The Chinese Economy Before 1949

The Chinese Economy Before 1949

• China's economic history has seen dramatic shifts, notably the 1949 revolution and post-1978 market economy transition.
• Before 1949, China did not achieve rapid, modern economic growth but since 1949 there has been consistent and strong growth.
• From the late 18th to early 20th century, China's economy performed poorly and faced political disintegration due to Western pressure.
• The traditional view is that China's economy failed in the 19th and early 20th centuries, making 1949 a crucial turning point.
• Some argue economic development is a long-term process of accumulating capital and modern institutions.
• The economic success post-1949, along with successes in Taiwan and Hong Kong, suggests supportive features in the traditional economy.
• Some argue China could have grown rapidly under any system, developing along capitalist lines without a socialist revolution.
• Emphasizing the 1949, it established peace, redistributed land, and politically/economically empowered the poor, necessary for economic takeoff.
• Interpreting the 1949 turning point requires assessing the traditional Chinese economy's performance.
• The "great divergence" between China and the industrialized West mainly occurred in the 19th century.
• It is more reflective of productivity and economic sophistication differences.
• Examining the traditional Chinese economy requires considering whether it failed before 1949 and why, its suitability for economic growth, and its response to Western challenges.
• To what extent did the pre-1949 provide a basis for vigorous growth after 1949? To what extent has the post-1978 economic takeoff revived traditional elements from the culture?

The Traditional Economy, 1127–1911

• The economy will be examined during three broad time periods.
• Evaluate the legacy of the economy in all aspects.

High-Productivity Traditional Agriculture

• Chinese society was primarily rural, with over 90% living in the countryside.
• Farmers used sophisticated agricultural techniques to achieve high crop yields per land unit.
• High labor input on small plots resulted in high productivity per land unit but low productivity per worked.
• A complex agricultural technology was established using selective seed varieties, fertilizer, and irrigation.
• Early-ripening rice, adopted from Southeast Asia, boosted the Southern Song dynasty's wealth and culture (AD 1127–1279).
• The technological breakthrough of rice allowed for multiple crops to be planted each year.
• Organic fertilizers, from manure to pond mud, maintained soil fertility.
• Sophisticated irrigation systems precisely controlled water, enhancing crop varieties and fertilizer use.
• Rice shoots were germinated in seedbeds, transplanted to flooded fields, drained as they matured, and then harvested.
• The productivity of each element was enhanced by the others.
• Preparing fields, irrigation canals, hauling fertilizer, and transplanting seedlings required immense labor.
• The product per land was high, but product per labor was low and so the income was very low.
• Enough food was produced for the family to feed, however many more labourers were often needed/added.
• Population growth put constant pressure on low incomes and consumption.
• Limited use of animals in farm work and diet.
• Meat was uncommon, protein consumption was inadequate, and most calories came from grain.
• The intensive labor on small plots resembled gardening to Western visitors in these times.
• Visitors were uniformly impressed by high yields and resource utilization.
• Waste recycling altered soil composition and maintained productivity.
• China had no natural soils left by the 19th century due to centuries of vegetation
• This system first was made in the Lower Yangtze and expanded to lowland and riverside areas.
• Population growth pushed farmers into hills, where they built terraces.
• New World crops like corn and potatoes let farmers spread to lands less fit for traditional methods.

The Commercialized Countryside

• Densely populated countryside supported a strong market network.
• Regions with canals, like the Lower Yangtze and Pearl River deltas, were well-connected through a developed water transport.
• Major rives linked regions.
• Grand Canal linked the food-surplus Lower Yangtze with the food-deficit North China Plain.
• Locations on the water network could trade even bulky goods.
• Local markets merged for interregional trade.
• Dense population and transport networks supported a very commercialized economy with sophisticated institutions.

Sophisticated Institutions

• Widespread Use of oney
  • Widespread use of money as of 1820, paper money was one-third or more of total coin in circulation.
• Familiarity with Large Formal Organizations
  • Clan or lineage organizations had extensive economic actions in south China. Sometimes formal shares were issued to regulate one's membership.
• Advanced commercial procedures
  • Written contracts were ubiquitous.
  • Contracts expanded beyond transactions to regulate obligations to family and the afterlife.
  • As early as the first century "tomb contracts" proving the right of the dead to occupy a given plot of ground were buried with the dead.
  • The use of middlemen in personal and commercial transactions was extremely normal.
• Supportive legal and customary institutions
  • Courts existed and were used for lawsuits. Interregional trade was usually regulated by local/merchant associations that helped resolve disputes and supported networkss.
• Traditional banks allowed merchants transfer funds nationwide.

