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. Paper Money: The Chinese invented paper money in the 9th century AD. How China created the world's first paper currency : The Indicator from Planet Money Paper currency has become standard around the world, but that wasn't always the case. Replica 100 Yuan Notes are also stuck on tombs. Still, in China, paper currency first began circulating over 1,000 years ago. It is hardly surprising that the first notes or better, the first paper money, appeared in China. This practice is derived from the credit notes used by merchants for their long-distance trade. Paper money has elastic supply and it can be printed for any purpose at any time. In exchange, they received bearer notes or the so-called hequan. (…) In fact, paper money is made there from the sapwood of the mulberry tree, whose leaves feed the silk worm. Paper money represented a currency. "The Invention of Paper Money." Published by China Reconstructs Magazine, Beijing, China, 1983. Macerated vegetable fiber fitted into porous molds became the first-ever paper at the hands of Chinese Eunuch Ts’ai Lun in 105 A.D. From paper’s earliest history, when it helped spread ideas and knowledge throughout the world, to today, where an overabundance of paper trash leaves its mark on the landscape, paper’s invention signifies an enormous impact on society in multiple ways. (2021, February 16). Biography of Kublai Khan, Ruler of Mongolia and Yuan China, Invention Highlights During the Middle Ages. Kai Yuan Tong Bao was circulated in many countries that had close commercial tie with the Tang Dynasty. This money has been put into circulation during the Yuan period by the Mongol chief Kublai Khan (1214-1294) : “It is in the city of Khanbalik that the Great Khan possesses his Mint. Unfortunately, those notes were issued continuously without redrawing from circulation the old ones. We do for instance know that paper was introduced to Xinjiang in northwestern China very early through travellers on the Silk Road. This practice of course led to an inflationary spiral: in the beginning, in 1380, one guan was worth 1000 copper coins, in 1535, one guan valued merely 0,28 copper coin! Examples of places along the Silk Road were paper was present as early as the 2nd century AD are Loulan, Kotan, Kusha, and Dunhuang. In the year since, China’s plastics imports have plummeted by 99 percent, leading to a major global shift in where and how materials tossed in the recycling bin are being processed. After everyone in China had started to use Paper Money, Khan noticed that more and … ThoughtCo. Th… Due to this lack of coins, also the dead had to change their habits of taking a coin with them to pay their passage to the other world. For their traditional calligraphy with brushes they used linen, hemp, bamboo (cane) and bark of the mulberry tree. The outflow of the coins caused money shortage in China so during the reign of Emperor Xi'an Zong (806-820) the government practiced the earliest transfer method, fei qian, namely flying money. Today, both rough-straw paper and paper money are distributed in all corners of the province. In 1024 the Authorities confer themselves the issuing monopoly and under Mongol governement, during the Yuan Dynasty (1279-1367), paper money becomes the only legal tender. On each sheet which is to become a note, specially appointed officials write their name and affix their seal. A much lighter coin, the wu zhu 五 铢 was introduced in 118BCE, retaining the same shape with a standard weight [a Zhu is a measure of weight]. At the end of the Tang period, traders deposited their values with their corporations. J.D., University of Washington School of Law, B.A., History, Western Washington University. Home » News » Paper money, a Chinese invention? That makes the note authentic. When Maro Polo traveld to China in the 13th century, he was so impressed by paper money that he described how it was made, used and valued. Once back home, Marco Polo amply reported about his experiences and adventures in the Chinese Empire but when he talked about paper money he only met disbelief. In fact, when the famous traveler Marco Polo visited China, somewhere between 1275 and 1292, he found paper money so intriguing that he dedicated a whole chapter to it in his book. The development of paper money resulted from a larger historical process whereby the leaders of the Song Dynasty (AD 960-1279) had to devise new ways to compensate for the demand for metal currency that resulted from their expanding economy. 