Get That Tree Bark Money: The Yuan Dynasty
Fund managers sometimes ask me “Why should I care about Chinese dynasties? China hasn’t even had a dynasty in 114 years.”
You got me, dudes. But the Yuan Dynasty ran paper money at empire scale, a partnership that sure looks like a LP and a GP, and launched trade network that figured out how to move product across a continent.
So far, we’ve profiled about four or five Chinese Dynasties, the Xia, Qin, Zhou and Han and even touched on the Northern Wei Dynasty. We’re not going in order, but we look at the ones that we think matter, as it applies to how money, land and power come together. Today we focus on the Yuan,
The Yuan didn’t invent of all of the pieces of China’s capital, it was the dynasty that finally connected every one of them together.
This particular dynasty we’re going to take a look at, when it comes to capital, they figured out four big, important things.
Using paper money as the main currency for a nation. Major development.
700 Years Before The First LPAs existed they invented something called An Ortoq. Calling this proto-VC is stretch, but it has two elements - the people providing capital and the operator are splitting profits, and the operator is getting backed for how they think and who’s in their network. The word comes from ortoq. It’s Turkic-Mongol for “partner.”
Using security and infrastructure for trade, This is stuff like like the yam relay network of postal stations and and the Pax Mongolica across the Silk Road
Creating salt and state monopolies as cash engines. This is what drove state revenue and kept the currency afloat.
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I began studying all of the Chinese dynasties over 20 years ago, with a two courses on Chinese history and a book about the Soong Dynasty.
When you think of all of the Chinese dynasties that have had major societal impact, the two or three that immediately come to mind, for most people who study capital are the Song Dynasty (960-1279), because they originated the first paper money that had any kind of wide circulation, and the Han, who we wrote about back in March, because the Silk road (and the state iron and salt monopolies) originated during their time period.
When we think of modern capitalism, we think of the Ming and Qing dynastyies (1368-1912) - this is where the Shanxi merchant banks slowly turned into the remittance and credit network that became the national banking system. We’ll definitely study those two in a future post.
The Yuan? Their dynasty put all of the pieces together.
There are four big things that the Yuan enabled that we still benefit from today:
The Cost of Moving money across Eurasia: For about a century, from the 1260s to the 1350s, if you wanted to get anything from China to the Black Sea, you went through the Mongols and their khans. One political system meant one set of rules, relay stations along the road, and merchants who could travel without having to pay off a new warlord every 100 miles. That’s the same reason LPs like boring, predictable reporting. When an LP trusts the GP to be reliable, raising money’s a lot easier.
Putting The Ortoq (pre-LPA) To Work At Continental Scale: Let’s say, a Mongol prince had silver. And, you have merchants who knew the roads, the markets, and who could be trusted.
So the prince hands over the cash, and the merchant goes out, grows it, and they split the proceeds.
When you had a merchant backed by some royal family that merchant could travel safely and get super VIP access. Ever seen an anchor LP open doors for a first-time GP? Same idea. It also went sideways in some wild ways. Some ortoq merchants started running loans with everyday brutal vigs, and the court had to step in.
Paper Money, At Scale: Sure, the Song invented paper money. But the Yuan made it the main currency of the entire empire. Starting in 1260, Kublai Khan’s government issued paper notes and required taxes to be paid in them. At first they were backed by silver reserves and you could redeem them. For decades it worked great.
Marco Polo thought it was one of the weirdest things he saw in China: the Great Khan made money out of tree bark, and people accepted the money.
Then, one big problem happened. The government broke rule number one of currency printing. The court started printing to cover its bills.
By the 1330s and 1340s inflation was wrecking trust in the notes, and the government issued more to fix the problem it caused.
The Mongol rulers of Persia copied the idea in 1294. It failed within months.
Merchants closed their shops and the experiment was abandoned.
The lesson is the same one LPs apply to a GP: nobody gives a shit about the structure if they don’t trust the GP.
They Shaped How Silver Money Moved: When people gave up on paper because nobody trusted it anymore, they went back to silver. The Ming tried paper money too and it collapsed, so over the 1400s and 1500s, China shifted toward silver, which became the main currency and how taxes were paid.
So, that created a huge demand for silver.
When Japanese and then American silver started flowing in, during the 1500s, China hoovered up a huge share o the world’s silver, and global trade reorganized around it. The Yuan’s paper money failure teed this up.
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© 2026 Adam Metz
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