What made possible the expansion of the Chinese economy, and what were the outcomes of this economic growth?

Chinese historians traditionally viewed dynasties as following a standard cyclical pattern. Founders were vigorous men able to recruit capable followers to serve as officials and generals. Externally they would extend China’s borders; internally they would bring peace. They would collect low but fairly assessed taxes. Over time, however, emperors born in the palace would get used to luxury and lack the founders’ strength and wisdom. Families with wealth or political power would find ways to avoid taxes, forcing the government to impose heavier taxes on the poor. As a result, impoverished peasants would flee, the morale of those in the government and armies would decline, and the dynasty would find itself able neither to maintain internal peace nor to defend its borders.

Viewed in terms of this theory of the dynastic cycle, by 800 the Tang Dynasty (see “Tang Culture” in Chapter 7) was in decline. It had ruled China for nearly two centuries, and its high point was in the past. A massive rebellion had wracked it in the mid-eighth century, and the Uighur Turks and Tibetans were menacing its borders. Many of the centralizing features of the government had been abandoned, with power falling more and more to regional military governors.

Historically, Chinese political theorists always assumed that a strong, centralized government was better than a weak one or than political division, but, if anything, the Tang toward the end of its dynastic cycle seems to have been both intellectually and economically more vibrant than the early Tang had been. Less control from the central government seems to have stimulated trade and economic growth.

A government census conducted in 742 shows that China’s population was still approximately 50 million, very close to what it had been in 2 C.E. Over the next three centuries, with the expansion of wet-field rice cultivation in central and south China, the country’s food supply steadily increased, and so did its population, which reached 100 million by 1100. China was certainly the largest country in the world at the time; its population probably already exceeded that of all the Islamic countries of the time or that of all the countries of Europe put together.

Agricultural prosperity and denser settlement patterns aided commercialization of the economy. Farmers in Song China no longer merely aimed at self-sufficiency. They had found that producing for the market made possible a better life. Farmers sold their surpluses and used their profits to buy charcoal, tea, oil, and wine. In many places farmers specialized in commercial crops, such as sugar, oranges, cotton, silk, and tea. (See “Global Trade: Tea.”) The need to transport the products of interregional trade stimulated the inland and coastal shipping industries, providing employment for shipbuilders and sailors and business opportunities for enterprising families with enough capital to purchase a boat. Marco Polo, the Venetian merchant who wrote of his visit to China from about 1275 to 1292, was astounded at the boat traffic on the Yangzi River. He claimed to have seen no fewer than fifteen thousand vessels at one city on the river, but he commented, “And yet there are other towns where the number is still greater.”1

As marketing increased, demand for money grew enormously, leading eventually to the creation of the world’s first paper money. The decision by the late Tang government to abandon the use of bolts of silk as supplementary currency had increased the demand for copper coins. By 1085 the output of coins had increased tenfold to more than 6 billion coins a year. To avoid the weight and bulk of coins for large transactions, local merchants in late Tang times started trading receipts from deposit shops where they had left money or goods. The early Song authorities awarded a small set of these shops a monopoly on the issuing of these certificates of deposit, and in the 1120s the government took over the system, producing the world’s first government-issued paper money. (See “Viewpoints 12.2: Circulating Paper Money.”)

With the intensification of trade, merchants became progressively more specialized and organized. They set up partnerships and joint stock companies, with a separation of owners (shareholders) and managers. In the large cities merchants were organized into guilds according to the type of product sold, and they arranged sales from wholesalers to shop owners and periodically set prices. When government officials wanted to requisition supplies or assess taxes, they dealt with the guild heads.

