Chinese characters known as "chop marks" which indicated that they were verified by a merchant and determined to be genuine. Spanish silver also circulated as ingots (known as sycee or yuanbao) which weighed a nominal liang (about 36 grams) although purity and weight varied from region to region. The liang was often referred to by Europeans by the Malay term tael. The first Chinese yuan coins had the same specification as a Spanish dollar, leading to a continuing equivalence in some respects between the names "yuan" and "dollar" in the Chinese language.

Guāng Xù Tōng Bǎo, Guāng Xù Zhòng Bǎo, and Guāng Xù Yuán Bǎo coins.

Silver coin: 1 yuan Guangxu, Hupei Province - (1895-1907)

Silver coin: 1 yuan/dollar Xuantong 3rd year - 1911 Chopmark

Late Imperial China maintained both a silver and a copper currency system. The copper system was based on the copper cash (wen). The silver system had several units which by the Qing dynasty were: 1 tael = 10 mace = 100 candareens = 1000 lí (silver cash).

In 1889, the Chinese yuan was introduced at par with the Spanish dollar or Mexican peso or Philippine peso and was subdivided into 10 jiao (角, not given an English name, cf. dime), 100 fen (分, cents), and 1000 wen (文, cash). The yuan was equivalent to 7 mace and 2 candareens (or 0.72 tael) and, for a time, coins were marked as such in English.

The earliest issues were silver coins produced at the Kwangtung mint in denominations of 5 fen, 1, 2 and 5 jiao and 1 yuan. Other regional mints were opened in the 1890s producing similar coins. Copper coins in denominations of 1, 2, 5, 10 and 20 wen were also issued. The central government began issuing its own coins in the yuan currency system in 1903. Banknotes were issued in yuan denominations from the 1890s by several local and private banks, along with the "Imperial Bank of China" and the "Hu Pu Bank" (later the "Ta-Ch'ing Government Bank"), established by the imperial government.

The Republic of China was founded after the Xinhai Revolution toppled the Qing dynasty. The Nanjing-based Provisional Government of the Republic of China urgently needed to issue military currency for use in place of the previous Qing currency. Successively, each province declared independence from the Qing and issued their own military currency. In 1914, the National Currency Ordinance established the silver dollar as the national currency of the Republic of China. Although designs changed compared with imperial era coins, the sizes and metals used in the coinage remained mostly unchanged until the 1930s. The majority of regional mints closed during the 1920s and 1930s, although some continued until 1949. From 1936, the central government issued copper 1⁄2, 1 and 2 fen coins, nickel (later cupronickel) 5, 10 and 20 fen and 1⁄1 yuan coins. Aluminium 1 and 5 fen pieces were issued in 1940.

The 1920s and 1930s saw the price of silver appreciate in the international market, increasing the purchasing power of the Chinese currency and leading to a massive efflux of silver out of China. It became evident to the Chinese government that it could not retain the Silver Standard without debt defaults increasing, and so chose to abandon it. The situation was exacerbated by the multitude of commercial, provincial and foreign banks issuing currencies all at different values.

In 1935, the Nationalist government issued a new currency, the fabi (Chinese: 法幣; pinyin: fǎbì; Wade–Giles: fa-pi), through the four major government controlled banks: the Bank of China, Central Bank of China, Bank of Communications, and the Agricultural Bank of China.[7]^: 5 H.H. Kung, the Nationalist government's Finance Minister, directed the creation of the fabi.[7]^: 10 This fiat currency replaced the silver standard.[7]^: 10

The onset of World War II saw a sharp devaluation of the fabi currency. This was largely due to the unrestrained issuance of the currency to fund the war effort.

The Nationalist government sought to ensure that the fabi remained convertible into foreign currency and expended large amounts of foreign exchange in an effort to maintain the pre-war exchange rate.[7]^: 12This approach became unviable and on March 13, 1938, the Nationalist government imposed strict foreign exchange controls.[7]^: 12 Foreign banks operating in China could evade most of these controls, however, and continued to move money out of the country.[7]^: 12

By October 1938, the Nationalist government lost control of its economic center to the invading Japanese.[7]^: 6 Military expenditures remained high, but tax revenues plunged.[7]^: 6 Printing of the fabi sought to cover the difference.[7]^: 6

After its 1941 declaration of war against the United States and the United Kingdom, Japan moved into the foreign-controlled areas of Shanghai that it had not previously occupied after its success in the Battle of Shanghai.[7]^: 12 It seized most of the banks in these areas of Shanghai and declared that fabi within Shanghai and occupied Tianjin had to be exchanged for bank notes of the Wang Jingwei regime.[7]^: 15 For most Chinese in these occupied areas, the exchange meant that their fabi lost half its value and a major blow to the economy of the lower Yangzi resulted.[7]^: 15

Customs gold units (關金圓, pinyin: guānjīnyuán) were issued by the Central Bank of China to facilitate payment of duties on imported goods. Unlike the national currency which suffered from hyperinflation, the CGUs were pegged to the U.S. dollar at 1 CGU = US$0.40.

