Modern Economic Growth in the Lower Yangzi in 1911-1937: a Quantitative, Historical and Institutional Analysis

Debin Ma Department of Economic History

London School of Economics London WC2A 2AE, UK Email: d.ma1@lse.ac.uk.

July 2006

Abstract: This article examines long-term economic growth and change in China’s most advanced region,

the Lower Yangzi, in a historical GDP framework. Through a detailed reconstruction of a 1933 GDP for

the two provinces in the region, the paper shows that their per capita income was 55% higher than China’s

national average, and had experienced a magnitude of growth and structural change between 1914/18 and

1931/36 comparable to contemporaneous Japan and her East Asian colonies. Upon this finding, this article

offers a historical and institutional narrative arguing that Shanghai’s unique political institution as a

city-state in early 20th century Shanghai, with its rule of law, secure property rights and provision of public

goods, laid the foundation for Modern Economic Growth in the Lower Yangzi with long-term impact

throughout East Asia.

* I want to thank Bart van Ark, Loren Brandt, Jean-Pascal Bassino, Huang Han Ming, Paul Kandasamy,

Carien Van Mourik, Angus Maddison, Andrew Mitchell, Ramon Myers, Konosuke Odaka, Sonja Opper,

Kenneth Pomeranz, Osamu Saito, Billy So, Peter Wardley, Jeffrey Williamson and Yuan Weipen. I alone

remain responsible for all errors.

Modern Economic Growth in the Lower Yangzi in 1911-1937: a Quantitative, Historical and Institutional Analysis

Abstract: This article examines long-term economic growth and change in China’s most advanced region,

the Lower Yangzi, in a historical GDP framework. Through a detailed reconstruction of a 1933 GDP for

the two provinces in the region, the paper shows that their per capita income was 55% higher than China’s

national average, and had experienced a magnitude of growth and structural change between 1914/18 and

1931/36 comparable to contemporaneous Japan and her East Asian colonies. Upon this finding, this article

offers a historical and institutional narrative arguing that Shanghai’s unique political institution as a

city-state in early 20th century Shanghai, with its rule of law, secure property rights and provision of public

goods, laid the foundation for Modern Economic Growth in the Lower Yangzi with long-term impact

throughout East Asia.

Chinese economic growth is not a recent phenomenon. Thomas Rawski, for example, contends

that China’s per capita GDP growth had already attained a similar rate to that of Japan in the

Republican era, the first three decades of the 20th century. In fact, economic growth is a theme as

enduring as Chinese economic history, ranging from the grand hypotheses of the Needham Puzzle,

the Song Economic Revolution, and the high level equilibrium trap in the 1970s, to the recent

revisionist scholars’ provocative claim that 18th century Chinese living standards in the Lower

Yangzi region (historically China’s most advanced area) were comparable to those of

Northwestern Europe.1

This article is a study of regional economic growth of the Lower Yangzi, situated largely

within the two provinces of Jiangsu and Zhejiang. Throughout the paper, the Chinese

abbreviation of “Jiang-Zhe” to is used to denote the combined territory of these two provinces

which includes the city of Shanghai. This article reconstructs the 1930s GDP estimate for

1 See Thomas Rawski 1989 for Republican era economic growth, Mark Elvin, 1973 for the Song economic

revolution and Kenneth Pomeranz 2000 for the revisionist scholarship on 18th century China and the Lower

Yangzi.

1

Jiang-Zhe. Using the 1933 sector of origin Chinese GDP framework of Liu Ta-chung and Yeh

Kung-chia (1965), I calculate the Jiang-Zhe share in the national net value-added of thirteen

sectors based on previously unused provincial and regional level data. The result shows that the

Jiang-Zhe per capita GDP in 1930s was about 55% higher than China’s national average, and

16-29% higher than the Japanese controlled Korea and Manchuria, and ranked only below Japan

and Taiwan. Back-projection based on my 1930s Jiang-Zhe benchmark shows a magnitude of

structural change and per-capita income growth comparable to Japan and her colonies between

the 1910s and 1930s, and an economic structure far removed from a traditional agrarian economy.

This article also develops preliminary estimates of the Jiang-Zhe per capita income ratio

relative to the national average of the 18th century, and links up with the 1952, 1978 and 1999

benchmark regional income data to illustrate long-term economic change in a regional, national

and global context. I offer a historical narrative to demonstrate that modern economic growth in

the early 20th century Lower Yangzi had its origin in the institutional set up of Shanghai as a treaty

port and later as a city-state – its rule of law, guarantee of private property rights, and provision of

public goods.

The findings of this article emphasize the distinctly regional nature of economic growth in

Republican China due to the geographic differentiation in the quality of political institutions.

Despite the superior historical conditions of the Lower Yangzi (as recently championed by

Kenneth Pomeranz and others), early 20th century economic growth did not grow directly out of

traditional institutions, but outside of them. In the tradition of North and Weingast (1989), Olson

(1993), DeLong and Shleifer (1993), this article points to institutions as crucial determinants of

long-term economic change in China, a finding in sharp contrast to historians’ emphasis on

resource constraints, such as deteriorating land-labor ratios or the lack of mineral deposits (Elvin

1975, Pomeranz 2000).

2

By highlighting institution as determinants of long-term economic change, this article draws

attention to potential methodological problems inherent in comparative studies that pair economic

regions with independent nation states. Situated within the political structure of a centralized

empire, economic regions such as the Lower Yangzi encountered constraints to institutional

change far more severe than independent nation-states such as Britain and Japan. Our

understanding on the diffusion of industrial revolution in China during the modern era and

China-Europe divergence in the early modern period is greatly enhanced by incorporating the

importance of fundamentally different organizational principles of political units - that of a

centralized hierarchical empire in China versus horizontal nation-states in Western Europe – on

institutional evolution.

The rest of the article is divided into two main sections. The first defines the geographic region,

and provides a quantitative assessment of Lower Yangzi economic change in a GDP framework,

with a focus on the period between the 1910s and 1930s. The second section offers a historical

narrative of political and institutional change, especially the rise of Shanghai as a city-state in the

early 20th century and its impact on economic growth.

I. The Lower Yangzi: a Quantitative Record

Initial Conditions: a Regional Reinterpretation

The macro-region of Lower Yangzi, as defined by William Skinner and discussed by China

historians, includes eight prefectures in Zhejiang province and ten prefectures in the Jiangsu

province plus the city of Shanghai. The macro-region is indicated in dark shade in the map below.

Four prefectures within the administrative boundaries of Jiang-Zhe provinces, two each in

Jiangsu and Zhejiang provinces (the area indicated in light shade in the map), lie outside this

macro-region. The Lower Yangzi macro-region constitutes a relatively integrated cultural,

economic and geographic region distinguished from those outlying prefectures in the Jiang-Zhe

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provinces in levels of development, degrees of commercialization, culture and dialects. Through

the remainder of the paper, the term “Lower Yangiz Region” will refer to the macro-region

indicated in dark shade in the map, while “Lower Yangzi” will remain a generic term for the

area.2

Insert Map here

At 210,741 square kilometers, the Jiang-Zhe provinces are 86% and 56% the size of Britain

and Japan respectively. Their population, at over 60 million in the 1930s, was slightly smaller

than Japan but 30% larger than Britain. But with a ratio of arable land to total area over three

times that of Japan, the Jiang-Zhe constituted an intermediate case between Japan and Britain in

terms of agricultural endowments.3

While pre-20th century Chinese GDP estimates are sparse, regional GDP estimates are simply

non-existent. As a crude approximation, tax revenue records are used to provide a benchmark

estimate for the economic distance between the Lower Yangzi and the rest of China in the

mid-18th century. Throughout the Qing, the Jiang-Zhe provinces bore the largest share of tax

burden. My calculation based on Wang Yeh-chien’s careful study on Qing taxation shows that the

per capita tax revenue contributed by the Jiang-Zhe provinces in 1753 was 1.44 times that of the

national average. Accepting Wang’s argument that the Qing taxation system in the mid-18th

century was relatively efficient and corruption-free, and assuming that taxation was proportional

to income, we could conceivably treat the 1.44 as the approximate ratio of Jiang-Zhe per capita

2 Skinner also defines a so-called Lower Yangzi Core which would only include the prefectures of Suzhou,

Songjiang, Jiangnin, Changzhou Taichang and the city of Shanghai in Jiangsu province and the prefectures

of Hangzhou, Jiaxing, Huzhou in Zhejiang province. This small and undoubtedly most advanced and

commercialized region, often known as the Jiangnan region, is most often discussed by Pomeranz and Li

Bo-Zhong, See Li Bo-zhong, 1998, chapter 1. 3 See notes to Table 1 for cultivated acreage and land area data.

4

income over China in the mid-18th century.4

I derive a crude per capita income ratio estimate for the Lower Yangzi Region by assuming the

per-capita income of the excluded prefectures as equal to China’s national average (including that

of the Jiang-Zhe Provinces). Thus, the Lower Yangzi Region per capita income can be calculated

as: YLY = (YJZ - YC × PEX ) ÷ PLY; where YLY, YJZ and YC, stand for the per capita incomes of the

Lower Yangzi Region, Jiang-Zhe and China respectively, and PLY and PEX denote the respective

population shares of the Lower Yangzi Region and the remaining four prefectures in Jiang-Zhe

provinces. This calculation yields a per capita income for the Lower Yangzi Region of 1.54 times

that of China in the mid-18th century.5

We can now recast our preliminary Lower Yangzi per capita income estimate in Maddison’s

global dataset. His “guess-estimates” for early modern Asia should be more appropriately

regarded as a quantitative approximation of historical narrative. Maddison estimates that the

British, West European and European (including East Europe but not Russia and Turkey)

4 Tax data is from p.70. Wang’s grand total is used. Population is for 1787 from p.87 (table 5.1). To do a

consistent check, I have calculated the average per-capita revenue of all provinces relative to that of China’s

average (China’s average set equal to 1) which are listed in descending order: Shanxi (1.77), Shaanxi (1.63),

Jiangsu (1.55), Zhejiang (1.47), Shandong (1.33), Henan (1.33), Yunan (1.18), Jiangxi (1.14), Guangdong

(0.93), Fujiang (0.91), Chihli (0.78), Anhui (0.75), Hunan (0.7), Hubei (0.62), Guangsi (0.59), Sichuan

(0.58), Guizhou (0.39), Kansu (0.38). Except for Shanxi, Shaanxi and perhaps Yunan, the overall

provincial per-capita tax revenue appears consistent with Wang’s scheme of developed versus developing

regions in 18th century China. Wang, in his other work, noted the problems of land tax records for Shanxi

and Yunan (pp.26-7), but overall, the biases caused by Shanxi, Shaanxi and Yunan are likely to be small due

to their low population share. As Wang’s grand total did not include salt, native customs and miscellaneous

taxes, estimated at about 25% of Qing’s total tax revenue, Jiang-Zhe’s tax-revenue based per capita income

relative to China is likely to be an underestimate due to her high degree of commercialization (p.72). For

Wang’s argument for a relatively efficient tax system in 1753, see chapters 4 and 5. 5 The Lower Yangzi Region’s population share in the Jiang-Zhe provinces is 0.82, calculated from Chao

Suji’s prefecture level data of 1776, vol.6, p.691-2.

