Through much of the history of paper money, banknotes were issued by private entities operating in a decentralized system of money and finance. In whatever country and whatever their denomination, banknotes even traded at discounts to their face value that varied according to their liquidity and the health of the issuing bank. In the 19th century, this kind of monetary system was common in Europe and America, even in China.

           However, in the latter, even control over the supply of metal coins was nearly entirely outside state control. The uniqueness of China’s decentralized 19th century coinage does not end there. Not only were there coins and banknotes of various issuers in circulation simultaneously, but these monies did not even use a consistent unit of account. The result was a paradise for money changers as foreign coins, domestic coins, and private ingots all circulated together using differing measures of value.

The Peso and the Yuan

           However incredible the claim may seem at first mention, it’s easy to argue that the foreign currency that most influenced China’s coinage was none other than the Mexican peso. True, this might provoke some disagreement among numismatists and economic historians but not at all if we limit the claim to the 19th century at least. Before then, Spanish silver coins had been circulating in China for centuries and may therefore have the stronger claim to such a distinction. Regardless, central to this story is silver. Though the precious metal was relatively scarce in East Asia in pre-modern times, trade surpluses and limited supplies of the metal in the country made China a large net silver importer, principally from Latin America.

           The surpluses date mostly to the 17th and 18th centuries, the result of large exports of tea and silk combined with limited demand for Western goods. The surpluses resulted in a large influx of Spanish silver into China, most of it mined in Spain’s American colonies. Following Mexico’s independence, its peso replaced the Spanish dollar as the most common precious metal coin in China. It was far from the only one though; by the mid-19th century, China was a numismatic zoo. In addition to small-denomination local coins, monies from Latin America and Britain also circulated in China, as did those of other European countries and their colonies.

           The most conspicuous fact of China’s system of coinage in the 19th century was the lack of a locally-minted precious metal coin. Indeed, though China had a monetary standard based on silver, the metal circulated exclusively in the form of foreign coins and bullion; there was no domestic silver coinage until late in the century. The introduction of such a coin only occurred when the Viceroy of Liangguang, Zhang Zhidong, petitioned the Emperor to permit the minting of a new Chinese coin in 1887. Production started two years later in Guangdong. This is the coin that would become the yuan but at the time it was often referred to by the image it bore, ‘the dragon dollar’. It was the first silver coin minted in China at such a scale in its history.

           This new coin, the yuan, was pegged to the Mexican peso and matched its composition of 27 grams of 90% silver. In China, this was expressed in terms of its domestic system of precious metal weights, which was then based on the tael (or liǎng in Mandarin), a unit of mass equal to 37.5 grams. A tael of silver was subdivided into 10 mace or 100 candareens. When introduced, the yuan weighed 0.72 tael (or 7 mace, 2 candareens) to match the 27-gram peso. Rather curiously perhaps, this amount and the name of the province in which it was struck, was inscribed into the coins in English.

Free Coinage

           Owing to the large supply of imported metal, China employed a de-facto silver standard even before the state started minting any silver coins of its own. Not only was there no domestic silver coinage, there similarly were no official reserves of silver anywhere backing an equivalent sum of state-issued banknotes or other monies. Nonetheless, silver served as a unit of account for recording transactions and accounts. The monetary standard was essentially a private convention, not an official decree.

           While many different currencies were in circulation simultaneously, the tael served as a useful abstract currency. It was a common bookkeeping unit even though there was no such thing as an official tael coin or banknote, nor was there any coin or note anywhere officially convertible into this abstract tael. Even to call the tael merely a common unit of account may still be giving it too much credit. Indeed, different institutions had varying definitions of a tael, causing there to be varying values assigned to the unit. For example, China’s Treasury and Customs Service used taels of different values for their internal bookkeeping and external transactions.

           There is no other way to put it; China was a monetary ‘wild east’. Besides foreign coins and the new yuan, which varied provincially, silver was accumulated and used in transactions through privately made ingots called sycees. A sycee was most often a boat-shaped ingot weighing fifty taels of fairly pure silver, however the exact specifications varied due to regional and personal variations in size, shape, and purity. There was no common standard for these ingots which also served as a kind of large-denomination currency, used to pay taxes or make large payments. Because they were used as a medium of exchange and a store of value, by casting a sycee, anyone with a supply of silver could essentially mint their own money.

