The innovation of paper money was brought about by the Chinese, which is no surprise considering they also invented paper and printing. It took thousands of years for the great idea to reach the western world but we haven’t looked back since.
Paper money came to fruition for the simple reason that coins were heavy. People would leave their hard-earned coins with a trusted individual and in return would receive a note saying how much money they had. This could then be used as a guarantee for any purchases that they would bring the money later. The system was evolving slowly in China when the government stepped in.
During the Tang dynasty, who ruled between 618BC and 907BC paper money was used for the first time. After the Tang dynasty’s reign was over the Song dynasty came into rule. The government at the time made several changes that made note usage more widespread. However, as the government continued to print money without removing any historic notes the currency became devalued. When the Ying dynasty came to power they printed even more money, making matters worse. Inflation became so bad that the use of paper currency had to stop The failed experiment lasted hundreds of years but it would be nearly 450 years before paper money returned to China.
The Ming dynasty came into power and restored the use of coins as the main currency, relying on ingots from Mexico and Peru. It was 1890 before the Chinese returned to paper money. They started circulating Yuan which is the same currency we know in China today (although some differences have taken place).
The use of notes was so early in China that it had arrived, disappeared and arrived again before it was ever introduced into European settlements. Today the use of notes is widespread in every country in the world.
