Printing and the economy: the first paper money

The Travels of Marco Polo includes a chapter explaining ‘How the Great Kaan Causeth the Bark of Trees, Made Into Something Like Paper, to Pass for Money All Over his Country.’ This description of Kublai Khan's capacity to transform tree bark into an unlimited supply of money as little short of miraculous vividly conveys China's lead in political integration as well as technological capacity in the thirteenth century.

The Emperor's Mint then is in this same City of Cambaluc, and the way it is wrought is such that you might say he hath the Secret of Alchemy in perfection, and you would be right! For he makes his money after this fashion. He makes them take of the bark of a certain tree, in fact of the Mulberry Tree, the leaves of which are the food of the silkworms,-- these trees being so numerous that whole districts are full of them. What they take is a certain fine white bast or skin which lies between the wood of the tree and the thick outer bark, and this they make into something resembling sheets of paper, but black. When these sheets have been prepared they are cut up into pieces of different sizes…. All these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver; and on every piece a variety of officials, whose duty it is, have to write their names, and to put their seals. And when all is prepared duly, the chief officer deputed by the Kaan smears the Seal entrusted to him with vermilion, and impresses it on the paper, so that the form of the Seal remains printed upon it in red; the Money is then authentic. Any one forging it would be punished with death. And the Kaan causes every year to be made such a vast quantity of this money, which costs him nothing, that it must equal in amount all the treasure in the world.

Origin of paper money. Ancient Chinese coins were circular in shape with a rectangular hole in the middle. This hole allowed large numbers of coins to be strung together on a cord, to ease transport and accounting. For major transactions, however, such cords were too heavy to be easily portable; so during the Tang Dynasty (618–907) merchants evolved a system of bills of exchange: the merchant left strings of coins with a trustworthy person and carried only a piece of paper indicating how much coinage was on deposit. 

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Image 1: Banknote from the Song dynasty (960–1279). By the Song dynasty, these slips could then be used as promissory notes, which could be exchanged for the coinage itself. Shortage of copper for striking coins prompted the Song to issue notes for general circulation, with banknotes depicting the coins for which they stood. These notes became known as 'flying cash', because they were so much more readily transportable than the string of coins they represented. Initially the right to create these certificates was devolved to a number of deposit shops, and the certificates themselves were of limited duration, valid only in specific regions, and circulated alongside metal coinage rather than replacing it.

Image 2: Yuan dynasty banknote (1271–1368) with its bronze printing plate. By the early twelfth century, the central government had begun producing state-issued paper money in huge quantities -- tens of millions of notes were issued each year, with elaborate designs in multiple colours on special paper that were developed to prevent counterfeiting. The founder of the Yuan dynasty, Kublai Khan, continued the practice. By the time Marco Polo visited (1271-95), paper money backed by gold and silver and guaranteed by the state was in widespread use. In the banknote depicted in Image 2, two 'strings' are depicted, each tied as a closed loop including 100 coins clustered in groups of 10.
 
Image 3: Ming dynasty banknote (1368–1644).  Larger than a sheet of A4, the banknote has plenty of space to record its function. The six large characters at the top declare that this is the 'Great Ming Circulating Treasure Certificate'. The decorative border running around the sheet is composed of dragons, which symbolise China and its emperor. The two columns of text just inside this border announce that this certificate will circulate forever. The value of the note is indicated by the string of 1000 coins in its centre. The banknote also declares that 'To counterfeit is death', adding that 'The informant will receive 250 taels of silver, and in addition the entire property of the criminal.'

The Ming were the first to replace metal coinage entirely with paper money, with predictably chaotic consequences: by 1425, the inevitable temptation to produce too much paper currency led to hyperinflation, and paper money lost over 99 per cent of its value against gold. This banknote is object 72 in the British Museum’ A History of the World in 100 Objects. A 14-minute podcast can be downloaded from the External Link provided to the right.

China, then, had been issuing paper money for centuries before paper reached Christendom and even longer before woodblock printing began in the West. Paper money was also the first form of printing encountered by European travelers during the Medieval period and apparently the only form of Asian printing described in European writings before Gutenberg. Marco Polo's description is the most detailed of eight such descriptions from the thirteenth, fourteenth, and early fifteenth centuries. 

Credit: Howard Hotson (May 2019)