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Q.1059: Where and when use of paper currency started?
Ans. The first paper banknotes appeared in China in 806 AD. In all, China experienced over 500 years of early paper money, spanning from the ninth through the fifteenth century. Over this period, paper notes grew in production to the point that their value rapidly depreciated and inflation soared. Then beginning in 1455, the use of paper money in China disappeared for several hundred years. This was still many years before paper currency would reappear in Europe, and three centuries before it was considered common.
Source : http://www.pbs.org/wgbh/nova/moolah/history.html