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per-capita figures are 2, 1.7 and 1.45 times the level of China in 1700 respectively.6 Using the

Lower Yangzi Region per capita income of 1.54 times that of China, this pushes its average living

standards above the European average, and to 91% and 77% of Western Europe and Britain

respectively.

For Japan, Maddison gives her per capita income as 12% and 40% higher than China in 1820

and 1870 respectively (2001, p.264). These are below Lower Yangzi Region’s 54% gap with

China in the mid-18th century.7 These estimates, highly tentative or even speculative, show that

temporarily suspending the nation-state framework (which was not applicable to East Asia until

the 20th century), a regional income perspective drastically alters our pre-existing perspective of

relative backwardness in the early modern period.

A regional perspective also throws new insights into the oft-noted case of a contrasting

population profile between Tokugawa Japan and Qing-China. Stagnant population growth in

Tokugawa Japan, viewed as a precocious demographic transition for a pre-modern society, is

often set up as an antithesis against the case of Malthusian population explosion that gripped

China during the 17th and 18th centuries (James Nakamura and Matao Miyamoto, 1982).

However, the China-Japan demographic dichotomy is open to substantial revision if the highly

differentiated population growth profiles across regions in China are take into account. While

population statistics of 1600-1850, despite their various limitations, confirm a faster Chinese

growth rate of 0.37% versus that of Japan at 0.21%, most of this growth stemmed from

newly-opened and sparsely settled frontier areas. Annualized population growth in well-settled

6 Maddison gives China, Eastern Europe, Western Europe and Britain per capita incomes of 600, 566, 1024,

and 1250 respectively (in 1990 international $), Maddison 2000, p.264, Table B-21. Also see Maddison

1998, p.25 for the European per capita average. 7 Another crude estimate by Yasukichi Yasuba gave the 1874-79 Japanese per capita income, corrected for

exchange rate effect, at 67% of the British level in 1760 (1987, p.302).

6

and economically developed Jiang-Zhe provinces was only 0.14% in 1630-1851, even slower

than Japan. 8

The adoption of a regional perspective, or a Lower-Yangzi-Japan (rather than a China-Japan)

comparison could lead to a significant overhaul of almost all the major aspects of the so-called

initial conditions ranging from demography, agricultural and industrial developments,

urbanization, literacy, to social and intellectual capital. Thus it is no surprise that recent the

revisionists’ case for the striking parallels in economic progress between the Lower Yangzi and

Northwestern Europe in the early modern period echoes the 1980s Japanese revisionist historians’

positive reassessment of cumulative and steady economic and cultural growth achieved in the

Tokugawa era.9

Regional Growth and National Statistics

The Lower Yangzi-Japan regional convergence in the 18th century becomes a puzzling

contrast to their mid-19th century political bifurcation in the face of a common Western imperial

challenge. The leaders that overthrew the old Bakufu regime and came to power through the 1868

Meiji Restoration made no pretense to “restore” Japan to her old days, but instead embarked on a

reform program to forge a modern nation state modeled after the West. Japan’s decisiveness in

turning outward in the face of the Western imperial challenge was matched by contemporaneous

Qing’s determination to reinstate orthodox Neo-Confucian ruling ideology to an empire that had

been brought to the brink of collapse by the devastating Taiping rebellion in the 1860s.

The subsequent economic policies pursued under Qing China and Meiji Japan in the latter

half of the 19th century became diametrically opposed. While the conservative Self-strengthening

8 For population figures of China and Japan, see Maddison 2001, p.40. The Jiang-zhe provincial figures are

from Chao Shuji, vol.4, p. 452, and vol.5, p. 703. For recent research on population control strategies in

traditional China, see Lee and Feng, 1999 and Li Bozhong, 2003, pp. 137-240. 9 For “industrious revolution” in Japan, see Akira Hayami 2003, chapters 2 and 6.

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movement (1860-1894) concentrated on modernizing the Chinese military through a series of

either government financed, or government controlled Western style, capital-intensive industrial

enterprises, Meiji Japan threw its full support behind the private sector, which, with the sell-off of

the limited number of government enterprises in the 1880s, was designated as the mainstay of

Japan’s industrialization. While the Self-strengtheners displayed either indifference or hostilities

towards private initiatives in the modern sector, supplied few critical modern public goods, and,

in most cases, even opposed private efforts to build public infrastructure such as railroads and

inland steam shipping, the Meiji leaders engaged in the build-up of crucial social and physical

infrastructures such as a legal system, public education, research and technological diffusion, a

modern monetary and banking system, and modern transportation and communication

infrastructures. While Qing China made superficial modifications of her bureaucracy to cope

with the new Western diplomatic and military challenge, Japan turned itself into a modern

constitutional monarchy by the 1890s.10

Macroeconomic statistics reveal that between 1887 and 1897, Japanese per capita GDP grew

at an annual 2.25%, and its per capita income level in 1897 and 1910 raised to 1.25 and 1.5 times

of that in 1887 respectively, and the share of manufacturing and mining in total GDP increased

from 8.7% to 11% and 16% respectively over the same period (Ohkawa, p.278).

Similar statistics are not available for Qing China in the latter half of the 19th century. We do

know that the government sponsored industrial enterprises in China induced little spillover or

industrial expansion. Chinese agriculture may have received mixed stimulus from heightened

commercialization, but genuine technological and productivity progress were largely absent

10 For the Tongji-Restoration, see Mary Wright. For the Self-Strengthening Movement, see chapters 9 and

10 in John K. Fairbank (ed.), The Cambridge History of China, Vol. 10. For Japan, see Marius B. Jansen,

The Making of Modern Japan.

8

(chapter 1 in Fairbank and Liu). In the absence of macro-economic statistics, Japan’s humiliating

defeat of China in the naval battle of 1894-5 seemed like a surrogate verdict on the three decades

of divergent national policies.

With Qing’s collapse in 1911, China entered an era of political disintegration and fiscal

bankruptcy. Ironically, it was during this period that China ushered in a historically

unprecedented industrial expansion – the industrial output index constructed by John Chang for

1912-1936 gives an annual growth rate of 10% (Chang, p.60-61). Calculations from the data

compiled by Du Xuncheng show that nominal annual industrial investment by Chinese nationals

from 1914 to 1925 was 11 times that of the 1840-1911 period, when general political stability and

fiscal solvency were still the norm.11

Twentieth century China saw the rise of modern macro-economic statistics, which

contributed to the first GDP estimate of reasonable quality for the 1930s.12 This is also where the

problem or debate arises: modern industry, despite its vigorous growth, had a negligible share in

the 1933 GDP - the entire modern sector and modern manufacturing being a mere 7% and 2.2%

respectively – overshadowed by the predominant 60% share of the agricultural sector (Perkins

p.119, Liu and Yeh, p.66). This led to a rather gloomy assessment of economic performance

between the 1910s and 1930s, characterized as one of “moderate industrial growth amidst

agrarian stagnation and continued population expansion,” with an annual growth rate of per capita

GDP at 0.33% per annum (Yeh, p.120).

This assessment was challenged by Thomas Rawski whose new estimate revises the annual

11 The calculation is from Cheng Linsun, p. 41. Du uses 1911 as the cut-off period. The contrast of

industrial expansion versus stagnation would be even sharper if the mid-189s was the cut-off period.

Throughout this period, the Chinese monetary standard was silver-based with moderate inflation. 12 There are other GDP estimates for the 1880s, the 1910s and 1946. They rely heavily on backward or

forward projection from the 1933 benchmark estimate. For the 1880s, 1910s and 1946 GDP estimates, see

respectively, Chang Chungli, Appendix, Yeh, 1977, and Ou, Pao san 1947a.

9

growth rate of Chinese GDP per capita between 1914/18 and 1931/36 to 1.1 and 1.2%

respectively (Rawski, p.330), not far from the peak to trough annual GDP per capita growth rate

of 1.42 and 1.64 for Japan between 1917 and 1931 (Ohkawa and Rosovsky, p.25).

Rawski’s upward revision, due to the small share of industrial sector, relies largely on a

reassessment of agricultural performance, of which aggregate output data are notoriously poor.

With the assumption of a long-run perfectly competitive Chinese agriculture, Rawski uses the

growth rate of several scattered series of agricultural real wages to derive real per capita

agricultural output series between the 1910s and 1930s. The positive growth in real agricultural

wages, converted by Rawski into a real 1.4-1.7% annual growth in per capita agricultural output,

raised his overall 1930s Chinese per-capita income estimate 16% above that of Liu and Yeh’s

original estimate. Without this upward revision in agricultural output, Rawski’s revised

per-capita income would only be 6% higher than the Liu and Yeh estimate and the annual GDP

per capita growth rate between the 1910s and 1930s would decrease to 0.5% (Rawski, p.

280-337).

These estimates and revisions based on the national context do not take proper account of

the distinctive regional character of industrial growth in this period. Throughout the first three

decades of the 20th century, both the growth and shares of modern industry and services were

disproportionately concentrated in Shanghai. On its own, Shanghai produced about 40% of

national manufacturing output (including Japanese-controlled Manchuria) in 1933; housed 50 to

60% of cotton spindles throughout the 1910s and 1930s; and generated about 50% of national

electricity in the 1920s, almost twice that of the major British industrial cities of Manchester and

Glasgow.13 In 1931 Shanghai absorbed 34% of total foreign direct investment (FDI) in China and

13 See the Appendix to Table 1. For the share of cotton spindles in Shanghai, see Editorial Committee, vol. 2,

p.444.

10

67% of FDI in manufacturing; handled more than half of China’s foreign trade; a fifth of its

shipping business in 1896-1936; and boasted 47.8% of China’s financial capital in 1936 (Xiong,

vol.1, p.19 and p.21, Zhang, Zhongli, p.313).

A new benchmark based estimate of Shanghai’s industrial gross output series in 1933 price

(compiled by Xu Xinwu and Huang Hanming) confirms Shanghai’s brisk pace of growth with

annual compound rates of 8.7% and 9.6% for 1895-1936 and 1912-1936 respectively (Statistical

Appendix, pp.311-342). Annualized growth rates among the benchmark years of 1911, 1925 and

1936 in Xu and Huang’s Shanghai index synchronizes strikingly with those in the John Chang

index for China, a confirmation of Shanghai’s predominant weight in the national total.14 Rapid

industrial growth saw Shanghai’s population double from only half a million in the 1890s, to over

a million in the 1910s, and to about 3.5 million in the 1930s, making her the world’s seventh

largest city (Murphy, p.22).

