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 18: China’s Modern Economic Growth: Retrospect and Prospect

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


CHINA’S ECONOMIC GROWTH IN RETROSPECT China’s past can roughly be divided into two major periods. The first, which lasted up to about 1300, had seen growth in both gross domestic product (GDP) and GDP per capita, with the highest growth phase being the Song period (960–1279) when China ranked highest in the world in terms of both criteria. In the second phase, from 1300 onward, China’s GDP growth continued and remained the largest in the world in absolute terms, but per capita income stagnated and after roughly 500 years of relative decline it amounted to only half that of Western European countries in the 1820s. Since the pre-modern economy was dominated by agriculture, the development of China’s traditional economy can be analysed in terms of agricultural output growth, which is mainly determined by increase in the yield of land and increase in land availability per capita. Before the 1300s land availability was an important factor because in this period China expanded from the core settlement area in the North China plain to all other areas of the country. Thus the area of land available for cultivation increased considerably over time. However, by far the most important determinant of growth was the rise of China’s agricultural productivity, which was much higher than that of Europe at the time. The reason was that China utilized better technologies and had better institutions and government policies. In the Song period the shift of the population to the South with the addition of land...

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