Foreign trade also flourished in the Song period. In 1225 the superintendent of customs at the coastal city of Quanzhou wrote an account of the foreign places Chinese merchants visited, with sketches of major trading cities from Srivijaya and Malabar in Southeast Asia to Cairo and Baghdad in the Middle East. Pearls were said to come from the Persian Gulf, ivory from the Red Sea port of Aden, pepper from the Indonesian islands of Java and Sumatra, and cotton from the various kingdoms of India. Chinese ships began to displace Indian and Arab merchants in the South Seas, and ship design was improved in several ways. Watertight bulkheads improved buoyancy and protected cargo. Stern-mounted rudders improved steering. Some of the ships were powered by both oars and sails and were large enough to hold several hundred men.

Also important to oceangoing travel was the perfection of the compass. The ability of a magnetic needle to point north had been known for some time, but in Song times the needle was reduced in size and attached to a fixed stem (rather than floated in water). In some instances it was put in a small protective case with a glass top, making it suitable for sea travel. The first reports of a compass used in this way date to 1119.

The Song also witnessed many advances in industrial techniques. Heavy industry, especially iron, grew astoundingly. With advances in metallurgy, iron production reached around 125,000 tons per year in 1078, a sixfold increase over the output in 800. At first charcoal was used in the production process, leading to deforestation of parts of north China. By the end of the eleventh century, however, bituminous coke had largely taken the place of charcoal. Much of the iron was put to military purposes. Mass-production methods were used to make iron armor in small, medium, and large sizes. High-quality steel for swords was made through high-temperature metallurgy. Huge bellows, often driven by water wheels, were used to superheat the molten ore. The needs of the army also brought Chinese engineers to experiment with the use of gunpowder. In the twelfth-century wars against the Jurchens (see “The Mongols” in Chapter 12), those defending a besieged city used gunpowder to propel projectiles at the enemy.

Economic expansion fueled the growth of cities. Dozens of cities had 50,000 or more residents, and quite a few had more than 100,000, very large populations compared to other places in the world at the time. China’s two successive capitals, Kaifeng (kigh-fuhng) and Hangzhou (hahng-joh), each had an estimated 1 million residents. Marco Polo described Hangzhou as the finest and most splendid city in the world. He reported that it had ten marketplaces, each half a mile long, where 40,000 to 50,000 people would shop on any given day. There were also bathhouses; permanent shops selling items such as spices, drugs, and pearls; and innumerable courtesans, whom Marco Polo described as “adorned in much finery, highly perfumed, occupying well-furnished houses, and attended by many female domestics.”2

The medieval economic revolution shifted the economic center of China south to the Yangzi River drainage area. This area had many advantages over the north China plain. Rice, which grew in the south, provides more calories per unit of land and therefore allows denser settlement. The milder temperatures often allowed two crops to be grown on the same plot of land, first a summer crop of rice and then a winter crop of wheat or vegetables. The abundance of rivers and streams facilitated shipping, which reduced the cost of transportation and thus made regional specialization economically more feasible. In the first half of the Song Dynasty, the capital was still at Kaifeng in the north, close to the Grand Canal (see “The Sui Dynasty, 581–618” in Chapter 7), which linked the capital to the rich south.

The economic revolution of Song times cannot be attributed to intellectual change, as Confucian scholars did not reinterpret the classics to defend the morality of commerce. But neither did scholar-officials take a unified stand against economic development. As officials they had to work to produce revenue to cover government expenses such as defense, and this was much easier to do when commerce was thriving.

Ordinary people benefited from the Song economic revolution in many ways. There were more opportunities for the sons of farmers to leave agriculture and find work in cities. Those who stayed in agriculture had a better chance of improving their situations by taking up sideline production of wine, charcoal, paper, or textiles. Energetic farmers who grew cash crops such as sugar, tea, mulberry leaves (for silk), and cotton (recently introduced from India) could grow rich. Greater interregional trade led to the availability of more goods at the rural markets held every five or ten days.

Of course, not everyone grew rich. Poor farmers who fell into debt had to sell their land, and if they still owed money they could be forced to sell their daughters as maids, concubines, or prostitutes. The prosperity of the cities created a huge demand for women to serve the rich in these ways, and Song sources mention that criminals would kidnap girls and women to sell in distant cities at huge profits.