Towards the 1930s, industrial production in Shanghai was moving from labor-intensive

consumer goods towards more capital-intensive sectors, with low value added sectors steadily

migrating to other regions, particularly southern Jiangsu. In 1933, the industrial output of Jiangsu

province trailed only behind Shanghai and Japanese controlled Manchuria at about 13% of the

14 The annual growth rates of the Chang index for 1912-1925 and 1925-1936 are 11.8 and 7.4%

respectively; for the Xu and Huang index, they are 12 and 5% respectively. Note that part of the higher

growth rate in the Chang index in the 1925-1933 period reflects heavy industry expansion in Manchuria

under Japanese colonialism from 1931 (Chang, p.98-103, Xu and Wang, Statistical Appendix). The Chang

index for China consisted of 15 industrial products covering between 40 and 57% of the total factory output

(Chang, p.36). The Xu and Wang index for total industry covers 9 sectors that include textiles (cotton, silk

and wool), flour milling, matches, cigarette making, paper, pharmacy, and machinery repair and other

sectors that are partly guess-estimated on the share of the 9 sectors in total industry. Shanghai occupied a

predominant share in the production of cotton and electric power, the first and the third largest items in the

Chang index. The rapid growth of modern industry in Shanghai constituted the most important demand for

coal, the item with the second highest share in the Chang index. Together these three items accounted for

over 50% and 80% of the Chang index in 1912 and 1933 respectively (p.76).

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Chinese total without including Manchuria (Kubo and Makino, 1998 table 2). The industrial belt

that stretched along the Shanghai-Nanjing railroad constructed in 1908 produced about 79% of

total Jiangsu industrial output (In and Tang, p.91).

For the Lower Yangzi and beyond, Shanghai became a massive draw for labor and a major

source of capital and entrepreneurship. Shanghai capital supported the rise of Nantong as an

industrial city under the remarkable leadership of the scholar-bureaucrat-entrepreneur Zhang

Qian. Capital infusion from Wuxi-born industrial tycoons in Shanghai transformed the market

town of Wuxi into China’s fifth largest industrial city by the 1930s, which was then dubbed “Little

Shanghai.” (Yu Xiaobo, pp.241-248).15

Shanghai-based industrialization also impacted the agriculture sector. Industrial demand

brought direct impetus to the improvement of major industrial cash crops such as cotton and silk

cocoons through the diffusion of new scientific seeds and practices; and accelerated the adoption

of commercial fertilizers and the introduction of power-driven agricultural machines such as

water pumps, rice and flour millers (Ma Junya, pp. 67-79).

Shanghai-based Industrialization: a Regional Quantitative Assessment

These staggering statistics of development lead some scholars to refer to China’s early 20th

century growth as Shanghai-based industrialization. Here I quantify its impact in region-based

production accounts. My methodology is to use provincial and regional data to tease out the

Jiang-Zhe share in the total net value added of all 13 sectors used by Liu and Yeh to estimate the

1933 national GDP. To calculate the Jiang-Zhe net value added (NVA) of each of these 13 sectors,

I first estimate the ratio of Jiang-Zhe gross value output (GVO) in China’s total and then use this

15 For Shanghai investors’ financial involvement in the Nantong enterprise and Shanghai bankers’ later

direct financial and managerial control of the Dasheng business conglomerate in Nantong in the 1920s, see

Elisabeth Koll, 2003, p. 63 and chapter 6. For the general spill-over effects of the Shanghai

industrialization on urbanization in the Lower Yangzi region, see Ma Junya, Introductory Chapter.

12

ratio to multiply China’s net value added for that sector. Mathematically it is expressed as:

Jiang-Zhe NVAi = iCHINAi

CHINA

n

R

iR

NVAGVO

GVO×

∑=1 ,

where i stands for the ith of the 13 sectors and R stands for the Rth provinces or city, namely,

Jiangsu, Zhejiang province and the city of Shanghai. The Jiang-Zhe Net Domestic Product

(NDP) is the summation of all 13 sectors’ net value added.16

For value-added weights of the 13 sectors, I use the Liu-and-Yeh national accounts. The two

volume works of Ou Bao-san et al on China’s 1930s GDP accounts include rich regional and

provincial level data. Their detailed archival work laid important groundwork for Liu-and-Yeh’s

1930s GDP estimation of 1965. I mainly rely on the Ou Bao-san volumes and other independent

sources for regional data.

Insert Table 1 here

Table 1 presents my estimate of the Jiang-Zhe NDP for the 1930s with a detailed breakdown of

all 13 sectors. The details of data sources and calculations are reported in the Appendices to Table

1. Of all the 13 sectors, the coverage of products in this study is about 67% of the total for

agriculture, 60% for handicrafts, and 100% for modern industry. As usual, data for service sectors

are more problematic. However, except for three sectors (less than 9% of the NDP),

guess-estimated from crude assumptions, all other sectors are supported by some form of regional

data.

Table 1 shows that in 1933, the Jiang-Zhe provinces, with a 12% share of Chinese population,

16 I have used Gross Value Output rather than Net Value Added to calculate the Jiang-Zhe share simply

because the NVA data were mostly unavailable at a detailed regional and sectoral level. This choice also

implies an assumption that the Jiang-Zhe gross to net value added ratio is equal to the national average.

Considering the relatively high degree of division of labor in the Jiang-Zhe, this could lead to an upward

bias in the Jiang-Zhe aggregate NVA estimate.

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contributed 15% of agriculture, 20% of handicrafts, 57% of modern factory output, 65% of

finance and 45% of modern utilities services. Taken together the Jiang-Zhe provinces had 19% of

China’s NDP, with a per capita NDP 1.55 times the national average. Output produced by modern

factories had a much larger impact in Jiang-Zhe, reaching 7% in NDP versus only 2% for China.

The share of modern factory to total manufacturing output (including both factory and traditional

handicraft production) was 47% for Jiang-Zhe versus only 24% for China. This ratio likely puts

Jiang-Zhe on about the same level as Japan in the 1900s or the 1910s.17

I now examine the growth dynamics for Jiang-Zhe in the period of 1914/18-1931/36. There is

no 1914/18 benchmark GDP data for China. The ones used by Yeh (1977) and Rawski (1989) are

based on backward projection using sectoral series of real growth rates for this period. Here I

follow their methodology and apply Rawski’s revised series of sectoral growth rates in China for

Jiang-Zhe, with the exception of modern factory output and financial services which uses the real

index for Shanghai. For agriculture, I still use the original Yeh growth rate estimate. Clearly, my

1914/18 Jiang-Zhe GDP and real growth rates of the 1914/18-1931/36 period should be seen as

highly preliminary and are meant to examine how overall GDP growth rates in China and

Jiang-Zhe vary given their different sectoral weights. The back-projected estimates are presented

in Table 2.

Insert Table 2 here

I also estimate per capita GDP of the Lower Yangzi Region based on the same earlier

assumptions for the mid-18th century level calculation. Table 2 confirms that the economic

17 Factory output accounted for only 4% and 6% of Japanese NDP in 1885 and 1900 respectively. The

factory to manufacturing output ratio was 41.2% in 1895. Since the Japanese definition of factory

(enterprises with 5 and more employees) was broader than the Chinese definition (enterprises with 30 and

more employees), the Japanese figures should be adjusted downward to be comparable (Ohkawa and

Rosovsky, p.15 and 80-2).

14

structures of the Lower Yangzi Region in 1914/18 and 1931/36 were characterized by shares in

industry and service sectors much higher than those that defined primarily agrarian China.

Annual per capita NDP growth in both Jiang-Zhe provinces and the Lower Yangzi Region were

roughly double that of China and almost matched those of Japan and her colonies during this

period, even in the absence of the “Rawskian” type of upward revision in agricultural output

growth. Preliminary comparisons based on 1930s exchange rates also show that per-capita

incomes in the Lower Yangzi were higher than those of Korea and Manchuria, ranking third only

after Japan and Taiwan. With a population almost the size of Japan and more than 10 times that of

Taiwan in the 1930s, the Lower Yangzi was clearly the second largest industrial region in East

Asia (perhaps Asia).

In an unpublished manuscript (1985), Rawski offers a GDP estimate for what he defines as

the “Lower Yangzi Core” in the 1930s. His per capita income estimate for the Core is only 37%

above the national average, lower than my 55% and 74% estimates for Jiang-Zhe and the Lower

Yangzi Region respectively. His Lower Yangzi Core has a 7.8% share of China’s population,

slightly lower than the 8.9% share for the Lower Yangzi Region in this study. But his figures for

structural composition with shares of agriculture, industry and services at 43, 17 and 20%

respectively are fairly close to mine presented in Table 2, thus supporting the general thesis that

the early 20th century industrialization exerted a much larger impact on structural changes in the

Lower Yangzi than in China (Rawski 1985 p.67). Unfortunately, his manuscript did not present

details of geographic definition or data sources, making it hard to pinpoint the sources of

discrepancy. My crude guess is that there are differences in geographic coverage and possible

underestimation of agricultural and handicraft sectors in his estimates.18

18 See Rawski 1985, p68 for his estimate. I am indebted to Rawski for sending me his unpublished

manuscript which in many ways initiated this research.

15

A comparison of the 20th century per capita income ratio between China and the Jiang-Zhe

provinces with my earlier highly tentative mid-18th century estimates based on tax revenue

records is revealing: the ratios in the mid-18th century and the 1910s are nearly identical at 1.44

and 1.45 respectively. But the rapid industrialization, particularly the expansion of Shanghai over

two decades, appears to have widened this per capita income gap between the Jiang-Zhe and

China to 1.55 by the 1930s.

Clearly any casual statements linking these growth figures to human welfare should hinge on

further research of consumption and income distribution. However, in a study based on thousands

of height records of railway employees across China, Morgan (2004) concludes that from the last

years of the 19th century to the second half of the 1920s, the average male stature in China

increased 0.25cm per decade but grew by 0.7cm per decade in Jiang-Zhe provinces. This 0.7 cm

per decade height increase is only slightly lower than the 0.91 cm per decade increase for Japan

between 1892 and 1937. In fact, Morgan’s regional figure for railway skilled workers shows that,

excluding the Jiang-Zhe adults, average heights in North China, Middle-Yangzi and South China

display either stagnant or fluctuating trends from 1890-94 to 1925-29. This evidence leads him to

conclude a spatially differentiated and uneven pattern of economic growth, a finding that lends

strong support to this study.19

II. Economic Growth in the Lower Yangzi: an Institutional Narrative

The Fall of an Empire

China’s humiliating defeat by Japan in 1894-96 and the debacle of the Boxer Rebellion

incident in 1900 were rude awakenings. In a remarkable twist of fate, the embattled Qing,

followed the steps of her former pupil and launched the Qing constitutional reform in 1903-11

19 See Morgan, figure 6 and concluding statement. Morgan’s classification of regions roughly corresponds

to that of Skinner. For Japanese height data, see Ted Shay. According to Mituhiko Kimura, height increase

in Korea remained dubious despite the increase in per capita GDP in the colonial period.

