! 22-4 K55 A A 1 SOUTHERN R[ 1 2 ^. 6 1 1 > 7 ;v^:v:':v^i;•^:•:^v^•^:^^vX■ TESTIMONY FRANCIS P. KNIGHT OF CHINA, BEFORE THE UNITED STATES SILVER COMMISSION APPOINTED BY CONGRESS. January 1, 1877. BOSTON : ALBERT J. WinciIT, STATE PRINTER, 79 Milk Street (cohner of Federal). 1877. TESTIMONY CHINA. In China, the only government coin is the " copper cash," the medium through which the small transactions throughout the empire are, for the most part, carried on. These vary in value ; from twelve to eighteen of them being equal to an American cent, according to the province where issued, or to over or under supply in any localit}' ; their value in silver is always fluctuating. These copper coins circulate all over the empire, being taken by count in payment of small sums, and bN- weight for large. They are made in strings of assorted issues of diflerent reigns, varying in size and quality, and the strings usually equal the value of one " tael " weight of pure silver, or, in some localities, of that of a Mexican dollar. Their value by weight is about the average of twelve cents, gold, per pound. This currenc}' is about the nearest approach to our " legal tender," and in mercantile transactions the rate at which it shall be taken with silver or gold, or as compared with either, is a matter of private contract. This coin is never of pure copper, but alloyed with tin, zinc, or spelter, and debased with iron and sand. The purit}' of different issues in circulation differs to a great degree ; hence the " strings " are made up of all sizes, qualities and periods. Although detection is punished with death, the "copper cash" is counterfeited in every province. Debased coins have been issued from time to time, either when the Imperial Government at Peking or its provincial olHcials became impoverished b}' a long war, or by extensive public improvements, and the effect of this debased issue was similar to that of inflating a currency of greenbacks, — panics and distress being the inevitable final result. Silver and gold are also current all over the empire itf various forms, their value being regulated by the laws of supply and demand. Silver, being the universal medium of the countr}-, averages in value rather above its value here, compared with our gold standard. Foreign coins circulate freely in the districts adjoining the open ports, where articles of export are produced. and are . generallj' taken by weight. At Hong Kong, clean {i. e., unstamped) Mexican dollars are bought b}' the native traders for coasting voyages, and the premium is governed by demand, supply, etc., ranging from one to six per cent, over the current " chopped " or stamped dollar. It is the custom in Hong Kong and in Canton for each native banker to place his firm, or " Hong" stamp on all the dollars which pass through his hands ; hence those dollars are termed by foreigners and by the English-speaking natives, not " stamped," but in the pigeon-English dialect common in China where foreigners reside, " chopped " dollars. A manufacturer's stamp or trademark on cotton goods is also termed his " chop." The reason the Chinese have for stamping foreign coins is partly to certify that when such a native firm (*' Hong") received or paid out the coin, it was by them considered, and, as it were, indorsed, as being good. As may be readily imagined, with reference to the stamped or so-called " chopped " dollars, the placing of many native impressions upon them almost obliterates in time their original national representation and motto. American " trade " dollars are used in the country near Hong Kong, Macao, Canton and Swatow, by count for small amounts, b}?- weight for large, and their use in the Canton province has been officially recognized by the viceroy ; but very few indeed are in circulation at the treaty ports, or in their respective provinces north of Foochow. Chopped (stamped) Mexican dollars are current in Southern China, and are weighed at the weight of taels, — 717 per $1,000. The " clean," that is, unstamped, dollars are of limited local circu- lation. In the tea districts around Foochow and Amo}-, broken and battered Ferdinand and Mexican dollars are taken by weight at taels, 720 per $1,000 equivalent; and in the silk districts, in the vicinity of Shangliai, the okl " Carolus," clean (unstamped) Mexi- can, and a few clean (unstamped) trade dollars are current. The " Carolus," sometimes at a premium above the local " tael " (a weight of pure silver) and the Mexican and " trade " from the par of 720 taels per $1,000 to five per cent, premium and upwards, according to stock and demand. Foreign coin, in fact, at its first introduction passes at less than its actual equivalent in "S3-cee" (pure silver), but when the people in and about the trading centres have become accustomed to it, they are willing to receive it at a premium. Such was the history of the old S|)aiii.sh pillar dollar coined in Mexico ; such, also, the history of the Mexican dollar ; and such, possibly, will be that of the trade dollar. At the present time, the trade dollar would probably be taken for simply its value as bullion, and at a period of money pressure it would be worth rather less than the same amount of sil- ver in the shape of native 85^cee ; but after a few years — if regularly supplied — it would be worth more than the equivalent quantit}^ of sycee. A coin of a fixed weight and quality is a convenience, and will buy more than^ its weight in bullion after the sellers in the interior have become accustomed to it and feel confidence that its weight and quality are always the same. Bar silver in its original shape does not circulate, but is