The Development of Paper Money in Ancient China

One of the oldest countries in the world, China had been the leader of cultures in the world before the Qing Dynasty (1644-1911) rejected connecting to any culture from the Western. Therefore, the period from the Tang Dynasty (618-907)to the Song Dynasty is the golden age of Chinese culture. There were many amazing innovations created during this period. One of the most important innovations is fei qian, which made China the first country to use paper money. During the Tang Dynasty, as the predecessor of paper money, fei qian was created for three main reasons: outflow of the coins, convenience, and security. Fei qian became more and more popular and evolved into paper money during the Song Dynasty (960-1279).

The Tang Dynasty was one of the most enchanting times in Chinese history. China was the commercial center of Asia, and the ample interactions between it and the Asian countries instigated the outflow of coins from China. However, “the outflow of the coins caused money shortage in China so during the reign of Emperor Xian Zong the government practiced the earliest transfer method, fei qian, namely flying money.” There were two types of fei qian. In the beginning, it was created by some private banks. Businessmen could cash it in the banks and get a receipt. Afterward, they could travel to any place in China and withdraw their money from one of the bank’s offices in China with the receipt. Obviously, except for the problem of the outflow of the coins, fei qian was more convenient and secure than coins.

As mentioned, China was the commercial center of Asia during the Tang Dynasty, so it was kind of ridiculous that businessmen carried bags of coins to travel hundreds kilometers to other countries for trading. Therefore, the government created the official fei qian. Basically, these two types were similar. The only difference between them was the private one did not charge any fee for cashing fei qian.Although fei qian dealt with some economic problems, it could not solve the new problems of the rapid development of the economy.

In the ancient China, the main material of coins was bronze. During the Tang Dynasty, because of the development of the economy, countless coins were consumed which created a shortage of bronze. After the Tang Dynasty collapsed, there were many wars for governance, and it aggravated the problem of the shortage of bronze. Therefore, when the Song empire took over China, the government improved the fei qian and created the paper money named Jiao Zi.

“Jiao Zi was the earliest paper currency in the World.” Actually, in the beginning, Jiao Zi was created by some businessmen. However, it did not work very well because there was lack of official power to control the amounts. After several years, the problem of lack of bronze became more serious than before. In order to cope with this problem, Jiao Zi was presented again. Contrary to the last time, the Jiao Zi was made by government. The “Song government set up an office in Chengdu to handle with the issuance of jiao zi. In the next year, stately jiao zi was issued.” This is the first time that people used paper money made by the government. Three types of currency were created by the Song Dynasty. The paper money, however, was not successful during this period, perhaps because only “issued small amounts, used in a limited area, and good for a specific time period.” During the last years of the Song Dynasty, because of the weakness of the army, the government spent a lot of money and gold to made peace with other countries, which directly caused inflation. Finally, the Jiao Zi and the other types paper money lost value and disappeared, accompanied the Song Dynasty’s collapse.

Although the Song Dynasty’s paper money was gone, it also existed during The Yuan Dynasty (1271-1368). The Yuan Dynasty was the zenith of using paper money in the ancient China.”Throughout the dynasty, paper notes were used and the system was developed and perfected.” The Yuan Dynasty, however, triggered too many wars invading other countries including western countries, and it impoverished the Yuan Empire. It persisted only ninety years, and the superior system of paper money went into the grave as well.

The development of paper money in ancient China was about 300 years. From the fei qian, the forerunner of the paper money, to the Jiao Zi, the first formal paper money, and then it ended on the perfect system of paper money during the Yuan Dynasty. Although the paper money did not work very well, it not only played a vital role in the history of Chinese economy, but also captured an important position in the history of human culture. (804)