16

modeled directly on Japan’s Meiji reform (Douglas Reynolds, 1993). The Qing constitutional

reform was a fundamental overhaul of the traditional system. It recognized the centrality of the

private sector to a market economy and promulgated China’s first commercial code, the Company

Law of 1904 (William Kirby 1995).

Unfortunately, the Late-Qing reform was as short-lived as the final years of the Empire,

which fell in 1911. The subsequent rule of Yuan Shikai fared no better, ending in 1916 with his

death. The ensuing two decades of Warlordism, according to James Sheridan, often brought

terror and exploitation. “[The Warlord’s] demand for money was insatiable and the militarists

wrung an astonishing array of taxes from the population. They printed worthless currency on a

large scale. …In many areas, the actions of organized crimes were less serious than the hordes of

uncontrolled soldiers who roamed the countryside preying on the peasantry”(p.318).

According to one estimate, there were some 140 wars fought among a total of more than

1,300 rival militarists between 1911 and 1928 (Phil Billingsley, p.24). In the Lower Yangzi, the

least war-torn area, the war between the rival Jiangsu and Zhejiang warlords in 1924 led to

massive forced requisition of civilian personnel and services, confiscation of private properties,

extortion of merchants and business, and severe disruptions of production and trade, inflicting

total economic losses estimated between four and five hundred million yuan (Feng Youcai, p.

160).

To underscore his case for Chinese growth in the interwar period, Rawski disputes the

extent of Warlord damage to the Chinese economy and points to the limited scale and duration of

warfare. Moreover, there were enlightened and stable warlords such as Yan Xishan and Feng

Yuxiang who promoted economic reforms in the territories under their rule. The logic of Chinese

warlord politics inspired Mancur Olson’s classic distinction between stationary bandits - those

with long-tenure rule and thus less predatory - and roving bandits - those with short time horizon

17

and consequently more destructive (Olson, p. 568). Overall, despite the reassessment of the

Warlord era, Rawski agrees that “political unrest and civil wars made any long-range investment

extremely precarious.” 20

How could economic growth in China take place in an era of widespread abuse of property

rights and pervasive political uncertainty? The following observation by Justice Richard Feetham

in his 1931 report of the International Settlement in Shanghai is insightful :

“The great piles of banks, offices and warehouses along the Bund [the financial hub of

Shanghai], as seen from the deck of an ocean liner steaming up the river, are at once recognized

by the newcomer as evidence of the wealth and enterprise of Shanghai, and of the belief which its

merchants and citizens have in its future. But they have a deeper economic significance than this;

they are the first conspicuous signs and symbols of the sanctity of the rights of private property, as

recognized and safeguarded in the [International] Settlement, and of the far-reaching confidence

which this condition of things has inspired.” 21

The Rise of a City-State

In the traditional Lower Yangzi, Shanghai was a market town peripheral to Suzhou city. With

its opening as a designated treaty port after the mid-19th century, Shanghai grew into a city with

three governments – the International Settlement, the French Concession and the Chinese quarter.

The International Settlement, born out of a merger of the British and American concession

quarters, started as a segregated community for Western expatriates. But following the massive

influx of Chinese refugees during the Taiping rebellion, the Settlement authority, in the interests

of the real estate merchants, began to accept Chinese residents after 1854.

20 See Rawski 1989, p. 47 and chapter 1 for his argument of local rulers often promoting economic

development. Also see Sheridan (p.317, footnote 35) for a criticism of Rawski’s assessment.

21 Richard Feetham, Report of the Hon Mr. Justice Feetham to the Shanghai Municipal Council (1931), Vol. 1, p. 317.  

18

The political institutions of the International Settlement evolved from a typical colonial

enclave towards a city-state in 1854 when it began to operate with a Municipal Council whose

members were elected by the tax-paying Western and later Japanese residents in the Settlement.

It had its own mini-constitution, as embodied in the Land Legislation. It relied on land and

property taxes and business license fees for its revenue. The Council ran its own prison and police

squad with the additional support of a volunteer army in times of need. Judicial powers over

foreign residents were, under the grant of extraterritoriality, vested in the Consular Courts of the

foreigners concerned, or, in the case of unrepresented foreigners or Chinese, in the International

Mixed Court. The Municipal Council had a right to sue in these courts, and could in turn be sued

in a court elected from the Consuls of the Treaty Powers, known as the Court of Consuls. As a

general rule, the Council could make no arrests except on a warrant of the proper court. This

institutional structure placed the Settlement on a foundation of limited power and rule of law.22 In

comparison with the Chinese quarter, the business-dominated Municipal Council was far more

efficient in the provision of public goods (or semi-public goods) including port facilities, public

roads, transportation, communication, light, water, and electricity

The rise of Western Shanghai – the International Settlement and French Concessions -

elicited a vigorous Chinese response, the most prominent being the establishment of the Shanghai

City Council by Chinese gentries and merchants in 1904 as part of the self-government movement

advocated by late-Qing constitutional reform. As a direct imitation of the Settlement institution,

the Shanghai City Council practiced what Mark Elvin called “gentry democracy” in the Chinese

territory, experimenting with the separation of power between the legislative and executive

branches, open debates and majority votes. They standardized tax collection (in place of tax

22 See Hawks Pott, p. 114. Archival materials revealed by Shen hui show that the Municipal Council had

only about 50% success in legal cases, including those cases involving Chinese litigants at the Court of

Consuls, see pp. 215- 228.

19

farming), maintained and improved public facilities, developed its own merchant militia, courts

of justice with elected judges, and promulgated various regulative laws and moral codes that

seemed like a distant echo of Lee Kuan Yew’s modern Singapore. The Council was remarkably

corruption-free (Elvin 1996, chapters 5 and 6). But this important Chinese experiment with local

self-government came to an end when Yuan Shikai’s policy of recentralization forcibly dissolved

the Council in 1913.

In contrast, Western Shanghai, outside the political reach of the Chinese empire thanks to the

backing of international treaties and the Western gunboats at its harbor, profited from a China

weakened by dynastic collapse. By 1911, the International Settlement and the French Concession

managed to extend their territories in Shanghai to an area 1.5 times the total size of foreign

concessions in the other 23 treaty ports in China (Fei Chenkang 1991). When the Qing magistrate

in Shanghai absconded - allegedly with public funds - during the 1911 revolution, the

International Settlement seized control of Qing’s Shanghai Mixed Court and began to appoint its

own Chinese personnel. By then, Western Shanghai became a de-facto city-state with full

territorial jurisdiction over its residents, Western or Chinese, a feature that set it apart from the rest

of foreign concessions in China.

The Legal Transformation

The Shanghai Mixed Court became an indispensable legal arm of the Settlement

administration that oversaw unprecedented growth in 1911-1927. Despite the stigma of a

foreign-run court on Chinese soil, Chinese litigation at the Mixed Court reached an annual

average of 32,000 lawsuits between 1913 and 1926, often outstripping the capacity of the Court.

The Mixed Court handled the largest civil caseload of all Shanghai courts, with a secular rise in

the share of Chinese lawsuits in the total. In 1908, the court for purely Chinese suits was in

session only about one fourth of that for foreign suits, but by 1925, this ratio inverted (Tahirih V.

20

Lee, pp.1348-9).

The Mixed Court successfully out-competed other courts established in early 20th century

Shanghai due to several advantages. First, the ruling or adjudication of the Mixed Court was

credible and enforceable with the backing of a highly-armed and well-trained Municipal police

force. Second, distinct from the Chinese tradition of discouraging formal legal litigation, the

Court catered to the plaintiffs who initiated the law suits and dealt in a rich variety of law suits

civil, commercial or otherwise from a wide spectrum of Chinese (Tahiri Lee, p.1350).

The impact of the Mixed Court reached far beyond the courtroom with their rulings often

widely publicized in newspapers and other media. In this era of legal reform, Shanghai nurtured

China’s biggest professional legal association and largest number of lawyers and law schools (Lee,

1409-10, Kirby, 48-50). In his study of the Mixed Court during 1911-27, Thomas Stephens

emphasized the transformation of legal culture. He characterizes the nature of the traditional

Chinese legal system as “disciplinary” which places priority on the maintenance of social order

and group solidarity over abstract and transcendent legal rules. The Mixed Court, he argued,

resorted to this “disciplinary” legal tradition, but more importantly, strived for the ideal of dispute

resolution according to predetermined and known standards, and the Court assessors’ attempted

to construct such a framework in the adjudicative model of Western jurisprudence brought some

legal certainty and calculability previously lacking in the Chinese legal tradition.23

23 See Stephens pp.107-8 and chapters 1, 2 and 3 for the traditional Chinese legal system. John Fairbank

views the non-development of Chinese law along lines familiar to the West as being related to the

non-development of capitalism and an independent business class in old China (cited in Kirby p.46). This

dominant Weberian view of Chinese legal tradition is challenged by recent legal revisionist scholars, most

notably Philip Huang (1996). Based on his study of Qing archival cases of civil disputes, Huang asserts that

civil rulings made in local courts were more or less rule-based and legally enforced, sharply contradicting

existing scholarship by Japanese legal historian Shuzo Shiga. However in a series of rebuttals, Shuzo Shiga

and Hiroaki Terada point to fundamental problems in Huang’s reinterpretation and reinstate their position

that Chinese legal tradition is fundamentally non-adjudicative. For an English summary of part of this

21

Legal institutions in Shanghai promoted economic growth through two major channels: the

protection of residents and their properties, and the shaping of a highly competitive market. The

Mixed Court’s role in the protection of resident Chinese and their business, according to Stephens,

helped sustain Shanghai as “an oasis of peace, order and good government, in a China torn into

convulsions by revolution, banditry and civil war” (Stephens, pp. 104-6). The Court’s

unremitting efforts to prosecute any attempts at illegal taxation upon any person within the

settlement effectively ended the recalcitrant practice of arbitrary taxation and its associated

tax-farming that had been the source of insecurity and uncertainty to private property throughout

Chinese history. 24 A virtuous circle of growth set off. The security of property, especially titles to

land within the Settlement launched a booming real estate that, serving as the most secure form of

mortgage, triggered the rise of a modern banking sector.25

The role of the Mixed Court in the emergence of Shanghai as a financial center is best

illustrated by the dramatic incident of the bank-note suspension order in 1916. In the 1910s,

Beijing was another important financial center thanks to the presence of large state-backed banks

such as the Bank of China and Bank of Communication. However in 1916 the Republican

government in Beijing decided to resort to the printing press for fiscal revenue and ordered the

suspension of paper note conversion to silver in the state-run banks, a move bound to bring panic

and ruin to financial sectors throughout China. However, the Shanghai Branch of the Bank of

debate, see Jerome Bourgon 2002 and Debin Ma 2006. 24 For a comparison with the taxation system in Shanghai and the Mixed Court’s repeated trials of illegal

Chinese taxation in the Settlement, see Feetham, pp.103-7. For a model illustrating the deleterious impact

of arbitrary taxation on property rights and corporate governance in China, see Ray Bowen II and David

Rose. 25 For a careful analysis of the impact brought by Western private property rights to the Lower Yangzi, see

Ma Xueqiang, Chu Chuantong Dao Ginda, chapter 3. For the Foreign Concession land certificate (Daoqi)

serving as the most secure loan collateral, see Zhao Jin, Zhongguo Chengshi Faodicaiyei Shiren, chapter 1.

