Currency, Monetary Policy and the Economic History of Imperial China: An Interview with Richard Von Glahn
Richard is Distinguished Research Professor of History at UCLA, having retired from teaching in 2025. His areas of study include the economic and social history of China, 10th-18th centuries; monetary history; comparative economic history; global economic integration, 1000-1800; and East Asian maritime history. He researches Chinese monetary history, especially the interrelationship between China’s monetary system and wider spheres of monetary circulation within Asia and on a global scale.
He is the author of a new book entitled The Rise and Demise of Paper Money in Imperial China: Fiscal Innovation, Market Growth, and Monetary Transitions, c.1000-1500. He is also the author of The Economic History of China: From Antiquity to the Nineteenth Century (2016) and co-editor of The Cambridge Economic History of China (2022). He has written or edited many books and articles and is a senior editor for the Oxford Research Encyclopedia for Asian History, an on-line resource for scholars.
Richard completed an undergraduate degree majoring in Chinese at Connecticut College and then pursued graduate study in Chinese history at UC Berkeley (M.A.) and Yale University (Ph.D., 1983). He held postdoctoral fellowships at Harvard and the University of Rochester, and an assistant professorship at Connecticut College, before he joined the UCLA faculty in 1987.
Q1. Please introduce yourself and tell us about your current interests.
My research has centered on the economic history of imperial China, especially monetary history, and with an eye toward situating China in the context of global economic history. My original training was focused on the period of the Song dynasty (960-1276), but I quickly broadened my perspective to the whole of the imperial period and beyond. My Economic History of China book, meant as a general introduction to the subject, begins with the Bronze Age and extends to the end of the 19th century.
Although I’ve occasionally wandered off in other directions (my Sinister Way book studied Chinese popular religion and its deity cults), I always pivot back toward economic and monetary history. My newest book, The Rise and Demise of Paper Money in China, 1000-1500 (published by Cambridge in September 2026), is mostly devoted to the Song period, although it also begins in antiquity and ends in the late imperial period. I’ve already plunged into my next project, the maritime trading world of East Asia from 800 to 1700, in which money again figures prominently.
Q2. Relatively little attention has been given to the role of currency in Chinese economic history, despite its cardinal importance in facilitating both internal and cross border transactions. What drew you to the subject and how have you overcome the scarcity of original sources, especially in the pre Song era?
It’s true that Chinese monetary history has attracted little attention from Western scholars, although there is plenty of Chinese and Japanese scholarship on the subject beginning already a century ago. So, I have had ample guidance from my learned predecessors. My intellectual orientation really was established when I was a grad student at Berkeley in the 1970s, when I had the good fortune to have Robert Hartwell as a mentor. Hartwell was the rare scholar (even now, but especially then) to be fully trained in reading historical sources in classical Chinese as well as in economics (Milton Friedman was one of his Ph.D. advisors). I could never match Hartwell’s sophistication in economics and quantitative methods, but he did steer me toward the study of Song monetary history, the subject of one of his grad seminars.
The seeds he planted only flowered much later, when I wrote my second book, The Fountain of Fortune, on monetary policy during the period 1000-1700, mostly focused on the Ming dynasty (1368-1644). That study inevitably drew me into considering the impact of China’s massive importation of foreign silver (from Japan and Spain’s American colonies) in the 16th and 17th centuries, which had enormous consequences not only for China (fueling a dramatic surge in commercialization of the domestic economy), but also on the global economy (China’s import of foreign silver can be considered the first truly global commodity trade, and made silver mining in Peru and Mexico extremely profitable). That work drew me into the study of global economic history, and I’ve subsequently incorporated global and comparative perspectives in my studies of Chinese and East Asian economic history.
The sources for studying Chinese monetary history are uneven. We lack the kind of richly detailed personal documentation (e.g., account books, correspondence, and other writings by merchants, firms, and bankers) or legal testimony (judicial records of economic disputes are almost non-existent) that scholars of Europe have mined to reconstruct the operations of the world of private exchange in premodern times. But we have far more rich documentation of government policy, especially on monetary matters. This proved to be the case especially in my study of paper money, which generated an enormous amount of public debate and government records. As a result, I can say much more about the place of money in the political economy and its macroeconomic effects but have far less information about how merchants and ordinary people used money in their daily life. For the most part I can only make inferences about the private economy based on what government officials and public intellectuals have to say about it.
Q3. In one of your early works, you noted that “The period from 400 BCE to 100 CE witnessed the flowering of philosophical debate over the origins, history, nature, and purpose of money that laid the foundations for the canonical traditions of Chinese monetary thought.” What were some of these debates, and given these founding principles of monetary theory how is it that governments of successive dynasties did not implement a centrally controlled and regulated monetary system?
Coined money originated in China at roughly the same time as the Mediterranean world (c. 600 bce). But from the outset and throughout the imperial period Chinese authorities minted low-value bronze currency, in contrast to the silver (and later gold) coinages of the Greek (and then the Roman, European, and Islamic) ecumene. This fundamental difference in coins and their values had enormous implications for monetary theory. In the West, stemming from Aristotle, money was conceived as having intrinsic value based on the worth of the metal it was made from. In China, since bronze coins had little individual value, from the beginning their value was measured simply by counting them (often measured in strings of 100 coins), regardless of the metallic content of different coins.
