Bob Klein in Economists and Finance, Finance / Banking, Business Investment Advisor Sep 26, 2019 · 1 min read · +600

The History of Ancient Chinese Money | Bob Klein of Medici Capital

The History of Ancient Chinese Money | Bob Klein of Medici Capital

Stretching back over thousands of years, China has had plenty of time to refine their currency system. Over the years, the way that they have bought and sold goods has changed greatly. Like many other primitive societies, China started out with a bartering system where people traded things like animals, grains, and crafted goods to each other, but they quickly realized it would be more efficient to have a form of actual money. There have been several different types of currency used throughout the centuries.

Shell Currency

Around the Neolithic Age, the most common type of money was shells that were divided into units called peng. This unit was used to describe a type of currency made up of two clusters of 10 shells each. The types of shells used to represent currency were normally small ones made of natural shell, but some people used bone, stone, jade, or pottery to represent the shells.

Metal Money

Eventually, China shifted away from shells as the empire expanded away from the coastline and found it difficult to access enough shells. Copper became a favorite type of currency around the Qin dynasty of the third century BCE. It started out as round copper rings that gradually evolved to be a flat coin shape with a square-shaped hole. These coins were easy to carry around by tying a loop through their hole. They were called "ban liang" due to their shape. As pricier purchases were made, people turned to other types of metal. Coins stamped out of silver were used for some purchases, and gold ingots were used for major transactions.

Paper Cash

China was the first country to invent paper cash. It first started showing up as early as the 7th century, but it took a little time for paper to take off. Initially, paper was a type of promissory note, where a person agreed to pay a certain amount of money to the bearer of the note. Eventually, in 1023, a type of actual paper currency called jiaozi was formed. Paper money was created by a group of 16 merchant princes in the Sichuan region. The first paper currency tended to be a short rectangular piece that had images of men, houses, and trees printed on them.  The Chinese experience with early paper money over approximately six centuries resulted in five different paper monies, each losing all of their value, including the paper money of the great Kublai Khan. Thus, the Chinese launched the form of money that has caused great turmoil and distress since its creation, which prompted Voltaire to say that, “Paper money eventually returns to its intrinsic value--zero.”

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