The Origin of Value: How 7th Century China Invented the Future Read this to Understand How China contributed to the Future
Updated January 12, 2026 • 7 min read The Origin of Value: How 7th Century China Invented the Future B Lokajna Reddy B Lokajna Reddy Young Man who wants to conquer everything.
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The Weight of Wealth The Concept of Abstraction: Enter "Flying Money" The Song Dynasty and the Birth of True Currency The Ripple Effect on the Global Stage Why This Matters Today Closing Thoughts References & Further Reading To understand the world, one must first understand the systems that govern it. We often take for granted the thin sheets of paper we carry in our wallets—the "money" that dictates our movements, our status, and our survival. But have you ever stopped to consider the absurdity of it? A piece of paper, in itself, is worthless. It is flammable, fragile, and easily torn. Yet, we bet our lives on its value.
This reliance on paper currency is not a modern phenomenon born of convenience. It is a calculated necessity that emerged over 1,400 years ago in the Tang Dynasty of China. Today, we are going to analyze the sequence of events that led to the creation of the world's first paper money. We will look beyond the surface of coins and banknotes to see the ingenuity of human adaptation.
Join me as we dissect the history of "Flying Money."
The Weight of Wealth Before we can appreciate the solution, we must first understand the problem.
In the 7th century, during the Tang Dynasty (618–907 AD), China was experiencing a golden age. Trade was flourishing, culture was blossoming, and the economy was expanding at an unprecedented rate. However, this growth brought with it a logistical nightmare.
At the time, the currency of the realm was the copper coin.
Material: Bronze and copper.
Shape: Circular with a square hole in the center (to be strung on cords).
Value: Intrinsic, based on the metal itself.
While effective for small daily transactions—buying a bun or paying for a haircut—these coins became a burden for large-scale commerce. Wealthy merchants, government officials, and tax collectors were forced to transport vast sums of money.
Imagine, for a moment, that you are a merchant in Chang'an (modern-day Xi'an). You need to transport your profits to another province to purchase goods. You don't carry a credit card or a check. You carry strings of 1,000 coins, known as a guan. A single string weighed approximately 3.5 kilograms (about 7.7 lbs).
To make a significant payment, you might need dozens of strings. Suddenly, your "wealth" becomes a literal physical burden, requiring carts, guards, and animals to transport. It was inefficient, dangerous, and frankly, exhausting. The sheer weight of value was stifling the economy.
Human beings, however, are adaptable creatures. When the physical world imposes limits, the mind finds ways to bypass them.
The Concept of Abstraction: Enter "Flying Money" The solution did not come from a sudden invention of a new material, but from a shift in perspective. It was a move from the physical to the conceptual.
Merchants began to realize that they didn't need to move the metal; they only needed to move the promise of the metal.
Around the early 8th century, a system emerged known as "Feiqian" (飛錢), which translates literally to "Flying Money."
It was a primitive form of a draft or a bill of exchange. Here is how the process functioned:
Deposit: A merchant would deposit a heavy sum of copper coins at a local government treasury or a prominent banking firm in one city.
Issuance: In exchange, they would receive a paper certificate. This document was not money in itself; it was a receipt, a coded promise that the value was being held elsewhere.
Transport: The merchant would then travel to their destination—perhaps Luoyang or Guangzhou—carrying only this lightweight piece of paper.
Redemption: Upon arrival, they would present the certificate at the corresponding branch of the treasury or bank, where they would be paid in coins (or the value transferred to a local debtor).
The money "flew" from one location to another without ever physically moving. The risk of robbery was reduced because the paper certificate was useless to thieves unless they could present it at the specific location under specific identity protocols.
It was a brilliant, almost elegant, bypassing of physical limitations. However, this was still a private or semi-governmental system. It was a tool for merchants, not yet a currency for the people.
The Song Dynasty and the Birth of True Currency Time flows forward, and systems evolve. The Tang Dynasty fell, giving way to the Song Dynasty (960–1279 AD).
It was in the 11th century, specifically in the Sichuan province, that the next critical leap occurred. Sichuan was a region rich in trade but poor in copper. To make matters worse, the region used iron coins for a time because copper was scarce. Iron coins were heavier and even more cumbersome than copper ones.
The need for a lighter alternative was desperate.
The local government and private merchants began to issue a new form of paper certificate called the "Jiaozi" (交子). Unlike the "Flying Money" of the Tang era, which was a draft for specific transactions, Jiaozi was intended to circulate.
It was the world's first true paper money.
Design: To prevent counterfeiting, these notes were printed on special paper made from mulberry bark. They featured intricate patterns, confusing lines, and multiple red and black seals.
Trust: The government eventually took over the issuance of Jiaozi, backing it with reserve coins. This was the birth of the modern central banking system—a system where currency is not backed by its own material value, but by the faith in the issuer and the reserves they hold.
This transition from commodity money (coins) to fiat money (paper) is one of the most significant psychological shifts in human history. It required a population to believe in a shared illusion. And because it worked, it stuck.
The Ripple Effect on the Global Stage China kept this innovation to itself for centuries. It was a guarded secret that powered their sophisticated economy. However, secrets have a way of leaking out.
The concept traveled slowly, along the Silk Road and through maritime trade routes.
Persia: By the 13th century, the Mongol Empire (which had adopted many Chinese administrative practices) experimented with paper currency in Persia.
Europe: Europe was stubborn. For a long time, they distrusted the idea of paper. They preferred gold and silver. It wasn't until 1661 that the first European banknotes were issued by Stockholms Banco in Sweden—a full 600 years after China's Jiaozi.
The Americas: The concept arrived even later, with the Massachusetts Bay Colony issuing paper money in 1690.
The history of paper money is often taught as a European invention in Western schools, but the roots are undeniably Chinese. It is a classic example of how civilization is built upon the incremental discoveries of those who came before.
Why This Matters Today Why should we care about a piece of paper from the 7th century?
Because the logic remains unchanged. The money in your pocket, the numbers in your bank account, the cryptocurrency on the blockchain—they are all abstractions. They are all based on the same fundamental principle established by the Tang and Song dynasties: Value is not a physical object; it is a consensus.
When we pay for a coffee with a tap of a card, we are participating in a system that began with a merchant in China realizing that carrying coins was too heavy. We are benefiting from centuries of trial and error, of trust-building and system-designing.
To understand the history of money is to understand the history of human cooperation. We agree to play by these rules because, on balance, they make our lives easier.
Closing Thoughts In this article, we traveled from the heavy copper strings of the Tang Dynasty to the sophisticated Jiaozi of the Song era. We observed the transition from weight to worth, from metal to trust.
It is a fascinating journey, not just of economics, but of human psychology. It reminds us that the systems we consider "modern" are often just polished versions of very old ideas.
Next time you hold a banknote, take a closer look. It is not just paper. It is a testament to human ingenuity—a message from the past, telling us that we can always find a way to make the world lighter, if only we are willing to rethink the weight we carry.
Thank you for reading.
References & Further Reading A History of Money by Glyn Davies.
The Song Dynasty Economy by Hucker.
Research on the "Jiaozi" currency from the Sichuan Provincial Museum archives.
Disclaimer: All historical facts presented are based on general historical consensus. The opinions expressed are analytical observations.