The Late Imperial China's Failed Economic Transition

The structural flaw that derailed China's first attempt to modernization

Scene in Nanking Arsenal, 1874 © John Thomson

What led to the failure of the Self-Strengthening Movement (SSM, 洋務運動) in late Qing China, as opposed to the success of the Meiji Restoration (明治維新) in accelerating Japan’s industrialization process? This question has haunted the Chinese for over a century.

Chinese historian Yan Lixian (嚴立賢) at Chinese Academy of Social Sciences (CASS) drew upon the theory of proto-industrialization to account for the late Qing Dynasty’s unsuccessful industrialization.¹

The term “proto-industrialization” was coined by economic historian Franklin Mendels in his 1969 doctoral dissertation on the rural linen industry in 18th-century Flanders. Proto-industrialization theories assume that economic developments, demographic structures, and social changes in rural areas prior to the Industrial Revolution paved the way for industrialization.²

So, what went wrong with the proto-industrialization in the Qing Dynasty?

Japan’s success in proto-industrialization rests on a vast wholesale network extending from central cities to rural areas, argues Yan Lixian. Japanese feudal lords differed from their Western counterparts in that they collected rice as the primary form of rent rather than levying a proportional tax on various goods. To acquire other necessities, they would circulate the collected rice in the commodity market, thereby stimulating the development of a wholesale distribution system. Moreover, the shogunate’s (幕府) economic control over the daimyo (大名) compelled the latter to depend as much on the central authority as the commodity market, facilitating the expansion of a nationwide wholesale network.³

Unlike Japanese feudal lords, Chinese landlords and local gentries exercised de facto rule over rural areas. While there were wholesalers penetrating into the rural economy, landlords and local gentries were economically independent of central authorities, leaving no space for a wholesale network spanning the whole nation. That is to say, the Chinese commodity market, if any, was internally fragmented and isolated. Japanese historian Yoshiie Yoda (依田憙家) holds that the lack of a unified distribution system nationwide gave rise to a Comprador Class (買辦階級) in China after 1840. While compradors were also found in Japan in the wake of opening ports, the scale of Japanese compradors was not large enough to constitute a class. Because of the lack of a nationwide distribution system, foreign merchants had to rely heavily upon the Comprador Class for their business activities in China.⁴

The fragmentation of the Chinese domestic market inherently limited the market size, even though the proto-industrialization had increased the volume of goods. By comparing the market capacity, i.e., average market demand per household, of two major commodities in China and Japan before 1850, Yan Lixian found that China’s grain market capacity was only 50% of Japan’s, while its cotton cloth market capacity was 76% of Japan’s, despite having a population 12 times larger than Japan. The comparison indicates that China’s average market demand was even smaller than Japan’s during the pre-industrial period.⁵

Source: The Domestic Market and Early Industrialization in China and Japan