An Essay on the Issue of the Zhong Tong Chao : The Formative Process of Monetary Policy of the Yuan Dynasty

Abstract

In China, copper was a unitary main currency until the Northern Sung period. First, it was issued not as means of payment for the foreign trade but for domestic use in China. In the North of China, since the latter half of the Chin period, it began to decrease because of monetary policy to circulate paper money and its devaluation. With the fall of the Chin, copper currency disappeared. After the Chin's fall, the North of China came under the Mongol empire's rule, and was included into the currency system of West Asia and Europe. The Mongol empire levied silver from the North of China in order to trade with the Islamic world which used gold and silver as main currencies, and spent part of silver on state expenses within China. Paper money was also issued by the empire, but the issue was not permanent, and only small amounts are used in limited districts. The main currency in China under the Mongol rule was paper money issued by local lords. Khubilai succeeded to the throne, and the North of China was separated from the Mongol empire. It was inevitable for the Khubilai regime to issue more money and to circulate it throughout the country permanently in order to meet the demand of currency. However, Khubilai could not issue silver as main currency to China. For the Khubilai regime, the best way was to use copper that had long been used by the past dynasties. But at that time in the North of China, few copper cash was in circulation and the copper itself was lacking. Moreover, the cost of mintage was high. Thus the Khubilai regime, considering great demand for local lords' paper money, issued the Jiao Chao and the Zhong Tong Chao. In conclusion, the Zhong Tong Chao was a substitute currency of copper coins.