22

China located within the Settlement rejected the government order with the legal backing of the

Mixed Court. The year 1916 became a turning point when Shanghai emerged as China’s sole

financial center. Subsequently the Shanghai bankers led the reorganization and privatization of

the government state banks, paving the way for the rise of a genuinely modern Chinese banking

sector that, by 1925, had grown to overtake the once dominant foreign banks in its share of capital

power.26

In the absence of modern legal institution, individual entrepreneurs and business in

traditional China often depended on the coordination of commercial and handicraft guilds for

dispute intermediation, information sharing and collective action against arbitrary taxation. But

the guilds also regulated market entry and competition and engaged rent-seeking sometimes in

collusion with Chinese authorities. The presence of a strong contract-enforcing court offered

individual business powerful alternatives beyond the control of traditional organization and

propelled the rise of a highly competitive market environment in Shanghai (Lee, pp.1398-1406).

As noted, a prominent feature of industrial and business tycoons in Shanghai was their modest

origin, with few traces of the bureaucratic patronage which characterized traditional merchants or

the bureaucrat merchants of the Self-strengthening era (Wellington Chan, pp.146-7).

Legal institutions restructured incentives of Chinese business organization. Shanghai

boasted China’s largest commercial, financial and industrial associations that engaged far more in

productive collective action than rent-seeking. They were the leading force to guide and facilitate

the massive movement of currency, capital and goods across major trading centers in China

26 For details of the note suspension incident and the role of Shanghai Bankers’ Association in privatizing

modern state banks in China and the shares of capital power, see Chen linsun, pp. 54-59, pp. 59-62,

pp.162-168, p.241. For other military and revolutionary activities that brought disastrous effects on

monetary and currency stability in Hankow and Guangdon, see Feetham, Vol. 1, p. 356. For the widespread

Warlord practice of house arrest, kidnapping and threats against bankers as revenue extortion, see Du

Xuncheng (2000), pp. 2275-6 and Bret Sheehan, p.101.

23

during this tumultuous period. 27 In the highly competitive and multi-national business

environment of Shanghai, Chinese entrepreneurs held their ground well. The shares of Chinese

ownership in nine major Shanghai modern industries, as calculated by Xue and Wang, were

consistently higher than those of foreign ownership throughout the 1910s-1930s, an outcome far

more favorable than the share of indigenous entrepreneurship in Taiwan and Korea, or Manchuria

under Japanese colonialism.28

The rule of law in the Settlement paid off well. Average land values in the International

Settlement shot up by a stunning 20 times between 1865 and 1930, with a three fold increase

between 1911 and 1930 (Zhao Jin p.145). More importantly by 1930, the average land value in

the International Settlement was over 26 times that of the entire Chinese quarter, and three times

that of the highest-valued area in the Chinese quarter, the Nanshi district, which was adjacent to

the financial center within the Settlement.29 A similar pattern is found in the geographic

distribution of business establishments. Data culled by Marie-Claire Bergere illustrate that in

1919 over 70% of highly contract-intensive sectors, such as banks, insurance, trading and other

service companies, were located in the International Settlement, whereas less than 20% - mostly

traditional native banks and pawn shops - were in the Chinese Quarter.30

Rising land value translated into an expanding tax base which in turn financed a well-paid

and -staffed administration, and a world-class infrastructure that made the Settlement the envy of

China. In an unusually candid speech made in Shanghai in 1926, the military warlord governing

the Jiangsu province Sun Chuan-fang lamented:

27 See Bergere (1986) pp.123-139 and Parks Coble pp.13-28 Du Xingcheng 2006, Ma Junya, chapter 3. 28 Xue and Wang, p. 341. For shares of Japanese capital in industries in Taiwan and Korea especially in

large scale establishments, see Mizoguchi and Umemura, p.77. 29 Overall, per unit land values in the Settlement were 28% higher than that of the French Territory (Zhao,

p.153 and 156). 30 Bergere (1986) Table 3.3 on pp.108-9.

24

“…whenever I come to a treaty port I feel thoroughly humiliated, not only because a treaty port is

a standing reminder of our loss of sovereignty, but also because whenever we pass from the

concessions into Chinese territory we feel that we are crossing into a different world - the former

is the upper and the latter is the under-world, for nothing in the Chinese territory - roads, buildings,

or public health - can be compared with the concessions. This is the greatest of our national

humiliations, much greater in my opinion than the loss of sovereignty.” (quoted in Feetham, vol.1,

p.242).

The City and the Empire

Beneath the prosperity of Western Shanghai lied a set of fundamental contradictions. The

Settlement practiced representation but no democracy. Controlled by what was dubbed as a

“Taipan Oligarchy,” the Municipal Council was elected by a tiny and powerful Western business

class who met the property requirements for voting rights. The Council defended the rule of law

as much as Western privileges. It denied representation of Chinese residents, who consisted

96% of the population and paid the bulk of tax revenue in 1925.31 Freedom of press and speech

upheld in the Settlement and French Concession sheltered China’s outspoken intellectuals and

creative artists as well as radical dissidents and revolutionary advocates of violence.32

With three independent jurisdictions in a tight, dense space with open borders (except in

brief periods of external military threat when Western Shanghai was heavily barricaded), a

growing Shanghai was increasingly difficult to govern. Shanghai gave birth to the infamous

“Green Gang,” China’s most powerful and legendary crime mafia that infiltrated the French

31 Feetham (vol. 1, p.138) gives the Chinese contribution to tax revenue at 55%. However, Ching-lin Hsia

argues that a substantial amount of property in the Settlement registered under Western names was actually

owned by the Chinese. His estimate suggests Chinese tax revenue contribution was at least 60%, and likely

more (p.127). 32 For Shanghai’s emergence as China’s new intellectual capital by the late 1920s, see Bergere (1981) pp.

12-3.

25

Concession, the Chinese Warlord government, and later the Nationalist government. In the midst

of surging nationalism, advancing Japanese imperialism, and growing communist agitation,

Shanghai was increasingly politicized by forces both within and without and saw a fair share of

massive labor strikes and sometimes violent protests.33

But the existence of Western Shanghai posed a greater dilemma for China: the insertion of

an independent political entity into the heart of an empire whose stability had long rested on the

elimination of alternative power structures. In this peculiar phase of Chinese history, the political

structure of Western Shanghai uniquely empowered the Chinese business class to defy and

challenge the political center. During the Warlord era, Shanghai capitalists often flexed their

economic muscle to wring concessions of peace from the Warlord governments. The Lower

Yangzi became the least war-torn region in China - avoiding major battles at least before 1924 -

partly thanks to the political mobilization of the Shanghai General Chamber of Commerce, the

majority members of which were Jiang-Zhe natives with a huge stake in the region’s peace and

order (Feng pp.136-9). As remarked by Parks Coble Jr., a symbiotic relationship between

Chinese entrepreneurs and the treaty port developed irrespective of the social-discrimination

these entrepreneurs had confronted - perhaps more keenly than average Chinese resident because

of their wealth and education (Coble 2003).

Western Shanghai thrived during the absence of empire, a period that seemed to be drawing

to a close by the late-1920s. The violent take over of British concession in the Hankow treaty port

by the left-wing Nationalism revolutionaries, accompanied by looting and destruction of property

in 1928 brought a poignant reminder on the limited reach of Western military power in the face of

rising nationalism. Western Shanghai survived Jiang Jieshe’ relatively right-wing Nationalist

33 The presence of labor strikes and violent protests should not obscure the fundamentals of the rule of law

in Shanghai in relation to the rest of Shanghai or China. See Wakeman and Yeh for chapters on labor strikes

and student protest. See Brian Martin (1996) for Green Gang.

26

regime headquartered in Nanjing of Jiangsu province in 1927. Some Western privileges were

forsaken: the Mixed Court was reverted to the new Chinese regime; the long-sought Chinese

representation was accepted into the Municipal Council and even the “public” parks were opened

to Chinese residents by 1928.34

The Nationalist regime in Nanjing was a mixed blessing for Shanghai capitalists. Not

unlike other Chinese rulers, Jiang’s government extended its grabbing hand to tax revenue and

then state control (Parks Coble Jr. 1983 and Bergere 1986, Epilogue). For the Nationalist

government, law, as pointed out by Kirby, was often deemed as an instrument of state control

(Kirby, p.51). But like all stationary and enlightened “bandits,” the Jiang regime brought back

general peace and stability to the Lower Yangzi, which enabled a heightened spill-over of

Shanghai industrialization to the region.

But only ten years later, Nationalist rule came to an end in the Lower Yangzi. In 1938, the

International Settlement lost its Hongkou district - a district with a concentration of Japanese

residents – to the incoming Japanese imperialists. Three years later, the entire Settlement and a

century of Western political autonomy were swept away with Japan’s full declaration of war

against the Allies (Coble, 2003, chapter 1, Fei, p. 415). But the sealing of fate on capitalism in

Shanghai came in 1949 when Communist troops marched into the heart of the City’s commercial

district and subsequently returned China to isolation.

Some managed to run away. Shanghai capitalists’ massive exodus to colonial Hong Kong,

brought the City capital, industrial skills, entrepreneurial vision and (as recognized by the Hong

Kong government) a ten to fifteen years’ head-start in industrialization over many other Asian

countries (Wong Siu-lun, p.2). In Nationalist-ruled Taiwan, the educated elites from the Lower

34 For the issue of public parks and other Municipal services in Shanghai, see Feetham (vol. 1, pp.

138-146).

27

Yangzi region made up the majority of economic planners and technocrats.35

The spirits of old Shanghai saw a resurrection in China’s new era of opening and reform. In

the late 1970s, the surviving members of the Rong family, the former industrial giant in old

Shanghai, were called to Beijing to help lure investment from overseas. Their family reunion in

1985 received a personal greeting from Deng Xiaoping, China’s paramount leader (Bergere 1986,

pp. 1-3; Coble Jr. 2003, p.139). In 1997 at the return of the colonial city of Hong Kong back to

China, a Shanghai émigré capitalist, Tung Chee Hwa, became its first Chinese chief executive.

More importantly a “city” is to co-exist with the “empire”: the fate of a full-scale takeover by

Beijing did not descend on Hong Kong in 1997 as it once did to Shanghai in 1949; instead Hong

Kong was granted a charter of autonomy under the “one country two systems” framework.