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. (…) The method of issue is very formal, as if the substance were pure gold or silver. Room 5 – What is the role of the National Bank? The impact these inventions had on the educational, political and literary development of the world is simply incalculable. While the glut of plastics is the main concern, China’s imports of mixed paper have also dropped by a third. Khan already knew before that not a lot of people would want to use this product, so he established a rule, “It’s either you use the paper money or you die”. During the Tang Dynasty (618-907) there was a growing need of metallic currency, but thanks to the familiarity with the idea of credit the Chinese were ready to accept pieces of paper or paper drafts. Over this period, paper notes were issued irresponsibly, to the point that their value rapidly depreciated and inflation soared. 'Paper money' (actually yellowy low-grade perforated paper) is even burned for the dead in the belief (or tradition) that it will give them money for the afterlife, especially on Qingming Festival or Tomb Sweeping Day. Paper was another Chinese idea, from 2,000 years ago. First paper, then paper money. The borders are attractively designed with arabesque style flowers and dragons. 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 djaou or 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. When Khan took over China, Paper money was compulsory. This is pure logic. May we consider this as a real means of payment? This was still many years before paper currency would reappear in Europe, and three centuries before it was … Being shrewd business people, the Chinese found the weight of the coin money to be cumbersome and figured that printed money would be more efficient. In China rolls of silk or gold ingots could be used to pay for any other type of goods. Denominations of Chinese Money After reading the chapter title like that, Polo’s readers probably thought the Great Khan to be the Great Con. For smaller exchanges metal coinage was used, first in the shape of tools, then in the form of more convenient small coins. In 105 A.D. Cai Lun, a eunuch during the Eastern Han Dynasty, invented paper from worn fishnet, bark and cloth. And in 1155 A.D., Liu Ching produces first printed map in China. Paper money saves gold and silver from useless lockup for other purposes.Paper money can be counted more easily than metallic money. Those notes were issued in values of 100, 200, 300, 400 and 500 wen and 1 kuan or 1000 wen. Marco Polo was amused at the thought that whereas the alchemists had struggled vainly for centuries to turn base metals into gold, the Chinese emperors had very simply turned paper into money. 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. One of the more notable applications of printing technology in China was the chao, the paper money of the Yuan, made from the bark of mulberry trees. The inscriptions left and right of the value there read as Note of the great Ming dynasty and Circulating within the Empire. Room 9 – The stock exchange, just an ordinary market. References . Szczepanski, Kallie. During the Tang Dynasty (618-907) there was a growing need of metallic currency, but thanks to the familiarity with the idea of credit the Chinese were ready to accept pieces of paper or paper drafts. This dynasty lasted from the year 618 to 907 AD, and paper money appeared around year 800. Ancient China has had many contributions to the modern world, especially their inventions. This money, known as “flying cash”, were certificates issued by the Tang government to pay local merchants in distants parts of the empire. For centuries the mulberry tree has been cultivated in the Valley of the Yellow River (Shang period, 18th to 12th century BC). As a result the name “Hung Wu” figures on the notes even after the end of his reign. As with many other Qin reforms the following Han dynasty revised rather than replaced the currency. Dr. Kallie Szczepanski is a history teacher specializing in Asian history and culture. Then beginning in 1455, the use of paper money in China disappeared for several hundred years. If everyone in your class pulled out all the money in their pockets, how old do you think the oldest coins would be? As mentioned above, the earliest known use of paper money in China is from the Tang dynasty. Confucianism blended the typically separate spheres of education, government and church. Room 13 – Central banks, a question of confidence, Room 14 – Purchasing power down the years. Note printed on dark slate paper of the mulberry tree. for emergency uses such as war or depression period. Bimetallism Definition and Historical Perspective, The History of Photography: Pinholes and Polaroids to Digital Images. The first traces of paper date back to the 2nd half of the 1st century BC but then it was not used as writing material. [61] [62] Although the output of copper currency had expanded immensely by 1085, some fifty copper mines were shut down between the years 1078 and 1085. "The Invention of Paper Money." About the 6th century notes replaced coins as burial money. The Mongols experimented with establishing the Chinese-style paper monetary system in Mongol-controlled territories outside of China. The first coins, however, are