Classical Chinese (文言 wényán, literal meaning: "literary language") is a style of writing the Chinese language which uses alternate sets of characters and grammar which resembles Chinese as it was written historically. It was used for almost all formal correspondence before the 20th century, not only in China but also in Korea and Japan.
It is in contrast to bai hua which is a writing style that uses characters used in modern spoken Chinese. In practice there is a socially accepted continuum between bai hua and wen yan. A person writing a letter might include wen yan expressions and phrases to express that the matter being discussed is formal or serious and important. A letter written completely in wen yan would be considered stylistically odd, but not incorrect and certainly not uneducated.
Most Chinese people with at least a middle school education are able to read basic wen yan, because the ability to read (but not write) wen yan is part of the Chinese middle school and high school curriculum and is part of the college entrance examination. Classical Chinese is taught primarily by presenting a classical Chinese work and including a bai hua gloss which explains the meaning of phrases. Tests on classical Chinese are typically essentially translation exercises which ask the student to express the meaning of a paragraph in bai hua, using multiple choice.
In addition, many works of literature in wen yan (such as Tang poetry) have major cultural influences. However, even with knowledge of grammar and vocabulary, wen yan can be extremely difficult to decipher, even by educated native speakers of Chinese, because of its heavy use of literature references and allusions.
Wen yan is distinguished from bai hua by the use of different characters, and a style which is extremely concise and pacted. The terms which are different in wen yan tend to be transition and grammatical words. A sentence which may take 20 characters in bai hua can often be rendered in wen yan in four or five. In addition to grammar and vocabulary differences, wen yan can be distinguished by an effort to maintain parallelism and rhythm, even in prose works, and its extensive use of allusions which also contribute to the brief style.
Wen yan was the primary form used in Chinese literary works until the May Fourth Movement, and was also heavily used in Japan and Korea. Exceptions to the use of wen yan were vernacular novels such as The Dream of the Red Chamber, which was considered low class at the time. Today, pure classical Chinese is occasionally used in formal or ceremonial occasions. The anthem San Min Chu-i, for example, is in wen yan. Most often, people will, in certain situations, add classical terms to writing in order to make it seem more formal. Ironically, Classical Chinese was used to write the Hunman jeong-eum in which the modern Korean alphabet (Hangul) was promulgated and the essay by Hu Shi in which he argued against using Classical Chinese and in favor of bai hua.
Classical Chinese is unique for today being an almost purely literary language. Classical Chinese characters are generally read with modern Mandarin Chinese sounds in which many different characters have become homonyms. This makes most Classical Chinese literature unintelligible when read with Mandarin pronunciations. However, some other Chinese dialects are closer to Classical Chinese, and in the subjective opinion of many Chinese, Classical Chinese literature, especially poetry, sounds better when read with a southern dialect such as Cantonese.