Kangxi Tongbao, Yongzheng Tongbao, and Qianlong Tongbao were inscriptions on Qing dynasty coins minted during the reigns of the Kangxi, Yongzheng, and Qianlong emperors. Photo: TUCHONG

In the 18th century, China experienced a series of pivotal transformations that laid the groundwork for a unified national market—an essential driver of the country’s economic prosperity at the time. Chief among these changes were institutional reforms, improved transportation networks, and the deepening of regional specialization and division of labor.

Institutional improvements

Institutional improvements took shape in three key areas: First, the Qing court largely embraced a laissez-faire approach to domestic trade. Throughout much of the dynasty—particularly in the 18th century—the imperial court promoted the exchange of essential goods, including grain, on a wide scale. Apart from collecting taxes at select checkpoints, state intervention remained limited. Compared to earlier dynasties, the number of government-run customs bureaus (queguan) was drastically reduced. Meanwhile, commercial tax collection became more systematic, and taxation methods were increasingly standardized.

Although commercial tax revenues rose with the expansion of trade, they remained far less significant than agricultural taxes in the Qing court’s overall revenue. From the early to mid-Qing period, commercial tax rates typically ranged from 3% to 6%—low by historical standards—and remained fixed for long stretches. As prices climbed, the real tax burden diminished. Since taxes were assessed by quantity rather than value, rising prices further reduced the effective rate. This policy of light taxation reflected not administrative incapacity, but a conscious decision by the Qing court to ease the fiscal burden on commerce.

Second, internal trade barriers were steadily dismantled. R. Bin Wong, a professor of history and Director of the Asia Institute at the University of California, Los Angeles, proposed that based on the political and economic policies of the Qing dynasty, China at the time was composed of four major “political-economic zones”: the core region, the interior region, the inland frontier region, and the coastal frontier region. In the 18th century, the Qing dynasty integrated these four zones into one.

Third, the Qing dynasty established a relatively stable monetary system. Silver served as the primary currency, while copper coins were used mainly for minor transactions. By the 18th century, privately issued paper money had begun to circulate, adding a new dimension to the monetary landscape. Court records from the period document the use of trademarks on a broad array of goods—including textiles, medicines, precious metals, grain receipts, jewelry, tea, alcohol, porcelain, stationery, and bronze ware. Many of these trademarks were safeguarded either by imperial authority or by kinship-based organizations.

Development of transportation

During the Qing dynasty, China’s water transport system underwent two major advancements. The first was the gradual integration of previously disconnected stretches of the Yangtze River—China’s principal waterway. In the Song dynasty, trade along the Yangtze was concentrated in its lower reaches. By the late Ming, however, emerging commercial centers like Shashi and Jiujiang began linking with the lower Yangtze. In the Qing period, the river’s upper reaches were finally connected to the midstream corridor. In the early years of the Qianlong reign, the hazardous shoals above Yibin were dredged to enable the transport of copper from Yunnan, opening more than 650 kilometers of navigable waterway along the Jinsha River. As a result, nearly the entire Yangtze River became fully navigable.

The second major advancement was the revival of the Northern Coastal Route (Beiyang Route). Originally established during the Yuan dynasty for official grain shipments, this sea route—running from Shanghai around the Shandong Peninsula to Tianjin—had largely fallen into disuse after the Ming court abolished maritime grain transport. The Qing court restored and extended it northward beyond Tianjin to Yingkou, where it connected with the Liao River system, forming a vital north-south transport corridor. Southern coastal routes, though already active during the Ming, saw further expansion and integration under the Qing. These improvements eventually gave rise to a vast inland and coastal waterway network.

This evolving waterway network formed three major “T-shaped” configurations, anchored by a shared east-west trunk and flanked by three north-south branches. The trunk was the Yangtze River, the nation’s main water artery. The three vertical branches were: the eastern coastal route; the Grand Canal–Yangtze–Gan River corridor; and the Han River–Yangtze–Dongting Lake–Xiang River route.

China’s water transport system expanded dramatically under the Qing. By 1840, the length of inland waterways had reached approximately 50,000 kilometers, and coastal shipping lanes extended to about 10,000 kilometers. This sprawling network encompassed nearly every region of the country. As navigable distances increased, so too did shipping capacity: by the mid-19th century, more than 200,000 vessels plied China’s waterways, with a total carrying capacity estimated at 4 to 5 million tons.

