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Differences Between Europe and China’s Economies

Differences Between Europe and China’s Economies

Identify the main differences between the economies of Europe and China in the three centuries before 1800. What factors can account for these differences and what were their implications for economic well-being?

The economies of Europe and China took utterly different paths at the beginning of the early modern period and continued to diverge throughout the next three centuries up to 1800. In this essay, it will look at how a wide range of interconnected factors, ranging from the geographical position and political climate to technological development, interacted with one another to account for different directions each region’s economic development took. By analysing the above factors for both China and Europe, it will compare their effects and connotations to the economic prosperity of each region.

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Political climate


First of all, the state exerts considerable influence over the economy. At the beginning of the modern era, China was governed by Ming dynasty (AD1368-1644), whose monarchs lifted the ban on external trade in 16th century, while encouraging trade with other Asian states as well as with further regions (e.g. the Middle East). In fact, as Kang (2012, p.107) stated: “China sat at the center of a vast trading network, and Chinese staple and luxury goods were desired literally around the world”. Furthermore, Chinese internal trade was revived by Ming canal system linking the north and the south (Kang, 2012, p.107). Above-mentioned disproves the Eurocentric stereotype that the Chinese economy was a closed, self-sufficient system, detached from surrounding economies.

After Manchu takeover of China in 1644 and the establishment of Qing dynasty rule, the empire started to expand to inner Asia. Conquering number of resource-rich regions (e.g. Xinjiang and Tibet) provided Qing dynasty with a variety of resources to utilize. However, it also caused an increase in the demand for goods needed for maintaining a large-scale military, i.e. food and clothes. Qing functionaries used trade as a mean to make up for their lack of necessities, trading commodities such as silk and cotton for livestock and edibles (Millward, 1998, p.80).

Moreover, according to Kang (2012, p.107), they conscientiously invested in infrastructure by building the network of roads which connected the east and west, thus improving the overall quality of communication throughout the realm. Consequently, the degree of economic activity was significantly increased, with enhanced economic growth and prosperity as consequences.


However, Europe was in an economically advantageous position, especially due to the monarchs who financed voyages to the New World. Although the discoveries temporarily disrupted the European economy by increasing the amount of silver and gold in circulation (resulting in high inflation rates), in the long run they empowered European economic growth.

Firstly, a number of formerly unknown herbs flooded into Europe, causing a revolution in the European standard of living. While the majority of the European population previously depended on wheat (which barely provided a living), after the discoveries they switched to maize and potatoes (Nelson, 1998). Those crops yielded on average two to three times more per acre of land than wheat, thus enabling people to feed animals with the residue and eventually regularly eat eggs and meat (Nelson, 1998). By making people richer, so-called dietary revolution allowed them to trade the excess agricultural products. Therefore, overall purchasing power increased, as well as demand for non-inferior goods.

Secondly, European governments saw the opportunity in exploiting their new colonies’ resources. Goods like gold, silver, timber and turpentine were used to fuel the growing industry by providing raw materials for the production of manufactured goods (Nelson, 1998). Aforementioned strengthened Sino-European trading ties, since European manufactured goods were often traded for Chinese goods.

Apart from the discoveries, Europe was in advantageous position (albeit temporarily) by its mercantilist policies. Although the practice is damaging in the long term, for a time it encouraged the use of all natural resources available (Gaille, 2015) within Europe, as well as it increased demand for European raw materials within Europe itself.  Moreover, those policies naturally decreased unemployment rate (Gaille, 2015) by employing workers in the extraction of resources along with employing them in the production of manufactured goods.



The geographic location of China greatly influenced its historical and economic development. Surrounded by the Pacific Coast as well as the Tibetan highlands in the west, and by the mountains of Inner Mongolia together with The Gobi Desert in the north, this vast area of land remained relatively uninfluenced by the outer world for the majority of known history. It was thus unpenetrated by foreign ideas, which allowed it to retain its integrity and unity.

