Over a thousand years ago, people in the Northern Song Dynasty (960–1127) in China invented the world's first paper currency—Jiaozi. The advent of Jiaozi demonstrated to the world that objects with little commodity value could become currency and perform significant fiscal and economic functions. From that point on, in addition to using commodities such as gold, silver, grain, and textiles as currency, people began to consciously explore the use of symbols of value as money.

Jiaozi was not a fleeting moment of fame; instead, it had a profound and tangible impact on the monetary development of China and the rest of the world. Ancient Chinese dynasties, including the Southern Song (1127–1279), Jin (1115–1234), Yuan (1206–1368), Ming (1368–1644), and Qing (1616–1911) successively issued paper currencies such as Huizi (会子), Jiaochao (交钞), and Baochao (宝钞) based on the system or principles of Jiaozi. In the Song and Yuan dynasties, the value of ancient Chinese paper money such as Jiaozi became known and imitated by the knowledgeable in various countries due to the movement of people and trade of goods between China and foreign countries. This pioneering invention of paper money gradually spread outwards, becoming a lever that propelled the development of global monetary finance.

The imitation of the Ilkhanate

According to the existing historical records, the Ilkhanate ruler, Ghazan Khan, was one of the earlier monarchs to imitate ancient Chinese paper money.

In 1294, Ghazan Khan announced the issuance of paper money in his capital Tabriz, modeling after the paper currency of the Yuan Dynasty. The History of the Mongols by d'Ohsson records that the notes were made of paper, rectangular in shape, with Chinese numerals on them, and also specified punitive measures against counterfeiters. Some of the supporting systems for the Ilkhanate's paper money were very similar to those of the Yuan Dynasty, such as the division into multiple denominations, the establishment of paper money institutions, known as the treasury, in several locations, staffed by officials including warehouse keepers, clerks, and cashiers, responsible for exchanging worn-out paper money and other matters.

Why did Ghazan Khan choose to imitate the Yuan Dynasty's system by issuing paper money? In addition to the kinship ties between the rulers Ilkhanate and the Yuan Dynasty, there was another important reason: the fundamental system of paper money was introduced to Ghazan Khan and other court officials by the Yuan Dynasty's Chancellor Bolod, who resided in the Ilkhanate. Ghazan Khan was extremely generous with rewarding and lavish in expenses, to the extent that "the money in the world was not enough for him." What's worse the financial situation of the Ilkhanate was much less encouraging. When the court officials consulted Bolod, he suggested adopting the "Chinese paper money system," replacing coins with paper money, thereby conveniently collecting gold and silver into the state treasury and alleviating the financial crisis.

European observations

Contemporary Europeans were more likely the observers of Chinese paper money. Travelers from afar recorded in writing what they had seen and heard about this magical oriental paper that could be used as money.

In 1253, Franciscan friar William of Rubruck, under the orders of King Louis IX, traveled to the Mongols to preach and observe political trends, and met many significant political figures of the time. He documented his journey and observations in a report titled The Journey of William of Rubruck to the Eastern Parts of the World (1253–55), which included what he heard about the Chinese paper money at Mangu's court. According to him, the commonly used money of Cathay was a type of paper of cotton, in length and width a palm, with several lines of characters, like those on the seal of Mangu. This account, though brief and not entirely accurate, is one of the earliest records we have of a European's observation of Chinese paper money. After the Mongols defeated the Jin Dynasty, they issued paper money in northern China twice, one in 1236 and another in 1252, just before Rubruck's departure for the East. In the southern part of China, paper money, such as Huizi, continued to circulate normally during the Southern Song Dynasty, playing a major role in fiscal and economic activities.

About twenty years after Rubruck's mission, a 17-year-old Italian youth set off for the East with his father and uncle, who arrived in Dadu, the capital of the Yuan Dynasty four years later and resided in China for seventeen years. This young man was the renowned Marco Polo. His prolonged stay allowed him ample time to observe many aspects of the Eastern world.

The Travels of Marco Polo devotes a significant amount of text to detailed and accurate descriptions of the paper money used in the Yuan Dynasty, including its raw materials, design, issuance and circulation mechanisms, denominations, and other crucial information. At that time, Europeans had begun to take a keen interest in the distant East, and Marco Polo captivated Western readers with his enchanting narrative about the wonders of Chinese paper money. He wrote that the Great Khan's paper money made from the bark of trees was in circulation throughout the entire country and the Great Khan had such a huge quantity of this money made that with it he could buy all the treasure in the world. Marco Polo vividly referred to paper money as "the Golden Touch." Although there was once scholarly debate about whether Marco Polo ever actually visited China, the precise accounts of paper money in his work serve as important evidence to confirm that this Italian indeed traveled to China.

