THIS is a story about genius, about unusual minds playing with extraordinary ideas, about the invention of moveable type, clocks, fireworks and the flare of killing machines, and of money that really does grow on trees. And it is also a story about the stultification of genius, of how a rigid education system, a strict segregation of court and people and a desire for continuity crushed creativity. The road through China's millennium has been paved with good inventions. Printing, paper, clocks, the sternpost ship steering device, paper money (and with it, runaway inflation) and gunpowder were all known to - at least a few - denizens of the Middle Kingdom around 1,000 years ago. They were discoveries with potential repercussions for the entire world. And - for certain early tourists including Marco Polo (if he ever actually made it to China) and Morocco's Muhammed Ibn-Batuta - the greatest of these was paper currency. 'Of this money,' Polo reported with admiration, Kublai Khan 'has such a quantity made that with it he could buy all the treasure in the world. With this currency he orders all payments to be made throughout every province and kingdom and region of his empire. And no one dares refuse it on pain of losing his life'. Paper money was first used in small quantities during the ninth-century Tang Dynasty, poetically called 'flying money' because unlike the unwieldy coinage it was so light it could blow out of your hand. But it was not until the 12th century, when the Sung Government gave itself licence to print money, that paper cash really caught on. Transactions until then still mostly involved coins. A shortage of metal in the realm led to a system for issuing sheets of currency - at a rate of about four million a year. After all, coins had been nothing but tokens, and it was a simple although revolutionary step to progress to drawing a picture of the cash on a piece of paper. This was how the Sung rulers financed their defence against the Tartars - and after they lost, they kept printing to finance their tribute to the victors. By 1209, the notes were printed on silk, and perfumed with expensive scents - none of which stopped runaway inflation. The victorious Mongols liked the tributes - and the idea of printed money, which they kept, although they backed the silk notes with deposits of real bundles of silk. 'These pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver; and on every piece a variety of officials, whose duty it is, have to write their names, and to put their seals,' Polo reports excitedly in his famous memoirs. 'And when all is prepared, the chief officer smears the Seal entrusted to him with vermilion, and impresses it on the paper, so the form of the Seal remains printed upon it in red; the money is then authentic. Anyone forging it would be punished with death.' As the Mongols grew weaker, so did the currency. Ibn-Batuta tells how, although coins were outlawed, merchants melted contraband currency into ingots, storing them in the rafters of their doorways. The Mongols' successors, the Mings, played briefly with the notion of notes, and issued 'Precious Notes of Great Ming' made of mulberry tree back in the late 1300s - after which China virtually abandoned paper money until the end of the 19th century, with the arrival of European colonisers. The Europeans 'created' paper notes in Sweden in 1661; America followed in 1690, France in 1720, England in 1797 and Germany in 1806. Chinese financial traditions did have some lasting effect: when Sung methods of paper money issuance became known in the West, they had a profound influence. The old Hamburg Bank and the Swedish banking system were both set up along Chinese lines. Barnaby Faull, director of the banknote department at Spink & Son auction house, London, confirms the earliest banknotes in existence today date from those Ming years. 'The Sung notes aren't around anymore: they were too fragile,' he says, describing the world's earliest extant banknotes as 'large, grey, woolly things', 30cm by 20cm, printed with red ink chops. 'They are surprisingly common, and they sell at auction for about HK$6,000 each.' The mechanical clock had a similar story: a concept discovered in China and then forgotten. In 1090 an official, Su Sung, was given the task of making a calendar machine for the emperor. The result was a combination of fantasy and ingenuity: a 10-metre pagoda, topped by an enormous bronze power-driven sphere, within which a celestial globe rotated automatically. Every 15 minutes, the five-storey structure would reverberate to the sound of gongs. Another king, another calendar, and by the time a new ruler took over in 1094, Su's time pagoda was history. Gunpowder, which appeared in the 1160s, was another major Asian invention. A mixture of potassium nitrate, charcoal and sulphur, it was largely ignored by armies although it was adopted for fireworks displays. It took the Arab civilisation to refine the technology for serious weaponry. And Pi Sheng's invention of moveable type in 1041 - three centuries before Gutenburg - had more potential than impact, partly because moving 5,000 characters around was trickier than shifting the 26 or so of Western alphabets. They were brilliant Asian minds that conceived explosives, printed books, 'flying currency' and mechanical clocks, but their inventions were largely lost to the Chinese people. Perhaps, historian J M Roberts suggests, the explanation can be found in the strictures of society, and in other less worldly priorities. 'Neither officialdom nor the social system favoured the innovator,' he argues. 'Somehow a lack of interest in the utilisation of invention was rooted in a Confucian social system which . . . did not regard as respectable the association between the gentleman and the technician.' But perhaps we should not be too surprised so many discoveries were not taken further. 'One need not be astonished the Chinese sages did not make these steps,' Albert Einstein wrote in 1953. 'The astonishing thing is that these discoveries were made at all.'