Peripheral Transformation: Financial Innovations in 18th-Century Inner Mongolia

This essay examines the monetary transformation in the Qing Empire’s northern frontier regions, such as Mongolia, Manchuria, and Xinjiang, between the eighteenth and nineteenth centuries. Using Guihuacheng, the Inner Mongolian city that became an center of frontier trade in the eighteenth century, as an example, I argue that the particular monetary constraints of the frontier and the vibrant long-distance trade ushered in significant financial innovations and revolutionary changes in the Qing’s dual monetary system More concretely speaking, in order to conduct business in the borderlands where specie supply was inadequate, Guihuacheng’s frontier traders, hailing from the Shanxi province, created new credit instruments and financial institutions. Two credit instruments, namely, paper money and account transfers, became critical in sustaining the economic life on the frontier. The development of these credit instruments went hand in hand with the rise of a set of new financial institutions, such as retail banks, loan firms, remittance firms, and bankers’ guilds, each playing a role in the functioning of the monetary and financial system on the frontier. The essay, therefore, traces the rise of this complex system and explicates its mechanism. It shows how this system’s functioning was intrinsically linked to the rhythm in the flow of trade and the fluctuations in the movement of silver within the Shanxi merchant network that connected the frontier with intramural China. The Guihuacheng case suggests that financial innovations and monetary changes often occur on the fringes, while a frontier and peripheral perspective could yield new insights in economic history.