Page 5

The Formation of the Modern East Asian Economy
     The figures even worsened over the remaining decades of Southern Sung rule in the thirteenth century. But this experience, along with even worse policy mishaps in North China under the foreign Jurchen government, did little to persuade the Yuan dynasty from attempting to establish its own paper notes as the sole currency in China from 1260. At the start, even though this Mongol government in north China banned the use of metal coins in tax payments and private trading, it declared its notes fully convertible to silver. By the late 1270s it had, at least implicitly, withdrawn from this principle. In 1287, it devalued its 1260 notes by 80% and issued new, unconvertible notes. Yet, paper money remained the principal means of exchange at least until 1350, when the depreciation reached such astronomic levels that trade outside of its capital, present-day Beijing, was conducted solely by barter.

     This unhappy experience was essentially repeated over the first seven decades of the subsequent Ming dynasty from 1368 to 1435. The first emperor of this dynasty sought to bully his way through the problem of copper shortage. An infamous xenophobe and monomaniac, he regarded coinage more as a political pawn than an economic factor. Oblivious like many of his advisers of the intrinsic value of coinage, he had ultimate faith in his state's ability to set the value of money and run a highly self-enclosed economy. In the last quarter of the fourteenth century, he closed down the country's silver mines prohibited the use of its own coin in trade, outlawed the export of gold silver, and copper coins, banned all privately conducted foreign trade, and issued an excessive amount of non-convertible paper notes. By his death in 1398, this policy had set back the commercial development of the country, particularly in the south. Even if most commercial transactions were in its paper money and the government issued at least four bans on the use of silver, by the 1430s, the dynasty's notes were worth, in silver, less than 1% of their marked value. Recognizing the impact of this deterioration not least on its own tax revenues, the Chinese government allowed its experiments with paper money to come to an inglorious end. Not until the nineteenth century would it return to paper money.

     Out of this series of failures emerged a third solution, which gained increasing prominence from the mid-fifteenth to the seventeenth centuries: that is, the mining and usage of greater amounts of other metals, especially silver. In the ninth century and earlier, silver had already found many uses in China, from art works to gambling and, of course, bribery. As such, it was employed largely by the wealthy. Yet, from the early tenth century, silver ingots received wider and greater use (as did gold).

1|2|3|4|5|6|7|8|9|10|Next