Economic Development in the Late Stage of the Last Chinese Dynasty, 1840–1912

Main Theme

Although historical estimations suggest there was a recession in the late Qing dynasty, there is much confusion and contradiction the depth and timing of the recession. This contribution provides some deconstructed estimates of Chinese economic development between 1840 and 1912.

State of Research and Sources 

Quantitative study in Chinese economic history was not popular in the modern historical research until the 1980s, influenced by Western scholars. The quantitative measurement of economic growth in Chinese modern history started with Rowski, Maddison, and Pomeranz. Rowski estimated the gross domestic growth rate from the 1910s to the 1940s by estimating of growth rate in each sector in Economic Growth in Prewar China (Rowski 1989). Maddison measured GDP from 960 to 2030 AD by aggregating estimated total output in all sectors in Chinese Economic Performance in the Long Run (Maddison 1998). In addition to GDP calculations, Pomeranz measured personal income and consumption in China before the Industrial Revolution as the estimator of economic growth in The Great Divergence (Pomeranz 2000).

The economic development in the late Qing dynasty is quite difficult to measure due to the lack of well-recorded statistics before 1912. Thus, there are few quantitative studies on this topic. However, Chinese scholars have never stopped the revision and reconstruction of historical data from different periods, including the late Qing dynasty. Liu et al. (1997) estimated the GDP growth rate from 1850 to 1949, but they do not mention the calculation methods and statistic sources. Based on Maddison’s method, GDP estimation was reconstructed from 1840 to 1912 by estimating each production sector (Ma & De Jong 2013). There has been major debate regarding the Great Divergence in the comparative analysis of real wages between China and Western countries, especially before and after the Industrial Revolution (Allen 2011). As such, a better understanding of the economic development in the late Qing dynasty would help provide evidence for the debate and study of Chinese modern history. The majority of works found out thatthere was an economic recession in the late Qing dynasty, but the extent of that recession remains to be examined. 

Key Indicators of Economic Growth 

Gross Domestic Product Per Capita 

The data used in this article were extracted from some of the main works listed above related to this period, and from other studies of population growth, urbanization, agricultural productivity, industrial development, and the real wage: Chinese Population History (Wu 2000), The Development and Underdevelopment of Agriculture in the Qing Dynasty (Shi 2015), Selected Statistics of China’s Modern Industrial History (Yan 2012), and Wages, Prices, and Living Standards in China, 1738–1925 (Allen 2011).

As the last dynasty in Chinese history, the Qing dynasty lasted 270 years. In the late Qing dynasty, the continuous success of invasion wars from foreign countries destroyed the great images of China in their minds. At the same time, external invasions, internal rebellion, natural disasters, and reforms were changing the social and economic order (Ma 2016, p.3). Economic recession was also a part of the collapse of the great powers of China. 

A country’s economic growth can be defined as a long-term rise in the capacity to supply increasingly diverse economic goods to its population. This growing capacity is based on advancing technology and the institutional and ideological adjustments it demands (Simon 1973). There are multiple ways to measure economic growth, including GDP growth, urbanization, and the real wage. The first of these is one of the most important measurements, and one of the most difficult to measure. The constructed historical GDP data support the idea in Maddison’s and Ma’s works that there was an economic recession in the late Qing dynasty, as represented in Figures 1 and Figure 2, but the two figures illustrate different growth rates. Figure 1 displays the decline of the growth rate from 1840 to 1912 overall at around 8%, whereas Figure 2 indicates a relatively small decline of around 0.9%.

Maddison estimated GDP per capita by the aggregation price of goods and services in different production sectors, which is the commonly used GDP calculation. He found that GDP p.c. declined dramatically from 1850 to 1870, then increased slightly from 1870 to 1913, but did not recover to the level of 1840. However, there are three main problems with the estimation: first, it is mostly based on extrapolations from secondary sources from 1870 to 1990; second, the deflator is not reliable and was generated to measure domestic price over a century; third, Maddison guessed that it was the same growth rate from 1870 to 1912 as that of 1913–1933 (Kent & Patrick 2017). Even though the result was heavily criticized, the approach was widely learned by later scholars studying the GDP measurement of Chinese modern history.