bought by native bankers, reraelted into the form of native " shoes," stamped with banker's seal, and then circulated by weight only. This is known as " sycee " silver, so-called pure silver, the value being established b}' test, agreement, brand, purity, etc., all of which differ in various sections of the countr}'. Attached to every custom-house or official station there is a government bank of deposit, or sub-treasury, where duties and taxes are deposited, and in settling these a premium of five to ten per cent, is exacted for exchanging local silver for government sil- ver, so called, although the greater part of the difference is fictitious. Silver is in realit}' the standard medium of the empire, principally in the form of " shoes," but taken in every shape b}' weight on the native basis. The money scales and weights vary but little, and are taels, mace, candareens, and cash as decimals, calculated thus : 10 cash = 1 candareen ; 10 candareens = 1 mace ; 10 mace = 1 tael = -^^ of 1^ lbs., avoirdupois. Accounts are kept in taels or their decimals, and although iveights^ they answer all the purposes of coin, as all business transactions with the natives, away from the small circles of the foreign ports, are reduced to a " tael" basis. The average value in sterling has usually been about six shillings per tael, and the equivalent of four shillings and sixpence for a clean Mexican and trade dollar ; but this year there has been a range of from ten to twenty per cent, fluctuation, or 4s. lid. to 6s. per Shanghai tael. Gold circulates on the borders of India and Thibet in the form of small bars and thin leaves, and keeps steadil}' up to the foreign value, and at a premium when in demand for remittances through disturbed districts. Large shipments have been made to India during the past twelve months by the agents in Shanghai of the Bomba}' opium firms, of gold received at the northern treat}' ports of Chefoo, Tientsin and Newchwang. The trade and consumption of Indiaia opium in China should occup}' a prominence in this paper, but tne trade has so deviated of late from its old course, since the depreciation of silver in India, that a more intimate practical knowledge of it is required than I possess or can command here. The dealers at the different treaty ports, however, have often been forced of late to barter their drug for produce, to sell and deliver at the ports against native drafts on Shanghai and Hong Kong, and to participate in the direct trade between China and London, when the}' could not get gold in return for it for India. But as the rupee regains i^s old value, the drug will be moi-e freely disposed of for sj'cee (pure silver), most of which will find its way directly to the Indian mint. The increased culti- vation of opium in China may lessen the cost of the Indian article, but no diminution of the imports is likely to take place for years. The value of the trade is equal to about $45,000,000 annually. Consumption of the Precious Metals. In China, with a population of some three hundred and fifty mill- ions, and in India, with a population of perhaps two hundred and fifty millions, silver furnishes the most convenient material for the ornaments and the hoardings of the great bulk of the people, for the simple reason that it bears a closer relation to their earnings and their possible savings than does gold. The dollar is better for the man who earns two dollars a month, than the eagle or the double eagle would be ; and, for this reason, I think that silver will for a long while continue to form the currency of China and India, and to be used for ornaments b}- the great body of the population. Here, then, we have about one-third of the human race to whom silver is more convenient than gold, both for ornament and for currency, and it would be of great interest if we could make any estimate of the quantities of the metal which can be absorbed without causing any marked changes in the prices of other articles, or in other words, any very marked decline in its own value. Unfortunately, however, it seems impossible to come to any solid opinion upon the point, a fact which is the less surprising if we consider how much men differ as to the effect which has been already produced upon the value of gold by the increased production of the mines of America and Australia ; some believing that its value has fallen very greatly (a belief which the present mone}' value of labor in England and the United States appears to authorize) ; while others, maintaining that there has been no decline whatsoever, produce in evidence the money price of forty different articles. If, however, we consider how great the tendency has been, during the last twenty-five 3'ears, to a reduction in prices, owing to the introduc- tion of labor-saving machinery, it would appear that the merely stationary prices of forty articles rather proved that the production of gold had very seriously enhanced the prices which would other- wise have obtained. Being in doubt, then, as to the past, we can hardly with an}- very- great confidence indulge in conjectures regarding the future ; but there are some reasons for expecting that the same addition to the quantity of silver in the world will produce less impression upon its price, than has been produced upon the price of gold by the mines of California and Australia. These are as follows : First, the total value of all the silver in the world must almost necessarily be much greater than the total value of all the gold, the cheaper metal beino- within the means of attainment of a vastly greater number of per- sons. From this we should infer that the addition of a hundred