User:Donald Trung/Copper-alloy Guangxu Yuanbao (光緒元寶)

This page serves as "the editing history" of the English Wikipedia article "Guangxu Yuanbao (Tongyuan)" and is preserved for attribution.

The copper-alloy Guangxu Yuanbao (光緒元寶)

Initial skepticism by the imperial government
Initially the imperial government was quite skeptical of this new coinage for various reasons.XUNYAN Among these reasons were that the new Guangxu Yuanbao had a radically different design from the earlier cash coins that had been circulating for millennia making the imperial government think that the market might not accept the new coinage as a form of currency at all.

The second reason that the imperial government was skeptical of the new Guangxu Yuanbao was because the 10 wén version of the coin had as much copper as a 2 wén cash coin. Because of its weight in copper it was an "official debasement", this debasement was not achieved through the reduction the proportionate copper content as was often previously done, rather it was done by increasing the nominal (or legal tender) value of these coins in comparison to their intrinsic value, in economics this strategy is commonly known as "crying up the money" or enhancement. To compare it to an earlier introduction of large denomination debasements, the Daqian issued under the Xianfeng Emperor that were first introduced in the year 1853 were cast of 70% pure copper and their official weight was initially set at 0.6 liǎng, later in the year 1855 this weight was reduced to 0.44 liǎng. While as counterfeiting was quite rampant at the time the 10 wén Daqian that were circulating in the market would eventually weigh only weigh 0.2 liǎng. This meant that a 10 wén Guangxu Yuanbao contained less copper than the 10 wén Guangxu Zhongbao Daqian cash coins. Because Beijing had bad experiences with such debasements only a few decades earlier they were quite skeptical that a new debased series of copper-alloy coins.

The third reason why the imperial government remained distrustful of the new Guangxu Yuanbao copper coins was because of small silver subsidiary coinage of the same inscription created even more monetary chaos on the market.

In fact, discussions about creating such a copper coinage was being debated in the imperial court since the early 1890s, but the imperial government was too reluctant to adopt it a decade earlier. The copper-alloy Guangxu Yuanbao was secretly introduced by the Guangdong provincial government during the Boxer Rebellion era battle of Beijing when Austria-Hungary, Belgium, Britain, France, Italy, Germany, Japan, Netherlands, Russia, Spain, and the United States forced the Guangxu Emperor and Empress Dowager Cixi to flee to the city of Xi'an. Contrary to what the imperial government had expected the new Guangxu Yuanbao Tongyuan were a huge success on the market and for Guangdong.

Introduction and circulation
In the year 1900 the Guangzhou Mint operated by the provincial government of Guangdong started minting the machine-struck Guangxu Yuanbao coins. This new copper-alloy coin was quite different from the traditional cast cash coin design, which was a round coin with a square centre hole. Because of its radical break from tradition and the fact that it was machine-made using steam powered it was regarded as a great technological and institutional advance. The traditional copper-alloy cash coins weren’t made using modern technology but using a largely unchanged ancient casting method created in moulds. Furthermore, the new Guangxu Yuanbao coins featured denominations in their design while most cash coins didn't have any inscribed denomination.

The design of the new Guangxu Yuanbao was that of a standard round coin with a dragon on it. These new coins didn’t have any holes and were minted in different denominations, specifically 2 wén (with a weight of 0.04 liǎng), 5 wén (with a weight of 0.1 liǎng), 10 wén (with a weight of 0.2 liǎng), and 20 wén (with a weight of 0.4 liǎng). These new modern coins contained around 95% pure copper and only 5% coarse metals (namely zinc and lead).

Most of the copper-alloy Guangxu Yuanbao produced were of the denomination 10 wén. The new Guangxu Yuanbao also had much higher denominations than the earlier cash coins that were circulating at the time had, the issuing of these new Tongyuan had a gross profit of 30% for the provincial mints.

