Routledge Handbook of the Chinese Economy

Gregory C. Chow, Dwight H. Perkins

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317663546
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

China's rapid rise to become the world's second largest economy has resulted in an unprecedented impact on the global system and an urgent need to understand the more about the newest economic superpower.

The Routledge Handbook of the Chinese Economy is an advanced-level reference guide which surveys the current economic situation in China and its integration into the global economy. An internationally renowned line-up of scholars contribute chapters on the key components of the contemporary economy and their historical foundations.

Topics covered include:

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• the history of the Chinese economy from ancient times onwards;

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• economic growth and development;

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• population, the labor market, income distribution, and poverty;

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• legal, political, and financial institutions; and

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• foreign trade and investments.

Offering a cutting-edge overview of the Chinese economy, the Handbook is an invaluable resource for academics, researchers, economists, graduate, and undergraduate students studying this ever-evolving field.

1
THE CHARACTERISTICS OF CHINA’S TRADITIONAL ECONOMY

Man-houng Lin

This chapter depicts the characteristics of China’s traditional economy developed in the seven thousand years before China encountered the impact of the West in the mid-nineteenth century. The concept of cultural complex has been applied and it emphasizes the interrelations among the geographical basis, mode of production, ideologies, economic institutions, and the change of time. International comparisons are made to highlight Chinese characteristics. The purpose of this description is to provide a background for understanding the economic development of present-day China.

The findings include the following: the unique beginning of the Chinese civilization which was in a loess highland, rather than in the alluvial plains of other civilizations; this led to the development of a more labor-intensive economy and an industrious population in China. The traditional Chinese economy that was developed more by the people than by the government, in contrast with the economy after 1949. The historical shift of the economic center since the eleventh century, from the northwest to the coastal area in the southeast, which has enabled the latter area to develop international cooperation in modern times. The intimate rural–urban relation in the Chinese tradition was jeopardized as some of the Chinese coastal cities were more integrated with the international market than the domestic market. Finally, China’s traditional economy, which was not stagnant but experienced long-term economic growth although it is interrupted by natural and political disasters.

In the view of some economists, a traditional economy is one developed without the influence of modern science, which was developed in the seventeenth-century European Scientific Revolution (Kuznets 1966: ch.1). China’s adoption of such a modern economy began in the mid-nineteenth century, but some elements of China’s traditional economy have lasted up to the present.

Some scholars see China’s traditional economy as having been precocious and only later stagnating. This view was debated among Chinese scholars in the 1930s and after 1949 (Schwartz 1954; Feuerwerker 1968), including a book related to the Tiananmen Incident (Jin Guantao and Liu Qingfong 1987). This chapter will point out that China’s traditional agriculture and commerce did continue to develop, although economic downturns and the political and natural disasters created some fluctuations around the upward trend.

Karl A. Wittfogel’s Oriental Despotism and other Marxian scholars tended to view China’s traditional economy through a totalitarian lens (Wittfogel 1957: 372–411). This chapter argues that despite the large state bureaucracy, small-scale private economic institutions dominated China’s traditional economy. In the early imperial period, the relationship between the government and merchants was characteristically one of dominance and subordination, but by the late imperial period, this relationship had become one of mutual dependence. An official statement of 1844 to allow commoners to open new mines declared: “Natural resources on Earth are provided for the use of millions and millions of people,” “It is also one way of hiding economic wealth among the people” (cangfu yumin), and “Neither can the officials repress or manipulate all affairs” (Lin 2006: 191). This chapter aims to reveal this tradition of popular wealth dispersal, a concept originating in ancient China and described in Hanshu, the Han Record (Zhu 1999: 132).

In ancient China, there were two prominent schools of egalitarian thought with regard to the distribution of wealth: the Mozi school advocated the equal distribution of wealth without status differentiation, while the Confucian school argued in favor of an egalitarian distribution with status differentiation. Historically, most Chinese scholars who addressed egalitarianism elaborated their ideas along the lines of the Confucian school (Li Quanshi 1928: 18–19). This chapter will demonstrate how this mainstream school of economic thought was manifested in China’s economy in the dominance of small-scale production and exchange activities, and long-lasting economic institutions capable of bolstering economic incentives and facilitating greater social mobility compared with contemporaneous societies.

