An Economic History of Modern China
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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.
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Chapter 8: The Rise of Modern Sectors and their Impact

Joseph C.H. Chai


MODERN INDUSTRY Chinese modern industry is defined here as factories using mechanical power and employing more than 30 workers. This industrial sector was driven by three groups of entrepreneurs, namely foreigners, government officials and private Chinese entrepreneurs. As discussed, foreigners began to set up their own manufacturing enterprises immediately after the Treaty of Nanking in 1842 and their number soared after the Treaty of Shimonoseiki in 1895 which officially opened China’s manufacturing sector to foreign direct investment (FDI). Initially it was foreign enterprises which dominated China’s modern industries; however, they were soon taken over by Chinese nationals (see Table 8.1). By 1933 the Chinese accounted for three-quarters, or the lion’s share, of modern manufacturing output, with foreign firms only one-quarter (Rawski 1989). China’s early industrial entrepreneurs largely were either gentry officials, merchants or compradores. The earliest Chinese-owned modern factories were established during the Self-Strengthening Period (1842–1904/05) by gentry officials led by Governor Zeng Guofan and Zou Zongtang and Li Hongzhang. Though adopting Western practices, Chinese officials still upheld the ideology of the gentry class under the policy of ‘Chinese learning as essence, Western learning for practical use’. They were convinced of the superiority of China’s traditional value, culture and institutions and were only prepared to borrow elements of Western military and industrial technology in order to gain sufficient strength to resist foreign incursion. Thus modern factories were established in the mining, ship building, armaments and machinery industries which included, for example, the Kaiping coal mines in Tianjin, dockyards in...

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