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The economy and modern Chinese history The trade surplus caused by poverty

In the 19th century, Britain completed the industrial revolution, and productivity advanced by leaps and bounds, which demanded much more raw materials, markets, and labor. Hence, the target was the enormous feudal empire of China, which was under the reign of the Qing government. Unexpectedly, the Chinese market should be with huge potential did not satisfy British business people. In contrast, Britain had a severe trade deficit because Britain had imported lots of tea and porcelain from China while China imported few products from the UK. What is or are the reasons resulting in the trade surplus for the Chinese market?

From the perspective of the economy, there are four reasons for the trade surplus: the advantage in techniques, cost advantage, mercantilism policy, and consumption disadvantage.

The advantage of techniques benefits a country by possessing advanced and irreplaceable scientific technology to form a monopoly. Considering the science and technology in the Qing dynasty, the productivity in China was far behind that of Britain and only improved a little more than two thousand years ago. As the dominating economic form, the natural economy completely eliminated the possibility of technological advantage in China in the 19th century. Cost advantage includes the advantages in labor and resources. Although the Qing Dynasty did have a cheap workforce, it could not take advantage of this because of the low degree of industrialization and participation in international markets. Furthermore, the closed-door policy, little domestic and foreign investment, lacking modern factories are also the reasons making cheap labor did not have any advantage. Besides, most of the Qing population was in the countryside, conducting a subsistence natural economy and not participating in industrial production. The Qing Dynasty sold to Britain not agricultural products that relied on labor costs but rather porcelains, tea, and other specialty products that were not available in Britain. Intending to win export advantages in the international market in exchange for currency, mercantilism means that a country sharply increases import tariffs to limit the encroachment of foreign products on its own market. It also implements preferential policies for its own industries to maximize their exports and ensure a massive inward flow of precious metals. Western countries typically adopted this policy at the beginning of capitalism. Nonetheless, the Qing government was closed to foreign trade and had no intention of participating in the international market. The restrictions on British goods were not imposed by tariffs but by administrative orders. In this case, only the last reason is feasible to explain the trade surplus that happened in the Qing dynasty. The people in the Qing dynasty lived in poverty and had deficient consumption of imported products, recorded in the Chinese and British data. At that moment, Chinese people were embroiled in the involution of agricultural society, or the over-consumption and over-competition of the fields, and trapped in the Malthusian Trap. The Malthusian Trap, also known as the Malthusian Population Trap, refers to the idea that increased food production due to advanced agricultural techniques creates higher population levels. In the Qing dynasty, the land was rugged to satisfy the rapidly increasing demand for food by the crazily growing population. Almost all the possible land was used for agricultural activities, and the limited land resources often caused violent conflict. People firmly believed that a more family population could bring a workforce and fortune, which is the classic symptom of the Malthusian Trap. Nevertheless, in such an impecunious society, the Qing government still exploited peasants, and the sympathy between people almost vanished.

Because of the poverty of the Chinese people in the Qing dynasty, the British's dream of investing in China and making a fortune could not be realized. Finally, the solution was the villainous opium trade. Opium is so addictive that the addict loses his reason to spend all the money, even stealing and robbing money. The rich and powerful, after becoming addicted to opium, purchased it on a large scale with silver money. At the beginning of the 19th century, China had a surplus of 26 million silver dollars; by 1828-1836, it had a 38 million silver dollars deficit. The British government had an extra £4 million in revenue, sending 18,760 boxes of opium into China each year.

With the increasing addiction to opium and the severe deficit, the Qing government must take measures to keep its profit.


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