Centuries ahead of Wall Street: how China’s Song dynasty pioneered global fiat currency

At least gold glitters. Long before the first paper banknotes fluttered through the financial houses of Europe, the bustling markets of 11th century China birthed an unprecedented financial “innovation”: the use of paper currency.In the 1020s, burdened by the shortage of bronze coins and a rapidly expanding economy, merchants in the southwestern province of Sichuan began issuing paper promissory notes. This marked the genesis of jiaozi, the world’s earliest paper money. Soon, with the imperial government’s realisation of this tool’s power, the Song state eventually launched another form of paper currency, huizi.With the issuance of jiaozi and huizi, China’s monetary system transitioned from the exclusive use of metal coins into an unprecedented era of state-backed fiat. This experiment pioneered a sophisticated financial practice centuries ahead of the rest of the world.