For much of the pre-modern period, the Chinese economy ran on a combination of silver and copper coins. Coins were minted in China since at least the 4th century BCE, and from the Han Dynasty onwards maintained a rather standard form, that of a circular coin with a square hole in the center. Paper money ("flying cash") was first developed and circulated in the 11th century or so.
Silver was used for large purchases, while copper was used for smaller purchases. The Chinese government minted massive numbers of coins, especially in the Song Dynasty, in such large amounts that they came to be widely used throughout the region, and survive in great numbers today, going back even as far as the Han Dynasty.
The standard unit of currency was the qián (銭, "cash"), referring to a single copper coin. These coins, roughly one inch in diameter, were minted by the central government in one of a small number of regional mints, and were imprinted with the name of the reigning emperor. As these had a very low monetary value, it quickly became common to carry cash in strings of roughly 1000 coins known as chuàn (串). As a whole string would be accepted by merchants without painstakingly counting the coins or weighing them individually, this allowed consumers and merchants alike to overlook issues of coins which were of uneven weight, e.g. those worn down over time. Though the currency system was in theory based on the weight (and therefore net value) of the precious metals, through the spread and acceptance of these strings, it became de facto a system of fiat money - valued not by weight but by nominal monetary value of a given number of coins.
Since counting and stringing together coins was a time-consuming task, money handlers known as qiánpù (錢鋪) emerged, and sold the service of stringing together one's coins for them. Coins were grouped into strings of 100, ten of which would then be strung together to form a chuàn of 1000 coins. The money handler would often take their fee directly out of the strings, however. Most strings in circulation were thus not truly of 1000 coins, but rather of 990; however, these would still be accepted as strings of 1000, since the money handlers' practice was well-known and accepted.
Silver was typically carried in one-ounce ingots known as taels, or liǎng in Chinese. (See Tael for more on this.)
References
- Lloyd Eastman, Family, Fields, and Ancestors: Constancy and Change in China's Social and Economic History, 1550-1949, Oxford University Press (1988), 108-109.