The majority of the population was concentrated in the fertile valleys of Yangtze and Huang He rivers. The fertility of those regions allowed Chinese population to cultivate a variety of crops (e.g. rice) and sustain themselves by consuming and trading those crops. Right until commercial revival in the late Ming dynasty, China’s economy was predominately agrarian (Myers, 1980, p.6), which made population reliant on the weather for the living. The few urban and commercial centres that existed were concentrated, as Von Glahn (2016) stated, along the two major canals of interregional trade, the Yangzi River and the Grand Canal. It could be suggested that this dense concentration of population made the quick exchange of ideas possible and was therefore one of the reasons why so many early inventions (e.g. paper, printed money, gunpowder) originated in China. However, it could also be argued that the densities of the population in these areas lead to quick spread of infectious diseases and therefore worsened living conditions to some extent.

During the 16th century and the above-mentioned commercial revival, living conditions undoubtedly improved. Jiangnan and barren Fujian regions started importing rice and other edibles from Yangzi valley provinces Hunan and Hubei, while earning their living by specializing in handicraft industry (Von Glahn, 2016, p.297). Other regions, like Huizhou (Anhui) started exploiting their own natural resources, e.g. timber. This overall diversification of economic activity resulted in proliferation of internal trade (e.g. handicraft goods produced in Fujian were traded for food imported from Hunan province) while also enabling the population to diversify its diet and therefore improve living conditions.

However, despite the progress described above, the size of the Chinese territory abated economic growth due to the inefficiency and slowness of communication. This was further amplified in the later centuries by the lack of technological development (discussed in the next section of this essay). Chinese unity and the enormity of its territory had an additional downside: over the course of the centuries, it became evident that the lack of competition from neighbouring states (unlike in Europe), stifled economic initiatives and resulted in economic stagnation.


Located between the Bosporus in the east, the Atlantic Ocean in the west and Mediterranean Sea in the south, Europe was geographically predisposed to become susceptible to the variety of different influences (the exact opposite of China). Due to its geographical features, it was unable to develop common language and culture.

Unlike China, Europe lacked enormous rivers and vast fertile valleys along them: this prevented concentration of population on a relatively small area of land. Furthermore, its landscape was much more fragmented than China’s, with various mountain ranges such as The Alps and The Pyrenees forming natural borders between distinct populated areas. Economic consequences of such fragmented geography were of utmost importance.

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As Kennedy (1988, p.17) reasoned: “For a start, it both made difficult the establishment of unified control (…) and minimized the possibility that the continent could be overrun by external force.” Therefore, a case can be made that Europe’s landscape helped to shape the commercial spirit of the continent. The lack of the central rule made imposition of trade restriction and government monopolies much harder to execute, therefore allowing competition and entrepreneurship to evolve. The diverse climate of the continent led to diverse products, which could then be exchanged via the network of rivers which helped the development of the long-distance trade and reduced its costs (Kennedy, 1988, p.19).

Furthermore, Europe’s surrounding seas played the crucial role in its economic development. By providing incentives for the growth of the shipbuilding industry and proliferation of seaborne trade(Kennedy, 1988, p.19), consequences were as far-reaching as the discovery of The New World. Numerous economic benefits of the discoveries (discussed in the previous section of this essay) put Europe in an economically advantageous position over China, who largely neglected investing in maritime commerce and financing of voyages after Zheng He’s expeditions in the early 15th century.

Technological development


Considering its earlier history of innovation, along with its large population and the geographical location favourable to the development of maritime commerce, China had all the potential to emerge as the world’s technologically most advanced nation. However, during the course of a few hundred years, it fell behind Europe, which inspired a number of theories trying to explain this phenomenon.

First of all, it should be noted that the political climate (discussed above) is closely related to the technological progress. In this context, emperor Hongxi’s ban on voyages in 1424 and the following dismantling of the navy (Headrick, 2009, p.73) had an enormous impact on the Chinese economic history. By turning its back on further expeditions and building of new ships, China effectively stopped participating in not only maritime trade, but also in the development of new naval technologies. As a consequence, China was not able to take part in exploitation of the New World’s resources and long-distance trade, the two pillars of Europe’s future economic growth.