The accounts of Rubruck, Marco Polo, and others not only satisfied the Europeans' curiosity about Eastern culture, but also quietly planted a seed in European society—currency did not necessarily have to be made of metal; paper could work, at least the Easterners on the other side of the world had done it. As the technology historian Robert Temple stated in his book The Genius of China: 3,000 Years of Science, Discovery, and Invention, "When the older methods of paper money issuance became known in the West, they had a profound influence on Western banking. The old Hamburg Bank and the Swedish banking system were based on Chinese models. Thus, some of the basic banking procedures of the Western world came directly from China."

Acceptance by neighboring countries

Unlike the imitation by West Asia and observation from Europe, some neighboring countries had a considerably high level of acceptance for ancient Chinese paper money, either circulating it directly or integrating it into their own monetary systems.

In 1285, Kublai Khan dispatched personnel carrying paper money worth a thousand ingots to the Kingdom of Malaya-bar on the east coast of South India to purchase rare treasures and exotic goods. In the Southeast Asian region, the paper money of the Yuan Dynasty and the local currencies formed a commonly acknowledged exchange rate in the market. According to the records of Dao Yi Zhi Lüe (A Brief Account of Island Barbarians) by the Yuan Dynasty navigator Wang Dayuan, Jiaozhi (交趾, modern-day northern Vietnam) used copper coins, with the civilian and official sectors exchanging 67 and 70 coins, respectively for one tael of Zhongtong paper money (issued during the Zhongtong era of the Yuan Dynasty). The Kingdom of Lavo (in the vicinity of modern-day Lopburi, Thailand) circulated shell currency, with 10,000 shells exchanged for 24 taels of Zhongtong paper money. The Kingdom of Wudie (in modern-day Myanmar) circulated silver and shell currencies, with each silver coin exchangeable for more than 11,520 shells or 10 taels of Zhongtong paper money.

The influence of ancient Chinese paper money on the Korean Peninsula and Japan was even greater. Historical records in Goryeo and Japan document the development of Chinese paper money. Unlike many countries that first encountered the paper money of the Yuan Dynasty, the knowledgeable people on the Korean Peninsula and in Japan were not only aware of the issuance of paper money during the Song Dynasty but were also familiar with items such as the leather currency of the Han Dynasty and the currency of the Tang Dynasty named flying money, which were considered precursors to paper money. Goryeo used the paper money of the Yuan Dynasty; conversational Chinese textbooks such as Old Qita also contained many scenarios involving paper money transactions, serving as reference for those doing business in the Yuan Dynasty. In 1391, the Goryeo Dynasty announced the issuance of paper money modeled on the Song Dynasty's Huizi and the Yuan Dynasty's Baochao. Later, Lee Bang-won, King Taizong of the Joseon Dynasty, who had previously visited the Ming Dynasty of China, started the printing of the "Jianwen paper currency" and "Yongle paper currency" based on the pattern of the Ming paper money. At the end of the 13th century, the Ashikaga Shogunate in Japan issued paper money and declared it to be used in parallel with copper coins. During the Edo period, various Japanese domains issued their own paper money called "hansatsu," which was gradually replaced by the modern currency, the yen, during the Meiji era.

The global impact of ancient Chinese paper money was not achieved overnight, but rather through a gradual process. It can be said that the Song Dynasty was the era in which paper money originated, and various systems were successively established, and that the Yuan Dynasty, with its formidable influence, brought Chinese paper money to the world and leveraged China's paper money system to propel the development of global currency and finance. Some scholars believe that the spread of ancient Chinese paper money not only advanced the development of global currency and finance but also facilitated the spread of printing technology, another significant invention that influenced human civilization.

The author is Wang Shen, assistant researcher at the Institute of Ancient History, Chinese Academy of Social Sciences.

Liu Xian /Editor    Zhang Rong /Translator

Yang Xinhua /Chief Editor    Liu Xian /Coordination Editor

Liu Li /Reviewer

Zhang Weiwei /Copyeditor    Tan Yujie /Image Editor

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