In the first half of the nineteenth century, China descended into a prolonged economic depression. Although population growth continued uninterrupted down to 1850, signs of economic malaise already were visible by 1820. The “Daoguang Depression” (named after the reigning Daoguang Emperor, r. 1820–50) coincided with grave political challenges and social turmoil. China's defeat at the hands of Great Britain in the Opium War (1839–42) led to the forcible opening of China to foreign trade on terms dictated by the British. The Taiping rebellion (1851–64) posed an even more dire threat to the survival of the Qing Empire. Although the Qing ultimately succeeded in suppressing the insurrection, it devastated the richest provinces of China and caused the deaths of tens of millions. In retrospect, the Opium War fiasco and the ruin left in the wake of the Taiping rebellion fostered the conventional portrait of nineteenth-century China – one that largely persists today – as a poor and backward country.

The sharp contrast between the “prosperous age” (shengshi 盛世) – as many contemporaries described it – of the eighteenth century and the apparent poverty and stagnation of the nineteenth century has long compelled scholars to ask what forces had brought about such a drastic change in China's fortunes. Many historians have focused on structural explanations: the inherent constraints of the smallholder peasant economy, the limits of premodern technology, and the absence of systems of knowledge that would promote technological and scientific innovation to overcome those limits. Others have proposed more historically contingent factors, especially China's integration into a global economy dominated by Western imperialist powers, resulting in the drain of wealth abroad, deindustrialization in traditional sectors such as cotton manufacture, and the peripheralization of China as a producer of cheap raw materials for the industrializing West.

Questions about the nature of the premodern Chinese economy and its modern fate have been thrust into new perspectives in recent debates about “the Great Divergence” in global economic history, which we examined briefly in the Introduction. It had been commonplace assumption that the onset of the Industrial Revolution in Europe was premised on institutional foundations – urban development, mercantile capitalism, demographic behavior, and a liberal-democratic political culture – established in medieval or early modern times.