Paper money is an invention of the Song Dynasty in China in the 11th century CE, nearly 20 centuries after the earliest known use of metal coins. While paper money was certainly easier to carry in large amounts, using paper money had its risks: counterfeiting and inflation.
Earliest Money
The earliest known form of money is also from China, a cast copper coin from the 11th century BCE, which was found in a Shang Dynasty tomb in China.Metal coins, whether made from copper, silver, gold, or other metals, have been used across the globe as units of trade and value.They have advantages—they are durable, difficult to counterfeit, and they hold intrinsic value.The big disadvantage?If you have very many of them, they get heavy.
For a couple thousand years after the coins were buried in that Shang tomb, however, merchants, traders, and customers in China had to put up with carrying coins, or with bartering goods for other goods directly.Copper coins were designed with square holes in the middle so that they could be carried on a string.For large transactions, traders calculated the price as the number of coin strings.It was workable, but an unwieldy system at best.
Paper Money Takes the Load Off
During the Tang Dynasty (618–907 CE), however, merchants began to leave those heavy strings of coins with a trustworthy agent, who would record how much money the merchant had on deposit on a piece of paper.The paper, a sort of promissory note, could then be traded for goods, and the seller could go to the agent and redeem the note for the strings of coins.With trade renewed along the Silk Road, this simplified cartage considerably.These privately-produced promissory notes were still not true paper currency, however.
At the beginning of the Song Dynasty (960–1279 CE), the government licensed specific deposit shops where people could leave their coins and receive notes.In the 1100s, Song authorities decided to take direct control of this system, issuing the world's first proper, government-produced paper money.This money was called jiaozi.
Jiaozi under the Song
The Song established factories to print paper money with woodblocks, using six colors of ink.The factories were located in Chengdu, Hangzhou, Huizhou, and Anqi, and each used different fiber mixes in their paper to discourage counterfeiting.Early notes expired after three years, and could only be used in particular regions of the Song Empire.
In 1265, the Song government introduced a truly national currency, printed to a single standard, usable across the empire, and backed by silver or gold.It was available in denominations between one and one hundred strings of coins.This currency lasted only nine years, however, because the Song Dynasty tottered, falling to the Mongols in 1279.
Mongol Influence
The Mongol Yuan Dynasty, founded by Kublai Khan (1215–1294), issued its own form of paper currency called chao; the Mongols brought it to Persia where it was called djaouor djaw.The Mongols also showed it to Marco Polo (1254–1324) during his 17-year-long stay in Kublai Khan's court, where he was amazed by the idea of government-backed currency.However, the paper money was not backed by gold or silver.The short-lived Yuan Dynasty printed increasing amounts of the currency, leading to runaway inflation.This problem was unresolved when the dynasty collapsed in 1368.
Although the succeeding Ming Dynasty (1368–1644) also began by printing unbacked paper money, it suspended the program in 1450.For much of the Ming era, silver was the currency of choice, including tons of Mexican and Peruvian ingots brought to China by Spanish traders.Only in the last two, desperate years of Ming rule did the government print paper money, as it attempted to fend off the rebel Li Zicheng and his army.China did not print paper money again until the 1890s when the Qing Dynasty began producing yuan.
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FAQs
In the 10th century, during the Song dynasty, generally circulating promises to pay were introduced to make up for a shortage of copper for coins. The first paper money as we know it was introduced by the Jin dynasty in the 12th century when it began issuing Exchange Certificates without any date limitation.
How was Chinese paper money invented? ›
900 CE) started trading receipts from deposit shops where they had left money or goods. The early Song authorities awarded a small set of shops monopoly on the issuing of these certificates of deposit, and in the 1020s the government took over the system, producing the world's first government-issued paper money.
Why did China most likely use paper money? ›
They would issue paper notes that were convertible for copper. That way, when merchants needed ready money, they could go to the bank for a stack of bills instead of hauling around satchels of heavy metal. These bills would then circulate in the market until someone had a need for hard currency.
When was paper invented in China? ›
The birth of paper, as we know it today, took place under the Chinese Han Dynasty in AD 105. Ts'ai Lun, a court official, invented a papermaking process which primarily used rags (textile waste) as the raw material with which to make paper.
