PAPER-MONEY AND BANKING IN CHINA.
The origin or prototype of so many of our European arts and customs has been found in the 'central flowery land,' that it is not surprising to hear of the Chinese having begun to use paper-money as currency in the second century preceding the Christian era. At that time, the coinage of the Celestials was of a more bulky and ponderous nature than it is at the present day; and we may easily believe that a people so cunning and ingenious, would contrive not a few schemes to avoid the burden of carrying it about; as the man did, who scratched the figure of an ox on a piece of leather, and went from door to door with that until he had found a customer, leaving the animal, meantime, at home in the stall. There was a deficiency, too, in the ways and means of the government: money was never plentiful enough in the imperial coffers. At last, to get out of the difficulty, it was determined to try the effect of a paper-currency, and an issue was made of assignats or treasury-warrants, which, being based on the credit of the highest authorities, were regarded as secure; which fact, with their facility of transfer, soon brought them into circulation. Of course, a good deal of legislation was expended on the measure, before it could be got to work satisfactorily, and it underwent many fluctuations in its progress towards permanence. The intestine wars to which China was exposed at that period, by overturning dynasty after dynasty, led one government to disavow the obligations of its predecessor, and the natural consequences of bad faith followed. After circulating with more or less success for five hundred years, the government paper-money disappeared.
This happened under the Ming dynasty: the Manchus, who succeeded, gave themselves no trouble to restore the paper-currency; on which the trading portion of the community took the matter into their own hands, and by the time that their Tatar conquerors were quietly settled in their usurped authority, the merchants had revived the use of paper. They were too sensible of its great utility not to make the attempt; and since that time, they have gone on without any aid from the state, developing their plans as experience suggested, and so cautiously as to insure success. This result is, however, far below what has been obtained by Europeans. In comparison with ours, the banking-system of China is in a very primitive condition; theirs is extremely limited in its application, each city restricting itself to its own method; and while the means of intercommunication are imperfect, there is little prospect of improvement.
One example may be taken as an illustration of the whole; and we avail ourselves of a communication made by Mr Parkes to the Royal Asiatic Society on the paper-currency of Fuhchowfoo, for the substance of the present article. As in other places, the system was started in the city of Fuhchow by private individuals, who began by circulating among each other notes payable on demand. As the convenience of such a medium became apparent, the circulation was extended, and ultimately offices were opened for the special purpose of issuing notes; but as the only guarantee for their security was the character of those who put them forth, the circulation remained comparatively trifling, until their credit was recognised and established. Not till the first quarter of the present century did the use of paper become extensive or permanent; and now, everybody in Fuhchowfoo prefers notes to coin.
As no licence is required, any one may commence the banking business, and at first considerable mischief resulted from this liberty. Speculators who forced their notes largely into circulation, not unfrequently met with a reverse, with the usual consequences of distress and embarrassment to their connection. Although this for a time brought paper into disfavour, it has now recovered, and the great competition is found to have the effect of mitigating the evils of failure. Where so many are concerned, individual suffering must be comparatively slight. The banks, moreover, are not banks of deposit; the proprietors prefer not to receive deposits, so that private parties run no risk of a great and sudden loss, beyond that of such notes as they may hold at the time of a stoppage. On the other hand, the usefulness of a bank is limited by this arrangement; there can be no paying of cheques; but very few of the banking establishments can transact business beyond the city or the department in which they may be located, and seldom or never beyond the limits of the province. Hence the convenience and safety of making payments at places remote from each other, through the medium of a banker, is almost unknown in China.
Within certain limits, the large bankers undertake mercantile exchanges; they also refine the sycee, or silver, for the receivers of taxes. The government will take no silver under a standard quality; the collector delivers his sycee to the banker, who weighs, refines, and casts it into ingots, for a consideration, giving a receipt, which is handed to the treasurer of the department, who calls for the amount when required.
The small banks transact their business on an extremely petty scale. On first starting in business, their notes are seldom in circulation above a few hours, and they have always to be watchful to avoid a 'run.' It is among this class that failures most frequently occur, the time of the crash being the end of the year, owing to the demand for specie which then arises. As a precautionary measure, some of them mostly circulate the notes of the large banks, which do not return to them as their own would. Their own are sure to come back once at least in the twenty-four hours, as the large banks make a rule of sending all petty bank-notes to their issuers every day, and exchanging them for specie or larger notes. The petty establishments resort to various expedients for the sake of profit; one is, to locate themselves in a good situation: if far from a large bank, they charge a higher rate of discount on notes presented for payment, than is charged by their more powerful competitor; and the people who live in the neighbourhood submit to this charge, rather than take the trouble of going to the large bank. On the contrary, if the great and the small are near together, the latter charge lower, and make their profit by placing base coin among the strings of copper cash which they pay to their customers in exchange for notes. The inferior cash is manufactured for the purpose, in the same way as Birmingham halfpence used to be for distribution by the keepers of toll-gates.
'Such petty chicanery is not viewed, as with us, in the light of an offence, since, from the exceeding low value of the Chinese cash—twenty-seven being only equivalent to a penny—those must be bad indeed which will not pass current with the rest; and, accordingly, the inferior sorts, when used in moderation, are accepted along with the better in all the ordinary transactions of life. The profits of these establishments must, therefore, be but slender—proportioned, however, to the extent of their dealings; and some of the smallest firms may not make more than half a dollar in the course of a day.'