China is a vast country, integrating various cultures, each of which developed in a particular manner and at a particular pace. Small-scale production started in Northwest China around 5,000 bc. Although China’s civilization originated in this inland northwestern region, its economic center shifted to the southeastern littoral region in the eleventh century (Chi 1936: 78, 89). The reasons for this shift include the following: frequent wars between the Han and the non-Han people on the northern frontier, the devastation of the irrigation works in the north, the threat of floods along the Yellow River valley, more suitable geographical conditions for the development of agriculture and commerce in the south, and the development of international commerce in the east. Furthermore, China’s geographical shift of economic power from northwest to southeast differs from the shift of Europe’s economic center from the southeast, along the shores of the Mediterranean, to the North Atlantic area in the northwest. This chapter will relate the change of China’s economic center to changes in its traditional economy over a period of approximately seven thousand years.

The chapter will be divided into six sections: section 1 will depict China’s broad social basis constituted of small-scale production and exchange activities. The existence of technological progress in China’s traditional economy will be discussed in section 2. Section 3 will point out the compatibility of the landlord and tenancy system, capital accumulation system, trade and ideologies with the rise of merchants. The close rural–urban relation in China with its rather broad rural basis, which was strengthened in the late imperial period, will be discussed in section 4. Section 5 will deal with the role of the government. Section 6 will describe China’s economic cycles in the process of its long-term growth, particularly the final economic downturn which caused China to drop from its dominant position in the East Asian order in the mid-nineteenth century when China encountered the West. Finally, an epilogue will be provided to summarize the characteristics of the traditional economy relevant for the development of modern China.

1 Economic institutions of small-scale production and exchange

1.1 The initiation of small-scale farming

Earlier studies of cultural diffusion stated that agriculture first originated in the alluvial deltas of Egypt and Mesopotamia and featured large-scale irrigation works and production units. They also stated that Chinese agriculture followed a similar pattern, beginning in the alluvial delta of the lower stream of the Yellow River in northern China. In fact, Chinese agriculture made its independent start in the loess of the northwest, which shaped the small farming as key aspect of the Chinese mode of production and other cultural traits.

1.2 The labor-intensive bent in the loess

Chinese civilization emerged in the upstream loess highland area of the Yellow River. Standing an average 50–150 meters above sea level, with an average rainfall of 250–500 millimeters, and possessing an irregular and vertically cut loess geology, large-scale irrigation of wheat crops, as practiced in ancient Egyptian and Mesopotamian civilizations, was impossible. Chinese agriculture instead practiced small-scale millet cultivation, which required less water and could better draw the water and mineral content of the loess. The irregularly cut loess was similarly unable to sustain large-scale animal husbandry, meaning that China could not rely upon animal energy to scale up agricultural production. The resultant labor-intensive technological bent encouraged population growth and an industrious spirit. This focus on population growth also bolstered ancestor worship, which underscores the extension of the bloodline (Ho 1975).

1.3 Less animal input

Such a mode of labor-intensive agricultural production without significant animal input was much extended in the later historical period. While large-scale farms using the multiple-hitch oxen ploughs were developed and practiced in the former Han period (206 BC–AD 220), this practice was replaced by a single-hitch plough in the later Han period due to the lack of oxen (Wang Zhirui 1964: 100; Li Jiannong 1981a: 155). In the later Han period (AD 25–220), a smaller farm size of 667 square meters replaced a bigger farm size of 831 square meters (60x60 chi – one chi of Han dynasty equals 23.09 cm) prevalent in the Former Han period (Li Jiannong 1981a: 156–158). The tendency to rely on labor-intensive technologies was reinforced after the Song period (960–1279), when China’s economic center shifted from the north to the south, where animal husbandry was even more difficult to develop due to the region’s higher population density (Wang Zhirui 1964: 99–100). In addition, high population density could hasten the spread of contagious diseases.

Considering that an acre of land used to produce wheat could, in a good harvest year, provide 2,988,000 calories of nutrition; if that piece of land were used instead to raise lamb, it would provide only 318,750 calories of nutrition. To offer a simple comparison, if a section of land sown in wheat yielded 100 calories, raising pigs would yield 7, sheep 11, dairy production 43, rice 131, beans 129, potatoes 260, and sweet potatoes 482. As cropland produced ten to seventy times more calories to feed the growing population than could pasture land, large-scale animal husbandry was discouraged (Majia 1930: 202–204).

