History of Chinese currency
The history of China's monetary system traces back to the Shang Dynasty (c. 1766–1154 BCE), where cowrie shells served as early currency.
Qin legal texts found in tombs (e.g., Shuijingzhu bamboo slips)[3] document the implementation of the Ban Liang coins and highlight their role in centralizing economic control.
Building on Qin’s monetary reforms, Han Dynasty (c. 202 BCE – 220 CE) later introduced "Wu Zhu" coins, which remained in circulation for over 700 years.
The Han government’s emphasis on coinage stability facilitated trade along the Silk Road, integrating China into a broader network of Eurasian commerce.
From paper money innovations in the Song Dynasty to the turbulent reforms of the late Qing, China’s monetary system evolved with its political and economic changes.
Qin legal texts found in tombs document the implementation of the Ban Liang coins and highlight their role in centralizing economic control.
The Han government’s emphasis on coinage stability facilitated trade along the Silk Road, integrating China into a broader network of Eurasian commerce.
The Han dynasty had allowed for debate on government monopolies on the iron and salt trade, to which scholars voiced disapproval due to disreputable connotations on industry and commerce.
By issuing Feiqian, the Tang dynasty was able to lessen the burden and risk of transporting large amounts of currencies, such as the accumulated weight and the potential to be robbed in transit.
As it started to expand outside of Sichuan, the Song dynasty saw an increase in inflation due to the overprinting of paper money that didn’t have sufficient backing in reserve through precious metals.
And indeed everybody takes them readily, for wheresoever a person may go throughout the Great Kaan’s dominions he shall find these pieces of paper current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold.
He has twelve experts chosen for this business, men of shrewdness and experience in such affairs; these appraise the articles, and the Emperor then pays a liberal price for them in those pieces of paper.
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.
By the late 19th century, the Qing dynasty faced a fragmented monetary system in which silver ingots, copper cash (tongqian), and foreign coins circulated simultaneously.
[14]: 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.
[14]: 15 The period from the late Qing to the early years of the People’s Republic illustrates China’s struggle to modernize its monetary system in the face of internal and external challenges.
Reforms such as the introduction of the Da Qing Silver Coin, the Fabi system, and ultimately the Renminbi reflect a nation striving for stability and modernization.
Each phase of this journey, shaped by political transitions and economic upheaval, contributed to the formation of the unified monetary system that underpins China’s contemporary financial strength.
[17] Customs gold units (關金圓, pinyin: guānjīnyuán) were issued by the Central Bank of China to facilitate payment of duties on imported goods.
[14]: 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.
[14]: 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.
One of these included the view that the private sector should gradually be allowed to play a bigger role in pricing, lend resources, and manage businesses.
In 2016, the significant step forward took place when the International Monetary Fund (IMF) included the RMB in its basket of currencies for Special Drawing Rights (SDRs) alongside the US dollar, Euro, British pound, and the Japanese yen.
[20] However, this inclusion was largely endorsing a political process as it didn’t change the true state about the usage of the formers, it greatly increased the status of the Chinese yuan.
[22] Such companies as Alipay and Wechat Pay provided opportunities to Chinese buyers to skip traditional banking systems and directly go to mobile transactions.
In just a few years, cash and credit cards started to lose importance in a number of situations in cities, and as per 2020, in over 90% of cases in China urban areas, cashless transactions were reported.
The triumph of these payment systems legitimized the recognition of digital finance by the government as a new frontier, which would lead not only to the improvement of domestic productivity, but even to the construction of global norms in the long perspective.
While the details remain limited, analysts still believe that the rush with which other countries are going about CBDC does offer a window of opportunity for China over a few norms in setting global digital currency systems.
Whether this will be similarly effective and pervasive remains to be seen, but one thing is beyond doubt: today's monetary system of China is much more internationally connected and sophisticated in terms of technology use than it was only a couple of decades ago.
While it is yet to be seen precisely how far these innovations will go in changing international monetary norms, they will be building the base on which other future developments will take place, potentially redefining how money moves across borders.
