A crumpled banknote issued by the first Ming emperor has been discovered hidden within a cavity inside a 13th-century Chinese wooden sculpture.

The carved head of a Luohan — someone who has achieved the enlightened state of Nirvana — gave up its 700-year-old secret after it was examined by Ray Tregaskis of Mossgreen, the Australian auction house.

Made of mulberry bark fibres, Chinese banknotes were first issued in the 10th century but the later Ming dynasty was the first regime to attempt the widespread replacement of coinage with paper. Its plan eventually failed, as overissuance led to hyperinflation in the 15th century. The note is dated at 1370, the third year of the reign of first Ming emperor, Zhu Yuanzhang, while the sculpture is thought to have been carved a century earlier.