The peg was removed in 1935 and the bank allowed CGUs to be released for general use. Already awash with excessive paper currency, the CGUs only added to rampant hyperinflation.

After the defeat of Japan in 1945, the Central Bank of China issued a separate currency in the northeast to replace those issued by puppet banks. Termed "東北九省流通券" (pinyin: Dōngběi jiǔ shěng liútōngquàn), it was worth approximately 10 times more than fabi circulating elsewhere. It was replaced in 1948 by the gold yuan. The Northeastern Provinces yuan was an attempt to isolate certain regions of China from the hyperinflation that plagued the fabi currency.

In response to hyperinflation, the Nationalist government issued the gold yuan in August 1948.[7]^: 8 The Gold Yuan Certificate replaced the fabi at the rate of 1 gold yuan = 3 million yuan fabi = US$0.25. The gold yuan was nominally set at 222.17 milligrams (1⁄140 ozt) of gold. However, the currency was never actually backed by gold.

The gold yuan failed with greater speed than the fabi had.[7]^: 8

Finally, in 1949, the Kuomintang again announced a reform with the introduction of the Silver Yuan Certificate, returning China to the silver standard. The silver yuan would be exchanged at 1 silver yuan = 100 million gold yuan, and was backed by silver dollars minted by the Central Mint of China.

This currency was short-lived, as the Chinese Communist Party soon gained control of the Mainland provinces. It was replaced by currency issued by the People's Bank of China which was less prone to inflation.

After the retreat of the Kuomintang to Taiwan, the silver yuan remained the de jure legal currency of account of the Republic of China, although only Taiwan dollars issued by the Bank of Taiwan were circulating in areas controlled by the ROC. After a currency reform in 1949 created the New Taiwan dollar, the statutory exchange rate was set at 1 silver yuan = NT$3.

An amendment was passed in 2000 to make the New Taiwan dollar the official legal currency of the Republic of China.

The Bank of Taiwan was originally established by the Japanese in 1899 whilst Taiwan was under Japanese administration. The bank issued Taiwanese yen which were pegged to the Japanese yen. After the retrocession of Taiwan to the Republic of China, the new Bank of Taiwan was allowed to continue issuing its own currency. Called the "Taiwan dollar", it replaced the Taiwanese yen at par. This was an attempt by the Kuomintang to prevent the hyperinflation affecting the mainland from affecting Taiwan.

However, mismanagement by the governor-general Chen Yi meant that the Taiwan dollar also suffered depreciation. It was replaced by the New Taiwan dollar in 1949 at the rate of 40,000 to 1.

At the time of invasion of China's northeast in 1931, multiple currencies were circulating. These included local provincial issues, the Kuomintang fabi and yen currencies issued by the Bank of Chosen and the Bank of Taiwan.

After the puppet state of Manchukuo was created, the Japanese founded the Central Bank of Manchou on July 1, 1932, in Changchun (長春), then known as Hsinking (新京). While the bank provided commercial functions, it also acted as a central bank and issuer of currency. The Manchukuo yuan was initially set at 1 Manchukuo yuan = 23.91 g silver, but became pegged to the Japanese yen at 1:1 in 1935 after Japan left the gold standard. The currency lasted until the end of World War II. It was replaced by the Northeastern Provinces Yuan issued by the Central Bank of China.

A 5 Jiao Coin issued in 1938 by the Bank of Mengjiang.

Before Japanese occupation, the predominant bank of China's northern provinces (including Suiyuan, Chahar and Shanxi) was the Charhar Commercial Bank. When the Japanese invaded, the bank evacuated the area taking all of its capital and all unissued currency. The Japanese military government quickly established the Channan Commercial Bank to replace its note issuing functions.

With the formation of Mengjiang puppet state, the authorities established the Bank of Mengjiang which amalgamated the Channan Commercial Bank with three other smaller regional banks. The Bank of Mengjiang issued Mengjiang yuan from 1937 which was pegged to the Japanese military yen and Japanese yen at par.

