China was among the first civilisations to use money. China’s earliest currency–in the form of cowrie shells–was introduced during the Shang Dynasty (17th to 11th century BCE). Before the advent of a system of exchange, people mainly used barter, but this quickly proved to be ineffective and inefficient.
In the later period of the Shang Dynasty, shell-shaped coins made of bronze heralded the start of minting. While they were used as currency for the Shang, these coins were not widely circulated. It would take a few more centuries before minted bronze coins became a common currency. An issue that arose was that every state issued a different type of coin. Among these, the state of Chu issued the ying yuan, which was China’s earliest form of gold currency.
In 221 BCE, Emperor Qin Shi Huang unified China and standardised the currency. He stipulated that gold would be represented by the metal of the highest value; and that the bronze coins would be used for daily circulation. Bronze coin manufacturing was regulated so that only circular coins with a hole in the middle could be used. This style continued to be used for two thousand years, all the way up to the Qing Dynasty.
After metal coins came paper money. One of the most significant events was the birth of jiaozi, the earliest paper note. It merged in Sichuan during the Northern Dynasty and the currency was named using the local dialect of the region. In the early days, it was only used among a select few merchants, but this currency eventually replaced the coins that were in circulation.
The high point in the use of paper money came during the Yuan dynasty. It was then that the paper note became the dominant form of currency. By the Ming Dynasty, silver–which was legal tender–was used for large business transactions while the paper notes were used for smaller transactions.