Most languages in China belong to the Sino-Tibetan language family, spoken by 29 ethnicities. There are also several major linguistic groups within the Chinese language itself. The most spoken varieties are Mandarin (spoken by over 70% of the population), Wu, Yue (Cantonese), Min, Xiang, Gan, and Hakka. Non-Sinitic languages spoken widely by ethnic minorities include Zhuang (Thai), Mongolian, Tibetan, Uyghur (Turkic), Hmong and Korean.
Most linguists believe that writing was invented in China during the latter half of the 2nd millenium BC and that there is no evidence to suggest the transmission of writing from elsewhere. The earliest recognisable examples of written Chinese date from 1500-950 BC (Shang dynasty) and were inscribed on ox scapulae and turtle shells - "oracle bones".
In 1899 a scholar from Beijing named Wang Yirong noticed symbols that looked like writing on some "dragon bones" which he had been prescribed by a pharmacy. At that time "dragon bones" were often used in Chinese medicine and were usually animal fossils. Many more "oracle bones" were found in the ruins of the Shang capital near Anyang in the north of Henan province.
The script on these "oracle bones" is known as 甲骨文 (jiăgŭwén) - literally "shell bone writing". They were used for divination, a process which involved heating them then inspecting the resulting cracks to determine to answers to one's questions. The bones were then inscribed with details of the questions and the answers. Most of the questions involved hunting, warfare, the weather and the selection of auspicious days for ceremonies.
Chinese is written with characters which are known as 漢字 [汉字] (hànzi). The characters were originally pictures of people, animals or other things, but over the centuries they have become increasingly stylised and no longer resemble the things they represent. Many characters have been combined with others to create new ones.
Until the early 20th century, Classical Chinese, 文言 (wényán), was the main form of writing in China. It was standardised during the late Han Dynasty (25-220 AD) and was also used in Korea, Japan and Vietnam before they developed their own writing systems.
In Classical Chinese most words were monosyllabic and written with a single character. However, during the 1920s a new form of written Chinese modelled on spoken Mandarin was developed. Most Chinese publications since then have been written in this form, which is known as 白話 [白话 ] (báihuà), though Classical Chinese constructions and especially proverbs are still used to some extent.
In spoken Chinese, words are made up of one, two or more syllables. Each of the syllables is written with a separate character. Each character has its own meaning, though many are used only in combination with other characters.
Every character is given exactly the same amount of space, no matter how complex it is. There are no spaces between characters and the characters which make up multi-syllable words are not grouped together, so when reading Chinese, you not only have to work out what the characters mean and how to pronounce them, but also which characters belong together.
How the Chinese writing system works
The illustrations below of the various ways the character for horse is used in Chinese give you an idea of how the Chinese script works.
Evolution of the character
You can see below how the character for horse has evolved since it first appeared in the Oracle Bone Script during the Shang Dynasty (c. 1400-1200 BC).

Basic meaning
The character "馬" is pronounced mă in Mandarin and máh in Cantonese. It means horse and is also used as a family name.
Usage in compound words
The character is used in horse-related compound words, such as:

Radicals and phonetics
About 90% of Chinese characters contain a radical or bùshŏu, which gives you a clue to the meaning of a character, and a phonetic component, which hints at how to pronounce the character. The character for horse is used both as a phonetic compontent and as a radical.
The charcter for horse is used as a phonetic component in the following characters:

The charcter for horse is used as a radical in the following characters:

Usage in the transliteration of foreign words
The character for horse is also used for its phonetic value alone when writing foreign loanwords or the names of foreign people or places.
The few foreign loanwords that exist in Chinese come mainly from English but the word măhū comes from the Sanskrit moha - ignorance. The syllables of măhū are usually doubled to make it mămahūhu. This is a common way to intensify the meaning of adjectives.
Homophones
There are approximately 1,700 possible syllables in Mandarin, which compares with over 8,000 in English. As a result, there are many homophones - syllables which sound the same but mean different things. These are distinguished in written Chinese by using different characters for each one.
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