Chinese money was in essence fiduciary money, its value reflecting public faith in the authority of the state that issued it (confidence in that authority rose and fell over time, of course). In addition, Aristotle and western monetary theory generally (most famously in Adam Smith’s thesis on the origins of money) believed that money originated in private exchange (replacing barter of goods), and that its principal function was to establish a “just” value between different commodities. Chinese monetary theory, by contrast, displayed little interest in the moral issue of “just price.” Instead, Chinese thinkers attributed the invention of money to legendary sage-kings who created money to relieve the economic distress of the people in times of dearth.
This quickly ramified into the idea that the ruler creates and manages money in order to control the economy at large: increasing and decreasing the stock of money to maintain an equilibrium between producer prices and consumer prices (a not unfamiliar idea in modern monetary theory). Although it was never fully true that Chinese rulers could manipulate the stock of money at will, they had far greater capacity to do so than European rulers, for whom the supplies of silver and gold was almost entirely exogeneous (sorry for using the economists’ language; meaning, beyond their control). Thus, Chinese monetary theory also condoned fiat currency, whose value was dictated by the ruler, completely anathema to Western theorists from Aristotle to Aquinas, Oresme, Locke, and Smith.
The presumption of every Chinese dynasty was that the ruler indeed established centralized control and management of the monetary system. All money was issued at the determination of the state, whereas in Europe anyone could bring their silver to the mint—usually privately operated under royal license—to have it minted into coin. Moreover, no foreign coins circulated in China, whereas European coins circulated widely across national borders, and—with the exception of England (being an island helped)—European rulers had very little control over their money supply. So Chinese rulers did exert far greater control over the monetary system.
While the Chinese public usually accepted the fiduciary value of bronze coin, prices were determined by the market, and the Chinese public was leery of attempts by rulers to overvalue currencies by raising their nominal values. Moreover, China (like everywhere else) suffered from chronic shortages of currency and the state often could not issue sufficient coin to meet market demand. So, the fiat principles of Chinese monetary theory often were difficult to implement in practice.
Paper money was the great test of these fiat principles, yet Chinese authorities achieved surprising success in managing paper money for centuries despite the limited tools at the disposal of premodern regimes. By contrast, early modern European states (Sweden in the 17th century and France in the 18th century) suffered immediate and complete failures when they tried to issue fiat paper currencies. The success of the Bank of England’s paper currency over the course of the 18th century derived from the combination of a strong central state and an unprecedentedly wealthy private economy that was undergoing the transition to modern economic growth.
Q4. China was one of the first nations to introduce paper currency, and with it the concept of fiduciary value rather than value tied to the type of metal used to produce coinage. What were the forces driving this innovation in the Song dynasty, and how was the issuance of currency controlled?
As I mentioned earlier, classical Chinese monetary theory was highly congenial to the concept of fiat money, the idea that the ruler can establish the value of his currency irrespective of its intrinsic (usually metallic) value. But the origins of Chinese paper money actually lay in the private sector. During the Song (宋) dynasty, the Sichuan (四川) region in western China was a distinct monetary region that had a tradition of iron currency rather than bronze coins. But iron coins had even lower value than bronze coins, which was a hindrance to the region’s thriving commercial economy. Sichuan was a major producer of silk, tea, and paper, and also boasted a prolific printing industry—and of course paper and printing are the key technological requirements for paper money (Europe at this time had neither paper nor printing).
In the 990s Sichuan merchants began to issue their own private bills of exchange, known as jiaozi (交子). Although these bills were warmly received as a substitute for cumbersome low-value iron coin, the issuers became reckless, and many could not honor their commitments to redeem the jiaozi bills. The provincial government stepped in to regulate the market for jiaozi and limited their issue to a consortium of 16 designated merchant firms. But problems of insolvency persisted, and state officials then decided to halt the use of jiaozi altogether. But merchants—especially in the tea trade—protested against this decision, insisting on the superiority of paper money in their businesses, and in the end the provincial government received imperial permission to take over the system and issue jiaozi directly. So, in 1023 it created the world’s first state-issued paper currency, still known as jiaozi.
Jiaozi were issued in large denominations (think 100 dollar and 500 dollar bills) intended mostly for large-scale commercial transactions, in combination with iron coin as retail currency for everyday transactions. The Sichuan government established a fixed quantity of bills that were issued on a biannual basis; after two years, the bills had to be returned to the government in exchange for new ones, which kept the quantity in circulation in check and also replaced worn out bills. This system proved to be a great success. To meet growing demand, in the 1060s the government reduced the denominations of jiaozi by 90 percent, making them more convenient to a broader swath of the population. One scholar has estimated that in the late 12th century jiaozi comprised 98% of Sichuan’s money supply.
