Al-Adil rules Egypt while his brother Saladin…

The Chinese central government had soon observed the economic advantages of printing paper money, issuing a monopoly right of several of the deposit shops to the issuance of these certificates of deposit.

By the early twelfth century, the amount of banknotes issued in a single year amounted to an annual rate of tweny-six million strings of cash coins.

The central government officially stepped in by the 1120s and produced their own state-issued paper money (using woodblock printing).

Even before this point, the Song government was amassing large amounts of paper tribute.

It is recorded that each year before 1101, the prefecture of Xinan (modern Xi-xian, Anhui) alone would send 1,500,000 sheets of paper in seven different varieties to the capital at Kaifeng.

In that year of 1101, the Emperor Huizong of Song decided to lessen the amount of paper taken in the tribute quota, because it was causing detrimental effects and creating heavy burdens on the people of the region.

However, the government still needs masses of paper product for the exchange certificates and the state's new issuing of paper money.

For the printing of paper money alone, the Song court has established several government-run factories in the cities of Huizhou, …

…Chengdu, …

…Anqui and …

…Hangzhou.

A Song Dynasty Chinese written record of the year 1175 states that a paper-printed-money factory in the city of Hangzhou alone employs a daily work force of more than one thousand. (Needham, Joseph (1986). Science and Civilisation in China: Volume 5, Part 1. Cambridge University Press).

However, the government issues of paper money are not yet nationwide standards of currency at this point; issues of banknotes are limited to regional zones of the empire, and are valid for use only in a designated and temporary limit of three-year's time.

Saladin has by 1175 taken control of Hama and …

…Homs, but …

…fails to take Aleppo in a siege.

Saladin's successes alarms Saif al-Din of Mosul, the current head of the Zengids at the time, who regards Syria as his family's estate and is angered that it is being usurped by a former servant of Nur al-Din.

He musters an army to face Saladin near Hama.

Although heavily outnumbered, Saladin and his veteran soldiers decisively defeat the Zengids.

After his victory, he proclaims himself king and suppresses the name of as-Salih Ismail al-Malik (Nur al-Din's adolescent son) in Friday prayers and Islamic coinage, replacing it with his own name.

The Abbasid caliph, al-Mustadi, graciously welcomes Saladin's assumption of power and gives him the title of "Sultan of Egypt and Syria".

A series of imperial campaigns against the Seljuq Turks of the Sultanate of Rûm between 1158 and 1161 had resulted in a treaty favorable to the Empire, with the sultan recognizing a form of subordination to the emperor.

Immediately after peace was negotiated the Seljuq sultan Kilij Arslan II had visited Constantinople where he had been treated by Emperor Manuel I Komnenos as both an honored guest and an imperial vassal.

Following this event, there has been no overt hostility between the two powers for many years.

It is a fragile peace, however, as the Seljuqs want to push from the arid central plateau of Asia Minor into the more fertile coastal lands, while Constantinole wants to recover the Anatolian territory the Empire has lost since the Battle of Manzikert one hundred years earlier.

During the long peace with the Seljuqs, Manuel has been able to concentrate his military power in other theaters.

In the west, he has defeated Hungary and imposed imperial control over all the Balkans.

In the east, he has recovered Cilicia from local Armenian dynasts and managed to reduce the Crusader Principality of Antioch to vassal status.

However, the peace with Constantinople has also allowed Killij Arslan to eliminate internal rivals and strengthen his military resources.

When the strongest Muslim ruler in Syria Nur ad-Din Zangi dies in 1174, his successor Saladin is more concerned with Egypt and Palestine than the territory bordering the Empire.

This shift in power has given Kilij Arslan the freedom to destroy the Danishmend emirates of eastern Anatolia and also to eject his brother Shahinshah from his lands near Ankara.

Shahinshah, who is Manuel's vassal, and the Danishmend emirs have fled to the protection of Constantinople.

In 1175, the peace between the Empire and the Sultanate of Rûm falls apart when Kilij Arslan refuses to hand over to Constantinople, as he is obliged to do by treaty, a considerable proportion of the territory he has recently conquered from the Danishmends.

Both sides have for some time been building up their fortifications and armies in preparation for a renewed war.

The Ghurid territory is partitioned after the death of 'Ala'-ud-Din, principally between his two nephews, Ghiyas-ud-Din Muhammad and Mu'izz-ud-Din Muhammad ibn Sam, commonly called Muhammad of Ghur.

Ghiyas-ud-Din rules over Ghur from Firuzkoh and looks toward Khorasan, while …