The Origins of Paper Money in China

Abstract

Abstract China’s heritage of coining money is as venerable as that of the Mediterranean world. By the time the first unified empire was founded in late third century B.c., use of money had become fundamental to Chinese economic life. Yet from ancient times the monetary system of China diverged substantially from the traditions of the Mediterranean region and west Asia. In the West, monetary standards were based on precious metals. Silver coin predominated within domestic trade, but gold coin prevailed as the monetary standard of international trade. The high and stable value of gold across time and space endowed it with enormous symbolic power as a measure of value invulnerable to manipulation by any state or ruler. Even today the notion of a “gold standard” connotes a stability of real value that transcends dollars, euros, yen, or any state-issued currency. In China, the monetary system of the imperial era was based not on precious metals but on bronze coin. In Western thought, money made from base metals like copper (or even silver) was seen as readily susceptible to fiscal chicanery at the hands of administrators who constantly sought to debase their coins, trying to circulate them at a nominal value greater than their substantive worth. Bronze coin was regarded as a primitive form of money and its low unit value testified to the lack of commercial development within the economy.