Competitive Markets

• Highly competitive markets
  • Recent studies confirm that this consisted of numerous suppliers, easy entry and normal or frequent exit.
• Competitive and efficient markets for land and labour.
• Few socially imposed barriers to mobility; no aristocracy or caste system.
• Movement in search od economic opportunities or just opportunity was normal during these times.
• High inequiality but potential social mobility was attainable.

Small-Scale, “Bottom-Heavy” Economy

• Agriculture was based on individual, small-scale households, not plantations.
• Most nonagricultural output was also small-scale and done by normal rural houses.
• Food products were mostly, if not all made by microenterprises in the countryside.
• Many households farmed, crafted, and marketed output, creating a vigorous household-based economy.
• These were also directly liked to markets.
• Consecutive production stages were handled by specialized households connected via markets.
• Vertical segmentation characterized silk cloth manufacture: raising silkworms, caring for cocoons, spinning thread, and weaving cloth.
• Small processors and middlemen linked producers, merchant and consumers together.
• Chinese foreign trade was very succesful, specifically the export of tea boom after 1880s with a peak being more than 1 million tonnes,
• Some small factories processed hundreds of tea tonnes a year.
• The industry grew rapidly at the turn of the twentieth century.
• China system didn't cope well with competition from Japan and India's standardization and reliable high quality.
• Chinese exporters were pushed outside of world markets that they created.
• Export industry declined as houses exited as quickly as then entered it.
• The economy had a fluid resource allocation
• resources/labor was used with high rate of return and exited as quickly when returns fell.
• Economic activity was fragmented small businesses with small capital
• However cotton fabric could woven through all three-quarters of China instead of large scale textiles.

A High-Level Equilibrium

• China and premodern Europe had similar population sizes and economic weight.
• China was more unified politically after AD 600 unlike Europe.
• The efficient farm in China backed population support for 400 years.
• China's population quadrupled from 72 million in 1400 to 310 million in 1794, growing at 0.4% per year.
• "Massive population growth with stable long-run living standards [was] the defining feature of the Ming-Qing economy”: 1368-1911.
• With its' productive economy and about 1/3 of the world population, China was undisputably the largest economy.
• Angus Maddison stated that China's per capita GDP was same to average 600 dollars 1990 from 1600-1820
• Pomeranz said it would be more meningul to compare specific regions.
• Comparing wages of unskilled workers across cities showed wages in London and Amsterdam, Beijing, Suzhous and Canton were close to those in Milan and Leipzig.

The Role of Government: Qing-Dynasty Florescence and Decline

• At its peak in the 18th century, The Qing dynasty (1644–1911) brought together Han Chinese, Mongols and others via political, military, ceremonial, and religious institutions.
• The Qing also supplied public goods like granaries, hydraulic works, justice system, and a courier or postal network
• It kept a national exam integrated society via Confucian ideology/political hierarchy,
• It also provided internal/external security.
• During “high” Qing, Kangxi and Qianlong ruled for 122 years between 1661 and 1796, pushed China's boundaries out to their greatest historical extent.
• Qianlong received a delegation sent from English George III in 1793.
• The delegation visit signals the end of an era of achievement and the start of weakening from external threats
• The Qing government was smaller relative to population/economy than European governments in the premodern era.
• In 1800, there was only one government worker per 32,000 people in China, vs. one for every 600-800 in Europe.
• Qings administrative was also extremely slow and fragile.
• Qing couldn't increase its' capbaility as the society and economy went on the increase.
• Budgetary revenues fell from 8% of GDP in early 1700s to below 3%.
• Qing government delegated justice to local officials in collaboration with local power instead due to vast size and population.
• Resources collected were substantial, but revenue reaching the national government was low due to corruption.
• Attempts were made but were limited capability
• Provision off justice was capricious.
• Property rights impossible.
• Public goods shrunk after the late 170ps.
• Security worsened drastically.
• The Chinese economy had a broad decline, which was paired with unprecedented economic and population growth in Europe.

The Failed Response to the West and Japan

• Foreign powers had a severe impact on it.
• Foreign encroachment grew during dynastic weakness, beginning with economic disruption and expanding to military confrontation.
• China had an export surplus and imported silver rather than foreign goods according to Quianlong.
• Trational exports brought an inflow which created a boom til the 1820's
• British merchants located opium to import into the country.
• By the 1830's export was less than than import.
• Opium also introduced to China.
• China faced both economic, slowdown and a new social problem, opium addiction.
• China fought the Opium war after it tried to stop the trade from 1839 with Britain
• Britain won the Opium war; in 1842 forced China to cede Hong Kong and five treaty parts during the treaty of Nanking.
• China and lost five wars against Foreign countries.
• Each loss furthered the crisis and reduced its options further.
• The weakened Qing dynasty was weak, and the Taiping Rebellions formed causing around 20-30 mil casualties.
• Treaty ports were not subjected to any chinese jurisdiction at this point.
• Japan gradually became the main foreign power which was encroaching on China economically/politically militarily.
• Sino-Japanese war caused Taiwan to be seized/incorporated to Empire.
• This defeat was an eye opener to china as the need to reform was now realized.
• Some officals had been in the know and sponsored industrial products.
• Qing was however virtuly in bankruptcy and little to no support for these projects.