The jiaozi bills remained a regional currency restricted to Sichuan. But in the early 1160s the Song state became embroiled in war against the Jurchen Jin (大金) kingdom that had conquered the northern half of the empire in the 1120s. Faced with this military emergency, the Song court (now located in Hangzhou, in the Yangzi River delta) decided to issue a new paper money, called huizi (會子), to pay for troops and provisions. The emperor at the time thought of huizi as a short-term expediency.
When the war ended in 1165, he asked his officials to remove the huizi bills in circulation, buying them back by using silver reserves in the state treasury. (Silver was not used as a means of market exchange at this time but had an important function as a store of value, that is to say, as savings.) When the merchants saw that the government was willing to give them silver for huizi, they declared that they were happy to keep the more convenient paper bills. The emperor was perplexed, but his officials persuaded him to retain huizi as a permanent currency that would circulate in most regions of the empire (Sichuan still had its own separate paper currency). The fact that state mints lacked enough copper to maintain the high rates of coinage it achieved in the 11th century also necessitated resorting to paper currency to sustain what was a highly dynamic commercial economy.
In effect, the government treated silver as an implicit hard-currency reserve for its paper money. Huizi were inconvertible; you could not exchange them for bronze coins (they were denominated in bronze coins) or silver. The principle of terms of expiry also was applied to huizi, although their term of circulation was raised to 3 years, and later 6 or more years. Whenever the market value of huizi began to depreciate, the state bought up excess bills by expending some of its silver reserves.
The other crucial means of maintaining public confidence in paper money was by requiring their use in payments to the state, mostly through tax collections. If the state is willing to take paper bills as tax payments, then they must be real money. Over time, as new military crises prompted the state to issue ever greater quantities of huizi, the bills did suffer from depreciation. Nonetheless, paper money essentially displaced bronze coin as the monetary standard. Certainly, large-scale transactions (land sales for instance) and long-distance trade were conducted almost exclusively in paper money. Huizi were issued in relatively large denominations, but depreciation had the effect of turning the smaller bills into small change that could be used in retail trade. The paper money system wobbled, but it did not collapse until the Mongol invasions, and the ultimate Mongol conquest of China forced the Song to issue exorbitant quantities of paper money to pay for its military costs, triggering runaway depreciation.
The Mongols immediately replaced the defunct Song huizi bills with their own bills (quite different in design from Song bills). Not only did the Mongols’ Yuan (大元) dynasty retain paper currency, they made paper money the sole legal tender of the empire. The Mongols issued much smaller denominations that could be readily used in everyday transactions while banning the use of both bronze coin and silver as means of exchange. The Mongol/Yuan paper currency had its ups and downs, but for the most part it completely replaced metallic money, and successfully so, until the empire began to collapse (for reasons having nothing to do with money) in the 1340s.
Q5. Why did paper currency eventually collapse in the Ming dynasty and bronze coin and silver become the major currencies for the rest of the imperial period? To what extent were Zheng He’s (鄭和) voyages the cause of the hyperinflation which beset the Ming instrumental in the demise of paper currency?
The story of paper money under the Ming (大明) dynasty was short and disastrous. The founder of the Ming dynasty, the Hongwu Emperor (洪武帝), detested the market economy that had thrived during the preceding Song and Yuan dynasties and the great disparities in wealth it fostered. In keeping with his vision of an empire of autarkic village communities insulated from the vicissitudes of the marketplace, Hongwu tried to suppress the market economy by replacing money taxes with in-kind payments in goods and labor services, creating a hereditary caste of self-supporting farmer-soldiers in place of the paid professional armies of the Song, setting up barriers to domestic commerce, and banning private foreign trade.
Hongwu’s policies indeed had destructive effects on the commercial economy, including reducing the demand for money. For its own expenditures the Ming state paid out in its new paper money (imitating Yuan designs), but almost none of it was returned to the government in the form of taxes. So, the Ming paper money was purely fiat (inconvertible, without any reliance on silver or coin to prop up its value) and could not be used for state payments. Unsurprisingly, its value in the marketplace quickly plummeted.
By the early 15th century, under Hongwu’s successor Yongle (永樂帝), the value of paper money had sunk to a mere 1-2% of its face value. The Ming also ceased minting bronze coin altogether for lack of copper resources), so private trade (now much diminished but trying to recover) by default was conducted in silver, which was uncoined. The Ming state’s efforts to discourage silver as a means of exchange failed, and slowly the government itself began to adopt silver into its fiscal system. This took a long time, but by the mid-16th century most state revenues had been converted to silver payments, although with a substantial portion of the land tax still paid in grain.
By the time of Yongle’s death in 1425, Ming paper money was all but defunct. Yongle was (in)famous for two major initiatives: building a new capital at Beijing (actually the site of the Mongol capital, but Hongwu had moved his capital to Nanjing) and sending his trusted advisor Zheng He on a renowned series of naval expeditions to Southeast Asia and the Indian Ocean. Both of these ventures were extremely costly and bankrupted the government. Zheng He’s voyages had no commercial purpose—they simply were intended to burnish the emperor’s prestige—and the ban on private maritime trade remained in effect. It was no coincidence that Yongle’s successor began to collect some taxes in the form of silver in order to restore solvency in state finances.