Within a period of ten years all other Chinese provinces had adopted the new modern machine-struck copper-alloy coinage and started minting them. They were such a success that people were queuing outside of issuing offices in many cities throughout China during the first day of their issuance and the issuing offices were forced to create a quota on how much coins could be exchanged in a day per person. While Gresham's law would usually drive out "the good money" out of the market (to be melted, hoarded, or exported), which in this case were the traditional cash coins. Despite this usually occurring throughout history, contemporary evidence seems to indicate that the Guangxu Yuanbao Tongyuan did not have such an effect at all on the traditional cash coins that remained circulating.

There were many factors that contributed to the success of the new Guangxu Yuanbao Tongyuan, among these reasons were the fact that the new coins were of standardised quality and the fact that the market was in demand for small denomination coins for a while.

In the year 1901 the Customs Commissioner in the treaty port city of Shanghai commented that the 10 wén Guangxu Yuanbao Tongyuan, which were struck by the Suzhou Mint in the city of Suzhou, Jiangsu, were well-received by the population there despite the fact that their intrinsic value was hardly worth that of 8 full weight "good" cash coins. While a Customs Commissioner in 1902 in the city of Hankou, Hubei (in present-day Wuhan, Hubei) noted that they were also well received this far inland.

The Guangxu Yuanbao Tongyuan provided more monies of small denomination for the internal Chinese market at an affordable cost, and their introduction mitigated the small change shortage issue which had particularly plagued the Chinese countryside.

Rather than being taken out of circulation due to Gresham's law, traditional copper-alloy cash coins were now being treated as the subsidiary coinage to the new Guangxu Yuanbao Tongyuan. The reasons why Gresham's law wasn't evoked is likely because of after decades of cash coins being scarce and the global price of silver declining due to the global adoption of the gold standard in many countries making silver into a mere commodity. By the turn of the century the cash coins that remained in circulation were heavily debased or spurious cash coins which contained copper in various proportions, rather than the high quality Zhiqian which circulated earlier. Because cash coins were of such low value, authenticating and testing them for their copper content was more costly than just accepting fake cash coins of low intrinsic value as is, as they were typically used in transactions of extremely low value. This meant that in spite of a possible gap existing in the intrinsic value which occurred between the traditional cash coins and modern Guangxu Yuanbao Tongyuan, the market tended to accept the new currency at their nominal values.

Despite their initial success, the good name of the Guangxu Yuanbao Tongyuan was undone not long after their introduction.

The new steam powered minting technology made their manufacturing process intricate enough to prevent black market counterfeiting, which in the past had often caused the over-provision of money in Chinese monetary history and therefore caused inflation because of forces outside of the hands of the government. But while the new technology could not prevent the Chinese government itself from over-issuing the coins themselves, as they wanted to maximise seigniorage profit.

Different provincial governments did not coordinate with each other and strong competition existed between them leading to the provincial Guangxu Yuanbao Tongyuan being over-issued. This created a situation of over-supply and market saturation, by 1905 the copper-alloy Guangxu Yuanbao were being discounted rather than continuing to circulate at nominal value.

In 1900 the Guangxu Yuanbao Tongyuan were valued at 80 pieces for a silver dollar despite their official nominal value of $1/undefined$ compared to the silver dollar, while in 1905 they were traded at less than their nominal value.

In respond to the changing market and the quickly over-issuance of Guangxu Yuanbao Tongyuan the central government of the Qing dynasty quickly set up limits on how many copper ingots each province was allowed to purchase for the production of new coins.

Aftermath
In 1910 the imperial government passed legislation that centralised the Qing dynasty currency system, but as the Qing dynasty was overthrown the following year the unification of the currency wasn't implemented and Tongyuan based on the Guangxu Yuanbao would continue to be issued during the early Republican period by decentralised provincial mints.

Numismatics and studies into the coinage
Author and economics researcher Xun Yan of the Department of Economic History, London School of Economics in their paper Money and Monetary System in China in the 19th–20th Century: An Overview noted that debates about the introduction of this modernised copper-alloy coinage has been debated in the imperial court of the Qing dynasty since 1875. These early debates mostly centered around the backward Chinese currency system, the enormous market need for liquidity, and the supply of low denomination coinage that was insufficient because of high production costs. These debates show that the introduction of the machine-struck Tongyuan in the form of the provincial Guangxu Yuanbao coinages indeed represented local attempts to try to meet the needs of the local markets rather than being solely issued for the sake of generating provincial government revenue.

