Currencies Circulating In Local Areas And Rural Monetary System During The Republic Of China

Circulating-in-small-area currencies refer to the token or the symbol of money. The issuers included not only money shops, native banks, businesses, industrial and mining enterprises and other business departments, but also local political powers, quasi-power sectors and social organizations. They could circulate in merely narrow and fixed areas. Circulating-in-small-area currencies reflected the monetary phenomena happening during the course of evolution from China's feudal economy to a modern capitalist economy. It also indicated the transitional stage and the whole process of financal development from the feudal monetary system to the establishment of the Central Bank with the capitalist system.Circulating-in-small-area currencies had different functions due to the different issuers. The notes issued by local powers indicated that those currencies at the local level had the same functions as legal tenders. Commercial bills issued by the business sectors had no such functions; they could be used only in the market through the trade and the liquidation between the businessmen, that is, it is not entirely currency in a sence. Notes issued by different government departments had also big differences in nature. The vertical circulating mode of notes issued by local governments is different from that of commercial bills flowing in a horizontal way. Thus it led to the formation of two series of money with two-dimensional structure. This system, compared to the national currency system, was independent to some extent, which was related to the warlords in the early Republic, and local powers and self-government movements.The imbalance of Circulating-in-small-area currencies is shown not only by the characteristics of the physical currency, but also by the regional imbalances of economic development in modern times. From a geographic perspective, the imbalances existed between north and south, urban and rural areas, as well as between developed and less developed regions. The differences were also reflected in financial institutions, money supply and demand, the level of economic development and so on. All of these were the reasons for the base of existence of rural monetary system. Cash notes were more widely used in the north than in the south in the 1920s and 1930s, which was the best example of North-South differences. The rural monetary system was a relatively independent monetary system under the state's monetary system. First, from an economic perspective, the rural self-sufficient natural economy came into bankruptcy, and handicrafts gradually slowed down which was mainly affected by the squeezing of foreign goods. Depressed rural economy prompted sharp drop in the income of farmers. Fractional currencies with small denominations were unavailable due to lack of supply from the national banks.Second, the rural reconstruction and self-government reform, aimed at strengthening the governance and building of rural orders so as to change the poor, weak, scattered, chaotic situation, in fact increased the financial burden of farmers. The rural gentry changed from the past defender for the country into the implementators of the state policy. Third, the fact that the national monetary system was not perfect was the basis for the existence of rural monetary system. The multiple issue of Circulating-in-small-area currencies added the total amnout of money supply and broke the rigescent feudal monetary system. But it was the tendency that the monetary system moved to the centralized issue of money. The domestic big market was far from being achieved, and consequently no uniform national currency was in circulation.On the whole the monetary scheme during the Republic period had the feature of two-dimensional structure, that is, governments at all levels issued notes or bills as the legal tender in order to finance, while commercial institutions made it for the purpose of business which was often regarded as non-statutory. Circulating-in-small-area currencies in rural communities were particularly significant. National banks, Provincial banks serving as the center of national and provincial political system coexisted with the local currency issued by the old-style banks and institutions in the countryside. The former took into account the service of bureaucrat-capitalist enterprises; the latter reflected the interests and demands of national capitalists, small and medium business groups. In the confrontation between the two, the latter had gradually been compressed.