Quantitative Growth, Qualitative Standstill: China's Economic Situation 1368-1800 (Part 2)

by James Graham

Ming policies were relatively conducive to economic growth. Taxation was kept light and laws and regulations favourable to merchants. As the economy became increasingly monetised the government also accepted money as payment for taxes. All encouraged a move away from subsistence farming in favour of market production. Peasants found it profitable to take part in various sideline occupations notably in relation to cotton that could be grown by peasants or bought at market. Peasant families hand spun and wove the cotton for domestic use and for sales to brokers. Cotton was purchased in all states by merchants and brokers and transported to large towns for weaving, dyeing and rolling into various cotton textiles. In the mid Qing period up to 20,000 people were employed in the cotton industry in Suzhou alone. Commercialisation of the Chinese economy provided surplus food and materials that drove the expansion of China's cities. Their growth was limited by the size of the agricultural surplus and thus was aligned with the growth of the general population.


Increasing commercialisation and organisational changes assisted China's merchants and expanded the banking industry. The growth of money shops and remittance banks, guilds of merchants engaged in inter-regional trade and the decrease of serf like conditions for the peasantry all encouraged the development of China's commercial economy. Shanghai's guilds built dormitories, commentaries, rental houses, temples, workshops, warehouses, wharves and even ran soup kitchens. Guilds were also an important meeting place where business could occur. Their proliferation and success contributed to and followed the economic fortunes of the region they were located in.

The most productive land in China was located in the Yangtze River basin and South China generally. As the population continued to increase the proportion of this land to total cultivated acreage declined significantly between 1400 and 1800. Improvements in crops and techniques only partly compensated for the inferior quality of newly cultivated land. Chinese agriculture was so efficient however that technology from anywhere else in the world even in 1800 would not have increased productivity.

Demand for copper, iron and silver easily outstripped the Chinese economy's capacity to supply them. Lack of wood and fuel in many areas was the direct result of forests and reed swamps being cleared to make way for agricultural crops. The cotton industry's development was also hindered by the necessity of using land to grow food. The conversion of Northern grazing fields into grain fields meant the number of draught animals per head of population also declined. These shortages were worst in coastal regions where resources to build homes, ships and machinery were needed most. Thus resources required for the substitution of labour and increasing per capita productivity were often not available or prohibitively expensive. Conversely China's increasing population meant labour costs were very low and even declining. The vast majority of industrial producers thus substituted labour in place of capital goods where ever possible. No where is this more obvious than in China's transport system where humans were often the cheapest method of transporting goods. Even China's vast network of waterways relied on immense quantities of labour to function. China's relative shortage of raw materials contrasted with its absolute abundance of labour and was a major constraint on China's qualitative development.

Mark Elvin argues that "in technological and investment terms, agriculture productivity per acre had nearly reached the limits of what was possible without industrial-scientific input." Thus Elvin believes China found itself stuck in a high-level equilibrium trap and was "incapable of change through internally-generated forces." He contends that a higher output of food could only be achieved by migration and the opening up of new land. Also any increases in output Elvin believed would suffer diminishing returns. There is ample evidence of this occurring, even double and triple cropping increased yields per acre by diminishing amounts. More important was that China constantly failed to achieve increases in per capita output.

Elvin's theory has been widely criticised by historians who believe other factors cannot be neglected. Lloyd Eastman argues that the Chinese attitude towards economic development was one of harmony with nature focussed on stability and was very different to the western attitude of dominating nature. The Chinese were not slow in adopting new production techniques however and in some cases as in the erosion on hilltops natural resources were unsustainably exploited. Eastman also argues that the status and prestige of the ruling class were based on success in China's examination system and scholarly achievement. Additionally private industrial wealth is often heavily concentrated in factories and capital goods and therefore relatively vulnerable to government exactions. Poor property rights and imbalances in power relationships create variability and uncertainty that discourages capital investment. The first use of a successful merchant's profits was thus often to obtain literati status for themselves and their family. This also had the effect of providing limited official protection for their commercial interests. The society's values therefore diverted money, time and interests of wealthy Chinese away from endeavours that could have fostered technical innovation.

Edicts were passed in 1433, 1449 and 1452 with increasingly savage penalties banning foreign trade and even coastal shipping. Short term the bans ensured shortages of copper and silver and thus a liquidity crisis within China that hindered trade and development. Long term though the bans ended in 1567 they helped to deprive China of the only real route it could grow qualitatively. China's lack of resources could have been alleviated through foreign trade and colonisation. At the turn of the fifteenth century China possessed the largest navy and merchant fleet in the world, hence an overseas expansion was a plausible escape from Elvin's high-level equilibrium trap. China's seafaring folk were instead forced to spend their energy smuggling, avoiding and sometimes fighting government forces. The decrease in trade and contacts with foreigners also deprived China of the opportunity to benefit from foreign technological advances. Though the Qing emperors lifted the ban on foreign trade they continued to see trade as largely a source of revenue and maintained an isolationist stance.

Quantitatively China's economy grew enormously and allowed a five fold increase in population to be sustained. Improvements in crops and the availability of new though inferior, land fed this increase but often at the expense of qualitative growth. China was therefore trapped between a lack of raw materials and productive land and a large and growing population. China's economy thus largely stagnated in per capita terms between the period 1368 and 1800.

Growth & Standstill in China's Economy 1368-1800

Growth & Standstill in China's Economy 1368-1800 (Part 1)
Chinese History Bibliography