 site of the ancient city of Xi’an, had practiced sophisticated irrigation for over

2,000 years, but by the nineteenth century, this infrastructure had broken down

and left the population vulnerable to droughts. Less effective government became

 apparent as China was straining the limits of economic possibility given traditional

technologies. It is clear that ecological exhaustion deprived the economy of readily

available materials, such as lumber and metal, and that environmental problems

 were becoming more severe. At the beginning of the nineteenth century, the Qing

dynasty had clearly entered a broad period of dynastic decline just as the European

coun- tries, which were entering an unprecedented period of economic and

population growth, were about to arrive on China’s doorstep.

3.2 The Failed Response to the West and Japan

 During the nineteenth century, foreign powers began to have an increasingly

severe political, military, and economic impact on China. The economic stimulus

from this contact could have been positive, but instead, China during the

 nineteenth century tumbled into a profound social crisis. This crisis was certainly

aggravated by the political and military challenge from the West, but it went

beyond anything we can explain by the direct impact of the West.

 As we have seen, foreign encroachment on China began during a period of dynas-

tic weakness. It started with economic disruption and then expanded to military
51 The Chinese Economy Before 1949

 confrontation. For centuries, China had run an export surplus with the outside

world, preferring to import silver rather than foreign goods (indirectly confirming

the Qian- long emperor’s judgment that China did not need foreign manufactures).

Traditional Chinese exports of silk, tea, and porcelain produced an inflow of silver

that increased the money supply and contributed to economic expansion until the

1820s.

 However, British merchants were unhappy with the steady drain of silver into

China and searched for a commodity that would appeal to Chinese consumers and

could be imported into China and redress the trade imbalance. They finally located

such a commodity in opium. Chests of opium, grown in India, were imported by

British merchants into China.

 By the 1830s, China was importing more than it was export- ing. China now faced

both an economic problem—a slowdown caused by slow adjust- ment to a

shrinking supply of monetary metals—and a new social problem, opium addiction.

 Chinese attempts to stop the inflow of opium led to the Opium War with Britain in

1839. Britain’s industrial revolution was still in its early stages, but Britain already

had the ability to mobilize financial, commercial, and military resources of unpre-

cedented scale. The British crushed the hopelessly outmoded Chinese defenses,
 and in the Treaty of Nanking (1842) forced China to cede Hong Kong to British

rule and open the first five Treaty Ports to foreign control. Between 1839 and

1895, China fought and lost five wars against various foreign powers encroaching

on its territory. After each loss, China was forced to pay reparations to the victors

and open more Chinese cities to foreign residence and control. The Qing

government, already enfee- bled, was never able to develop an effective response,

and each defeat intensified its fiscal crisis and reduced its options further.

The weakened Qing dynasty was increasingly unable to deal with domestic chal- lenges.

By far the most serious threat was the Taiping Rebellion (1850–1864). This uprising

gained control of the rich Lower Yangtze, the economic heartland. The attacks of the

rebels and their suppression by the Qing armies caused massive dam- age and casualties

estimated at 20 to 30 million or more. The traditional Lower Yang- tze center of

Hangzhou was completely destroyed. The Qing dynasty might well have collapsed then,

but it was propped up by the foreign powers, who thought that the Taiping rebels were

worse than the enfeebled imperial regime. Instead, the Qing teetered from crisis to crisis

until its ultimate collapse in 1911.

Other foreign powers piled on, winning concessions and spheres of influence in China.

At their peak, there were more than 80 Treaty Ports, governed by foreign powers and not

subject to Chinese jurisdiction. Shanghai was the most important, and emerged as the

economic center of the Lower Yangtze region after it was protected from the destruction

of the Taiping Rebellion by its foreign status. Extraterritoriality (foreign exemption from
domestic law) and foreign control of Treaty Ports and customs revenues were politically

controversial until their abolition in the mid-twentieth

52 Legacies and Setting