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Ancient China economics- A fascinating history

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Ancient China economics is pretty fascinating, especially when you live in China or are travelling in China. So in this article I am going to tell you about a few interesting ancient China economics fasts. Interested to learn more? Read on…

Ancient China economics: Why was ancient China successful?

In a wide variety of ways, China was further developed and technologically advanced several centuries ahead of the Middle East and Europe.  Yet by the 19th century, China had fallen far behind the West and even the Chinese themselves had forgotten the importance of their early achievements.  

Why was ancient China so successful?   Ancient Chinese life moved through successful social change, as well as periods of disarray, and established a civilisation with social development and organisation.  The answer lies in the following:

  • Stable government
  • Productive economy
  • Innovation and technology
  • Coinage and standard measures
  • International trade

The early Dynasties lasted for long periods of time which allowed Chinese culture and advancement to progress.  This was an important time in Ancient China economics.  

During the Qin Dynasty (221 – 207 BC), the king of the state conquered six other kingdoms and united them in a bureaucracy with centralised control.  The unified state stretched over most of the China we know today and the name ‘China’ is derived from the First Emperor’s home state of Qin, pronounced ‘Chin’.

He set up a forward-looking legal system that lasted for some 2,000 years and included legal responsibility; 18thcentury Jesuit missionaries described the system as a great improvement on other countries which were ruled by the aristocracy.

Another of the First Emperor’s decrees was to standardise Chinese script, later refined during the Han dynasty (206 BC – AD 220) and which has been used ever since.  Though pronunciation has changed, an educated person can still read ancient Han dynasty texts fairly easily.

Ancient China became unified with a strong government, a social hierarchy and a belief system centred on family, education and civilisation as a whole which survived times of conflict and political division.  However, a more sinister aspect of the traditional respect for language and script is China’s long tradition of censorship.  The First Emperor is said to have ordered a great bonfire to burn all ancient Confucian texts.

Red tourism. Ancient China economics


Like all societies which had developed beyond the hunter/gatherer, Ancient China’s economy was based on agriculture and therefore agriculture is an important part of Ancient China economics.  Moving from subsistence and feeding one’s family to collective ways of farming, China developed an increasingly productive agricultural economy.  Large-scale irrigation projects brought more land under cultivation and field-rotation maintained crop productivity.  

Animals were harnessed and around 2,500 years ago, when no-one in the Middle East or Europe knew how to melt iron, the Chinese were casting multi-iron objects to create ploughs and other heavy agricultural tools.   In time, as population densities increased, the cultivation of animals for food gave way to increased production of crops. 

Guanzi is said to be the record of thoughts and remarks by Qi’s famous premier Guan Zhong and his School between 475 B.C. and 221 B.C. In this work, the author shows a deep understanding of the changing rules of both the natural world and social economy, and proposed countermeasures.

As in many other countries, the economy in ancient China fluctuated according to natural climate cycles; in favourable weather, harvests were abundant and therefore food prices would fall while in times of flood or drought, when food production was low, prices would increase.  The Chinese noted that price fluctuations had significant impact on the economy and threatened the dominance of the ruling dynasties.  

When food prices were low, the government stepped in to buy grain which pushed the price up to benefit the farmers; in times of need, when the prices were high, stored grain was sold to lower the price.  In this way, millions of people were saved from the impact of the climate and disaster cycles.  It was not until 1,900 years later that the US discovered the enormous value of this system and in 1938, the concept was written into their Agricultural Adjustment Act.


The increasingly productive farming economy gave rise to trade and industry., another important part of Ancient China economics  Alongside food production which included dairy products, textiles were spun and woven, clothes created and sewn and silk produced.  Most of the manufacturing took place in the homes of farmers and craftsmen and the introduction and use of iron was a major step forward.

Implements were easier and cheaper to make from iron; bronze became mainly for decorative objects and weapons used by the most influential people of society whereas iron tools enabled farmers and artisans to become far more productive.

As demand intensified, larger manufacturing units began to appear, some reportedly employing over 200 workmen. Experimentation led to technological advances including larger kilns and the Chinese invented steel more than a thousand years before the West.  Weapons and armour were produced in state factories.

silk road china itinerary


Metal coins were introduced in late 5th century BC and circulated widely which facilitated the expansion of trade and led to the development of larger towns and cities as centres of commerce. Currency was very convenient, a far better way of paying for goods than by exchange or rendering for services.  Bronze coins with holes in the middle were easy to carry and soon widely adopted; they remained in use for some 2,000 years until 1911.

Craftsmen needed merchants to distribute their wares and trade with other nations in ancient Chinese civilisations which gave rise to wealthy urban classes.   Long periods of peace stimulated the growth of trade and some merchants became extremely wealthy indeed, especially those in the iron and salt industries, and wholesale grain merchants.

Official administrators maintained control through a system of law. Weights and measures became standardised throughout China and checked rigorously; swindlers were punished with sentences of hard labour. Successive state governments became active promoters of trade and industry, opening routes all across the country. This was another important time for Ancient China economics.

International trade

International trade was also important to Ancient China economics. The peace and stability of the Han Dynasty (206 BC to 220 AD) enabled the kings to impose their control over the Eastern steppes of central Asia and longer distance routes were opened, the most notable being the Silk Road.  Explorers from ancient China set out to find new countries and markets with which to trade and people travelled in long caravans carrying food and clothes and sharing beliefs.  

