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A silver sycee ingot bought at an antiques market in Quanzhou, Fujian province. Photo: Stuart Heaver

How China and Hong Kong’s currencies were shaped by Spanish, Mexican silver dollars

Many modern East Asian currencies have roots in Ming dynasty trade and Chinese traders’ faith in the Mexican silver dollar. Attempts to dislodge it, such as the Hong Kong-minted silver British dollar, were not always successful


At the antiques market near the old Qingjing mosque in central Quanzhou, a city in China’s south-eastern Fujian province, it is sometimes possible to purchase unusual silver objects that reveal much about the currencies in circulation in East Asia today.

On one stall, crammed with opium pipes, blue-and-white ceramics and jade trinkets, is a small, dome-shaped lump of metal in a rusty tin box. It is not much to look at, and the vendor cannot vouch for its authenticity, but the three hallmarks on its flat base and the lined, pockmarked surface suggest it is sycee – a high-grade silver ingot.

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“Sycee was the silver money of the Chinese empire,” says Joe Cribb, the former keeper of the department of coins and medals at London’s British Museum and author of Money in the Bank, which documents the money collection of the HSBC archives.

HSBC still has a number of sycee ingots (or “shoes”) of various shapes and sizes in its archive, but for decades its vaults would have been stuffed with them as hard backing for the Hong Kong dollar. A few are currently on display at an exhibition called “The Silver Age” at the Hong Kong Maritime Museum (until February 25), which outlines how important silver once was to Hong Kong’s economy, maritime trade and culture.

Silver is known to have existed as a medium of payment in China since nearly 5,000 years ago, and was a popular means of payment for large transactions from the 8th century. Italian explorer Marco Polo was amazed by paper money in Kublai Khan’s China in the 1280s, but overprinting led to hyper-inflation. The Chinese lost faith in paper money centuries before most other nations even considered introducing it.

‘The Silver Age’ exhibition at the Hong Kong Maritime Museum outlines how important silver once was to Hong Kong’s economy, maritime trade and culture. Photo: Stuart Heaver

As a result, silver became predominant. While copper cash was in common use for day-to-day business, silver – weighed in taels and stored as sycee – was the currency of choice for foreign trade, large transactions and government taxes.

“Chinese dynasties collected tax in silver through the Ming and Qing period, while silk, porcelain and tea had been the most profitable commodities in global trade,” says Professor Kuroda Akinobu of the University of Tokyo. “There was no other item than silver which could be exchanged for those commodities until the 18th century.”

Silver deposits are scarce in China, but by the middle of the Ming dynasty (1368-1644) the growth in maritime trade and demand for Chinese silk and tea meant more silver poured into the country. According to Kuroda, this initially came from Japan, beginning in the 1540s. Later that century, silver entered on a massive scale from the new Spanish colonies in South America.

A trader at the antiques market in Quanzhou, where it is sometimes possible to purchase high-grade silver ingots. Photo: Stuart Heaver

“By far the bulk of the world’s silver production was from Spanish America and at least a third of that amount went to China,” says Peter Gordon, co-author of The Silver Way.

Gordon’s book, co-written by Juan José Morales, explains how silver Spanish (or Carolus) dollars minted in Mexico flooded into China via Manila in the 16th century, brought in on huge galleons. Then, as now, China was by far the biggest regional economy, making the hazardous transpacific voyage from the Mexican port of Acapulco highly lucrative.

Entrepreneurial Fujianese junk captains based in Manila, who conducted trade with the Spaniards, craved only silver, and the Spaniards had plenty of it. Juan Niño de Tabora, governor of the Philippines, wrote of the Chinese to the king of Spain in 1628: “Their god is silver and their religion the various ways that they have of gaining it.”

Exhibit from ‘The Silver Age’ exhibition at the Hong Kong Maritime Museum. Photo: Stuart Heaver

The trade allowed China to “silverise” its money supply, and Gordon and Morales say this was the catalyst for the development of a global economy.

But as Kuroda points out, the silver coins coveted by Chinese merchants were not initially used as a currency. More likely, they were melted down and stored as sycee ingots, like the one found in the Quanzhou market on display at the Maritime Museum. Only later were they adopted as coins that could be cut into smaller strips to pay for less expensive items.

The Spanish and, from 1824, the Mexican silver dollar had an intrinsic face value based on its consistent purity and weight, and this appealed greatly to Chinese merchants. It rapidly became the de facto approved currency for trade in Southeast Asia and the most widely used coinage in history.