One of the ironies of the adoption of uncoined silver as the monetary standard—it would persist as the monetary standard of the Ming and Qing empires until the imperial system itself collapsed in 1911—is that it completely inverted the principles of Chinese monetary theory. The supply of silver was beyond the ruler’s control—indeed from the 16th century onward, the vast majority of China’s silver supply was imported from abroad. Silver was also uncoined, so the state exercised no control over the money supply. Not surprisingly, many Chinese theorists of political economy denounced silver for betraying classical principles and undermining the state’s capacity to control the economy through its monetary policies. But over time it was the classical theory itself that was undermined. By the 18th-19th centuries (some, not all) Chinese writers on fiscal and monetary policy were espousing ideas about the intrinsic value of money and the futility of state efforts to control its flow that would have been readily endorsed by David Hume or Adam Smith.
Q6. Land was the most significant wealth asset through successive dynasties. Was land always in private ownership until the Communist victory in 1949? How did the administration of successive governments monitor land ownership given its importance as a source of tax revenue? What penalties could the government of the day impose for false declarations?
In the Warring States period and the early empires, land and labor were the most important economic and fiscal resources. Under the Qin (秦) and Han (漢) empires, the state claimed ownership of land, which it allocated to its subjects primarily as a reward for military service and accomplishments. As a result, land ownership became widely dispersed, and family farms dominated the economy. But over the long course of the Han dynasty this system began to break down. Rich households (including those of officials, who protected their private interests) began to acquire large landholdings in defiance of government regulations. By the end of the Han land allocations were completely defunct, and the economy was dominated by great, landed estates. Much of the population was reduced to bond servitude; not quite serfdom, but with no land of their own.
In the late 5th century CE, the foreign-ruled Northern Wei (北魏) dynasty sought to reestablish state control of landowning with its equal-field system (均田法), in which the state allocated lands fairly equally to households based on their labor power and consumption needs (how many mouths to feed). This system seems to have functioned reasonably well under the Northern Wei and was retained by the succeeding unified empires of Sui (隋) and Tang (唐). But in the Tang, like the Han, state control gradually eroded. After the An Lushan rebellion (安史之亂) in the mid-8th century the power of the central government collapsed and the equal-field system along with it, which deprived the government of its tax base.
To regain revenues, the Tang state instituted a new tax system (called the “twice-a-year tax” 兩稅法, because it was collected in two installments in summer and fall) that abandoned the principle of equity that underlay the equal-field system and instead assessed taxes on household wealth (in most cases determined by landholdings). The twice-a-year tax in effect conceded the principle of private landownership, and land became a tradable commodity.
The dynamic market economy that emerged during the Song dynasty further implanted private landownership, which remained the rule down to modern times. Except for limited purposes (for example, giving land grants to frontier soldiers to help them be self-supporting), state control of land vanished in the late imperial period. In other ways (inheritance laws, for example) the state did try to encourage and protect the family farm as an economic institution. Late imperial China was characterized by broad access to landownership, which was far more widely shared than in Europe, where aristocratic and clerical landownership prevailed.
Of course, rice cultivation, which required intensive labor input that was difficult to implement at larger scales, also was an impediment to the concentration of landowning. Rice farms generally were comprised of scattered micro-units of land (to better control irrigation of paddies and to distribute risk) worked with household labor. Absentee landholding relying on tenant cultivators increased in the late imperial period, but tenants acquired strong tenurial rights to the land they worked, further impeding consolidation of land ownership. After the Tang dynasty, no Chinese government attempted to exercise the ruler’s theoretical sovereignty over land before the People’s Republic initiated its land reform and collectivization campaigns in the 1950s.
Although the land tax was the main revenue base for imperial governments, the competitive private market for land, which frequently changed hands, prevented officials from maintaining sufficient knowledge to match tax assessments to actual landholders. The government rarely conducted cadastral surveys, nor did it maintain proper population registers. The general principle was to set tax quotas at the beginning of the dynasty and then freeze them permanently. The government secured a minimal tax base but failed to capture new revenues from improved lands or lands newly brought under cultivation.
This failure to maintain proper land and population registers over time proved to be a major fiscal handicap, starving the state of revenue even as the economy expanded. But it had benefits for the populace: in the late imperial period China probably had the lowest tax rates (and most equally distributed tax burden) in the world, and farm families retained the profits of higher land productivity, an inducement to work harder and invest more.
Q7. The evolution of financial services in China and Europe took very different directions. How do you account for the differences? Given that preconditions for capitalism existed in China, such as private property, competition and market driven price setting through supply and demand, why did capitalism not take root in China until the entry of foreign forces in the 19th century?
Answering this question hinges on defining “capitalism” and assessing its role in the genesis of modern economic growth. If we conceive of capitalism as Adam Smith did—minimal government interference in the market economy, elimination of barriers to commerce, expansion of the reach of the market to all parts of the country, and enabling a more efficient division of labor—then late imperial China was a Smithian paradise.
