An Economic History of Modern China

An Economic History of Modern China

Joseph C.H. Chai

As a country’s current development is path dependent, the rise of China and its strategic implications can only be understood in a historical context. Hence, the key to understanding contemporary China is the understanding of its past. So far there has been an absence of a comprehensive text dealing with Chinese economic history in the English language. An Economic History of Modern China fills this important gap, focusing on modern Chinese economic growth and comprehensively surveying the patterns of China’s growth experience over the past 200 years, from the Opium wars to the present day. Key events are traced back to their foundations in history to explain their impact on China’s modern economic growth.

Chapter 4: Trade

Joseph C.H. Chai

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, development economics, economic psychology


Compared to agriculture, trade played a minimal role in China’s traditional economy. It consisted of local market trade, regional long-distance and foreign trade. The first was small in volume and usually involved an exchange between peasants of their respective surplus products, such as grain for cloth and vice versa (Huang 1990). Nevertheless it was by far the most important type of trade in China and accounted for 77 per cent of all trade before 1910 according to Perkins (1969). The distinction between local market and long-distance trade is important from the point of view of economic development, as the latter involves a certain degree of division of labour, specialization and economies of scale and enables producers to capture the resulting productivity gains and, hence, leads to Smithian growth (Wrigley 2002). However, this type of trade was rather limited prior to 1910 and accounted for less than 20 per cent of gross domestic product (GDP) (Perkins 1969). The long-distance trade that was generated was largely regional trade based on the comparative advantage of each region in terms of resources and climate conditions. Thus tea was exported from Fujian, Zhejiang and Anwei, raw cotton and cotton textiles from the Yangzi delta, opium from Yunan, sugar from Guangdong and Fujian, and silk from Jiejiang, Jiangsu, Guangdong and Sichuan. Salt was exported from Sichuan; wheat, soybeans and cotton from North China; and rice from the Yangzi delta (Chen and Meyers 1989). Table 4.1 presents the main commodities entering regional longdistance trade in China in...

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