The single overriding reason is that Chinese specie was based on copper (cash-coin strings), and by the mid-Tang dynasty the realm had literally just outstripped its own capacity to mine sufficient quantities of the ore. Combine with this was the fact that cash-currency was under the ever-present threat from counterfeiters, ore replacement, and some "brilliant" monarch or bureaucrat thinking that he'd just discovered the miracle cure to all his economic ills by saying "hey, let's just mint more money!" (note: this would not be improved by switching over to apper curency) This was especially impactful following the An Lushan Rebellion of the mid-8th century. This was because in the aftermath of that devastation, the entire northeastern plain of the Yellow River remained almost entirely autonomous for the subsequent century. This mattered because the majority of the population, mints, and productivity came from the northeast... and as such it proved to be a unrecoverable fumble for the Tang regime. Paper was seen as a potential substitute in lage part because it was trivially easy and cheap for the Chinese to produce, and yet could hold all the force of law of a minted coin thanks to indelible stamps (after all it - for the most part - had worked for official legal transcripts and edicts for centuries). Regardless, though paper currency was experimented with in the later Tang period, it never saw wide circulation and was only ever just that - an experiment.
Paper money made its first "real" debut onto the Chinese stage by - not the Chinese at all, actually - but instead their Mongol overlords during the Yuan Dynasty. All precious metals were illegal for Chinese to hold or carry (beyond trivial amounts in the form of jewelry and other small trinkets) under pain of death, and the Yassa laws stipulated that all commerce must be carried out in the imperial paper notes or in-kind barter.
The Ming came into power and did endeavor to continue the implementation of the paper monetary system, but it proved untenable. In order to effectively enforce such an economic policy, one needed to have the sufficient breadth of power and authority to compel its adherence, which the early Ming especially simply didn't command, especially along the coasts as foreign trade become more and more central to the lives and fortunes of the coastal populace. The Ming attempted to enact "harsh" laws like execution for being found in possession of large amounts of specie, but ultimately were forced to admit that those laws weren't worth the paper they were printed on, since the odds of actually being caught and prosecuted were so low that pretty much everyone was willing to "risk it." This reversion to specie as the de-facto currency of the realm was furthered (one might even say "kicked into overdrive") with the widespread import of silver bullion from Japan and Spanish Mexico... though that led to an eventual overriance on silver, and the same kind of inevitable collapse of its value that had come with copper centuries prior.
The cycle was much the same for the majority of the subsequent Qing. National-scale banks finally began appearing in the 1820s out of Shanxi, known as Piaohao, but it wasn't until 1897 that the very first Imperial Bank of China (中國通商銀行) began guaranteeing paper bank bills once again. Interestingly enough, the IBC would susvive the death of the Qing Dynasty in 1911, renaming itself under the Republic of China as the Commercial Bank of China, and continued to operate until it was absorbed by the Central Government of the nascent PRC in 1952.
Cheng, Lusun. Banking in Modern China: Entrepreneurs, Professional Managers, and the Development of Chinese Banks, 1897-1937.
Twitchett, Denis [ed.] (1979). The Cambridge History of China: Sui and T'ang China, 589–906 AD, Part 1.
Twitchett, Denis and Herbert Franke [ed.] (1994). The Cambridge History of China: Alien Regimes and Border States, 907–1368.
Twitchett, Denis and Fredrick W. Mote [ed.] (1998). The Cambridge History of China: The Ming Dynasty, 1368–1644, Part 2.