The empire established a common economic region over vast territories, with different resources, encouraging the Ricardian principle of comparative advantage in production and trade. It imposed only minimal regulation of trade with the major exception being the salt monopoly. It denied merchant and artisan guilds powers over access to entry into a trade and price-setting; and taxes on domestic commerce and tariffs on foreign trade were far lower than in early modern Europe. Smith himself recognized these features of the Chinese economy of his day. But in the end, Smithian dynamics, while encouraging growth of markets, did not produce the innovations that led to the Industrial Revolution.
We can also think of capitalism in terms of the institutions that foster innovations in financial services and economic organization that enabled the accumulation and investment of commercial capital in economic enterprises. A long line of European historians from Henri Pirenne to Fernand Braudel (and their contemporary successors) has followed this thread to find the origins of capitalism in the Italian and Flemish city-states of medieval Europe, ruled by merchants who sought to develop their commercial economies. This body of scholarship also forged the conceptual link between “democracy” (in its medieval forms, really oligarchies of merchants) and capitalism, an idea that has not stood up well over time.
As mentioned above, Chinese entrepreneurs enjoyed considerable freedom from state controls and did innovate in creating institutions to pool, allocate, and intensify capital. But China did not develop the kind of financial institutions—banks, joint-stock companies, stock markets, and sophisticated mechanisms such as bills of exchange and government bonds—that emerged in Europe by the early modern era. However, it is not clear that these advantages in financial institutions were crucial to the genesis of the Industrial Revolution.
The early incubators of the Industrial Revolution—potteries, textile mills, and coal mines—were family firms that relied on retained profits rather than borrowing from banks or raising capital on stock markets. Banks and stock markets did prove indispensable for the second phase of the Industrial Revolution, which came with the onset of the railway era in the 19th century. Railroad construction required massive amounts of capital that family firms could not produce on their own. Still, the corporation did not dislodge the family firm as the dominant form of economic enterprise in England and the US until the end of the 19th century and the rise of trusts.
In my view, the real story of the Industrial Revolution—and modern economic growth in general—is one of technology, and especially the replacement of manual labor and animal power with fossil fuels and steam power, rather than “capitalism,” however defined. Why this technological breakthrough occurred in late 18th century England rather than in China is vigorously debated. Many would credit Europe’s burgeoning scientific knowledge and the social and economic links between scientists, merchant entrepreneurs, and craft workers that translated scientific knowledge into practical technologies for industrial improvement.
I think there is much merit to this argument. Others would stress England’s unique resource endowments (easily mined coal deposits), the abundant capital resources generated by its enormous colonial profits, or its high labor costs (an inducement to adopt labor-saving machinery). I would say that these factors all played a role as well. I don’t think the modern economy has a single progenitor.
Q8. Historically, an important mandate of European banks was lending to kings and other potentates to finance wars. In China how were conflicts financed and did this change across dynasties?
European monarchs had limited resources at their disposal. They were expected to “live on their own,” from the income of their own (often enormous, as is still true of the British Crown) landed estates. Monarchs also were allowed to earn revenues from commercial sources such as customs duties and coinage. But they had no right to tax the land or the people (who were seen as the subjects of their lords rather than the king). To raise armies for war (one of their perennial activities) European monarchs had to beseech their nobles and other sovereign constituencies (e.g. chartered cities, clerical orders) for the privilege of imposing levies as short-term expediencies. In many cases the nobles did not comply, forcing the monarchs to turn to borrowing money from banks.
But lending to kings was risky, as many private bankers came to learn (the great medieval banks were bankrupted by lending to kings). The Italian city-states, beginning with Venice, pioneered a more sustainable form of public finance—mandatory loans from the citizenry to the state, the first government bonds. Although lending was compulsory, it also proved profitable, as the city-states reliably repaid their bonds with interest. Public debt soared in the early modern era with the consolidation of nation-states under strong monarchal control. Armed with the power of taxation but still enamored of deficit spending, early modern European rulers built up massive debts through bond markets that would be paid off through future tax revenues. As it turned out, though, this was a workable formula. The states that amassed the greatest public debts (Britain and the Dutch Republic) also had by far the highest rates of taxation to repay those debts, and in the meantime acquired formidable miliary power.
No such deficit financing appeared in China. A basic axion of Chinese public finance was “measure revenues to determine expenditures” (量入為出)—never spend more than you have. In practice that meant that the imperial government was fully financed by current tax revenues. Not infrequently, when the government did spend beyond its means, it imposed extraordinary tax surcharges, or deferred revenue obligations from cash-strapped local governments. But it never resorted to borrowing.
During the Song dynasty strong economic growth and greater reliance on commercial and consumption taxes fueled massive expansion of revenues and state fiscal capacity. The Ming and Qing (大清) dynasties reverted to a fiscal model based on land tax revenue (and at minimal levels), scarcely taxing commerce or consumption at all. This model failed in the late Ming period as military costs vastly exceeded revenues, prompting radical increases in tax surcharges that provoked peasant rebellions and brought about the collapse of the dynasty.
Trying to learn from that experience, the Qing was extremely conservative in maintaining a low level of taxation. It also benefited from steady economic growth through the end of the 18th century. Indeed, the Qing state became a lender rather than a borrower, issuing loans to privileged clients such as imperial kinsmen, bannermen soldiers (a hereditary military caste created by the Manchus), and merchants closely tied to the state through grants of monopoly privileges. As a creditor, the Qing state burnished its reputation for benevolent governance, while at the same time creating new revenue streams and expanding the availability of credit to select private entrepreneurs.
