This is a detailed financial and monetary explanation for the time period, focusing on the mechanics of the currency system, the cause of exchange rate instability, and the impact on the Qing Dynasty.
The financial landscape of China in 1895 was defined by its unique, non-uniform silver standard at a time when the world's major powers were operating on the gold standard. This disparity was the root cause of China's financial instability and the enormous burden of its war indemnity.
I. The Qing Monetary System: The Tael and the Cash
The Qing Dynasty did not possess a single, national, state-minted silver coin. Its monetary system was a chaotic mix of two primary metals:
A. The Silver Tael (Liang)
Nature: The Tael (or Liang, meaning ounce) was primarily a unit of weight for silver, not a standardized coin. It was used for large commercial transactions, long-distance trade, and government tax collection.
Physical Form: Silver circulated as boat-shaped ingots called Sycee or foreign silver coins (like the Mexican or Spanish silver dollar), which were often chopped and stamped to certify their weight and fineness by local merchants.
Non-Uniformity: The crucial issue was that the Tael's weight and purity varied geographically. Common types included:
Kuping Tael (Treasury Tael): The standard for central government accounts and tax payments.
Shanghai Tael: The standard for foreign trade and exchange in the largest commercial port.
Haikwan Tael (Customs Tael): The standard used for collecting customs duties.
This lack of uniformity meant every transaction required an assay (testing of silver purity) and weighing, incurring time, cost, and opportunities for corruption.
B. The Copper Cash (Wen/Qian)
Nature: The small, round copper cash coin with a square hole (the Wen) was the currency of the common people and retail trade.
Exchange Rate Problem: Theoretically, 1 Tael was equivalent to 1,000 copper cash. However, this rate was never fixed and fluctuated wildly, typically falling to 700-800 cash per Tael due to factors like the cost of copper, illicit minting, and the central government's occasional debasement of the copper coin. This instability disproportionately hurt the common peasant, who earned in cheap cash but often had to pay taxes in increasingly expensive silver (Taels).
II. The Core Problem: Silver vs. Gold in 1895
By 1895, Britain (the world's major power), the United States, and most of Europe were on the Gold Standard, while China remained on the Silver Standard.
The Global Silver Crash (Post-1873): Starting around 1873, major economies demonetized silver in favor of gold, leading to a massive oversupply of silver globally. As the demand for silver plummeted, its price relative to gold-backed currencies (the Pound and Dollar) fell continuously.
The Tael's Depreciation: Since the Tael was literally a unit of silver, its international value also fell continuously.
For the Qing government, this was disastrous: the value of their silver-based revenue (Taels) was constantly dropping relative to the price of foreign imports (like weapons, machinery, and ships), which had to be paid for in gold-backed currencies.
The war indemnity owed to Japan in the Treaty of Shimonoseki (200 million Kuping Taels) had to be paid in gold or currencies convertible to gold. The Tael's depreciation meant the Qing had to raise exponentially more silver at home just to acquire the necessary gold-backed foreign currency, accelerating the internal financial crisis.
III. Exchange Rates and Purchasing Power (Approximate 1895)
The exchange rates below reflect the declining value of silver relative to gold and the Yuan's silver-based parity.
The core financial crisis stemmed from the Global Silver Crash following 1873, when most Western nations shifted to the Gold Standard and demonetized silver. This caused the global price of silver, and thus the value of the Tael, to depreciate continuously against gold-backed currencies like the British Pound (GBP) and the U.S. Dollar (USD). For the Qing government, this was devastating. The value of their domestic, silver-based tax revenue was constantly falling relative to the price of foreign imports (e.g., modern weapons and machinery), which had to be purchased in gold-backed currency. This depreciation magnified the cost of the Treaty of Shimonoseki war indemnity, which was a fixed amount of 200 million Kuping Taels that had to be paid in gold or gold-convertible foreign currencies. The government had to raise exponentially more silver domestically just to purchase the required foreign exchange, accelerating the internal financial crisis.
This global market reality is reflected in the approximate 1895 exchange rates and purchasing power. The high exchange rate of ≈6.5 Taels to £1 Sterling demonstrated the massive depreciation of the Tael against the global gold standard, allowing a British merchant's gold-backed Pound to buy six times more Chinese silver than it would have a generation earlier. Similarly, US$1 was worth ≈1.3 Taels. In terms of local purchasing power, 1 Tael was roughly equivalent to the daily wage of a skilled worker, enough to buy about 3-4 bags of high-grade rice or cover a month's basic rent. In stark contrast, a single £1 Sterling—the weekly wage of a highly skilled British worker—could purchase a major foreign manufactured item like a Breech-loading Rifle, demonstrating the immense and distorting purchasing power that gold-standard currencies held in China.