Its backwardness regarding military technology had even greater effects on China’s economy. As Headrick (2009, p.73) stated: “The Chinese were familiar with cannon and other firearms but used them far less than did the Turks or Europeans because they lacked sufficient bronze”. It can be argued that this came as the result of the aforementioned neglect of the naval development. That is, if China had a stronger navy and an active maritime trade with distant nations, it could make up for its lack of raw materials by importing them. Since this was not the case, its military technology was not sufficiently advanced and fell far behind European.

Again, political situation and geography provided context for such course of events. Considering China’s unique historical unity (as opposed to Europe’s political fragmentation) and its enormous size, there were little to no incentives to compete and therefore to innovate. Chinese inability to resist Europeans and their trading posts came as a result, with the foreign monopolies on trade in China’s surrounding seas being the ultimate outcome.


While China experienced stagnation, Europe thrived regarding both economic growth and technological development. Its political disunity encouraged competition among warring nation-states, resulting in rapid technological advancement.

Contrary to China, who discouraged seaborne trade and shipbuilding, European nations invested as much time and money as they could into development of the naval technologies. Equally important, Europeans were quick to assimilate technologies developed elsewhere (e.g. navigational aids, the compass and the astrolabe), some of which proved to be quite useful in the European voyages (Jones, 1987, p.57). Europe’s enthusiasm for maritime affairs further intensified after the discovery of the New World in late 15th century, when the advantages of a strong navy became obvious. Their growing interest in maritime affairs is illustrated by the memorable event in the early 18th century, when the British Parliament offered £20,000 for any method of precisely determining longitude (Headrick, 2009, p.76). Above-mentioned anecdote further supports the claim made in this essay that maritime technology in Europe was growing ever more important, in contrast to waning interest in technology in China.

Likewise, the competition among many conflicting states had an obvious consequence: a lot of attention was paid to the military technology. However, Europeans did not merely assimilate foreign technologies. They looked to improve them and therefore gain advantage over their competitors, an argument which can be supported by Headrick’s (2009, p.81) claim: “The English, who lacked the copper to make bronze, experimented with cast iron(…)The first iron cannon were (…) much cheaper than bronze. By the early eighteenth century, England had the largest and most heavily armed fleet in the world.” As explained above, although some technologies have originated elsewhere (e.g. cannon), they were upgraded in Europe for the sake of bettering the competitors.

All of the above listed factors combined to shape Europe as the technologically and economically most developed continent at the beginning of the 19th century. Thus it was the place where one of the most important processes of the 19th century took place: the Industrial Revolution.


In conclusion to this essay, it can be said that many factors interacted with one another from the 1500(and earlier) to 1800 to ultimately result in the Great Divergence (that is, the great disparity in economic prosperity between Europe and China) at the end of this period. They can be grouped into a few main categories: political situation, geographical features and technological development. For the sake of organization, the categories for each region were examined separately. However, that is not to say that they are independent of one another. Quite the opposite, throughout the essay the effort has been made to show that they have heavily influenced one another and should therefore be taken into consideration together.


  • Kang, D.C. (2012) East Asia before the West: Five Centuries of Trade and Tribute. New York City, New York: Columbia University Press
  • Millward, J.A. (1998) Beyond the Pass: Economy, Ethnicity, and Empire in Qing Central Asia, 1759-1864. Stanford, California: Stanford University Press
  • Nelson, L.H. (1998) The Impact of Discovery on Europe. Available at: (Accessed: 13 November 2018).
  • Gaille, B. (2015) 8 Pros and Cons of Mercantilism. Available at: (Accessed: 13 November 2018).
  • Tregear, T.R. (1965) A Geography of China. London, United Kingdom: University of London press
  • Myers, R.H. (1980) The Chinese Economy: Past and Present. Belmont, California: Wadsworth
  • Von Glahn, R. (2016) The Economic History of China. Cambridge, United Kingdom:  Cambridge University Press
  • Kennedy, P. (1988) The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000. New York, New York: Random House
  • Headrick, D.R. (2009) Technology: The World History. New York, New York: Oxford University Press
  • Jones, E.L. (1987) The European Miracle. 2nd edn. New York, New York: Cambridge University Press

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