Ma and De Jong applied a similar approach to Maddison, but they revised problems concerning the data source and deflator by adding more reliable historical data and reconstructing the deflator. They set four benchmark estimations (1840, 1880, 1920, and 1933) likely to be more accurate than Maddison’s estimations. Furthermore, they created the deflator by calculating PPP based on the price level of important goods. In his estimation, there was growth from 1840 to 1880, then it declined until 1900, and there was a growth stage from 1900 to 1910, then it declined to a similar level as in 1840 by the end of 1912. Overall, the economic recession estimated by Ma and De Jong was not as dramatic as Maddison’s estimation, and the decline started around 1880 instead of between 1850 and 1870.

The major differences regarding growth rates and the timing of their fluctuations call for a deeper investigation of the underlying mechanisms. By drawing on works of Chinese scholars, this contribution focuses on changes in population growth, urbanization trends, agricultural labor productivity, industrial development, and real wages to identify the main drivers of economic change.  

When considering population growth, there was a huge expansion in the early and middle stages of the Qing dynasty. Maddison based his estimation mainly on the study of Kezhi Liu, and the trend of population growth was coordinated with other studies on population growth (Liu 2010).

Maddison asserts that aggregate GDP growth in China outpaced Europe between 1700 and 1820, , by 1820, China’s share of global GDP reached 33%, eclipsing that of Europe 27% (Glahn 2017, p.5). The total GDP in the early Qing dynasty did increase, according to the statistics; however, it resulted in a booming population growth instead of GDP p.c. growth. This situation was in line with the predictions in Malthusianism, which suggest that income fluctuates around a constant long-term level and technology improvements ultimately only increase population (Chaney & Hornbeck 2016. p.1404). Malthusianism also has its limitation it only applied well in a certain era before the Industrial Revolution. As Clack (2007, p.242) said, “A muted, gradual transition between the Malthusian and modern economies took place in England around 1800. Rapid productivity growth rates fully equal to those of modern economies did not appear until the late nineteenth century.” The rapid increase of productivity due to the Industrial Revolution changed the rules of Malthusianism. The changing population structure and production modes in the late Qing dynasty could also suggest an increase of productivity, which may lead to a different relationship between population growth and GDP p.c. growth.

The increase of productivity in the agricultural sector in the early and middle Qing dynasty could be the reason for the population booming until the late Qing dynasty (Shi 2017, p.138). The decline in population growth from 1850 to 1870 was largely influenced by the Taiping Rebellion, the Second Opium War, and several natural disasters (Maddison 2018, p.43). If we follow the assumption of Malthusianism, the GDP estimation of Ma and De Jong seems more reliable than Maddison, because the population decline between 1850 and 1872 is coordinated with the increase of GDP p.c. during this period in Ma and De’s estimation, but only when the decline of population growth exceeded the decline of total GDP growth. However, Maddison’s (2010) calculation is the other way around: total GDP growth declined quicker than population growth. If Maddison’s estimation is correct, then it is necessary to explain why there was a dramatic economic recession, especially between 1850 and 1870. Regarding urbanization, agricultural productivity, and industrial development, a crosscheck is helpful.

In Table 1, the urban population increased from 1843 to 1918, as did the urbanization rate. The data were collected mainly around 1893 and 1915, combined with travel books from 1840 to 1910. The data collected in 1893 were mostly reliable, and the data in 1918 were collected from the National Christian Council of China (Xu et al. 2018, p.334), so Table 1 could be representative of urbanization. First, major rebellions from 1843 to 1890 caused a decreased population in cities. Second, promoted urbanization (Skinner 1977, p.262). The Treaty of Nanking in 1842 is an important point for urbanization growth, when the Chinese market was opened to the world (Skinner 1977, p.253). Urbanization can be used as an estimator for labor productivity. Agricultural labor productivity was measured as the ratio of the total population to the agricultural population in European countries before the 19^th century. A higher urbanization rate means higher labor productivity in the agricultural sector because fewer farmers can feed more people (Allen 2000, p.1). If we apply this assumption, then agricultural productivity should have increased in China during the examined period, but it somehow contradicts the estimated GDP growth. The explanation for this contradiction may lie in the changing agricultural and industrial development. 

