Economy of Song Dynasty

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The Song Dynasty (960–1279) of China was a period of Chinese history marked by commercial expansion, economic prosperity, and revolutionary new economic concepts. Private trade grew and a market economy began to link the coastal provinces with the interior. The world's first development of the banknote, or printed paper money (see Jiaozi), was established on a massive scale. Combined with a unified tax system and efficient canal and roadways, this meant the development of a true nationwide market system in China.

The root of the development of paper money goes back to the the earlier Tang Dynasty, when the government outlawed the use of bolts of silk as currency, which increased the use of copper coinage for a means of money. However, by 1085 the output of copper currency had reached 6 billion coins a year, as the Song economy was much larger than the preceding Tang (as it fit a larger population with a more unified market system).^[1] For Tang-era merchants, avoiding the weight and bulk of so many copper coins in each transaction, this led them to using trading receipts from deposit shops where goods or money were left previously. The later Song government soon saw the economic advantage of this, issuing a monopoly right of several of these deposit shops to the issuance of these certificates of deposit, and by the 1120s the government stepped in, producing the world's first paper printed money.^[1]

Accompanying this was the beginnings of what one might term the Chinese industrial revolution. For example the historian Robert Hartwell has estimated that per capita iron output rose sixfold between 806 and 1078, such that, by 1078 China was producing 127000000 kg (125,000 t) in weight of iron per year.^[2] In the smelting process of using huge bellows driven by waterwheels, massive amounts of charcoal were used in the production process, leading to a wide range of deforestation in northern China.^[2] However, by the end of the 11th century the Chinese discovered that using bituminous coke could replace the role of charcoal, hence many acres of forested land in northern China were spared by the steel and iron industry with this switch of resources.^[2] Iron and steel of this period were used to mass produce ploughs, hammers, needles, pins, and cymbals among other routine items for an indigenous mass market and for trade with the outside world, which also expanded greatly at this time. The merchant class (mentioned above) also became more sophisticated and organized. Ebrey, Walthall, and Palais state that:

[Song Dynasty Chinese] set up partnerships and joint stock companies, with a separation of owners (shareholders) and managers. In the large cities, merchants were organized into guilds according to the type of product sold; they periodically set prices and arranged sales from wholesalers to shop owners. When the government requisitioned goods or assessed taxes, it dealt with the guild heads.^[3]

Sea trade abroad to the South East Pacific, the Hindu world, the Islamic world, and the East African world brought merchants great fortune, but there was risk involved in such long overseas ventures. In order to reduce the risk of losing money instead of gaining it on maritime trade missions abroad:

[Song era] investors usually divided their investment among many ships, and each ship had many investors behind it. One observer thought eagerness to invest in overseas trade was leading to an outflow of copper cash. He wrote, "People along the coast are on intimate terms with the merchants who engage in overseas trade, either because they are fellow-countrymen or personal acquaintances...[They give the merchants] money to take with them on their ships for purchase and return conveyance of foreign goods. They invest from ten to a hundred strings of cash, and regularly make profits of several hundred percent,".^[4]

Wealthy landholders were still typically those who were able to educate their sons the most. Hence small groups of prominent families in any given local county would gain national spotlight for having sons travel far off to be educated and appointed as ministers of the state. Yet downward social mobility was always an issue with the matter of divided inheritence. Suggesting ways to increase a family's property, Yuan Cai wrote in the late 12th century that those who obtained office with decent salaries shouldn't convert it to gold and silver, but instead could watch their values grow with investment:

For instance, if he had 100,000 strings worth of gold and silver and used this money to buy productive property, in a year he would gain 10,000 strings; after ten years or so, he would have regained the 100,000 strings and what would be divided among the family would be interest. If it were invested in a pawn broking business, in three years the interest would equal the capital. He would still have the 100,000 strings, and the rest, being interest, could be divided. Moreover, it could be doubled again in another three years, ad infinitum.^[5]

[edit] See also

• Society of Song Dynasty
• Culture of Song Dynasty
• Technology of Song Dynasty
• Architecture of Song Dynasty

[edit] Notes

[edit] References

• Ebrey, Walthall, Palais, (2006). East Asia: A Cultural, Social, and Political History. Boston: Houghton Mifflin Company.