Francis P Knight.

Testimony of Francis P. Knight of China, before the United States silver commission appointed by Congress. January 1, 1877 online

. (page 1 of 1)
Online LibraryFrancis P KnightTestimony of Francis P. Knight of China, before the United States silver commission appointed by Congress. January 1, 1877 → online text (page 1 of 1)
Font size
QR-code for this ebook

! 22-4
















January 1, 1877.



79 Milk Street (cohner of Federal).




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

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|) 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

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


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

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


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.

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.


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


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.


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. .


AA 001 120 611

University of California, Saji Diego


UUI 17 1978

UCSD Libf.


Online LibraryFrancis P KnightTestimony of Francis P. Knight of China, before the United States silver commission appointed by Congress. January 1, 1877 → online text (page 1 of 1)