The introduction of money economy and money taxes led to a need for more coinage.  As metal was scarce and minting very expensive, iron coins were introduced, silver became more and more common as means of exchange, and paper money was issued.  As the relative value of these moneys changed with supply and demand, speculation became a flourishing business which led to further enrichment of people in business.  Even the government became more money-minded:  costs of operations and even of wars were carefully calculated in order to achieve savings; financial specialists were appointed by the government, just as clans appointed such men for the efficient administration of their clan properties.

Yet no real capitalism or industrialism developed until towards the end of this epoch, although at the end of the twelfth century almost all conditions for such a development seemed to be given.

2 Political situation in the tenth century

The Chinese call the period from 906 to 960 the “period of the Five Dynasties” (Wu Tai).  This is not quite accurate.  It is true that there were five dynasties in rapid succession in North China; but at the same time there were ten other dynasties in South China.  The ten southern dynasties, however, are regarded as not legitimate.  The south was much better off with its illegitimate dynasties than the north with the legitimate ones.  The dynasties in the south (we may dispense with giving their names) were the realms of some of the military governors so often mentioned above.  These governors had already become independent at the end of the T’ang epoch; they declared themselves kings or emperors and ruled particular provinces in the south, the chief of which covered the territory of the present provinces of Szechwan, Kwangtung and Chekiang.  In these territories there was comparative peace and economic prosperity, since they were able to control their own affairs and were no longer dependent on a corrupt central government.  They also made great cultural progress, and they did not lose their importance later when they were annexed in the period of the Sung dynasty.

As an example of these states one may mention the small state of Ch’u in the present province of Hunan.  Here, Ma Yin, a former carpenter (died 931), had made himself a king.  He controlled some of the main trade routes, set up a clean administration, bought up all merchandise which the merchants brought, but allowed them to export only local products, mainly tea, iron and lead.  This regulation gave him a personal income of several millions every year, and in addition fostered the exploitation of the natural resources of this hitherto retarded area.

3 Monopolistic trade in South China.  Printing and paper money in the north