Silver Standard - China

China

China had long used silver ingots as a medium of exchange, along with the cast copper-alloy cash. The use of silver ingots can be traced back as far as the Han dynasty (206 BC-220 AD). But prior to the Song Dynasty (960-1279), those silver ingots were used mainly for hoarding wealth. During the Song Dynasty, though first time in history the government became the sole issuer of paper currency after 1024, cast coins and silver ingots were still used as a medium of exchange. In the Shanyuan Treaty, signed with the state of Liao in 1004, Song China agreed to pay an annual indemnity or tribute of 100,000 tael of silver and 200,000 bolts of silk. This was the first time bulk silver in tael (Chinese: 銀兩) was used as indemnity in a treaty with a foreign power. Silver ingots had a shape similar to a boat or a Chinese shoe during the Yuan Dynasty (1279–1368). This became an ordinary shape for silver ingots during the following centuries.

The use of silver as money was very established at the time of the Ming Dynasty (1368–1644). Paper money was first issued in 1375 by the founder Hongwu Emperor amid the ban of silver as medium of exchange. But due to the increasingly depreciation, the paper money became basically ineffective and the ban on silver usage was finally lifted in 1436 (1st year of the Zhengtong Emperor). Meanwhile, silver was made much available through foreign trade with the Portuguese and the Spanish, beginning in the 16th century. The great tax reform by the statesman Zhang Juzheng in 1581 (9th year of the Wanli Emperor) simplified the taxation and required all the tax and corvee to be paid in silver. This can be seen as an indication of the firm position of silver in the monetary system of the Ming. But the reform would not have been a success or even feasible if the enormous amounts of silver were not available through the trade and imports from America, mainly through the Spanish.

During the Qing Dynasty (1644–1911), silver ingots were still used, but various foreign silver dollars had become popular in the Southern coastal region through foreign trade since the mid-Qing era. It was apparent that the silver ingots became awkward and more complicated to use viz-a-viz the foreign silver dollars, which could be counted easily, given their fixed specification and fineness of silver. However, the Qing dynasty very much resisted the idea of minting a silver coin of their own. It was not until late Qing, in 1890, that the first circulating silver coin was introduced by Guangdong province. The coin was at par with the Mexican Peso, and soon this issue was emulated by other provinces. For these silver coins, the tael was still seen as the proper monetary unit, as the denomination of the coins were given as 0.72 tael (specifically: 7 mace and 2 candareens). Note for the treaties signed between the Qing dynasty and the foreign powers the indemnities were all in tael of silver, except for the Treaty of Nanking, where the silver dollar was indicated. (See the Treaties of Tianjin, Convention of Peking, Treaty of Shimonoseki and Boxer Protocol). It was not until 1910 that the "yuan" (Chinese: 圓, literally "roundness"), was officially announced as the standard monetary unit. The yuan was subdivided into 10 jiao or 100 fen, and specified as 0.72 tael of 900 fineness silver. The next year, 1911, the so-called "Great Qing Silver Coin" one yuan (dollar) was issued, but soon after the dynasty was replaced by the Republic.

The silver standard was again adopted and codified in 1914 by the newly established republic, with one yuan still being equal to 0.72 tael of 900 fineness silver. After the Chinese Nationalist Party unified the country in 1928, the yuan was again announced as the standard unit in 1933, but this time the relationship of the yuan to the tael was abolished, as one yuan was now equal to 26.6971 grams of 880 fineness silver. In the same year, 1933, while most of the Western countries (especially Britain and USA) had left the gold standard because of the Great Depression, it was said that China almost avoided the depression entirely, mainly due to having stuck to the silver standard. (See Great Depression). However, the US silver purchase act of 1934 created an intolerable demand on China's silver coins, and so in the end the silver standard was officially abandoned in 1935 in favor of the four Chinese national banks' "legal note" issues. China and the British colony of Hong Kong, which followed suit in this regard in September 1935, would be the last to abandon the silver standard. Hong Kong then adopted the gold exchange standard and the Hong Kong dollar took on the exact value of one shilling and three pence ("1s 3d") sterling.

China's use of silver as a medium of exchange is reflected in the name for bank "銀行" (literally "silver house" or "silver office") and for the precious metal and jewel dealer "銀樓" (literally "silver building" or "silver shop").