But the rigidity of this fiscal model ultimately culminated in fiscal crisis in the mid-19th century, in the wake of the Opium Wars and the Taiping Rebellion. Sorely needing new revenues, the Qing adopted new commercial taxes (especially domestic commercial levies and foreign customs duties) and began to experiment in a limited way with public borrowing. But the real trigger for adopting public debt as a core feature of state finance came after the Sino-Japanese War in 1895 and the Boxer insurgency in 1900. The foreign powers saddled the Qing state with immense indemnities that would take decades to pay off (some still hadn’t been paid off at the time of the 1949 revolution). To pay the indemnities the Qing was forced to borrow from (foreign) banks and to begin to issue government bonds. But this enhanced fiscal capacity did little to strengthen the state or its political fortunes.
Q9. There is an active debate among economic historians focusing on “The Great Divergence”. The key question is whether China’s long run economic history is a story of early strength and late divergence or a story of persistent weakness held back by institutional, demographic and political factors. Do you agree with Mark Elvin’s contention that 3000 years of deforestation and progressive impairment of its natural resources put China at a great disadvantage to European nations, whose colonisation policies gave unbridled access to the resources of their subject nations?
I don’t share the views of those who see history in terms of long-term path dependency, including Elvin I would say. To me, history is more disjunctive and contingent. The economic development that emerged in the Song dynasty, for example, was not a harbinger of a (or the) industrial revolution, which, as discussed above, was the product of a range of contingent factors at a much later time. History is replete with cases of national economies that surge to a leading position globally, only to fall behind later on (medieval Italy and Flanders, 16th century Spain, 17th century Netherlands, and even modern Britain), while once lagging economies eclipse them (contemporary China being the salient example).
18th century China, as Pomeranz has (to my mind) convincingly shown, was on a par in terms of economic performance with other advanced economies before the breakthrough to the Industrial Revolution. It is fascinating to see the contrast between mid-18th century British writings on China, which laud its wealth, prosperity, and commitment to free trade, and those of British writers in the mid-late 19th century, for whom China had become mired in a so-called Asiatic mode of production that rendered all progress impossible without outside intervention (the helping hand of the Opium Wars seen as giving China a kick-start).
On Elvin’s thesis about the continual degradation of the Chinese environment since the formation of the first states in the Bronze Age, I find it profoundly ahistorical. One could make the same argument about the entire history of homo sapiens. It didn’t take long for paleolithic hunters to drive to extinction virtually all large mammals after their arrival in the Americas following the last Ice Age. Elvin links environmental degradation in China to the imperial state as a form of governance. Yet virtually all of the environmental changes he deplores (deforestation, animal extinctions, erosion and flooding, the destruction of wetlands, displacement of native flora and fauna by monocrop agriculture) were the result not of state activities but rather the collective impact of private actors.
The state most frequently appears instead as a force to counteract environmental catastrophes, for example in building flood control systems. Nor was environmental change linear. As Ruth Mostern shows in her prize-winning book The Yellow River, the environments of the Yellow River’s basins underwent continual change since neolithic times; the forest cover retreated and advanced; flood management had both failures and successes; the deplorable state of the river (in terms of the failure of flood control) in the 19th century, when Western observers first got a good look at it and dubbed it “China’s Sorrow,” reflected conditions that really arose in the 18th century.
Mostern also shows that the most significant contributors to erosion and Yellow River flooding were non-Chinese pastoralists and farmers who cleared the natural vegetation around the upper course of the river during the Song period. The brunt of the consequences of their activities was borne by Chinese farmers far downstream on the North China Plain, who were subjected to far worse flooding than in the past. The environmental history of China needs to be seen in terms of a contrapuntal process of interaction between humans and the environment rather than a singular narrative of decline.
Pomeranz makes the argument that all of the major advanced economies of the world had reached a stage of exhaustion of resources (especially cultivated land and forests) by the end of the 18th century. Britain was able to escape this ecological cul-de-sac by exploiting new resources (coal and steam power to replace animal traction and human labor as well as wood fuels; food imports from the American colonies to supplement the output of domestic agriculture, which had been stretched to the limits of its productive capacity). Others have challenged Pomeranz’s arguments (for example, grain from the Americas didn’t really become a significant source of food until the second half of the 19th century). But certainly, the breakthrough to fossil fuel energy sources was key to overcoming the ecological constraints of premodern economies, and Britain’s crisis of resources in the 18th century was at least as great as China’s.
Q10. Much scholarly attention has focused on the Song dynasty as a pivotal period in the management of financial services, the emergence of non-clan based charitable institutions, and the establishment of State sponsored granaries. What occasioned the new attitude to wealth accumulation and recognition of poverty as a condition to be alleviated? How effective did it prove in improving the conditions of the poor?
