Coins or Paper Money

We talked about the network effects of a real society many days ago. Hopefully, that explains why Chinese don’t use voice mail, calendar, or classified. We talked about it in YLF 2009 conference, and there are people who don’t agree with what I said.

Then I have another great example. When I was in Chengdu, no one uses coins. They always use the paper money of 1 RMB. Everyone hates coins. Why? Not for a rational reason. It is just because when you have a 1 RMB coin, you cannot spend it. People won’t accept it, and they ask you to change it to 1 RMB paper money. Just because you cannot spend it, you don’t accept it, and because you don’t accept it, others cannot spend it. The stronger the current feedback loop is, the harder it is to break.

On the contary, people in Shanghai LOVE coins. They don’t want paper money, although they unwillingly accept it. People will be surprised to get 7 coins as change to buy a 3 RMB ticket with 10 RMB note.

That is the network effect. Before debating about whether coin money is better than paper money or not, we need to look at where you are going to spend it, Chengdu, or Shanghai.

8 thoughts on “Coins or Paper Money

  1. GN

    so… how did it start… why is that people don’t accept coins in Chengdu? They use to… well, 20 years ago.

  2. shan

    beijing is the same. it’s all paper money here. the only coins i’ve seen are 10cent coins. i prefer paper as they’re easier to carry. coins are very cumbersome, and you tend to take them out of your pocket and throw them on a table somewhere, never to be used again. that’s dangerous when you have high denomination coins, like the 2euro coin for example

  3. Joyce

    A colleague suddenly left our Hong Kong office to go back to America. (Long story).

    All along, he said he hated carrying coins. Many of my foreign colleagues say the same thing. It’s heavy. It’s inconvenient.

    Everyone here is spoiled by the Octopus card, which allows you to “beep” small expenses, like a bus ride or snack at 7-Eleven.

    After this guy left, we discovered a HUGE box of coins in his desk. He must not have used a single coin for years! It was worth alot. (We have HK$5 and HK$10 coins).

    We counted it all up, brought the coin rolls to the bank, and used the money to buy regular snacks for our office! :)

  4. chake

    Those little tubes of Mini-M&Ms they sell at a lot of the convenience stores are perfect for saving your 1 RMB coins. They fit exactly 50 RMB coins in each tube.

  5. MMS

    Coins can certainly become heavy and a nuisance to carry around if you have a lot of them, yet at the same time notes for smaller denominations don’t make a lot of sense either. I htink it depends a lot on the currency value.

  6. Michael

    In my hometown-Pingliang (Gansu province), most people don’t accept coins, they all use paper money. because use coin can not bring us convenience more than paper money, but in shanghai not.

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