much, much older. His subjugation of the Song Dynasty in southern China made him the first Mongol to rule over the entire country and led to a long period of prosperity for the empire. The making technique was exported to Korea in 384 A.D. A Korean Monk then took this skill with him to Japan in 610 A.D. And again, it required social institutions: paper money is only as good as people's willingness to trust it. Planet Money … Clerical texts and reports for the Court were henceforth written on paper but still in a vertical direction. They have made inventions like porcelain, paper money, compass, gunpowder and fireworks. It is fairly large (340 x 221 mm) and printed on dark slate paper of the mulberry tree. With the invention of paper money, commerce between nations was facilitated. Does texture of paper affect the distance a paper airplane will fly? China: 7000 years of Discovery China's Ancient Technology, written and edited by China Science and Technology Museum. The resulting slurry was then poured over a horizontal mold; loosely-woven cloth stretched over a framework of bamboo allowed the water to drip out the bottom or evaporate, leaving behind a flat sheet of dry hemp-fiber paper. When this work has been done in accordance with the rules, the chief impregnates his seal with pigment and affixes his vermillion mark at the top of the sheet. The first western country paper money was issued in was Sweden in 1661. Initially it was used for wrapping precious objects, but soon people began to write on it because … While paper money was certainly easier to carry in large amounts, using paper money had its risks: counterfeiting and inflation. It started in the Medevil ages the money lenders started issuing IOUs. This practice is derived from the credit notes used by merchants for their long-distance trade. In the inferior cartouche, a long inscription, which must be read vertically from right to left, gives more information on the note : Printed by imperial authorisation by the Minister of Finance (2 columns to the right); The note of the Great Ming Dynasty circulates together with copper money. China tried to keep the art of paper making a secret to pr… These raw materials could be easily found at a much lower cost so large quantities of paper could be produced. The improvement was such that paper gradually replaced the former bamboomats. ThoughtCo, Feb. 16, 2021, thoughtco.com/the-invention-of-paper-money-195167. Important progress has been made between the 2nd and 4th century AD: Thanks to the use of soaked bast of the mulberry the quality of the pulp significantly improved and paper became less heavy. 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. Paper money cost very little, but it required a certain technological sophistication, such as good printing. It is primarily used for writing, artwork, and packaging; it is commonly white. These IOUs allowed the lenders to expand thier usable money pool. Paper, Printing and the Printing Press The blanks had to be filled in by hand but this was never put into practice. Did you know that Charles V came from Ghent? With the invention of paper and printing on its account, this country was almost destined to produce the first paper money. During the Song Dynasty (960-1276) booming business in the region of Tchetchuan likewise resulted in a shortage of copper money. For a couple hundred years, China had a paper currency that worked quite well, centuries before anybody else had it. On all notes issued between 1380 (13th year of the Emperor Hung Wu’s reign) and 1560 the names of Hung Wu and the Minister of Finance can be read. paper was important to china because it was also used to make money. Paper is a thin nonwoven material traditionally made from a combination of milled plant and textile fibres. Understanding Economics: Why Does Paper Money Have Value? 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. Szczepanski, Kallie. Maybe 20 or 30 years old, and perhaps one or two would be even older. During the Ming Dynasty (1368-1644) the issuing of notes is conferred to the Ministry of Finance. Early paper-makers in China used hemp fibers, which were soaked in water and pounded with a large wooden mallet. The … While paper money was certainly easier to carry in large amounts, using paper money had its risks: counterfeiting and inflation. She has taught at the high school and university levels in the U.S. and South Korea. Paper fabrication during the Han Dynasty (206 BC – 220 AD). The inventions of paper money and the compass produced similar effects in China during the middle ages in that they made it easier to engage in trade. The Yuan government first used woodblocks to print paper money, but switched to bronze plates in 1275. Woven into history – A tapestry of Charles V in the museum of the National Bank of Belgium, Belgian emergency money from the First World War, Videos about the tasks and activities of the NBB, Marsh G., “Chinese note of Ming Dynasty rates among oldest paper currency known”, in. Thus one kuan had the same value as 1000 copper coins or 1 liang (1 tael) of silver; 4 kuan equalled 1 liang of gold. As the PBOC’s digital money is designed to replace cash, it won’t have a big impact on the broad money supply, and thereby its effect on monetary policy will likely be neutral. The Yuan minister Bolad was sent to Iran, where he explained Yuan paper money to the Il-khanate court of Gaykhatu. 