It was inevitable that [Hong Kong] would have to select a currency directly linked to that of China
Joe Cribb

From 1757, British East India ships would leave home ports bound for Guangzhou, laden with the statutory 10 per cent cargo of local produce (usually wool) and then (it being illegal to export British silver) would procure thousands of silver Carolus dollars from Holland and Germany en route to Asia. It may have been the European term “thaler” that gave the dollar its popular name, but in Spain and Mexico it was known only as the peso, or “pieces of eight”, referring to its value of eight Spanish reales.

“In parts of China and Southeast Asia, the Spanish and later Mexican dollars were so widespread that they formed the most significant part of the local money supply, [much the same as the US dollar in modern South America],” Cribb says.

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The ubiquity of Spanish and Mexican dollars posed a problem in the early years of colonial Hong Kong. Attempts to introduce British coins failed miserably because local merchants needed something standardised and trusted by their Chinese counterparts. Hong Kong governor Sir Henry Pottinger incurred the displeasure of Queen Victoria by proclaiming in 1842 that the silver dollar was the “standard for all government and mercantile transactions” in the colony.

“It was inevitable that the colony would have to select a currency directly linked to that of China,” says Cribb, and that meant embracing the Mexican silver dollar and backing the Hong Kong paper dollar with it.

“Hong Kong was monetarily Mexican, not British,” Gordon says. Many officials objected to the presence of “chopped dollars”, however, when assayers marked the coins with their chop of authenticity. They also feared they could not control the supply of foreign dollars and were losing out by not minting their own.

Their solution is depicted in an impressive oil painting on display at the Maritime Museum exhibition. In 1866, a purpose-built mint was constructed in Causeway Bay at the huge cost of HK$71,500. It was an ambitious engineering project and doomed to fail.

Painting of the Hong Kong Mint exhibited at the Hong Kong Maritime Museum. Photo: Stuart Heaver

The purity and size of the silver British dollar was designed to mimic its Mexican counterpart, but despite a heavy marketing campaign, the Chinese trading community shunned it. They remained loyal to the Mexican dollar, which had been established and trusted since the 1570s in Manila. In April 1868, the mint was closed and the machinery was later sold to Japan. The British dollar was reintroduced in 1895, but was minted in Bombay and London.

Other nations also attempted to dislodge the Mexican dollar with their own version, and there were nine types of silver dollar in circulation by 1900.

The American trade dollar was specifically minted for trade in Southeast Asia and was widely used in Hong Kong, Singapore and Malaysia. The Japanese silver yen was minted with the equipment acquired from Hong Kong. There were three types of Chinese dollars minted locally: the Formosan and Fukien dollars (issued in 1838), the Dragon, and the Republican.

I think one can call [the Mexican dollar and its Spanish predecessor] the first and, so far, longest-lived global currency
Peter Gordon

The French in Indochina introduced the piastre de commerce, or Saigon dollar, which became particularly popular in China’s Yunnan province. Eventually China minted a single standardised silver dollar, and in 1889 the yuan was equated at par with the Mexican dollar. “The US dollar and the Chinese yuan are at least cousins, if not siblings,” Gordon says.

Cribb writes that most of the present-day currencies of East Asia originated in the silver dollars of Spain’s former American colonies. Some, like Hong Kong and Singapore, have retained the dollar name, while many others, like Malaysia’s ringgit and China’s yuan, have not. None are backed by silver any more but all have a common ancestor, mined and minted in Spain’s former colonies in South America.

In Quanzhou, not far from the antiques market, archaeologists unearthed a pot of silver coins in 1975. According to Cribb, some were dated 1654, suggesting that they came to China via Manila and Acapulco, and that hoarding silver was a common practice in unstable times.

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Chinese currency expert Eduard Kann estimates that “between 400 and 500 million dollars” of these coins were in circulation or being hoarded at the time of the 1911 founding of the Chinese republic. They would still have been accepted as legal tender in Hong Kong until 1935, when the colony followed China’s lead and finally abandoned the silver standard.

These days even hard currencies including the US dollar are so-called “fiat money” with no backing from hard assets such as sycee. Perhaps there are lessons to be learned from the longevity of the Mexican dollar.

“I think one can call it [and its Spanish predecessor] the first and, so far, longest-lived global currency,” Gordon says.