It all began with a shell. China led the ancient world by introducing these items of the sea as an unofficial currency. They are durable, easy to carry, and easy to count. As a result, it was used in many other areas beyond China. The unit is peng(朋), which has evolved to mean “friend”. I guess money is your friend after all.
At the end of the Shang Dynasty (1200 BCE), northerners in China found it difficult to find enough shells all the way from the south, where the currency came from. Instead, they used other materials like pottery, stone, bronze and gold coins that would be molded or made into shell-shaped currency. These other coins eventually led to different dynasties circulating spade and knife-shaped coins. Imagine carrying these around!
Then in around 200 BCE, Qin Dynasty Emperor Shihuangdi standardized money to help make trades easier. He introduced the ban liang (半两). It had a standard weight in the form of a round disc with a square hole. He also divided all currency between gold: shang bi (上币) and bronze: xia bi (下币). The iconic square hole in the middle has a few different reasons to it. First, it allows the coins to be easily and conveniently strung together. Secondly, the square hole is easy to make than most other holes in the early currency. This is particularly interesting because it displays how the people at that time were consciousness about efficiency. Lastly, people in ancient times believed that the heaven was round and the earth was square, which is yet another reason of ban liang’s (半两) shape. The copper coins were cast in a bronze mold and had two or four characters inscribed on them. These coins were used for many millennia after they were issued as currency in China.
All in all, coins in China have a long and extremely complex history. As a result of China’s vastness, communication was difficult and standardizing a currency over time resulted in many challenges along the way.