China itself. And this provided a new field of speculation, through the
variations in the rates for silver and for copper. Speculation was also
possible with the deposit certificates, which were issued in quantities
by the state from the beginning of the eleventh century, and to which
the first true paper money was soon added. The paper money and the
certificates were redeemable at a definite date, but at a reduction of
at least 3 per cent of their value; this, too, yielded a certain revenue
to the state.

The inflation that resulted from all these measures brought profit to
the big merchants in spite of the fact that they had to supply directly
or indirectly all non-agricultural taxes (in 1160 some 40,000,000
strings annually), especially the salt tax (50 per cent), wine tax (36
per cent), tea tax (7 per cent) and customs (7 per cent). Although the
official economic thinking remained Confucian, i.e. anti-business and
pro-agrarian, we find in this time insight in price laws, for instance,
that peace times and/or decrease of population induce deflation. The
government had always attempted to manipulate the prices by
interference. Already in much earlier times, again and again, attempts
had been made to lower the prices by the so-called "ever-normal
granaries" of the government which threw grain on the market when prices
were too high and bought grain when prices were low. But now, in
addition to such measures, we also find others which exhibit a deeper
insight: in a period of starvation, the scholar and official Fan
Chung-yen instead of officially reducing grain prices, raised the prices
in his district considerably. Although the population got angry,
merchants started to import large amounts of grain; as soon as this
happened, Fan (himself a big landowner) reduced the price again. Similar
results were achieved by others by just stimulating merchants to import
grain into deficit areas.

With the social structure of medieval Europe, similar financial and
fiscal developments which gave new chances to merchants, eventually led
to industrial capitalism and industrial society. In China, however, the
gentry in their capacity of officials hindered the growth of independent
trade, and permitted its existence only in association with themselves.
As they also represented landed property, it was in land that the
newly-formed capital was invested. Thus we see in the Sung period, and
especially in the eleventh century, the greatest