What is the oldest money in China? ›
Beginning about 5000 BC, cowrie shells were the first form of currency used in China. Later in the Bronze Age, imitations of cowrie shells, made of other types of shell, bone and bronze, were introduced. With the advent of bronze-cast coinage (771 – 221 BC), Eastern Zhou states minted their own distinctive coins.
How did the invention of paper money change the world? ›
The shift to paper money in Europe increased the amount of international trade that could occur. Banks and the ruling classes started buying currencies from other nations and created the first currency market.
How did ancient China make money? ›
Mainly people shipped silk to the West, and imported gold. People first used cowrie shells for money in China as early as 1800 BC, under the Shang Dynasty. Then people used metal imitations of cowrie shells, and then metal strings of beads called cash.
How did China benefit from paper? ›
The invention of paper in China
Apart from the conventional use of paper as a form of writing material for Chinese scholars, it was also used to preserve the flavour of tea. Another type of material originating in China is rice paper.
Does China still use paper money? ›
In the early 20th century, China started using a combination of banknotes and coins as money, which by then had become standard across the world. It remains the standard today, although electronic payments are threatening to make banknotes and coins obsolete.
Is China the first country to issue paper currency? ›
The first use of paper currency can be traced back to the year 806 AD in China. The paper currency was known as flying money. The term flying money came from the fact that it had a tendency to blow away in the wind. The Song dynasty was the first to issue real paper money.
Origin: China
The earliest accounts of paper being used for cleaning up are from 6th century China, though it's likely people could have used it even earlier than that. Large-scale manufacturing of toilet paper officially started in the 14th century in the modern-day province of Zhejiang, China.
What problem did paper solve? ›
The information had to be set on a lightweight and durable medium that was easily transportable. The invention of paper allowed papyrus and parchment to be replaced with a material that was easier and, with the advent of new production techniques, cheaper to make.
What two things were made easier because of the invention of paper? ›
The early trade of paper and perhaps more importantly the spread of paper making technologies along the regions encompassed by the Silk Roads greatly improved our collective abilities to record, store, and transport knowledge and information.
When was China the poorest? ›
In 1978, China was one of the poorest countries in the world. The real per capita GDP in China was only one-fortieth of the U.S. level and one-tenth the Brazilian level. Since then, China's real per capita GDP has grown at an average rate exceeding 8 percent per year.
Who owes China the most money? ›
These countries owe China billions. Some are struggling to pay
- Kazakhstan: $64.2 billion (£51bn) total debt. ...
- Angola: $64.8 billion (£52 billion) total debt. ...
- Pakistan: $68.9 billion (£55bn) total debt. ...
- Venezuela: $112.8 billion (£90bn) total debt. ...
- Russia, $169.3 billion (£134bn) total debt.
Real paper money was introduced early during the Song dynasty (960-1279) by a group of wealthy merchants and financiers in Szechuan. Notably, Szechuan was the province where Chinese printing first occured.
When did the Yuan Dynasty start using paper money? ›
In 1234, the Mongols defeated the Jin and conquered Northern China. After becoming the Khan of the Mongol Empire in 1260, Kublai promulgated that a new paper money, the zhongtongchao 中統鈔, pegged to silver, was to be issued to replace circulating notes.
What were ancient Chinese coins made of? ›
Chinese coins were manufactured by being cast in molds, whereas European coins were typically cut and hammered or, in later times, milled. Chinese coins were usually made from mixtures of metals such copper, tin and lead, from bronze, brass or iron: precious metals like gold and silver were uncommonly used.
Does China use paper money anymore? ›
Chinese citizens have embraced digital payment systems. While paper money is still used in China, the country's two most popular mobile payment technologies, WeChat Pay and Alipay, are changing how Chinese consumers think about commerce. In some cases, these digital payment systems have made cash obsolete.
Did the Chinese invent the mechanical clock? ›
The world's first mechanical clock -Water-driven Spherical Birds – was invented by Yi Xing, a Buddhist monk in 725 A.D.. It was operated by dripping water which powered a wheel that made one revolution in 24 hours.