millions' worth, for instance, to the quantity of silver in the world, would produce less effect upon its price than was produced by the addition of a hundred millions' worth to the quantity of gold in the world. Second, the tendency of gold to depreciate, in conse- quence of its greater production, has been supplemented and in- creased b}' the extension of the use of paper mone}-, by the increase of banks of discount and of deposit, by the use of clearing-houses and of telegraphs, and by the increased facilities for the transport of materials, — all of which causes enable a given amount of ex- changes to be effected by the intervention of a smaller quantity of gold, and none of which are likely, during the next quarter of a century, to come into action in the countries using a silver currencj^ with an effect at all comparable to that which they have had in the countries which use gold as a circulating medium. In the countries where gold is used as a measure of value, we shall of course see the quotations of silver vary considerabl}' ; for while it must, in the long run, be maintained in the East at a price somewhat above its price in London, in order that a portion of the products of the American mines ma}- reach that part of the globe, it will nevertheless be subject to occasional temporary fluctuations, whenever the balance of trade compels the sending back of silver to Europe. It costs some four to five per cent, to send silver from London to China, and an equal amount to send it back, so that a temporary reversal of the usual balance of trade would alone, without the aid of a panic, produce a difference of about ten per cent., which would appear at once in the quotations that are made in gold. But gold is liable to similar fluctuations, for ordinarily and in the long run the bialance of trade must be such as to allow it to flow out of the United States into the rest of the world. At times, however, we see the current reversed, and gold coming to our shores, which shows conclusively that for the moment it is dearer with us and cheaper abroad, contrary to the normal condition of things. But gold being the standard of values, its own changes or fluctuations 8 of value are not perceived in the same way that we perceive similar fluctuations in the value of silver. These temporary fluctuations, both in gold and silver, are, how- ever, but momentary reversals of the normal currents of trade. They give us no information as to the general rapidit}' of that cur- rent, and they throw no light whatever upon the question, whether the one metal or the other is increasing or diminishing in value throughout the entire world. There are some who greatl}' fear an over-production of silver ; but if, during the next quarter of a centur}', the population and wealth of the world increase rapidly, the entire production of this metal may be absorbed without an}' depreciation whatsoever ; and although so great an increase of wealth and population appears improbable, it does not seem at all unlikely that there ma}' be an improvement quite sufficient to keep silver, during the next twenty- five years, as near its present value as gold has kept during the last twenty-five. I mean that it does not seem extravagant to expect the actual change of value to be no greater. The apparent change will, per- haps, be more distinct, because there is not likely to occur in the East a mechanical development at all comparable to that which may have masked the decline of gold in the Western World since 1850. But it is not by any means certain that even the apparent changes will be greater, for China is rapidly recovering from that enormous loss of population which was caused by the terrible rebellion of 1852- 1864, and, in the West, our own country will probably add some forty millions to the members of the most commercial and wealthy portion of mankind, and will require an immense amount of silver for plate, etc., and a considerable quantity for the small currency. While, however, no absolute answer can be given to the question as to what may be the consumption and employment of the precious metals in China, every one who has lived there and has observed the great use of silver ornaments by the bulk of the people, and who, moreover, reflects upon the fact that scarcely any other recipient of savings exists for the millions, must perceive that silver constitutes a much greater proportion of the capital of that nation, and doubt- less of India also, than it or gold does of the capital of Europe and America, and it becomes somewhat difficult to resist the conviction that silver, under the same circumstances as to increased production, would prove to have a more stable value than gold. Adam Smith estimates the production of gold and silver of the American mines at six millions sterling per annum, and concludes that in the ninety years extending from 1545 to 1636, this produc- tion had reduced the value of silver to one-third or one-fourth of its 9 value at the first-named date, so that it required from three to four times as much silver to pay for a (juarter of wheat at the close of the period cited. But the advances which are now being made in wealth and in population so many times exceed those made during the six- teenth and seventeenth centuries, and the capital now existing, also, so greatly exceeds that which existed at the earlier period, that we cannot expect a similar decline in value to occur now, unless the annual production should be several times greater. Exchange, Foreign. The course of foreign exchanges may be briefly stated to exist between the China ports and London onl3\ There is a fictitious, or