Agricultural Productivity

The data on agricultural production were collected from many primary statistics from local historical records and include more concrete estimates compared with Maddison and De Jong’s works. The estimation includes different sectors, including crop production, cash crops, fishery, animal husbandry, and forestry. Crop production was the dominant sector, with over 65% of the total output value; therefore, the focus is on this sector (Shi 2017, pp.126–127). Compared with Maddison’s and Ma and De Jong’s estimations on agricultural development based on secondary sources, the estimations in Tables 1 and 2 are more reliable and comprehensive. Maddison’s and Ma and De Jong’s estimations of the agricultural sector could be misleading. Maddison estimated the agricultural output based only on Perkins’s calculation, which uses the consumption approach for crop production (Perkins 2013, p.8). Ma and De Jong (2016, p.8) only considered the harvest ratio, which is the score of the quality of summer or autumn harvests recorded in the semi-annual official reports from the provinces to the central government. Another difficult aspect is that the total population in Shi’s estimation was rather different from the other two, but the trend is comparable, so it did not influence the result too much.

In Table 2, the cultivated area increased, but the total output did not increase after 1850, so the average yield per mu declined. In Table 3, labor productivity in the agricultural sector decreased during 1812–1850 and 1887–1911, but had a brief increase during 1850–1887. The output per capita decreased from 1812 to 1911, but the decreased rate was not so dramatic after 1850. Combined with the rising urbanization rate, this indicates more people moving to the cities, so the output per capita in the agricultural sector was decreasing, but the productivity per labor in the agricultural sector was relatively stable. If we put agricultural development into a broader understanding, the situation seems more obvious. Agricultural productivity was at its peak in the middle Qing dynasty but afterward. The food issue became a major problem for the government. Although the government had taken measures to encourage better cultivation methods and encouraged immigrants to work uncultivated land, the issue was part of the trigger for the Taiping Rebellion from 1851 to 1864 (Shi 2017, p.146).

Based on these estimations, agricultural productivity experienced a decline from 1840 to 1912, mainly because of the increasing population and lack of agricultural technology improvement. 

   Foreign Trade and Investment in Textile Industry 

​The stagnation in the agricultural sector held back urban development due to less food being available for the cities (Fei 1983, p.19). However, urbanization growth was mainly influenced by industrial development. Industrial development faced a turning point after the First Opium War; international goods influenced the domestic market, especially textiles, and the inflow of capital drove industrial development, especially the use of machines and the development of the transportation system. 

It is estimated that industrial production comprised around 8% of the total economy, with the textile sector being around 50% of the industrial sector (Maddison, 2007). Textile manufacturing was positively influenced by imports. Cloth and cotton imports were decreasing, but cotton yarn imports were increasing. More cotton was exported to other countries and there was less production of cotton yarn domestically, but more cloth production used the imported cotton yarn from 1971 to 1921 than before.

This assumption is supported by the transformation of textile manufacturing. In the 1850s, spinning and weaving still occupied an important place in family income, producing cotton yarn and cloth to exchange with merchants. The final processing of cloth was carried out in workshops, usually in the cities. At the end of 19^th century, the spinning manufacturers collapsed because of imports and, later, machine production, so manufacturers and farms moved to the cities, which helps explain the increase in the urbanization rate. Nevertheless, cloth manufacturers still ran well because domestic cloth made of foreign and machine-produced cotton yarn was cheaper and warmer than foreign cloth (Fei 1983, pp.20–29). 