As a result, human-hauled ploughs or hoes were more often used than ox-hauled ploughs after the Song period (Majia 1930: 209; Sudo 1962: 73–138). In the 1910s, animal husbandry made up only around 1 percent of China’s agricultural production (Perkins 1969: 30).

1.4 Bloodline concept

The tendency towards labor-intensive technology affected China’s emphasis on extending familial bloodlines. The Chinese concept of lineage extension differs from that of the Japanese, which underscored the expansion of family properties or prestige. The Japanese inheritance system had featured primogeniture since the seventeenth century due to the more competitive life challenge in the Warring States period. The Japanese system tended to promote one capable son, or lead to the adoption of a capable son from another family, in order to extend a well-established family’s property or prestige.

By contrast, China had employed equal distribution since the Han dynasty (206 BC–AD 220) and there are many interpretations for such practice. In the feudal period or semi-feudal period before the unification of the Chinese empire in the Qin dynasty, inheritance included the feudal ranks. As a rank could not be divided in the same manner as economic resources, both the rank together with the economic resources were inherited by only one heir. After the feudal or semi-feudal system was replaced by the imperial administration, each registered household had to pay taxes to the government; the equal division inheritance system secured the basis for tax payment. Furthermore, Confucian persuasion for equal wealth, Chinese emphasis on the bloodline extension, and the small-scale mode of production of traditional China had also facilitated this practice (Liu Xinning: 1, 132–136).

This inheritance system is significant in that the Chinese system made possible a higher marriage ratio of males than did the Japanese as Chinese males had a better economic basis to get married. China also had the baby-daughter-in-law system, which saw girls adopted as daughters and married to an elder son of the step-parents when they became of age. This system enabled poor males with no chance of inheritance to marry. The concubine system, on the other hand, enabled rich men to have more offspring.

China’s marriage ratios for men and women were both higher than those in Europe, and China’s male marriage ratio was higher than that of Japan. Marital age in China was younger than that of Europe, and remarriage encouraged. The family dynamics in China effectively implemented the Confucian maxims that “a boy or a girl should be married,” and “an ideal society should be one in which there are no unmarried men or women” (Lin 1991).

With some use of birth control, family sizes in traditional China were about the same as those in early modern Europe or Japan. However, China’s higher marriage ratio or lower marriage age, together with other exogenous factors, resulted in China’s more vivid population growth.

1.5 Population growth

During the Northern Song dynasty (960–1126), the Chinese population increased to 100 million (in 1086) as compared with the 70 million reached during the Western Han era (206 BC–AD 25). In the early Qing period (around 1760) it reached 200 million, around 1790, the population rose to 300 million, and by 1850, topped 430 million (Durand 1960; Liu and Hwang 1979: 88). Dwight Perkins has estimated the average annual population growth rate of China from 1400 to 1957 as 0.39 percent (Perkins 1969: 81). Hanley and Yamamura estimated that the average annual growth rate for Japan’s population was 0.03 percent from 1721 to 1846 (1977: 63). Thus the overall annual population growth rate of Japan’s entire late Tokugawa period was significantly lower than that of China from 1400 to 1957.

1.6 Small farming

Typically, a Chines...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• Notes on contributors
• Preface
• List of abbreviations
• 1 The characteristics of China’s traditional economy
• 2 The late Qing dynasty to the early Republic of China: a period of great institutional transformation
• 3 The centrally planned command economy (1949–84)
• 4 China’s economic reform: processes, issues, and prospects (1978–2012)
• 5 Economic growth and development
• 6 Population in China: changes and future perspectives
• 7 A labor market with Chinese characteristics
• 8 The Chinese savings puzzles
• 9 Macroeconomic management of the Chinese economy since the 1990s
• 10 Trends in income inequality in China since the 1950s
• 11 China’s agriculture: past failures, present successes and enabling policies
• 12 State and non-state enterprises in China’s economic transition
• 13 Foreign trade of China
• 14 China’s inbound and outbound foreign direct investment
• 15 Banking and financial institutions
• 16 Law and the economy in China
• 17 Political mechanisms and corruption
• 18 Energy and environmental issues and policy in China
• 19 The future of the Chinese economy
• Index