#3028 - Week 4 Lecture Notes - Chinese Economic History Since 1850

Few historians agree that there was an economic take-off at the aggregate level pre-Communist era

Some however, argue that some modern sectors did experience some form of high growth around the turn of the 20^th century and particularly at the beginning of WWI

Production of cotton is a good indicator of labour-intensive industrialization

• A slight increase in output is seen around 1900 (doubling from 100,000 bales to more than 200,000 in 2 or 3 years

• There was a marked increase around 1922 following WWI (growing from 600,000 bales to over 2,500,000 before WWII

• During WWII however, production fell dramatically with decreased demand to a low of 500,000 in 1946

• Yan Se found import substitution was growing following the start of WWI

Other evidence of a surge around 1900:

• Railway mileage from 10km in 1890 to 9,854 in 1913

  • Against Japan from 2,349 to 10,570

  • India 26,400 to 55,822

However, growth was limited because modern manufacturing output accounted for only 24% of total manufacturing

• 3% of total GNP

• Was a regional phenomenon

Modern industry and foreign exports helped destroy traditional agriculture and handicraft

• Leading to decline in living standards

Supported Malthusian view of “involution”

• i.e. peasants forced to engage in low value-added handicrafts in order to make a living due to falling land-labour ratio

Trade and opening-up

• Led to increased commercialization

• Reallocation of resources

• Regional specialization

• Rise in overall living standards

Traditional peasants poor

• Preyed upon by large landlords

Supported by superficial examination of data:

• Land distribution was very unequal in China 1930s

  • 25% of all rural households landless

  • Top 5% owned 38.7% of the land

  • Gini coefficient of 0.72

  • Brandt and Sands argue that this was

    • Better than Mexico 1920s

    • Better than Victorian England

    • Same as post-independence India

    • Misleading measure of overall inequality

    • Gini coefficient for cultivated holdings was much lower around 0.6

    • Gini coefficient for income was around 0.45

Why is Gini coefficient so high for land distribution?

• Very active land-rental market in traditional China

• Large land owners rent out rather than cultivate on their own

• Tenancy rights were well-protected by customs

• Active labour market

  • Easy to hire in and out short term labor for agriculture

    • Reveals importance of non-agricultural income

• Active labour and land-rental markets weaken land ownership link to agricultural househole income

• Returns to labour relatively high in commercialized regions

  • Returns to land were lower than self-sufficient regions

• Household income was higher in commercialized regions

• Malthus linkage only works well in self-sufficient regions

Cotton textile was the hallmark of industrialization in East Asia

Machine-spun yarn from modern factories destroyed traditional hand-spinning

• Reduced traditional household production which had been using women and children for labour

Evidence: Decline in hand-spun yarn accompanied by rise in machine-spun yarn

• However, cheaper machine yarn stimulates growth of hand weaving

  • Where the handloom dominated

• So must analyze yarn production data in context

Machine-spinning is 40 times more productive than hand-spinning

• Weaving was only 4 times more productive

  • Explains why weaving took off from hand-spinning

Weaving allowed more differentiation

Weaving also benefited from continuous and ongoing technical innovations

• Came at a time of institutional innovations in marketing and finance of...