The Beginnings of Modernization, 1912–1937

• After Qing dynasty and then the 1911 revolution, the Chinese economy was changing.
• Industrial development had begun.
• Transportation opened up as well to other sectors.
• It was troubled by warlord domination at the time.
• The Nationalist Party reunified china again.
• For 10 years until invasion the government from Nanjing began to invest in education and agriculture services.
• New technologies were developed such as the crop strains.
• Shanghai became vigourous.

Industry

• Modern factory productions grew 8-9.
• Industry began after China was forced to accept foreign investimted by the trade of Shimonoseki.
• Modern factors were 2% of GDP and employed like 1 million people which was 4% of the workforce.
• Distinct patterns in intital in industrial growth: "Treaty-Port" and Manchurian Industrialization.
• Foreigners started factories at the turn of the country.
• Early industrialization was focused in downstreams such as good industries.
• Textiles became major factories.
• Output rapidly increased removing the need for imports.
• Enclave was started by all and grew with example and competition.
• 78 %came from chinese owned businesses.
• Shanghai Dalong was one example.
• Different pattern of industrialization came in Marchuria Japanese government with a mixture of economic and strategic objectives.
• They expanded and expolited coal and iron and focused on heavy duty.

The Rural Economy

• China was under enormous amounts of pressure.

Evaluation

• There was a small but growing industry growth wise in the 1920s and 1930s
• Agriculture, handicrafts, and transport experienced positive growth from 1914-1936.
• GDP modestly increased.
• Total economy consisted of cotton textiles.
• Factory spinning took markets and farm households declined spinning dramatically.
• Farmers experienced severe hardship.
• Household weaving turned out to be cost effective as a product.
• Areas lost product competitiveness.
• In coastal cities there increased markets for local food.
• Many farmers worked traditionally for many centurries
• Vibrant society, with an open and stimulating intellecutal and cultural environment.

War and Civil War, 1937–1949

• Japanese presence slowly increased over sucsess over over war period..
• Japand had gained toehold in Manchuria when seized the Liaodong.
• 1937 became invasion of China proper.
• Intiated a peiord til 1949.
• This brought mass suffering to the population and damage to the economy
• Created the condition for the civil war between the Nationalist and commonist
• 5 main changes occured during this decade.
• Japan moves into china with the concept of East econmic procecdure.
• Core of that system was focused to Japan . Most manufacturing etc was focused to japan.

The Rise of Manchuria

• Even though the Japanese had a failed project, there was still industrialzation.
• Output peaked in 1936 and by 1942 Manchuria had the bulk of powers, iton more than half of economy value.

Increased State Intervention

• Nationalist government was in chongqing, in sichuan.
• Guomindang government turned to plannng commission called national rescources.
• 160 000 worker factories by NRC in the 1940s.
• The Japanese were taking over industry.
• The government controlled 90% steel, 2/3, and 45% cement output.
• Communist government took over this government state for its plans.

Inflation

• To fund war Nationalist government took over printing money
• Inflation spiraled outa controll.

Relative Standing

• The relative position in the world had substantially eroded.
• Per capita became less that 40% and around 20%
• Of course west was acceleating over the average.
• Had descnded position of obvious backwardness underdevelopment.

Legacies of the Pre-1949 Economy

• The legacies of the pre 1949 economy.

Legacy for the Socialist Era (1949–1978)

• The legacy of the economic infrastructure was damage from the war.
• Agriculture fell also and it was below potential
• Financial chaos had immediate action.
• Lost all economic growh that started with the 20 30s.
• The economy experiened socialist institutions due to this.
• The experienc caused chinsese to have adverse and deep suspision because China was invaded.
• Corruption compromised.
• Aversion to foreign dominnance led to support
• socialist strategies.
• There was a core of heavy industry that was built thanks to all these times.
• Human capital rose etc.

Legacy for the Post-1978 Market Economy

• The legacy of the economic infrastructure was important and that it was equally important for the post 1978 economy.
• Familiarity to the domestic helped adopt economic opportunity.
• Returned the tradition.
• Bussiness was more vigouruos.
• Traditional links outside chins, created explosive growth.
• Still needed to be sensitive during this period,
• Helped start the trasnformation of dual track.

Before 1949, China's economy struggled, facing political disintegration and failing to achieve rapid, modern growth. The 1949 revolution is seen as a turning point, leading to consistent and strong economic development. Some argue that pre-1949 China had inherent strengths that could have supported growth under a different system.