Xun Yan argues that the provincial attempts at creating a new coinage were far from ideal because of their inconsistent implementation, but as the imperial government of the Qing dynasty were neither willing nor were they able to conduct any types of reforms, so these modernisation experiments at the provincial level and provincially wide adoption could provide a solution. Xun Yan argues that many contemporary commentaries and criticisms of these reforms made their judgement based on the disastrous end of the new coinages rather than the full story.

As an example Xun Yan mentions that the new Tongyuan only became an issue a full decade after the issue of the first (Cantonese) Guangxu Yuanbao and that the issues surrounding the Tongyuan happened in the Republic of China and not during the reign of the Manchu Qing dynasty. Xun Yan further points out that drastic institutional changes had already taken place that would invalidate a lot of the criticisms directed at the monetary policies of the provincial governments during the Qing era. According to Xun Yan the most powerful historiographic attack on the copper-alloy Guangxu Yuanbao and other Tongyuan coinages came from Liang Qichao, and that the criticisms proposed by Liang would influence all later research on this topic to a degree. The criticisms by Liang Qichao appeared in a political column for a newspaper that was less than 10 pages long, the article condemned the fragmentation of the Chinese political framework at the time and the predatory fiscal behaviour of the various regional warlords that reigned during the warlord era early Republic of China period. Xun Yan pointed out that Liang Qichao's criticism of inflation only applied to the early Republic of China and not the late Qing dynasty and Xun Yan further criticised the mythology of Liang stating that it was exaggerated as the whole newspaper column was based on his estimations made by Liang himself of provincial mint output instead of any actual figures.

Assessment of the coinage by Xun Yan
Author and economics researcher Xun Yan of the Department of Economic History, London School of Economics in their paper Money and Monetary System in China in the 19th–20th Century: An Overview argued that the ideal reform to a currency system would provide a stable creation of money that would meet the requirements of a diverse range of fiscal transactions, at that this currency would be manufactured at an affordable cost. According to Xun Yan neither the Tongyuan nor the small denomination Yinyuan introduced during the Qing dynasty period actually fulfilled this, but that they should both be considered as necessary and natural steps that would eventually lead towards a more advanced coinage system, and therefore these coinages deserve fair re-examination by later economists. Xun Yan argues that both these series of coinages were an attempt by the Chinese to transform the existing bimetallic system into a monometallic one, as was a global trend at the time. As Xun Yan argues that bimetallism was an unstable system as change in the supply or market price of either metal was detrimental to the stability of the currency system.

Xun Yan explained that the success of the copper-alloy Guangxu Yuanbao coins over the small silver Guangxu Yuanbao coins was based on the fact that in general debased copper-alloy coins are more useful as a medium of exchange for minor transactions because of their lower market value. Xun Yan further argues that because of this copper-alloy coinages are more easily used as a basic unit of account. Another reason for the relative success of the Guangxu Yuanbao Tongyuan was that counterfeiters were more easily incentivised to counterfeit silver coinages over copper coinages because of the higher value of the former (hence higher profit margins for faking silver coins), while the new steam powered coin-production technology itself made counterfeiting more difficult.

Furthermore, Xun Yan argued that the modern technology involved with the creation of the Guangxu Yuanbao Tongyuan coinages was also a major reason for their success comparing them to the Daqian that were produced earlier and largely rejected by the market. According to the paper normally such a debasement in the nominal value relative to its intrinsic value would induce black market counterfeiting, generating inflation which would then phase out the positive initial effects of the increase in fiscal liquidity. Steam powered machines made counterfeiting more difficult and costly plus the governments could produce uniform coinages which facilitated trade. According to the paper Money and Monetary System in China in the 19th–20th Century: An Overview this was the main reason why the market accepted the new copper-alloy Guangxu Yuanbao coins at their face value instead of discounting them or faking them as had happened to the earlier Daqian.