1919 40c on 20c Franklin, Deep Ultramarine, Shanghai Overprint

Shanghai Overprints are intriguing stamps issued during a unique time in world history.  They were issued in very limited quantities, making them hard to find today.  They were also short-lived, only available for sale from 1919 to 1922. But for modern collectors, they are a direct tie to this interesting period in US-China relations. The time after China opened its borders to American settlers and before it became a Communist nation.

Why Did the U.S. Establish a Postal Agency in China?

US merchants began trading with China after the Revolutionary War, with much of the business conducted in the port city of Shanghai. After the First Opium War and the signing of the Treaty of Nanking, America established formal diplomatic relations with China. Under this agreement, Americans were allowed to buy land and build hospitals and churches. US settlements in
China were much like home, with US laws and amenities. The US maintained its own courts, police, and armed forces. 

Initially, American mail had to pass through the British post office in Hong Kong, but that proved expensive and unreliable. Then in 1865, the US Post Office was authorized to provide its own mail service to China. The Pacific Mail Steamship Company built four ships to carry mail from San Francisco, by way of Japan, to Shanghai. When mail service first began, it cost 10¢ to send a letter to China. This was later lowered to 5¢ with the establishment of the Universal
Postal Union, which regulated how mail was sent between countries. Starting in
June 1903, US domestic postage rates were applied to Shanghai mail.

At first, the US Postal Agency accepted payment in US currency only, which was inconvenient for many customers. By not accepting Chinese currency, the Postal Agency was also hurting its revenue. That changed in 1919, when they finally decided to accept Chinese currency. By that time, the value of the Chinese tael was equal to half a US dollar.

New stamps were overprinted with the exchange rate, which was double the stamp’s face value. So the 1¢ stamp was overprinted 2¢, the 2¢ stamp was overprinted 4¢, and so
on. The overprinting was done by the Bureau of Engraving and Printing, except in the case of US #K17 and K18, which were locally overprinted in Shanghai.

US stamps were also available without overprints in Shanghai. It was all a matter of how the customer was paying... if they bought a stamp with US currency, they received a normal US stamp, but if they purchased a stamp with Chinese currency, they received an overprint.