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. Paper money was introduced as a new idea to western civilization by Marco Polo in a chapter of his Travels entitled: " How the Great Khan Causes the Bark of Trees, Made into Something Like Paper, to Pass for Money All Over His Country ". It also helps to Govt. By the 15th century even China had more or less given up paper money. The value was fixed so that 1 jin of gold coins was equal to 10,000 bronze wu zhu coins.. China was the commercial center of Asia. In the travel accounts of the Venetian traveller Marco Polo the reader becomes familiar with the fascinating world of paper money production. The value of Yi guan (or 1 kuan) is represented by the two characters and by ten heaps of coins just beneath them. Szczepanski, Kallie. Coins as we know them were invented in China some 3,000 years ago and have been used in various forms around the world ever since. By using certificates, the government could avoid having to transport metal money far away. This centuries-old way of writing is probably a result of writing on strips of bamboo which were tied together. The inscriptions in the heading read the name of the issuer and the name Hung Wu, the founder of the Dynasty. Let's learn more about ancient China's coins and other parts of its eco… Which means a headstart of no less than seven centuries on the West! This religion focused on the revival and interpretation of the ruling religion of the Zhou dynasty, which taught that by taking proactive measures, such as performing ceremonies and rituals, Chinese citizens honored the gods, who returned the appreciation with good luck and prosperity. John Law and the Invention of Paper Money. China's first official regional paper-printed money can be traced back to the year 1024, in Sichuan province. 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. 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. One of the many things that spread along the Silk Road was the custom of making paper from natural fibers. Cagan's Hypothesis and the First Nationwide Inflation of Paper Money in World History. 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.Â. Of course not, but it is remarkable that also here paper replaces very smoothly the copper coins that were used before. The sapwood, between the bark and the heart, is extracted, ground and then mixed with glue and compressed into sheets similar to cotton paper sheets, but completely black. The Invention of Paper Money. [63] China today still are inventing things, something's that have been created before was made by accident like the gunpowder. Merchants were invited to deposit henceforth their metallic money in the Government Treasury in exchange for official “compensation notes”, called Fey-thsian or flying money. Forgers will be decapitated and those who can give information which leads to the arrest of forgers are offered a reward of 250 liang of silver on top of the belongings of the forger (4 central columns); (made in the era) Hung Wu ___year ___month __ day (left column). America followed in 1690, France in 1720, and Germany not till 1806.At first paper money did not succeed everywhere. Some merchants issued private drafts covered by a monetary reserve which initially consisted of coins and salt, later of gold and silver. In fact, if we keep to the concept of paper money as notes issued with a monetary reserve as a warranty, the first Chinese notes date from the 10th century. The note in the showcase dates back to the same period. Paper money was not used in Europe until the 17th century. https://www.thoughtco.com/the-invention-of-paper-money-195167 (accessed February 24, 2021). Khan had send all of his top men out to every single town in China to tell them about the Paper Money. This paper currency is circulated in every part of the Great Khan’s dominions, nor dares any person, at the peril of his life, refuse to accept it in payment.”. Paper money began with the "flying cash" of the Tang (618-907) dynasty around 800. Following increases in trade, the system of barter, or the exchange of one material for another, was replaced by a system where one particular commodity came to be a common form of payment. Those hequan were a real success and the idea was exploited by the Authorities. Those notes are considered to be the first to circulate as legal tender. The counting of big amount of coins is a tedious.