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 9: Why Japan Succeeded and China Failed

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


This chapter examines the two major hypotheses advanced to explain China’s failure to generate modern economic growth (MEG) after the opening to the West while Japan succeeded. One hypothesis is related to China’s difficulties in absorbing modern technology because of its unfavourable conditions as compared to Japan (Minami 1994; Eastman 1988). The second hypothesis is related to the difference in the role of government, because in contrast to the Meiji government which took a proactive role in facilitating industrialization, neither the Qing nor the Republican government in China provided the conditions vital for the private sector to absorb Western technology and generate modern industrialization (Perkins 1967). INITIAL ECONOMIC CONDITIONS This section compares the level of economic development of China and Japan during their initial periods using the following key indicators: (1) per capita gross domestic product (GDP); (2) the share of the primary sector in employment and output; (3) the growth of agriculture; (4) their respective degrees of commercialization and urbanization; (5) their industrial development; and (6) the share of their transaction sectors in GDP. Japan’s transition period lasted from 1868 to 1885 (Minami 1994) but since statistical data are only available for the year 1887 it is reasonable to take this as indicative of Japan’s initial conditions for industrialization (Ohkawa and Shinohara 1979). China’s transition was much longer and lasted, as stated previously, from 1842 to 1949. Around 1700, Japan’s GDP per capita was much lower than that of China. However, it rose by 40 per cent in the...

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