This is LONG VIEW, one of two of our weekly columns. We are a pair of finance professionals with boots on the ground in China, each with 10 years of experience in the country. If you like what we are doing please subscribe 👇 and share it with a colleague or friend.

Contents:

1. Background: The Qing Dynasty

2. Grain Prices & Political Instability

3. Legitimising Silver as a Currency

The Setup:

When trawling the Internet, we chanced upon the Qing dynasty grain prices data set. So we thought we’d make this a fun historical issue and see whether we can read history through grain prices. The database itself contains prices of major grains reported by provinces to the emperor on a monthly basis since the first year of the Qianlong reign (1736) during the Qing Dynasty (1644-1911). Quotes from Wikipedia article on the Qing unless otherwise noted.

1. Background: The Qing Dynasty

The Qing dynasty was the last dynasty in the imperial history of China. It was established in 1636, and ruled China proper from 1644 to 1912, with a brief restoration in 1917. It was preceded by the Ming dynasty and succeeded by the Republic of China. The multiethnic Qing empire lasted for almost three centuries and assembled the territorial base for modern China. It was the largest Chinese dynasty and in 1790 the fourth largest empire in world history in terms of territory. With a population of 432 million in 1912, it was the world's most populous country at the time.

The height of Qing glory and power was reached in the reign of the Qianlong Emperor (1735-1796). He led Ten Great Campaigns that extended Qing control into Inner Asia and personally supervised Confucian cultural projects. After his death, the dynasty faced changes in the world system, foreign intrusion, internal revolts, population growth, economic disruption, official corruption, and the reluctance of Confucian elites to change their mindsets.

2. Grain Prices & Political Instability

The data set itself contains prices for various grains across the provinces, including corn, wheat, and ~10 varieties of rice. For brevity we plot only the main rice variety here. The original prices are quoted in taels of silver per picul (~60kg) and should be read as follows: e.g. 135 = 1 silver tael + 30 maces + 5 candareens. One could say this is something akin to the British pound-shilling-pence. Prices show the highest and lowest quotes during the month. Though implicit this probably means one quote per month from a number of merchants.

And here’s the spread between the quotes. Notice how these change over time and vary between provinces.

So does political instability show up in the prices? It seems that the Taiping Rebellion (1850–1864) and the Dungan Revolt (1862–1877) do, both in the prices and the spreads in the Hubei and Fujian provinces. For Hunan, these two conflicts only showed up in prices. Anhui is totally missing grain quotes from that time (related?). The sustained rally going in the end of the 19th century across all provinces tracks the successive conflicts as well (First Sino-Japanese War of 1895, Boxer Uprising 1899-1901, etc.) before the dynasty finally falls in 1912.

3. Legitimising Silver as a Currency

And finally, here’s an interesting bit of history how something becomes a legitimate currency. Bear in mind that unlike in the West where gold was often used as the main benchmark of value, China went with silver. So much so that the word “bank” (银行) in Chinese today still contains the character for “silver” (银) in it.

During the mid-Ming China had gradually shifted to silver as the standard currency for large scale transactions and by the late Kangxi reign the assessment and collection of the land tax was done in silver. Landlords began only accepting rent payments in silver rather than in crops themselves, which in turn incentivized farmers to produce crops for sale in local and national markets rather than for their own personal consumption or barter.[104] Unlike the copper coins, qian or cash, used mainly for smaller transactions, silver was not reliably minted into a coin but rather was traded in units of weight: the liang or tael, which equaled roughly 1.3 ounces of silver. A third-party had to be brought in to assess the weight and purity of the silver, resulting in an extra "meltage fee" added on to the price of transaction. Furthermore, since the "meltage fee" was unregulated until the reign of the Yongzheng emperor it was the source of much corruption at each level of the bureaucracy. The Yongzheng emperor cracked down on the corrupt "meltage fees," legalizing and regulating them so that they could be collected as a tax, "returning meltage fees to the public coffer." From this newly increased public coffer, the Yongzheng emperor increased the salaries of the officials who collected them, further legitimizing silver as the standard currency of the Qing economy.

So the legitimisation of silver occurred because:

1. An economically important group (i.e. landlords) banded together and decided to accept payments exclusively in the particular commodity (i.e. silver);

2. Taxes were paid in said commodity (via the meltage fee), meaning a second economically important group (i.e. state) became a user of silver.

It’s probably more historically nuanced than the above portrayal but still. An interesting generalisation. Anyone wondering why Bitcoin’s use-case hasn’t gone much beyond speculation and illicit transactions?