Table 3 captures this geographic shift of capitalism in East Asia in a national accounts

framework. It shows that the relative ranking of per capita income in 1952 largely mirrored those

of the 1930s (with Northeast China, formerly Manchuria, being the only exception).36 While the

gap between Jiang-Zhe and China remains unchanged in 1978, China’s overall standing in per

capita GDP had fallen far behind those market economies of her East Asian neighbors after two

decades of isolation and command economies. Notably the per capita income of Jiang-Zhe

provinces, previously higher than Korea in 1933, was less than half of that of South Korea in 1978.

After two decades of opening-up and reform, China, especially her coastal macro-regions such as

the Jiang-Zhe, realized significant catch-up and a narrowing of her economic divide with her East

Asian neighbors. However, China’s catch-up with the rest of the world was marked by a

35 See Alan P. L. Liu, p.49. Liu points out that economic planners in Communist China were more likely to

come from inland and Northern China than their Taiwan counterparts, see p.66. 36 For a study that links the Chinese rural incomes in the 1930s with the 1950s and shows that Lower Yangzi

per capita income in the 1950s being higher than the national average, see Charles Roll, 1980.

28

widening of economic distance between Jiang-Zhe and the rest of the nation which attained a

ratio of two by 1999, a historical high.

Insert Table 3 here

Conclusion

Through the reconstruction of the first region-based pre-War GDP estimate, this article

offers a major reinterpretation of the extent and nature of Chinese economic growth in the first

three decades of the 20th century, an era marked by national disintegration and political instability.

It points to the distinctively regional character of growth and its disproportionately high

concentration in the Lower Yangzi area, particularly in the city of Shanghai. Shanghai-based

industrialization exerted a much larger impact on economic growth and structural change in the

Lower Yangzi than in China between the 1910s and 1930s. Furthermore, this regional pattern

persisted into the Post-War period and has become even more pronounced in today’s rapidly

growing China.

Notwithstanding factors of geography and agglomeration, I attribute the rise of the

Shanghai-based industrialization to the political institutions of the Shanghai city-state, which

brought profound changes in property rights regimes, the contract enforcement mechanism, fiscal

organization, civil societies, and the provision of public goods. More importantly, the Shanghai

miracle in the early 20th century engendered under a regime of free flow of money, goods and

capital with minimal governmental interference but strong legal institution offers us alternative

developmental modes to reexamine the so-called East Asian developmental pattern based on the

state-led industrialization success of Japan and Korea in the Post-War context.37

The legacy of institutional transformation in the early 20th century shadows over the past

37 See Ramon Myers (pp.138-140) for an argument linking the role of treaty ports (or what he termed as

mini-Hong Kongs) as a regime of free trade and financial center to promote national growth in the

Republican era.

29

two decades of Chinese economic reform. The spectacularly successful policy of “special

economic zones” in the 1980s smacks of the old “treaty port” regime purged of its imperialist

vestige; foreign direct investment continued to play an extremely important role in China’s

reform period as it did in the early 20th century. Even the “one country two systems” for Hong

Kong in 1997 seems like an implicit and long overdue acknowledgement of the value of the

political institution in early 20th century Shanghai.

The lessons on the diffusion of the Industrial Revolution in East Asia offered in this paper

are highly relevant to the ongoing debate on the origin of the Industrial Revolution. Resource

constraints have turned out to be far less binding than institutional and ideological constraints. In

fact, industrialization in Meiji Japan and early 20th century Lower Yangzi rested on these much

bemoaned “surplus labor” – labor intensive industries such as cotton spinning, silk-reeling,

food-processing formed the major sources of their competitive advantage.

Neither did the lack of coal deposits in the Lower Yangzi, as emphasized by Pomeranz,

become a major constraint to Shanghai based industrialization. Shanghai industrialization, as

noted by Rhodes Murphey, was an anomaly by Western standards, characterized by a local

absence of most of the essential materials for manufacturing, especially coal. In the mid-19th

century when the city was opened as a treaty port, coal arrived from faraway England, then from

Japan from the late 19th century, and finally from North China in the 20th century following the

completion of railroads.38 Factor and resource endowments may account for the particular path of

East Asian industrialization but not its origin.

This paper reveals the fundamental shortfalls of China’s traditional institutions in generating

modern economic growth. The return to orthodox Confucius ideology coupled with some

38 See Rhodes Murphey, pp. 184-195. For discussion of the lack of coal deposits in the Lower Yangzi, see

Pomeranz pp.64-5.

30

modifications - the hallmarks of the Tongji restoration and the Self-strengthening movement,

while effective in restoring China to stability and economic recovery in the second half of the 19th

century, failed to engender the breakthroughs needed to bring about sustained economic growth.

If institutional change is the key, economic regions within the centralized and hierarchical

Chinese empire were far more constrained in their capacity for institutional innovation than

independent nation-states within the European political framework of inter-state competition.

Within China’s centralized power structure, spirits of innovation were perennially short of

political space and often survived precariously at the empire’s fringe. It is no surprise that

institutional breakthroughs in modern East Asia came from new political structures created

outside the empire: the rise of a nation-state of Meiji Japan since 1868 and the formation of a

breakaway city of Shanghai after the turn of the 20th century.

This article, amidst the current swirl of excitement about the imminent rise of the world’s

largest economy of the “Greater China”, is a reminder on the historical significance of that small

space of autonomy which once supplied refuge to a risk-taking, often beleaguered “minor” China,

the rise of which opened up a new horizon for an ancient civilization.

References:

Bergere Marie-Claire, The Golden Age of the Chinese Bourgeoisie, 1911-1937. Cambridge: Cambridge

University Press, 1986.

_________________ “’The Other China’: Shanghai from 1919 to 1949” in Shanghai, Revolution and

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39

Table 1. Net Domestic Product by Sector of Origin for China and the Jiang-Zhe Provinces in 1933 (in Billion Yuans)

Net Value Added

China Jiang-Zhe Provinces

Jiang-Zhe Share (in %)

Agriculture 18.76 2.81 15 Factories 0.64 0.37 57 Handicrafts 2.04 0.41 20 Mining 0.21 0 negligible Utilities 0.13 0.059 45 Construction 0.34 0.1 30 Modern Transportation & Communication

0.43 0.09 21

Old-fashioned transportation 1.2 0.29 24 Trade 2.71 0.76 28 Government administration 0.82 0.1 12 Finance 0.21 0.14 65 Personal services 0.34 0.082 24 Residential rents 1.03 0.25 24 Net domestic product 28.86 5.45 19 Per Capita NNP (yuan) 57.36 88.92 155% Population (millions) 503.1 60.4 12 Land Area (million square kms)

966 21 2

Cultivated Area (million shi mou)

1543 143 9.3

Sources: See Appendices to Table 1. Population for Jiangsu, Zhejiang, and Shanghai were 34.9, 22, and

3.5 million respectively. See Liu and Yeh, p.178-9 and Murphey, p. 22. Cultivated acreage for China,

Jiangsu, Zhejiang were 1534, 92 and 51 millions respectively, see Liu and Yeh, p.129. Land area is the

China State Statistical Bureau cited in Maddison (1998), p.181.

40

Table 2. Per capita NDP and Structural Composition in East Asia in 1914-1918 and 1931-1936 (in 1930s Chinese Yuan)

China Jiang-Zheprovinces

Lower Yangzi Region

Japan Taiwan Korea Manchuria

Agriculture 71% 60 57 29 48 66 Industry 8 10 11 20 29 7 Services 21 30 32 51 23 24

Per Capita NDP 52.44 75.17 83.16 161 102 64

1914- 1918

As % of China 100% 143 159 305 195 122

Agriculture 65 52 47 19 44 53 36 Industry 10 14 16 28 27 13 20

1931- 1936

Services 25 34 37 53 29 34 44 Per Capita NDP 57.36 88.92 100 203 132 77 69 As % of China 100% 155 174 354 230 134 120

Annual per capita NDP Growth rate between 1914-18 and 1931-36

0.53 1.0 1.1 1.4 1.5 1.1

Population (million) in 1931/36 503.1 60.4 44.7 67.2 5.1 21.2 38.7

Source Notes:

1. The averages of NDP (all in 1934-36 constant prices) and population in 1914-1918 and 1931-1936 for

Japan, Taiwan and Korea are calculated from Mizoguchi & Umemura, pp. 228-9, 232-3, and 236-7

respectively.

2. “Industry” includes factory, handicrafts and mining. “Services” include sectors other than agriculture

and industry.

3. Growth rates used for the 13 sectors to project the 1931/36 China series backward to the 1914/18 are

from Rawski 1989, p.274. They are 0.8, 8.1, 8.1, 8.1, 1.4, 4.6, 3, 1.9, 2.5, 5, 3.4, 0.9 and 0.8% respectively

for agriculture, modern factory, mining, utilities, handicrafts, construction, modern transportation and

communication, traditional transportation and communication, trade, finance, government administration,

personal services, residential rents. Growth rates for Jiang-Zhe backward projection are the same as for

China except that I used 9.6 and 7% respectively for modern factory and finance.

Population for China and Jiang-Zhe provinces in 1914-1918 are 440 and 54.1 millions respectively. China’s

440 million population in 1914-18 is from Yeh, p.104. The population for Jiangsu and Zhejiang provinces

is 33.7 and 19.2 millions respectively from Perkins, p.212. Adding the 1.2 million Shanghai population

sums to 54.1 million for Jiang-Zhe (Shanghai population from Murphey, p.23). The prefectural level data

in 1910 is from Chao Suji vol. 5, p.691-692, which shows that population in the Lower Yangzi Region had

a share of 74% of the Jiang-Zhe provinces. The same 74% is applied to calculate the 1931-36 population of

the Lower Yangzi Region.

4. Manchuria (for 1934) is from Eckstein, Chao, Change, p. 254-5.

5. Exchange rate is equal to 1 yuan = 1.1 yen calculated as the average of 1933-36 from Hsiao, p.192.

41

Table 3. Relative Per-capita GDP in China and East Asia (China = 100) Jiang-Zhe

Provinces Japan Taiwan Korea

(South Korea) Manchuria

(Northeast China Provinces)

1933 155 354 230 134 120 1952 158 436 198 140 192 1978 161 1285 571 415 149 1999 200 633 483 397 127

Data for Japan, Taiwan and South Korea in 1952-1999 are from Groningen Growth Center website

(http://www.ggdc.net/homeggdc.html). The regional per capita income differences for 1999 are calculated

from relevant annual issues China Statistical Yearbook. The data for China 1952 and 1978 are from Xin

Zhongguo Wusenian by the State Statistical Bureau.

42

Map of Lower Yangzi and Other Macro-Regions in China

Notes: The bold dark lines mark the provincial boundaries of Jiangsu and Zhejiang.

