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.'
'The banking establishments in the city and suburbs of Fuhchow,' says
Mr Parkes, 'may be enumerated by hundreds. Most of them are naturally
very insignificant, and the circulation of their notes exceedingly
limited. Many of the outside notes will not pass current inside; and
are only convertible at the place of issue. Such branches as these
must be entirely superfluous, and might seriously inconvenience or
trammel the transactions of the higher ones; but, in order to guard
against encroachment from this direction, and as a self-protective
measure, several of the leading banks of known stability co-operate
with each other to keep up the value of their notes; and thus, by
holding a strong check on the issues of those minor parties,
effectually continue to regulate the whole system. There are thirty of
these establishments inside and outside the city, all reported to be
possessed of capital to the amount of from 500,000 to upwards of
1,000,000 dollars.
'These latter establishments command the utmost confidence, and their
notes pass current everywhere and with everybody. They contribute
mutual support by constantly exchanging and continually cashing each
other's notes, which they severally seem to value as highly as their
own particular issues. This reciprocal and implicit trust must add
greatly to their solidity, and tend to prevent the possibility of
failure. The chief banker gained his high reputation by a voluntary
subscription, about thirty years ago, of no less than 100,000 dollars
to the government toward the repairs of the city walls and other
public works, for which he was rewarded with honorary official
insignia, and the extensive patronage or business of all the
authorities. These large banks are complete rulers of the
money-market; they regulate the rates of exchange, which are
incessantly fluctuating, and are known to alter several times in the
course of the day. The arrival or withdrawal from the place of specie
to the amount of a few thousands, has an immediate effect in either
raising or lowering the exchange. The bankers are kept most accurately
informed on the subject by some twenty men in their general employ,
whose sole business it is to be in constant attendance in the market,
and to acquaint the banks with everything that is going on, when they,
guided by the transactions of the day, determine and fix upon, between
themselves, the various prices of notes, sycee, and dollars. Their
unanimity on those points is very remarkable; and they are all deeply
impressed with the salutary conviction, that their chief strength
consists in the degree of mutual harmony that they preserve, and the
confidence they place in one another. These reporters are also very
useful to new arrivals, in affording them guidance on matters of
exchange, or in introducing them to the best bankers; and the
allowances that the stranger makes to them for their assistance, and
the banker for procuring him custom, constitute the gains of their
calling. They have also to report the prices of silver every morning
at the Magistracy, which, from its daily increasing value, has become
an object of especial attention.' Twenty years ago, much discontent
was expressed that silver, which had been worth 1000 cash per ounce,
rose to 1500; now it is over 2000, owing to the continuous drain of
the metal from the country.
Still, with all this, failures are rare. The petty banks are most
liable to this reverse; and on such occasions, they generally contrive
to arrange the matter quietly among themselves; but the whole property
or lands belonging to the defaulters may be seized and sold to satisfy
the claims of the creditors: the dividend is usually from 10s. to 12s.
in the pound. Wilful fraud is seldom practised; the heaviest instance
known, was for 70,000 dollars; from the year 1843 to 1848, there were
but four bankruptcies, and three of these were for less than 6000
dollars. The defaulters frequently escape punishment owing to the high
cost of prosecution. The large banks are safe; but at times, from
false or malicious reports, are exposed to a sudden 'run;' a great
crowd besets the doors when least expected, and numbers of vagabonds
seize the opportunity for mischief and plunder. These outbreaks grew
to such a pitch, that the magistrates now, whenever possible, hasten
to the threatened establishment, to repress violence by their presence
and authority. The rush, however, is so sudden, that before they can
arrive on the spot, the mob has improved its opportunity for
destruction, and disappeared.
Forgery is not often attempted, probably because it does not pay,
owing to the fact of its being extremely difficult to circulate any
but notes of small value. The penalty for this offence is
transportation to a distance of three thousand _le_--about a thousand
miles; or imprisonment or flogging, according to circumstances. We
question if such an instance as the following ever occurred out of
China:--'A forger of some notoriety having been several times
prosecuted by the bankers, and with but little success, for he still
continued to carry on his malpractices, they conferred together, and
agreed _to take him into their pay_, making him responsible for any
future frauds of the kind. He continues to receive a stipend from them
at the present time, and is one of their most effective safeguards
against further imposition, as it devolves upon him to detect and
apprehend any other offender.'
Most of the bank-notes are printed from copperplates, but some of the
petty dealers still use wooden blocks. They are longer and narrower
than ours, and have a handsomely engraved border, within which are
paragraphs laudatory of the ability or reputation of the firm. The
notes are of three kinds: for cash, dollars, and sycee. The first are
from 400 cash (1s. 3d. sterling), to hundreds of thousands, and are
largely circulated in all the smaller business transactions. The
dollar-notes, varying from a unit to 500, and, in some instances, to
1000, circulate among the merchants, their value continually
fluctuating with that of the price of the silver which they represent.
The sycee-notes are from one to several hundred _taels_ (ounces), and
are chiefly confined to the government offices, to avoid the trouble
and inconvenience of making payments in silver by weight. Whatever be
the value or denomination of the notes, the holder is at liberty to
demand payment of the whole whenever he pleases, and receives it
without abatement, as the banker makes his profit at the time of their
issue. When notes are lost, payment is stopped, as here, and they are
speedily traced, as it is the practice not to take notes of a high
value--say, 100 dollars--without first inquiring at the bank as to
their genuineness. But no indemnification is made for notes lost or
destroyed by accident. Promissory-notes are the chief medium of
interchange among merchants, who take ten days' grace on all bills,
except those on which is written the word 'immediate.'
The rates of interest are, on lands and houses, from 10 to 15 per
cent.; on government deposits, which the people are made to take at
times against their will, 8 per cent.; on insurance of ships and
cargoes, owing to the risk from storms and pirates, from 20 to 30 per
cent.; on pawnbrokers' loans, 2 per cent. per month, or 20 per cent.
per annum. Five days' grace is allowed on pledges; and if goods be not
redeemed within three years, they are made over to the old clothes'
shops at a settled premium of 20 per cent. on the amount lent on them.
Pawnbrokers' establishments are numerous, and are frequented by all
classes, who pawn without scruple anything they may possess. The
banks, we are informed, 'keep up an intimate connection with the
pawnbrokers, who make and receive all their payments in notes for
copper cash, and will not take sycee, dollars, or dollar-notes--the
former, lest they should prove counterfeit, and the latter, on account
of the fluctuating value. They are very particular in passing the
bank-notes, and will accept only those of the large banks. A notice is
hung up in each shop, specifying what notes pass current with them;
and when the people go to redeem the articles they have pledged, as
they can present only those notes in payment, they have often to
repair previously to the bank where they are issued, to purchase them,
and, being at a premium, the banker thus gains his discount upon them.
Of such importance is this considered, that, without the support of
the pawnbrokers' connection, the business of a banker will always be
limited. Indeed, many of the banks keep pawnbrokers' shops also; and
the chief banker at Fuhchow is known to have opened no less than five
of these establishments. This is on account of the high interest paid
on pawnbrokers' loans.'