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currencies, free banking, Manchuria


From 1906 until 1931, Manchuria – Northeast China - was a complex patchwork of Chinese, Japanese, and Russian spheres of control. Since political authority was fragmented, none of the governments was capable of establishing a central bank with a monopoly over the money supply. Multiple currencies were in use, ranging from strings – tiao- of traditional Chinese copper cash, to silver dollars (yuan) from Mexico, China, and Japan, to Russian rubles (which crashed in value after the 1917 Bolshevik Revolution), and miscellaneous paper currencies of varying stability. The modern banks established under national and private auspices to serve the commercial needs of the burgeoning economy found themselves without central regulation, resulting in an unusual situation of competitive “free banking.” This case is interesting as an example of rapid economic growth despite the costs of a chaotic monetary regime. Historical sources, including the Chinese Maritime Customs reports, contemporary yearbooks, and the South Manchuria Railway (Mantetsu) research reports, indicate that the combination of modern and pre-modern currencies and financial institutions managed to serve the needs of the different elements of society, from the tiny household purchases made in copper coins, to large commercial transactions made in silver ingots, or silver dollars, or in silver-backed yuan notes. Furthermore, there were well-established informal credit practices, based to a great extent on personal relations – guanxi – that circumvented much of the need for modern financial instruments.

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