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China’s Two Wars Created Important Banknote Rarities

A generated image of Mao Zedong. Image: Adobe Stock / CoinWeek.
A generated image of Mao Zedong. Image: Adobe Stock / CoinWeek.

By Dr. Richard S. AppelUniqueRareCoins.com ……

China’s two overlapping bloody wars had a devastating impact on its citizens. They generated the overthrow of the Republic of China’s government (ROC; 1912-1949) by the Mao Zedong-led Communist regime. And in the process destroyed the way of life for its people. But for today’s collectors and investors they set the stage for an exciting opportunity by creating some exceptional banknote rarities.

In 1927, Chiang Kai-shek rose to power by gaining control of China’s Nationalist government. Almost immediately he initiated a purge of his Communist opposition. Earlier, the Communists had carried out violent strikes that severely disrupted banking and business throughout China.

Chiang allegedly struck a deal with several banks to disband the Communists in exchange for loans to his government. This was his first act that led to the destructive inflation that was to follow, which ultimately upended the country and fostered the Communist takeover.

Chiang was initially successful in dispersing the Communists. However, they quickly regrouped and strengthened. Then, in June 1937, Japan attacked China. Before retreating in 1945 after losing World War II, the Japanese at one time occupied and controlled one-third of China’s enormous landmass.

Central Bank of China. 2 Chiao Banknote(1931). Image: Stack's Bowers.
Central Bank of China. 2 Chiao Banknote (1931). Image: Stack’s Bowers.

Fighting dual wars was extremely costly for Chiang’s Nationalist government. Before gaining power, China’s banking system was primarily composed of a network of hundreds of private and local banks. In November 1928, Chiang created the Central Bank of China, which he controlled. By 1935, through several additional acts and decrees, Chiang’s government effectively eliminated his banking competitors and gained sole control of China’s money creation. First through bank loans and later via the printing press China’s money supply exploded and inflation soared, as Chiang paid for his costly wars.

When Japan invaded China, 3.7 yuan were worth one U.S. dollar. By December 1941 it required 18.9 yuan to purchase a dollar, and by the end of 1945, 1,220 yuan were needed. Finally, in May 1949, with the Communists on the verge of victory, one lonely dollar could buy 23.3 MILLION yuan.

Enter Mao Zedong

Once in power, Mao cancelled the Republic of China’s currency, making all earlier Chinese banknotes totally worthless. Living through the extended inflationary period devastated the Chinese People economically, financially, and emotionally. Wealthy people became poor, and the poor lost all hope. With their currency finally made worthless, they discarded, buried, burned, and otherwise destroyed the once valuable paper money they had depended upon for their futures. The type or denomination of the notes didn’t matter. They were all treated the same and destroyed to forget the misery they represented. Most of the Republic’s coinage survived only because they were at least worth their metal content!

People's Republic of China. 2 Yüan Banknote (1953). Image: Stack's Bowers.
People’s Republic of China. 2 Yüan Banknote (1953). Image: Stack’s Bowers.

Banknotes of the Republic of China are widely collected by today’s Chinese citizens. I’ve been told that there are as many as 10,000 currency shops across China. Fortunately, some early notes that were long recognized for their rarity were spared destruction by residing in collections. A small number of other important banknotes survived only because they were pinned or taped to walls or tucked away in albums.

The catastrophic and indiscriminate destruction of countless notes rendered a number of ROC banknotes once thought available rare or incredibly rare. These are joining the quest by Chinese banknote collectors for the legendary rarities that have long been coveted. Today, some notes that were printed in overlooked or forgotten locations or bear exceedingly rare printer’s names or official signatures have become among the rarest and most desired Chinese banknotes. In fact, all but a few of the entire issues of some banknotes are gone forever.

Before the turn of this century only a few long-time collectors and dealers recognized the absence of some of these strangely created rarities. But it wasn’t until the nearly 20-year tabulation of millions of Chinese banknotes graded by Paper Money Guarantee (PMG) that their true rarity became obvious for anyone interested. Additionally, the PMG Pop Report goes a long way toward exposing the relative rarity of all remaining Republic of China and other Chinese banknotes.

PMG is the world’s largest independent paper money grading and authentication service. It began certifying worldwide banknotes in 2005. Their Population Report lists every banknote they’ve authenticated. Attesting to the great collectability of Chinese notes, of the nine million global banknotes including the U.S., PMG has graded five million of Chinese origin. These rest in diverse hands among the tens of thousands of active Chinese and worldwide collectors.

Standard Catalogue of World Paper Money, 25th Edition.
Standard Catalogue of World Paper Money, 25th Edition.

Numerous Republic of China banknotes are very attractive and of historical significance. Until recently, collectors have focused almost entirely on possessing high-grade examples. Sadly, some exceedingly rare banknotes only exist in Very Fine or even lower grades. Notably, the two highly regarded publications, The General Issues and The Specialized Issues of Pick’s Standard Catalogue of World Paper Money, list some notes with Very Fine or even Fine as the highest known grades.

Until recently, these conditions have kept the prices low for many extremely rare notes! This includes some of the great rarities that are known only in very low grades. Some banknotes with PMG populations in all conditions of three or even fewer often still sell for a few hundred dollars or less.

This widely held quest for high grade banknotes caused many rarities to be overlooked and ignored due to their poor condition. Many of the finest collections are missing certain extremely rare notes because the collector was waiting to acquire a gem example when none are known. Further, some important notes are so rare they were unknown to the editors of the authoritative Pick Catalogues. Occasionally one surfaces to the excitement the collector fraternity.

Millions of China’s citizens became affluent in the past few decades as their incomes have substantially risen. This allowed an increasing number of new collectors and investors to begin acquiring Republic of China banknotes in their thirst to obtain pieces of their heritage. The result is increasingly rising prices for the extremely desirable properties in any condition as more people compete whenever one appears.

Finishing an entire set of one of the major ROC banks with their elusive places of origin, official signatures or printing factories may take years to accomplish. The builders of major and important collections recognize this and drives them to acquire examples of them to complete their unique collections.

If money were no object, then I believe it is impossible to build a complete set of Republic of China notes in ANY CONDITION! Further, some challenging place names or other desirable attributes are so rare they seldom appear for sale. Even attempting to finish a set of notes listed in one or both of Pick’s catalogues will take decades if ever to achieve. However, any attempt comes with exceptional rewards. You will be proud to have acquired many important properties that few others can own, and you will possess piece of history that are not only beautiful but some of which can only be owned by an elite few.

And, you will have likely invested your money wisely and pursued an exceptional investment opportunity.

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Dr. Richard S. Appel
Dr. Richard S. Appelhttps://uniquerarecoins.com/
Dr. Richard S. Appel has been a numismatic expert for 50 years. He offers his personal services as a rare coin broker or rare coin consultant to both beginner and experienced consumers alike.

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