China’s unsuccessful economy in the 19TH and early 20TH century.





China’s unsuccessful economy in the 19TH and early 20TH century.


China is the second largest world economy currently. Macroeconomists predict that China can attain the first largest economy but they have to achieve full employment in the economy and equilibrium balance of payments. The China government has to come up with fiscal and monetary policies that help solve major economic problems of unemployment and inflation. During the  19TH and the early 20TH century  China were  economically unsuccessful because of difficulty in accommodating  the overpopulated citizens, uncompetitive market structure  due to institutional and political constraints and limited development of  modern industry sector. After Manchu took over towards the 19TH century China believed too much in its own inherent greatness, they thought they were invincible. They closed down their connections to other nation states and the outside world. They did not have the mindset of improving and innovation.


In 1800 China was in conflict with England, it placed demands on China , on China’s denial it imposed unequal treaties to get back at China, this wrangles continued to the 20th century.The wars by the West weakened China economically. During the 19th century, earlier in 1839 Chiina suffered a major humiliation at the hands of the Western powers at the Boxer Rebellion.It was

the first Opium war with the British. Because of the Chinese being treated unjustly and humiliated, they did not modernize and remained weak throughout the 19TH and 20TH century.

In the 19TH century China had   numerous internal crisis, the country experienced floods, famines, increase in number of opium addicts, rebellions and explosive population growth. This time of the century was disastrous China since the challenges popped out at a crucial time. This was the time China had foreign attacks. This was because China denied trade on England.

China lacked sovereignty on numerous political and economic areas. This was a barrier for Chinas economic development. China economy suffered negative economic consequences of the unequal treaties from 1860 to 1943.Beacause of the unequal treaties the loans could only be paid for by increasing domestic taxes. The many natural catastrophes: the floods and famine hit China in the late 19th century; these calamities prevailed to the early 20th century. It led to the weakening of the state and unstabalizing the economy.

In 1870, the invading foreigners owned and ruled large part of the Chinese economy without economic and legal accountability. This deprived the China government of its control and regulation to the economy. This led to increased unemployment and high poverty rates in the country. The foreign aggression led to the collapse of the Qing (Ch’ing) or Manchu dynasty in 1911, this called for establishment of a republic. Sun Yat-sen led the forces calling for a republican government and established the Kuomintang (KMT) or Nationalist Party in 1912. The collapse of the dynastic system ushered in the “warlord period,” with regional power centers competing for control. The country was partially reunited under the army of Chiang Kai-shek and the Nationalist Party in 1928, but it was invaded by Japan in 1937 and destroyed by World War II.

From 1946 to 1949 after the end of World War II Chinas Nationalists and Communists began a civil war. This prevented the Nationalists   from making use of the new sovereignty. This led to a major inflation. Because of the war, China had insufficient funds to pay off its war indemnity obligation and still develop the country’s economy. The Nationalists government kept taking new loans to pay old loans.

The calamities of the 19th and early 20th century kept recurring until the late 20th century. Inflation led to the collapse of monetary system. Unemployment, low output in the economy, increased poverty levels, high dependence ratio and internal wars are what made Chinas economy unsuccessful in the 19th and  the early 20th century. It is evident that China’s inflation to responds asymmetrically to macroeconomic shocks during low and high regimes and adjusting the domestic interest rate in China may be an effective way in controlling inflation. The rampant inflation during the two centuries increased social unrest. There was discontent among the poor and the middle class citizens. The government tried to take modest steps to stimulate the economy like enacting a fiscal stimulus plan but more was needed go reduce the inflation rate in China.

In both centuries, China experienced a shady banking system. This helped inflate the economy. China had bad loans from foreign countries. The loans were a disaster to the government. It was no longer a secret. Taxes on basic   goods were hiked to get money to repay the banks loan.


Raised interest rates and persistent increase in the general price level of goods and services led to the poor economy in the 19th and early 20th century. During this two subsequent periods there was excess money supply chasing few goods, decreased personal savings and taxes. China believed too much in its own inherent greatness this led to their unsuccessful economy. The distanced themselves from other nation states as a result they did not embrace any improvement and innovation. The lack of internal political stability and a corrupt political system led to the unsuccessful economy. It was advisable for the China government to open up the economy with private investment and monetary reforms. The poverty in China led to a fall off in domestic demand this indicated that the economy was in a midst of a financial crisis.

Works Cited.

Temple, Richard. Progress of India, Japan and China in the Century. London, 1902. Print.

Starr, John B. Understanding China: A Guide to China’s Economy, History, and Political Structure. New York: Hill and Wang, 1997. Print.

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