The period immediately after the Opium War (1840–2) marked the first stage of state transformation and economic reforms in modern China. During this period, the age-old socio-political and socio-economic structures and equilibria ended and new structures gradually took shape. Despite political hiccups, including the erosion of China's sovereignty, the market worked its own way out and modern growth began.

CHINA'S EARLY SUCCESS AND A CHANGE IN THE RULES OF THE GAME

China's superiority

China was a success story of pre-modern economic growth. Its socio-economic structure was flexible enough to expand across four time zones and 10 million km2, reaching the physical limits for an agrarian civilisation. Its economy was productive enough to generate the surplus to finance Confucian education, science and technology, a bureaucratic machine controlling more than a thousand counties, an army of one million men and gigantic public works (e.g. the Great Wall and Grand Canal), and to sustain a remarkable degree of urbanisation, a nationwide market and extensive foreign trade.

In terms of inventions and innovations, the Chinese almost certainly held the world record by the eve of the European Renaissance with a long list of claims including metallurgy, gunpowder, the compass, stirrups, silk, porcelain, paper-making and paper currency, block printing, mechanical clocks, examinations to recruit civil servants, to name just a few.

China's production capacity was reflected by its export pattern. Until the end of the eighteenth century, China remained the main supplier of porcelain wares to the rest of the world.