Isn’t this a bit like how America was only officially “discovered” in 1492? To the general surprise of everyone already living there :)
There are descriptions from the 4th century China which can be read to imply that they found dinosaur bones. The area indicated by these writings is known in the present to have such fossils.
Can we say for certain that what they had were dinosaur bones? No, of course not. They didn’t describe their findings in detail and the actual bones were lost since then.
The ancient chinese description clearly correctly understood that what they are seeing are the bones of some long ago lived creature with large bodies. The same text also made incorrect assumptions (for example that they died because they could not fly up to heaven).
But it is not like suddenly in whenever you says dinosaurs were discovered they understood everything about them correctly. Just to note a few earlier mistakes: the lack of feathers in depictions, and the famous nose horn of the Crystal Palace dinosaurs.
What might be confusing is that the word “dinosaur” is used in scientific literature while the world “dragon” is associated with fantasy and legends. But this is just a linguistic difference. The world dinosaur is a portmanteau from two greek words, coined by a western scientist. Obviously the ancient chinese sources could not have used it before that.
In short: Are we now more knowledgeable about these once lived animals than the scholars of the 4th century China? Massively, without a doubt. Is there some bright line where we can delineate “correctly understood” from not correctly understood? I would say no, discovery is more of an incremental process.
http://markwitton-com.blogspot.com/2021/03/dinosaur-fossils-...
