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Asia’s Influence on the History of Money & Finance

Updated on April 16, 2014
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Asia & Investment

The financial arena is ever-evolving and developing, with new investment opportunities every day. Over the years there are shifts in trends and different industries and areas become more popular. Currently Asia is the focus of a great deal of investment, both in Asian stock market investment and in business in general. In the past few decades many Asian countries have seen fast growth in both population and industry. As a result the recent downturn in the economic climate hit a number of UK companies hard, while Asian markets have generally stayed fairly buoyant. This, coupled with the fact that most Asian countries have few deficits and large cash reserves, means that they are attracting large numbers of investors. These investors are looking to not only take advantage of strong markets but also to diversify their portfolio, investing in companies outside of Europe. This recent focus on Asia as a financial hub is, however, unsurprising. Asia has a long history, in which many of the roots of today’s banking and currency systems can be found.

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Early Currency: Shells

Currency was not always the same as it is today, with metal coins and paper notes that are exchanged for goods and services. Before it was possible for these types of currency to be produced and manufactured, people had to make do with what was available. The early forms of currency were made up of what was readily available, some countries used beads while Japan used rice. An important forerunner of currency, however, was the cowrie shell. The cowrie shell was used as an early form of currency in China between 3000 and 45000 years ago. Over time the shells developed almost into coinage, with people starting to use representations of the shells instead of the shells themselves. These representations could be carved out of wood or bone but were also made from lead and copper. Bronzed shells, which were found in the Ruins of Yin, are some of the earliest examples of coinage.

Early Lydian coins
Early Lydian coins | Source

The First Metal Coins

Though the Chinese cowrie shells are some of the earliest examples of coinage, it has often been debated from who and where the first metal ‘coins’ actually originated. A popular theory is that the Lydians, an ancient Anatolian people from Asia Minor, were the first to introduce metal coins. Herodotus, the Greek historian living in the fifth century BC who was known as the ‘Father of History’, claimed that the Lydians were the first to use gold and silver coins. The meaning of Herodotus’ claim has since been debated. Some people believe that Herodotus meant the Lydians were the first people to use coins made out of precious metals. Others think that the Lydians were not the first people to use metal coins, but were the first to use gold and silver to make coins. No matter which interpretation you believe, the Lydians use of metal coins soon spread from Anatolia to the rest of the world.

A Tang Dynasty (c.618-907) coin
A Tang Dynasty (c.618-907) coin

Promissory Notes

As well as having strong historical links to early metal currency, Asia can also claim to have originated the first banknotes. As coinage became more popular, the types of coins that different areas were using also developed. By the early 7th century, the Chinese were using coins that had a hole punched in the middle. The reasoning behind this was so that people could string their money like beads onto a rope and carry them around. The very wealthy members of society, however, soon ran into problems. Carrying around all their money on a rope was unwieldy and difficult. A solution was created whereby a person could leave their coins with a trusted party. The person looking after the money would give them a form of promissory note that stated how much money had been left in their care. The note would allow the owner of the money to reclaim their coins if they produced their promissory note.

A Song Dynasty banknote
A Song Dynasty banknote

Printed Money & Banknotes

The promissory note can be seen as a forerunner to the bank note, although it was several hundred years before it evolved into printed money. Though the promissory note worked well for a time, it was not until a need for a lighter form of currency coincided with a shortage of copper that it developed into the banknote. The Song Dynasty in 10th century China started the circulation of promissory notes and several shops were authorised to issue notes. A century later the government had taken over the system and was issuing official government banknotes that were created using woodblock printing. The fast production of printed money did provoke inflation and caused the banknotes to later fall out of use. Coins reigned supreme again until banknotes were reinvented in the 17th century.

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Cheques & Money Lending

As we have seen both coins and printed money have their origins in Asia, and both are now staples of modern finance. But what about cheques? Cheques are another part of the financial system that are a useful payment method for when you do not have enough cash on hand. These too, have some basis in Asia. There is evidence that early forms of cheques were used in the Mauryan period in India (c.321-185 BC). These cheques were known as ‘adesha’ and would denote an amount of money that a banker would need to pay to a third party - a precursor to our modern cheques. Banking even has roots in Asian history. In the 20th century BC there were ‘banks’ or ‘groups’ of merchants that would loan grain to traders and farmers. Though many accounts of Greek and Roman history will point out that the Ancient Greeks and Romans had money-lenders, there is also evidence that money lending was happening in China and India at a similar time. The Asian continent has been home to many different financial and money-related innovations and it is no surprise that it is currently a prime location for investment.

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