Fiat Currency in Ancient China, 21st Dec., 2010.

According to Francis T. Lui's article, "Cagan's Hypothesis and the First Nationwide Inflation of Paper Money in World History,":

Paper money was invented in China in the Northern Sung dynasty (A.D. 960-1126) and widely used in the Southern Sung dynasty (A.D. 1127-1278). The first inflation on a national scale occurred from around 1190 to the end of the dynasty when the monetary system collapsed. In this inflation period, available historical records do not suggest significant expansion of the economy or important changes in real income.