I would say that there is a big divide in the role of the state in public welfare between the Song dynasty on one hand and the late Ming and Qing dynasties on the other. The Song exercised its considerable fiscal powers to amass substantial resources. It’s been estimated that the Song government collected about 10 percent of GDP (these calculations are speculative, of course, given the limits of our data), which would be an enormous amount by the standards of premodern states. Much of this revenue was expended on the military, given the precarious geopolitical situation of the empire, which was continually subject to foreign invasion (and ultimately the Mongol conquest). But the Song also devoted significant spending on what we call public goods: investments in flood control, irrigation, and land reclamation; education (creating the first nation-wide system of government-funded schools); famine relief (instituting a nation-wide system of granaries to store grain for emergency needs); and poor relief (the first state-funded hospitals, orphanages, and poor houses).
The booming commercial economy generated the wealth tapped by the state for these purposes. But the market economy also created more demand for welfare, as economic inequality worsened. In the Song period the attitude that “the poor are always with us” and that poverty was simply an inevitable social condition still prevailed. Although there was certainly more social mobility at this time than in the past, elite intellectuals assumed that the poor could do little to improve their lot. By the same token, one could not expect the poor to behave according to the tenets of Confucian morality; poverty was also a mental habit that precluded moral knowledge and behavior.
The late imperial period was also marked by commercial growth and increasing private wealth in the hands of merchants, landlords, and official families. But as mentioned earlier, the imperial state, steadfast in its ideological commitment to minimal taxation, collected far less revenue (perhaps 3 percent of GDP on average). As before, most state income was spent on the military, but investment in public goods of the sort we see in the Song declined substantially. Imperial officials increasingly relegated the administration of public goods to informal local elites.
This was a shift strongly sanctioned by the Zhu Xi (朱熹) tradition of Confucian philosophy, which favored local governance over central state control. In the 18th century we see corporate lineages, guilds, native-place associations, and other local elite groups taking over management of public works, irrigation projects, famine and poor relief, schools, and temples. Although these local elites nominally acted independently of the state bureaucracy, many of them were schooled in the same way as officials and held examination degrees. They shared the same agenda as government officials on matters of social control, moral leadership, and popular welfare.
A conspicuous feature of this shift toward private management of social welfare was the emergence, from the early 17th onward, of private philanthropic societies which funded and managed institutions like poorhouses and homes for widows, orphans, and the infirm. The commercial efflorescence of this era undermined older notions of class, status, and power. To an unprecedented degree wealth conveyed power, and the power of wealth erased its moral stigma. A growing share of the elite, including government officials, arose from mercantile backgrounds, and the image of the virtuous entrepreneur who displays virtues of thrift, hard work, and generosity displaced older caricatures of greedy and miserly swindlers.
The erasure of social boundaries prompted new efforts to define virtue. There was a growing belief that poverty was not simply the natural condition of a broad swath of society but rather a mark of personal virtue (the lack thereof). Leaders of philanthropic societies engaged in protracted debate over the “deserving poor” (more unanimously, they accepted the idea of the “deserving rich”). So, the morally neutral view of poverty that prevailed in the Song was eclipsed by deepening suspicions that poverty resulted from sloth and improvidence. Charity became a means by which elites could honorably use their wealth to alleviate the misery of the “deserving poor,” which in turn justified their own accumulation of wealth.
We lack any kind of data that might indicate to what degree either the Song state-run relief programs or the late imperial private charities actually had ameliorative effects. Some, perhaps, on the individual level, but either form of charity probably had marginal impact on society as a whole. In both the Song and the late imperial period these public welfare institutions mattered mostly for what they tell us about the relative importance of public or private responsibility for popular welfare.
Q11. On a lighter note, in one of your works you examine the emergence in the Ming dynasty of a God of Wealth with a demonic aspect as opposed to the characteristic smiling aspect of gods propitiated for good financial outcomes. This demonic entity effectively trades in young women whose surrender to the god is granted in return for the promise of future financial reward for her family. Although many recognised this as a scam, the cult thrived and indeed survived into the modern era. Were there many such scams associated with religious cults in China?
I’m not sure I would take this (or any other religious belief) as a “scam.” There is no reason to doubt the sincerity of such beliefs; the interesting question is why they took the forms they did. In the case of the Wutong (五通神) cult to which you allude, this cult emerged in the Song dynasty, at a time of prodigious growth of the commercial economy, and to my mind reflected the ambivalence of the popular imagination toward the market economy and the wealth it generated. The Wutong cult symbolized the capriciousness of new-found wealth: here today, gone tomorrow, under the control of unseen and by no means benevolent forces.
The “trade” you mention (exchanging wives and daughters and their sexual favors for monetary gain) underscored the ways in which women were considered—through marriage exchange—commodities, deployed to benefit the family’s material welfare. What’s striking in the folklore about the Wutong cult is that responsible males (fathers and husbands) invariably agree to the bargain. But wealth obtained in this fashion was tainted: the family eventually suffers ruin, and the women often die. And yet worship of Wutong continued unabated, at least before government officials launched a comprehensive crackdown in the late 17th century.