In addition to the boom in water transport, overland infrastructure also saw remarkable advances during the Ming and especially the Qing periods. By the early 19th century, twelve major commercial land routes had taken shape. These arteries not only connected China’s inland provinces and major cities, but also extended deep into frontier regions—including Mongolia, Xinjiang, Tibet, and Qinghai—linking them with the economic heartland.

Regional specialization and division of labor

By the 19th century, following centuries of gradual development, China had crystallized into three major economic zones. The first was a developed zone encompassing ten provinces in the east, north, and southeast. The third was an underdeveloped zone, consisting of the Northeast, Qing-era Mongolia, Qinghai, and Tibet. Sandwiched between them was the second, or developing zone—comprising the provinces that lay between the economic core and the periphery.

Economic disparities among these zones closely paralleled variations in population density. The developed zone was densely populated; the developing zone moderately so; and the underdeveloped zone sparsely inhabited. The developed zone witnessed rapid growth in industry and commerce, while the developing zone saw swift advances in agriculture. In contrast, both economic and demographic changes in the underdeveloped zone were limited. The developed zone relied on the other two regions for grain, fertilizer, mineral resources, timber, and various raw materials, while supplying them with manufactured goods, capital, technology, labor, and even financial support.

Development of commerce and finance

Beyond these foundational developments, 18th-century China also saw notable advances in several key areas: the expansion of the money supply, the growth of financial institutions, the rise of merchant groups and commercial capital, and the refinement of commercial communication systems.

These changes helped spur a rapid expansion in long-distance trade. Across China, key factors of production—goods, labor, capital, technology, and information—began to circulate more freely and at greater scale. This broad-based mobility fostered the integration of regional markets into a unified national market, anchored by a central commercial hub and its surrounding hinterland. That center lay at the intersection of major trade routes, linking the country’s largest cities and extending commerce to more remote areas.

As noted earlier, the Yangtze River system, the Grand Canal, and the coastal sea routes formed the three principal arteries of China’s transport network during the 18th century. Long-distance trade was heavily concentrated in regions along these routes. Consequently, China’s national market radiated outward from these three corridors. This structure included three tiers of commercial hinterlands: the first, directly adjacent to the main transport lines; the second, linked via smaller rivers and canals; and the third, accessible only by land routes.

The economic center of the national market was the region that not only held a pivotal position within the water transport system, but was also the most economically advanced. In Qing China, only one region fit both criteria: Jiangnan. Jiangnan boasted the country’s highest population density and the most advanced level of urbanization. It was home to Suzhou, the nation’s largest city, as well as other major urban centers such as Nanjing and Hangzhou, and mid-sized cities including Songjiang, Shanghai, Huzhou, and Changzhou. With its strong purchasing power and robust consumer demand, Jiangnan was a prime destination for long-distance trade in bulk goods. In Jiangnan, merchants from across the empire could count on earning stable profits.

Situated at the junction of the two major T-shaped trade corridors described earlier, Jiangnan occupied a central node in China’s water transport system. With the expansion of inland and maritime shipping, cities like Shanghai, Nanjing, Zhapu, and Hangzhou rose as key ports. Jiangnan’s central role in the national market was further underscored by its dominance in finance. During the 18th and early 19th centuries, the primary financial institutions in China were pawnshops, silver shops, loan brokers, and exchange shops—and Jiangnan had more of them than any other region.

The above-mentioned regional division of labor gave rise to an integrated national economy, with Jiangnan at its core and the other three zones arranged around it like concentric rings. Population and wealth diminished with each ring outward. Jiangnan stood not only at the center of the country’s water transport network but also at the heart of its trade, industry, commerce, finance, and even cultural life. Nearly all regions of China belonged to its vast commercial hinterland—a testament to the scale and integration of the Qing-era national market.

The emergence and expansion of this national market ranks among the most consequential developments in China’s economic history. The primary driver of Qing economic growth was what economists term the Smithian force—the productivity gains arising from specialization and trade—which can only flourish in a well-integrated market. The broader and more cohesive the market, the more effectively this force operates. In the 18th century, as population growth outpaced the expansion of arable land, the Smithian force helped propel the economy forward. This dynamic underpinned the prosperity seen during the reigns of Kangxi, Yongzheng, and Qianlong, offering an internal explanation for China’s impressive economic performance in that period.

Li Bozhong is a professor from the Department of History at Peking University.