A sycee

           The yuan gradually replaced these alternative monies however. After the initial production in Guangdong, other provincial authorities began to mint their own versions of the yuan. These yuan coins were usually quite similar though they often came in slight variations until they were finally standardized in 1910 to conform with the 0.72 tael standard mentioned earlier. Differences in size and composition meant that yuan coins had differing values based on local supply and demand, popular familiarity, and metal content. This disadvantage meant that even after the introduction of the yuan, foreign coins continued to circulate. Mexican pesos continued to make up perhaps half of the total silver coins circulating in China into the 1910s. By comparison, the yuan made up as little as 10% of the currency in circulation.

           The monetary system in China was a system of free coinage, an arrangement where any entity can create its own currency. Historically, this was usually established by monetary authorities permitting unrestricted conversion of precious metals into coins. As a result, anyone with a supply of gold or silver would be able to take that metal to a mint and have it struck into coins. In China however, it was less official sanction that effected free coinage than economic custom. Indeed, though what existed in China in the early 19th century could be described as a system of free coinage, it didn’t seem like much of a ‘system’ at all.

           In China, even the printing of banknotes was fairly unrestricted. This should hardly be too surprising. After all, banknotes in many countries were printed by private banks before the responsibility became the exclusive prerogative of governments and central banks. In some jurisdictions, private banks are still to this very day the principal producers of banknotes.

           That said, even where many different banks printed their own monies, there was usually a common unit of account. In the past, private banks in Britain and America printed their own notes but these were consistently denominated in pounds sterling and dollars respectively. However, in the Middle Kingdom, banknotes were not just issued by numerous foreign and domestic banks, but they were also denominated in different units. Some notes were denominated in yuan, others in taels, and some had their values specified in terms of the low-denomination copper coins in everyday use. By all measures, 19th century China was a money changer’s Shangri-La.


           In the first half of the 20th century, China’s monetary system was organized into something recognizable to observers today. In 1914, the first President of China, Yuan Shih-kai, introduced a new national yuan coin, struck with his likeness on the obverse side. The coin began to replace many of the various silver coins that circulated previously. By 1924, perhaps 75% of the currency in circulation was comprised of the new Yuan Shih-kai yuan. Ten years later, China abandoned its silver standard altogether. With it went the use of the tael as a unit of account and its replacement with the fiat yuan, the currency in use in China ever since.


           Virtually all nations modernized their monetary systems in the late 19th and early 20th centuries. Most often this occurred through the establishment of central banks, the granting of them full control over the money supply, and the abandonment of monetary standards based on the precious metals. However, in few countries was this transformation as extraordinary as in China. Currencies are usually thought of as being simultaneously a unit of account, a medium of exchange, and a store of value. In China though, these functions were separate. The tael took the role of unit of account, acting as a purely abstract bookkeeping unit while several different coins and sycees served as mediums of exchange and stores of value with varying degrees of utility. In China, perhaps better than anywhere else, these qualities of money reveal themselves as distinct characteristics serving distinct functions.

More from the Tontine Coffee-House

Read about the more ancient history of Chinese paper money and also consider this post about American coins in China and the United States’s system of free coinage.

Further Reading

1.      Chen, Kung-Chin. “The Chinese Monetary System.” Boston University, 1949.

2.      Heaver, Stuart. “How Mexican Silver Dollar Shaped China and Hong Kong’s Mint.” South China Morning Post, 7 Feb. 2018.

3.      Leavens, Dickson Hammond. Silver Money. Principia Press, Inc., 1939.

4.      Ma, Debin, and Liuyan Zhao. “A Silver Transformation: Chinese Monetary Integration in Times of Political Disintegration during 1898-1933.” London School of Economics and Political Science – Economic History Working Papers, July 2018.

5.      Ma, Debin, and Liuyan Zhao. “A Silver Transformation: Chinese Monetary Integration in Times of Political Disintegration during 1898–1933.” The Long Run, Economic History Society, 28 Nov. 2019.

Comments (1)

  1. Paul Ochman


    Fascinating read!

    China was not the only one influenced by Mexico. I started my International coin collection with the old Mexican pesos. I’ll have to show it to you someday.

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