History of Chinese currency

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The history of Chinese currency spans more than 3000 years from ancient china to imperial china and modern China. Currency of some type has been used in China since the Neolithic age which can be traced back to between 3000 and 4500 years ago. The history of China's monetary system traces back to the Shang Dynasty (c. 1766–1154 BCE), where cowrie shells served as early currency. Cowry shells are believed to have been the earliest form of currency used in Central China, and were used during the Neolithic period. By the Warring States Period, diverse metal currencies like knife and spade coins emerged. These early currencies, starting as a commodity exchange to cowrie shells, copper coins, paper money and modern chinese currencies and digital currencies shows how centralized power developed the most influential monetary system in the world.

Early Establishment

The Shang Dynasty (c. 1600 – c. 1046 BC) came as a significant first step in the evolution of currency by introducing cowrie shells as a mode of exchange. Cowries, sourced from the Indian Ocean, were valued for their rarity, durability, and portability. Their usage as currency likely came from their symbolic value which represented wealth and status. Archaeological findings, such as cowrie shell imitations made of bone and stone, indicate the growing institutionalization of monetary practices during this period. One of the reasons why they started producing cowrie shell imitations was mainly due to the lack of organic cowrie shells.^[1] New Research on the Origin of Cowries in Ancient China by K.Peng^[2] also mentions tributes and exchanges involving cowries, highlighting their role in economic context.

Zhou Dynasty ((Western Zhou c. 1046 – 771 BC) and (Eastern Zhou c. 771 – 256 BC)) saw the diversification of currency forms. By the late Western Zhou and early Eastern Zhou, bronze objects such as spades and knife-shaped coins began circulating alongside cowries. These currencies reflected both regional economic diversity and the growing influence of metalworking technologies.

The Warring States Period (c. 475 – 221 BC) expanded on the diversity of currencies as competing states issued their own coinages to assert economic independence. Bronze inscriptions on Zhou coins serve as primary evidence which gives details about issuing authorities and intended denominations. These inscriptions show the relationship between political authority and economic systems.

Qin Dynasty (c. 221 – 206 BC) specifically Around 210 BC, the first emperor of China Qin Shi Huang (260–210 BC) abolished all other forms of local currency and introduced a uniform "Ban Liang" copper coin which eliminated the regional variations that had characterized the Warring States Period and showed economic integration and simplifying taxation. Qin legal texts found in tombs (e.g., Shuijingzhu bamboo slips)^[3] document the implementation of the Ban Liang coins and highlight their role in centralizing economic control. This standardization served as a model for future dynasties that influenced monetary policies in subsequent centuries.

Building on Qin’s monetary reforms, Han Dynasty (c. 202 BCE – 220 CE) later introduced "Wu Zhu" coins, which remained in circulation for over 700 years. The Han government’s emphasis on coinage stability facilitated trade along the Silk Road, integrating China into a broader network of Eurasian commerce.^[4] These coins, marked by their consistent weight and size, reflected the dynasty’s commitment to economic stability. The Han period also saw the integration of commodity trade and currency usage. Goods like silk, salt, and iron often supplemented or substituted coinage in transactions, particularly in regions where coin circulation was limited.

Paper money was invented in China in the 7th century, but the base unit of currency remained the copper coin. Copper coins were used as the chief denomination of currency in China until the introduction of the yuan.

From paper money innovations in the Song Dynasty to the turbulent reforms of the late Qing, China’s monetary system evolved with its political and economic changes. Currently, the renminbi is the official currency of the People's Republic of China (PRC). It is the legal tender in mainland China, but not in Hong Kong or Macau. The special administrative regions of Hong Kong and Macau use the Hong Kong dollar and the Macanese pataca, respectively. In the Republic of China (ROC), the New Taiwan dollar is the official legal tender in Taiwan since 2000.