Why was paper money useful during Kublai Khan’s reign?

During the reign of Kublai Khan, the Yuan dynasty made paper money the sole legal currency throughout the empire, a significant shift from previous dynasties that used paper notes only alongside bronze coins.12

This system was useful and essential for several reasons:

• Facilitating Transactions: By establishing a standardized currency, the government simplified financial dealings within both the private sector and state treasuries.13
• Addressing Metal Shortages: China lacked sufficient metal ores to produce enough coins for its population of approximately 80 million people.13
• Resource Allocation: Large quantities of bronze and copper were being diverted away from coinage to create statues and other cult objects for Buddhist devotion, further limiting the supply of metal for currency.23
• Economic Growth: The use of banknotes supported a period of expanding trade, providing a practical medium of exchange that metal coinage could not sustain at the time.2

As long as the economy remained productive, this reliance on paper money functioned effectively without negative consequences.13