Paper Money

Paper money is a negotiable note, payable to whoever holds it on demand, that circulates as currency. The earliest paper money appeared in China during the Tang dynasty in the seventh century as receipts issued by merchants, and it developed into a true government issued currency called jiaozi under the Song dynasty in the eleventh century. Although the terms paper money and banknote are often used interchangeably, paper money is the broader category: a banknote is strictly a note issued by a bank, while paper money also includes government issued notes and, in premodern China and Japan, notes issued directly by merchants.