The First Paper Money. In the history of Chinese currency, the Chinese peoples have used shells, copper, iron, and precious metals in coins, ingots, and sycees as currency. Paper notes representing hoards of cash stored somewhere were used as far back as the early ninth century. This sort of cash deposit receipt currency was called “flying money” (飛錢) because the notes were very light, and could fly away in a breeze if one wasn’t careful in handling them. Paper money (as actual government-issued currency) was an innovation of 1023, but this replaced paper money that had been issued by private enterprises as far back as the early tenth century (starting in Szechuan). Paper currency flourished during the Northern Song Dynasty (960-1127AD). The introduction of “jiau tzi” (交子) currency in 1011 AD marked a milestone in early currency development. This early currency was introduced by a group of sixteen prosperous business households is Szechuan, who also had to establish a form of early banking establishment (called “jiau tzi pu” (交子舖) to care for deposits and savings. Like modern banks, these early jiau tzi pu burdened their customers with fees as a source of bank profits. Marco Polo wrote a chapter about paper money when he returned to Europe, but paper money wasn't introduced in Europe until Sweden began printing paper currency in 1601.

1. Valerie Hansen's The Open Empire: A History of China to 1600 (published in New York by W. W. Norton in 2000) has a discussion of early banking and currency developments on pages 261-272. You can use Worldcat.org to search for this book in English or in a Chinese version.
2. The NOVA documentary television program in the United states mentions the year 806 as the first year for paper currency in their history of money page.
3. The Computersmiths have a page about the history of paper money in China.
4. The National Numismatic Collection suggests that the Chinese may have had paper money as early as the seventh century, but such a date is not widely recognized by the authorities we've consulted.