Paper money, a Chinese invention?  Share

First paper, then paper money. This is pure logic. It is hardly surprising that the first notes or better, the first paper money, appeared in China. With the invention of paper and printing on its account, this country was almost destined to produce the first paper money.

For centuries the mulberry tree has been cultivated in the Valley of the Yellow River (Shang period, 18th to 12th century BC). 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. For their traditional calligraphy with brushes they used linen, hemp, bamboo (cane) and bark of the mulberry tree. 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. The improvement was such that paper gradually replaced the former bamboomats. Clerical texts and reports for the Court were henceforth written on paper but still in a vertical direction. This centuries-old way of writing is probably a result of writing on strips of bamboo which were tied together.

From paper to paper money

Paper fabrication during the Han Dynasty (206 BC - 220 AD)

Paper fabrication during the Han Dynasty (206 BC – 220 AD)

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 practice is derived from the credit notes used by merchants for their long-distance trade.

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. About the 6th century notes replaced coins as burial money. May we consider this as a real means of payment? Of course not, but it is remarkable that also here paper replaces very smoothly the copper coins that were used before.

At the end of the Tang period, traders deposited their values with their corporations. In exchange, they received bearer notes or the so-called hequan. Those hequan were a real success and the idea was exploited by the Authorities. 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.

During the Song Dynasty (960-1276) booming business in the region of Tchetchuan likewise resulted in a shortage of copper money. Some merchants issued private drafts covered by a monetary reserve which initially consisted of coins and salt, later of gold and silver. Those notes are considered to be the first to circulate as legal tender. 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. During the Ming Dynasty (1368-1644) the issuing of notes is conferred to the Ministry of Finance.

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. Those notes were issued in values of 100, 200, 300, 400 and 500 wen and 1 kuan or 1000 wen. 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.

Unfortunately, those notes were issued continuously without redrawing from circulation the old ones. 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!

Note printed on dark slate paper of the mulberry tree

Note printed on dark slate paper of the mulberry tree

The note in the showcase dates back to the same period. It is fairly large (340 x 221 mm) and printed on dark slate paper of the mulberry tree. The inscriptions in the heading read the name of the issuer and the name Hung Wu, the founder of the Dynasty. The value of Yi guan (or 1 kuan) is represented by the two characters and by ten heaps of coins just beneath them. The inscriptions left and right of the value there read as Note of the great Ming dynasty and Circulating within the Empire.

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. 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). The blanks had to be filled in by hand but this was never put into practice. As a result the name “Hung Wu” figures on the notes even after the end of his reign. The borders are attractively designed with arabesque style flowers and dragons.

The discovery of Chinese paper money in Europe

In the travel accounts of the Venetian traveller Marco Polo the reader becomes familiar with the fascinating world of paper money production. 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. (…) In fact, paper money is made there from the sapwood of the mulberry tree, whose leaves feed the silk worm. 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 method of issue is very formal, as if the substance were pure gold or silver. On each sheet which is to become a note, specially appointed officials write their name and affix their seal. 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. That makes the note authentic. 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.”

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. 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. It is hardly surprising that it took a few more centuries before paper money was introduced in Europe. 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. Which means a headstart of no less than seven centuries on the West!

Coralie Boeykens
Museum guide


  • Museum of the National Bank of Belgium, A story of money, 2006, p. 21.
  • Kann E., History of Chinese paper money (ancient), International Banknote Society, 1963.
  • Marsh G., “Chinese note of Ming Dynasty rates among oldest paper currency known”, in Coin World, december 1, 1965, p. 56.
  • Reinfeld F., The story of paper money, Sterling publishing CO., Inc., 1957.
  • Narbeth C., Collecting paper money, Seaby London, 1986.