automatically made an end of all external trade.  The merchants accordingly began to prepare deposit certificates, and in this way to set up a sort of transfer system.  Soon these deposit certificates entered into circulation as a sort of medium of payment at first again in Szechwan, and gradually this led to a banking system and the linking of wholesale trade with it.  This made possible a much greater volume of trade.  Towards the end of the T’ang period the government began to issue deposit certificates of its own:  the merchant deposited his copper money with a government agency, receiving in exchange a certificate which he could put into circulation like money.  Meanwhile the government could put out the deposited money at interest, or throw it into general circulation.  The government’s deposit certificates were now printed.  They were the predecessors of the paper money used from the time of the Sung.

4 Political history of the Five Dynasties

The southern states were a factor not to be ignored in the calculations of the northern dynasties.  Although the southern kingdoms were involved in a confusion of mutual hostilities, any one of them might come to the fore as the ally of Turks or other northern powers.  The capital of the first of the five northern dynasties (once more a Liang dynasty, but not to be confused with the Liang dynasty of the south in the sixth century) was, moreover, quite close to the territories of the southern dynasties, close to the site of the present K’aifeng, in the fertile plain of eastern China with its good means of transport.  Militarily the town could not be held, for its one and only defence was the Yellow River.  The founder of this Later Liang dynasty, Chu Ch’uean-chung (906), was himself an eastern Chinese and, as will be remembered, a past supporter of the revolutionary Huang Ch’ao, but he had then gone over to the T’ang and had gained high military rank.

His northern frontier remained still more insecure than the southern, for Chu Ch’uean-chung did not succeed in destroying the Turkish general Li K’o-yung; on the contrary, the latter continually widened the range of his power.  Fortunately he, too, had an enemy at his back—­the Kitan (or Khitan), whose ruler had made himself emperor in 916, and so staked a claim to reign over all China.  The first Kitan emperor held a middle course between Chu and Li, and so was able to establish and expand his empire in peace.  The striking power of his empire, which from 937 onward was officially called the Liao empire, grew steadily, because the old tribal league of the Kitan was transformed into a centrally commanded military organization.