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zhezhongfa 折中法, equitable exchange method

May 18, 2016 © Ulrich Theobald

The equitable exchange method (zhezhongfa 折中法), during the Yuan period 元 (1279-1368) called ruzhongfa 入中法 , and during the Ming period 明 (1368-1644) kaizhongfa 開中法, was a procedure to secure the supply of border garrisons and at the same time allowing long-distance merchants to profit from the state monopoly on tea and salt.

The method was invented during the early Northern Song period 北宋 (960-1126) and was based upon certificates (jiaoyin 交引). The need to supply the northern border garrisons with rice and fodder emerged in the 980s, and the government therefore decided to engage merchants with the duty to ship the needed items to the border zones. Depending on the distance, they were given certificates documenting the funds the merchants had advanced. Having delivered the military supplies, the merchants travelled to the capital, where they were disbursed, or to regions where salt or tea was produced (mainly the lower Yangtze and the Huai River region), and received an according amount of the respective commodity.

In 989 the Equitable Exchange Depot (zhezhongcang 折中倉) in the capital Kaifeng 開封 was founded, receiving rice deliveries by traders, who in turn were paid out or given a certificate to acquire salt or tea with. In a short phase around 1020 it was also allowed to deliver silk fabric in return for a salt certificate. Both types of commodities, rice/fodder and salt/tea, were nominally exchanged against each other and calculated in book money. The government would in this way save transport cost, but gave merchants a free hand to the price of tea and salt, and in the mode of calculating the value of rice and salt. Quite a few merchants speculated with grain and inflated its price.

In 1048 the certificate were replaced by receipts (chao 鈔) and the method renamed chaofa 鈔法. The zhezhongfa was part of the salt administration (yanfa 鹽法) of imperial China. The business with the certificates was so important that there were many "certificate shops" (jiaoyin pu 交引鋪) in Kaifeng.

Sources:
Chen Dewei 陳德維, ed. (1992). Shichang da cidian 市場大辭典 (Beijing: Zhongguo kexue jishu chubanshe), Vol. 1, 536.
Huang Yunwu 黃運武, ed. (1992). Xinbian caizheng da cidian 新編財政大辭典 (Shenyang: Liaoning renmin chubanshe), 1058.
Li Bingzhong 李秉忠, Wei Canjin 衛燦金, Lin Conglong 林從龍, ed. (1990). Jianming wenshi zhishi cidian 簡明文史知識詞典 (Xi'an: Shaanxi renmin chubanshe), 421.
Lin Songmei 林松梅 (1993). "Zhezhongfa 折中法”, "Zhezhongcang 折中倉", in Shi Quanchang 石泉長, ed. Zhonghua baike yaolan 中華百科要覽 (Shenyang: Liaoning renmin chubanshe), 122, 123.
Wang Meihan 王美涵, ed. (1991). Shuishou da cidian 稅收大辭典 (Shenyang: Liaoning renmin chubanshe), 851.
Zhou Fazeng 周發增, Chen Longtao 陳隆濤, Qi Jixiang 齊吉祥, ed. (1998). Zhongguo gudai zhengzhi zhidu shi cidian 中國古代政治制度史辭典 (Beijing: Shoudu shifan daxue chubanshe), 273.