Another change in textile manufacturing was that modern industrial production started to emerge because of the inflow of capital and use of machines at the end of the 19^th century (see Table 5). However, the industrial production of cloth was almost zero prior to the 1920s (Fei 1983, p.27). It was not only textile manufacturing that started machine production, but also other manufactures and the mining industry. In addition, the Westernized movement encouraged domestic industrial development, especially investment from the government (Fei 1983, p.36). According to the statistics, 549 factories opened between 1895 and 1913 (Wang 1962, p.1041). Many government-funded enterprises emerged, including the Nanjing Jinling Arsenal (see Image 1). The Westernized movement lasted from 1861 to 1895 after the failure of the Second Opium War. The original aim of the movement was to strengthen the army by setting up military industries, but it was soon recognized that this was difficult because of insufficient financial support, so the focus shifted to enriching the country by developing civilian enterprises (Li 2015, pp.242–43).

Nevertheless, industrial development was constrained by stagnation in the agricultural sector and the underdeveloped banking system (Fei 1983, p.41). However, undeniably, the foreign capital inflow and cultural movement promoted the budding of industrial development.

The wage series in this study are constructed from data obtained from Chinese imperial ministry records, merchant account books, and local gazetteers, which have been deflated using the appropriate cost of living (Allen 2011, p.9). While the Allen et al. study is the most comprehensive so far in terms of data coverage and methodology, their comparison concentrates only on the real wage of urban unskilled workers in major cities of Europe and China. This raises questions of the representativeness and comparability of their findings (Joerg 2010, p.348), meaning critical discussion is necessary. According to Figure 3, the real wage in Beijing increased from the 1870s until the end of the 19^th century, and then declined. When the welfare ratio equals 1, an unskilled worker working full time could earn just enough to support his family at the subsistence level (Allen 2011, p.26). Unskilled workers almost lived at a “bare bones” level from 1840 to 1870. The ratio reached its peak of near 2 around 1900, then declined to almost 1 again in 1912.

Many farmers and craftsmen moved to cities and became workers in workshops or factories. The characteristics of economic development in the late Qing dynasty fitted the preconditions for the take-off stage described by Rostow (Rostow 1990). The stage of preconditions arises not endogenously but from external intrusions by more advanced societies. It is a transition stage from traditional society to the take-off stage, exploiting modern science, opening the scope of commerce, and manufacturing enterprise appears using new methods (Rostow 1990, pp.6–7). With the development of government- and foreign-funded enterprises, the working class in China started to develop, growing from 10,000 in 1870 to two million in 1920 (Jiang 1994, p.150). However, not only were wages not ideal, but working conditions were bad, almost comparable to the initial living standards of workers in British industrialization (Li 2015, p.250). Even though skilled workers may have earned two or three times more than unskilled ones, in the case of the official bureau of cloth (Frederick 1898, pp.228–29), the average wage was much more likely to be still lower than in Western countries. The real wage presented cannot represent the living standard of all laborers, for example, skilled workers. Nevertheless, it can offer a clue to increasing industrial productivity.

The contradiction between increasing urbanization and agriculture can be explained by urbanization being triggered more by the development of commerce and the failure of the agricultural sector, rather than increasing labor productivity. The increase of manufacturing factories, urbanization, and the constrained industrial development of agriculture and other social factors during this late Qing dynasty testify to the prediction that China is in the transition stage from traditional society to take-off stage. 

Conclusion 

According to the indicators of the development of agriculture and textile industry, as well as the urbanization rate, labor productivity in the agricultural sector decreased from 1850 to 1912, but increased in the industrial sector from at least 1870. Based on the crosscheck for the GDP estimation, we conclude that Maddison’s measurement seems to match more with indicators listed above. In Maddison’s estimation, there was a dramatic decline in economic growth, especially from 1850 to 1870, due to the stagnation of agricultural development. After 1870, there was a slight recovery due to increasing labor productivity in the industry sector, probably also in the service sector, which compensated for the stagnant agriculture sector. The urbanization growth triggered by external intrusions brought more people to the cities and resulted in decreased agricultural labor productivity as fewer farmers needed to feed more people but with a consistent average output. Although there was budding industrial development, both industrial and urban development were constrained by agricultural development; therefore, a new level of economic growth failed to materialize. This article provided a new interpretation of economic trends and fluctuations in the late Qing dynasty, but the question of economic recession remains open to debate.

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 Qinyi Gao

MA History & Economics​