Song Dynasty Coinage

Song dynasty coinage refers to the money of China under the Song dynasty (960–1279), made up chiefly of bronze and iron cash coins and, from the early 11th century, the first paper money issued by a government. The Song state cast coins on a scale never before reached in China, and its experiments with paper currency mark a turning point in the history of money.

The period divides into the Northern Song, ruling from Kaifeng until 1127, and the Southern Song, based at Hangzhou until the Mongol conquest completed in 1279. Both faced the same problem: a fast-growing commercial economy that needed more money than metal supplies could easily provide.

Song coins kept the round shape with a square hole inherited from the Tang Kaiyuan Tongbao, but most carried the name of the current reign period, so a new legend appeared whenever the emperor proclaimed a new era. Inscriptions were written in several calligraphic styles, sometimes on matching coins of the same issue, and Emperor Huizong (reigned 1100–1126) is known for coins bearing his distinctive "slender gold" script.

Output rose sharply during the 11th century. By the reforms of the 1070s and 1080s the state was casting several million strings of coins a year, many times the level of the Tang. Even so, merchants frequently complained of a "coin famine", because coins were hoarded, melted for their metal or carried abroad. Large quantities of Song cash flowed to Japan, Korea and Southeast Asia, where they served as everyday currency for centuries.

Strings of coins were the normal way of making larger payments. In practice "short strings" containing fewer than the nominal 1,000 coins were widely accepted, so a string functioned as a unit of account as much as a physical quantity.

To protect scarce copper and to stop bronze leaving the country, the Song issued iron coins in some regions, particularly Sichuan and frontier areas facing rival states to the north and west. Iron cash was heavy and of low value, so even modest purchases required bulky loads of coin. The country was effectively divided into separate currency zones, with restrictions on carrying bronze coin into iron-coin areas. The Song also tried higher-value coins rated at several times their metal content, which invited counterfeiting and resembled a form of currency debasement.

The weight of iron coin is the background to the jiaozi, generally regarded as the world's first government-issued paper money. In Sichuan, merchant houses in Chengdu began issuing deposit receipts that could be passed from hand to hand in place of iron cash. After problems with these private notes, the government took over the business: a state jiaozi bureau was set up in 1023 and the first official notes followed in 1024.

Official jiaozi were issued for fixed terms, after which they were exchanged for new notes, and each issue was limited by a ceiling and supported by a reserve of coin. These rules show an early understanding that the value of paper depended on controlling the money supply. Under financial pressure, however, later governments issued more notes and the jiaozi lost value. It was replaced by the qianyin in the early 12th century, and the Southern Song introduced the huizi from the 1160s.

During the 13th century, wars against the Jin and then the Mongols led the Southern Song to print huizi in growing quantities, causing serious inflation and repeated attempts to restore confidence by issuing new series. The experience shows how a currency without a fixed metal backing, an early form of fiat currency, depends on restraint by its issuer. The origins of fiat money are often traced to this period, and the Yuan dynasty that followed built its own paper currency system on Song and Jin precedents.

Song coinage left a lasting mark. Song cash remained in circulation in China and East Asia long after the dynasty fell, and the institutional ideas behind the jiaozi, such as issue limits, reserves and fixed note terms, anticipated questions later faced by issuers of banknotes around the world. Its predecessors in China's bronze tradition include the Wu Zhu and the earlier Ban Liang.

• Song dynasty – Encyclopaedia Britannica
• The British Museum
• American Numismatic Society