Chartalism in Ancient China: A Retrospective of Monetary Thought

Chartalism is an influential and continuous tradition of monetary thought in ancient China. It dates back to the earliest Chinese text on monetary thought and continued into the Qing Dynasty. A vast body of related literature can be found across ancient Chinese dynasties. Chartalism in ancient China had the following main propositions. First, money originated as an invention of ancient monarchs and is a creature of the state. The second is the nominal theory of money: useless metal can function as money and become a tool of state intervention in the economy through state support. Third, the right to issue money should be monopolized by the state; otherwise, the state's monetary policy will be interfered with by other currencies. Fourth, an important monetary policy is the government's buying and selling of commodities countercyclically by issuing and receiving money, thus stabilizing prices. Fifth, the circulation process of sovereign money consists of two parts: the state's minting of coins (or issuing of paper money) and spending are the outflow of money, and levying monetary taxes (or selling goods) is the inflow of money. The state stabilizes the value of money by intervening in the circulation process.