China Quiz Index

Tue 12th Sep

Mulberry bark money

Among the most influential inventions of the Chinese has been paper money. While the rest of the world was lugging around silver and gold China had made the break in the Tang dynasty around 800CE. In China the problem was that normal coinage was in standard bronze discs. The coins had a hole in the middle so they could be strung together in groups of 100. A string of cash was a heavy and inaccurate unit of currency (some traders would claim a 'complete' string which would only have 65 coins). How much better to carry around IOUs rather than cash? As long as the IOU was unequivocally signed by a reputable merchant it was just as valuable as thecoins it represented.

The problem of metal coins was particularly acute when the government forced Sichuan province to use iron coins. As soon as the government saw that the system of IOUs was working well they of course stepped in and made it a government monopoly.

At the same time counterfeiters threatened the new currency and for that reason in the reign of Kublai Khan (1279-1294) Marco Polo witnessed the use of money in the form of strips of black mulberry bark which was then marked with the red seal of the Emperor (only the Emperor was allowed to write in vermillion ink). The bark had to be specially processed and so the notes were hard to forge. An even rarer form of currency had been attempted much earlier in the Han dynasty (175 BCE) when Emperor Wudi introduced money made from pieces of hide from rare white stags.

As the issuing of paper money did not have to be backed by actual silver and gold the modern system was born where a government can just print money to get itself out of (or into!) financial difficulties.


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