The Song dynasty issues the first government paper money

Merchants of Chengdu in Sichuan began to use paper notes called jiaozi, 'exchange medium', in the tenth century, because iron coins were so heavy that a large transaction needed a cart. When private issuers failed, the Song government took over the issue in 1024 and set up an office for it, creating the first state-issued paper currency in the world. The notes were valid for set periods and backed by reserves. Later the Song and Yuan governments issued so much paper that it lost its value. Marco Polo was astonished by the Mongols' paper money, and in Europe the first banknotes did not appear until Sweden in 1661.

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