apparent, course of exchange between China and New York or San Francisco, but it is only with those points as halting-places, being even then really on London, and the rate always based upon that existing in London. This will be readily understood by those who are at all conversant with the business, since British capital carries on the whole China trade. There can be no change until that fact is changed, and until rates of interest equalize. Rates of exchange follow the value of silver in London, being based upon the cost of remittances of that metal to China, except in cases where the silver supply falls short, or such otlier exceptional causes as affect merchandise. Bills on London are negotiated through the local foreign banks, and the agencies of London banks, as well as through foreign merchants. At Shanghai, bills on London at six months' sight are drawn for the equivalent of taels, the rate varying the past year from 5s. to 6s. per tael. At Hong Kong and other China ports, as well as at Japan, bills are drawn at six months' sight for equivalent of Mexican dollars, and the rate has varied from 3s. Qd. to 4s. 6d. per dollar. li'or man}' years previous the rates have usually been from 5s. 8d. to 6s. 6d. per tael, and 4s. 4d. to 4s. 6d. per dollar. Internal Exchange, Native, Is negotiated through individual merchants and private bankers, rates being regulated by distance, time, risk, etc. ; but silver and gold can generally be shipped, and are so shipped, as favorably as drafts can be bought. Banking. Foreign banks are established at most of the open ports, and do a general banking business ; but the circulation of their notes is merely local. Rate of interest ten to twelve per cent, per annum. 2 10 Native banks exist in ever}' town and city, and their business corresponds to that of our bankers, although resmelting is a branch. Rate of interest is a matter of agreement, rai'el}' below twelve per cent, per annum, and sometimes as high as three per cent, per month upon short loans. In some parts of China paper notes are issued by bankers, merchants, and even innkeepers, for small amounts and local convenience, without much profit, however, to the issuer. Of the legal-tender laws of China I have no reliable information. Pawnbkoking. Pawnbrokers are everywhere established under government license, restriction, and protection, and are of great service to small traders and laborers.* Rate of interest, twelve per cent, per annum. The government banks are merely for deposit, and certifi- cates are issued showing that duties, etc., have been paid to the amount specified on their face ; but being usually deposited imme- diately at the custom-house, they are only a convenience, and have no circulation. China is, without doubt, a " hard mone}' " country, silver being the medium, and paper currency of all kinds is every- where looked upon with suspicion, and rules at a discount. Their ideas of all coined mone^' of foreign denominations, and even of foreign ingot gold and silver, are extremely whimsical. A Chinese Mint Proposed. Since writing the above, information has reached me that it is the intention of the Chinese government to establish a mint, and this fact is one of great importance to all those who are interested in the subjects upon which this paper treats. I apprehend that the result will be to reduce, and finally altogether abolish, the use of foreign coins, but to increase the demand for, and employment of, silver bullion in that empire. That the new coins of the realm will be received at once into cir- culation there can be no question, for the few copper " cash " and small silver coins which were fabricated for two years in the British colony of Hong Kong, are yet freely received for small payments in Hong Kong and Canton, and it is reasonable to expect that a native government coin will have a far better experience than a foreign coin. One of England's greatest mistakes, I may here remark by way of parenthesis, in her Eastern polic}', was to allow their mint in Hong Kong to be sold and transfewed to Japan, because it brought no immediate profit. The Chinese government, however, will not put out their new coins without previous assuring official announce. 11 ments and edicts ; and when once the government receives its own coins in payments of duties, no difficulties will follow. That the establishment of a mint in China will increase the de- mand for bullion in that empire, may, I think, be demonstrated with equal ease. It is probable that the government, having established its own standard " touch" of silver, will issue coins representing in value the old decimal weight currency of the country, and recog- nized as a tael, a mace, and a candareen, besides some new and improved copper " cash " coins or tokens ; and if they do so, these small, convenient coins — a convenience entirely new to the Chinese nation — will obviate the necessity, to the millions of the poorer classes, of carr3'ing about upon their persons the heavy, incon- venient strings of copper " cash " with which they have always been burdened. Small silver coins will take their place, with the excep- tion of the few " cash " required for the Chinaman's trifling daily expenses, and this continued increase of demand for silver will take place, I think, for years to come. Of the benefits which must accrue to China, morally and commer- cially, by the establishment of a government mint, jio mention need be made here, but it is safe to say that they are incalculable. . UC SOUTHERN REGIONAL LIBRARY FACILITY AA 001 120 611 CENTRAL UNIVERSITY LIBRARY University of California, Saji Diego DATE DUE UUI 17 1978 UCSD Libf.