For Jiangsu province, the Lower Yangzi Region (in shade) includes the following prefectures in Jiangsu

province: Suzhou, Songjiang, Jiangnin, Changzhou, Taichang, Zhengjiang, Yangzhou, Tongzhou, Haimen,

Haizhou and the City of Shanghai; and the following prefectures in Zhejiang province: Hangzhou, Jiaxing,

Huzhou, Yanzhou, Caoxin, Ningbo, Cuzhou, Jinhua.

The prefectures outside the Lower Yangzi Region (in light shade) are Xuzhou and Hua-An for Jiangsu

province and Wenzhou and Taizhou for Zhjiang province.

The ten macro-regions that Skinner defined are Manchuria, North China, Northwester China, Upper,

Middle and Lower Yangzis, Yungui, Lingnan and Southeast Coast. For detailed boundaries of

macro-regions, see Skinner, 1985, p. 273.

43

Appendices to Table 1

A. Agriculture The agricultural share of the Jiang-Zhe province is calculated through two steps. The first step is to use the

provincial level data (1931-37 averages) in the Crop Reports published by the National Agricultural

Research Bureau (NARB) to calculate the Jiang-Zhe share in physical units for each commodity. The

results are presented in columns A through E. The second step is to multiply the 1933 unit prices of each

agricultural commodity by the 1933 agricultural output in physical units to arrive at a total agricultural

gross value for China. This Chinese agricultural output value is then multiplied by the Jiang-Zhe share to

arrive at the Jiang-Zhe agricultural gross output value in column C. The final share of Jiang-Zhe provinces

in agricultural value-added is then calculated as the ratio of Jiang-Zhe gross value to that of China shown as

0.148 in column H.

Note that our Jiang-Zhe share in physical output units are calculated based on the 1931-37 averages, but our

Jiang-zhe share in gross value is for 1933 based on Liu and Yeh price and output data (p.140). Their gross

value for Chinese agriculture in 1933 amounts to 21170 million yuan (p.140). Since the gross value of

Chinese agricultural products covered in this study sums to 14110.77 million yuan (col. F), this indicates

the coverage of products included in this study amounts to 67% of the total agricultural gross output for

China.

Table A. Chinese and Jiang-Zhe Provincial Agricultural Gross output (in 1931-37 Average) and

Gross Value in 1933 Price Jiangsu

(1000 piculs)

Zhejiang (1000

piculs)

Jiang-Zhe total

China total (1000

piculs)

Jiang-ZheShare in Physical

Quantities

China Gross Value

(million yuan)

Jiang-Zhe Gross Value

Jiang-Zhe Share

in Gross Value

A B C = A+B D E = C/D F G=ExF H=G/F Rice 132000 98000 230000 1553200 0.148 5436.2 805

Wheat 59802 10579 70381 447410 0.157 2403 378.01 Barley 27787 6953 34740 159126 0.218 576.08 125.77 Millet 3194 501 3695 136090 0.027 916.92 24.90 Corn 12926 1637 14563 126278 0.115 539.11 62.17

Kaoliang 10887 239 11126 141309 0.079 703.64 55.40 Soybeans 22651 3382 26033 123395 0.211 921.57 194.43

Broad beans 6751 5290 12041 60402 0.199 211.05 42.07 Peanuts 6418 521 6939 53460 0.130 348.4 45.22

Sweet Potatoes 37923 14974 52897 342471 0.154 611 94.37 Rapeseed 3456 4006 7462 49238 0.152 247.8 37.55 sesame 1864 143 2007 16780 0.120 154.4 18.47 cotton 3697 548 4245 16316 0.260 596.6 155.22

Tobacco 158 386 544 12460 0.044 596.6 14.84 cocoons 420 1200 1620 4200 0.386 340 40.50

tea 1.55 508.97 511 4278 0.120 105 15.55

Total 14110.77 2109.47 0.148 Sources: For gross output in physical quantities, rice output is from Liu and Yeh, p.290, tea is from Ou (vol.2), p.11,

cocoons are for the early 1920s from Perkins, p.286 and the rest are the 1931-37 averages (1000 piculs) from the

44

various issues of Crop Reports by NARB summed up in Shina Nongyou Kisou Tokei Shiryou, vol.2 that also included

the Manchuria agricultural output.

Column F for China gross value is the product of 1933 commodity prices and output. Price and output data are from Liu

and Yeh, p.136 and p.300 respectively. Cocoon price is from Perkins, p.288.

B. Modern Factory The coverage of modern factory output is the most complete thanks to the 1933 survey conducted under the

able leadership of D.K. Lieu. However, the survey covered only the so-called “China Proper” which is

equivalent to the current Chinese territory but without the Japanese-controlled Manchuria, roughly

equivalent to today’s Northeast provinces of Heilongjiang, Changchun and Jilin. From Table B, I derive the

Jiang-Zhe Share of China Proper as 0.663. Then I calculate the Japanese controlled Manchuria share of

0.166 in China Proper from Liu and Yeh’s estimate. These two results enable me to calculate the Jiang-Zhe

share of China total (including Manchuria) as 0.569.

A new estimate by Makino and Kubo gives a higher Manchuria share of China Proper’s industrial output at

0.266 (Table 13, p. 41). Using their estimates would have a negligible impact on my result (Jiang-Zhe share

of modern industry would be 0.549 instead of 0.569). In view of the preliminary nature of their revision, I

have stayed with the Liu and Yeh figure.

Table B. China’s Gross Output Value by Modern Factory (1000 yuans) Gross Industrial Output in vol. 3 of Lieu’s survey

1. Shanghai 750,869 2. Nanjing 22,938 3. Jiangsu 202,081 4. Zhejiang 70,179 5. Jiang-Zhe (=1+2+3+4) 1,046,067 6. China Proper (excluding Manchuria) 1,577,590 7. Jiang-Zhe share of China proper (line 5÷line 6)

0.663

Gross Industrial Output Estimate by Liu and Yeh 8. Manchuria Total 376,700 9. China Proper Total 2,268,800 10. Manchuria share of China Proper (= line 8 ÷ line 9)

0.166

11. Jiang-Zhe share of China Total (including Manchuria) = Line 5 ÷ [ line 6 x (1+0.166)]

0.569

Shanghai Share = line 1 / [ line 6 x (1+0.166) ]

0.41

Source: The gross industrial output in vol. 3 of D.K. Lieu’s survey is summarized in Makino and Kubo, Table 2, p. 29.

Makino and Kubo’s table also listed provincial level industrial output data from Vol.2 of Lieu’s survey. Vol. 2 data

would give the Jiang-Zhe a higher share of 0.596 in China’s total (including Manchuria). I have opted for the vol. 3

figure because it had a wider coverage of factories than vol. 2. The gross industrial output estimate by Liu and Yeh is

45

from p. 428, Table F-1.

C. Handicraft

For calculating the share of Jiang-Zhe provinces in Handicraft value added, I use the provincial level

handicraft gross output value data in Volume 2 of Ou, Baosan et al's book to calculate the Jiang-Zhe share

for 12 products. Unfortunately, there is no solid provincial level data for most other handicraft products

including some of the most important items such as flour and rice milling, cotton and silk goods, oil

products. I make rough estimates of these shares based on a variety of sources with different cross-checks.

In particular, as most of these handicraft productions are highly localized agricultural sideline activities, I

use provincial share of agricultural raw materials as proxies for shares of handicraft output. In Table C,

columns A through E derive the Jiang-Zhe shares of each of these 19 items. Then I multiply this Jiang-Zhe

share to the total Chinese Net Value-added (NVD) to derive the Jiang-Zhe NVD in column G. China Net

Value-added in column F is from Ou, vol. 1, pp.65-6. The final Jiang-Zhe share in national handicraft NVD

is 0.21. This ratio matches surprisingly well with a government survey in 1936 showing that the Jiang-Zhe

share in total agricultural by-products is 0.22 (cited in Wang Jin-yu, p. 101).

Note that as the total net value added of China’s handicraft product amounts to 134,0078 thousand yuan

(Ou, vol.1, p.66), the 19 products included here (with total net value added summed to 796,823) would

constitute about 60% of total handicraft NVD in China.

Table C. Jiang-Zhe Provinces Handicraft Net Value-Added for the 1930s Gross Output Value (1000 yuan)

Jiangsu Zhejiang

Shanghai China

Jiang-Zhe Share China NVD (1000

yuan)

Jiang-Zhe NVD

A B C D E= (A+B+C) ÷D

F G=E x F

1. Hemp weaving 189 8295 0.02 3152 71.8 2. Machinery repair 655 205 6718 11782 0.64 3574 2299 3. Metal products 68 98 1470 3417 0.48 342 163.7 4. Electric machinery 30 197 1394 3007 0.54 1013 546 5. Pottery and chinaware

1200 438 25063 0.07 15153 990

6. Lime 2808 528 16936 0.20 5215 1027 7. Coal Product 323 332 1400 3059 0.67 1224 822 8. Stone and clay 247 1000 0.25 500 123.5 9. Match 6253 0 1378 0 10. Paint and dyes 1500 229 4346 0.40 1759 699.8 11. Sugar (1000 piculs) 269 6374 0.04 10313 435.2 12.Paper making 119 20581 55800 0.37 27063 10039.5 13. Edible Oil 0.13 103231 13420.03 14. Cotton Spinning 0.26 12858 3343.

15. Cotton Weaving 0.26 154346 40130 16. Silk-Reeling 0.23 6419 1476.4 17. Silk-Weaving 0.35 30169 10559 18. Flour Milling 0.16 226680 36269

19. Rice Milling 0.23 192434 42336

Total 796823 163719 Jiang-Zhe Share in Handicraft Sector 0.21

Source and derivation notes for the 19 handicraft items:

1. Hemp weaving: Ou, p.113-4 (hereafter vol.2)

46

2. Machinery repair: Ou, p.37-40.

3. Metal products: Ou, p.36

4. Electric machinery: Ou, p.47

5. Pottery and chinaware: Ou, p.60

6. Lime: Ou, p.61-63

7. and 8. Coal products, Stone and clay: Ou, p. 64-65

9. Match : Ou, p.74

10. Paint and dyes : Ou, p.82

11. Sugar: Ou, p.138-9.

12. Paper making : Ou, p.152-5

13. Oil: Ou, p. 145 provides national estimates of seven types of edible oil products but no provincial level data. As

traditional oil processing was highly localized, I use share of raw agricultural materials to gauge Jiang-Zhe’s share of

edible oil products in national output. The two most important oil items are soybean and peanut oil. Jiang-zhe share

in soybeans production in national agricultural output is 0.14. Perkins’s book provides provincial level acreage

statistics for soybeans, rapeseed, sesame, peanut and cotton (for cotton oil) (pp.258-261). The Jiang-Zhe shares of

acreage in these five items are 0.11, 0.13, 0.11, 0.09 and 0.21. I give an overall Jiang-Zhe share of 0.12 for oil

products.

14. Cotton-spinning: there is no provincial level hand-spun cotton yarn data. It is however reasonable to assume a close

geographical relationship between local cotton cultivation and hand-spun cotton yarn production. So I use 0.26,

which is the Jiang-Zhe share of raw cotton production to proxy for its share of hand-spun yarn.