We shouldn’t think of the mythology around the Wutong cult as pure fantasy. It was a genuine social phenomenon. Local officials in the 17th century informed their superiors that they received dozens of reports of such incidents every year. Moreover, once the trope of this wealth-for-woman exchange became firmly implanted in the popular imagination, women could turn it to their own advantage, claiming to suffer such possession experiences as a way of avoiding their conjugal duties (either renouncing marriage altogether, or removing their husbands from their beds). So here too we see the flexibility of the popular imagination, as otherwise powerless people seek to leverage religious beliefs to their own advantage.
But the disappearance of the demonic forms of Wutong (sanitized and benevolent forms persisted) cannot be simply attributed to government suppression. I think something else was at work. By the 18th century, the commercial economy was no longer a boom-and-bust operation. It had stabilized, becoming more predictable, with the institutions of lineages, guilds, private charitable organizations, and state famine relief programs cushioning many from the worst effects of the marketplace. Money no longer was understood in terms of the capricious and demonic forces that animated the Wutong cult, and hence a shift toward more benevolent images of the god of wealth, including transformed versions of Wutong. The cult still exists today, but the focus of worship has shifted to the god’s fecund mother, who gave birth to five sons, a metaphor for the ultimate form of blessings and wealth.
I think it is fair to say that Chinese generally approach religion in transactional terms, expecting some concrete reward (whether material goods or posthumous salvation) in return for worship and offerings. Chinese tend to be fatalists, seeing their success and failures as preordained, or at least as reflections of moral actions in this or previous lifetimes. Affluent Chinese today devote a significant portion of their wealth to religious donations (more evident in Taiwan than in China itself, given the restrictions on religious activities there; but certainly true in places like rural Fujian, for example). To me Chinese have an abiding belief that one’s stock of good fortune is finite: the more success and wealth you accrue, the more likely that those gains will dissipate. And so, one turns to divine aid to prolong your run of good luck.
Q12. Please share any favorite books, publications, blogs, podcasts or other resources that readers could use to improve their understanding of China’s monetary and economic history, or other related topics.
There isn’t much of an institutional presence for Chinese economic history. The Asian Economic History Society is the closest thing to a learned society for the field; it really confines its activities to biannual conferences (most recently in Singapore in May 2026). Chinese economic history is also a significant presence at the triennial World Economic History Conferences (most recently in Upsala in July 2025).
Economic history has a more prominent institutional profile in China than in the Western academy, and it is a major subject of research at all of the major universities. Particular mention should be made of the institutes for economic history at the National Academy of Social Sciences, Tsinghua University, Beijing University, and Nankai University.
For the fairly hardcore, the Quantitative History Webinar (https://www.cqh.hku.hk/events-overview/webinars/) run out of the University of Hong Kong Institute for Humanities and Social Sciences regularly holds webinars, mostly but not exclusively devoted to Asian economic history, that lean toward quantitative and econometric analysis, but not exclusively so (webinars on Chinese history are held both in English and in Chinese; a main caveat is that they are broadcast in Hong Kong time).
For further reading on Chinese and global monetary history, I would recommend Akinobu Kuroda, A Global History of Money (Routledge, 2020); Kuroda is a specialist in Chinese monetary history, which he draws on heavily in this book; also, he provides a novel approach in looking at money from the perspective of peasants rather than merchants and bankers; William Goetzmann, Money Changes Everything: How Finance Made Civilization Possible (Princeton, 2016), a business school professor’s take on innovations in monetary institutions from ancient Mesopotamia to modern times); and Nina Bandelj et al. (eds.) Money Talks: Explaining How Money Really Works (Princeton, 2017), a wide range of interdisciplinary essays on the social uses and meanings of money across the globe.
A landmark study of European (specifically British) monetary history that really is essential reading in the field is Christine Desan’s Making Money: Coin, Currency, and the Coming of Capitalism (Oxford, 2014). Scholarship on the Chinese monetary and financial systems in English remains scant, apart from my own writings. One book that I can recommend is Luman Wang’s Chinese Hinterland Capitalism and Shanxi Piaohao: Banking, State, and Family, 1720-1910 (Routledge, 2021), which studies indigenous banks at the end of the imperial era.
For Chinese economic history more generally there are lots more resources, including my The Economic History of China from Antiquity to the Nineteenth Century (Cambridge, 2016) and The Cambridge Economic History of China (2022, edited by Debin Ma and myself), which includes nearly 50 essays in 2 volumes spanning Chinese history from the preimperial era to the modern day (about half of volume 2 is focused on the PRC).
Ken Pomeranz’s The Great Divergence: China, Europe, and the Making of the Modern World (Princeton, 2000) is an indispensable classic. I would also recommend Jean-Laurent Rosenthal and R. Bin Wong, Before and Beyond Divergence: The Politics of Economic Change in China and Europe (Harvard, 2011), likewise a comparative study of European and Chinese economic performance over the long run, and Loren Brandt, Debin Ma, and Thomas G. Rawski, “From Divergence to Convergence: Reevaluating the History Behind China’s Economic Boom,” in the Journal of Economic Literature 52.1 (2014): 45-123, in which the leading economists studying modern Chinese economic history examine the historical continuities between the late imperial economy and the PRC today.