The Japanese managed to establish two collaborationist regimes during their occupation in China. In the north, the "Provisional Government of China" (中華民國臨時政府) based in Beijing established the Federal Reserve Bank of China (中國聯合準備銀行, pinyin: Zhōngguó Liánhé Zhǔnbèi Yínháng). The FRB issued notes in 1938 at par with Kuomintang fabi. Although initially equivalent, the Japanese banned the use of Nationalist currency in 1939 and set arbitrary exchange rates in favour of the FRB yuan. The FRB yuan was replaced by Kuomintang fabi in 1945 at 5 FRB yuan = 1 fabi.

The Wang Jingwei government in Nanjing established the collaborationist Nanjing Reformed Government (南京維新政府) in 1938. This was later reorganized into the Nanjing National Government (南京國民政府) in 1940. They established the Central Reserve Bank of China (中央儲備銀行, pinyin: Zhōngyāng Chǔbèi Yínháng) which began issuing CRB yuan in 1941. Although initially set at par with the Nationalist fabi, it also was arbitrarily changed to equal 0.18 Japanese military yen. In 1945, it was also replaced by the Nationalist fabi at 200 CRB yuan = 1 fabi.

The Japanese military yen was distributed in many regions throughout East Asia under Japanese occupation. Initially, these were issued as payment to soldiers. The intention was the payout of an indefinite amount of Japanese military yen which could not be converted into Japanese yen and therefore could not cause inflation in Japan. However, the destructive effects on local East Asian economies was not a major concern.

The currency became legal tender in China commencing in 1937. It was later replaced by issues from puppet banks. However, the currency remained in force in Hong Kong between 1941 and 1945. Initially set at HK$2 = JMY1, the Hong Kong dollar was largely preferred by locals and hoarded away. In order to address this, the Japanese government made possession of Hong Kong dollars illegal in 1943 and required a conversion to JMY at 4 to 1.

In the period immediately following the Japanese surrender in the Second Sino-Japanese War, the formerly occupied areas had competing currencies.[7]^: 95 Japan had never unified the currency systems in the areas it occupied, thus the Wang Jingwei regime, the Wang Kemin regime, and the Manchukuo puppet state all had separate currency systems.[7]^: 94–95 The Nationalist government attempted to replace these currencies with the fabi.[7]^: 96 For the currency of the Wang Jingwei regime, the Nationalist government set a minimal exchange rate of 200 yuan in regime currency to one fabi and required the regime currency to be exchanged within four months.[7]^: 96 This undervaluation made inflation worse as Chinese who formerly lived under the regime rushed to hoard goods rather than exchange for fabi which in turn drove price increases.[7]^: 96 Ultimately, the unrealistic exchange rate impoverished those who had lived under the Wang Jingwei regime and made economic revival of the area more difficult.[7]^: 96 The Nationalist government set more realistic exchange rates for the Wang Kemin and Manchukuo regime currencies.[7]^: 97

A RMB200 note issued by the People's Bank of China in 1949.

The Chinese Communist Party gained control of large areas of the northeast of China during 1948 and 1949. Although several regional banks were established, they were united in December 1948 as the People's Bank of China. Established in Shijiazhuang, the new bank took over currency issuance in areas controlled by the Communist Party.

After the promulgation of the People's Republic of China, there was a brief period where 100,000 gold yuan could be exchanged for 1 yuan Renminbi.

Renminbi notes were issued in 12 denominations: 1, 5, 10, 20, 50, 100, 200, 500, 1000, 5000, 10,000, and 50,000 yuan. These denominations were subdivided into 62 styles. After adjusting the currency value with ratio 1:10,000 in March 1955, the second edition of Renminbi were issued in 12 denominations, including 1 fen, 2 fen, 5 fen, 1 jiao, 2 jiao, 5 jiao, 1 yuan, 2 yuan, 3 yuan, 5 yuan and 10 yuan.

The People's Republic of China began issuing aluminum coins in December 1957, in denominations of 1, 2 and 5 fen. From 1961, China outsourced the printing of 3, 5 and 10 yuan notes to the Soviet Union.

The fifth and latest editions of the currency of the People's Republic of China have been produced since 1 October 1999. Notes have been produced in 8 denominations: old types of 1 fen, 2 fen and 5 fen, as well as new issues depicting Mao Zedong: 5 yuan, 10 yuan, 20 yuan, 50 yuan and 100 yuan. In 2004, a 1 yuan note depicting Mao Zedong first came into production. Since 1999, coins have been produced in denominations of 1 fen, 2 fen, 5 fen, 1 jiao, 5 jiao and 1 yuan.

The Bank of China on the Mainland was chartered as the main foreign trade and exchange bank. Foreign visitors to the People's Republic of China were required to conduct transactions with Foreign Exchange Certificates issued by the Bank of China between 1979 and 1994. These have been abolished, and all transactions now occur in Renminbi.

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