15. Cotton-weaving; there is no provincial level hand-woven cotton cloth data. I the 0.26 Jiang-Zhe share of cotton

production in national total as a proxy for its share of hand-woven cloth output with the following two independent

cross-checks:

1. Xu Xinwu (1989), p.215 shows that the Jiangsu share of hand-woven cloth output amount to 27% of the national

total around 1860. 2. Yan Zhong-ping, pp. 241-251 provides a survey of regional distribution of hand-weaving

production in selected provinces in China. The relative importance across difference provinces in hand-weaving

production ranked in his survey matches the ranking in provincial levels level cotton acreage statistics for 1931-1937

listed in Perkins’ data (p.261), with Hebei province having the highest output, followed by Shandong and Jiangsu.

This is a confirmation of the relationship between local cotton cultivation and hand-weaving production. Both these

two cross-checks are far from perfect, but they offer support that the 0.26 share I chose is possibly within reasonable

bounds of accuracy.

16. Silk-reeling: using data compiled by Japanese scholar Shigemi Uehara, Ou (p.102-3) shows that total raw silk

output (both machine and hand-reeled) for Jiangsu, Zhejiang and China proper (excluding the Japanese occupied

Manchuria) were 36405, 106230 and 300788 piculs respectively for 1927. Ou (on p.102) shows the total raw silk

output for both China total (including Manchuria) and Manchuria as well as prices for Zhejiang and Manchuria raw

silk in 1933. Based on this, I calculate the Manchuria share in China’s total gross output value as 18%. From this, I

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derive the Jiang-Zhe share in China’s total raw silk output as equal to 0.40 [=(36405+106230)/(300788*1.18)]. To

calculate the Jiang-Zhe share in hand-reeled raw silk, I use the information (Ou, p. 102) that machine-reeled raw silk

was about 41% of total raw silk output and the Jiang-Zhe share of machine-reeled raw silk output was 65% of China

(Ou, p.101, table 5) to derive the ratio of 0.23 [=(0.40-0.41*0.65)/(1-0.41)] for Jiang-Zhe share of hand-reeled raw

silk in China’s total.

17. Silk-weaving: the Lower Yangzi region has traditionally been the premium producing region. Ou (p.104) shows that

the Jiang-Zhe share of machine-woven silk goods amounts to more than 70% of the national total. Clearly, the

Jiang-Zhe share of hand-woven silk products would not be as dominant but could be higher than its 0.23 share for

hand-reeled raw silk. I choose 0.35 as the final share for Jiang-Zhe share.

18. Flour-milling: I use the Jiang-Zhe share of wheat output, 0.16, for its share of handicraft flouring milling in China.

19. Rice-milling: Ou (p.126) shows the Jiang-Zhe share in rice milled in modern factories is 0.28 of the national total.

However, rice output in Jiang-Zhe is equal to 0.16 of the national total. As Jiang-Zhe provinces have long been

rice-deficit region and rice imported from other regions are likely go through additional milling, I give 0.22 for the

Jiang-Zhe share.

D. The Service Sector

I. Finance:

For finance, one estimate claims that Shanghai`s total capital including deposits, convertible notes and

retained earnings of banks, Native Banks (Qiangzhong), Trust Corp. was about 47.8% of China in 1936

(Chang, Chung-li, Jinda Shanghai Chengshi Yanjiu, p.313). Rawski estimates that deposits of native banks

in Shanghai account for 30% of the national total in 1935 (p.390). Ou also provides some provincial level

figures for native banks and pawn shops as follows. It is not very clear whether Ou’s data of native banks

and pawn shops included Shanghai. In my estimate, I use 48% share of national total for Shanghai and add

another 17% for Jiangsu and Zhejiang provinces to sum up to 0.65 for the Jiang-Zhe share of financial

services.

Table D1. Total capital of Native Banks (Qianzhang and Ninhao) and Pawn Shops (in Yuan) Total Capita of Native

Banks (Qianzhang and Ninhao Capital

Total Capital of Pawn Shops

Jiangsu 25603000 13393749 Zhejiang 8567400 19364758 China total 121836207 63898586 Jiang-Zhe share 0.28 0.51 Sources: Ou, vol.2, p.275 for native banks and p. 276 for pawn shops.

II. Utilities:

The utilities share of Jiang-Zhe, 0.57, is calculated as the average of water, electricity and gas weighted by

the gross value of each sector in China’s total output. The steps of calculation are shown in Table D2.

Table D2. Gross Output Values of Utilities (1000 Yuans)

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Water supply Electricity Gas Chinese owned

Foreign owned

Shanghai 2154 8324 2568 Jiangsu 798 Zhejiang 155 China 18740 11847 214377 27697 Jiang-Zhe Share in each sector 0.374 0.50 0.093 Aggregated Jiang-Zhe share 0.45 Source Notes: Gross value of water supply from Ou, vol.2, p.68-70, gas is from Ou, vol. 2, pp. 65-68. Ou’s

book does not have separate provincial level data for electricity. I use his gross value data (vol. 2, p.70) and

calculate from Shenbao Nianjian (p. 569) the share of Jiangsu and Zhejiang in China’s total as equal to 0.46.

As the Shengbao figure does not include electricity generated by factories, I round the figure up to 0.5.

III. Modern Transportation and Communication

Table D3 presents both China’s gross value output of transportation and communication services for seven

sectors from Liu and Yeh (p. 590). The derivation of Jiang-Zhe share in national total for these seven

sectors is presented in the detailed footnotes to table D3. Multiplying these individual sectoral shares with

the weights derived from the gross value output, I obtain the sectoral share weighted Lower Yangzi share of

21% in the national total.

Table D3. Gross Value Output (million yuans) Railroad Shipping Trucks,

taxis, and buses

Trolleys Air Communications Postal Services

Total

China Gross output

369 137

95

13

4

44

46

708

Jiang-Zhe Share

0.12 0.25 0.46 0.57 0 0.3 0.33 0.21

Notes:

For Railroads, Ou (vol.2. Table 3, p.189) has gross income for all the railroads. The share of Jiang-Zhe in

the national railway income is about 14%. However, some of the railroads covered mileage outside

Jiang-Zhe. In this case, I give a 12% for the Jiang-Zhe share to equalize it with its population share.

For shipping, I used the number of junks (Minchuan) in Jiang-Zhe as a proxy for their gross value.

Jiang-Zhe had about a 22% share (Ou, vol.2, p.181). For steam ships, I used gross receipts of shipping

companies located in the Jiang-Zhe. There were two major shipping companies (Minshen and Zaosanqu)

which plied the entire Lower Yangzi river but with a significant share in Jiang-Zhe. Including them in

Jiang-Zhe would give a Jiang-Zhe share of 55% and excluding them would yield 28%, I take the

intermediate number 40% (Ou, vol.2, p.176-7). Averaging the ships and boats using their weights in total

net value added gives a Jiang-Zhe share of 0.25 (weights equal to 0.86 for native boats and 0.14 for modern

ships, calculated from Ou, vol.2, table 9, p.185).

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For trucks, taxis, buses, I used the number of vehicles in the Jiang-Zhe provinces as a proxy for the share

which is 46% (Ou, vol.2, p.202).

For Trolleys in the Jiang-Zhe provinces, they were only operating in Shanghai whose net income was about

57% of the national total (Ou, vol2, p.202).

For Air, it was very small. I just assumed it to be zero for Jiang-Zhe.

For modern communication, I calculate the NVD share of the Jiang-Zhe provinces for the two largest items,

local phone and wire telegraph. They add up to over 70% of the net income for modern communication (Ou,

vol.2, table 18, p.241). For local phone, the Jiang-Zhe share is 36% in gross income (Ou, vol.2, table 10,

p.235) and for wire telegraph, the share is 24% (Ou, vol.2, table 8, p.232). The weighted average is 30%

(weights for phone and telegraph are 0.39 and 0.61 respectively. Ou’s provincial data for phone and

telegraph did not include Manchuria. I use Ou’s table 18 (vol.2, p.241) to calculate Manchuria share being

28%. So the China total for both phone and telegraph in Ou’s data was multiplied by 1.28.

Postal Services share for the Jiang-Zhe share in net income is calculated as 33% (Ou, vol.2, table 2, p. 245).

IV. Trade (Commerce)

Ou’s calculation (vol.2, pp.247-258) is based on the total number of retail stores and restaurants and the

peddlers. Based on Ou’s data, I calculate that the number of stores (and restaurants) per 1000 in Jiang-Zhe

equal to 2.7 times that of China. Multiplying 2.7 to 0.12 (the L.Y. population share) gives 32% for the L.Y.

share.

For peddlers, there is no good national survey. Ou’s calculation is based largely on the Jiangsu data (Ou,

vol.1, p.107-8). I just assume here the Jiang-Zhe share here is equal to its population share of 0.12.

Averaging the two sums by value added weights gives a final Jiang-Zhe share of 28% (the value-added

weights for stores and peddlers are 0.79 and 0.21 respectively, Ou, vol.1, p.106 and p.107).

V. Government Administration

Appendix 6 in Ou (p.277-296) has provincial level government administration expenses for counties,

provinces, central government, and foreign concessions. Table D5 shows that government administration

expenses (excluding the Central government) in Jiang-Zhe are about 11% of the total. With the capital

located in Nanjing city, I round the Jiang-Zhe share to be 12%. The central government expenses are equal

to 4,8452,5780 with almost three-fourth of it spent on military expenditures (p.294).

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Table D5. Government Expenditures in the Jiang-Zhe Provinces (in yuan) County Level Provincial Level Foreign

Concessions Total

Jiangsu 23484538 11908006 Zhejiang 10748913 11080321 Hanzhou 846816 773510 Nanjing 2426175 Shanghai 7735110 28623516 Jiang-Zhe 35080267 33149612 28623516 68229879 China 210344878 407708136 47796200 618053014

Jiang-Zhe Share 0.11

Sources: County and Provincial level and Foreign Concessions data from Ou, p.287, p.292 and p.295

respectively.

VI. Construction

For Construction, Ou Baosan defined it as the building and repair of residential and business housing,

factories, canals and rivers, railroads, roads, ports and transportation infrastructure (Vol.1, p.77).

Unfortunately, there were no provincial level data in Ou’s volume. The national data was based on the

amount of construction materials used such as stone, cement, lime, bricks, iron and steel and woods.

Considering the Jiang-Zhe provinces had a share of 57% in modern factories and 21% in handicraft

production, the products of which correlate highly with these construction materials, I assign a rather

conservative share of 30% for construction in the Jiang-Zhe provinces.

VII. Old-fashioned Transportation, Personal Services, Residential Rents

There are no regional data on these three sectors, I used 0.24, a number that is about the simple-averaged

Jiang-Zhe shares in trade and modern transportation communication and twice the national per capita

average.

51