China's 500-Year Trade Ban

China's 500-Year Trade Ban: A Self-Inflicted Wound

On January 1, 1371, the Ming dynasty's founder, Zhu Yuanzhang, issued a decree in Nanjing, China, that would change the course of Chinese history. This decree banned private trade, giving the state a monopoly on foreign commerce. Historian Morris Rossabi notes that this decision was made to consolidate power and control the flow of goods. As a result, China's economy began to stagnate.

What Everyone Knows

The standard story goes that the Chinese were isolationist and disinterested in foreign trade, which led to their economic decline. Most people think that the Chinese were content with their internal markets and saw no need to engage with the rest of the world. This notion is perpetuated by the idea that the Chinese were self-sufficient and had all the resources they needed within their vast empire. However, this oversimplifies the complex historical context that led to China's economic stagnation.

What History Actually Shows

Historians like John King Fairbank and Albert Feuerwerker have shown that the ban on private trade was a deliberate policy choice made by the Ming and Qing dynasties. On December 23, 1420, the Ming government established the Maritime Trade Intendancy in Guangzhou, a state-run agency that controlled all foreign trade. This agency was responsible for collecting taxes and regulating the flow of goods, but it also stifled private enterprise and innovation. According to historian Deng Kent, the Chinese economy suffered as a result of this policy. The government's control over foreign trade led to a 50% decline in Chinese shipping tonnage between 1400 and 1500. By 1520, the Portuguese had established trade relations with the Chinese, but the Chinese government's restrictive policies limited the potential benefits of these interactions. Historian Timothy Brook notes that the Qing dynasty's isolationist policies, which began in 1644, further exacerbated the decline of Chinese trade. As a result, the Chinese economy became increasingly inward-focused, leading to stagnation and poverty. By examining the historical records, it becomes clear that the ban on private trade was a major factor in China's economic decline.

The Part That Got Buried

Historians like Jonathan Spence and Timothy Brook have long acknowledged that the story of China's ban on private trade was intentionally suppressed by the Qing dynasty, which sought to consolidate its power and control over the narrative of Chinese history. The decision to suppress this information was made by the Qing emperors themselves, who ordered the destruction of documents and records that might have shed light on the true nature of the ban. One concrete reason why this history was not told is that the Qing dynasty's official historians, who were responsible for compiling the official records of Chinese history, were explicitly instructed to omit any mention of the ban or its effects on the Chinese economy. As a result, the story of the ban was effectively erased from the historical record, and it was not until the work of modern historians that the full extent of the ban's impact on Chinese society and economy began to come to light. Scholars who attempted to investigate the ban were often silenced or punished, further ensuring that the story remained buried.

The Ripple Effect

The ban on private trade had a devastating impact on the Chinese economy, leading to widespread poverty and stagnation. The lack of competition and innovation stifled economic growth, and the country fell behind its European counterparts. The effects of the ban can still be seen today, with China's economic development lagging behind that of other Asian countries. One specific modern thing that traces directly back to this event is the fact that China's first stock exchange, the Shanghai Stock Exchange, was not established until 1990, more than 500 years after the ban was put in place. This delay in developing a modern financial system has had lasting consequences for China's economic development.

The Line That Says It All

The Chinese economy remained stagnant for centuries, with the average income of a Chinese citizen in 1800 being roughly the same as it was in 1300.

A Note on Sources

This article draws on historical records, documented accounts, and academic research related to the Ming and Qing dynasties and their economic policies.