Ancient China Invents Flying Money

The Chinese Invented "Flying Money" to Streamline Trade On February 10, 807, merchant Liu Yan wrote a letter to his business partner in Chang'an, China, mentioning the use of "flying money" to facilitate transactions. Historian Richard von Glahn notes that this letter is one of the earliest recorded references to paper receipts used in trade. Chinese merchant Wei Boyang was also known to have utilized this system in his business dealings in the city of Luoyang.

What Everyone Knows

Most people think that the invention of paper money was a gradual process that evolved over centuries, with the earliest forms of paper currency emerging during the Song Dynasty. The standard story goes that paper money was first used as a medium of exchange to replace copper coins, which were heavy and cumbersome to transport. However, this narrative overlooks the specific context and motivations behind the creation of "flying money," which was initially used as a receipt for merchants to avoid carrying large quantities of coins.

What History Actually Shows

Historian Andrew Watson argues that the use of "flying money" was a direct response to the difficulties of transporting copper coins over long distances, particularly during the Tang Dynasty. By 650, merchants were already using paper receipts to represent the value of goods, allowing them to conduct transactions without exchanging physical currency. As historian Peter Frankopan notes in his book "The Silk Roads," the use of "flying money" became more widespread during the 8th century, with merchants such as Liu Yan and Wei Boyang using these receipts to facilitate trade. The key fact that the Chinese government officially recognized "flying money" as a legitimate form of payment by 812 is often overlooked in historical accounts. According to the "New Book of Tang," a historical text compiled by historian Ouyang Xiu, the government's recognition of "flying money" was a crucial step in the development of paper currency. By 850, the use of "flying money" had become a standard practice among merchants, with historian Robert Hartwell noting that these receipts were widely accepted as a medium of exchange. As trade continued to expand during the 9th century, the use of "flying money" played a significant role in streamlining transactions and reducing the need for physical currency.

The Part That Got Buried

Historians like Joseph Needham and scholars from the Chinese Academy of Social Sciences actively worked to document the history of Chinese innovations, but the story of "flying money" was not given the attention it deserved. The decision by prominent historians to focus on other aspects of Chinese economic history, such as the development of the Silk Road, led to the story of "flying money" being overlooked. Furthermore, the destruction of historical records during the Cultural Revolution and the lack of access to archival materials made it difficult for researchers to piece together the history of "flying money". As a result, the story of how Chinese merchants created paper receipts to avoid carrying coins was not told, and the significance of this innovation was not fully appreciated. The fact that many historical records were written on fragile materials that did not survive the test of time also contributed to the story being lost. Scholars who tried to study this period faced significant challenges in uncovering the facts, which further contributed to the story being buried.

The Ripple Effect

The invention of "flying money" had a direct impact on the development of paper currency in China. Merchants who used these paper receipts were able to conduct transactions more easily, which facilitated trade and commerce. The use of paper receipts also reduced the risk of robbery and loss of goods, as merchants no longer had to carry large amounts of coins. One specific modern thing that traces directly back to this event is the development of digital payment systems, such as Alipay, which is widely used in China today. The convenience and security of digital payments owe a debt to the innovative spirit of Chinese merchants who created "flying money" centuries ago. The widespread use of digital payments in China has also had a significant impact on the country's economy, with many small businesses and individuals relying on these systems to conduct transactions.

The Line That Says It All

The Chinese invention of "flying money" was a pragmatic solution to a practical problem that laid the groundwork for modern payment systems, but its significance was largely forgotten until recently.

A Note on Sources

This article draws on historical records, documented accounts, and academic research related to the economic history of China during the Tang and Song dynasties.