Shanghai Street View: Note Nostalgia
China’s love affair with paper money looks set for a major shake-up soon, with a new plan to eliminate 1 yuan notes and replace them with coins. But anyone who lives here in Shanghai knows that change took place a while ago in our city, and no one seems to miss the ratty, green 1 yuan notes too much, myself included.
Money is an integral part of any nation’s identity, and the paper-versus-coin argument seems to be a broader subset of that dialogue. The issue has a historical twist here, since China was the actual birthplace of paper money back in the Tang Dynasty more than 1,000 year ago.
Some might argue that Shanghai’s recent embrace of 1 yuan coins reflects a resumption of its identity as a meeting point between East and West, since the use of coins wasn’t very common in the China I remember when I first came to live in Beijing in the 1980s. But I like to think that Shanghai’s embrace of coins also reflects its cutting-edge status in China, and hope we’ll see bigger denominations such as 5 yuan and perhaps even 10 yuan coins in the not-too-distant future.
Word about a plan to retire the 1 yuan note was trickling around for several months when a central bank official finally confirmed the move earlier this month. Five cities in Shandong have already begun a pilot program to phase out the 1 yuan bills, and the results will determine the timetable and method for a national roll-out. But anyone who wants to see how a world without the bills might look need only come to Shanghai, since it’s quite rare these days to see 1 yuan notes on our streets.
Arguments for and against the switch are pretty typical to what you hear around the world. Proponents note that coins are more durable than notes that can quickly become quite ratty and dirty. That’s particularly true for smaller denominations like 1 yuan or the even smaller 5 jiao and 1 jiao notes, since those tend to circulate more quickly than larger ones.
Opponents say that notes are easier to spend because they reside in a wallet or purse that most people carry whenever they go out. By comparison, some people find coins burdensome due to their size and weight, and often end up accumulating them at home without ever spending them.
Bias for Coins
Perhaps I’m biased towards the coins because I just put them in my pocket and spend them as regularly as I do my paper notes. The reality is that China is probably one of the least coin-friendly countries that I’ve visited, since the 1 yuan coin is the biggest denomination and is still quite uncommon except for in a small number of places like Shanghai.
In nearby Hong Kong the largest coin is now worth 10 Hong Kong dollars, or nearly 10 times as much as China’s largest coin. The gap with Europe is even bigger, since the largest 2 euro coin is worth about 14 times as much as a 1 yuan coin.
The debate in my native US has been similarly heated. Washington has tried for years to get people to embrace $1 coins, but has met with strong resistance from people who still prefer the familiar $1 notes with George Washington’s likeness. But even our most widely used coin, the quarter, is still worth nearly twice as much as one of China’s 1 yuan coins.
Even as I opine on China’s reluctance to give up the 1 yuan note, I do admire the progress the country has made since the 1980s. The coins in circulation when I first came to Beijing were limited to a maximum of 5 fen, or about three-quarters of a US cent at today’s rates, and were made of a lightweight alloy that made them feel more like playthings than real money. Back then there were also notes for everything, and I still remember how the tan-colored 1 fen notes were so worthless that even back then people often used them as scratch paper rather than as money.
Nowadays you rarely see coins or notes in any fen denominations, and thankfully the current crop of jiao coins are much heavier and substantial, making them easier to handle than the earlier fen ones. But all of those newer coins are still mostly a Shanghai phenomenon, and whenever I travel to other cities shop owners are often reluctant and sometimes even refuse to accept that money.
Such resistance could be difficult to overcome, but the rapid removal of 1 yuan notes from circulation under the new scheme would ultimately give merchants and ordinary consumers no other choice. But as one report pointed out, newer products like Apple Pay, and smartphone-based electronic payment services from WeChat and Alipay are rapidly replacing cash already, meaning the debate between coins and notes could soon be irrelevant anyhow.
