Song China Issues the World’s First Government Paper Money

During the Song dynasty in eleventh-century Chengdu, merchants faced severe practical difficulties when carrying out regional trade. The local currency consisted largely of heavy iron cash coins, which were cumbersome to transport over long distances or use in high-value commerce. To bypass this burden, private merchant enterprises developed the jiaozi, an early form of promissory paper note representing deposits of coins. Initially lacking standardized designs or fixed values, these early private notes were issued in amounts tailored to customer needs or in large sums such as one thousand qian. Issuing firms added nominal values each year, and multiple seals were stamped onto the notes to guard against counterfeiting.

In the early eleventh century, sixteen prominent Sichuan trading houses established a dedicated paper note agency known as the Jiaozi hu. This coalition brought standardization to the notes, establishing a recognized medium of regional commerce alongside an exchange fee of thirty wen per string of cash. However, financial instability and bankruptcies among participating merchants eventually threatened the credibility of the entire enterprise. To stabilize the monetary system and maintain trust in paper trade, the regional authorities stepped in, taking over the enterprise and establishing an official state body, the Jiaozi wu, in 1023.