Many luxury and exotic goods were moved along this route, but the chief was the trade in silks, sold initially by the Chinese in exchange for horses; the sturdy steppe ponies were highly prized and the Chinese struggled to breed them successfully owing to a lack of wide grasslands.  

This great trade route connected China with the Middle East and beyond into Europe and continued throughout the centuries.  Much later, in the 1500’s, silk was being traded with Great Britain in return for woollen goods.

The Han conquest of south China opened up the maritime trade to south-east Asia.  Some important ports were established and although trade was largely in the hands of foreign merchants and seamen, Chinese businessmen benefited from the handling of imported and exported goods.  

Inland waterways were developed and in successive dynasties, led ultimately to the construction of the Grand Canal originally for the transportation of grain, but which later enabled the maritime routes to join up with the overland Silk Road in China

silk road china itinerary

The four great inventions of ancient China

The four great inventions contributed significantly to the Ancient China economics. Dr Joseph Needham (1900 – 1995), a British academic who studied Chinese history, customs and politics, defined four key inventions of ancient China which had an enormous impact on the development of civilisation, not only in China, but in the Western world too. They are the inventions of paper, printing, gunpowder and the compass.


Mankind has always found means to communicate eg by scratching on stones, painting on rocks or by handmade means of forming materials into papyrus, clay tablets, woven leaves, wooden strips, etc.  The ancient people of China made ‘bo’ from silk, but it was a very expensive process.  

It is thought that a court official, Cai Lun, produced paper around 105 AD, made from bark, rags, wheat stalks and other plant fibres.  These were soaked, pounded, washed, boiled, strained and bleached to form a mash which was strained through a frame and left to dry, flattened into sheets.  It was relatively cheap to make, was light, thin and most suitable for Chinese brush writing.  The result was a good quality writing material which was easy to produce on a large scale.  

At the beginning of the 3rd century, the paper-making process spread to Korea and then Japan.  It reached the Arab world around 750AD via the Silk Road and Europe by the 13th century.  In the 16th century, settlers took the process to America and through travel and exploration, paper gradually spread all over the world.


Before the invention of printing, knowledge was shared through word of mouth or handwritten on manuscripts.  Around 25 AD, stone-tablet rubbing was used to spread Buddhist sayings and this led to the practice of engraving writing onto a wood board, smearing it with ink and then printing on to pieces of paper.   It is known that block printing was used around 200 AD both for printing on paper and for printing designs on cloth.

During the Tang Dynasty (618 – 907 AD), block printing was gradually introduced into Korea, Japan, Vietnam and the Philippines. The first book with a verifiable date was a Buddhist sutra which appeared in China in 868 AD.  

Block printing had its drawbacks; a mistaken mark could not be removed and the wooden board could only be used once.  Bi Sheng (960 – 1279 AD) carved individual characters on identical pieces of fine clay which he hardened by a slow-baking process.  In this way, he created pieces of movable type.  When the printing was finished, the clay type could be stored for later use.  However, the thousands of Chinese written characters were not very suitable for being printed with movable type.

The technology spread to Korea, Japan, Vietnam and to Europe where, later in 1440-48, German Johann Gutenberg invented type made of metal.  European alphabets are easily suited to movable type which can be reused many times. 

Having already acquired paper, the advent of printing led to mass production of literature.  Printed material for educational, religious and recreational use became commonly available across all levels of society.


Gunpowder is a mixture of charcoal, saltpetre and sulphur which the ancient alchemists of China discovered could create an explosion when mixed in the right proportions and heated.  In ‘The Collection of the Most Important Military Techniques’, edited in 1044 by Zeng Gongliang, three formulas for making gunpowder were recorded.  Joseph Needham has identified these as the earliest formulas of such a kind.

Gunpowder was originally used for fireworks and then used extensively during the 1200s in a variety of weapons such as rockets, guns, small cannons, incendiary devices, bombs, grenades, landmines and to make smoke for camouflage.  It was also used as blasting powder for mining.

In the 12th century, use of gunpowder spread to the Arab world and in the 14th century, to Europe.  Later adaptations revolutionised warfare; a gun enabled trained infantry to move more easily than heavily armoured knights and large cannons destroyed the strong castle fortifications built before the widespread use of gunpowder.  In time, this invention had a huge impact on governments and political boundaries across the world.

The Compass

In ancient times, people identified directions by the position of the sun, moon, stars and the orientation of trees and plants.  It is thought that American tribes such as the Olmecs may have used natural magnetite some 3,000 years ago, but the earliest invention of the compass is attributed to the Chinese.  While mining ores and smelting copper and iron, people found a natural magnetite which attracted iron and pointed north.  

Needham cites ‘Dream Pool Essays’ by Shen Kuo in 1086 as one of the first books to describe the use of magnetic compass, about 100 years earlier than its first record in Europe.  People used compasses to align their houses to practice fengshui and later, it was used for sea navigation.

Shipping industries were developed and Europeans began long-distance exploration.   Sea journeys led to the expansion of trade, the acquisition of knowledge and in time, distribution of wealth.  The compass enabled the discovery of America, trade routes through Asia and travel around the world.

Ancient China economics- further reading

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