Jiaozi, the World's Earliest Paper Money

Song commerce flourished, trade was frequent and the volume of monetary transactions grew greatly, but the main currency in circulation was still metal. Sichuan used iron coins, low in value and heavy, and inconvenient to carry and trade with. In early Northern Song, merchants around Chengdu issued paper exchange certificates called “jiaozi” to ease trading, which holders could redeem for iron coins. Later sixteen rich merchants jointly ran jiaozi shops and issued them in a unified way, but disputes arose when some failed to redeem them through poor management. In 1023 (the first year of Tiansheng under Emperor Renzong), the Northern Song court set up a “Jiaozi Office” in Yizhou (present-day Chengdu, Sichuan) to issue jiaozi through the government, and the next year began issuing “official jiaozi”, with a fixed issue limit, circulation period and reserve funds. Their issue marks the formal birth of the world's earliest paper money. Jiaozi were a great step forward in Chinese monetary history, easing exchange of goods and promoting commercial growth. In late Northern Song jiaozi were renamed “qianyin”. In the Southern Song paper money circulated alongside copper coins, the most widely used being the “huizi”. But in late Southern Song, because of financial difficulty, the court issued paper money excessively, causing it to depreciate sharply, prices to soar and hardship for the people. In the Yuan, paper money became the main currency, used across the country, and Marco Polo expressed amazement at China's use of it in his travels. The appearance of jiaozi reflects the high development of Song commerce and is of great significance in the world history of money.