Economy of the Song dynasty

The economy of the Song dynasty (960–1279) has been characterized as the most prosperous in the world at the time.^[1] The dynasty moved away from the top-down command economy of the Tang dynasty (618–907) and made extensive use of market mechanisms as national income grew to be around three times that of 12th century Europe.^[2] The dynasty was beset by invasions and border pressure, lost control of North China in 1127, and fell in 1279. Yet the period saw the growth of cities, regional specialization, and a national market. There was sustained growth in population and per capita income, structural change in the economy, and increased technological innovation such as movable print, improved seeds for rice and other commercial crops, gunpowder, water-powered mechanical clocks, the use of coal as an industrial fuel, improved iron and steel production, and more efficient canal locks. China had a steel production of around 100,000 tons plus urban cities with millions of people at the time.^[3]

Commerce in global markets increased significantly. Merchants invested in trading vessels and trade which reached ports as far away as East Africa. This period also witnessed the development of the world's first banknote, or printed paper money (see Jiaozi, Guanzi, Huizi), which circulated on a massive scale. A unified tax system and efficient trade routes by road and canal meant the development of a nationwide market. Regional specialization promoted economic efficiency and increased productivity. Although much of the central government's treasury went to the military, taxes imposed on the rising commercial base refilled the coffers and further encouraged the monetary economy.^[4] Reformers and conservatives debated the role of government in the economy. The emperor and his government still took responsibility for the economy, but generally made fewer claims than in earlier dynasties. The government did, however, continue to enforce monopolies on certain manufactured items and market goods to boost revenues and secure resources that were vital to the empire's security, such as tea, salt, and chemical components for gunpowder.

These changes led some historians to call Song China an "early modern" economy centuries before Western Europe made its breakthrough. Many of these gains were lost, however, in the following Yuan and Ming dynasties, which replaced the Song use of market mechanisms with top-down command strategies.