It is stated in Chinese texts that the system was taught to the Malabari traders by the Chinese, some say by Cheng Ho or Zheng He in particular. As he and his trading entourage had no clue about Arabic or Malayalam, they figured out a new method. But I am sure now that the system existed before Cheng ho. So effective was it that since 1407, the system has remained unchanged!! Even today go to the markets out there in Calicut and the process uses fingers under a towel…The language that withstood the test of time has been around for over 600 years!!!
This Time article provides details as recounted by a Calicut trader to A Ghosh - In a sudden, unexpected gesture of generosity, Harikant inducts me into a secret ritual, practiced by spice traders for over a millennium: the bargaining of prices. Buyer and seller clasp right hands under a towel or handkerchief and, thus hidden, make offers and counteroffers with a system of finger signals. If I grasp all of your fingers under the towel, I'm offering either 5 or 50, depending on the context of the transaction. If I tug at your index finger, it means I'm offering 1 or 10; two fingers indicate 2 or 20, and so on. There are more complex signals, but these are not to be shared with prying journalists. Buyer and seller use combinations of this code at lightning speed—without exchanging a word—to do business worth millions of rupees.
This undoubtedly is how the admiral's minions conducted negotiations while they were here. (Ma Huan's account, Triumphant Visions of the Ocean's Shores, cites deals sealed by the clasping of hands.) The finger-code system was devised to allow traders from all over the world to do business here without having to learn Malayalam, the local language. The towel keeps the deal-making under wraps, a useful precaution in an overcrowded bazaar where the next man might try to undercut you. For added secrecy, the codes are commodity-specific: rice traders have different signals from spice traders. In an era of handheld computers that can exchange data by infrared beams, no spice merchant in Calicut would dream of giving up the old way. "It's a perfect system," Harikant beams. "There's no need to change what's perfect."
Now how could I check if this practice existed outside India, especially China? So I Googled quite a bit and finally hit pay dirt. This is exactly how gems, especially jade is traded in China & Hong Kong.
VB Meen who attended an auction at the Tai Tung Hotel in 1962 stated - Presently, the auctioneers appeared and placed a boulder on the table... He gave the number of the specimen and a brief description of its appearance... Then he gave the price the owner was asking for it. Remember that this was probably many times what the owner really expected to get. Then the auctioneer draped a towel over his hand and walked through the group. If somebody wished to bid, he attracted the auctioneer's attention and they clasped hands under the towel. By appropriate pressures on the auctioneer's fingers, the bidder indicated his offer. Each bidder, in turn, did this until all had been taken care of. Then, the auctioneer went to the owner, who all this time was seated in his rooms with his stock of jades. If the owner did not accept the highest bid, the auctioneer returned... and started taking new bids... Eventually, of course, the sale is made or the piece is withdrawn by the owner and then a new one is offered for sale
Ma Huan explains the honor of this deal in his accounts on Ku-Li (Calicut) - Ying-Yai Sheng-lan or The Overall Survey of the Oceans’ Shores Circa 1433 - The chief and the Chetti with his Excellency Zheng He, all join hands together and the broker then says “in such and such a moon on such and such a day we have all joined hands and sealed our agreement with a hand clasp, whether the price be dear or cheap, we will never repudiate it or change it”
On the other hand, it chould also have been a Calicut ritual taken back by Chinese traders…Who knows for sure??? What makes me think it went to China from India?
This paragraph from the above Ma Huan account states thus, proving that it existed before Cheng Ho's arrival - In their (Ku-li) method of calculation, they do not use a calculating plate abacus, for calculating, they use only the two hands and two feet and twenty digits on them and they do not make the slightest mistake, this is very extraordinary.
PHILLOTT, D.C. (1906) A note on the mercantile sign language of India. J. Asiatic Soc. Bengal new series, II (7) 333-334. Notes that various covert buying and selling codes could be used by two parties in the bazaar, who grasped hands under a covering drape and indicated their price and offer by the number of fingers given or taken, or by the section of a finger, or other manual codes, according to a well-known practice. This reduced the level of interference from idle bystanders.
PYRARD, François  The Voyage of François Pyrard of Laval to the East Indies, the Maldives, the Moluccas and Brazil, ... from the third French edition of 1619, ed. and transl. Albert GRAY & H.C.P. BELL (1888). 2 vols. London: Hakluyt.II: 178-179, silent, concealed bargaining amidst the vast crowds buying and selling at Goa around 1608: "they are wont to make signs under their silk or cotton mantles, which are worn like our cloaks: so touching the hands thus privily, they give one another to understand by the fingers at what price they are willing to buy or sell, without the others knowing or being aware of anything."
VARTHEMA, Ludovico di  The Travels of Ludovico di Varthema in Egypt, Syria, Arabia ..., in Persia, India, and Ethiopia, A.D. 1503 to 1508, ... from the original Italian edition of 1510, transl. John W. JONES, ed. George P. BADGER (1863), 2 vols, London: Hakluyt.I: 168-169, description, with footnoted additions, of Indian bargaining conducted by finger signs hidden under a cloth, at Calicut